MERRILL LYNCH FUNDAMENTAL GROWTH FUND INC, 485BPOS, 1995-12-21

MERRILL LYNCH FUNDAMENTAL GROWTH FUND INC
485BPOS, 1995-12-21

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 21, 1995

SECURITIES ACT FILE NO. 33-47875
INVESTMENT COMPANY ACT FILE NO. 811-6669
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

PRE-EFFECTIVE AMENDMENT NO. / /

POST-EFFECTIVE AMENDMENT NO. 4 / /

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 5 /X/
(CHECK APPROPRIATE BOX OR BOXES)

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

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

<TABLE>
<S> <C>
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800

ARTHUR ZEIKEL
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C>
PHILIP L. KIRSTEIN, ESQ.
MERRILL LYNCH ASSET COUNSEL FOR THE FUND:
MANAGEMENT BROWN & WOOD
P.O. BOX 9011 ONE WORLD TRADE CENTER
PRINCETON, NEW JERSEY NEW YORK, NEW YORK 10048-0557
08543-9011 ATTENTION: THOMAS R. SMITH, JR.
</TABLE>

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

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

/X/ immediately upon filing pursuant to paragraph (b)

/ / on (date) pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)(1)

/ / on (date) pursuant to paragraph (a)(1)

/ / 75 days after filing pursuant to paragraph (a)(2), or

/ / on (date) pursuant to paragraph (a)(2) of Rule 485.

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

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

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF COMMON
STOCK UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE NOTICE REQUIRED BY SUCH RULES FOR THE
REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON OCTOBER 24, 1995.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- ---------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page............................... Cover Page
Item 2. Synopsis................................. Not Applicable
Item 3. Condensed Financial Information.......... Financial Highlights
Item 4. General Description of Registrant........ Investment Objective and Policies;
Additional Information
Item 5. Management of the Fund................... Fee Table; Management of the Fund;
Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance............................ Not Applicable
Item 6. Capital Stock and Other Securities....... Cover Page; Purchase of Shares;
Additional Information
Item 7. Purchase of Securities Being Offered..... Cover Page; Fee Table; Purchase of
Shares; Merrill Lynch Select Pricing(SM)
System; Shareholder Services;
Additional Information; Inside Back
Cover Page
Item 8. Redemption or Repurchase................. Merrill Lynch Select Pricing(SM) System;
Purchase of Shares; Redemption of
Shares
Item 9. Pending Legal Proceedings................ Not Applicable
PART B
Item 10. Cover Page............................... Cover Page
Item 11. Table of Contents........................ Back Cover Page
Item 12. General Information and History.......... Not Applicable
Item 13. Investment Objectives and Policies....... Investment Objective and Policies
Item 14. Management of the Fund................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities............................. Management of the Fund
Item 16. Investment Advisory and Other Services... Management of the Fund; Purchase of
Shares; General Information
Item 17. Brokerage Allocation and Other
Practices.............................. Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities....... General Information--Description of
Shares
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............... Purchase of Shares; Redemption of
Shares; Determination of Net Asset
Value; Shareholder Services
Item 20. Tax Status............................... Additional Information--Dividends and
Distributions; Additional
Information--Taxes
Item 21. Underwriters............................. Purchase of Shares
Item 22. Calculation of Performance Data.......... Performance Data
Item 23. Financial Statements..................... Statement of Assets and Liabilities
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3

PROSPECTUS

DECEMBER 21, 1995

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

Merrill Lynch Fundamental Growth Fund, Inc. (the "Fund") is a mutual fund
seeking to provide shareholders with long-term growth of capital. The Fund will
seek to achieve its investment objective by investing in a diversified portfolio
of equity securities placing particular emphasis on companies that have
exhibited above-average growth rates in earnings. There can be no assurance that
the Fund's investment objective will be realized. For more information on the
Fund's investment objective and policies, please see "Investment Objective and
Policies" on page 9.

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

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

Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9081, Princeton, New Jersey 08543-9081 [(609)
282-2800], or from other securities dealers which have entered into selected
dealer agreements with the Distributor, including Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"). The minimum initial purchase is $1,000
and the minimum subsequent purchase is $50, except that for retirement plans the
minimum initial purchase is $100 and the minimum subsequent purchase is $1.
Merrill Lynch may charge its customers a processing fee (presently $4.85) for
confirming purchases and repurchases. Purchases and redemptions directly through
the Fund's transfer agent are not subject to the processing fee. See "Purchase
of Shares" and "Redemption of Shares".

------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

This Prospectus is a concise statement of information about the Fund that is
relevant to making an investment in the Fund. This Prospectus should be retained
for future reference. A statement containing additional information about the
Fund, dated December 21, 1995 (the "Statement of Additional Information"), has
been filed with the Securities and Exchange Commission (the "Commission") and is
available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference in to this Prospectus.

------------------------
MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE> 4

FEE TABLE

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

<TABLE>
<CAPTION>
CLASS A(A) CLASS B(B) CLASS C CLASS D
----------- ----------------------- ------------ -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)................ 5.25%(c) None None 5.25%(c)
Sales Charge Imposed on Dividend
Reinvestments................................ None None None None
Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)................ None(d) 4.0% during the first 1.0% for one None(d)
year, decreasing 1.0% year
annually thereafter to
0.0% after the fourth
year
Exchange Fee................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Investment Advisory Fees(e).................... 0.65% 0.65% 0.65% 0.65%
12b-1 Fees(f):
Account Maintenance Fees..................... None 0.25% 0.25% 0.25%
Distribution Fees............................ None 0.75% 0.75% None
(Class B shares
convert to Class D
shares automatically
after approximately
eight years and cease
being subject to
distribution fees)
Other Expenses(g):
Custodial Fees............................. 0.01% 0.01% 0.01% 0.01%
Shareholder Servicing Costs(h)............. 0.23% 0.27% 0.26% 0.22%
Other...................................... 0.57% 0.55% 0.52% 0.52%
-------- ----- ----- ------
Total Other Expenses................... 0.81% 0.83% 0.79% 0.75%
-------- ----- ----- ------
TOTAL FUND OPERATING EXPENSES.................. 1.46% 2.48% 2.44% 1.65%
-------- ----- ----- ------
-------- ----- ----- ------
</TABLE>

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

(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and certain investment
programs. See "Purchase of Shares--Initial Sales Charge Alternatives--Class
A and Class D Shares"--page 17.

(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Purchase of Shares--Deferred Sales Charge
Alternatives--Class B and Class C Shares"--page 19.

(c) Reduced for purchases of $25,000 and over, and waived for purchases of Class
A shares by certain retirement plans in connection with certain investment
programs. Class A or Class D purchases of $1,000,000 or more may not be
subject to an initial sales charge. See "Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares"--page 17.

(d) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that certain purchases of $1,000,000 or more which
may not be subject to an initial sales charge may instead be subject to a
CDSC of 1.0% of amounts redeemed within the first year of purchase.

(e) See "Management of the Fund--Management and Advisory Arrangements"--page 14.

(f) See "Purchase of Shares--Distribution Plans" page 23.

(g) Other expenses for Class A and Class B shares is stated for the period
October 21, 1994 (commencement of operations) to August 31, 1995 and is
stated for Class C and Class D shares for the year ended August 31, 1995.

(h) See "Management of the Fund--Transfer Agency Services"--page 15.

2
<PAGE> 5

EXAMPLE:

<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD
OF:
----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment including the maximum $52.50 initial sales
charge (Class A and Class D shares only) and assuming
(1) the Total Fund Operating Expenses for each class
set forth above, (2) a 5% annual return throughout the
periods and (3) redemption at the end of the period:
Class A............................................ $ 67 $ 96 $ 128 $218
Class B............................................ $ 65 $ 97 $ 132 $263*
Class C............................................ $ 35 $ 76 $ 130 $278
Class D............................................ $ 68 $ 102 $ 137 $238
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of
the period:
Class A............................................ $ 67 $ 96 $ 128 $218
Class B............................................ $ 25 $ 77 $ 132 $263*
Class C............................................ $ 25 $ 76 $ 130 $278
Class D............................................ $ 68 $ 102 $ 137 $238
</TABLE>

- ---------------
* Assumes conversion to Class D shares approximately eight years after purchase.

The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The expenses set forth under "Other Expenses" are based on estimated
amounts through the end of the Fund's first fiscal year on an annualized basis.
The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated by Commission
regulations. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE.
Class B and Class C shareholders who hold their shares for an extended period of
time may pay more in Rule 12b-1 distribution fees than the economic equivalent
of the maximum front-end sales charges permitted under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. ("NASD").
Merrill Lynch may charge its customers a processing fee (presently $4.85) for
confirming purchases and repurchases. Purchases and redemptions through the
Fund's Transfer Agent are not subject to the processing fee. See "Purchase of
Shares" and "Redemption of Shares".

MERRILL LYNCH SELECT PRICINGSM SYSTEM

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

3
<PAGE> 6

advised by MLAM or FAM which use the Merrill Lynch Select Pricing(SM) System are
referred to herein as "MLAM-advised mutual funds".

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

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

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

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

4
<PAGE> 7

(Footnotes for preceding page)
- ---------------

(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.
(2) Offered only to eligible investors. See "Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares--Eligible Class A
Investors".

(3) Reduced for purchases of $25,000 or more and waived for purchases of Class A
shares by certain retirement plans in connection with certain investment
programs. Class A and Class D share purchases of $1,000,000 or more may not
be subject to an initial sales charge but, if the initial sales charge is
waived, will be subject to a 1.0% CDSC for one year. See "Class A" and
"Class D" below.

(4) The conversion period for dividend reinvestment shares and the conversion
and holding periods for certain retirement plans are modified. Also, Class B
shares of certain other MLAM-advised mutual funds into which exchanges may
be made have a ten-year conversion period. If Class B shares of the Fund are
exchanged for Class B shares of another MLAM-advised mutual fund, the
conversion period applicable to the Class B shares acquired in the exchange
will apply, and the holding period for the shares exchanged will be tacked
onto the holding period for the shares acquired.

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

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

5
<PAGE> 8

Class C: Class C shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25% and an
ongoing distribution fee of 0.75% of the Fund's average net assets
attributable to Class C shares. Class C shares are also subject to a
CDSC if they are redeemed within one year of purchase. Although Class C
shares are subject to a 1.0% CDSC for only one year (as compared to
four years for Class B), Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject
to distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Fund's Board of
Directors and regulatory limitations.

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

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

Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because there is an account maintenance fee
imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative particularly
attractive because similar sales charge reductions are not available with
respect to the 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 sales charge and, in the case of Class D
shares, the account maintenance fee. Class A, Class B, Class C and Class D share
holdings will count toward a right of accumulation which may qualify the
investor for reduced initial sales charges on new initial sales charge
purchases. In addition, the ongoing Class B and Class C account maintenance and
distribution fees will cause Class B and Class C shares to have higher expense
ratios, pay lower dividends and have lower total returns than the initial sales
charge shares. The ongoing Class D account maintenance fees will cause Class D
shares to have a higher expense ratio, pay lower dividends and have a lower
total return than Class A shares.

Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the benefit
of putting all of the investor's dollars to work from the time the investment is
made. The deferred sales charge alternatives may be particularly appealing to
investors who do not qualify for a reduction in initial sales charges. Both
Class B and Class C shares are subject to ongoing account maintenance fees and
distribution fees; however, the ongoing account maintenance

6
<PAGE> 9

and distribution fees potentially may be offset to the extent any return is
realized on the additional funds initially invested in Class B or Class C
shares. In addition, Class B shares will be converted into Class D shares of the
Fund after a conversion period of approximately eight years, and thereafter
investors will be subject to lower ongoing fees.

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

7
<PAGE> 10

FINANCIAL HIGHLIGHTS

The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Fund by
Ernst & Young LLP, independent auditors. Financial statements for the fiscal
year ended August 31, 1995, and the independent auditors' report thereon are
included in the Statement of Additional Information. Class A shares of the Fund
outstanding as of October 21, 1994 were redesignated Class D shares on such
date, and the Fund commenced offering shares of a new Class A having different
characteristics. In addition, Class B shares of the Fund outstanding as of
October 21, 1994 were redesignated Class C shares on such date, and the Fund
commenced offering shares of a new Class B having different characteristics. As
a result, financial information is presented for new Class A and new Class B
shares only for the period October 21, 1994 (commencement of the offering of
those shares) to August 31, 1995. Further information about the performance of
the Fund is contained in the Fund's most recent annual report to shareholders
which may be obtained, without charge, by calling or by writing the Fund at the
telephone number or address on the front cover of this Prospectus.

CLASS A CLASS B CLASS C(1)
----------- ------------ ------------------------------------------------
FOR THE
FOR THE YEAR ENDED PERIOD
FOR THE PERIOD AUGUST 31, DEC. 24, 1992+
OCT. 21, 1994+ ------------------------- TO AUG. 31,
TO AUG. 31, 1995++ 1995++ 1994++ 1993++
-------------------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 9.99 $ 9.85 $ 9.96 $ 9.86 $ 10.00
----------- ------ ----------- ----------- --------------
Investment income (loss)--net........... -- (.09) (.09) (.05) (.05)
Realized and unrealized gain (loss)
on investments--net................... 1.98 1.95 1.84 .15 (.09)
----------- ------ ----------- ----------- --------------
Total from investment operations........... 1.98 1.86 1.75 .10 (.14)
----------- ------ ----------- ----------- --------------
Less distributions from realized gain
on investments--net...................... (.31) (.31) (.31) -- --
----------- ------ ----------- ----------- --------------
Net asset value, end of period............. $ 11.66 $ 11.40 $ 11.40 $ 9.96 $ 9.86
========== ========== =========== =========== ==============
TOTAL INVESTMENT RETURN:**
Based on net asset value per share......... 20.55%# 19.60%# 18.28% 1.01% (1.40)%#
========== ========== =========== =========== ==============
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding account maintenance
and distribution fees.................... 1.46%* 1.48%* 1.44% 1.35% 1.79%*
========== ========== =========== =========== ==============
Expenses................................... 1.46%* 2.48%* 2.44% 2.35% 2.79%*
========== ========== =========== =========== ==============
Investment income (loss)--net.............. .02%* (.95)%* (.88)% (.52)% (.83)%*
========== ========== =========== =========== ==============
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............................ $21,288 $ 63,748 $44,220 $47,263 $45,736
========== ========== =========== =========== ==============
Portfolio turnover......................... 80.41% 80.41% 80.41% 112.68% 64.09%
========== ========== =========== =========== ==============

CLASS D(2)
-------------------------------------------
FOR THE
FOR THE YEAR ENDED PERIOD
AUGUST 31, DEC. 24, 1992+
------------------------- TO AUG. 31,
1995++ 1994++ 1993++
----------- ----------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......................... $ 10.09 $ 9.91 $ 10.00
----------- ----------- --------------
Investment income (loss)--net.............................. (.01) .03 --
Realized and unrealized gain
(loss) on investments--net............................... 1.87 .15 (.09)
----------- ----------- --------------
Total from investment operations.............................. 1.86 .18 (.09)
----------- ----------- --------------
Less distributions from realized
gain on investments--net.................................... (.31) -- --
----------- ----------- --------------
Net asset value, end of period................................ $ 11.64 $ 10.09 $ 9.91
=========== =========== ==============
TOTAL INVESTMENT RETURN:**
Based on net asset value per share............................ 19.15% 1.82% (.90)%#
=========== =========== ==============
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding account maintenance
and distribution fees....................................... 1.40% 1.33% 1.78%*
=========== =========== ==============
Expenses...................................................... 1.65% 1.58% 2.03%*
=========== =========== ==============
Investment income (loss)--net................................. (.10)% .31% (.04)%*
=========== =========== ==============
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)............................................... $13,231 $ 8,623 $ 6,930
=========== =========== ==============
Portfolio turnover............................................ 80.41% 112.68% 64.09%
=========== =========== ==============
</TABLE>

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

(1) Prior to October 21, 1994, the Class C shares for which information is
presented here were designated Class B shares.

(2) Prior to October 21, 1994, the Class D shares for which information is
presented here were designated Class A shares.

+Commencement of Operations.

++Based on average number of shares outstanding during the period.

* Annualized.

**Total investment returns exclude the effects of sales loads.

#Aggregate total investment return.

8
<PAGE> 11

INVESTMENT OBJECTIVE AND POLICIES

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

The Fund will give particular emphasis to companies which possess
above-average growth rates in earnings, resulting from a variety of factors
including, but not limited to, above-average growth rates in sales, profit
margin improvement, proprietary or niche products or services, leading market
shares, and underlying strong industry growth. Management of the Fund believes
that companies which possess above-average earnings growth frequently provide
the prospect of above-average stock market returns, although such companies tend
to have higher relative stock market valuations. Emphasis also will be given to
companies having medium to large stock market capitalizations ($500 million or
more). Investment in companies with lower market capitalizations, especially
those under $1 billion, may involve special risks including limited product
lines, market or financial resources or a limited management group. In addition,
many smaller company stocks trade less frequently and in smaller volume, and may
be subject to more abrupt or erratic price movements or more sensitive to market
fluctuations, than stocks of larger companies.

Investment emphasis is on equities, primarily common stock and, to a lesser
extent, securities convertible into common stock and rights to subscribe for
common stock, and the Fund will maintain at least 65% of its total assets
invested in equity securities except during defensive periods. The Fund reserves
the right as a defensive measure and to provide for redemptions to hold other
types of securities, including non-convertible preferred stocks and debt
securities rated investment grade by a nationally recognized statistical rating
organization, Government and money market securities, including repurchase
agreements, or cash, in such proportions as, in the opinion of management,
prevailing market or economic conditions warrant.

The Fund may invest up to 10% of its total assets in equity securities of
foreign issuers with the foregoing characteristics. (Purchases of American
Depositary Receipts ("ADRs"), however, will not be subject to this restriction.)
Investments in securities of foreign entities and securities denominated in
foreign currencies entail risks not typically involved in domestic investment,
including fluctuations in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or United States governmental laws or restrictions. In addition, foreign
entities may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of United States entities. In
addition, certain foreign investments may be subject to foreign withholding
taxes. Foreign financial markets, while growing in volume, have, for the most
part, substantially less volume than United States markets, and securities of
many foreign companies are less liquid and their prices more volatile than
securities of comparable domestic companies. The foreign markets also have
different clearance and settlement procedures, sometimes resulting in delays in
settlement which could have an adverse effect on the Fund, including on its
performance. Costs associated with transactions in foreign securities are
generally higher than with transactions in United States securities.

9
<PAGE> 12

necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by an American bank or
trust company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, which are issued in registered form, are
designed for use in the United States securities markets, and EDRs, which are
issued in bearer form, are designed for use in European securities markets.

OTHER INVESTMENT POLICIES AND PRACTICES

Portfolio Strategies Involving Options and Futures. The Fund does not
presently intend to engage to any significant degree in options or futures
transactions. However, the Fund is authorized to engage in various portfolio
strategies to hedge its portfolio against adverse movements in the equity
markets, interest rates and exchange rates between currencies.

The Fund has authority to write (i.e., sell) covered put and call options
on its portfolio securities, purchase put and call options on securities and
engage in transactions in stock index options, stock index futures and financial
futures, and related options on such futures. The Fund may also deal in forward
foreign exchange transactions and foreign currency options and futures, and
related options on such futures. Each of these portfolio strategies is described
in more detail in the Appendix attached to this Prospectus. Although certain
risks are involved in options and futures transactions (as discussed in "Risk
Factors in Options and Futures Transactions" in the Appendix to this
Prospectus), Merrill Lynch Asset Management, L.P. (the "Manager" or "MLAM")
believes that, because the Fund will engage in options and futures transactions
only for hedging purposes, the options and futures portfolio strategies of the
Fund will not subject the Fund to the risks frequently associated with the
speculative use of options and futures transactions. While the Fund's use of
hedging strategies is intended to reduce the volatility of the net asset value
of Fund shares, the Fund's net asset value will fluctuate.

THERE CAN BE NO ASSURANCE THAT THE FUND'S HEDGING TRANSACTIONS WILL BE
EFFECTIVE. FURTHERMORE, THE FUND WILL ONLY ENGAGE IN HEDGING ACTIVITIES FROM
TIME TO TIME AND MAY NOT NECESSARILY BE ENGAGING IN HEDGING ACTIVITIES WHEN
MOVEMENTS IN THE EQUITY MARKETS, INTEREST RATES OR CURRENCY EXCHANGE RATES
OCCUR. Reference is made to the Appendix to this Prospectus and to the Statement
of Additional Information for further information concerning these strategies.

Portfolio Transactions. In executing portfolio transactions, the Fund
seeks to obtain the best net results, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution, operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While the Fund generally seeks
reasonably competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available. The Fund contemplates that, consistent
with its policy of obtaining the best net results, it will place orders for
transactions with a number of brokers and dealers, including Merrill Lynch, an
affiliate of the Manager. Subject to obtaining the best price and execution,
brokers who provide supplemental investment research to the Fund may receive
orders for transactions by the Fund. Information so received will be in addition
to, and not in lieu of, services required to be performed by the Manager and the
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information. See "Management of the
Fund--Management and Advisory Arrangements". In addition, consistent with the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD"), the Manager may consider sales of shares of the Fund as a factor in
the

10
<PAGE> 13

selection of brokers or dealers to execute portfolio transactions for the Fund.
It is expected that the majority of the shares of the Fund will be sold by
Merrill Lynch.

Portfolio Turnover. While the Fund generally does not expect to engage in
trading for short-term gains, it will effect portfolio transactions without
regard to holding period if, in its management's judgment, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry or in general market, economic or financial
conditions. Accordingly, while the Fund anticipates that its annual portfolio
turnover rate should not exceed 150% under normal conditions, it is impossible
to predict portfolio turnover rates. For the fiscal years ended August 31, 1994
and August 31, 1995 the portfolio turnover rate was 112.68% and 80.41%,
respectively. Higher portfolio turnover involves tax consequences for investors
and correspondingly greater transaction costs in the form of the dealer spreads
and brokerage commissions, which are borne directly by the Fund. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases or sales of all
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of the securities in the portfolio during the year.

Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities, although it will limit such investments to 10% of its net
assets to the extent required by state law. Pursuant to that restriction, the
Fund may not invest in securities which cannot be readily resold because of
legal or contractual restrictions or which are not otherwise readily marketable,
including repurchase agreements maturing in more than seven days, if, regarding
all such securities, more than 15% (or 10%) of its net assets, taken at market
value, would be invested in such securities. Although not a fundamental policy,
the Fund will include over-the-counter ("OTC") options and the securities
underlying such options (to the extent provided under "Portfolio Strategies
Involving Options and Futures--Restrictions on OTC Options" in the Appendix
herein) in calculating the amount of its total assets subject to the limitation
on illiquid securities. The Fund will not change or modify this policy prior to
the change or modification by the Commission staff of its positions regarding
OTC options.

However, the Fund may purchase, without regard to the above limitation,
securities that are not registered under the Securities Act of 1933 (the
"Securities Act") but that can be offered and sold to "qualified institutional
buyers" under Rule 144A under the Securities Act, provided that the Fund's Board
of Directors, or the Manager pursuant to guidelines adopted by the Board,
continuously determines, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Board of Directors, however, will retain
oversight and is ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how this market for restricted
securities sold and offered under Rule 144A will develop, the Board of Directors
will carefully monitor the Fund's investments in these securities, focusing on
such factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these securities.

11
<PAGE> 14

The prices at which the trades are conducted do not reflect accrued interest on
the underlying obligation. Such agreements usually cover short periods, such as
under one week. Repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities transferred to
the purchaser. As a purchaser, the Fund will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement. In the
event of default by the seller under a repurchase agreement construed to be
collateralized loans, the underlying securities are not owned by the Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs or possible
losses in connection with disposition of the collateral. Repurchase agreements
maturing in more than seven days are deemed illiquid by the Commission and are
therefore subject to the Fund's investment restriction limiting investments in
securities that are not readily marketable to 15% of the Fund's net assets.

Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the United States
Government which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. This limitation is a
fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, as defined in
the Investment Company Act. During the period of this loan, the Fund receives
the income on the loaned securities and either receives the income on the
collateral or other compensation (i.e. negotiated loan premium or fee) for
entering into the loan and thereby increases its yield. In the event that the
borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the borrowed securities.

When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase or sell securities on a delayed delivery basis or a when-issued basis
at fixed purchase terms. These transactions arise when securities are purchased
or sold by the Fund with payment and delivery taking place in the future. The
purchase will be recorded on the date the Fund enters into the commitment and
the value of the obligation will thereafter be reflected in the calculation of
the Fund's net asset value. The value of the obligation on the delivery date may
be more or less than its purchase price. A separate account of the Fund will be
established with its custodian consisting of cash, cash equivalents or high
grade, liquid debt securities having a market value at all times at least equal
to the amount of the forward commitment.

INVESTMENT RESTRICTIONS

The Fund's investment activities are subject to further restrictions that
are described in the Statement of Additional Information. Investment
restrictions and policies which are fundamental policies may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities (which for this purpose and under the Investment Company Act
means the lesser of (a) 67% of the shares represented at a meeting at which more
than 50% of the outstanding shares are represented or (b) more than 50% of the
outstanding shares). Among its fundamental policies, the Fund may not invest
more than 25% of its total assets, taken at market value at the time of each
investment, in the securities of issuers in any particular industry (excluding
the U.S. Government and its agencies and instrumentalities).

12
<PAGE> 15

Investment restrictions and policies that are non-fundamental policies may
be changed by the Board of Directors without shareholder approval. As a
non-fundamental restriction, the Fund may not borrow amounts in excess of 20% of
its total assets, taken at market value, and then only from banks as a temporary
measure for extraordinary or emergency purposes such as the redemption of Fund
shares. As a non-fundamental policy, the Fund will not invest in securities
which cannot readily be resold because of legal or contractual restrictions or
which are not otherwise readily marketable, including repurchase agreements and
purchase and sale contracts maturing in more than seven days, if, regarding all
such securities, more than 15% of its total assets (or 10% of its total assets
as presently required by certain state laws) taken at market value would be
invested in such securities. Notwithstanding the foregoing, the Fund may
purchase without regard to this limitation securities that are not registered
under the Securities Act, but that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the Securities Act, provided that
the Fund's Board of Directors continuously determines, based on the trading
markets for the specific Rule 144A security, that it is liquid. The Board has
determined that securities which are freely tradeable in their primary market
offshore should be deemed liquid.

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Board of Directors of the Fund consists of six individuals, five of
whom are not "interested persons" of the Fund as defined in the Investment
Company Act. The Board of Directors of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies by the Investment Company Act.

The Directors of the Fund are:

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

JOE GRILLS--Member of the Committee of Investment of Employee Benefit
Assets of the Financial Executives Institute ("CIEBA"). Member of CIEBA's
Executive Committee; Member of the Investment Advisory Committee of the State of
New York Common Retirement Fund; Director, Duke Management Company and LaSalle
Street Fund.

WALTER MINTZ--Special Limited Partner of Cumberland Associates (investment
partnership).

MELVIN R. SEIDEN--President of Silbanc Properties, Ltd. (real estate,
investments and consulting).

STEPHEN B. SWENSRUD--Principal of Fernwood Associates (financial
consultants).

HARRY WOOLF**--Member of the editorial board of Interdisciplinary Science
Reviews; Director, Alex. Brown Mutual Funds, Advanced Technology Laboratories,
Family Health International and SpaceLabs Medical (medical equipment
manufacturing and marketing).

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

** Mr. Woolf is retiring from the Board of Directors as of December 31, 1995
pursuant to the Fund's retirement policy.

13
<PAGE> 16

MANAGEMENT AND ADVISORY ARRANGEMENTS

The Manager, which is owned and controlled by ML&Co., a financial services
holding company, acts as the manager to the Fund and provides the Fund with
management and investment advisory services. The Manager, or an affiliate of the
Manager, FAM, acts as the investment adviser for more than 125 other registered
investment companies. The Manager or FAM also offers portfolio management and
portfolio analysis services to individuals and institutions. As of November 30,
1995, the Manager and FAM had a total of approximately $194.2 billion in
investment company and other portfolio assets under management.

The agreement with the Manager (the "Management Agreement") provides that,
subject to the direction of the Board of Directors of the Fund, the Manager is
responsible for the actual management of the Fund's portfolio and for the review
of the Fund's holdings in light of its own research analysis and analyses from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Manager, subject to review by the
Board of Directors.

The Manager provides the portfolio managers for the Fund, who considers
analyses from various sources, makes the necessary decisions, and places
transactions accordingly. The Manager is also obligated to perform certain
administrative and management services for the Fund and is obligated to provide
all of the office space, facilities, equipment and personnel necessary to
perform its duties under the Management Agreement. The Manager has access to the
total securities research and economic facilities of Merrill Lynch.

The Fund pays the Manager a monthly fee at the annual rate of 0.65% of the
average daily net assets of the Fund. For the fiscal year ended August 31, 1995,
the management fee paid by the Fund to the Manager aggregated $560,426 (based on
average net assets of approximately $92.0 million). At August 31, 1995, the
Fund's net assets were approximately $142.5 million. At this asset level the
annual management fee would aggregate approximately $926,164.

The Management Agreement obligates the Fund to pay certain expenses
incurred in its operations including, among other things, the management fee,
legal and audit fees, registration fees, unaffiliated Directors' fees and
expenses, custodian and transfer agency fees, accounting costs, the costs of
issuing and redeeming shares, and certain of the costs of printing proxies,
shareholder reports, prospectuses and statements of additional information.

Accounting services are provided to the Fund by the Manager, and the Fund
reimburses the Manager for its costs in connection with such services. For the
fiscal year ended August 31, 1995, the Fund paid the Manager $72,042 for such
accounting services. For the period October 21, 1994 (commencement of
operations) to August 31, 1995, the annualized ratio of total expenses to
average net assets was 1.46% and 2.48% for Class A and Class B shares,
respectively. For the fiscal year ended August 31, 1995, the ratio of total
expenses to average net assets was 2.44% and 1.65% for Class C and Class D
shares, respectively.

Lawrence R. Fuller is primarily responsible for the day-to-day management
of the Fund's portfolio. Mr. Fuller is a Vice President of the Fund and has been
a Vice President of the Manager or its predecessors since 1992. From 1984 to
1992, Mr. Fuller served as a Senior Vice President and Director of Benefit
Capital Management.

14
<PAGE> 17

CODE OF ETHICS

The Board of Directors of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the Investment Company Act which incorporates the Code of
Ethics of the Manager (together, the "Codes"). The Codes significantly restrict
the personal investing activities of all employees of the Manager and, as
described below, impose additional, more onerous, restrictions on fund
investment personnel.

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

TRANSFER AGENCY SERVICES

Merrill Lynch Financial Data Services, Inc. (formerly known as Financial
Data Services, Inc.) (the "Transfer Agent"), which is a wholly-owned subsidiary
of ML & Co., acts as the Fund's transfer agent pursuant to a transfer agency,
dividend disbursing agency and shareholder servicing agency agreement (the
"Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement, the
Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. Pursuant to the
Transfer Agency Agreement, the Transfer Agent receives an annual fee of $11.00
per Class A or Class D shareholder account, $14.00 per Class B or Class C
shareholder account and nominal miscellaneous fees (e.g., account closing fees)
and is entitled to reimbursement for out-of-pocket expenses incurred by it under
the Transfer Agency Agreement. For the fiscal year ended August 31, 1995, the
Fund paid the Transfer Agent $219,735 pursuant to the Transfer Agency Agreement.
At November 30, 1995, the Fund had 6,592 Class A shareholder accounts, 11,854
Class B shareholder accounts, 5,879 Class C shareholder accounts and 1,431 Class
D shareholder accounts. At this level of accounts, the annual fee payable to the
Transfer Agent would aggregate approximately $336,515 plus miscellaneous and
out-of-pocket expenses.

PURCHASE OF SHARES

The Distributor, an affiliate of the Manager, FAM and Merrill Lynch, acts
as the distributor of the shares of the Fund. Shares of the Fund are offered
continuously for sale by the Distributor and other eligible tor and other
eligible securities dealers (including Merrill Lynch). Shares of the Fund may be
purchased from securities dealers or by mailing a purchase order directly to the
Transfer Agent. The minimum initial purchase is $1,000 except that the minimum
initial purchase for retirement plans is $100. The minimum subsequent purchase
is $50.00 ($1 for retirement plans).

The Fund offers its shares in four classes at a public offering price equal
to the next determined net asset value per share plus sales charges imposed
either at the time of purchase or on a deferred basis depending

15
<PAGE> 18

upon the class of shares selected by the investor under the Merrill Lynch Select
Pricing(SM) System, as described below. The applicable offering price for
purchase orders is based upon the net asset value of the Fund next determined
after receipt of the purchase orders by the Distributor. As to purchase orders
received by securities dealers prior to the close of business on the New York
Stock Exchange (generally, 4:00 p.m., New York time), which includes orders
received after the close of business on the previous day, the applicable
offering price will be based on the net asset value determined as of 15 minutes
after the close of business on the New York Stock Exchange on the day the order
is placed with the Distributor, provided the order is received by the
Distributor prior to 30 minutes after the close of business on the New York
Stock Exchange on that day. If the purchase orders are not received by the
Distributor prior to 30 minutes after the close of business on the New York
Stock Exchange, such orders shall be deemed received on the next business day.
Any order may be rejected by the Distributor or the Fund. The Fund or the
Distributor may suspend the continuous offering of the Fund's shares of any
class at any time in response to conditions in the securities markets or
otherwise and may thereafter resume such offering from time to time. Any order
may be rejected by the Distributor or the Fund. Neither the Distributor nor the
dealers are permitted to withhold placing orders to benefit themselves by a
price change. Merrill Lynch may charge its customers a processing fee (presently
$4.85) to confirm a sale of shares to such customers. Purchases directly through
the Transfer Agent are not subject to the processing fee.

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

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

16
<PAGE> 19

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

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

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

(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. CDSCs may be imposed if the redemption occurs within the
applicable CDSC time period. The charge will be assessed on an amount equal
to the lesser of the proceeds of redemption or the cost of the shares being
redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge
Alternatives--Class A and Class D Shares--Eligible Class A Investors."

(3) Reduced for purchases of $25,000 or more, and waived for purchases of Class
A shares by certain retirement plans in connection with certain investment
programs. Class A and Class D share purchases of $1,000,000 or more may not
be subject to an initial sales charge but, if the initial sales charge is
waived will be subject to a 1.0% CDSC for one year.

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

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

17
<PAGE> 20

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

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

- ---------------
* Rounded to the nearest one-hundredth percent.

** The initial sales charge may be waived on Class A and Class D share purchases
of $1,000,000 or more and on Class A share purchases by certain retirement
plan investors in connection with certain investment programs, made on or
after October 21, 1994. If the sales charge is waived in connection with a
purchase of $1,000,000 or more, such purchases will be subject to a CDSC of
1.0% if the shares are redeemed within one year after purchase. Class A share
purchases made prior to October 21, 1994 may be subject to a CDSC if the
shares are redeemed within one year of purchase at the following annual
rates: 1.00% on purchases of $1,000,000 to $2,500,000; 0.60% on purchases of
$2,500,001 to $3,500,000; 0.40% on purchases of $3,500,001 to $5,000,000; and
0.25% on purchases of more than $5,000,000 in lieu of paying an initial sales
charge. The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed. A sales
charge of 0.75% will be charged on purchases of $1,000,000 or more of Class A
or Class D shares by certain 401(k) plans.

The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and Class
D shares of the Fund will receive a concession equal to most of the sales
charge, they may be deemed to be underwriters under the Securities Act of 1933,
as amended (the "Securities Act").

During the period October 21, 1994 (commencement of operations) to August
31, 1995, the Fund sold 2,009,549 Class A shares for aggregate net proceeds to
the Fund of $21,624,913. The gross sales charges for the sale of Class A shares
of the Fund for that period were $7,234, of which $541 and $6,693 were received
by the Distributor and Merrill Lynch, respectively. During such period, the
Distributor received no CDSCs relating to the early redemption of Class A shares
purchased subject to front-end charge waivers. During the fiscal year ended
August 31, 1995, the Fund sold 695,327 Class D shares for aggregate net proceeds
of $7,169,960. The gross sales charges for the sale of Class D shares of the
Fund for the period were $98,184, of which $6,751 and $91,433 were received by
the Distributor and Merrill Lynch, respectively. During such period, the
Distributor received CDSCs of $735 with respect to redemptions within one year
after purchase of Class D shares purchased subject to front-end sales charge
waivers.

Eligible Class A Investors. Class A shares are offered to a limited group
of investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares. Investors who currently own Class A shares of the
Fund in a shareholder account, including participants in the Merrill Lynch
Blueprint(SM) Program, are entitled to purchase additional Class A shares of the
Fund in that account. Certain employer sponsored retirement or savings plans,
including eligible 401(k) plans, may purchase Class A shares of the Fund at net
asset value provided such plans meet the required minimum number of eligible
employees or required amount of assets advised by MLAM or any of its affiliates.
Class A shares are available at net asset value to corporate

18
<PAGE> 21

warranty insurance reserve fund programs provided that the program has $3
million or more initially invested in MLAM-advised mutual funds. Also eligible
to purchase Class A shares at net asset value are participants in certain
investment programs including TMA(SM) Managed Trusts to which Merrill Lynch
Trust Company provides discretionary trustee services and certain purchases made
in connection with the Merrill Lynch Mutual Fund Adviser program. In addition,
Class A shares will be offered at net asset value to ML & Co. and its
subsidiaries and their directors and employees and to members of the Boards of
MLAM-advised investment companies, including the Fund. Certain persons who
acquired shares of certain MLAM-advised closed-end funds who wish to reinvest
the net proceeds from a sale of their closed-end fund shares of common stock in
shares of the Fund also may purchase Class A shares of the Fund if certain
conditions set forth in the Statement of Additional Information are met (for
closed-end funds that commenced operations prior to October 21, 1994). For
example, Class A shares of the Fund and certain other MLAM-advised mutual funds
are offered at net asset value to shareholders of Merrill Lynch Senior Floating
Rate Fund, Inc. who wish to reinvest the net proceeds from a sale of certain of
their shares of common stock of Merrill Lynch Senior Floating Rate Fund, Inc. in
shares of such funds.

Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and D sales charges also may
be reduced under a Right of Accumulation and a Letter of Intention.

Class A shares are offered at net asset value to certain eligible Class A
investors as set forth above under "Eligible Class A Investors."

Class A and Class D shares are offered at net asset value to certain
employer sponsored retirement or savings plans and to Employee Access
Accounts(SM) available through employers which provide such plans.

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

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

Class D shares of the Fund are offered at net asset value to shareholders
of Merrill Lynch Municipal Strategy Fund, Inc. and Merrill Lynch High Income
Municipal Bond Fund, Inc. who wish to reinvest the net proceeds from a sale of
certain of their shares of common stock of those funds in shares of the Fund.

Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement or
Savings Plans, is set forth in the Statement of Additional Information.

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

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

19
<PAGE> 22

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

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

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

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

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

20
<PAGE> 23

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

<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
--------------------------------------------------------------- -----------------
<S> <C>
0-1...................................................... 4.00%
1-2...................................................... 3.00
2-3...................................................... 2.00
3-4...................................................... 1.00
4 and thereafter......................................... 0.00
</TABLE>

For the period October 21, 1994 (commencement of operations) to August 31,
1995, the Distributor received CDSCs of $61,480 with respect to redemption of
Class B shares, all of which were paid to Merrill Lynch.

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

To provide an example, assume an investor purchases 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the
applicable rate in the third year after purchase) for shares purchased on or
after October 21, 1994.

In the event that Class B shares are exchanged by certain retirement plans
for Class A shares in connection with a transfer to the Merrill Lynch Mutual
Fund Adviser ("MFA") program, the time period that such Class A shares are held
in the MFA program will be included in determining the holding period of Class B
shares reacquired upon termination of participation in the MFA program (see
"Shareholder Services--Exchange Privilege").

The Class B CDSC is waived on redemptions of shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
("IRA") or other retirement plan or following the death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a shareholder. The
Class B CDSC also is waived on redemptions of shares by certain eligible 401(a)
and eligible 401(k) plans. The CDSC also is waived for any Class B shares which
are purchased by eligible 401(k) or eligible 401(a) plans which are rolled over
into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such account at the time of redemption. The Class B CDSC also is waived for any
Class B shares which are purchased by a Merrill Lynch rollover IRA that was
funded by a rollover from a terminated 401(k) plan managed by the MLAM Private
Portfolio Group and held in such account at the time of redemption.

21
<PAGE> 24

Additional information concerning the waiver of the Class B CDSC is set forth in
the Statement of Additional Information.

Contingent Deferred Sales Charge--Class C Shares. Class C shares which are
redeemed within one year after purchase may be subject to a 1.0% CDSC charged as
a percentage of the dollar amount subject thereto. The charge will be assessed
on an amount equal to the lesser of the proceeds of redemption or the cost of
the shares being redeemed. Accordingly, no Class C CDSC will be imposed on
increases in net asset value above the initial purchase price. In addition, no
Class C CDSC will be assessed on shares derived from reinvestment of dividends
or capital gains distributions.

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

For the year ended August 31, 1995, the Distributor received CDSCs of
$10,532 with respect to redemptions of Class C shares, all of which were paid to
Merrill Lynch.

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

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

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

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

22
<PAGE> 25

exchange will apply, and the holding period for the shares exchanged will be
tacked onto the holding period for the shares acquired.

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

The Conversion Period also is modified for retirement plan investors who
participate in the MFA program. While participating in the MFA program, such
investors will hold Class A shares. If these Class A shares were acquired
through exchange of Class B shares (see "Shareholder Services--Exchange
Privilege"), then the holding period for such Class A shares will be "tacked" to
the holding period of the Class B shares originally held for purposes of
calculating the Conversion Period on Class B shares acquired upon termination of
participations in the MFA program.

DISTRIBUTION PLANS

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

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

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

23
<PAGE> 26

For the period October 21, 1994 (commencement of operations) to August 31,
1995, the Fund paid the Distributor $295,005 pursuant to the Class B
Distribution Plan (based on average net assets subject to the Class B
Distribution Plan of approximately $34.3 million), all of which was paid to
Merrill Lynch for providing account maintenance and distribution-related
activities and services in connection with Class B shares. For the fiscal year
ended August 31, 1995, the Fund paid the Distributor $409,486 pursuant to the
Class C Distribution Plan (based on average net assets subject to the Class C
Distribution Plan of approximately $40.9 million), all of which was paid to
Merrill Lynch for providing account maintenance and distribution-related
activities and services in connection with Class C shares. For the fiscal year
ended August 31, 1995, the Fund paid the Distributor $23,581 pursuant to the
Class D Distribution Plan (based on average net assets subject to the Class D
Distribution Plan of approximately $9.4 million), all of which was paid to
Merrill Lynch for providing account maintenance services in connection with
Class D shares.

At November 30, 1995, the net assets of the Fund subject to the Class B
Distribution Plan aggregated approximately $79.1 million. At this asset level,
the annual fee payable pursuant to the Class B Distribution Plan would aggregate
approximately $790,710. At November 30, 1995, the net assets of the Fund subject
to the Class C Distribution Plan aggregated approximately $48.5 million. At this
asset level, the annual fee payable pursuant to the Class C Distribution Plan
would aggregate approximately $485,426. At November 30, 1995, the net assets of
the Fund subject to the Class D Distribution Plan aggregated approximately $16.0
million. At this asset level, the annual fee payable pursuant to the Class D
Distribution Plan would aggregate approximately $39,910.

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

With respect to Class B shares, as of August 31, 1995, direct cash
revenues, for the period since commencement of operations, exceeded direct cash
expenses by $255,169 (.40% of Class B net assets at that date). With respect to
Class C shares, as of August 31, 1995, direct cash revenues, for the period
since commencement of operations, exceeded direct cash expenses by $450,714
(1.02% of Class C net assets at that date).

With respect to Class B shares, for the period from commencement of
operations to December 31, 1994, fully allocated accrual expenses incurred by
the Distributor and Merrill Lynch, exceeded fully allocated accrual revenues by
$526,000 (3.46% of Class B net assets at that date).

24
<PAGE> 27

LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES

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

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

REDEMPTION OF SHARES

The Fund is required to redeem for cash all shares of the Fund upon receipt
of a written request in proper form. The redemption price is the net asset value
per share next determined after the initial receipt of proper notice of
redemption, except for any contingent deferred sales charge which may be
applicable. Shareholders liquidating their holdings will receive upon redemption
all dividends reinvested through the date of redemption. The value of shares at
the time of redemption may be more or less than the shareholder's cost,
depending on the market value of the securities held by the Fund at such time.

25
<PAGE> 28

REDEMPTION

A shareholder wishing to redeem shares may do so by tendering the shares
directly to the Transfer Agent, Merrill Lynch Financial Data Services, Inc.,
P.O. Box 45289, Jacksonville, Florida 32232-5289. Redemption requests delivered
other than by mail should be delivered to Merrill Lynch Financial Data Services,
Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper notice
of redemption in the case of shares deposited with the Transfer Agent may be
accomplished by a written letter requesting redemption. Proper notice of
redemption in the case of shares for which certificates have been issued may be
accomplished by a written letter as noted above accompanied by certificates for
the shares to be redeemed. Redemption requests should not be sent to the Fund. A
redemption request requires the signature(s) of all persons in whose name(s) the
shares are registered, signed exactly as his (their) name(s) appear(s) on the
Transfer Agent's register or on the certificate, as the case may be. The
signature(s) on the redemption request must be guaranteed by an "eligible
guarantor institution" (including, for example, Merrill Lynch branch offices and
certain other financial institutions) as such term is defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
existence and validity of which may be verified by the Transfer Agent through
the use of industry publications. Notarized signatures are not sufficient. In
certain instances, the Transfer Agent may require additional documents such as,
but not limited to, trust instruments, death certificates, appointments as
executor or administrator, or certificates of corporate authority. For
shareholders redeeming directly with the Transfer Agent, payment will be mailed
within seven days of receipt of a proper notice of redemption.

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

REPURCHASE

The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request for
repurchase is received by the dealer prior to the close of business on the New
York Stock Exchange (generally, 4:00 p.m., New York time) on the day received,
and such request is received by the Fund from such dealer not later than 30
minutes after the close of business on the New York Stock Exchange on the same
day. Dealers have the responsibility of submitting such repurchase requests to
the Fund not later than 30 minutes after the close of business on the New York
Stock Exchange in order to obtain that day's closing price.

These repurchase arrangements are for the convenience of shareholders and
do not involve a charge by the Fund other than any applicable CDSC in the case
of Class B shares. Securities firms which do not have selected dealer agreements
with the Distributor may impose a transaction charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its
customers a processing fee (presently $4.85) to confirm a repurchase of shares.
Redemptions directly through the Fund's Transfer Agent are not subject to the
processing fee. The Fund reserves the right to reject any order for repurchase,
which right of rejection might affect adversely shareholders seeking redemption
through the repurchase procedure. However, a shareholder whose order for
repurchase is rejected by the Fund may redeem shares as set forth above.

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<PAGE> 29

For a shareholder redeeming through his listed securities dealer other than
Merrill Lynch, payment for fractional shares will be made by the Transfer Agent
directly to the shareholder and payment for full shares will be made by the
securities dealer. A shareholder redeeming through Merrill Lynch will receive
payment for both full and fractional shares through Merrill Lynch. Redemption
payments will be made within seven days of the proper tender of the
certificates, if any, and stock power or letter requesting redemption, in each
instance with signatures guaranteed as noted above.

REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES

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

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services and investment plans
described below which are designed to facilitate investment in its shares. Full
details as to each of such services, copies of the various plans described below
and instructions as to how to participate in the various plans and services, or
to change options with respect thereto, can be obtained from the Fund by calling
the telephone number on the cover page or from the Distributor or Merrill Lynch.
Certain of these services are available only to U.S. investors. Included in the
Fund's shareholder services are the following:

Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive statements, at least
quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of
ordinary income dividends and long-term capital gain distributions. The
statements will also show any other activity in the account since the preceding
statement. Shareholders may make additions to their Investment Account any time
by mailing a check directly to the Transfer Agent. Shareholders may also
maintain their accounts through Merrill Lynch. Upon the transfer of shares out
of a Merrill Lynch brokerage account, an Investment Account in the transferring
shareholder's name will be opened, automatically, without charge, at the
Transfer Agent. Shareholders considering transferring their Class A or Class D
shares from Merrill Lynch to another brokerage firm or financial institution
should be aware that, if the firm to which the Class A or Class D shares are to
be transferred will not take delivery of shares of the Fund, a shareholder
either must redeem the Class A or Class D shares (paying any applicable CDSC) so
that the cash proceeds can be transferred to the account at the new firm or such
shareholder must continue to maintain an Investment Account at the Transfer
Agent for those Class A or Class D shares. Shareholders interested in
transferring their Class B or Class C shares from Merrill Lynch and who do not
wish to have an Investment Account maintained for such shares at the Transfer
Agent may request their new brokerage firm to maintain such shares in an account
registered in the name of the brokerage firm for the benefit of the shareholder
at the Transfer Agent. If the new brokerage firm

27
<PAGE> 30

is willing to accommodate the shareholder in this manner, the shareholder must
request that he or she be issued certificates for his or her shares, and then
must turn the certificates over to the new firm for re-registration as described
in the preceding sentence. Shareholders considering transferring a tax-deferred
retirement account such as an IRA from Merrill Lynch to another brokerage firm
or financial institution should be aware that, if the firm to which the
retirement account is to be transferred will not take delivery of shares of the
Fund, a shareholder must either redeem the shares (paying any applicable
contingent deferred sales charge) so that the cash proceeds can be transferred
to the account at the new firm, or such shareholder must continue to maintain a
retirement account at Merrill Lynch for those shares.

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

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

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

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

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

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

Class A, Class B, Class C and Class D shares also are exchangeable for
shares of certain MLAM-advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares are
held in a money

28
<PAGE> 31

market fund, however, will not count toward satisfaction of the holding period
requirement for reduction of any CDSC imposed on such shares, if any, and, with
respect to Class B shares, toward satisfaction of the Conversion Period.

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

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

The exchange privilege is modified with respect to certain retirement plans
which participate in the MFA program. Such retirement plans may exchange Class
B, Class C or Class D shares that have been held for at least one year for Class
A shares of the same fund on the basis of relative net asset values in
connection with the commencement of participation in the MFA program, i.e., no
CDSC will apply. The one-year holding period does not apply to shares reacquired
through reinvestment of dividends. Upon termination of participation in the MFA
program, Class A shares will be re-exchanged for the class of shares originally
held. For purposes of computing any CDSC that may be payable upon redemption of
Class B or Class C shares so reacquired, or the Conversion Period for Class B
shares so reacquired, the holding period for the Class A shares will be "tacked"
to the holding period for the Class B or Class C shares originally held. The
Fund's exchange privilege also is modified with respect to purchases of Class A
and Class D shares by nonretirement plan investors under the MFA program. First,
the initial allocation of assets is made under the MFA program. Then, any
subsequent exchange under the MFA program of Class A or Class D shares of a
MLAM-advised mutual fund for Class A or Class D shares of the Fund will be made
solely on the basis of the relative net asset values of the shares being
exchanged. Therefore, there will not be a charge for any difference between the
sales charge previously paid on the shares of the other MLAM-advised mutual fund
and the sales charge payable on the shares of the Fund being acquired in the
exchange under the MFA program.

Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions are reinvested automatically in full
and fractional shares of the Fund, without sales charge, at the net asset value
per share next determined on the ex-dividend date of such dividend or
distribution. A shareholder whose account is maintained through the Transfer
Agent may at any time, by written notification or telephone call
(1-800-MER-FUND) to the Transfer Agent, elect to have subsequent dividends or
capital gains distributions, or both, paid in cash, rather than reinvested, in
which event payment will be mailed or directly deposited on or about the payment
date. Cash payments can also be directly deposited to the shareholder's bank
account. A shareholder whose account is maintained through Merrill Lynch may, at
any time, by written notification to Merrill Lynch, elect to have both dividends
and capital gains distributions paid in cash, rather than reinvested. No CDSC
will be imposed on redemption of shares issued as a result of the automatic
reinvestment of dividends or capital gains distributions.

Systematic Withdrawal Plans. A Class A or Class D shareholder may elect to
receive systematic withdrawal payments from his Investment Account in the form
of payments by check or through automatic payment by direct deposit to his bank
account on either a monthly or quarterly basis. A Class A or Class D

29
<PAGE> 32

shareholder whose shares are held within a CMA(R), CBA(R) or Retirement Account
may elect to have shares redeemed on a monthly, bimonthly, quarterly, semiannual
or annual basis through the Systematic Redemption Program, subject to certain
conditions.

Automatic Investment Plans. Regular additions of Class A, Class B, Class C
or Class D shares may be made to an investor's Investment Account by
pre-arranged charges of $50 or more to his or her regular bank account.
Investors who maintain CMA(R) or CBA(R) accounts may arrange to have periodic
investments made in the Fund in their CMA(R) or CBA(R) accounts or in certain
related accounts in amounts of $100 or more ($1 for retirement plans) through
the CMA(R) or CBA(R) Automated Investment Program.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Subject to policies established by the Board of Directors of the Fund, the
Manager is responsible for the Fund's portfolio decisions and the placing of the
Fund's portfolio transactions. With respect to such transactions, the Manager
seeks to obtain the best net results for the Fund, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution and operational facilities of
the firm involved and the firm's risk in positioning a block of securities.
While the Manager generally seeks reasonably competitive commission rates, the
Fund does not necessarily pay the lowest commission or spread available.

The Fund has no obligation to deal with any broker in the execution of
transactions for its portfolio securities. The Fund has been informed by Merrill
Lynch that it will in no way, at any time, attempt to influence or control the
placing by the Manager or by the Fund of orders for brokerage transactions.
Brokers and dealers, including Merrill Lynch, which provide supplemental
investment research to the Manager may receive orders for transactions by the
Fund. Supplemental investment research received by the Manager may also be used
in connection with other management accounts of the Manager and its affiliates.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Manager under the Management Agreement. The
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information. Whether or not a particular
broker-dealer sells shares of the Fund neither qualifies nor disqualifies that
broker-dealer to execute transactions for the Fund.

PERFORMANCE DATA

From time to time the Fund may include its average annual total return for
various specified periods in advertisements or information furnished to present
or prospective shareholders. Average annual total return is computed separately
for Class A, Class B, Class C and Class D shares in accordance with a formula
specified by the Commission.

Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any capital gains or losses on portfolio investments over
such periods) that would equate the initial amount invested to the redeemable
value of such investment at the end of each period. Average annual total return
will be computed assuming all dividends and distributions are reinvested and
taking into account all applicable recurring and nonrecurring expenses,
including the maximum sales charge in the case of Class A and Class D shares and
the contingent deferred sales charge that would be applicable to a complete
redemption of the investment at the end of the

30
<PAGE> 33

specified period in the case of Class B and Class C shares. Dividends paid by
the Fund with respect all shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that account maintenance fees, distribution charges and
any incremental transfer agency costs relating to each class of shares will be
borne exclusively by that class. The Fund will include performance data for all
classes of shares of the Fund in any advertisement or information including
performance data of the Fund.

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

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

On occasion, the Fund may compare its performance to that of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average or
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., and CDA Investment Technology, Inc. or to data contained in
publications such as Money Magazine, U.S. News & World Report, Business Week,
Forbes Magazine and Fortune Magazine or other industry publications. As with
other performance data, performance comparisons should not be considered
indicative of the Fund's relative performance for any future period. The Fund
may also compare historical performance of U.S. equity securities to the
performance over the same period of time of other financial instruments issued
by domestic issuers in its advertising literature. In addition, from time to
time the Fund may include the Fund's risk-adjusted performance ratings assigned
by Morningstar Publications, Inc. in advertising or supplemental sales
literature.

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<PAGE> 34

ADDITIONAL INFORMATION

DIVIDENDS AND DISTRIBUTIONS

It is the Fund's intention to distribute substantially all of its net
investment income, if any. Dividends from such net investment income are paid at
least annually. All net realized long- or short-term capital gains, if any, are
distributed to the Fund's shareholders at least annually. See "Additional
Information--Determination of Net Asset Value" below. Dividends and
distributions may be reinvested automatically in shares of the Fund, at net
asset value without a sales charge. Shareholders may elect in writing to receive
any such dividends or distributions, or both, in cash. See "Shareholder
Services--Automatic Reinvestment of Dividends and Capital Gains Distributions"
for information as to how to elect either dividend reinvestment or cash
payments. Dividends and distributions are taxable to shareholders as described
below whether they are reinvested in shares of the Fund or received in cash.
From time to time, the Fund may declare a special distribution at or about the
end of the calendar year in order to comply with a Federal income tax
requirement that certain percentages of its ordinary income and capital gains be
distributed during the calendar year.

The per share dividends and distributions on each class of shares will be
reduced as a result of any account maintenance, distribution and transfer agency
fees applicable to that class. See "Determination of Net Asset Value" below.

Certain gains or losses attributable to foreign currency related gains or
losses from certain of the Fund's investments may increase or decrease the
amount of the Fund's income available for distribution to shareholders. If such
losses exceed other income during a taxable year, (a) the Fund would not be able
to make any ordinary income dividend distributions, and (b) distributions made
before the losses were realized would be recharacterized as a return of capital
to shareholders, rather than as an ordinary income dividend, reducing each
shareholder's tax basis in Fund shares for Federal income tax purposes. For a
more detailed discussion of the Federal tax considerations relevant to foreign
currency transactions, see "Taxes" below.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of all classes of the Fund is determined
once daily 15 minutes after the close of business on the New York Stock Exchange
(generally, 4:00 p.m., New York time), on each day during which the New York
Stock Exchange is open for trading. Any assets or liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or dealers
on the day of valuation. The net asset value is computed by dividing the market
value of the securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time. Expenses, including the management fees payable to the
Manager and any account maintenance and/or distribution fees payable to the
Distributor, are accrued daily. The Fund employs Merrill Lynch Securities
PricingSM Service ("MLPS") an affiliate of the Manager, to provide certain
securities prices for the Fund. During the fiscal year ended August 31, 1995,
the Fund did not pay MLPS a fee for such service.

The per share net asset value of Class A shares generally will be higher
than the per share net asset value of shares of the other classes, reflecting
the daily expense accruals of the account maintenance, distribution and higher
transfer agency fees applicable with respect to the Class B and Class C shares
and the daily

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<PAGE> 35

expense accruals of the account maintenance fees applicable with respect to the
Class D shares; moreover, the per share net asset value of Class D shares
generally will be higher than the per share net asset value of Class B and Class
C shares, reflecting the daily expense accruals of the distribution and higher
transfer agency fees applicable with respect to Class B and Class C shares. It
is expected, however, that the per share net asset value of the classes will
tend to converge (although not necessarily meet) immediately after the payment
of dividends or distributions which will differ by approximately the amount of
the expense accrual differentials between the classes.

Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which securities are traded, as
of the close of business on the day the securities are being valued, or, lacking
any sales, at the last available bid price. In cases where securities are traded
on more than one exchange, the securities are valued on the exchange designated
by or under the authority of the Board of Directors as the primary market.
Securities traded in the OTC market are valued at the last available bid price
in the OTC market prior to the time of valuation. When the Fund writes a call
option, the amount of the premium received is recorded on the books of the Fund
as an asset and an equivalent liability. The amount of the liability is
subsequently valued to reflect the current market value of the option written,
based upon the last sale price in the case of exchange-traded options or, in the
case of options traded in the over-the-counter market, the last asked price.
Options purchased by the Fund are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the last bid price. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith under the direction of the Board of Directors of the
Fund.

TAXES

The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the "shareholders"). The
Fund intends to distribute substantially all of such income.

Dividends paid by the Fund from its ordinary income or from an excess of
net short-term capital gains over net long-term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses (including gains or
losses from certain transactions in futures and options) ("capital gain
dividends") are taxable to shareholders as long-term capital gains, regardless
of the length of time the shareholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or less, however, will be
treated as long-term capital loss to the extent of any capital gain dividends
received by the shareholder. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming the shares are held as a capital asset).

33
<PAGE> 36

previous October, November or December to shareholders of record on a specified
date in one of such months, then such dividend will be treated for tax purposes
as being paid by the Fund and received by its shareholders on December 31 of the
year in which such dividend was declared.

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

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

Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.

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

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

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

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

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<PAGE> 37

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

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

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

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

ORGANIZATION OF THE FUND

The Fund was incorporated under Maryland law on April 30, 1992. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and Class
D Common Stock, each of which consists of 100,000,000 shares. Shares of Class A,
Class B, Class C and Class D Common Stock represent an interest in the same
assets of the Fund and are identical in all respects except that Class B, Class
C and Class D shares bear certain expenses related to the account maintenance
fee relating to such shares and Class B and Class C shares bear certain expenses
related to the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to account maintenance and distribution
expenditures, as applicable. See "Purchase of Shares". The Fund has received an
order from the Commission permitting the issuance and sale of multiple classes
of common stock. The Directors of the Fund may classify and reclassify the
shares of the Fund into additional classes of common stock at a future date.

Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matters submitted to a shareholder vote. The Fund does not intend to
hold an annual meeting of shareholders in any year in which the Investment
Company Act does not require shareholders to elect Directors. Also, the by-laws
of the Fund require that a special meeting of shareholders be held upon the
written request of at least 10% of the outstanding shares of the Fund entitled
to vote at such meeting, if they comply with applicable Maryland law. Voting
rights for Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive rights. Shares have the conversion rights
described in this Prospectus. Each share of common stock is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund upon liquidation or dissolution after satisfaction of
outstanding liabilities, except that, as noted above, expenses related to the
distribution of the Class B, Class C, and Class D shares bear certain additional
expenses.

SHAREHOLDER INQUIRIES

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

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<PAGE> 38

SHAREHOLDER REPORTS

Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts the shareholder should notify in writing:

Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, FL 32232-5289

The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this
please call your Merrill Lynch financial consultant or Merrill Lynch Financial
Data Services, Inc. at 800-637-3863.

36
<PAGE> 39

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

NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH
BLUEPRINT(SM) PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINTSM PROGRAM
APPLICATION BY CALLING TOLL FREE (800) 637-3766.
- --------------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION

I, being of legal age, wish to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C
shares / / Class D shares
of Merrill Lynch Fundamental Growth Fund, Inc. and establish an Investment
Account as described in the Prospectus. In the event that I am not eligible to
purchase Class A shares, I understand that Class D shares will be purchased.

Basis for establishing an Investment Account:

A. I enclose a check for $.......... payable to Merrill Lynch Financial
Data Services, Inc., as an initial investment (minimum $1,000). I understand
that this purchase will be executed at the applicable offering price next to
be determined after this Application is received by you.

B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the Right of Accumulation as outlined in the Statement of
Additional Information: (Please list all funds. Use a separate sheet of paper
if necessary.)

<TABLE>
<S> <C>
1. .......................................................... 4. ..........................................................

2. .......................................................... 5. ..........................................................

3. .......................................................... 6. ..........................................................
</TABLE>

Name............................................................................
First Name Initial Last Name

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

<TABLE>
<S> <C>
Address......................................................

............................................................. Name and Address of Employer.................................
(Zip Code)

Occupation ................................................... .............................................................

............................................................. .............................................................

Signature of Owner Signature of Co-Owner (if any)

</TABLE>

(In the case of co-owner, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.)
- --------------------------------------------------------------------------------
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS

<TABLE>
<S> <C> <C> <C> <C> <C>
Ordinary Income Dividends Long-Term Capital Gains
--------------------------------- ---------------------------------
SELECT / / Reinvest SELECT / / Reinvest
ONE: / / Cash ONE: / / Cash
--------------------------------- ---------------------------------
</TABLE>

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

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

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

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

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

Name on your Account............................................................

Bank Name.......................................................................

Bank Number ....................... Account Number..............................

Bank Address....................................................................

I agree that this authorization will remain in effect until I provide written
notification to Merrill Lynch Financial Data Services, Inc. amending or
terminating this service.

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

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

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

37
<PAGE> 40

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

3. SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER

---------------------------------------------
/ /
---------------------------------------------

Social Security Number or Taxpayer Identification Number

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

INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING AND IF
YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS BEEN
TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS CERTIFICATION TO
OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.

<TABLE>
<S> <C>
............................................................. ............................................................
Signature of Owner Signature of Co-Owner (if any)
</TABLE>

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

4. LETTER OF INTENTION--CLASS A AND D SHARES ONLY (SEE TERMS AND CONDITIONS IN
THE STATEMENT OF ADDITIONAL INFORMATION)

<TABLE>
<S> <C>
..................., 19.......
Dear Sir/Madam: Date of initial purchase
</TABLE>

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

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

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

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

<TABLE>
<S> <C>
By............................................................... ...............................................................
Signature of Owner Signature of Co-Owner
(If registered in joint names, both must sign)
</TABLE>

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

<TABLE>
<S> <C>
(1) Name ................................................... (2) Name....................................................

Account Number ............................................ Account Number..............................................
</TABLE>

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

5. FOR DEALER ONLY

Branch Office, Address, Stamp.

This form when completed should be mailed to:

Merrill Lynch Fundamental Growth Fund, Inc.

c/o Merrill Lynch Financial Data Services, Inc.

P.O. Box 45289
Jacksonville, Florida 32232-5289

We hereby authorize Merrill Lynch Funds Distributor, Inc. to act as our agent in
connection with transactions under this authorization form and agree to
notify the Distributor of any purchases made under a Letter of Intention or
Systematic Withdrawal Plan. We guarantee the Shareholder's signature.

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

By .............................................................................
Authorized Signature of Dealer

/ / / / / / / / / ..............................
Branch-Code F/C No. F/C Last Name
/ / / / / / / / /
Dealer's Customer Account No.

38
<PAGE> 41

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.--AUTHORIZATION FORM (PART 2)
- --------------------------------------------------------------------------------

NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE SYSTEMATIC WITHDRAWAL PLAN OR THE
AUTOMATIC INVESTMENT PLANS ONLY.

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

1. ACCOUNT REGISTRATION
<TABLE>
<S> <C>
------------------------------------
Name of Owner.......................................................................
------------------------------------
Social Security No.
or Taxpayer Identification No.
Name of Co-Owner (if any)...........................................................
Address.............................................................................
.................................................................................... Account Number...........................
(if existing account)

</TABLE>

- --------------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)

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

SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE): / / $......
or / / ......% of the current value of / / Class A or / / Class D shares in the
account.

SPECIFY WITHDRAWAL METHOD: / / check or / / direct deposit to bank account
(check one and complete part (a) or (b) below):

DRAW CHECKS PAYABLE (CHECK ONE)

(a) I hereby authorize payment by check
/ / as indicated in Item 1.
/ / to the order of..........................................................

Mail to (check one)
/ / the address indicated in Item 1.
/ / Name (please print)......................................................

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

...........................................................................

Signature of Owner
..............................................................................
Date............................................................................

Signature of Co-Owner (if any)..................................................

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

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

Name on your account............................................................

Bank Name.......................................................................

Bank Number .............................................................
Account Number..................................................................

Bank Address....................................................................

......................................................................

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

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

(if joint account, both must sign)

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

39
<PAGE> 42

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.--AUTHORIZATION FORM (PART
2)--(CONTINUED)
- --------------------------------------------------------------------------------

3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN

I hereby request that Merrill Lynch Financial Data Services, Inc. draw an
automated clearing house ("ACH") debit on my checking account as described below
each month to purchase: (choose one)

/ / Class A shares / / Class B shares / / Class C shares / / Class D shares

of Merrill Lynch Fundamental Growth Fund, Inc., subject to the terms set forth
below. In the event that I am not eligible to purchase Class A shares, I
understand that Class D shares will be purchased.

MERRILL LYNCH FINANCIAL DATA SERVICES, INC.

You are hereby authorized to draw an ACH debit each month on my bank account for
investment in Merrill Lynch Fundamental Growth Fund, Inc. as indicated below:

Amount of each check or ACH debit $..........................................

Account Number...............................................................
Please date and invest ACH debits on the 20th of each month beginning

.................................. or as soon as possible thereafter.

(month)

I agree that you are preparing these ACH debits voluntarily at my request and
that you shall not be liable for any loss arising from any delay in preparing or
failure to prepare any such debit. If I change banks or desire to terminate or
suspend this program, I agree to notify you promptly in writing. I hereby
authorize you to take any action to correct erroneous ACH debits of my bank
account or purchases of fund shares including liquidating shares of the Fund and
credit my bank account. I further agree that if a debit is not honored upon
presentation, Merrill Lynch Financial Data Services, Inc. is authorized to
discontinue immediately the Automatic Investment Plan and to liquidate
sufficient shares held in my account to offset the purchase made with the
dishonored debit.

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

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

AUTHORIZATION TO HONOR ACH DEBITS DRAWN BY MERRILL LYNCH FINANCIAL DATA
SERVICES, INC.

To..........................................................................Bank
(Investor's Bank)

Bank Address....................................................................

City .................... State ........ Zip Code...............................

As a convenience to me, I hereby request and authorize you to pay and charge to
my account ACH debits drawn on my account by and payable to Merrill Lynch
Financial Data Services, Inc., I agree that your rights in respect to each such
debit shall be the same as if it were a check drawn on you and signed personally
by me. This authority is to remain in effect until revoked by me in writing.
Until you receive such notice, you shall be fully protected in honoring any such
debit. I further agree that if any such debit be dishonored, whether with or
without cause and whether intentionally or inadvertently, you shall be under no
liability.

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

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

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

40
<PAGE> 43

APPENDIX

The Fund is authorized to engage in various portfolio hedging strategies.
These strategies are described in more detail below:

Writing Covered Options. The Fund is authorized to write (i.e., sell)
covered call options on the securities in which it may invest and to enter into
closing purchase transactions with respect to certain of such options. A covered
call option is an option where the Fund in return for a premium gives another
party a right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects a
closing purchase transaction. A closing purchase transaction cancels out the
Fund's position as the writer of an option by means of an offsetting purchase of
an identical option prior to the expiration of the option it has written.
Covered call options serve as a partial hedge against the price of the
underlying security declining.

The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options, which means that so
long as the Fund is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By writing a
put, the Fund will be obligated to purchase the underlying security at a price
that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. The Fund may engage in
closing transactions in order to terminate put options that it has written. The
Fund will not write put options if the aggregate value of the obligations
underlying the put shall exceed 50% of the Fund's net assets.

The exchanges on which the Fund intends to conduct options transactions
generally have established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not covered)
that may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). "Trading limits" are imposed on the maximum number of
contracts that any person may trade on a particular trading day. The Manager
does not believe that these trading and position limits will have any adverse
impact on the portfolio strategies for hedging the Fund's portfolio. The Fund
will not write covered put options or covered call options on any stock index if
the cash, cash equivalents, liquid debt securities, or other assets used as
cover for such options have an aggregate value of greater than 50% of the Fund's
net assets.

Purchasing Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option the Fund has a right to sell the underlying security at the exercise
price, thus limiting the Fund's risk of loss through a decline in the market
value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
costs. Prior to its

A-1
<PAGE> 44

expiration, a put option may be sold in a closing sale transaction and profit or
loss from the sale will depend on whether the amount received is more or less
than the premium paid for the put option plus the related transaction costs. A
closing sale transaction cancels out the Fund's position as the purchaser of an
option by means of any offsetting sale of an identical option proper to the
expiration of the option it has purchased.

In certain circumstances, the Fund may purchase call options on securities
held in its portfolio on which it has written call options or on securities
which it intends to purchase. The Fund will not purchase options on securities
(including stock index options discussed below) if as a result of such purchase,
the aggregate cost of all outstanding options on securities held by the Fund
would exceed 5% of the market value of the Fund's total assets.

Stock Index Options and Futures and Financial Futures. The Fund is
authorized to engage in transactions in stock index options and futures and
financial futures, and related options on such futures. The Fund may purchase or
write put and call options on stock indices to hedge against the risks of
market-wide stock price movement in the securities in which the Fund invests.
Options on indices are similar to options on securities except that on exercise
or assignment, the parties to the contract pay or receive an amount of cash
equal to the difference between the closing value of the index and the exercise
price of the option times a specified multiple. The Fund may invest in stock
index options based on a broad market index, or based on a narrow index
representing an industry or market segment.

The Fund may also purchase and sell stock index futures contracts and
financial futures contracts ("futures contracts") as a hedge against adverse
changes in the market value of its portfolio securities as described below. A
futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract to
sell a security for a set price on a future date. Unlike most other futures
contracts, a stock index futures contract does not require actual delivery of
securities, but results in cash settlement based upon the difference in value of
the index between the time the contract was entered into and the time of its
settlement. The Fund may effect transactions in stock index futures contracts in
securities and financial futures contracts in United States Government and
agency securities and corporate debt securities. Transactions by the Fund in
stock index futures and financial futures are subject to limitations as
described below under "Restrictions on the Use of Futures Transactions".

The Fund may sell futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When the Fund is not fully
invested in the securities markets and anticipates a significant market advance,
it may purchase futures in order to gain rapid market exposure that may in part
or entirely offset increases in the cost of securities that the Fund intends to
purchase. As such purchases are made, an equivalent amount of futures contracts
will be terminated by offsetting sales. The Manager does not consider purchases
of futures contracts to be a speculative practice under these circumstances. It
is anticipated that, in a substantial majority of these transactions, the Fund
will purchase such securities upon termination of the long futures position,
whether the long position is the purchase of a futures contract or the purchase
of a call option or the writing of a put option on a future, but under unusual
circumstances (e.g., the Fund experiences a significant amount of redemptions),
a long futures position may be terminated without the corresponding purchase of
securities.

The Fund may sell financial futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market values of debt securities which may be held by the Fund as a
temporary defensive measure will fall, thus reducing the net asset value of the
Fund. However, as interest rates

A-2
<PAGE> 45

rise, the value of the Fund's short position in the futures contract will also
tend to increase, thus offsetting all or a portion of the depreciation in the
market value of the Fund's investments which are being hedged. While the Fund
will incur commission expenses in selling and closing out futures positions,
these commissions are generally less than the transaction expenses which the
Fund would have incurred had the Fund sold portfolio securities in order to
reduce its exposure to increases in interest rates. The Fund also may purchase
financial futures contracts in anticipation of a decline in interest rates when
it is not fully invested in a particular market in which it intends to make
investments to gain market exposure that may in part or entirely offset an
increase in the cost of securities it intends to purchase. It is anticipated
that, in a substantial majority of these transactions, the Fund will purchase
securities upon termination of the futures contract.

The Fund also has authority to purchase and write call and put options on
futures contracts and stock indices in connection with its hedging activities.
Generally, these strategies are utilized under the same market and market sector
conditions (i.e., conditions relating to specific types of investments) in which
the Fund enters into futures transactions. The Fund may purchase put options or
write call options on futures contracts and stock indices rather than selling
the underlying futures contract in anticipation of a decrease in the market
value of its securities. Similarly, the Fund may purchase call options, or write
put options on futures contracts and stock indices, as a substitute for the
purchase of such futures to hedge against the increased cost resulting from an
increase in the market value of securities which the Fund intends to purchase.

The Fund may engage in options and futures transactions on U.S. and foreign
exchanges and in options in OTC options. Exchange-traded contracts are
third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) which, in general, have
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller. See
"Restrictions on OTC Options" below for information as to restrictions on the
use of OTC options.

Foreign Currency Hedging. The Fund has authority to deal in forward
foreign exchange among currencies of the different countries in which it will
invest and multinational currency units as a hedge against possible variations
in the foreign exchange rates among these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date (up to one year) and price set at the time of the
contract. The Fund's dealings in forward foreign exchange will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency with
respect to specific receivables or payables of the Fund accruing in connection
with the purchase and sale of its portfolio securities, the sale and redemption
of shares of the Fund or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward foreign currency with respect to
portfolio security positions denominated or quoted in such foreign currency. The
Fund will not speculate in forward foreign exchange. The Fund is also authorized
to purchase or sell listed or OTC foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-U.S. dollar denominated securities owned
by the Fund, sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.

Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the rights to
buy or sell a currency at a fixed price on a future date. A futures contract on
a foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on

A-3
<PAGE> 46

boards of trade of futures exchanges. The Fund will not speculate in foreign
currency options, futures or related options. Accordingly, the Fund will not
hedge a currency substantially in excess of the market value of securities which
it has committed or anticipates to purchase which are denominated in such
currency, and in the case of securities which have been sold by the Fund but not
yet delivered, the proceeds thereof in its denominated currency. The Fund may
not incur potential net liabilities of more than 20% of its total assets from
foreign currency options, futures or related options.

Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures and
movements in the prices of the securities, interest rates or currencies which
are the subject of the hedge. If the price of the options or futures moves more
or less than the price of the subject of the hedge, the Fund will experience a
gain or loss which will not be completely offset by movements in the price of
the subject of the hedge. The successful use of options, futures and currency
transactions also depends on the Manager's ability to predict correctly price
movements in the market involved in a particular options or futures transaction.

The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, the
Manager believes the Fund can receive on each business day at least two
independent bids or offers. There can be no assurance, however, that a liquid
secondary market will exist at any specific time. Thus, it may not be possible
to close an options or futures position. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
hedge effectively its portfolio. There is also the risk of loss by the Fund of
margin deposits or collateral in the event of the bankruptcy of a broker with
whom the Fund has an open position in an option, a futures contract or related
option.

Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission ("CFTC") applicable to the Fund provide
that the futures trading activities described herein will not result in the Fund
being deemed a "commodity pool" under such regulations if the Fund adheres to
certain restrictions. In particular, the Fund may purchase and sell futures
contracts and options thereon (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 does 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.

When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Fund's Custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
insuring that the use of such futures is unleveraged.

Restrictions on OTC Options. The Fund will engage in OTC options,
including OTC stock index options, OTC foreign currency options and options on
foreign currency futures, only with member banks of the Federal Reserve System
and primary dealers in United States Government securities or with affiliates of
such banks or dealers that have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
The Fund will acquire only these OTC options for which the Manager

A-4
<PAGE> 47

believes the Fund can receive on each business day at least two independent bids
or offers (one of which will be from an entity other than a party to the
option).

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

A-5
<PAGE> 48

[This page intentionally left blank]
<PAGE> 49

MANAGER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011

DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:

P.O. Box 9081

Princeton, New Jersey 08543-9081

CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Securities Services
Chase MetroTech Center
Brooklyn, New York 11245

TRANSFER AGENT

Merrill Lynch Financial Data Services, Inc.

Administrative Offices:

4800 Deer Lake Drive East

Jacksonville, Florida 32246-6484
Mailing Address:

P.O. Box 45289

Jacksonville, Florida 32232-5289

INDEPENDENT AUDITORS
Ernst & Young LLP

202 Carnegie Center

Princeton, New Jersey 08543-5321

COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE> 50

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table....................................... 2
Merrill Lynch Select Pricing(SM) System........... 3
Financial Highlights............................ 8
Investment Objective and Policies............... 9
Other Investment Policies and Practices....... 10
Investment Restrictions....................... 12
Management of the Fund.......................... 13
Board of Directors............................ 13
Management and Advisory Arrangements.......... 14
Code of Ethics................................ 15
Transfer Agency Services...................... 15
Purchase of Shares.............................. 15
Initial Sales Charge Alternatives--
Class A and Class D Shares.................. 17
Deferred Sales Charge Alternatives--
Class B and Class C Shares.................. 19
Distribution Plans............................ 23
Limitations on the Payment of Deferred Sales
Charges..................................... 25
Redemption of Shares............................ 25
Redemption.................................... 26
Repurchase.................................... 26
Reinstatement Privilege--
Class A and Class D Shares.................. 27
Shareholder Services............................ 27
Portfolio Transactions and Brokerage............ 30
Performance Data................................ 30
Additional Information.......................... 32
Dividends and Distributions................... 32
Determination of Net Asset Value.............. 32
Taxes......................................... 33
Organization of the Fund...................... 35
Shareholder Inquiries......................... 35
Shareholder Reports........................... 36
Authorization Form.............................. 37
Appendix........................................ A-1
Code # 16463-1295
</TABLE>

(ART)

Merrill Lynch
Fundamental
Growth Fund, Inc.

PROSPECTUS

December 21, 1995

Distributor:
Merrill Lynch
Funds Distributor, Inc.

This prospectus should be
retained for future reference.
<PAGE> 51

STATEMENT OF ADDITIONAL INFORMATION

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

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

Merrill Lynch Fundamental Growth Fund, Inc. (the "Fund") is a mutual fund
seeking to provide shareholders with long term growth of capital. The Fund will
seek to achieve its investment objective by investing in a diversified portfolio
of equity securities placing particular emphasis on companies that have
exhibited above-average growth rates in earnings.

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

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

The Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Fund, dated December
21, 1995 (the "Prospectus"), which has been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained, without charge, by
calling or by writing the Fund at the above telephone number or address. This
Statement of Additional Information has been incorporated by reference into the
Prospectus.

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

MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR

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

The date of this Statement of Additional Information is December 21, 1995

<PAGE> 52

INVESTMENT OBJECTIVE AND POLICIES

The Fund will give particular emphasis to companies that have exhibited
above-average growth rates in earnings, resulting from a variety of factors
including--but not limited to--above-average growth rates in sales, profit
margin improvement, proprietary or niche products or services, leading market
shares, and underlying strong industry growth. Management of the Fund believes
that companies which possess above-average earnings growth frequently provide
the prospect of above-average stock market returns, although such companies tend
to have higher relative stock market valuations. Emphasis also will be given to
companies having medium to large stock market capitalizations ($500 million or
more).

The Fund may invest up to 10% of its total assets in equity securities of
foreign issuers with the foregoing characteristics. (Purchases of American
Depositary Receipts ("ADRs"), however, are not subject to this restriction.)
Investments in securities of foreign entities and securities denominated in
foreign currencies involve risks not typically involved in domestic investment,
including fluctuations in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or United States governmental laws or restrictions applicable to such
investments. Since the Fund may invest in securities denominated or quoted in
currencies other than the United States dollar, changes in foreign currency
exchange rates may affect the value of investments in the portfolio and the
unrealized appreciation or depreciation of investments insofar as the United
States investors are concerned. Changes in foreign currency exchange rates
relative to the U.S. dollar will affect the U.S. dollar value of the Fund's
assets denominated in that currency and the Fund's yield on such assets. Foreign
currency exchange rates are determined by forces of supply and demand on the
foreign exchange markets. These forces are, in turn, affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resources, self-sufficiency and balance of payments
position.

With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign financial
instrument than about a United States instrument, and foreign entities may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those of United States entities. In addition, certain
foreign investments may be subject to foreign withholding taxes. Foreign
financial markets, while growing in volume, have, for the most part,
substantially less volume than United States markets, and securities of many
foreign companies are less liquid and their prices more volatile than securities
of comparable domestic companies. The foreign markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The ability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result

2
<PAGE> 53

either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Costs associated
with transactions in foreign securities are generally higher than with
transactions in United States securities. There is generally less government
supervision and regulation of exchanges, financial institutions and issuers in
foreign countries than there is in the United States.

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

Investment emphasis is on equities, primarily common stock and, to a lesser
extent, securities convertible into common stock and rights to subscribe for
common stock. The Fund will maintain at least 65% of its total assets invested
in equity securities except during defensive periods. The Fund reserves the
right as a defensive measure and to provide for redemptions to hold other types
of securities, including non-convertible preferred stocks and debt securities,
Government and money market securities, including repurchase agreements, or
cash, in such proportions as, in the opinion of management, prevailing market or
economic conditions warrant.

PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES

Reference is made to the discussion under the caption "Investment Objective
and Policies--Portfolio Strategies Involving Options and Futures" in the
Prospectus (including the Appendix thereto) for information with respect to
various portfolio strategies involving options and futures. The Fund may seek to
hedge its portfolio against adverse movements in the equity markets, interest
rates and exchange rates between currencies. The Fund has authority to write
(i.e., sell) covered put and call options on its portfolio securities, purchase
put and call options on securities and engage in transactions in stock index
options, stock index futures and stock futures and financial futures, and
related options on such futures. The Fund may also deal in forward foreign
exchange transactions, foreign currency options and futures and related options
on such futures. Each of such portfolio strategies is described in the
Prospectus. Although certain risks are involved in options and futures
transactions (as discussed in the Prospectus and below), Merrill Lynch Asset
Management, L.P. (the "Manager" or "MLAM"), believes that, because the Fund will
engage in options and futures transactions only for hedging purposes, the
options and futures portfolio strategies of the Fund will not subject the Fund
to the risks frequently associated with the speculative use of options and
futures transactions. While the Fund's use of hedging strategies is intended to
reduce the volatility of the net asset value of Fund shares, the Fund's net
asset value will fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund will only engage in
hedging activities from time to time and may not necessarily be engaging in
hedging activities where movements on the equity markets, interest rates or
currency exchange rates occur. The following is further information relating to
portfolio strategies involving options and futures the Fund may utilize.

3
<PAGE> 54

options. A covered call option is an option where the Fund, in return for a
premium, gives another party a right to buy specified securities owned by the
Fund at a specified future date and price set at the time of the contract. The
principal reason for writing call options is to attempt to realize, through the
receipt of premiums, a greater return than would be realized on the securities
alone. By writing covered call options, the Fund gives up the opportunity, while
the option is in effect, to profit from any price increase in the underlying
security above the option price. In addition, the Fund's ability to sell the
underlying security will be limited while the option is in effect unless the
Fund effects a closing purchase transaction. A closing purchase transaction
cancels out the Fund's position as the writer of an option by means of an
offsetting purchase of an identical option prior to the expiration of the option
it has written. Covered call options serve as a particular hedge against the
price of the underlying security declining.

The writer of a covered call option has no control over when he may be
required to sell his securities since he may be assigned an exercise notice at
any time prior to the termination of his obligation as a writer. If an option
expires unexercised, the writer realizes a gain in the amount of the premium.
Such a gain, of course, may be offset by a decline in the market value of the
underlying security during the option period. If a call option is exercised, the
writer realizes a gain or loss from the sale of the underlying security.

The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options which means that so long
as the Fund is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By writing a
put, the Fund will be obligated to purchase the underlying security at a price
that may be higher than the market value of that security at the time of the
exercise for as long as the option is outstanding. The Fund may engage in
closing transactions in order to terminate put options that it has written. The
Fund will not write put options if the aggregate value of the obligations
underlying the put options shall exceed 50% of the Fund's net assets.

Options referred to herein and in the Fund's Prospectus may be options
traded on foreign securities exchanges. An options position may be closed only
on an exchange which provides a secondary market for an option of the same
series. If a secondary market does not exist, it might not be possible to effect
closing transactions in particular options, with the result, in the case of a
covered call option, that the Fund will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation (the "Clearing Corporation") may not, at all
times, be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Clearing Corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms.

4
<PAGE> 55

The Fund may also enter into over-the-counter options transactions ("OTC
options"), which are two party contracts with prices and terms negotiated
between the buyer and seller. The staff of the Commission has taken the position
that OTC options and the assets used as cover for written OTC options are
illiquid securities.

Purchasing Options. The Fund may purchase put options to hedge against a
decline in the market value of its equity holdings. By buying a put, the Fund
has a right to sell the underlying security at the exercise price, thus limiting
the Fund's risk of loss through a decline in the market value of the security
until the put option expires. The amount of any appreciation in the value of the
underlying security will be offset partially by the amount of the premium paid
for the put option and any related transaction costs. Prior to its expiration, a
put option may be sold in a closing sale transaction; profit or loss from the
sale will depend on whether the amount received is more or less than the premium
paid for the put option plus the related transaction cost. A closing sale
transaction cancels out the Fund's position as the purchaser of an option by
means of an offsetting sale of an identical option prior to the expiration of
the option it has purchased. In certain circumstances, the Fund may purchase
call options on securities held in its portfolio on which it has written call
options or on securities which it intends to purchase. The Fund may purchase
either exchange-traded options or OTC options. The Fund will not purchase
options on securities (including stock index options discussed below) if as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets.

Stock Index Options and Futures and Financial Futures. As described in the
Prospectus, the Fund is authorized to engage in transactions in stock index
options and futures and financial futures, and related options on such futures.
Set forth below is further information concerning futures transactions.

A futures contract is an agreement between two parties to buy and sell a
security, or, in the case of an index-based futures contract, to make and accept
a cash settlement for a set price on a future date. A majority of transactions
in futures contracts, however, do not result in the actual delivery of the
underlying instrument or cash settlement, but are settled through liquidation,
i.e., by entering into an offsetting transaction.

The purchase or sale of a futures contract differs from the purchase or
sale of a security in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to the broker and the relevant contract
market, which varies, but is generally about 5% of the contract amount, must be
deposited with the broker. This amount is known as "initial margin" and
represents a "good faith" deposit assuring the performance of both the purchaser
and seller under the futures contract. Subsequent payments to and from the
broker, called "variation margin", are required to be made on a daily basis as
the price of the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"mark to the market". At any time prior to the settlement date of the futures
contract, the position may be closed out by taking an opposite position which
will operate to terminate the position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid to or released by the broker, and the purchaser realizes a loss or gain.
In addition, a nominal commission is paid on each completed sale transaction.

An order has been obtained from the Commission exempting the Fund from the
provisions of Section 17(f) and Section 18(f) of the Investment Company Act of
1940 (the "Investment Company Act") in connection with its strategy of investing
in futures contracts. Section 17(f) relates to the custody of securities and
other assets of an investment company and may be deemed to prohibit certain
arrangements between the Fund and commodities brokers with respect to initial
and variation margin. Section 18(f) of the Investment Company Act prohibits an
open-end investment company such as the Fund from issuing a "senior

5
<PAGE> 56

security" other than a borrowing from a bank. The staff of the Commission has in
the past indicated that a futures contract may be a "senior security" under the
Investment Company Act.

Foreign Currency Hedging. Generally, the foreign exchange transactions of
the Fund will be conducted on a spot (i.e., cash basis), at the spot rate for
purchasing or selling currency prevailing in the foreign exchange market. The
Fund has authority to deal in forward foreign exchange among currencies of the
different countries in which it may invest as a hedge against possible
variations in the foreign exchange rate among these currencies. This is
accomplished through contractual agreements to purchase or sell a specified
currency at a specified future date and price set at the time of the contract.
The Fund's dealings in forward foreign exchange will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward foreign currency with respect to
specific receivables or payables of the Fund accruing in connection with the
purchase and sale of its portfolio securities, the sale and redemption of shares
of the Fund or the payment of dividends and distributions by the Fund. Position
hedging is the sale of forward foreign currency with respect to portfolio
security positions denominated or quoted in such foreign currency. The Fund will
not speculate in forward foreign exchange. The Fund may not position hedge with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency. The
Fund will enter into such transactions only to the extent, if any, deemed
appropriate by the Manager. The Fund will not enter into a forward contract with
a term of more than one year.

The Fund is also authorized to purchase or sell listed or over-the-counter
("OTC") foreign currency options, foreign currency futures and related options
on foreign currency futures as a short or long hedge against possible variations
in foreign exchange rates. Such transactions may be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased by the
Fund. As an illustration, the Fund may use such techniques to hedge the stated
value in U.S. dollars of an investment in a pound sterling denominated security.
In such circumstances, for example, the Fund may purchase a foreign currency put
option enabling it to sell a specified amount of pounds for dollars at a
specified price by a future date. To the extent the hedge is successful, a loss
in the value of the pound relative to the dollar will tend to be offset by an
increase in the value of the put option. To offset in whole or part the cost of
acquiring such a put option, the Fund may also sell a call option which, if
exercised, requires it to sell a specified amount of pounds for dollars at a
specified price by a future date (a technique called a "straddle"). By selling
such call option in this illustration, the Fund gives up the opportunity to
profit without limit from increases in the relative value of the pound to the
dollar. The Manager believes that "straddles" of the type which may be utilized
by the Fund constitute hedging transactions and are consistent with the policies
described above.

Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currencies involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis, no fees or commissions are involved.

Risk Factors in Options, Futures and Currency Transactions. Utilization of
futures transactions involves the risk of imperfect correlation in movements in
the prices of options and futures and movements in the

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<PAGE> 57

prices of the securities and currencies which are the subject of the hedge. If
the prices of the options and futures move more or less than the prices of the
hedged securities or currencies, the Fund will experience a gain or loss which
will not be completely offset by movements in the prices of the securities and
currencies which are the subject of the hedge. The successful use of options,
futures and currency transactions also depends on the Manager's ability to
predict correctly price movements in the market involved in a particular options
or futures transaction.

Prior to exercise or expiration, an exchange-traded option or futures
position can only be terminated by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange for call or put
options of the same series. The Fund will enter into options or futures
transactions on an exchange only if there appears to be a liquid secondary
market for such options or futures. However, there can be no assurance that a
liquid secondary market will exist for any particular call or put option or
futures contract at any specific time. Thus, it may not be possible to close an
option or futures position. The Fund will acquire only OTC options for which
management believes the Fund can receive on each business day at least two
independent bids or offers. In the case of a futures position or an option on a
futures position written by the Fund in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the security underlying futures contracts it holds.
The inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option. The risk of loss from investing in futures transactions is theoretically
unlimited.

The exchanges on which the Fund intends to conduct options transactions
generally have established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not covered)
which may be written by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or through
one or more brokers). "Trading limits" are imposed on the maximum number of
contracts which any person may trade on a particular trading day. An exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. The Manager does not believe
that these trading and positions limits will have any adverse impact on the
portfolio strategies for hedging the Fund's portfolio.

OTHER INVESTMENT POLICIES AND PRACTICES

Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or a primary dealer in U.S. Government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, on entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Such
agreements usually cover short periods, such as under a week. The Fund will
require the seller to provide additional collateral if the market value of the
securities falls below the repurchase price at any time during the term of the
repurchase agreement. In the event of a default by the seller, the Fund
ordinarily will retain ownership of the securities underlying the repurchase
agreement, and instead of a contractually fixed rate of return, the rate of
return to the Fund shall be dependent upon intervening fluctuations of the
market value of such securities

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<PAGE> 58

and the accrued interest on the securities. In such event, the Fund would have
rights against the seller for breach of contract with respect to any losses
arising from market fluctuations following the failure of the seller to perform.
In certain circumstances, repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs or possible losses in connection with the
disposition of the collateral. From time to time the Fund also may invest in
securities pursuant to purchase and sale contracts. While purchase and sale
contracts are similar to repurchase agreements, purchase and sale contracts are
structured so as to be in substance more like a purchase and sale of the
underlying security than is the case with repurchase agreements.

Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities, although it will limit such investments to 10% of its net
assets to the extent required by state law. However, the Fund may purchase,
without regard to that limitation, securities that are not registered under the
Securities Act of 1933 (the "Securities Act") but that can be offered and sold
to "qualified institutional buyers" under Rule 144A under the Securities Act,
provided that the Fund's Board of Directors, or the Manager pursuant to
guidelines adopted by the Board, continuously determines, based on the trading
markets for the specific Rule 144A security, that it is liquid. The Board of
Directors, however, will retain oversight and is ultimately responsible for the
determinations. Since it is not possible to predict with assurance exactly how
this market for restricted securities sold and offered under Rule 144A will
develop, the Board of Directors will carefully monitor the Fund's investments in
these securities, focusing on such factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these securities.

Investment Restrictions. In addition to the investment restrictions set
forth in the Prospectus, the Fund has adopted a number of fundamental and
non-fundamental investment policies and restrictions. The fundamental policies
and restrictions set forth below may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities (which for
this purpose 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). Unless otherwise provided, all references
to the assets of the Fund below are in terms of current market value. The Fund
may not:

1. Make any investment inconsistent with the Fund's classification as
a diversified company under the Investment Company Act.

2. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).

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<PAGE> 59

3. Make investments for the purpose of exercising control or
management.

4. Purchase or sell real estate, except that, to the extent permitted
by applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.

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.

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

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

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

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

Notwithstanding fundamental investment restriction (7) above, the Fund
currently does not intend to borrow amounts in excess of 33 1/3% of its total
assets, taken at market value, and then only from banks as a temporary measure
for extraordinary or emergency purposes such as the redemption of Fund shares.
In addition, the Fund will not purchase securities while borrowings are
outstanding.

Under the 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.

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

c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed or put to the issuer or a third party, if at the time

9
<PAGE> 60

of acquisition more than 15% of its total assets would be invested in
such securities. This restriction shall not apply to securities which
mature within seven days or securities which the Board of Directors of
the Fund have otherwise determined to be liquid pursuant to applicable
law. Notwithstanding the 15% limitation herein, to the extent the laws
of any state in which the Fund's shares are registered or qualified for
sale require a lower limitation, the Fund will observe such limitation.
As of the date hereof, therefore, the Fund will not invest more than 10%
of its total assets in securities which are subject to this investment
restriction (c). Securities purchased in accordance with Rule 144A under
the Securities Act (each a "Rule 144A security") and determined to be
liquid by the Fund's Board of Directors are not subject to the
limitations set forth in this investment restriction (c).
Notwithstanding the fact that the Board may determine that a Rule 144A
security is liquid and not subject to limitations set forth in this
investment restriction (c), the State of Ohio does not recognize Rule
144A securities as securities that are free or restrictions as to
resale. To the extent required by Ohio law, the Fund will not invest
more than 50% of its total assets in securities of issuers that are
restricted as to disposition, including Rule 144A securities or in
securities of issuers described in (e) below.

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 net assets; included within such
limitation, but not to exceed 2% of the Fund's net 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.

e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
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.

f. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Fund, the officers and general
partner of the 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.

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.

h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be
amended from time to time.

i. Notwithstanding fundamental investment restriction (7) above,
borrow amounts in excess of 20% of its total assets, taken at market
value, and then only from banks as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares.

Lending of Portfolio Securities. Subject to investment restriction (5)
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
securities issued or guaranteed by the United States Government which will be
maintained at all times in an

10
<PAGE> 61

amount equal to at least 100% of the current market value of the loaned
securities. Such cash collateral will be invested in short-term securities,
which will increase 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. With respect to the lending of portfolio
securities, there is the risk of failure by the borrower to return the
securities involved in such transactions.

Because of the affiliation of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") with the Fund, the Fund is prohibited from
engaging in certain transactions involving Merrill Lynch except pursuant to a
permissive order or otherwise in compliance with the provisions of the
Investment Company Act and the rules and regulations thereunder. Included among
such restricted transactions are purchases from or sales to Merrill Lynch of
securities in transactions in which it acts as principal and purchases of
securities from underwriting syndicates of which Merrill Lynch is a member.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

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

ARTHUR ZEIKEL (63)--President and Director (1)(2)--President of the Manager
(which term as used herein includes its corporate predecessors) since 1977;
President of Fund Asset Management, L.P. ("FAM") (which term as used herein
includes its corporate predecessor) since 1977; President and Director of
Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice
President of ML&Co. since 1990; Executive Vice President of Merrill Lynch from
1990 to 1995 and Senior Vice President thereof from 1985 to 1990; and Director
of Merrill Lynch Funds Distributor, Inc. (the "Distributor").

JOE GRILLS (60)--Director (2)--183 Soundview Lane, New Canaan, Connecticut
06840. Member of the Committee of Investment of Employee Benefit Assets of the
Financial Executives Institute ("CIEBA") since 1986; member of CIEBA's Executive
Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of
International Business Machines Incorporated ("IBM") and Chief Investment
Officer of IBM Retirement Funds from 1986 until 1993; Member of the Investment
Advisory Committee of the State of New York Common Retirement Fund; Director,
Duke Management Company; Director, La Salle Street Fund.

WALTER MINTZ (66)--Director (2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Associates (investment
partnership) since 1982.

MELVIN R. SEIDEN (64)--Director (2)--780 Third Avenue, Suite 2502, New
York, New York 10017. President of Silbanc Properties, Ltd. (real estate,
investment and consulting) since 1987; Chairman and President of Seiden & de
Cuevas, Inc. (private investment firm) from 1964 to 1987.

STEPHEN B. SWENSRUD (62)--Director (2)--24 Federal Street, Boston,
Massachusetts 02110. Principal of Fernwood Associates (financial consultants).

11
<PAGE> 62

HARRY WOOLF (72)--Director (2)(3)--The Institute for Advanced Study, Olden
Lane, Princeton, New Jersey 08540. Member of the editorial board of
Interdisciplinary Science Reviews; Director, Alex. Brown Mutual Funds; Director,
Advanced Technology Laboratories, Family Health International and SpaceLabs
Medical (medical equipment manufacturing and marketing).

TERRY K. GLENN (55)--Executive Vice President (1)(2)--Executive Vice
President of the Manager and FAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President of the Distributor since
1986 and Director thereof since 1991; President of Princeton Administrators,
L.P. since 1988.

NORMAN R. HARVEY (62)--Senior Vice President (1)(2)--Senior Vice President
of the Manager and FAM since 1982; Senior Vice President of Princeton Services
since 1993.

LAWRENCE R. FULLER (54)--Vice President (1)--Vice President of the Manager
since 1992; Senior Vice President and Director of Benefit Capital Management
from 1984 to 1992.

GERALD M. RICHARD (46)--Treasurer (1)(2)--Senior Vice President and
Treasurer of the Manager and FAM since 1984; Senior Vice President and Treasurer
of Princeton Servicers since 1993; Treasurer of the Distributor since 1984 and
Vice President since 1981.

DONALD C. BURKE (35)--Vice President (1)(2)--Vice President and Director of
Taxation of the Manager since 1990; employee of Deloitte & Touche LLP from 1982
to 1990.

MICHAEL J. HENNEWINKEL (43)--Secretary (1)(2)--Vice President of the
Manager since 1985; attorney associated with the Manager since 1982.

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

(1) Interested person, as defined in the Investment Company Act, of the Fund.

(2) Such Director or officer is a director or officer of one or more investment
companies for which the Manager, or its affiliate FAM, acts as investment
adviser or manager.

(3) Mr. Woolf is retiring from the Board of Directors as of December 31, 1995
pursuant to the Fund's retirement policy.

As of December 1, 1995 the officers and Directors of the Fund as a group
(12 persons) owned an aggregate of less than 1% of the outstanding shares of
common stock of ML&Co. and owned an aggregate of less than 1% of the outstanding
shares of the Fund.

The Fund pays each Director not affiliated with the Manager a fee of $2,000
per year, plus a fee of $500 for each board meeting attended and out-of-pocket
expenses relating to attendance at meetings, and each Audit Committee member an
annual fee of $2,000 plus $500 for each Committee meeting attended. Fees and
expenses paid to the unaffiliated Directors aggregated $25,420 for the fiscal
year ended August 31, 1995.

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<PAGE> 63

The following table sets forth for the fiscal year ended August 31, 1995
compensation paid by the Fund to the non-interested Directors and for the
calendar year ended December 31, 1994 the aggregate compensation paid by all
investment companies (including the Fund) advised by MLAM and its affiliate. FAM
("MLAM/FAM-Advised Funds"), to the non-interested Directors:

<TABLE>
<CAPTION>
AGGREGATE
PENSION OR COMPENSATION
RETIREMENT FROM FUND AND
BENEFITS ACCRUED MLAM/FAM-ADVISED
COMPENSATION AS PART OF FUNDS PAID TO
DIRECTOR FROM THE FUND FUND EXPENSE DIRECTOR(1)
- ----------------------------------------------- ------------- ----------------- ----------------
<S> <C> <C> <C>
Joe Grills..................................... $ 5,000 None $156,150
Walter Mintz................................... $ 5,000 None $156,150
Melvin R. Seiden............................... $ 5,000 None $156,150
Stephen B. Swensrud............................ $ 5,000 None $164,150
Harry Woolf.................................... $ 5,000 None $156,150
</TABLE>

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

(1) In addition to the Fund, the Directors serve on the boards of other
MLAM/FAM-Advised Funds as follows: Joe Grills (36 funds and portfolios),
Walter Mintz (36 funds and portfolios), Melvin R. Seiden (36 funds and
portfolios), Stephen B. Swensrud (46 funds and portfolios), and Harry Woolf
(36 funds and portfolios).

MANAGEMENT AND ADVISORY ARRANGEMENTS

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

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

The Fund has entered into a management agreement (the "Management
Agreement") with the Manager. As discussed in the Prospectus, the Manager
receives for its services to the Fund monthly compensation at the annual rate of
0.65% of the average daily net assets of the Fund. For the period December 24,
1992 (commencement of operations) to August 31, 1993 and the fiscal years ended
August 31, 1994 and 1995, the total advisory fees paid by the Fund to the
Manager aggregated $220,631, $347,874 and $560,426, respectively. For those
periods, the Manager made no reimbursement of expenses to the Fund in respect of
the applicable expense limitation provisions.

The State of California imposes limitations on the expenses of the Fund. At
the date of this Statement of Additional Information, these annual expense
limitations require that the Manager reimburse the Fund in any amount necessary
to prevent the aggregate ordinary operating expenses (excluding taxes, brokerage
fees and commissions, distribution fees and extraordinary charges such as
litigation costs) from exceeding in any fiscal year 2.5% of the Fund's first $30
million of average net assets, 2.0% of the next $70 million of average net
assets and 1.5% of the remaining average net assets. Such reimbursement, if any,
will be subtracted from the monthly management fee. The Manager's obligation to
reimburse the Fund is limited to the amount of the

13
<PAGE> 64

investment advisory fee. No fee payment will be made to the Manager during any
fiscal year which will cause such expenses to exceed the expense limitations at
the time of such payment. The Manager has not been required to reimburse the
Fund pursuant to such operating expense limitations since the inception of the
Fund.

The Management Agreement obligates the Manager to provide investment
advisory services and to pay all compensation of and furnish office space for
officers and employees of the Fund connected with investment and economic
research, trading and investment management of the Fund, as well as the fees of
all Directors of the Fund who are affiliated persons of ML&Co. The Fund pays all
other expenses incurred in its operation, including, among other things, taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports and prospectuses and statements of additional
information (except to the extent paid by the Distributor), charges of the
custodian, any sub-custodian and transfer agent, expenses of redemption of
shares, Commission fees, expenses of registering the shares under Federal, state
or foreign laws, fees and expenses of unaffiliated Directors, accounting and
pricing costs (including the daily calculation of net asset value), insurance,
interest, brokerage costs, litigation and other extraordinary or non-recurring
expenses, and other expenses properly payable by the Fund. Accounting services
are provided to the Fund by the Manager and the Fund reimburses the Manager for
its costs in connection with such services on a semiannual basis. For the Fund's
fiscal period December 24, 1992 (commencement of operations) to August 31, 1993,
the amount of such reimbursement was $37,463. For the Fund's fiscal years ended
August 31, 1994 and 1995 the amounts of such reimbursement were $21,149 and
$72,042, respectively. The Distributor will pay certain promotional expenses of
the Fund incurred in connection with the offering of its shares. Certain
expenses will be financed by the Fund pursuant to distribution plans in
compliance with Rule 12b-1 under the Investment Company Act. See "Purchase of
Shares--Distribution Plans".

ML&Co. and Princeton Services are "controlling persons" of the Manager as
defined under the Investment Company Act because of their ownership of its
rating securities or their power to exercise a controlling influence over its
management or policies.

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

PURCHASE OF SHARES

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

ALTERNATIVE SALES ARRANGEMENTS

The Fund issues four classes of shares under the Merrill Lynch Select
PricingSM System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives, and shares of Class B and Class C are
sold to investors choosing the deferred sales charge alternatives. Each Class A,
Class B, Class C and Class D share of the Fund represents an identical interest
in the investment portfolio of the Fund, and has the same rights except that
Class B, Class C and Class D shares bear the expenses of the ongoing account
maintenance fees and Class B and Class C shares bear the expenses of the ongoing
distribution fees and the additional incremental transfer agency costs resulting
from the deferred sales charge arrangements.

14
<PAGE> 65

Class B, Class C and Class D shares each have exclusive voting rights with
respect to the Rule 12b-1 distribution plan adopted with respect to such class
pursuant to which account maintenance and/or distribution fees are paid. Each
class has different exchange privileges. See "Shareholder Services--Exchange
Privilege".

The Merrill Lynch Select Pricing(SM) System is used by more than 50 mutual
funds advised by the Manager or its affiliate, FAM. Funds advised by the Manager
or FAM which use the Merrill Lynch Select Pricing(SM) System are referred to
herein as "MLAM-advised mutual funds".

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

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

For the period October 21, 1994 (commencement of operations) to August 31,
1995, the gross sales charge for the sale of Class A shares was $7,234, of which
the Distributor received $541 and Merrill Lynch received $6,693 as a selected
dealer. During such period, the Distributor received no CDSCs relating to the
early redemption of Class A shares purchased subject to front-end sales charge
waivers. The gross sales charge for the sale of Class D shares for the fiscal
year ended August 31, 1995 was $98,184, of which the Distributor received $6,751
and Merrill Lynch received $91,433 as a selected dealer. During such period, the
Distributor received CDSCs of $735 with respect to redemptions within one year
after purchase of Class D shares purchased subject to front-end sales charge
waivers.

The term "purchase", as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Fund refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and to single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code")) although more than
one beneficiary is involved. The term "purchase" also includes purchases by any
"company", as that term is defined in the Investment Company Act, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of shares of
the Fund or shares of other registered investment companies at a discount. The
term "purchase" shall not include purchases by any group of individuals whose
sole organization nexus is that the participants therein are credit cardholders
of a company, policyholders of an insurance company, customers of either a bank
or broker-dealer or clients of an investment adviser. The term "purchase" also
includes purchases by employee benefit plans not qualified under Section 401 of
the Code, including purchases by employees or by employers on behalf of
employees, by means of a payroll deduction plan or otherwise, of shares of the
Fund. Purchases by such a company or non-qualified employee benefit plan will
qualify for the quantity discounts discussed above only if the Fund and the
Distributor are able to realize economies of scale in sales effort and sales
related expense by means of the company, employer or plan making the Fund's

15
<PAGE> 66

Prospectus available to individual investors or employees and forwarding
investments by such persons to the Fund and by any such employer or plan bearing
the expense of any payroll deduction plan.

Closed-End-Fund Investment Option. Class A shares of the Fund and certain
other MLAM-advised mutual funds ("Eligible Class A shares") are offered at net
asset value to shareholders of certain closed-end funds advised by the Manager
or FAM who purchased such closed-end fund shares prior to October 21, 1994 (the
date the Merrill Lynch Select Pricing(SM) System commenced operations) and wish
to reinvest the net proceeds of a sale of their closed-end fund shares of common
stock in Eligible Class A or Class D shares, if the conditions set forth below
are satisfied. Alternatively, closed-end fund shareholders who purchased such
shares on or after October 21, 1994 and who wish to reinvest the net proceeds
from a sale of their closed-end fund shares are offered Class A shares (if
eligible to buy Class A shares) or Class D shares of the Fund and other
MLAM-advised mutual funds ("Eligible Class D Shares"), if the following
conditions are met. First, the sale of closed-end fund shares must be made
through Merrill Lynch, and the net proceeds therefrom must be immediately
reinvested in Eligible Class A shares. Second, the closed-end fund shares must
either have been acquired in the initial public offering or be shares
representing dividends from shares of common stock acquired in such offering.
Third, the closed-end fund shares must have been continuously maintained in a
Merrill Lynch securities account. Fourth, there must be a minimum purchase of
$250 to be eligible for the investment option. Class A shares of the Fund are
offered at net asset value to shareholders of Merrill Lynch Senior Floating Rate
Fund (formerly known as Merrill Lynch Prime Fund, Inc.) ("Senior Floating Rate
Fund") who wish to reinvest the net proceeds from a sale of certain of their
shares of common stock of Senior Floating Rate Fund in shares of the Fund. In
order to exercise this investment option, Senior Floating Rate Fund shareholders
must sell their Senior Floating Rate Fund shares to the Senior Floating Rate
Fund in connection with a tender offer conducted by the Senior Floating Rate
Fund and reinvest the proceeds immediately in the Fund. This investment option
is available only with respect to the proceeds of Senior Floating Rate Fund
shares as to which no Early Withdrawal Charge (as defined in the Senior Floating
Rate Fund prospectus) is applicable. Purchase orders from Senior Floating Rate
Fund shareholders wishing to exercise this investment option will be accepted
only on the day that the related Senior Floating Rate Fund tender offer
terminates and will be effected at the net asset value of the Fund at such day.
Similarly, Class D shares of the Fund are offered at net asset value to
shareholders of Merrill Lynch Municipal Strategy Fund, Inc. ("Municipal Strategy
Fund") and Merrill Lynch High Income Municipal Bond Fund, Inc. ("High Income
Municipal Bond Fund") who wish to purchase shares of the Fund with the net
proceeds from a sale of certain of their shares of common stock of Municipal
Strategy Fund pursuant to a tender offer by Municipal Strategy Fund or by High
Income Municipal Bond Fund. This investment option is available only with
respect to the proceeds of Municipal Strategy Fund shares as to which no CDSC
(as defined in the Municipal Strategy Fund prospectus) is applicable and to the
proceeds of High Income Municipal Bond Fund shares as to which no Early
Withdrawal Charge (as defined in the High Income Municipal Bond Fund prospectus)
is applicable.

REDUCED INITIAL SALES CHARGE

Right of Accumulation. The reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of the purchaser's combined holdings of all classes
of shares of the Fund and of any other MLAM-advised mutual fund. For any such
right of accumulation to be made available, the Distributor must be provided at
the time of purchase, by the purchaser or the purchaser's securities dealer,
with sufficient information to permit confirmation of

16
<PAGE> 67

qualification, and acceptance of the purchase order is subject to such
confirmation. The right of accumulation may be amended or terminated at any
time. Shares held in the name of a nominee or custodian under pension,
profit-sharing, or other employee benefit plans may not be combined with other
shares to qualify for the right of accumulation.

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

Merrill Lynch Blueprint(SM) Program. Class D shares of the Fund are
offered to participants in the Merrill Lynch Blueprint(SM) Program
("Blueprint"). In addition, participants in Blueprint who own Class A shares of
the Fund may purchase additional Class A shares of the Fund through Blueprint.
The Blueprint program is directed to small investors, group IRAs and
participants in certain affinity groups such as credit unions, trade
associations and benefit plans. Investors placing orders to purchase Class A or
Class D shares of the Fund through Blueprint will acquire the Class A or Class D
shares at net asset value per share plus a sales charge calculated in accordance
with the Blueprint sales charge schedule (i.e., up to $300 at 4.25%, $300.01 to
$5,000 at 3.25% plus $3.00 and $5,000.01 or more at the standard sales charge
rates disclosed in the Prospectus). In addition, Class D shares of the Fund are
being offered at net asset value per share plus a sales charge of 1/2 of 1% for
corporate or group IRA programs placing orders to purchase their Class A and
Class D investors through Blueprint, however, may differ from those available to
other investors in Class A or Class D shares.

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<PAGE> 68

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

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

Employee Access Accounts(SM). Class A or Class D shares are offered at net
asset value to Employee Access Accounts available through employers that provide
employer sponsored retirement or savings plans that are eligible to purchase
such shares at net asset value. The initial minimum for such accounts is $500,
except that the initial minimum for shares purchased for such accounts pursuant
to the Automatic Investment Program is $50.

Employer Sponsored Retirement and Savings Plans. Class A and Class D
shares are offered at net asset value to employer sponsored retirement or
savings plans, such as tax qualified retirement plans within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
deferred compensation plans within the meaning of Sections 403(b) and 457 of the
Code, other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system, herein
referred to as "Employer Sponsored Retirement or Savings Plans", provided the
plan has accumulated $20 million or more in MLAM-advised mutual funds (in the
case of Class A shares) or $5 million or more in MLAM-advised mutual funds (in
the case of Class D shares). Class D shares may be offered at net asset value to
new Employer Sponsored Retirement or Savings Plans, provided the plan has $3
million or more initially invested in MLAM-advised mutual funds. Assets of
Employer Sponsored Retirement or Savings Plans sponsored by the same sponsor or
an affiliated sponsor may be aggregated. Class A shares and Class D shares also
are offered at net asset value to Employer Sponsored Retirement or Savings Plans
that have at least 1,000 employees eligible to participate in the plan (in the
case of Class A shares) or between 500 and 999 employees eligible to participate
in the plan (in the case of Class D shares). Employees eligible to participate
in Employer Sponsored Retirement or Savings Plans of the same sponsoring
employer or its affiliates may be aggregated. Tax qualified retirement plans
within the meaning of Section 401(a) of the Code meeting any of the foregoing
requirements and which are provided specialized services (e.g., plans whose
participants may direct on a daily basis their plan allocations among a wide
range of investments including individual corporate equities and other
securities in addition to mutual fund shares) by the Merrill Lynch Blueprint(SM)
Program, are offered Class A shares at a price equal to net asset value per
share plus a reduced sales charge of 0.50%. Any Employer Sponsored Retirement or
Savings Plan which does not meet the above described qualifications to purchase
Class A or Class D shares at net asset value has the option of (i) purchasing
Class A shares at the initial sales charge schedule and possible CDSC schedule
disclosed in the Prospectus if it is otherwise eligible to purchase Class A
shares, (ii) purchasing Class D shares at the initial

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<PAGE> 69

sales charge and possible CDSC schedule disclosed in the Prospectus, (iii) if
the Employer Sponsored Retirement or Savings Plan meets the specified
requirements, purchasing Class B shares with a waiver of the CDSC upon
redemption, or if the Employer Sponsored Retirement or Savings Plan does not
qualify to purchase Class B shares with a waiver of the CDSC upon redemption,
purchasing Class C shares at the CDSC schedule disclosed in the Prospectus. The
minimum initial and subsequent purchase requirements are waived in connection
with all the above referenced Employer Sponsored Retirement or Savings Plans.

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

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

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

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

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

Acquisition of Certain Investment Companies. The public offering price of
Class D shares of the Fund may be reduced to the net asset value per Class D
share in connection with the acquisition of the assets of or merger or
consolidation with a personal holding company or a public or private investment
company. The value of the assets or company acquired in a tax-free transaction
may be adjusted in appropriate cases to reduce possible adverse tax consequences
to the Fund which might result from an acquisition of assets having

19
<PAGE> 70

net unrealized appreciation which is disproportionately higher at the time of
acquisition than the realized or unrealized appreciation of the Fund. The
issuance of Class D shares for consideration other than cash is limited to bona
fide reorganizations, statutory mergers or other acquisitions of portfolio
securities which (i) meet the investment objectives and policies of the Fund;
(ii) are acquired for investment and not for resale (subject to the
understanding that the disposition of the Fund's portfolio securities shall at
all times remain within its control); and (iii) are liquid securities, the value
of which is readily ascertainable, which are not restricted as to transfer
either by law or liquidity of market (except that the Fund may acquire through
such transactions restricted or illiquid securities to the extent the Fund does
not exceed the applicable limits on acquisition of such securities set forth
under "Investment Objective and Policies" herein).

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

DISTRIBUTION PLANS

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

Payments of the account maintenance fees and/or distribution fees are
subject to the provisions of Rule 12b-1 under the Investment Company Act. Among
other things, each Distribution Plan provides that the Distributor shall provide
and the Directors shall review quarterly reports of the disbursement of the
account maintenance fees and/or distribution fees paid to the Distributor. In
their consideration of each Distribution Plan, the Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Fund and its related class of shareholders. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund, as defined in the Investment Company Act (the
"Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is
reasonable likelihood that such Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors or
by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to increase
materially the amount to be spent by the Fund without the approval of the
related class of shareholders, and all material amendments are required to be
approved by the vote of the Directors, including a majority of the Independent
Directors who have no direct or indirect financial interest in such Distribution
Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further
requires that the Fund preserve copies of each Distribution Plan and any report
made pursuant to such plan for a period of not less than six years from the date
of such Distribution Plan or such report, the first two years in an easily
accessible place.

LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES

The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") imposes a limitation on certain
asset-based sales charges such as the distribution fee and the CDSC borne by the
Class B and Class C shares but not the account maintenance fee. The maximum
sales charge rule is applied separately to each class. As applicable to the
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Fund to (1) 6.25% of eligible

20
<PAGE> 71

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

The following table sets forth information as of August 31, 1995, with
respect to the Class B shares and Class C shares of the Fund indicating the
maximum allowable payments that can be made under the NASD maximum sales charge
rule and the Distributor's voluntary maximum, with respect to Class B shares.

DATA CALCULATED AS OF AUGUST 31, 1995

<TABLE>
<CAPTION>
ALLOWABLE ANNUAL
INTEREST AMOUNT DISTRIBUTION
ELIGIBLE AGGREGATE ON MAXIMUM PREVIOUSLY AGGREGATE FEES AT CURRENT
GROSS SALES UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES CHARGES BALANCE(1) PAYABLE DISTRIBUTOR(2) BALANCE LEVEL(3)
------- --------- ---------- ------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B (IN THOUSANDS)
Under NASD Rule as
Adopted................ $52,856 $ 3,303 $404 $3,707 $608 $ 3,099 $ 478
Under Distributor's
Voluntary Waiver....... $52,856 $ 3,303 $265 $3,568 $608 $ 2,959 $ 478
CLASS C (IN THOUSANDS)
Under NASD Rule as
Adopted................ $37,068 $ 2,317 $360 $2,677 $608 $ 2,069 $ 332
</TABLE>

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

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

(2) Consists of CDSC payments, distribution fee payments and accruals. See
"Purchase of Shares--Distribution Plans" in the Prospectus.

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

REDEMPTION OF SHARES

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

21
<PAGE> 72

The right to redeem shares or to receive payment with respect to any such
redemption may be suspended only for any period during which trading on the New
York Stock Exchange is restricted as determined by the Commission or such
Exchange is closed (other than customary weekend and holiday closings) for any
period during which an emergency exists, as defined by the Securities and
Exchange Commission, as a result of which disposal of portfolio securities or
determination of the net asset value of the Fund is not reasonably practicable,
and for such other periods as the Securities and Exchange Commission may by
order permit for the protection of shareholders of the Fund.

DEFERRED SALES CHARGE--CLASS B AND CLASS C SHARES

As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while the new Class B shares
redeemed within four years of purchase are subject to a CDSC under most
circumstances, the charge is waived on redemptions of the new Class B shares in
connection with certain post-retirement withdrawals from an IRA or other
retirement plans or on redemptions of Class B shares following the death or
disability of the new Class B shareholder. Redemptions for which the waiver
applies are: (a) any partial or complete redemption in connection with a
distribution following retirement under a tax-deferred retirement plan or
attaining age 59 1/2 in the case of an IRA or other retirement plan, or part of
a series of equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) or any redemption resulting from the tax-free
return of an excess contribution to an IRA; or (b) any partial or complete
redemption following the death or disability (as defined in the Code) of the new
Class B shareholder (including one who owns the new Class B shares as joint
tenant with his or her spouse), provided the redemption is requested within one
year of the death or initial determination of disability. For the period
December 24, 1992 (commencement of operations) to August 31, 1993 and the fiscal
year ended August 31, 1994, for original Class B shares, the Distributor
received CDSCs of $27,165 and $23,762, respectively. For the period October 21,
1994 (commencement of operations) to August 31, 1995, the Distributor received
CDSCs of $61,480, with respect to redemptions of Class B shares, all of which
was paid to Merrill Lynch. With respect to Class C shares, for the fiscal year
ended August 31, 1995, the Distributor received CDSCs of $10,532, all of which
was paid to Merrill Lynch.

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

Retirement Plans. Any Retirement Plan which does not meet the
qualifications to purchase Class A or Class D shares at net asset value has the
option of purchasing Class A or Class D shares at the sales charge schedule
disclosed in the Prospectus, or if the Retirement Plan meets the following
requirements, then it may

22
<PAGE> 73

purchase Class B shares with a waiver of the CDSC upon redemption. The CDSC is
waived for any Eligible 401(k) Plan redeeming Class B shares. "Eligible 401(k)
Plan" is defined as a retirement plan qualified under Section 401(k) of the Code
with a salary reduction feature offering a menu of investments to plan
participants. The CDSC is also waived for redemptions from a 401(a) plan
qualified under the Code, provided, however, that each such plan has the same or
an affiliated sponsoring employer as an Eligible 401(k) Plan purchasing Class B
shares of MLAM-advised mutual funds ("Eligible 401(a) Plan"). Other tax
qualified retirement plans within the meaning of Section 401(a) and 403(b) of
the Code which are provided specialized services (e.g., plans whose participants
may direct on a daily basis their plan allocations among a menu of investments)
by independent administration firms contracted through Merrill Lynch also may
purchase Class B shares with a waiver of the CDSC. The CDSC is waived for any
Class B shares which are purchased by an Eligible 401(k) Plan or Eligible 401(a)
Plan and are rolled over into a Merrill Lynch or Merrill Lynch Trust Company
custodied IRA and held in such account at the time of redemption. The Class B
CDSCs is also waived for any Class B shares which are purchased by a Merrill
Lynch rollover IRA, that was funded by a rollover from a terminated 401(k) plan
managed by the MLAM Private Portfolio Group and held in such account at the time
of redemption. The minimum initial and subsequent purchase requirements are
waived in connection with all the above referenced Retirement Plans.

PORTFOLIO TRANSACTIONS AND BROKERAGE

Reference is made to "Investment Objective and Policies--Other Investment
Policies and Practices--Portfolio Transactions" in the Prospectus.

Subject to policies established by the Board of Directors of the Fund, the
Manager is responsible for making the Fund's portfolio decisions and placing the
Fund's portfolio transactions. The Fund has no obligation to deal with any
broker or group of brokers in the execution of transactions in portfolio
securities. Orders for transactions in portfolio securities are placed for the
Fund with a number of brokers and dealers, including Merrill Lynch. In placing
orders, it is the policy of the Fund to obtain the most favorable net results,
taking into account various factors, including price, commissions, if any, size
of the transaction and difficulty of execution. Where practicable, the Manager
surveys a number of brokers and dealers in connection with proposed portfolio
transactions and selects the broker or dealer which offers the Fund best price
and execution or other services which are of benefit to the Fund. Securities
firms also may receive brokerage commissions on transactions including covered
call options written by the Fund and the sale of underlying securities upon the
exercise of such options. In addition, consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. and policies
established by the Fund's Board of Directors, the Manager may consider sales of
shares of the Fund as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund.

For the fiscal year ended August 31, 1995, the Fund paid total brokerage
commissions of $199,948, of which $21,850, or 10.93%, was paid to Merrill Lynch
for effecting 12.81% of the aggregate amount of transactions on which the Fund
paid brokerage commissions. For the fiscal year ended August 31, 1994, the Fund
paid total brokerage commissions of $127,842, of which $11,240, or 8.8%, was
paid to Merrill Lynch for effecting 10.7% of the aggregate amount of
transactions on which the Fund paid brokerage commissions. For the period
December 24, 1992 (commencement of operations) to August 31, 1993, the Fund paid
total brokerage commissions of $89,810, of which $4,620, or 5.14% was paid to
Merrill Lynch for effecting 4.06% of the aggregate dollar amount of transactions
in which the Fund paid brokerage commissions.

23
<PAGE> 74

The Fund does not use any particular broker or dealer, and brokers who
provide supplemental investment research to the Manager may receive orders for
transactions by the Fund. Such supplemental research services ordinarily consist
of assessments and analyses of the business or prospects of a company, industry
or economic sector. Information so received will be in addition to and not in
lieu of the services required to be performed by the Manager under the
Management Agreement. If in the judgment of the Manager the Fund will be
benefitted by supplemental research services, the Manager is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. The expenses of the Manager will not necessarily be reduced as a
result of the receipt of such supplemental information, and the Manager may use
such information in servicing its other accounts.

The Fund also may invest in certain securities traded in the
over-the-counter market and, where possible, deals directly with the dealers who
make a market in the securities involved, except in those circumstances in which
better prices and execution are available elsewhere. Under the Investment
Company Act, persons affiliated with the Fund are prohibited from dealing with
the Fund as a principal in the purchase and sale of securities unless a
permissive order allowing such transactions is obtained from the Commission.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principal for their own accounts, affiliated persons of
the Fund, including Merrill Lynch, will not serve as the Fund's dealer in such
transactions. However, affiliated persons of the Fund may serve as its broker in
over-the-counter transactions conducted on an agency basis provided that, among
other things, the fee or commission received by such affiliated broker is
reasonable and fair compared to the fee or commission received by such
nonaffiliated brokers in connection with comparable transactions.

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

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

While the Fund generally does not expect to engage in trading for
short-term gains, it will effect portfolio transactions without regard to
holding period if, in its management's judgment, such transactions are advisable
in light of a change in circumstances of a particular company or within a
particular industry or in general market, economic or financial conditions.
Accordingly, while the Fund anticipates that its annual turnover rate should not
exceed 150% under normal conditions, it is impossible to predict portfolio
turnover rates. Higher portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads and brokerage commissions, which
are borne directly by the Fund. The portfolio turnover rate is calculated by

24
<PAGE> 75

dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of all securities whose maturities
at the time of acquisition were one year or less) by the monthly average value
of the securities in the portfolio during the year.

DETERMINATION OF NET ASSET VALUE

Reference is made to "Additional Information--Determination of Net Asset
Value" in the Prospectus concerning the determination of net asset value. The
net asset value of the shares of all classes of the Fund is determined once
daily Monday through Friday, as of 15 minutes after the close of business on the
New York Stock Exchange (generally, 4:00 p.m., New York time) on each day during
which such Exchange is open for trading. The New York Stock Exchange is not open
on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The net asset value is computed
by dividing the sum of the value of the securities held by the Fund plus any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total number
of shares outstanding at such time. Expenses, including the management fees and
any account maintenance and/or distribution fees, are accrued daily. The per
share net asset value of the Class B, Class C and Class D shares generally will
be lower than the per share net asset value of the Class A shares reflecting the
daily expense accruals of the account maintenance, distribution and higher
transfer agency fees applicable with respect to the Class B and Class C shares
and the daily expense accruals of the account maintenance fees applicable with
respect to the Class D shares; moreover, the per share net asset value of the
Class B and Class C shares generally will be lower than the per share net asset
value of Class D shares, reflecting the daily expense accruals of the
distribution fees and higher transfer agency fees applicable with respect to the
Class B and Class C shares of the Fund. It is expected, however, that the per
share net asset value of the four classes will tend to converge (although not
necessarily meet) immediately after the payment of dividends or distributions,
which will differ by approximately the amount of the expense accrual
differential between the classes.

Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the time
of valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last bid price.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith under the direction of the
Board of Directors of the Fund.

The Fund may, to the extent permitted by its investment restrictions, have
positions in portfolio securities for which market quotations are not readily
available. It may be difficult to determine precisely the fair market value for
such investments and there may be a range of values which are reasonable at any
particular time. Determination of fair value in such instances will be based
upon such factors as are deemed relevant under the circumstances, including the
financial condition and operating results of the issuer, recent third party

25
<PAGE> 76

transactions (actual or proposed) relating to such securities and, in extreme
cases, the liquidation value of the issuer.

Option Accounting Principles. When the Fund sells an option, an amount
equal to the premium received by the Fund is included in the Fund's Statement of
Assets and Liabilities as a deferred credit. The amount of such liability will
be subsequently marked-to-market to reflect the current market value of the
option written. If current market value exceeds the premium received there is an
unrealized loss; conversely, if the premium exceeds current market value there
is an unrealized gain. The current market value of a traded option is the last
sale price or, in the absence of a sale, the last offering price. If an option
expires on its stipulated expiration date or if the Fund enters into a closing
purchase transaction, the Fund will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option will be extinguished. If an option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security and the proceeds of sale are increased by the premium originally
received.

SHAREHOLDER SERVICES

The Fund offers a number of shareholder services described below which are
designed to facilitate investment in shares of the Fund. Certain of such
services are not available to investors who place orders for the Fund's shares
through the Merrill Lynch Blueprint(SM) Program. Full details as to each of such
services can be obtained from the Fund, the Distributor or Merrill Lynch.

INVESTMENT ACCOUNT

Each shareholder whose account is maintained with Financial Data Services,
Inc. (the "Transfer Agent") has an Investment Account and will receive
statements, at least quarterly, from the Transfer Agent. These statements will
serve as transaction confirmations for automatic investment purchases and the
reinvestment of ordinary income dividends and long-term capital gain
distributions. The statements will also show any other activity in the account
since the preceding statement. Shareholders also will receive separate
confirmations for each purchase or sale transaction other than automatic
investment purchases and the reinvestment of ordinary income dividends and
long-term capital gains distributions. A shareholder may make additions to his
or her Investment Account at any time by mailing a check directly to the
Transfer Agent.

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

Shareholders considering transferring their Class A or Class D shares from
Merrill Lynch to another brokerage firm or financial institution should be aware
that, if the firm to which the Class A or Class D shares are to be transferred
will not take delivery of shares of the Fund, a shareholder either must redeem
the Class A or Class D shares (paying any applicable CDSC) so that the cash
proceeds can be transferred to the account at the new firm, or such shareholder
must continue to maintain an Investment Account at the Transfer Agent for those
Class A or Class D shares. Shareholders interested in transferring their Class B
or Class C shares from Merrill Lynch and who do not wish to have an Investment
Account maintained for such shares at the Transfer Agent may request their new
brokerage firm to maintain such shares in an account registered in the name of
the brokerage firm for the benefit of the shareholder at the Transfer Agent. If
the new brokerage firm is willing to accommodate the shareholder in this manner,
the shareholder must request that he or she be issued certificates for his or
her shares, and then must turn the certificates over to the new firm for
registration as described in the preceding sentence. Shareholders considering
transferring a tax-deferred retirement

26
<PAGE> 77

account such as an individual retirement account from Merrill Lynch to another
brokerage firm or financial institution should be aware that, if the firm to
which the retirement account is to be transferred will not take delivery of
shares of the Fund, a shareholder must either redeem the shares (paying any
applicable CDSC) so that the cash proceeds can be transferred to the account at
the new firm, or such shareholder must continue to maintain a retirement account
at Merrill Lynch for those shares.

AUTOMATIC INVESTMENT PLANS

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

AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTION

Unless specific instructions to the contrary are given as to the method of
payment of dividends and capital gains distributions, dividends and
distributions will be reinvested automatically in full and fractional shares of
the Fund. Such reinvestment will be at the net asset value per share (i.e.,
without a sales charge) next determined on the ex-dividend date for such
dividends and distributions. Shareholders may elect in writing to receive either
their income dividends or capital gains distributions, or both, in cash, in
which event payment will be mailed or direct deposited on or about the payment
date. Cash payments can also be directly deposited to the shareholder's bank
account.

Shareholders may, at any time, notify the Transfer Agent in writing or by
telephone (1-800-MER-FUND) that they no longer wish to have the dividends and/or
capital gains distributions reinvested in shares of the Fund or vice versa and,
commencing ten days after the receipt by the Transfer Agent of such notice, such
instructions will be effected.

SYSTEMATIC WITHDRAWAL PLANS--CLASS A AND CLASS D SHARES

A Class A or Class D shareholder may elect to make systematic withdrawals
from an Investment Account in the form of payments by check or through automatic
payment by direct deposit to such shareholder's bank account on either a monthly
or quarterly basis as provided below. Quarterly withdrawals are available for
shareholders who have acquired Class A or Class D shares of the Fund having a
value, based on cost or the current offering price, of $5,000 or more and
monthly withdrawals for shareholders with Class A or Class D shares with such a
value of $10,000 or more.

At the time of each withdrawal payment, sufficient Class A or Class D
shares are redeemed from those on deposit in the shareholder's account to
provide the withdrawal payment specified by the shareholder. The shareholder may
specify either a dollar amount or a percentage of the value of his or her Class
A or Class D shares. Redemptions will be made at net asset value as determined
as of 15 minutes after the close of business on the New York Stock Exchange
(generally, 4:00 p.m., New York City time) on the 24th day of each month

27
<PAGE> 78

or the 24th day of the last month of each quarter, whichever is applicable. If
the Exchange is not open for business on such date, the Class A or Class D
shares will be redeemed at the close of business on the following business day.
The check for the withdrawal payment will be mailed or the direct deposit of the
withdrawal payment will be made on the next business day following redemption.
When a shareholder is making systematic withdrawals, dividends and distributions
on all Class A or Class D shares in the Investment Account are reinvested
automatically in the Fund Class A or Class D shares respectively. A
shareholder's Systematic Withdrawal Plan may be terminated at any time, without
charge or penalty, by the shareholder, the Fund, the Transfer Agent or the
Distributor.

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

A Class A or Class D shareholder whose shares are held within a CMA(R),
CBA(R) or Retirement Account may elect to have shares redeemed on a monthly,
bimonthly, quarterly, semiannual or annual basis through the CMA(R)/CBA(R)
Systematic Redemption Program. The minimum fixed dollar amount redeemable is
$25. The proceeds of systematic redemptions will be posted to the shareholder's
account five business days after the date the shares are redeemed. Monthly
systematic redemptions will be made at net asset value on the first Monday of
each month, bimonthly systematic redemptions will be made at net asset value on
the first Monday of every other month, and quarterly, semiannual or annual
redemptions are made at net asset value on the first Monday of months selected
at the shareholder's option. If the first Monday of the month is a holiday, the
redemption will be processed at net asset value on the next business day. The
CMA(R)/CBA(R) Systematic Redemption Program is not available if Fund shares are
being purchased within the account pursuant to the Automatic Investment Program.
For more information on the CMA(R)/CBA(R) Systematic Redemption Program,
eligible shareholders should contact their Financial Consultant.

RETIREMENT PLANS

Self-directed individual retirement accounts and other retirement plans are
available from Merrill Lynch. Under these plans, investments may be made in the
Fund and in certain of the other mutual funds sponsored by Merrill Lynch as well
as in other securities. Merrill Lynch charges an initial establishment fee and
an annual custodial fee for each account. Information with respect to these
plans is available upon request from Merrill Lynch. The minimum initial purchase
to establish any such plan is $100, and the minimum subsequent purchase is $1.

Capital gains and ordinary income received in each of the plans referred to
above are exempt from Federal taxation until distributed from the plans.
Investors considering participation in any such plan should review specific tax
laws relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.

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<PAGE> 79

EXCHANGE PRIVILEGE

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

Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another MLAM-advised mutual
fund ("new Class A or Class D shares") are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount equal
to the difference, if any, between the sales charge previously paid on the
outstanding Class A or Class D shares and the sales charge payable at the time
of the exchange on the new Class A or Class D shares. With respect to
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the "sales charge previously paid" shall include the aggregate of the
sales 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.

In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively ("new Class B or
Class C shares"), of another MLAM-advised mutual fund on the basis of relative
net asset value per Class B or Class C share, without the payment of any CDSC
that might otherwise be due on redemption of the outstanding shares. Class B
shareholders of the Fund exercising the exchange privilege will continue to be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the new Class B shares acquired through use of the exchange
privilege. In addition, Class B shares of the Fund acquired through use of the
exchange privilege will be subject to the Fund's CDSC schedule if

29
<PAGE> 80

such schedule is higher than the CDSC schedule relating to the Class B shares of
the fund from which the exchange has been made. For purposes of computing the
sales charge that may be payable on a disposition of the new Class B or Class C
shares, the holding period for the outstanding Class B or Class C shares is
"tacked" to the holding period of the new Class B or Class C shares. For
example, an investor may exchange Class B shares of the Fund for those of
Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") after having held
the Fund Class B shares for two and a half years. The 2% CDSC that generally
would apply to a redemption would not apply to the exchange. Three years later
the investor may decide to redeem the Class B shares of Special Value Fund and
receive cash. There will be no CDSC due on this redemption, since by "tacking"
the two and a half year holding period of Fund Class B shares to the three year
holding period for the Special Value Fund Class B shares, the investor will be
deemed to have held the new Class B shares for more than five years.

The exchange privilege is modified with respect to certain retirement plans
which participate in the Merrill Lynch Mutual Fund Adviser ("MFA") program. Such
retirement plans may exchange Class B, Class C or Class D shares that have been
held for at least one year for Class A shares of the same fund on the basis of
relative net asset values in connection with the commencement of participation
in the MFA program, i.e., no CDSC will apply. The one-year holding period does
not apply to shares acquired through reinvestment of dividends. Upon termination
of participation in the MFA program, Class A shares will be re-exchanged for the
class of shares originally held. For purposes of computing any CDSC that may be
payable upon redemption of Class B or Class C shares so reacquired, or the
Conversion Period for Class B shares so reacquired, the holding period for the
Class A shares will be "tacked" to the holding period for the Class B or Class C
shares originally held.

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

Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:

Funds Issuing Class A, Class B, Class C and Class D Shares:

MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC. ...... High current income consistent with a policy of
limiting the degree of fluctuation in net
asset value by investing primarily in a

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<PAGE> 81

portfolio of adjustable rate securities,
consisting principally of mortgage-backed and
asset-backed securities.

MERRILL LYNCH AMERICAS INCOME
FUND, INC. ................. A high level of current income, consistent with
prudent investment risk, by investing
primarily in debt securities denominated in a
currency of a country located in the Western
Hemisphere (i.e., North and South America and
the surrounding waters).

MERRILL LYNCH ARIZONA LIMITED
MATURITY MUNICIPAL BOND
FUND........................ A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and Arizona income taxes
as is consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Arizona Municipal Bonds.

MERRILL LYNCH ARIZONA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Arizona income taxes as is consistent
with prudent investment management.

MERRILL LYNCH ARKANSAS
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arkansas
income taxes as is consistent with prudent
investment management.

MERRILL LYNCH ASSET GROWTH
FUND, INC. ................. High total investment return, consistent with
prudent risk, from investment in United
States and foreign equity, debt and money
market securities the combination of which
will be varied both with respect to types of
securities and markets in response to
changing market and economic trends.

MERRILL LYNCH ASSET INCOME
FUND, INC. ................. A high level of current income through
investment primarily in United States fixed
income securities.

MERRILL LYNCH BALANCED FUND
FOR INVESTMENT AND
RETIREMENT, INC. ........... As high a level of total investment return as
is consistent with a reasonable risk
investing in common stock and other types of
securities, including fixed income securities
and convertible securities.

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<PAGE> 82

MERRILL LYNCH BASIC VALUE
FUND, INC. ................. Capital appreciation and, secondarily, income
through investment in securities, primarily
equities, that are undervalued and therefore
represent basic investment value.

MERRILL LYNCH CALIFORNIA
INSURED MUNICIPAL BOND
FUND........................ A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management through investment in a
portfolio consisting primarily of insured
California Municipal Bonds.

MERRILL LYNCH CALIFORNIA
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
and California income taxes as is consistent
with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade California
Municipal Bonds.

MERRILL LYNCH CALIFORNIA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and California income taxes as is consistent
with prudent investment management.

MERRILL LYNCH CAPITAL FUND,
INC. ....................... The highest total investment return consistent
with prudent risk through a fully managed
investment policy utilizing equity, debt and
convertible securities.

MERRILL LYNCH COLORADO
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Colorado income taxes as is consistent
with prudent investment management.

MERRILL LYNCH CONNECTICUT
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Connecticut income taxes as is consistent
with prudent investment management.

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<PAGE> 83

MERRILL LYNCH CORPORATE BOND
FUND, INC. ................. Current income from three separate diversified
portfolios of fixed income securities.

MERRILL LYNCH DEVELOPING
CAPITAL MARKETS FUND,
INC. ....................... Long-term capital appreciation through
investments in securities, principally
equities, of issuers in countries having
smaller capital markets.

MERRILL LYNCH DRAGON FUND,
INC. ....................... Capital appreciation primarily through
investment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin.

MERRILL LYNCH EUROFUND........ Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.

MERRILL LYNCH FEDERAL
SECURITIES TRUST............ High current return through investments in U.S.
Government and Government agency securities,
including GNMA mortgage-backed certificates
and other mortgage-backed Government
securities.

MERRILL LYNCH FLORIDA LIMITED
MATURITY MUNICIPAL BOND
FUND........................ A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal income taxes as is
consistent with prudent investment management
while serving to offer shareholders the
opportunity to own securities exempt from
Florida intangible personal property taxes
through investment in a portfolio primarily
of intermediate-term investment grade Florida
Municipal Bonds.

MERRILL LYNCH FLORIDA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
income taxes as is consistent with prudent
investment management, while seeking to offer
shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes.

MERRILL LYNCH FUND FOR
TOMORROW, INC. ............. Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially
positioned to benefit from demographic and
cultural changes as they affect consumer
markets.

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<PAGE> 84

MERRILL LYNCH FUNDAMENTAL
VALUE PORTFOLIO
(available only for
exchanges by certain
individual retirement
accounts for which Merrill
Lynch acts as custodian).... A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objective
is to provide shareholders with capital
appreciation and income by investing in
securities, with at least 65% of the
portfolio's assets being invested in
equities.

MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC. ...... High total return, consistent with prudent
risk, through a fully managed investment
policy utilizing United States and foreign
equity, debt and money market securities, the
combination of which will be varied from time
to time both with respect to the types of
securities and markets in response to
changing market and economic trends.

MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND
RETIREMENT.................. High total investment return from investment in
a global portfolio of debt instruments
denominated in various currencies and
multinational currency units.

MERRILL LYNCH GLOBAL
CONVERTIBLE FUND, INC. ..... High total return from investment primarily in
an internationally diversified portfolio of
convertible debt securities, convertible
preferred stock and "synthetic" convertible
securities consisting of a combination of
debt securities or preferred stock and
warrants or options.

MERRILL LYNCH GLOBAL HOLDINGS,
INC.
(residents of Arizona must
meet investor suitability
standards................... The highest total investment return consistent
with prudent risk through worldwide
investment in an internationally diversified
portfolio of securities.

MERRILL LYNCH GLOBAL
OPPORTUNITY PORTFOLIO
(available only for
exchanges by certain
individual retirement
accounts for which Merrill
Lynch acts as custodian).... A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objective
is to provide shareholders with a high total
investment return through an investment
policy utilizing United States and foreign
equity, debt and money market securities, the

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<PAGE> 85

combination of which will vary depending upon
changing market and economic trends.

MERRILL LYNCH GLOBAL RESOURCES
TRUST....................... Long-term growth and protection of capital from
investment in securities of foreign and
domestic companies that possess substantial
natural resource assets.

MERRILL LYNCH GLOBAL SMALLCAP
FUND, INC. ................. Long-term growth of capital by investing
primarily in equity securities of companies
with relatively small market capitalizations
located in various foreign countries and in
the United States.

MERRILL LYNCH GLOBAL UTILITY
FUND, INC. ................. Capital appreciation and current income through
investment of at least 65% of its total
assets in equity and debt securities issued
by domestic and foreign companies which are
primarily engaged in ownership or operation
of facilities used to generate, transmit or
distribute electricity, telecommunications,
gas or water.

MERRILL LYNCH GROWTH FUND FOR
INVESTMENT AND RETIREMENT... Growth of capital and, secondarily, income from
investment in a diversified portfolio of
equity securities placing a principal
emphasis on those securities which management
of the Fund believes to be undervalued.

MERRILL LYNCH HEALTHCARE FUND,
INC.
(residents of Wisconsin must
meet investor suitability
standards).................. Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.

MERRILL LYNCH INTERNATIONAL
EQUITY FUND................. Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.

MERRILL LYNCH LATIN AMERICA
FUND, INC. ................. Capital appreciation by investing primarily in
Latin American equity and debt securities.

MERRILL LYNCH MARYLAND
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Maryland income taxes as is consistent
with prudent investment management.

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<PAGE> 86

MERRILL LYNCH MASSACHUSETTS
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and Massachusetts income
taxes as is consistent with prudent
investment management through investment in a
portfolio primarily of intermediate-term
investment grade Massachusetts Municipal
Bonds.

MERRILL LYNCH MASSACHUSETTS
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Massachusetts income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH MICHIGAN LIMITED
MATURITY MUNICIPAL BOND
FUND........................ A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and Michigan income taxes
as is consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Michigan Municipal Bonds.

MERRILL LYNCH MICHIGAN
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Michigan income taxes as is consistent
with prudent investment management.

MERRILL LYNCH MINNESOTA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Minnesota personal income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH MUNICIPAL BOND
FUND, INC. ................. Tax-exempt income from three separate
diversified portfolios of municipal bonds.

MERRILL LYNCH MUNICIPAL
INTERMEDIATE TERM FUND...... Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level as possible of income exempt

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<PAGE> 87

from Federal income taxes by investing in
investment grade obligations with a dollar
weighted average maturity of five to twelve
years.

MERRILL LYNCH NEW JERSEY
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and New Jersey income
taxes as is consistent with prudent
investment management through a portfolio
primarily of intermediate-term investment
grade New Jersey Municipal Bonds.

MERRILL LYNCH NEW JERSEY
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and New Jersey income taxes as is consistent
with prudent investment management.

MERRILL LYNCH NEW MEXICO
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and New Mexico income taxes as is consistent
with prudent investment management.

MERRILL LYNCH NEW YORK LIMITED
MATURITY MUNICIPAL BOND
FUND........................ A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal, New York State and New
York City income taxes as is consistent with
prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade New York
Municipal Bonds.

MERRILL LYNCH NEW YORK
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal,
New York State and New York City income taxes
as is consistent with prudent investment
management.

MERRILL LYNCH NORTH CAROLINA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and North Carolina

37
<PAGE> 88

income taxes as is consistent with prudent
investment management.

MERRILL LYNCH OHIO MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Ohio income
taxes as is consistent with prudent
investment management.

MERRILL LYNCH OREGON MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Oregon income taxes as is consistent with
prudent investment management.

MERRILL LYNCH PACIFIC
FUND, INC. ................. Capital appreciation by investing in equity
securities of corporations domiciled in Far
Eastern and Western Pacific countries,
including Japan, Australia, Hong Kong and
Singapore.

MERRILL LYNCH PENNSYLVANIA
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
shareholders with as high a level of income
exempt from Federal and Pennsylvania income
taxes as is consistent with prudent
investment management through investment in a
portfolio of intermediate-term investment
grade Pennsylvania Municipal Bonds.

MERRILL LYNCH PENNSYLVANIA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
and Pennsylvania income taxes as is
consistent with prudent investment
management.

MERRILL LYNCH PHOENIX
FUND, INC. ................. Long-term growth of capital by investing in
equity and fixed income securities, including
tax-exempt securities, of issuers in weak
financial condition or experiencing poor
operating results believed to be undervalued
relative to the current or prospective
condition of such issuer.

38
<PAGE> 89

MERRILL LYNCH QUALITY BOND
PORTFOLIO
(available only for
exchanges by certain
individual retirement
accounts for which Merrill
Lynch acts as custodian).... A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objective
is to provide shareholders with a high level
of current income through investment in a
diversified portfolio of debt obligations,
such as corporate bonds and notes,
convertible securities, preferred stocks and
governmental obligations.

MERRILL LYNCH SHORT-TERM
GLOBAL INCOME FUND, INC. ... As high a level of current income as is
consistent with prudent investment management
from a global portfolio of high quality debt
securities denominated in various currencies
and multi-national currency units and having
remaining maturities not exceeding three
years.

MERRILL LYNCH SPECIAL VALUE
FUND, INC. ................. Long-term growth of capital from investments in
securities, primarily equities of relatively
small companies believed to have special
investment value and emerging growth
companies regardless of size.

MERRILL LYNCH STRATEGIC
DIVIDEND FUND............... Long-term total return from investment in
dividend paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.

MERRILL LYNCH TECHNOLOGY FUND,
INC. ....................... Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in technology.

MERRILL LYNCH TEXAS MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide shareholders with as
high a level of income exempt from Federal
income taxes as is consistent with prudent
investment management by investing primarily
in a portfolio of long-term, investment grade
obligations issued by the State of Texas, its
political subdivisions, agencies and
instrumentalities.

39
<PAGE> 90

MERRILL LYNCH U.S. GOVERNMENT
SECURITIES PORTFOLIO
(available only for
exchanges by certain
individual retirement
accounts for which Merrill
Lynch acts as custodian).... A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objective
is to provide shareholders with a high
current return through investments in U.S.
Government and government agency securities,
including GNMA mortgage-backed certificates
and other mortgage-backed government
securities.

MERRILL LYNCH UTILITY INCOME
FUND, INC. ................. High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in the
ownership or operation of facilities used to
generate, transmit or distribute electricity,
telecommunications, gas or water.

MERRILL LYNCH WORLD INCOME
FUND, INC. ................. High current income by investing in a global
portfolio of fixed income securities
denominated in various currencies, including
multinational currencies.

Class A Share Money Market Funds:

MERRILL LYNCH READY ASSETS
TRUST....................... Preservation of capital, liquidity and the
highest possible current income consistent
with the foregoing objectives from the short-
term money market securities in which the
Trust invests.

MERRILL LYNCH RETIREMENT
RESERVES MONEY FUND
(available only for
exchanges within certain
retirement plans)........... Currently the only portfolio of Merrill Lynch
Retirement Series Trust, a series fund, whose
objectives are to provide shareholders with
current income, preservation of capital and
liquidity available from investing in a
diversified portfolio of short-term money
market securities.

MERRILL LYNCH U.S.A.
GOVERNMENT RESERVES......... Preservation of capital, current income and
liquidity available from investing in direct
obligations of the U.S. Government and
repurchase agreements relating to such
securities.

MERRILL LYNCH U.S. TREASURY
MONEY FUND.................. Preservation of capital, liquidity and current
income through investment exclusively in a
diversified portfolio of short-term
marketable securities which are direct
obligations of the U.S. Treasury.

40
<PAGE> 91

Class B, Class C and Class D Share Money Market Funds:

MERRILL LYNCH GOVERNMENT
FUND........................ A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide shareholders with
current income consistent with liquidity and
security of principal from investment in
securities issued or guaranteed by the U.S.
Government, its agencies and
instrumentalities and in repurchase
agreements secured by such obligations.

MERRILL LYNCH INSTITUTIONAL
FUND........................ A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide shareholders with
maximum current income consistent with
liquidity and the maintenance of a
high-quality portfolio of money market
securities.

MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND............. A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide shareholders with
current income exempt from Federal income
taxes, preservation of capital and liquidity
available from investing in a diversified
portfolio of short-term, high quality
municipal bonds.

MERRILL LYNCH TREASURY FUND... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide shareholders with
current income consistent with liquidity and
security of principal from investment in
direct obligations of the U.S. Treasury and
up to 10% of its total assets in repurchase
agreements secured by such obligations.

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

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

41
<PAGE> 92

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

It is the Fund's intention to distribute substantially all of its net
investment income, if any. Dividends from such net investment income are paid at
least annually. All net realized long- or short-term capital gains, if any, are
distributed to the Fund's shareholders at least annually. Premiums from expired
options written by the Fund and net gains from closing purchase transactions are
treated as short-term capital gains for Federal income tax purposes. See
"Shareholder Services--Automatic Reinvestment of Dividends and Distributions" in
the Prospectus for information concerning the manner in which dividends and
distributions may be reinvested automatically in shares of the Fund. Dividends
and distributions are taxable to shareholders as described below whether they
are invested in shares of the Fund or received in cash. The per share dividends
and distributions on Class B and Class C shares will be lower than the per share
dividends and distributions on Class A and Class D shares as a result of the
account maintenance, distribution and higher transfer agency fees applicable
with respect to the Class B and Class C shares; similarly, the per share
dividends and distributions on Class D shares will be lower than the per share
dividends and distributions on Class A shares as a result of the account
maintenance fees applicable with respect to the Class D shares. See
"Determination of Net Asset Value".

TAXES

Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income or capital gain dividends. A
portion of the Fund's ordinary income dividends may be eligible for the
dividends received deduction allowed to corporations under the Code, if certain
requirements are met. For this purpose, the Fund will allocate dividends
eligible for the dividends received deduction among the Class A, Class B, Class
C and Class D shareholders according to a method (which it believes is
consistent with the Securities and Exchange Commission exemptive order
permitting the issuance and sale of multiple classes of stock) that is based on
the gross income allocable to Class A, Class B, Class C and Class D shareholders
during the taxable year, or such other method as the Internal Revenue Service
may prescribe. If the Fund pays a dividend in January which was declared in the

42
<PAGE> 93

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

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

TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS

The Fund may write, purchase or sell options, futures and forward foreign
exchange contracts. Options and futures contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the end
of each taxable year, i.e., each such option or futures contract will be treated
as sold for its

43
<PAGE> 94

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

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

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

One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income be derived from gains from the sale or other disposition
of securities held for less than three months. Accordingly, the Fund may be
restricted in effecting closing transactions within three months after entering
into an option or futures contract.

SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS

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

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

44
<PAGE> 95

described above, however, will not apply to certain transactions entered into by
the Fund solely to reduce the risk of currency fluctuations with respect to its
investments.

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

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

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

PERFORMANCE DATA

From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present or
prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total returns are determined separately for Class A, Class B,
Class C and Class D shares in accordance with a formula specified by the
Commission.

Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charge in the case of Class A and Class D
shares and the CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of Class B and Class C
shares.

The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that, (i) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted and
(ii) the maximum applicable sales charge will not be included. Actual annual or
annualized total return data generally will be lower than average annual total
return data since the average rates of return reflect compounding of return;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over a
longer period of time.

45
<PAGE> 96

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

<TABLE>
<CAPTION>
CLASS C
SHARES
(FORMERLY
CLASS B
CLASS A SHARES CLASS B SHARES SHARES)
----------------------------- ----------------------------- ------------
EXPRESSED REDEEMABLE EXPRESSED REDEEMABLE EXPRESSED
AS A VALUE OF A AS A VALUE OF A AS A
PERCENTAGE HYPOTHETICAL PERCENTAGE HYPOTHETICAL PERCENTAGE
BASED ON A $1,000 BASED ON A $1,000 BASED ON A
HYPOTHETICAL INVESTMENT HYPOTHETICAL INVESTMENT HYPOTHETICAL
$1,000 AT THE END $1,000 AT THE END $1,000
INVESTMENT OF THE PERIOD INVESTMENT OF THE PERIOD INVESTMENT
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
(including maximum applicable sales charges)
One Year Ended August 31, 1995....... 17.28%
Inception (December 24, 1992) to
August 31, 1995..................... 6.29%
Inception (October 21, 1994) to
August 31, 1995..................... 16.71% $1,142.20 18.35% $1,156.00
ANNUAL TOTAL RETURN
(excluding maximum applicable sales charges)
One Year Ended August 31, 1995....... 18.28%
One Year Ended August 31, 1994....... 1.01%
Inception (December 24, 1992) to
August 31, 1993..................... (1.40)%
Inception (October 21, 1994) to
August 31, 1995..................... 20.55% $1,205.50 19.60% $1,196.00
AGGREGATE TOTAL RETURN
(including maximum applicable sales charges)
Inception (December 24, 1992) to
August 31, 1995.................... 17.80%
Inception (October 21, 1994) to
August 31, 1995..................... 14.22% $1,142.20 15.60% $1,156.00

<CAPTION>
CLASS D SHARES
(FORMERLY CLASS A SHARES)
-----------------------------
REDEEMABLE EXPRESSED REDEEMABLE
VALUE OF A AS A VALUE OF A
HYPOTHETICAL PERCENTAGE HYPOTHETICAL
$1,000 BASED ON A $1,000
INVESTMENT HYPOTHETICAL INVESTMENT
AT THE END $1,000 AT THE END
OF THE PERIOD INVESTMENT OF THE PERIOD
------------- ------------ -------------
<S> <C> <C> <C>
One Year Ended August 31, 1995....... $1,172.80 12.90% $1,129.00
Inception (December 24, 1992) to
August 31, 1995..................... $1,178.00 4.97% $1,139.10
Inception (October 21, 1994) to
August 31, 1995.....................
One Year Ended August 31, 1995....... $1,182.80 19.15% $1,191.50
One Year Ended August 31, 1994....... $1,010.10 1.82% $1,018.20
Inception (December 24, 1992) to
August 31, 1993..................... $ 986.00 (0.90)% $ 991.00
Inception (October 21, 1994) to
August 31, 1995.....................
Inception (December 24, 1992) to
August 31, 1995.................... $1,178.00 13.91% $1,139.10
Inception (October 21, 1994) to
August 31, 1995.....................
</TABLE>

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

GENERAL INFORMATION

DESCRIPTION OF SHARES

The Fund was incorporated under Maryland law on April 30, 1992. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and Class
D Common Stock, each of which consists of 100,000,000 shares. Class A, Class B,
Class C and Class D Common Stock represent an interest in the same assets of the
Fund and are identical in all respects except that the Class B, Class C and
Class D shares bear certain expenses related to the account maintenance and/or
distribution of such shares and have exclusive voting rights with respect to
matters relating to such account maintenance and/or distribution expenditures.
The Fund has received an order from the Commission permitting the issuance and
sale of multiple classes of Common Stock. The Board of Directors of the Fund may
classify and reclassify the shares of the Fund into additional classes of Common
Stock at a future date.

Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter submitted to a shareholder vote. The Fund does

46
<PAGE> 97

not intend to hold annual meetings of shareholders in any year in which the
Investment Company Act does not require shareholders to elect Directors. Also,
the by-laws of the Fund require that a special meeting of stockholders be held
upon the written request of at least 10% of the outstanding shares of the Fund
entitled to vote at such meeting, if they comply with applicable Maryland law.
Voting rights for Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive rights. Redemption and conversion rights
are discussed elsewhere herein and in the Prospectus. Each share is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund upon liquidation or dissolution after satisfaction of
outstanding liabilities, except that expenses related to the distribution of the
shares within a class will be borne solely by such class. Stock certificates are
issued by the Transfer Agent only on specific request. Certificates for
fractional shares are not issued in any case.

The Manager provided the initial capital for the Fund by purchasing 5,000
Class A (now redesignated Class D) shares of Common Stock and 5,000 Class B (now
redesignated Class C) shares of Common Stock for an aggregate of $100,000. Such
shares were acquired for investment and can only be disposed of by redemption.
The organizational expenses of the Fund (estimated at approximately $104,725)
will be paid by the Fund and amortized over a period not exceeding five years.
The proceeds realized by the Manager (or any subsequent holder) upon redemption
of any of such shares will be reduced by the proportionate amount of the
unamortized organizational expenses which the number of shares redeemed bears to
the number of shares initially purchased.

COMPUTATION OF OFFERING PRICE PER SHARE

The offering price for Class A, Class B, Class C and Class D shares of the
Fund, based on the value of the Fund's net assets on August 31, 1995 and its
shares outstanding on that date is set forth below.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Assets......................................... $21,287,507 $63,748,494 $44,220,150 $13,230,549
============ ============ ============ ============
Number of Shares Outstanding....................... 1,825,560 5,593,805 3,880,283 1,136,577
============ ============ ============ ============
Net Asset Value Per Share (net assets divided by
number of shares outstanding).................... $ 11.66 $ 11.40 $ 11.40 $ 11.64
Sales Charge (Class A and Class D shares: 5.25% of
offering price (5.54% of net asset value per
share))*......................................... .65 ** ** .64
----------- ----------- ----------- -----------
Offering Price..................................... $ 12.31 $ 11.40 $ 11.40 $ 12.28
============ ============ ============ ============
</TABLE>

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

* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is
applicable.

** Class B and Class C shares are not subject to an initial sales charge but may
be subject to a CDSC upon redemption. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares" in the Prospectus and
"Redemption of Shares--Deferred Sales Charges--Class B and Class C Shares"
herein.

INDEPENDENT AUDITORS

Ernst & Young LLP, 202 Carnegie Center, Princeton, New Jersey 08543-5321,
has been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the Fund's shareholders. The
independent auditors are responsible for auditing the annual financial
statements of the Fund.

CUSTODIAN

The Chase Manhattan Bank, N.A., Global Securities Services, Chase MetroTech
Center, 18th Floor, Brooklyn, New York 11245, acts as the Custodian of the
Fund's assets. Under its contract with the Fund, the

47
<PAGE> 98

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

TRANSFER AGENT

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

LEGAL COUNSEL

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

REPORT TO SHAREHOLDERS

The fiscal year of the Fund ends on August 31 of each year. The Fund sends
to its shareholders at least semi-annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements audited
by independent auditors, is sent to shareholders each year. After the end of
each year, shareholders will receive Federal income tax information regarding
dividends and capital gains distributions.

ADDITIONAL INFORMATION

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

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

To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's common stock on December 1, 1995.

48
<PAGE> 99

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors,

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Fundamental Growth Fund, Inc., including the schedule of investments, as
of August 31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Fundamental Growth Fund, Inc. at August 31, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Princeton, New Jersey

September 29, 1995

49
<PAGE> 100
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS

Value Percent of
Industries Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Advertising 45,000 Interpublic Group of Companies, Inc. $ 1,610,850 $ 1,749,375 1.2%

Automotive & Truck 20,000 Ek Chor China Motorcycle Co. Ltd. (ADR)(a) 734,300 397,500 0.3

Banking & Financial 10,000 State Street Boston Corp. 352,275 368,750 0.3

Beverages 70,000 The Coca-Cola Co. 3,849,200 4,497,500 3.2
55,000 PepsiCo, Inc. 2,198,500 2,488,750 1.7
------------ ------------ ------
6,047,700 6,986,250 4.9

Chemical Producers 80,000 Duracell International Inc. 3,469,407 3,570,000 2.5
30,000 Great Lakes Chemical Corp. 1,962,268 1,983,750 1.4
------------ ------------ ------
5,431,675 5,553,750 3.9

Communications 100,000 ++Bay Networks Inc. 3,968,563 4,737,500 3.3

Computers 100,000 ++Compaq Computer Corp. 3,762,873 4,775,000 3.3
20,000 Hewlett-Packard Co. 1,514,950 1,600,000 1.1
------------ ------------ ------
5,277,823 6,375,000 4.4

Consumer Products & 105,000 ++CUC International, Inc. 2,296,189 3,583,125 2.5
Services

Cosmetics 100,000 The Gillette Co. 3,875,150 4,175,000 2.9
40,000 International Flavors & Fragrances Inc. 1,814,597 1,915,000 1.3
------------ ------------ ------
5,689,747 6,090,000 4.2

Electrical Equipment 10,000 Emerson Electric Co. 658,040 713,750 0.5

Electronics 90,000 Intel Corp. 4,522,225 5,523,750 3.9

Entertainment 25,000 ++Viacom, Inc. (Class A) 1,210,525 1,215,625 0.8
40,000 The Walt Disney Co. 2,415,368 2,245,000 1.6
------------ ------------ ------
3,625,893 3,460,625 2.4

Financial Services 100,000 The Travelers Group Inc. 4,443,567 4,800,000 3.4

Food 10,000 Wrigley (Wm.) Jr. Co. (Class B) 436,070 451,250 0.3

Food Merchandising 75,000 Albertson's, Inc. 2,150,222 2,390,625 1.7

Hotel 100,000 Marriott International, Inc. 3,394,490 3,550,000 2.5

Household Products 10,000 Colgate-Palmolive Co. 696,062 680,000 0.5
60,000 Procter & Gamble Co. 3,911,888 4,162,500 2.9
------------ ------------ ------
4,607,950 4,842,500 3.4
</TABLE>

<PAGE> 101

<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (continued)

Shares Held/ Value Percent of
Industries Face Amount Stocks & Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Information Processing 35,000 First Financial Management Corp. $ 2,156,956 $ 3,154,375 2.2%
75,000 General Motors Corp. (Class E) 3,096,100 3,496,875 2.5
------------ ------------ ------
5,253,056 6,651,250 4.7

Insurance 65,000 American International Group, Inc. 4,783,093 5,240,625 3.7

Leisure 60,000 PolyGram N.V. (ADR) (a) 2,789,132 3,675,000 2.6

Medical--Technology 30,000 ++Haemonetics Corp. 751,330 645,000 0.5
55,000 Johnson & Johnson 3,848,050 3,795,000 2.7
------------ ------------ ------
4,599,380 4,440,000 3.2

Oil Services 40,000 Schlumberger Ltd. 2,438,770 2,580,000 1.8

Pharmaceuticals 100,000 ++Amgen, Inc. 3,273,581 4,787,500 3.4
50,000 Merck & Co., Inc. 2,388,000 2,493,750 1.7
100,000 Pfizer Inc. 3,889,338 4,937,500 3.5
100,000 Upjohn Co. 4,262,940 4,237,500 3.0
------------ ------------ ------
13,813,859 16,456,250 11.6

Photography 60,000 Eastman Kodak Co. 3,209,725 3,457,500 2.4

Pollution Control 70,000 WMX Technologies Inc. 2,051,425 2,056,250 1.4

Publishing 10,000 ++Scholastic Corp. 455,625 612,500 0.4
125,000 Times Mirror Co. (Class A) 3,407,785 3,828,125 2.7
------------ ------------ ------
3,863,410 4,440,625 3.1

Restaurant 25,000 McDonald's Corp. 912,925 912,500 0.6

Retail Specialty 35,000 The Pep Boys--Manny, Moe & Jack 1,166,513 962,500 0.7
$ 350,000 The Pep Boys--Manny, Moe & Jack,
Convertible Bond, 4% due 9/01/1999 350,000 332,500 0.2
165,000 ++Staples Inc. 2,450,364 4,207,500 3.0
100,000 ++Toys 'R' Us, Inc. 2,626,260 2,600,000 1.8
------------ ------------ ------
6,593,137 8,102,500 5.7

Software--Computer 50,000 ++Microsoft Corp. 4,676,162 4,618,750 3.2

Telecommunications 200,000 MCI Communications Corp. 4,515,146 4,800,000 3.4

Toys 150,000 Mattel, Inc. 3,553,505 4,350,000 3.1

Travel & Lodging 100,000 Carnival Corporation (Class A) 2,290,068 2,175,000 1.5

Total Stocks & Bonds 120,590,372 135,530,000 95.1
</TABLE>

<PAGE> 102

<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded)

Value Percent of
Face Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Commercial Paper* $5,120,000 General Electric Capital Corp.,
5.82% due 9/01/1995 $ 5,120,000 $ 5,120,000 3.6%

US Government & 2,500,000 Federal Home Loan Bank, 5.62% due
Agency Obligations* 9/26/1995 2,490,243 2,490,243 1.8
3,000,000 Federal National Mortgage Association,
5.64% due 9/13/1995 2,994,360 2,994,360 2.1

Total Short-Term Securities 10,604,603 10,604,603 7.5

Total Investments $131,194,975 146,134,603 102.6
------------
Liabilities in Excess of Other Assets (3,647,903) (2.6)
------------ ------
Net Assets $142,486,700 100.0%
============ ======

<FN>
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
++Non-income producing security.

See Notes to Financial Statements.
</TABLE>

TEN LARGEST HOLDINGS PERCENT OF
(EQUITY INVESTMENTS) NET ASSETS
<S> <C>
Intel Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9%
American International Group, Inc. . . . . . . . . . . . . . . 3.7
Pfizer Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
MCI Communications Corp. . . . . . . . . . . . . . . . . . . . 3.4
The Travelers Group Inc. . . . . . . . . . . . . . . . . . . . 3.4
Amgen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Compaq Computer Corp. . . . . . . . . . . . . . . . . . . . . . 3.3
Bay Networks Inc. . . . . . . . . . . . . . . . . . . . . . . . 3.3
Microsoft Corp. . . . . . . . . . . . . . . . . . . . . . . . . 3.2
The Coca-Cola Co. . . . . . . . . . . . . . . . . . . . . . . . 3.2

PERCENT OF
TEN LARGEST INDUSTRIES NET ASSETS
<S> <C>
Pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . 11.6%
Retail Speciality . . . . . . . . . . . . . . . . . . . . . . . 5.7
Beverages . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
Information Processing. . . . . . . . . . . . . . . . . . . . . 4.7
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Chemical Producers. . . . . . . . . . . . . . . . . . . . . . . 3.9
Electronics . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Household Products. . . . . . . . . . . . . . . . . . . . . . . 3.4

</TABLE>

EQUITY PORTFOLIO CHANGES FOR THE QUARTER ENDED
AUGUST 31, 1995

ADDITIONS
*Capital Cities/ABC, Inc.
Johnson & Johnson
Merck & Co., Inc.
Times Mirror Co. (Class A)
Upjohn Co.
Viacom, Inc. (Class A)
The Walt Disney Co.

DELETIONS
3Com Corp.
*Capital Cities/ABC, Inc.
Countrywide Credit Industries, Inc.
Darden Restaurants Inc.
Electronics Arts, Inc.
General Mills, Inc.
Kellogg Co.
TCI Communications, Inc. (Class A)
Time Warner Inc.
Turner Broadcasting System, Inc.

*Added and deleted in the same quarter.

<PAGE> 103

FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of August 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$131,194,975) (Note 1a) $146,134,603
Receivables:
Securities sold $ 4,685,584
Capital shares sold 605,651
Dividends 153,323
Interest 7,000 5,451,558
------------
Deferred organization expenses (Note 1f) 45,693
Prepaid registration fees and other assets (Note 1f) 66,972
------------
Total assets 151,698,826
------------

Liabilities: Payables:
Securities purchased 8,245,722
Capital shares redeemed 275,485
Distributor (Note 2) 91,606
Investment adviser (Note 2) 75,535 8,688,348
------------
Accrued expenses and other liabilities 523,778
------------
Total liabilities 9,212,126
------------

Net Assets: Net assets $142,486,700
============

Net Assets Class A Shares of capital stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $ 182,556
Class B Shares of capital stock, $0.10 par value, 100,000,000 shares
authorized 559,381
Class C Shares of capital stock, $0.10 par value, 100,000,000 shares
authorized 388,028
Class D Shares of capital stock, $0.10 par value, 100,000,000 shares
authorized 113,658
Paid-in capital in excess of par 124,581,701
Accumulated investment loss--net (647,006)
Undistributed realized capital gains on investments and foreign
currency transactions--net 2,368,754
Unrealized appreciation on investments--net 14,939,628
------------
Net assets $142,486,700
============

Net Asset Value: Class A--Based on net assets of $21,287,507 and 1,825,560
shares of capital stock outstanding $ 11.66
============
Class B--Based on net assets of $63,748,494 and 5,593,805
shares of capital stock outstanding $ 11.40
============
Class C--Based on net assets of $44,220,150 and 3,880,283
shares of capital stock outstanding $ 11.40
============
Class D--Based on net assets of $13,230,549 and 1,136,577
shares of capital stock outstanding $ 11.64
============

See Notes to Financial Statements.
</TABLE>

<PAGE> 104

FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
Statement of Operations for the Year Ended August 31, 1995
<S> <S> <C>
Investment Dividends (net of $5,168 foreign withholding tax) $ 863,232
Income Interest and discount earned 468,462
(Notes 1d & 1e): ------------
Total income 1,331,694
------------

Expenses: Investment advisory fees (Note 2) 560,426
Account maintenance and distribution fees--Class C (Note 2) 409,486
Account maintenance and distribution fees--Class B (Note 2) 295,005
Printing and shareholder reports 143,693
Transfer agent fees--Class C (Note 2) 104,571
Registration fees (Note 1f) 97,250
Professional fees 84,708
Transfer agent fees--Class B (Note 2) 79,935
Accounting services (Note 2) 72,042
Directors' fees and expenses 25,420
Account maintenance fees--Class D (Note 2) 23,581
Transfer agent fees--Class D (Note 2) 20,372
Amortization of organization expenses (Note 1f) 20,308
Transfer agent fees--Class A (Note 2) 14,857
Custodian fees 12,471
Other 14,575
------------
Total expenses 1,978,700
------------
Investment loss--net (647,006)
------------

Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 2,630,816
(Loss) on Foreign currency transactions--net (51) 2,630,765
Investments & ------------
Foreign Change in unrealized depreciation on investments--net 15,920,146
Currency ------------
Transactions Net Increase in Net Assets Resulting from Operations $ 17,903,905
- --Net (Notes 1b, ============
1c, 1e & 3):

See Notes to Financial Statements.
</TABLE>

54
<PAGE> 105

FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended August 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment loss--net $ (647,006) $ (214,924)
Realized gain on investments and foreign currency
transactions--net 2,630,765 2,028,567
Change in unrealized depreciation on investments--net 15,920,146 (964,529)
------------ ------------
Net increase in net assets resulting from operations 17,903,905 849,114
------------ ------------

Distributions to Realized gain on investments--net:
Shareholders Class A (81,095) --
(Note 1g): Class B (445,476) --
Class C (1,196,817) --
Class D (213,366) --
------------ ------------
Net decrease in net assets resulting from distributions to
shareholders (1,936,754) --
------------ ------------

Capital Share Net increase in net assets derived from capital share
Transactions transactions 70,633,396 2,371,410
(Note 4): ------------ ------------

Net Assets: Total increase in net assets 86,600,547 3,220,524
Beginning of year 55,886,153 52,665,629
------------ ------------
End of year $142,486,700 $ 55,886,153
============ ============

See Notes to Financial Statements.
</TABLE>

55
<PAGE> 106

FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
Financial Highlights
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to August 31, 1995++++
Increase (Decrease) in Net Asset Value: Class A Class B
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.99 $ 9.85
Operating ------------ ------------
Performance: Investment loss--net -- (.09)
Realized and unrealized gain on investments and
foreign currency transactions--net 1.98 1.95
------------ ------------
Total from investment operations 1.98 1.86
------------ ------------
Less distributions from realized gain on investments--net (.31) (.31)
------------ ------------
Net asset value, end of period $ 11.66 $ 11.40
============ ============

Total Investment Based on net asset value per share 20.55%+++ 19.60%+++
Return:** ============ ============

Ratios to Expenses, excluding account maintenance and distribution fees 1.46%* 1.48%*
Average Net ============ ============
Assets: Expenses 1.46%* 2.48%*
============ ============
Investment income (loss)--net 0.02%* (.95)%*
============ ============

Supplemental Net assets, end of period (in thousands) $ 21,288 $ 63,748
Data: ============ ============
Portfolio turnover 80.41% 80.41%
============ ============

<FN>
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effect of sales loads.

See Notes to Financial Statements.
</TABLE>

<PAGE> 107
FINANCIAL INFORMATION (continued)

<TABLE>
<CAPTION>
Financial Highlights (continued)
Class C
For the
Period
The following per share data and ratios have been derived Dec. 24,
from information provided in the financial statements. For the Year 1992++ to
Ended August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993++++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.96 $ 9.86 $ 10.00
Operating -------- -------- --------
Performance: Investment loss--net (.09) (.05) (.05)
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 1.84 .15 (.09)
-------- -------- --------
Total from investment operations 1.75 .10 (.14)
-------- -------- --------
Less distributions from realized gain on
investments--net (.31) -- --
-------- -------- --------
Net asset value, end of period $ 11.40 $ 9.96 $ 9.86
======== ======== ========

Total Investment Based on net asset value per share 18.28% 1.01% (1.40%)+++
Return:** ======== ======== ========

Ratios to Average Expenses, excluding account maintenance and
Net Assets: distribution fees 1.44% 1.35% 1.79%*
======== ======== ========
Expenses 2.44% 2.35% 2.79%*
======== ======== ========
Investment loss--net (.88%) (.52%) (.83%)*
======== ======== ========

Supplemental Net assets, end of period (in thousands) $ 44,220 $ 47,263 $ 45,736
Data: ======== ======== ========
Portfolio turnover 80.41% 112.68% 64.09%
======== ======== ========

See Notes to Financial Statements.
</TABLE>

57
<PAGE> 108

FINANCIAL INFORMATION (concluded)

<TABLE>
<CAPTION>
Financial Highlights (concluded)
Class D
For the
Period
The following per share data and ratios have been derived Dec. 24,
from information provided in the financial statements. For the Year 1992++ to
Ended August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993++++
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.09 $ 9.91 $ 10.00
Operating -------- -------- --------
Performance: Investment income (loss)--net (.01) .03 --
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 1.87 .15 (.09)
-------- -------- --------
Total from investment operations 1.86 .18 (.09)
-------- -------- --------
Less distributions from realized gain on
investments--net (.31) -- --
-------- -------- --------
Net asset value, end of period $ 11.64 $ 10.09 $ 9.91
======== ======== ========

Total Based on net asset value per share 19.15% 1.82% (.90%)+++
Investment ======== ======== ========
Return:**

Ratios to Expenses, excluding account maintenance fees 1.40% 1.33% 1.78%*
Average ======== ======== ========
Net Assets: Expenses 1.65% 1.58% 2.03%*
======== ======== ========
Investment income (loss)--net (.10%) .31% (.04%)*
======== ======== ========

Supplemental Net assets, end of period (in thousands) $ 13,231 $ 8,623 $ 6,930
Data: ======== ======== ========
Portfolio turnover 80.41% 112.68% 64.09%
======== ======== ========

See Notes to Financial Statements.
</TABLE>

58
<PAGE> 109

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies:
Merrill Lynch Fundamental Growth Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.

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

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

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

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

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

59
<PAGE> 110

paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).

Written and purchased options are non-income producing investments.

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

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

(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend date, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.

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

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

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

MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at the annual rate of 0.65% of
the average daily value of the Fund's net assets. The Investment
Advisory Agreement obligates MLAM to reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the remaining average daily net assets. No fee payment
will be made to MLAM during any fiscal year which will cause such
expenses to exceed the expense limitations at the time of such
payment. Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
<TABLE>
<CAPTION>
Account
Maintenance Distribution
Fee Fee
<S> <C> <C>
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
</TABLE>

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

60
<PAGE> 111

NOTES TO FINANCIAL STATEMENTS

For the year ended August 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
<TABLE>
<CAPTION>
MLFD MLPF&S
<S> <C> <C>
Class A $ 541 $ 6,693
Class D $6,751 $91,433
</TABLE>

For the year ended August 31, 1995, MLPF&S received contingent
deferred sales charges of $61,480 and $10,532 relating to
transactions in Class B and Class C Shares, respectively.

In addition, MLPF&S received $21,850 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
August 31, 1995.

Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.

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

3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1995 were $132,812,639 and $64,906,083,
respectively.

Net realized and unrealized gains (losses) as of August 31, 1995
were as follows:
<TABLE>
<CAPTION>
Realized
Gains Unrealized
(Losses) Gains
<S> <C> <C>
Long-term investments $ 2,630,961 $14,939,628
Short-term investments (145) --
Foreign currency transactions (51) --
----------- -----------
Total $ 2,630,765 $14,939,628
=========== ===========
</TABLE>

As of August 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $14,933,383, of which $16,062,112
related to appreciated securities and $1,128,729 related to
depreciated securities. At August 31, 1995, the aggregate cost of
investments for Federal income tax purposes was $131,201,220.

4. Shares of Beneficial Interest:
Net increase in net assets derived from capital share transactions
for the years ended August 31, 1995 and August 31, 1994 were
$70,633,396 and $2,371,410, respectively.

Transactions in capital shares for each class were as follows:
<TABLE>
<CAPTION>

Class A Shares for the Period Dollar
Oct. 21, 1994++ to August 31, 1995 Shares Amount
<S> <C> <C>
Shares sold 2,009,549 $21,624,913
Shares issued to share-
holders in reinvestment
of distributions 8,261 76,992
----------- -----------
Total issued 2,017,810 21,701,905
Shares redeemed (192,250) (2,043,907)
----------- -----------
Net increase 1,825,560 $19,657,998
=========== ===========

<FN>
++Commencement of Operations.
<CAPTION>
Class B Shares for the Period Dollar
Oct. 21, 1994++ to August 31, 1995 Shares Amount
<S> <C> <C>
Shares sold 8,004,244 $80,928,047
Shares issued to share-
holders in reinvestment
of distributions 46,613 427,439
----------- -----------
Total issued 8,050,857 81,355,486
Shares redeemed (2,444,266) (24,442,131)
Automatic conversion
of shares (12,786) (131,315)
----------- -----------
Net increase 5,593,805 $56,782,040
=========== ===========

<FN>
++Commencement of Operations.

<CAPTION>
Class C Shares for the Year Dollar
Ended August 31, 1995 Shares Amount
<S> <C> <C>
Shares sold 2,740,277 $27,157,046
Shares issued to share-
holders in reinvestment
of distributions 115,667 1,060,667
----------- -----------
Total issued 2,855,944 28,217,713
Shares redeemed (3,721,745) (36,946,754)
----------- -----------
Net decrease (865,801) $(8,729,041)
=========== ===========

<CAPTION>
Class C Shares for the Year Dollar
Ended August 31, 1994 Shares Amount
<S> <C> <C>
Shares sold 2,123,924 $20,737,115
Shares redeemed (2,017,787) (19,872,529)
----------- -----------
Net increase 106,137 $ 864,586
=========== ===========
</TABLE>

<PAGE> 112
<TABLE>
<CAPTION>
Class D Shares for the Year Dollar
Ended August 31, 1995 Shares Amount
<S> <C> <C>
Shares sold 695,327 $ 7,169,960
Automatic conversion
of shares 12,554 131,315
Shares issued to share-
holders in reinvestment
of distributions 19,040 177,267
----------- -----------
Total issued 726,921 7,478,542
Shares redeemed (445,171) (4,556,143)
----------- -----------
Net increase 281,750 $ 2,922,399
=========== ===========

<CAPTION>
Class D Shares for the Year Dollar
Ended August 31, 1994 Shares Amount
<S> <C> <C>
Shares sold 556,921 $ 5,502,292
Shares redeemed (401,467) (3,995,468)
----------- -----------
Net increase 155,454 $ 1,506,824
=========== ===========
</TABLE>

As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated to Class D Shares. There were
676,497 shares redesignated amounting to $6,699,703. In addition,
Class B Shares of the Fund outstanding prior to October 21, 1994
were redesignated to Class C Shares. There were 2,449,771 shares
redesignated amounting to $24,321,655.

<PAGE> 113

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies....... 2
Portfolio Strategies Involving Options
and Futures......................... 3
Other Investment Policies and
Practices........................... 7
Management of the Fund.................. 11
Directors and Officers................ 11
Management and Advisory
Arrangements........................ 13
Purchase of Shares...................... 14
Alternative Sales Arrangements........ 14
Initial Sales Charge
Alternatives--Class A and Class D
Shares.............................. 15
Reduced Initial Sales Charge.......... 16
Distribution Plans.................... 20
Limitations on the Payment of Deferred
Sales Charges....................... 20
Redemption of Shares.................... 21
Deferred Sales Charge--Class B and
Class C Shares...................... 22
Portfolio Transactions and Brokerage.... 23
Determination of Net Asset Value........ 25
Shareholder Services.................... 26
Investment Account.................... 26
Automatic Investment Plans............ 27
Automatic Reinvestment of Dividends
and Capital Gains Distribution...... 27
Systematic Withdrawal Plans--Class A
and Class D Shares.................. 27
Retirement Plans...................... 28
Exchange Privilege.................... 29
Dividends, Distributions and Taxes...... 42
Dividends and Distributions........... 42
Taxes................................. 42
Tax Treatment of Options, Futures and
Forward Foreign Exchange
Transactions........................ 43
Special Rules for Certain Foreign
Currency Transactions............... 44
Performance Data........................ 45
General Information..................... 46
Description of Shares................. 46
Computation of Offering Price Per
Share............................... 47
Independent Auditors.................. 47
Custodian............................. 47
Transfer Agent........................ 48
Legal Counsel......................... 48
Report to Shareholders................ 48
Additional Information................ 48
Report of Independent Auditors.......... 49
Financial Statements.................... 50
Code #16464-1295
</TABLE>

(Logo)

Merrill Lynch
Fundamental
Growth Fund, Inc.

STATEMENT OF
ADDITIONAL
INFORMATION

December 21, 1995

Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE> 114
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL

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

DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull.
<PAGE> 115

PART C. OTHER INFORMATION

(a) FINANCIAL STATEMENTS
CONTAINED IN PART A:

Financial Highlights for the period October 21, 1994 (commencement
of operations) to August 31, 1995 and for the year ended August 31,
1995 and 1994 and for the period December 24, 1992 (commencement of
operations) to August 31, 1993.

CONTAINED IN PART B:

Report of Independent Auditors dated September 29, 1995.

Schedule of Investments, as of August 31, 1995.

Statement of Assets and Liabilities, as of August 31, 1995.

Statement of Operations for the year ended August 31, 1995.

Statements of Changes in Net Assets for the year ended August 31,
1995 and 1994.

Financial Highlights for the year ended August 31, 1995 and 1994.

Notes to Financial Statements.

(b) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------
<S> <C> <C>
1(a) -- Articles of Incorporation of Registrant.(a)
(b) -- Articles of Amendment, dated July 7, 1992, to Articles of Incorporation of
Registrant.(a)
(c) -- Articles of Amendment, dated October 17, 1994, to Articles of Incorporation
of Registrant.(a)
(d) -- Articles of Amendment, dated October 17, 1994, to Articles of Incorporation
of Registrant.(a)
(e) -- Articles Supplementary, dated October 17, 1994, to Articles of Incorporation
of Registrant.(a)
2 -- By-Laws of Registrant.(a)
3 -- None.
4(a) -- Portions of the Articles of Incorporation and By-Laws of Registrant defining
the rights of holders of shares of common stock of Registrant.(b)
5(a) -- Management Agreement between Registrant and Merrill Lynch Asset Management,
L.P.(a)
(b) -- Supplement to Investment Advisory Agreement between Registrant and Merrill
Lynch Asset Management, L.P.(c)
6(a) -- Form of Class A Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(c)
(b) -- Form of Class B Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(c)
(c) -- Form of Class C Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc. (including Selected Dealers Agreement).(c)
(d) -- Form of Class D Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc. (including Selected Dealers Agreement).(c)
7 -- None.
8 -- Custody Agreement between Registrant and Chase Manhattan Bank, N.A.(a)
9(a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement between Registrant and Merrill Lynch Financial Data Services,
Inc.(a)
(b) -- Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.(a)
10 -- None.
11 -- Consent of Ernst & Young LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, L.P.(a)
14 -- None.
15(a) -- Form of Class B Distribution Plan and Class B Distribution Plan
Sub-Agreement of Registrant.(c)
</TABLE>

C-1
<PAGE> 116

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------
<C> <C> <S>
</TABLE>

<TABLE>
<C> <C> <S>
(b) -- Form of Class C Distribution Plan and Class C Distribution Plan
Sub-Agreement of Registrant.(c)
(c) -- Form of Class D Distribution Plan and Class D Distribution Plan
Sub-Agreement of Registrant.(c)
16(a) -- Schedule for computation of each performance quotation for Class A shares
provided in the Registration Statement in response to Item 22.
(b) -- Schedule for computation of each performance quotation for Class B shares
provided in the Registration Statement in response to Item 22.
(c) -- Schedule for computation of each performance quotation for Class C (formerly
Class B) shares provided in the Registration Statement in response to Item
22(a).
(d) -- Schedule for computation of each performance quotation for Class D (formerly
Class A) shares provided in the Registration Statement in response to Item
22(a).
17(a) -- Financial Data Schedule for Class A Shares.
(b) -- Financial Data Schedule for Class B Shares.
(c) -- Financial Data Schedule for Class C Shares.
(d) -- Financial Data Schedule for Class D Shares.
</TABLE>

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

(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") phase-in requirements.

(b) Reference is made to Article II, Article IV, Article V (sections 2, 3, 4 and
6), Article VI, Article VII and Article IX of the Registrant's Articles of
Incorporation, previously filed as Exhibit (1), to the Registration
Statement, and to Article II, Article III (sections 1, 3, 5, 6 and 17),
Article VI, Article VII, Article XII, Article XIII and Article XIV of the
Registrant's By-Laws previously filed as Exhibit (2) to the Registration
Statement.

(c) Filed on EDGAR as an exhibit to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N1-A, filed October 13, 1994.

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

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS AT
TITLE OF CLASS NOVEMBER 30, 1995
- ---------------------------------------------------------------------------- ------------------
<S> <C>
Class A Shares of Common Stock, par value $0.10 per share................... 6,592
Class B Shares of Common Stock, par value $0.10 per share................... 11,854
Class C Shares of Common Stock, par value $0.10 per share................... 5,879
Class D Shares of Common Stock, par value $0.10 per share................... 1,431
</TABLE>

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

Note: The number of holders shown above includes holders of record plus
beneficial owners whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.

ITEM 27. INDEMNIFICATION.

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

Insofar as the conditional advancing of indemnification moneys for actions
based on the Investment Company Act of 1940 may be concerned, Article VI of the
Registrant's By-Laws provides that such payments will be made only on the
following conditions: (i) the advances must be limited to amounts used, or to be
used, for the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may be made
only on receipt of a written promise by, or on behalf of, the recipient to repay
that amount of the advance which exceeds the amount to which it is ultimately
determined that he is entitled to receive from the Registrant by reason of
indemnification; and (iii)(a) such

C-2
<PAGE> 117

promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayments may be obtained by
the Registrant without delay or litigation, which bond, insurance or other form
of security must be provided by the recipient of the advance and (b) a majority
of a quorum of the Registrant's disinterested non-party Directors, or an
independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that the recipient of the advance ultimately
will be found entitled to indemnification.

In Section 9 of the Class A, Class B, Class C and Class D Shares
Distribution Agreements relating to the securities being offered hereby, the
Registrant agrees to indemnify the Distributor and each person, if any, who
controls the Distributor within the meaning of the Securities Act of 1933 (the
"Act"), against certain types of civil liabilities arising in connection with
the Registration Statement or Prospectus.

Insofar as indemnification for liabilities arising under the Act may be
permitted to Directors, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted by such Director, officer or controlling
person or the principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF MANAGER.

Fund Asset Management, L.P. ("FAM"), an affiliate of the Manager, acts as
the investment adviser for the following open-end investment companies: CBA
Money Fund, CMA Government Securities Fund, CMA Money Fund, CMA Multi-State
Municipal Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate
Fund Accumulation Program, Inc., Financial Institutions Series Trust, Merrill
Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust,
Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal Series
Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund,
Inc., and The Municipal Fund Accumulation Program, Inc., and for the following
closed-end investment companies: Apex Municipal Fund, Inc., Corporate High Yield
Fund, Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc.,
Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc.

Merrill Lynch Asset Management, L.P. ("MLAM" or the "Manager") acts as
investment adviser for the following open-end investment companies: Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund,
Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Balanced Fund
for Investment and Retirement, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc.,
Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill
Lynch Fund For Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc.,
Merrill Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch
Global Convertible Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch Institutional
Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin
America Fund, Inc., Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch
Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund,
Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch

C-3
<PAGE> 118

U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government Reserves, Merrill
Lynch Utility Income Fund, Inc. and Merrill Lynch Variable Series Funds, Inc.,
and for the following closed-end investment companies: Convertible Holdings
Inc., Merrill Lynch High Income Municipal Bond Fund, Inc. and Merrill Lynch
Senior Floating Rate Fund, Inc.

The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds
for Institutions Series and Merrill Lynch Institutional Intermediate Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
the Manager, FAM and Princeton Services, Inc, ("Princeton Services"), and
Princeton Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey
08543-9011. The address of Merrill Lynch Funds Distributor, Inc. ("MLFD") is
P.O. Box 9081, Princeton, New Jersey 08543-9081. The address of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Merrill Lynch & Co.,
Inc. ("ML&Co.") is North Tower, World Financial Center, 250 Vesey Street, New
York, New York 10281-1201. The address of the Fund's transfer agent, Merrill
Lynch Financial Data Services, Inc. ("FDS"), is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.

Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
September 1, 1992, for his own account or in the capacity of director, officer,
partner or trustee. In addition, Mr. Zeikel is President, Mr. Glenn is Executive
Vice President and Mr. Richard is Treasurer of all or substantially all of the
investment companies described in the preceding paragraph and Messrs. Giordano,
Harvey, Hewitt, Kirstein and Monagle are directors or officers of one or more of
such companies.

<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ---------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
ML & Co. ................... Limited Partner Financial Services Holding Company;
Limited Partner of FAM
Princeton Services.......... General Partner General Partner of FAM
Arthur Zeikel............... President and Director President of FAM; President and
Director of Princeton Services;
Director of Merrill Lynch Funds
Distributor, Inc. (the
"Distributor"); Executive Vice
President of ML & Co.
Terry K. Glenn.............. Executive Vice President Executive Vice President of FAM;
Executive Vice President and Director
of Princeton Services; President and
Director of the Distributor; Director
of FDS; President of Princeton
Administrators, L.P.
Philip L. Kirstein.......... Senior Vice President, Senior Vice President, General Counsel
General Counsel and and Secretary of FAM; Senior Vice
Secretary President, General Counsel, Director
and Secretary of Princeton Services;
Director of the Distributor
Vincent R. Giordano......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth Griffin........... Senior Vice President Senior Vice President of FAM
Norman R. Harvey............ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
N. John Hewitt.............. Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Ronald M. Kloss............. Senior Vice President and Senior Vice President and Controller of
Controller FAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller......... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr. ..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
</TABLE>

C-4
<PAGE> 119

<TABLE>
<CAPTION>
POSITION OTHER SUBSTANTIAL BUSINESS,
NAME WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- ---------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Gerald M. Richard........... Senior Vice President and Senior Vice President and Treasurer of
Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of the
Distributor
Richard L. Rufener.......... Senior Vice President Senior Vice President of FAM; Vice
President of the Distributor; Senior
Vice President of Princeton Services
Ronald L. Welburn........... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Anthony Wiseman............. Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
</TABLE>

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) MLFD acts as the principal underwriter for the Registrant. MLFD acts as
the principal underwriter for each of the open-end investment companies referred
to in the first two paragraphs of Item 28 except CBA Money Fund, CMA Government
Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, CMA Treasury Fund, Convertible Holdings, Inc., The Corporate
Fund Accumulation Program, Inc., MuniAssets Fund, Inc. and The Municipal Fund
Accumulation Program, Inc., and MLFD also acts as the principal underwriter for
the following closed-end investment companies: Merrill Lynch High Income
Municipal Bond Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, Inc.

(b) Set forth below is information concerning each director and officer of
the Distributor. The principal business address of each such person is P.O. Box
9081, Princeton, New Jersey 08543-9081, except that the address of Messrs.
Crook, Aldrich, Brady, Breen, Graczyk, Fatseas, and Wasel is One Financial
Center, Boston, Massachusetts 02111-2665.

<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
- ------------------------------ ------------------------------------- ------------------------
<S> <C> <C>
Terry K. Glenn................ President and Director Executive Vice President
Arthur Zeikel................. Director President and Trustee
Philip L. Kirstein............ Director None
William E. Aldrich............ Senior Vice President None
Robert W. Crook............... Senior Vice President None
Kevin P. Boman................ Vice President None
Michael J. Brady.............. Vice President None
William M. Breen.............. Vice President None
Vice President and Assistant
Sharon Creveling.............. Treasurer None
Mark A. DeSario............... Vice President None
James T. Fatseas.............. Vice President None
Stanley Graczyk............... Vice President None
Debra W. Landsman-Yaros....... Vice President None
Michelle T. Lau............... Vice President None
Gerald M. Richard............. Vice President and Treasurer Treasurer
Richard L. Rufener............ Vice President None
Salvatore Venezia............. Vice President None
William Wasel................. Vice President None
Robert Harris................. Secretary None
</TABLE>

C-5
<PAGE> 120

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and its transfer agent, Merrill Lynch Financial
Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484.

ITEM 31. MANAGEMENT SERVICES.

Other than as set forth under the caption "Management of the
Fund--Management and Advisory Arrangements" in the Prospectus constituting Part
A of the Registration Statement and under "Management of the Fund--Management
and Advisory Arrangements" in the Statement of Additional Information
constituting Part B of the Registration Statement, Registrant is not a party to
any management-related service contract.

ITEM 32. UNDERTAKINGS.

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish to each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

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

C-6
<PAGE> 121

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT HAS DULY CAUSED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF PLAINSBORO, AND THE STATE OF NEW
JERSEY, ON THE 21ST DAY OF DECEMBER, 1995.

MERRILL LYNCH FUNDAMENTAL
GROWTH FUND, INC.
(Registrant)

By /s/ ARTHUR ZEIKEL
---------------------------------
(Arthur Zeikel, President)

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------ ------------------
<C> <S> <C>
/s/ ARTHUR ZEIKEL President and Director December 21, 1995
- --------------------------------------------- (Principal Executive
(Arthur Zeikel) Officer)

/s/ GERALD M. RICHARD Treasurer (Principal December 21, 1995
- --------------------------------------------- Financial and
(Gerald M. Richard) Accounting Officer)

Director
- ---------------------------------------------
(Joe Grills)

WALTER MINTZ* Director
- ---------------------------------------------
(Walter Mintz)

MELVIN R. SEIDEN* Director
- ---------------------------------------------
(Melvin R. Seiden)

STEPHEN B. SWENSRUD* Director
- ---------------------------------------------
(Stephen B. Swensrud)

HARRY WOOLF* Director
- ---------------------------------------------
(Harry Woolf)

*By /s/ ARTHUR ZEIKEL December 21, 1995
- ---------------------------------------------
(Arthur Zeikel, Attorney-in-Fact)
</TABLE>

C-7
<PAGE> 122

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ------------------------------------------------------------------ ------
<S> <C> <C> <C>
1(a) -- Articles of Incorporation of Registrant.(a)
(b) -- Articles of Amendment, dated July 7, 1992, to Articles of
Incorporation of Registrant.(a)
(c) -- Articles of Amendment, dated October 17, 1994, to Articles of
Incorporation of Registrant.(a)
(d) -- Articles of Amendment, dated October 17, 1994, to Articles of
Incorporation of Registrant.(a)
(e) -- Articles Supplementary, dated October 17, 1994, to Articles of
Incorporation of Registrant.(a)
2 -- By-Laws of Registrant.(a)
5(a) -- Management Agreement between Registrant and Merrill Lynch Asset
Management, L.P.(a)
8 -- Custody Agreement between Registrant and Chase Manhattan Bank,
N.A.(a)
9(a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Merrill Lynch
Financial Data Services, Inc.(a)
(b) -- Agreement between Merrill Lynch & Co., Inc. and Registrant
relating to Registrant's use of Merrill Lynch name.(a)
11 -- Consent of Ernst & Young LLP independent auditors for Registrant
13 -- Certificate of Merrill Lynch Asset Management, L.P.(a)
16(a) -- Schedule for computation of each performance quotation for Class A
shares provided in the Registration Statement in response to Item
22
(b) -- Schedule for computation of each performance quotation for Class B
shares provided in the Registration Statement in response to Item
22
(c) -- Schedule for computation of each performance quotation for Class C
(formerly Class B) shares provided in the Registration Statement
in response to Item 22.(a)
(d) -- Schedule for computation of each performance quotation for Class D
(formerly Class A) shares provided in the Registration Statement
in response to Item 22.(a)
17(a) -- Financial Data Schedule for Class A Shares
(b) -- Financial Data Schedule for Class B Shares
(c) -- Financial Data Schedule for Class C Shares
(d) -- Financial Data Schedule for Class D Shares
</TABLE>

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

(a) Refiled pursuant to the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") phase-in requirements.

C-8
<PAGE> 123

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
------------------------

Supplement to Prospectus dated December 21, 1995

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

FOR USE IN THE STATE OF OHIO

Notwithstanding the fact that the Board may determine that a Rule 144A
security is liquid and not subject to the 15% restriction on illiquid
securities, the State of Ohio does not recognize Rule 144A securities as
securities which are free of restrictions as to resale. Consequently, to the
extent required by Ohio law, the Fund will not invest more than 50% of its total
assets in securities of issuers which are restricted as to disposition,
including Rule 144A securities, or in securities of issuers having a record,
together with predecessors, of less than three years of continuous operations.

Code #16464-1295OH

<PAGE> 1
Ex-99.1(a)

ARTICLES OF INCORPORATION
MERRILL LYNCH EQUITY FUND, INC.

THE UNDERSIGNED, BRIAN M. KAPLOWITZ, whose post-office address is one
world Trade Center, Now York, Now York 10048-0557, being at least eighteen
years of age, does hereby act as an incorporator, under and by virtue of the
General Laws of the State of Maryland authorizing the formation of corporations
and with the intention of forming a corporation.

ARTICLE I
NAME

The name of the corporation is MERRILL LYNCH EQUITY FUND, INC.

ARTICLE II
PURPOSES AND POWERS

The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:

(1) To conduct and carry on the business of an investment company of
the management type.

(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.

(3) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes
<PAGE> 2
and for such amount or kind of consideration now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of Incorporation,
as its Board of Directors may determine; provided, however, that the value of
the consideration. per share to be received by the Corporation upon the sale
or other disposition of any shares of its capital stock shall not be less
than the net asset value per share of such capital stock outstanding at the
time of such event.

(4) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation.

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

The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.

2
<PAGE> 3
ARTICLE III
PRINCIPAL OFFICE AND RESIDEMT AGENT

The Post office address of the principal Office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a corporation
of this State, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.

ARTICLE IV
CAPITAL STOCK

(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Two Hundred Million (200,000,000) shares, of
the par value of Ten Cents ($.10) per share and of the aggregate par value of
Twenty Million Dollars ($20,000,000). The capital stock initially is
classified into two classes, consisting of One Hundred Million (100,000,000)
shares of Class A Common Stock and One Hundred Million (100,000,000) shares of
Class B Common Stock.

(2) The Board of Directors may classify and reclassify any unissued
shares of capital stock into one or more additional or other classes or series
as may be established from time to time by setting or changing in any one or
more respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms
or conditions of redemption of such shares of stock and

3
<PAGE> 4
pursuant to such classification or reclassification to increase or
decrease the number of authorized shares of any existing class or series.

(3) The Board of Directors may redesignate a class of shares of capital
stock whether or not shares of such class are issued and outstanding, provided
that such redesiqnation does not affect the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of stock.

(4) Unless otherwise expressly provided in the charter of the
corporation, including any Articles Supplementary creating any class or series
of capital stock, the holders of each class or series of capital stock shall be
entitled to dividends and distributions in such amounts and at such times as
may be determined by the Board of Directors, and the dividends and
distributions paid with respect to the various classes or series of capital
stock may vary among such classes and series. Dividends on a class or series
may be declared or paid only out of the net assets of that class or series.
Expenses related to the distribution of, and other identified expenses that
should properly be allocated to, the shares of a particular class or series of
capital stock may be charged to and borne solely by such class or series and
the bearing of expenses solely by a class or series of capital stock may be
appropriately reflected (in a manner determined by the Board of Directors) and
cause differences in the not asset value attributable to, and the

4
<PAGE> 5
dividend, redemption and liquidation rights of, the shares of each class or
series of capital stock.

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

5
<PAGE> 6
(6) Notwithstanding any provision of the Maryland General corporation
Law requiring a greater proportion than a majority of the votes of all classes
or series of capital stock of the Corporation (or of any class or series
entitled to vote thereon as a separate class or series) to take or authorize
any action, the corporation is hereby authorized (subject to the requirements
of the Investment Company Act of 1940, as amended, and in affect from time to
time, and any rules, regulations and orders issued thereunder) to take such
action upon the concurrence of a majority of the votes entitled to be cast by
holders of capital stock of the Corporation (or a majority of the votes
entitled to be cast by holders of a class or series entitled to vote thereon as
a separate class or series).

(7) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or series
of capital stock, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of each class or
series of capital stock of the Corporation shall be entitled, after
payment or provision for payment of the debts and other liabilities of the
Corporation, to share ratably in the remaining net assets of the Corporation
applicable to that class or series.

(8) Any fractional shares shall carry proportionately all the rights of
a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including,

6
<PAGE> 7
without limitation, the right to vote and the right to receive dividends.

(9) The presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast shall constitute a
quorum at any meeting of stockholders, except with respect to any matter which
requires approval by a separate vote of one or more classes of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class entitled to vote
an a separate class shall constitute a quorum.

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

ARTICLE V

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

(1) The number of directors of the Corporation shall be three (3),
which number may be increased pursuant to the BY-Laws of the Corporation but
shall never be less than three (3)The names of the directors who shall act
until their successors are duly elected and qualify are:

<PAGE> 8
Philip L. Kirstein
Michael J. Hennewinkel
Jerry Weiss

(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may dean advisable, subject to such limitations as may be not forth in these
Articles of Incorporation or in the By-Laws of the Corporation or in the
General Laws of the State of Maryland.

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

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

<PAGE> 9
any act or omission that occurred prior to such amendment or repeal.

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

(6) The Board of Directors of the Corporation may make, alter or
repeal from time to time any of the By-Laws of the Corporation.

ARTICLE VI
REDEMPTION

Each holder of shares of capital stock of the Corporation shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of such holder on the
books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the
redemption price of such shares as in effect from time to time an may be deter-
mined by the Board of Directors of the corporation in accordance with the
provisions hereof, subject to the right of the Board of Directors of the
corporation to suspend the right of redemption

9
<PAGE> 10

of shares of capital stock of the corporation or postpone the date of payment
of such redemption price in accordance with provisions of applicable law.
The redemption price of shares of capital stock of the Corporation shall be the
net asset value thereof as determined by the Board of Directors of the Corpo-
ration from time to time in accordance with the provisions of applicable law,
less such redemption fee or other charge, if any, as may be fixed by
resolution of the Board of Directors of the Corporation. Payment of the
redemption price shall be made in cash by the Corporation at such time and in
such manner as may be determined from time to time by the Board of Directors of
the Corporation.

ARTICLE VII
DETERMINATION BINDING

Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Diractors, as to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income
of the Corporation from dividends and interest for any period or amounts at any
time legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating, reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created, shall have been paid

10
<PAGE> 11

or discharged or shall be then or thereafter required to be paid or
discharged), as to the price of any security owned by the Corporation or an to
any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or shares of capital stock of the
Corporation, and any reasonable determination made in good faith by the Board
of Directors as to whether any transaction constitute* a purchase of
securities on "margin," a sale of securities "short," or an underwriting or the
sale of, or a participation in any underwriting or selling group in
connection with the public distribution of, any securities, shall be final and
conclusive, and shall be binding upon the Corporation and all holders of its
capital stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding, evidenced
by the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No
provision of these Articles of Incorporation shall be effective to (a) require
a waiver of compliance with any provision of the Securities Act of 1933, as
amended, or the Investment Company Act of 1940, as amended, or of any valid
rule, regulation or order of the Securities and Exchange commission
thereunder or (b) protect or purport to protect any director or officer of the
Corporation against any liability to the corporation or its security holders to
which he would otherwise be subject by reason of willful misfeasance, bad

11
<PAGE> 12

faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office.

ARTICLE VIII
EXISTENCE

The duration of the Corporation shall be perpetual.

ARTICLE IX
AMENDMENT

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

IN WITNESS WHEREOF, the undersigned incorporator of MERRILL LYNCH
EQUITY FUND, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act.

Dated this 29th day of April, 1992.

/s/ BRIAN M. KAPLOWITZ
--------------------------
Brian M. Kaplowitz

<PAGE> 1
Ex-99.1(b)

MERRILL LYNCH EQUITY FUND, INC.

ARTICLES OF AMENDMENT

Merrill Lynch Equity Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland, that:

FIRST: The charter of the Corporation as hereby amended by striking out
Article II of the Articles of Incorporation and inserting in lieu thereof the
following:

Article II
NAME

The name of the Corporation is "Merrill Lynch Fundamental Growth Fund,
Inc."

SECOND: The Board of Directors of the Corpoation at a meeting held on
July 7, 1992 duly adopted a resolution in which was set forth the foregoing
amendment to the charter.

THIRD: The remaining Articles of the charter shall remain in full force
and effect.

FOURTH: The amendment of the charter of the Corporation as hereinabove
set forth has been duly advised, approved and adopted
<PAGE> 2
by the board of directors of the Corporation there being no stock
outstanding or subscribed for at the time of approval.

FIFTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

IN WITNESS WHEREOF, the officers of Merrill Lynch Equity Fund, Inc. who
executed on behalf of said corporation these Articles of Amendment hereby
acknowledge, in the name and on behalf of said corporation, these Articles of
Amendment to be the corporate act of said corporation and further certify,
under the penalties of perjury, that, to the best of their knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, all on this 7th day of
July, 1992.

Merrill Lynch Equity Fund, Inc.

/s/ PHILIP L. KIRSTEIN
-------------------------------
Philip L. Kirstein
President

Attest:

/s/ MICHAEL J. HENNEWINKEL
- ----------------------------
Michael J. Hennewinkel
Secretary

<PAGE> 1
Ex-99.1(c)

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

ARTICLES OF AMENDMENT

TO THE ARTICLES OF INCORPORATION

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

FIRST: The charter of the Corporation is hereby amended by
substituting the words "Class D" in each place where the words "Class A"
appear.

SECOND: The foregoing amendment has been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment is limited to a change expressly permitted by Section
2-605(a)(4) of the Maryland Corporations and Associations Code to be made
without action by the stockholders and was approved by a majority of the entire
Board of Directors of the Corporation. The Corporation is registered as an
open-end company under the Investment Company Act of 1940, as amended.

THIRD: The charter of the Corporation is hereby amended by
substituting the words "Class C" in each place where the words "Class B"
appear.

FOURTH: The foregoing amendment has been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment is limited to a change expressly permitted by Section
2-605(a)(4) of the Maryland Corporations and Associations Code to be made
without action by the stockholders and was approved by a majority of the entire
Board of Directors of the Corporation. The Corporation is registered as an
open-end company under the Investment Company Act of 1940, as amened.

FIFTH: Except as amended hereby, the Corporation's charter shall
remain in full force and effect.

SIXTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

SEVENTH: These Articles of Amendment shall be effective at the
very beginning of the day on October 21, 1994.
<PAGE> 2
The President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and states that to the best of his knowledge,
information and belief, the matters set forth in these Articles of Amendment
with respect to the authorization and approval of the amendment of the
Corporation's charter are true in all material respects, and that this
statement is made under the penalties for perjury.
<PAGE> 3
IN WITNESS WHEREOF, MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf
by its President, a duly authorized officer of the Corporation, and attested by
its Secretary as of the 17th day of October, 1994.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

/s/ ARTHUR ZEIKEL
--------------------------------------------
Arthur Zeikel
President

Attest:

/s/ MICHAEL J. HENNEWINKEL
- ---------------------------------
Michael J. Hennewinkel
Secretary

<PAGE> 1
EX-99. 1(d)

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

ARTICLES OF AMENDMENT

TO THE ARTICLES OF INCORPORATION

FIRST: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article IV:

(11) The Board of Directors may classify and reclassify any issued
shares of capital stock into one or more additional or other classes or series
as may be established from time to time by setting or changing in any one or
more respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that any
such classification or reclassification shall not substantially adversely
affect the rights of holders of such issued shares. The Board's authority
pursuant to this paragraph shall include, but not be limited to, the power to
vary among all the holders of a particular class or series (a) the length of
time shares must be held prior to reclassification to shares of another class
or series (the "Holding Period(s)"), (b) the manner in which the time for such
Holding Period(s) is determined and (c) the class or series into which the
particular class or series is being reclassified; provided, however, that,
subject to the first sentence of this section, with respect to holders of the
Corporation's shares issued on or after the date of the Corporation's first
effective prospectus which sets forth Holding Period(s), the Holding Period(s),
the manner in which the time for such Holding Period(s) is determined and the
class or series into which the particular class or series is being reclassified
shall be disclosed in the Corporation's prospectus or statement of additional
information in effect at the time such shares, which are the subject of the
reclassification, were issued.
<PAGE> 2

SECOND: The foregoing Articles of Amendment have been effected in the
manner and by the vote required by the Corporation's charter and the laws of
the State of Maryland. Pursuant to Section 2-604 of the Maryland Corporations
and Associations Code Annotated, the amendment was advised by the Board of
Directors of the Corporation and approved by the stockholders.

THIRD: Except as amended hereby, the Corporation's charter shall
remain in full force and effect.

FOURTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.

FIFTH: These Articles of Amendment shall be effective on October 21,
1994 immediately following the effective filing of the Corporation's Articles
Supplementary filed on the same day.

The President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and states that to the best of his knowledge,
information and belief, the matters set forth in these Articles of Amendment
with respect to the authorization and approval of the amendment of the
Corporation's charter are true in all material respects, and that this
statement is made under the penalties for perjury.
<PAGE> 3

IN WITNESS WHEREOF, MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf
by its President, a duly authorized officer of the Corporation, and attested by
its Secretary as of the 17th day of October, 1994.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

/s/ ARTHUR ZEIKEL
-------------------------------------------
Arthur Zeikel
President

Attest:

/s/ MICHAEL J. HENNEWINKEL
- -----------------------------
Michael J. Hennewinkel
Secretary

<PAGE> 1
Ex-99.1(e)

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED CAPITAL STOCK OF THE
CORPORATION AND CREATING TWO ADDITIONAL CLASSES
OF COMMON STOCK

FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940, as amended, with authority to issue TWO HUNDRED
MILLION (200,000,000) shares of capital stock. The Corporation has two classes
of capital stock consisting of ONE HUNDRED MILLION (100,000,000) shares of
Class D Common Stock and ONE HUNDRED MILLION (100,000,000) shares of Class C
Common Stock. All shares of all classes and series of the Corporation's
capital stock have a par value of Ten Cents ($.10) per share and an aggregate
par value of TWENTY MILLION Dollars ($20,000,000).

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

THIRD: After this increase in the number of authorized shares of
capital stock of the Corporation, the Corporation will have authority to issue
FOUR HUNDRED MILLION (400,000,000) shares of capital stock and the capital
stock will consist of ONE HUNDRED MILLION (100,000,000) shares of Class D
Common Stock and THREE HUNDRED MILLION (300,000,000) shares of Class C Common
Stock.

FOURTH: After this increase in the number of authorized shares of
capital stock of the Corporation, all shares of all classes and series of the
Corporation's capital stock will have a par value of Ten Cents ($.10) per share
and an aggregate par value of FORTY MILLION Dollars ($40,000,000).

FIFTH: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by its charter, the Board of Directors has
reclassified ONE HUNDRED MILLION (100,000,000) authorized and unissued shares
of the Class C Common Stock of the Corporation as Class B Common Stock of par
value of Ten Cents
<PAGE> 2
($.10) per share and of the aggregate par value of TEN MILLION Dollars
($10,000,000).

SIXTH: The preferences, designations, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of Class B Common Stock are as follows:

The Class B Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class C
Common Stock as of the date of these Articles Supplementary, except as
otherwise set forth in the Corporation's charter and further except that:

(i) Expenses related to the distribution of the Class B Common Stock
shall be borne solely by such class and such class shall have exclusive voting
rights with respect to matters relating to the expenses being borne solely by
such class;

(ii) Such distribution expenses borne solely by Class B Common Stock
shall be appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and liquidation
rights of the shares of such class; and

(iii) Class B shares shall be reclassified to Class D shares in the
month following the month in which such Class B shares have been held for the
length of time such shares must be held prior to reclassification to Class D
shares as established by the Corporation's Board of Directors in the
Corporation's first effective prospectus which sets forth the length of time
Class B shares must be held prior to reclassification to Class D shares.

SEVENTH: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by its charter, the Board of Directors has
reclassified ONE HUNDRED MILLION (100,000,000) authorized and unissued shares
of the Class C Common Stock of the Corporation as Class A Common Stock of par
value of Ten Cents ($.10) per share and of the aggregate par value of TEN
MILLION Dollars ($10,000,000).

EIGHTH: The preferences, designations, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of Class A Common Stock are as follows:
<PAGE> 3
The Class A Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class C
Common Stock as of the date of these Articles Supplementary, except as
otherwise set forth in the Corporation's charter and further except that:

(i) Expenses related to the distribution of the Class A Common Stock
shall be borne solely by such class and such class shall have exclusive voting
rights with respect to matters relating to the expenses being borne solely by
such class; and

(ii) Such distribution expenses borne solely by Class A Common Stock
shall be appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and liquidation
rights of the shares of such class.
<PAGE> 4
IN WITNESS WHEREOF, MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. has
caused these Articles Supplementary to be signed in its name and on its behalf
by its President and attested by its Secretary on October 17, 1994.

MERRILL LYNCH PHOENIX FUND, INC.

By /s/ ARTHUR ZEIKEL
--------------------------------
Arthur Zeikel
President

Attest:

/s/ MICHAEL J. HENNEWINKEL
- ---------------------------------
Michael J. Hennewinkel, Secretary

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

/s/ ARTHUR ZEIKEL
----------------------------
Arthur Zeikel
President

<PAGE> 1
Ex-99.2

BY-LAWS
OF
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
ARTICLE I
Offices

Section 1. Principal Office. The principal office of the Merrill Lynch
Fundamental Growth Fund, Inc. (the "Corporation") shall be in the City of
Baltimore, State of Maryland.

Section 2. Principal Executive office. The principal executive office of
the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.

Section 3. Other offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine.

ARTICLE II
Meetings of Stockholders

Section 1. Annual Meeting. The Corporation shall not be required to hold
an annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. In the event that the Corporation shall be required to hold an annual
meeting of stockholders to elect directors by the Investment Company Act of
1940, as amended, such meeting shall be held no
<PAGE> 2
later than 120 days after the occurrence of the event requiring the meeting.
Any stockholders' meeting held in accordance with this Section shall for all
purposes constitute the annual meeting of stockholders for the year in which
the meeting is held.

Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law, may be called for any purpose or purposes by
a majority of the Board of Directors, the President, or on the written request
of the holders of at least 10% of the outstanding shares of capital stock of
the Corporation entitled to vote at such meeting if they comply with Section
2-502(b) or,(c) of the Maryland General Corporation Law.

Section 3. Place of Meetings. Meetings of the stockholders shall be
held at such place within the United States as the Board of Directors may from
time to time determine.

Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
date and time of the holding of each stockholders' meeting and, if the meeting
is a special meeting, the purpose or purposes of the special meeting, shall be
given personally or by mail, not less than ten nor more than ninety days
before the date of such meeting, to each stockholder entitled to vote at such
meeting and to each other stockholder entitled to notice of the meeting.
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid.

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<PAGE> 3
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall
fix a new record date for an adjourned meeting, or the adjournment is for more
than one hundred and twenty days after the original record date, notice of
such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken.

Section 5. Quorum. At all meetings of the stockholders, the holders of
shares of stock of the Corporation entitled to cast one-third of the votes
entitled to be cast, present in person or by proxy, shall constitute a quorum
for the transaction of any business, except with respect to any matter which
requires approval by a separate vote of one or more classes of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class entitled to vote
as a separate class shall constitute a quorum. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may adjourn
the meeting from time to time, without notice other than announcement thereat
except as otherwise required by

3
<PAGE> 4
these By-Laws, until the holders of the requisite amount of. shares of stock
shall be so present. At any such adjourned meeting at which a quorum may be
present any business may be transacted which might have been transacted at the
meeting as originally called. The absence from any meeting, in person or by
proxy, of holders of the number of shares of stock of the Corporation in
excess of a majority thereof which may be required by the laws of the State of
Maryland, the Investment Company Act of 1940, as amended, or other applicable
statute, the Articles of Incorporation, or these By-Laws, for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which nay properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.

Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall act
as chairman of the meeting. The Secretary, or in his absence or inability to
act, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting and keep the minutes thereof.

4
<PAGE> 5
Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.

Section 8. Voting. Except as otherwise provided by statute or the
Articles of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation as of the record date determined
pursuant to Section 9 of this Article or if such record date shall not have
been so fixed, then at the later of (i) the close of business on the day on
which notice of the meeting is mailed or (ii) the thirtieth day before the
meeting.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases where such proxy states that
it is irrevocable and where an irrevocable proxy is permitted by law. Except
as otherwise provided by statute, the Articles of Incorporation or these
By-Laws, any corporate action to be taken by vote of the stockholders (other
than the election of directors, which shall be by plurality vote)

5
<PAGE> 6
may be authorized by a majority of the total votes cast at a meeting of
stockholders by the holders of shares present in person or represented by
proxy and entitled to vote on such action.

If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.

Section 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at
any meeting of the stockholders. The record date, which may not be prior to
the close of business on the day the record date is fixed, shall be not more
than ninety nor less than ten days before the date of the meeting of the
stockholders. All persons who were holders of record of shares at such time,
and not others, shall be entitled to vote at such meeting and any adjournment
thereof.

Section 10. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each

6
<PAGE> 7
inspector, before entering upon the discharge of his duties, may be required to
take and sign an oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors may be empowered to determine the number of shares outstanding and
the voting powers of each, the number of shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No director or candidate for the office of director shall act as inspector of
an election of directors. Inspectors need not be stockholders.

Section 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Articles of Incorporation, any action
required to be taken at any meeting of stockholders, or any action which may be
taken at any meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the

7
<PAGE> 8
records of stockholders meetings: (i) a unanimous written consent which sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.

ARTICLE III
Board of Directors

Section 1. General Powers. Except as otherwise provided in the Articles
of Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation
nay be exercised by or under authority of the Board of Directors except as
conferred on or reserved to the stockholders by law or by the Articles of
Incorporation or these By-Laws.

Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the entire Board of Directors; provided, however, that the number of
directors shall in no event be less than one nor more than fifteen. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless such director is specifi-

8
<PAGE> 9
cally removed pursuant to Section 5 of this Article III at the time of such
decrease. Directors need not be stockholders.

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

Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman
of the Board or the President or the Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.

9
<PAGE> 10
Section 5. Removal of Directors. Any director of the. Corporation may
be removed by the stockholders by a vote of a majority of the votes entitled
to be cast for the election of directors.

Section 6. Vacancies. Any vacancies in the Board, whether arising from
death, resignation, removal, an increase in the number of directors or any
other cause, may be filled by a vote of the majority of the Board of Directors
then in office even though such majority is less than a quorum, provided that
no vacancies shall be filled by action of the remaining directors, if after
the filling of said vacancy or vacancies, less than two-thirds of the
directors then holding office shall have been elected by the stockholders of
the Corporation. In the event that at any time there is a vacancy in any
office of a director which vacancy may not be filled by the remaining
directors, a special meeting of the stockholders shall be held as promptly as
Possible and in any event within sixty days, for the purpose of filling said
vacancy or vacancies.

Section 7. Place of Meetings. Meetings of the Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.

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

10
<PAGE> 11
Section 9. Special Meetings. Special meetings of the Board may be called
by two or more directors of the Corporation or by the Chairman of the Board or
the President.

Section 10. Telephone Meetings. Members of the Board of Directors or of
any committee thereof may participate in a 'meeting by means of a conference
telephone or similar communications equipment if all persons participating
in the meeting can hear each other at the same time. Subject to the
provisions of the Investment Company Act of 1940, as amended, participation in
a meeting by these means constitutes presence in person at the meeting.

Section 11. Notice of Special Meetings. Notice of each special meeting
of the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before
the time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at
least three days before the day on which such meeting is to be held.

Section 12. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice which is filed with the records of
the meeting or who
11
<PAGE> 12

shall attend such meeting. Except as otherwise specifically required by these
By-Laws, a notice or waiver or notice of any meeting need not state the
purposes of such meeting.

Section 13. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended,
or other applicable statute, the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business nay be transacted
which might have been transacted at the meeting as originally called.

Section 14. Organization. The Board may, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In

12
<PAGE> 13
the absence or inability of the Chairman of the Board to preside at a meeting,
the President or, in his absence or inability to act another director chosen
by a majority of the directors present, shall act as chairman of the meeting
and preside thereat. The Secretary (or, in his absence or inability to act,
any person appointed by the Chairman) shall act as secretary of the meeting
and keep the minutes thereof.

Section 15. Written Consent of Directors in Lieu of a Meeting. Subject
to the provisions of the Investment Company Act of 1940, as amended, any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof nay be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writings or writing are filed with the minutes of the
proceedings of the Board or committee.

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

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

13
<PAGE> 14
recited in the Prospectus of the Corporation included in the Registration
Statement of the Corporation, as recited in the current Prospectus and
Statement of Additional Information of the Corporation, as filed from time to
time with the Securities and Exchange Commission and as required by the
Investment Company Act of 1940, as amended. The Board however, may delegate
the duty of management of the assets and the administration of its day to day
operations to an individual or corporate management company and/or investment
adviser pursuant to a written contract or contracts which have obtained the
requisite approvals, including the requisite approvals of renewals thereof, of
the Board of Directors and/or the stockholders of the Corporation in accor-
dance with the provisions of the Investment Company Act of 1940, as amended.

ARTICLE IV
Committees

Section 1. Executive Committee. The Board may, by resolution adopted by
a majority of the entire board, designate an Executive Committee consisting of
two or more of the directors of the corporation, which committee shall have
and may exercise all the powers and authority of the Board with respect to all
matters other than:

14
<PAGE> 15
(a) the submission to stockholders of any action requiring authorization
of stockholders pursuant to statute or the Articles of Incorporation;

(b) the filling of vacancies on the Board of Directors;

(c) the fixing of compensation of the directors for serving on the Board
or on any committee of the Board,including the Executive Committee;

(d) the approval or termination of any contract with an investment
adviser or principal underwriter, as such terms are defined in the Investment
Company Act of 1940, as amended, or the taking of any other action required to
be taken by the Board of Directors by the Investment Company Act of 1940, as
amended;

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

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

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

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

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

15
<PAGE> 16
Section 2. Other Committees of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of two or more directors and to have such powers and duties as the
Board of Directors may, by resolution, prescribe.

Section 3. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The
Board may designate a chairman of any committee and such chairman or any two
members of any committee may fix the time and place of its meetings unless the
Board shall otherwise provide. In the absence or disqualification of any
member of any committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
The Board shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace
any absent or disqualified member, or to dissolve any such committee. Nothing
herein shall be deemed to prevent the Board from appointing one or more
committees consisting in whole or in part

16
<PAGE> 17
of persons who are not directors of the corporation; provided, however, that
no such committee shall have or may exercise any authority or power of the
Board in the management of the business or affairs of the Corporation.

ARTICLE V
Officers, Agents and Employees

Section 1. Number of Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. The Board of Directors !nay elect or
appoint one or more Vice Presidents and nay also appoint such other
officers, agents and employees as it may deem necessary or proper. Any two or
more offices may be held by the same person, except the offices of President
and Vice President, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. such officers shall be elected by the
Board of Directors each year at a meeting of the Board of Directors, each to
hold office for the ensuing year and until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall have
resigned, or have been removed, as hereinafter provided in these By-Laws. The
Board may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice Presidents, one
or more Assistant Treasurers and one or more Assistant Secretaries)

17
<PAGE> 18
and such agents, as may be necessary or desirable for the business of the
Corporation. Such officers and agents shall have such duties and shall hold
their offices for such terms as may be prescribed by the Board or by the
appointing authority.

Section 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of resignation to the Board, the Chairman of the
Board, President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation shall be
necessary to make it effective.

Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors.
Such removal shall be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.

Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office

18
<PAGE> 19
which shall be vacant, in the manner prescribed in these By-Laws for the
regular election or appointment to such office.

Section 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power nay be
delegated to any officer in respect of other officers under his control.

Section 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.

Section 7. President. The President shall be the chief executive officer
of the Corporation. In the absence of the Chairman of the Board (or if there
be none), he shall preside at all meetings of the stockholders and of the
Board Directors. He shall have, subject to the control of the Board of
Directors, general charge of the business and affairs of the Corporation. He
may employ and discharge employees and agents of the Corporation, except such
as shall be appointed by the Board, and he may delegate these powers.

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

Section 9. Treasurer. The Treasurer shall

19
<PAGE> 20
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934, as
amended) pursuant to a written agreement designating such bank or trust company
or member of a national securities exchange as custodian of the property of the
Corporation;

(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;

(d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the investment of
its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and

(f) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.

Section 10. Secretary. The Secretary shall

(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;

20
<PAGE> 21
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other

documents and records required by law to be kept and filed are properly kept
and filed; and

(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board or the President.

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

ARTICLE VI
Indemnification

Each officer and director of the Corporation shall be indemnified by the
corporation to the full extent permitted under

21
<PAGE> 22
the Maryland General Corporation Law, except that such indemnity shall not
protect any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Corporation to indemnify such person must be based
upon the reasonable determination of independent legal counsel or the vote of
a majority of a quorum of the directors who are neither "interested persons,"
as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("non-party independent directors"),
after review of the facts, that such officer or director is not guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the
full extent permitted under the Maryland General Corporation Law

22
<PAGE> 23
without a preliminary determination as to his or her ultimate entitlement to
indemnification (except as set forth below); provided, however, that the
person seeking indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct necessary
for indemnification by the Corporation has been met and a written undertaking
to repay any such advance, if it should ultimately be determined that the
standard of conduct has not been met, and provided further that at least one
of the following additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (b) the Corporation is insured against
losses arising by reason of the advance; (c) a majority of a quorum of
non-party independent directors, or independent legal counsel in a written
opinion, shall determine, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that there is
reason to believe that the person seeking indemnification will ultimately be
found to be entitled to indemnification.

The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Corporation. The Corporation, however, may not
purchase insurance on behalf of any officer or director of the Corporation

23
<PAGE> 24
that protects or purports to protect such person from liability to the
Corporation or to its stockholders to which such officer or director would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.

The Corporation may indemnify, make advances or purchase insurance to the
extent provided in this Article VI on behalf of an employee or agent who is not
an officer or director of the Corporation.

ARTICLE VII
Capital Stock

Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the Chairman, President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature

24
<PAGE> 25
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate shall be issued, it may be
issued by the corporation with the same effect as if such officer, transfer
agent or registrar were still in office at the date of issue.

Section 2. Books of Account and Record of Stockholders. There shall be
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.

Section 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as
otherwise provided by law, the Corporation shall be entitled to recognize the
exclusive right of a person in whose name any share or shares stand on the
record of

25
<PAGE> 26
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions,
and to vote as such owner, and the Corporation shall not be bound to recognize
any equitable or legal claim to or interest in any such share or shares on the
part of any other person.

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

Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his
legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such

26
<PAGE> 27
form and with such surety or sureties, as the Board in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board, in its absolute discretion, may refuse to
issue any such new certificate, except pursuant to legal proceedings under the
laws of the State of Maryland.

Section 6. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.

Section 7. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during usual business hours
the Corporation's By-Laws, minutes of the proceedings of its stockholders,
annual statements of its

27
<PAGE> 28
affairs, and voting trust agreements on file at its principal office.

ARTICLE VIII
Seal

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

ARTICLE IX
Fiscal Year

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

ARTICLE X
Depositories and Custodians

Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of
the Corporation may from time to time determine.

Section 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation

28
<PAGE> 29
may from time to time determine. Every arrangement entered into with any bank
or other company for the safe keeping of the securities and investments of the
Corporation shall contain provisions complying with the Investment Company Act
of 1940, as amended, and the general rules and regulations thereunder.

ARTICLE XI
Execution of Instruments

Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as
the Board of Directors by resolution shall from time to time designate.

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

29
<PAGE> 30
ARTICLE XII
Independent Public Accountants

The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors
and, if required by the provisions of the Investment Company Act of 1940, as
amended, ratified by the stockholders.

ARTICLE XIII
Annual Statement

The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of
the Corporation and at such other times as may be directed by the Board. A
report to the stockholders based upon each such examination shall be mailed to
each stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders, if any, and, within 20 days after the
meeting (or, in the absence of an annual meeting, within 20 days after the end
of the month of October following the end of the fiscal year), be placed on
file at the Corporation's principal office. Each such

30
<PAGE> 31
Each such report shall show the assets and liabilities of the Corporation as
of the close of the annual or quarterly period covered by the report and the
securities in which the funds of the Corporation were then invested. Such
report shall also show the Corporation's income and expenses for the period
from the end of the Corporation's preceding fiscal year to the close of the
annual or quarterly period covered by the report and any other information
required by the Investment Company Act of 1940, as amended, and shall set
forth such other matters as the Board or such firm of independent public
accountants shall determine.

ARTICLE XIV
Amendments

These By-Laws or any of them may be amended, altered or repealed by the
Board of Directors. The stockholders shall have no power to make, amend,
alter or repeal By-Laws.

<PAGE> 1
Ex-99.5(a)

MANAGEMENT AGREEMENT

AGREEMENT made this 18th day of August, 1992, by and between MERRILL
LYNCH FUNDAMENTAL GROWTH FUND, INC., a Maryland corporation (hereinafter
referred to as the "Fund"), and MERRILL LYNCH ASSET MANAGEMENT, a Delaware
corporation (hereinafter referred to as the "Manager").

W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act"); and

WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and

WHEREAS, the Fund desires to retain the Manager to render management
and investment advisory services to the Fund in the manner and on the terms
hereinafter set forth; and

WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set
forth;
<PAGE> 2
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:

ARTICLE I
Duties of the Manager

The Fund hereby employs the Manager to act as an investment manager and
investment adviser of the Fund and to furnish or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to policies of, review by and overall control of the Board of
Directors of the Fund (the "Directors"), for the period and on the terms and
conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations
herein set forth for the compensation provided for herein. The Manager and
its affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have
no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.

(a) Management Services. The Manager shall perform (or arrange for
the performance by affiliates of) the management and administrative services
necessary for the operation of the Fund including administering shareholder
accounts and handling shareholder relations. The Manager shall provide the
Fund with
<PAGE> 3
office space, equipment and facilities and such other services as the
Manager, subject to review by the Directors, shall from time to time determine
to be necessary or useful to perform its obligations under this Agreement. The
Manager shall also, on behalf of the Fund, conduct relations with custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder
service agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such other
capacity deemed to be necessary or desirable. The Manager shall generally
monitor the Fund's compliance with investment policies and restrictions as set
forth in the currently effective prospectus and statement of additional
information relating to the shares of the Fund under the Securities Act of
1933, as amended (the "Prospectus" and "Statement of Additional Information",
respectively). The Manager shall make reports to the Directors of its
performance of obligations hereunder and furnish advice and recommendations
with respect to such other aspects of the business and affairs of the Fund as
it shall determine to be desirable.

(b) Investment Advisory Services. The Manager shall provide (or
arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time
to
<PAGE> 4
time which securities shall be purchased, sold or exchanged and what portion
of the assets of the Fund shall be held in the various securities in which the
Fund invests, options, futures, options on futures or cash, subject always to
the restrictions set forth in the Articles of Incorporation and By-Laws of the
Fund, as amended from time to time, the provisions of the Investment Company
Act and the statements relating to the Fund' s investment objectives,
investment policies and investment restrictions as the same are set forth in
the Prospectus and Statement of Additional Information. The Manager shall also
make decisions for the Fund as to the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the Fund's
portfolio securities shall be exercised. Should the Directors at any time,
however, make any definite determination as to investment policy and notify the
Manager thereof in writing, the Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination has been revoked. The Manager shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders
for the purchase or sale of portfolio securities for the Fund's account with
brokers or dealers selected by it, and to that end, the Manager is authorized
as the agent of the Fund to give instructions to the Custodian of the Fund as
to deliveries
<PAGE> 5
of securities and payments of cash for the account of the Fund. In connection
with the selection of such brokers or dealers and the placing of such orders
with respect to assets of the Fund, the Manager is directed at all times to
seek to obtain execution and price within the policy guidelines determined by
the Directors as set forth in the Prospectus and Statement of Additional
Information. Subject to this requirement and the provisions of the Investment
Company Act, the Securities Exchange Act of 1934, as amended, and other
applicable provisions of law, the Manager may select brokers or dealers
with which it or the Fund is affiliated.

ARTICLE II
Allocation of Charges and Expenses

(a) The Manager. The Manager assumes and shall pay for maintaining
the staff and personnel necessary to perform its obligations under this
Agreement, and shall at its own expense, provide the office space, equipment
and facilities which it is obligated to provide under Article I hereof, and
shall pay all compensation of officers of the Fund and all Directors who are
affiliated persons of the Manager.

(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund (except for the expenses paid by the Distributor),
including, without limitation: redemption expenses, expenses of portfolio
transactions, expenses of registering shares under federal and state
securities laws,
<PAGE> 6
pricing costs (including the daily calculation of net asset value), expenses
of printing shareholder reports, stock certificates, prospectuses and
statements of additional information, Securities and Exchange Commission fees,
interest, taxes, custodian and transfer agency fees, fees and actual
out-of-pocket expenses of Directors who are not affiliated persons of the
Manager, fees for legal and auditing services, litigation expenses, costs of
printing proxies and other expenses related to shareholder meetings, and other
expenses properly payable by the Fund. It is also understood that the Fund
will reimburse the Manager for its costs in providing accounting services to
the Fund. The Distributor will pay certain of the expenses of the Fund
incurred in connection with the continuous offering of Fund shares.

ARTICLE III
Compensation of the Manager

(a) Investment Management Fee. For the services rendered, the
facilities furnished and expenses assumed by the Manager, the Fund shall pay to
the Manager at the end of each calendar month a fee based upon the average
daily value of the net assets of the Fund, as determined and computed in
accordance with the description of the determination of net asset value
contained in the Prospectus and Statement of Additional Information, at the
annual rate of 0.65% of the average daily net assets of the Fund, commencing on
the day following effectiveness hereof. If this

<PAGE> 7
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fee as set forth above. Subject to the provisions of
subsection (b) hereof, payment of the Manager's compensation for the preceding
month shall be made as promptly as possible after completion of the
computations contemplated by subsection (b) hereof. During any period when the
determination of net asset value is suspended by the Directors, the net asset
value of a share as of the last business day prior to such suspension shall for
this purpose be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.

(b) Expense Limitations. In the event the operating expenses of the
Fund, including amounts payable to the Manager pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Manager shall reduce its
management fee by the extent of such excess and, if required pursuant to any
such laws or regulations, will reimburse the Fund in the amount of such excess;
provided, however, to the extent permitted by law, there shall be excluded from
such expenses the amount of any interest, taxes, brokerage
<PAGE> 8
commissions, distribution fees and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Whenever the
expenses of the Fund exceed a pro rata portion of the applicable annual
expense limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the monthly payment of
the management fee due to the Manager. Should two or more such expense
limitations be applicable as at the end of the last business day of the month,
that expense limitation which results in the largest reduction in the Manager's
fee shall be applicable.

ARTICLE IV
Limitation of Liability of the Manager

The Manager shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission
in the management of the Fund, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Article
IV, the term "Manager" shall include any affiliates of the Manager performing
services for the Fund contemplated hereby and directors, officers and
employees of the Manager and such affiliates.
<PAGE> 9
ARTICLE V
Activities of the Manager

The services of the Manager to the Fund are not to be deemed to be
exclusive, and the Manager and any person controlled by or under common control
with the Manager (for purposes of Article V referred to as "affiliates") is
free to render services to others. It is understood that Directors, officers,
employees and shareholders of the Fund are or may become interested in the
Manager and its affiliates, as directors, officers, employees and shareholders
or otherwise and that directors, officers, employees and shareholders of the
Manager and its affiliates are or may become similarly interested in the Fund,
and that the Manager and directors, officers, employees, partners and
shareholders of its affiliates may become interested in the Fund as shareholder
or otherwise.

ARTICLE VI
Duration and Termination of this Contract

This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force until July 31,
1994 and thereafter, but only so long as such continuance is specifically
approved at least annually by (i) the Directors, or by the vote of a majority
of the outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of
<PAGE> 10
any such party cast in person at a meeting called for the purpose of voting on
such approval.

ARTICLE VII
Amendments of this Agreement

This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.

ARTICLE VIII
Definitions of Certain Terms

The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
the Investment Company Act.
<PAGE> 11

ARTICLE IX
Governing Law

This Agreement shall be construed in accordance with laws of the State
of New York and the applicable provisions of the Investment Company Act. To
the extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
---------------------------------

MERRILL LYNCH ASSET MANAGEMENT, INC.

By /s/ TERRY K. GLENN
---------------------------------

<PAGE> 1
Ex-99.5(b)

SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
WITH
MERRILL LYNCH ASSET MANAGEMENT

As of January 1, 1994 Merrill Lynch Investment Management, Inc. d/b/a Merrill
Lynch Asset Management was reorganized as a limited partnership, formally known
as Merrill Lynch Asset Management, L.P. and continuing to do business under the
name Merrill Lynch Asset Management ("MLAM"). The general partner of MLAM is
Princeton Services, Inc. and the limited partners are Merrill Lynch Investment
Management, Inc. and Merrill Lynch & Co., Inc. Pursuant to Rule 202(a)(1)-1
under the Investment Advisers Act of 1940 and Rule 2a-6 under the Investment
Company Act of 1940 such reorganization did not constitute an assignment of
this investment advisory agreement since it did not involve a change of control
or management of the investment adviser. Pursuant to the requirements of
Section 205 of the Investment Advisers Act of 1940, however, Merrill Lynch
Asset Management hereby supplements this investment advisory agreement by
undertaking to advise you of any change in the membership of the partnership
within a reasonable time after any such change occurs.

By /s/ Arthur Zeikel
---------------------
Dated: January 3, 1994

<PAGE> 1
CLASS A SHARES

DISTRIBUTION AGREEMENT

AGREEMENT made as of the 21st day of October 1994 between Merrill Lynch
Fundamental Growth Fund, Inc., a Maryland corporation (the "Fund"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").

W I T N E S S E T H :

WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its
shares for sale continuously; and

WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and

WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class A shares
of common stock in the Fund.

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to
sell Class A shares of common stock in the Fund (sometimes herein referred to
as "Class A shares") to
<PAGE> 2
eligible investors (as defined below) and hereby agrees during the term of
this Agreement to sell Class A shares of the Fund to the Distributor upon the
terms and conditions herein set forth.

Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:

(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class A shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall terminate,
but this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.

(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Fund or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding Class A shares of any
such company by the Fund.

(c) Such exclusive right also shall not apply to Class A shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
<PAGE> 3
(d) Such exclusive right also shall not apply to Class A shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class A shares as shall be
agreed between the Fund and the Distributor from time to time.

Section 3. Purchase of Class A shares from the Fund.

(a) The Distributor shall have the right to buy from the Fund the Class
A shares needed, but not more than the Class A shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class A
shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class A shares shall be
those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and
"statement of additional information", respectively) under the Securities Act
of 1933, as amended (the "Securities Act"), relating to such Class A shares
("eligible investors"). The price which the Distributor shall pay for the
Class A shares so purchased from the Fund shall be the net asset value,
determined as set forth in Section 3(d) hereof, used in determining the public
offering price on which such orders were based.

(b) The Class A shares are to be resold by the Distributor to eligible
investors at the public offering price, as set forth in Section 3(c) hereof, or
to securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
<PAGE> 4
(c) The public offering price(s) of the Class A shares, i.e., the
price per share at which the Distributor or selected dealers may sell Class A
shares to eligible investors, shall be the public offering price as set forth
in the prospectus and statement of additional information relating to such
Class A shares, but not to exceed the net asset value at which the Distributor
is to purchase the Class A shares, plus a sales charge not to exceed 5.25% of
the public offering price (5.54% of the net amount invested), subject to
reductions for volume purchases. Class A shares may be sold to certain
Directors, officers and employees of the Fund, directors and employees of
Merrill Lynch & Co., Inc. and its subsidiaries, and to certain other persons
described in the prospectus and statement of additional information, without a
sales charge or at a reduced sales charge, upon terms and conditions set forth
in the prospectus and statement of additional information. If the public
offering price does not equal an even cent, the public offering price may be
adjusted to the nearest cent. All payments to the Fund hereunder shall be made
in the manner set forth in Section 3(f).

(d) The net asset value of Class A shares shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
<PAGE> 5
(e) The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend
the sale of its Class A shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event,
which, in the judgment of the Fund, makes it impracticable or inadvisable to
sell the Class A shares.

(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class A shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class A shares from eligible
investors. The Fund (or its agent) will confirm orders upon their receipt,
will make appropriate book entries and, upon receipt by the Fund (or its agent)
of payment therefor, will deliver deposit receipts or certificates for such
Class A shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds. The Distributor agrees
to cause such payment and such instructions to be delivered promptly to the
Fund (or its agent).
<PAGE> 6
Section 4. Repurchase or Redemption of Class A shares by the Fund.

(a) Any of the outstanding Class A shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class A
shares so tendered in accordance with its obligations as set forth in Article
VI of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information. The price to be paid to redeem or
repurchase the Class A shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(d) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the Fund.
All payments by the Fund hereunder shall be made in the manner set forth below.
The redemption or repurchase by the Fund of any of the Class A shares
purchased by or through the Distributor will not affect the sales charge
secured by the Distributor or any selected dealer in the course of the
original sale, except that if any Class A shares are tendered for redemption
or repurchase within seven business days after the date of the confirmation of
the original purchase, the right to the sales charge shall be forfeited by the
Distributor and the selected dealer which sold such Class A shares.

The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions
<PAGE> 7
of the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the
Fund as follows: (i) any applicable CDSC shall be paid to the Distributor,
and (ii) the balance shall be paid to or for the account of the shareholder,
in each case in accordance with the applicable provisions of the prospectus
and statement of additional information.

(b) Redemption of Class A shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or during any other period
when the Securities and Exchange Commission, by order, so permits.

Section 5. Duties of the Fund.

(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class A
shares of the Fund, and this shall include, upon request by the Distributor,
one certified copy of all financial statements prepared for the Fund by
independent public accountants. The Fund shall make available to the
Distributor
<PAGE> 8
such number of copies of the prospectus and statement of additional
information as the Distributor shall reasonably request.

(b) The Fund shall take, from time to time, but subject to any
necessary approval of the Class A shareholders, all necessary action to fix the
number of authorized Class A shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor may
reasonably be expected to sell.

(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.

(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.

Section 6. Duties of the Distributor.

(a) The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund but shall not be obligated to sell any
specific number of Class A shares. The
<PAGE> 9
services of the Distributor to the Fund hereunder are not to be deemed
exclusive and nothing herein contained shall prevent the Distributor from
entering into like arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.

(b) In selling the Class A shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither
the Distributor nor any selected dealer, as defined in Section 7 hereof, nor
any other person is authorized by the Fund to give any information or to make
any representations, other than those contained in the registration statement
or related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.

(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to eligible investors
and selected dealers, the collection of amounts payable by eligible investors
and selected dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.

Section 7. Selected Dealers Agreements.

(a) The Distributor shall have the right to enter into selected
dealers agreements with securities dealers of its choice
<PAGE> 10
("selected dealers") for the sale of Class A shares and fix therein the
portion of the sales charge which may be allocated to the selected dealers;
provided that the Fund shall approve the forms of agreements with dealers and
the dealer compensation set forth therein. Class A shares sold to selected
dealers shall be for resale by such dealers only at the public offering
price(s) set forth in the prospectus and statement of additional information.
The form of agreement with selected dealers to be used during the continuous
offering of the Class A shares is attached hereto as Exhibit A.

(b) Within the United States, the Distributor shall offer and sell
Class A shares only to such selected dealers as are members in good standing of
the NASD.

Section 8. Payment of Expenses.

(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and interim reports and proxy materials to
Class A shareholders (including but not limited to the expense of setting in
type any such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
<PAGE> 11
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments
of sales commissions to financial consultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are to
be used in connection with the offering of Class A shares to selected dealers
or eligible investors pursuant to this Agreement. The Distributor shall bear
the costs and expenses of preparing, printing and distributing any other
literature used by the Distributor or furnished by it for use by selected
dealers in connection with the offering of the Class A shares for sale to
eligible investors and any expenses of advertising incurred by the Distributor
in connection with such offering.

(c) The Fund shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost
and expenses payable to each such state for continuing qualification therein
until the Fund decides to discontinue such qualification pursuant to Section
5(c) hereof.
<PAGE> 12
Section 9. Indemnification.

of their obligations and duties under this Agreement; or (ii) is the Fund to be
liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Distributor or any such controlling persons,
unless the Distributor or such controlling persons, as the case may be, shall
have notified the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or
persons, defendant or defendants in the suit. In the event the Fund elects to
assume the defense of any such suit and retain such counsel, the Distributor or
such controlling person or persons, defendant or defendants in the suit shall
bear the fees and expenses of any additional counsel retained by them, but in
case the Fund does not elect to assume the defense of any such suit, it will
reim-
<PAGE> 14
burse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
shares.

(b) The Distributor shall indemnify and hold harmless the Fund and
each of its Directors and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to Class A shareholders. In case any
action shall be brought against the Fund or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Fund, and the Fund
and each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of subsection (a) of this Section 9.
<PAGE> 15
Section 10. Merrill Lynch Mutual Fund Adviser Program.
In connection with the Merrill Lynch Mutual Fund Adviser Program, the
Distributor and its affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, are authorized to offer and sell shares of the Fund, as agent for
the Fund, to paraticipants in such program. The terms of this Agreement shall
apply to such sales, including terms as to the offering price of shares, the
proceeds to be paid to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the Distributor.

This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Distributor, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in
the event of its assignment.
<PAGE> 16
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.

Section 12. Amendments of this Agreement. This Agreement may be
amended by the parties only if such amendment is specifically approved by (i)
the Directors or by the vote of a majority of outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors of the Fund who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.

Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment
Company Act. To the extent that the applicable law of the State of New York,
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.

Section 14. This Agreement supersedes the prior Distribution Agreement
entered into by the parties hereto with respect to the Class A shares of the
Fund.

<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ Arthur Zeikel
-----------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ Terry K. Glenn
-----------------------------------------
Title: President
<PAGE> 18
EXHIBIT A

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

CLASS A SHARES OF COMMON STOCK

SELECTED DEALERS AGREEMENT

Gentlemen:

Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an
agreement with Merrill Lynch Fundamental Growth Fund, Inc., a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class A shares of common stock, par value $0.10 per share (herein
referred to as "Class A shares"), of the Fund and as such has the right to
distribute Class A shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class A shares are registered under the Securities Act of
1933, as amended. You have received a copy of the Class A shares Distribution
Agreement (the "Distribution Agreement") between ourself and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms "Prospectus" and "Statement of Additional Information" used herein
refer to the prospectus and statement of additional information, respectively,
on file with the Securities and Exchange Commission which is part of the most
recent effective registration statement pursuant to the Securities Act of 1933,
as amended. We offer to sell to you, as a member of the Selected Dealers
Group, Class A shares of the Fund for resale to investors identified in the
Prospectus and Statement of Additional Information as eligible to purchase
Class A shares ("eligible investors") upon the following terms and conditions:

1. In all sales of these Class A shares to eligible investors, you
shall act as dealer for your own account and in no transaction shall you have
any authority to act as agent for the Fund, for us or for any other member of
the Selected Dealers Group, except in connection with the Merrill Lynch Mutual
Fund Adviser program and such other special programs as we from time to time
agree, in which case you shall have authority to offer and sell shares, as
agent for the Fund, to participants in such program.

2. Orders received from you will be accepted through us only at
the public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling
<PAGE> 19
of orders shall be subject to Section 5 hereof and instructions which we or
the Fund shall forward from time to time to you. All orders are subject to
acceptance or rejection by the Distributor or the Fund in the sole discretion
of either. The minimum initial and subsequent purchase requirements are as
set forth in the current Prospectus and Statement of Additional Information of
the Fund.

3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:

<TABLE>
<CAPTION>
Discount to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of the Net Percentage
of the Amount of the
Amount of Purchase Offering Price Invested Offering Price
- ------------------ -------------- -------------- --------------
<S> <C> <C> <C>
Less than $25,000.... 5.25% 5.54% 5.00%

$25,000 but less
than $50,000........ 4.75% 4.99% 4.50%

$50,000 but less
than $100,000....... 4.00% 4.19% 3.75%

$100,000 but less
than $250,000....... 3.00% 3.09% 2.75%

$250,000 but less
than $1,000,000.. 2.00% 2.04% 1.80%

$1,000,000 and over**.. 0.00% 0.00% 0.00%
</TABLE>

* Rounded to the nearest one-hundredth percent.

** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
<PAGE> 20
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for
a single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Fund or Class A shares of other registered
investment companies at a discount; provided, however, that it shall not
include purchases by any group of individuals whose sole organizational nexus
is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.

The reduced sales charges are applicable through a right of
accumulation under which certain eligible investors are permitted to purchase
Class A shares of the Fund at the offering price applicable to the total of (a)
the public offering price of the shares then being purchased plus (b) an amount
equal to the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares
of the Fund and of any other investment company with an initial sales charge
for which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.

The reduced sales charges are applicable to purchases aggregating
$10,000 or more of Class A shares or of Class D shares of any other investment
company with an initial sales charge for which the Distributor acts as the
distributor made through you within a thirteen-month period starting with the
first purchase pursuant to a Letter of Intention in the form provided in the
Prospectus. A purchase not originally made pursuant to a Letter of Intention
may be included under a subsequent letter executed within 90 days of such
purchase if the Distributor is informed in writing of this intent within such
90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.

You agree to advise us promptly at our request as to amounts of any
sales made by you to eligible investors qualifying for reduced sales charges.
Further information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
<PAGE> 21
4. You shall not place orders for any of the Class A shares unless
you have already received purchase orders for such Class A shares at the
applicable public offering prices and subject to the terms hereof and of the
Distribution Agreement. You agree that you will not offer or sell any of the
Class A shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class A shares you will furnish to each person to whom
any such sale or offer is made a copy of the Prospectus and, if requested, the
Statement of Additional Information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class A shares of the
Fund which is inconsistent in any respect with the information contained in the
Prospectus and Statement of Additional Information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.

5. As a selected dealer, you are hereby authorized (i) to place
orders directly with the Fund for Class A shares of the Fund to be resold by us
to you subject to the applicable terms and conditions governing the placement
of orders by us set forth in Section 3 of the Distribution Agreement and
subject to the compensation provisions of Section 3 hereof and (ii) to tender
Class A shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.

6. You shall not withhold placing orders received from your
customers so as to profit yourself as a result of such withholding: e.g., by
a change in the "net asset value" from that used in determining the offering
price to your customers.

7. If any Class A shares sold to you under the terms of this
Agreement are repurchased by the Fund or by us for the account of the Fund or
are tendered for redemption within seven business days after the date of the
confirmation of the original purchase by you, it is agreed that you shall
forfeit your right to, and refund to us, any discount received by you
on such Class A shares.

8. No person is authorized to make any representations concerning
Class A shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class A
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or
<PAGE> 22
responsibility to you in these respects unless expressly assumed in connection
therewith.

9. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current Prospectus and, if requested, the Statement
of Additional Information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.

10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely or to certain
persons or entities in a class or classes specified by us. Each party hereto
has the right to cancel this agreement upon notice to the other party.

11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this
paragraph is intended to operate as, and the provisions of this paragraph shall
not in any way whatsoever constitute, a waiver by you of compliance with any
provision of the Securities Act of 1933, as amended, or of the rules and
regulations of the Securities and Exchange Commission issued thereunder.

12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such Association.

13. Upon application to us, we will inform you as to the states in
which we believe the Class A shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class A
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class A shares, if necessary.

14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.

15. Your first order placed pursuant to this Agreement for the
purchase of Class A shares of the Fund will represent your acceptance of this
Agreement.
<PAGE> 23
16. This Agreement supersedes any prior Selected Dealers Agreement
entered into by the parties hereto with respect to the Class A shares of the
Fund.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
-------------------------------------
(Authorized Signature)

Please return one signed copy
of this agreement to:

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011

Accepted:

Firm Name:
------------------------------------------------------
By: [SIG]
-------------------------------------------------------------
Address:
--------------------------------------------------------
Date:
-----------------------------------------------------------

<PAGE> 1
CLASS B SHARES

DISTRIBUTION AGREEMENT

AGREEMENT made as of the 21st day of October 1994, between Merrill
Lynch Fundamental Growth Fund, Inc. a Maryland corporation (the "Fund"), and
MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").

W I T N E S S E T H :

WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and

WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's Class B
shares in order to promote the growth of the Fund and facilitate the
distribution of its Class B shares.

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to
sell Class B shares of common stock in the Fund (sometimes herein referred to
as "Class B shares") to
<PAGE> 2
the public and hereby agrees during the term of this Agreement to sell shares
of the Fund to the Distributor upon the terms and conditions herein set forth.

Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class B shares, except that:

(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class B shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class B shares in the areas so designated shall terminate,
but this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.

(b) The exclusive right granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class B
shares of any such company by the Fund.
<PAGE> 3
(c) Such exclusive right also shall not apply to Class B shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.

(d) Such exclusive right also shall not apply to Class B shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class B shares as shall be
agreed between the Fund and the Distributor from time to time.

Section 3. Purchase of Class B Shares from the Fund.

(a) The Distributor shall have the right to buy from the Fund the
Class B shares needed, but not more than the Class B shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class B
shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class B shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class B shares. The price
which the Distributor shall pay for the Class B shares so purchased from the
Fund shall be the net asset value, determined as set forth in Section 3(c)
hereof.

(b) The Class B shares are to be resold by the Distributor to
investors at net asset value, as set forth in Section 3(c)
<PAGE> 4
hereof, or to securities dealers having agreements with the Distributor upon
the terms and conditions set forth in Section 7 hereof.

(c) The net asset value of Class B shares of the Fund shall be
determined by the Fund or any agent of the Fund in accordance with the method
set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.

(d) The Fund shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend
the sale of its Class B shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event,
which, in the judgment of the Fund, makes it impracticable or inadvisable to
sell the Class B shares.

(e) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class B shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class B shares. The Fund (or
its agent) will confirm orders upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its

<PAGE> 5
agent) of payment therefor, will deliver deposit receipts or certificates for
such Class B shares pursuant to the instructions of the Distributor. Payment
shall be made to the Fund in New York Clearing House funds. The Distributor
agrees to cause such payment and such instructions to be delivered promptly to
the Fund (or its agent).

Section 4. Repurchase or Redemption of Class B Shares by the Fund.

(a) Any of the outstanding Class B shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class B
shares so tendered in accordance with its obligations as set forth in Article
VI of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information of the Fund. The price to be paid to
redeem or repurchase the Class B shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(c) hereof, less any
contingent deferred sales charge ("CDSC"), redemption fee or other charge(s),
if any, set forth in the prospectus and statement of additional information of
the Fund. All payments by the Fund hereunder shall be made in the manner set
forth below.

The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of
<PAGE> 6
the Distributor on or before the seventh business day subsequent to its having
received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to
or for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.

(b) Redemption of Class B shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or during any other period
when the Securities and Exchange Commission, by order, so permits.

Section 5. Duties of the Fund.

(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class B
shares of the Fund, and this shall include, upon request by the Distributor,
one certified copy of all financial statements prepared for the Fund by
independent public accountants. The Fund shall make available to the
Distributor
<PAGE> 7
such number of copies of its prospectus and statement of additional
information as the Distributor shall reasonably request.

(b) The Fund shall take, from time to time, but subject to any
necessary approval of the shareholders, all necessary action to fix the number
of authorized shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Class B shares as the Distributor reasonably may be expected to sell.

(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class B shares for sale under the
securities laws of such states as the Distributor and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.

(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.

Section 6. Duties of the Distributor.

(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of
<PAGE> 8
the Distributor to the Fund hereunder are not to be deemed exclusive and
nothing herein contained shall prevent the Distributor from entering into like
arrangements with other investment companies so long as the performance of its
obligations hereunder is not impaired thereby.

(b) In selling the Class B shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither
the Distributor nor any selected dealer, as defined in Section 7 hereof, nor
any other person is authorized by the Fund to give any information or to make
any representations, other than those contained in the registration statement
or related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.

(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may
be necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
<PAGE> 9
Section 7. Selected Dealer Agreements.

(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class B shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.

(b) Within the United States, the Distributor shall offer and sell
Class B shares only to such selected dealers that are members in good standing
of the NASD.

Section 8. Payment of Expenses.

(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and interim reports and proxy materials to
Class B shareholders (including but not limited to the expense of setting in
type any such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
<PAGE> 10
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments
of sales commissions to financial consultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are to
be used in connection with the offering of Class B shares to selected dealers
or investors pursuant to this Agreement. The Distributor shall bear the costs
and expenses of preparing, printing and distributing any other literature used
by the Distributor or furnished by it for use by selected dealers in connection
with the offering of the Class B shares for sale to the public and any expenses
of advertising incurred by the Distributor in connection with such offering.
It is understood and agreed that so long as the Fund's Class B Shares
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
remains in effect, any expenses incurred by the Distributor hereunder may be
paid from amounts recovered by it from the Fund under such Plan.

(c) The Fund shall bear the cost and expenses of qualification of the
Class B shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund
<PAGE> 11
and the Distributor pursuant to Section 5(c) hereof and the cost
and expenses payable to each such state for continuing qualification therein
until the Fund decides to discontinue such qualification pursuant to Section
5(c) hereof.

Section 9. Indemnification.

(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith), as incurred, arising by reason
of any person acquiring any Class B shares, which may be based upon the
Securities Act, or on any other statute or at common law, on the ground that
the registration statement or related prospectus and statement of additional
information, as from time to time amended and supplemented, or an annual or
interim report to Class B shareholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and
in conformity with, information furnished to the Fund in connection therewith
by or on behalf of the Distributor; provided, however, that in no case (i) is
the indemnity of the Fund in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor
<PAGE> 12
or any such controlling persons thereof against any liability to the Fund or
its security holders to which the Distributor or any such controlling persons
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of their duties or by reason of the
reckless disregard of their obligations and duties under this Agreement; or
(ii) is the Fund to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or such controlling
persons, as the case may be, shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund will be entitled to participate at its
own expense in the defense or, if it so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons,
defendant or
<PAGE> 13
defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses, as incurred, of any additional counsel retained by them,
but in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses, as incurred,
of any counsel retained by them. The Fund shall promptly notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or Directors in connection with the issuance or sale of any
of the Class B shares.

Section 10. Merrill Lynch Mutual Fund Adviser Program.
In connection with the Merrill Lynch Mutual Fund Adviser Program, the
Distributor and its affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, are authorized to offer and sell shares of the Fund, as agent for
the Fund, to paraticipants in such program. The terms of this Agreement shall
apply to such sales, including terms as to the offering price of shares, the
proceeds to be paid to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the Distributor.

Section 11. Duration and Termination of this Agreement. This
Agreement shall become effective as of the date first above written and shall
remain in force until October 21, 1995 and thereafter, but only for so long as
such continuance is specifically approved at least annually by (i) the
Directors or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
<PAGE> 15
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding
voting securities of the Fund, or by the Distributor, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
--------------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
--------------------------------------------
Title: President
<PAGE> 17
EXHIBIT A

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

Class B SHARES OF COMMON STOCK

SELECTED DEALER AGREEMENT

Gentlemen:

Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an
agreement with Merrill Lynch Fundamental Growth Fund, Inc., a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class B shares of common stock, par value $0.10 per share (herein
referred to as the "Class B shares"), of the Fund and as such has the right to
distribute Class B shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class B shares being offered to the public are registered
under the Securities Act of 1933, as amended. You have received a copy of the
Class B Shares Distribution Agreement (the "Distribution Agreement") between
ourself and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" as used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
which is part of the most recent effective registration statement pursuant to
the Securities Act of 1933, as amended. We offer to sell to you, as a member
of the Selected Dealers Group, Class B shares of the Fund upon the following
terms and conditions:

1. In all sales of these Class B shares to the public, you shall act
as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.

2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 4 hereof and
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum ini-
<PAGE> 18
tial and subsequent purchase requirements are as set forth in the current
Prospectus and Statement of Additional Information of the Fund.

3. You shall not place orders for any of the Class B shares unless you
have already received purchase orders for such Class B shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class B shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class B shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish
to any person any information relating to the Class B shares of the Fund which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any
public place without our consent and the consent of the Fund.

4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class B shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and (ii) to
tender Class B shares directly to the Fund or its agent for redemption subject
to the applicable terms and conditions set forth in Section 4 of the
Distribution Agreement.

5. You shall not withhold placing orders received from your customers
so as to profit yourself as a result of such withholding: e.g., by a change
in the "net asset value" from that used in determining the offering price to
your customers.

6. No person is authorized to make any representations concerning
Class B shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class B
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall
<PAGE> 19
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.

7. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.

8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class B shares entirely or to certain
persons or entities in a class or classes specified by us. Each party hereto
has the right to cancel this Agreement upon notice to the other party.

9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this
paragraph is intended to operate as, and the provisions of this paragraph shall
not in any way whatsoever constitute, a waiver by you of compliance with any
provision of the Securities Act of 1933, as amended, or of the rules and
regulations of the Securities and Exchange Commission issued thereunder.

10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such Association.

11. Upon application to us, we will inform you as to the states in which
we believe the Class B shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class B shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.

12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
<PAGE> 20
13. Your first order placed pursuant to this Agreement for the purchase of
Class B shares of the Fund will represent your acceptance of this Agreement.

14. This Agreement supersedes any prior Selected Dealers Agreement
entered into by the parties hereto with respect to the Class B shares of the
Fund.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
---------------------------------------------
(Authorized Signature)

Please return one signed copy
of this Agreement to:

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011

Accepted:

<PAGE> 1
CLASS C SHARES

DISTRIBUTION AGREEMENT

AGREEMENT made as of the 21st day of October 1994, between Merrill
Lynch Fundamental Growth Fund, Inc., a Maryland corporation (the "Fund"), and
MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").

W I T N E S S E T H :

WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and

WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's Class C
shares in order to promote the growth of the Fund and facilitate the
distribution of its Class C shares.

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to
sell Class C shares of common stock in the Fund (sometimes herein referred to
as "Class C shares") to

<PAGE> 2
the public and hereby agrees during the term of this Agreement to sell shares
of the Fund to the Distributor upon the terms and conditions herein set forth.

Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class C shares, except that:

(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate,
but this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.

(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class C
shares of any such company by the Fund.
<PAGE> 3
(c) Such exclusive right also shall not apply to Class C shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.

(d) Such exclusive right also shall not apply to Class C shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class C shares as shall be
agreed between the Fund and the Distributor from time to time.

Section 3. Purchase of Class C Shares from the Fund.

(a) It is contemplated that the Fund will commence an offering of its
Class C shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class C shares needed, but not more than the Class C shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class C shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class C shares shall be
those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and
"statement of additional information", respectively) under the Securities Act
of 1933, as amended (the "Securities Act"), relating to such Class C shares.
The price which the Distributor shall pay for the Class C shares so purchased
from the Fund shall be the net asset value, determined as set forth in Section
3(c) hereof.
<PAGE> 4
(b) The Class C shares are to be resold by the Distributor to
investors at net asset value, as set forth in Section 3(c) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.

(c) The net asset value of Class C shares of the Fund shall be
determined by the Fund or any agent of the Fund in accordance with the method
set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.

(d) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend
the sale of its Class C shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event,
which, in the judgment of the Fund, makes it impracticable or inadvisable to
sell the Class C shares.

(e) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class C shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class C shares. The Fund
<PAGE> 5
(or its agent) will confirm orders upon their receipt, will make appropriate
book entries and, upon receipt by the Fund (or its agent) of payment therefor,
will deliver deposit receipts or certificates for such Class C shares pursuant
to the instructions of the Distributor. Payment shall be made to the Fund in
New York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).

Section 4. Repurchase or Redemption of Class C Shares by the Fund.

(a) Any of the outstanding Class C shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class C
shares so tendered in accordance with its obligations as set forth in Article
VI of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information of the Fund. The price to be paid to
redeem or repurchase the Class C shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(c) hereof, less any
contingent deferred sales charge ("CDSC"), redemption fee or other charge(s),
if any, set forth in the prospectus and statement of additional information of
the Fund. All payments by the Fund hereunder shall be made in the manner set
forth below.
<PAGE> 6
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.

(b) Redemption of Class C shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or during any other period
when the Securities and Exchange Commission, by order, so permits.

Section 5. Duties of the Fund.

(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class C
shares of the Fund, and this shall include, upon request by the Distributor,
one certified copy of all
<PAGE> 7
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
prospectus and statement of additional information as the Distributor shall
reasonably request.

(b) The Fund shall take, from time to time, but subject to any
necessary approval of the shareholders, all necessary action to fix the number
of authorized shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Class C shares as the Distributor reasonably may be expected to sell.

(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.

(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.
<PAGE> 8

Section 6. Duties of the Distributor.

(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.

(b) In selling the Class C shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither
the Distributor nor any selected dealer, as defined in Section 7 hereof, nor
any other person is authorized by the Fund to give any information or to make
any representations, other than those contained in the registration statement
or related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.

(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may
be necessary to comply with the requirements of the National Association
<PAGE> 9
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.

Section 7. Selected Dealer Agreements.

(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.

(b) Within the United States, the Distributor shall offer and sell
Class C shares only to such selected dealers that are members in good standing
of the NASD.

Section 8. Payment of Expenses.

(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments
of sales commissions to financial consultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are to
be used in connection with the offering of Class C shares to selected dealers
or investors pursuant to this Agreement. The Distributor shall bear the costs
and expenses of preparing, printing and distributing any other literature used
by the Distributor or furnished by it for use by selected dealers in connection
with the offering of the Class C shares for sale to the public and any expenses
of advertising incurred by the Distributor in connection with such offering.
It is understood and agreed that so long as the Fund's Class C Shares
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
remains in effect, any expenses incurred by the Distributor hereunder may be
paid from amounts recovered by it from the Fund under such Plan.

(c) The Fund shall bear the cost and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali-
<PAGE> 11
fying the Fund as a broker or dealer in such states of the United States or
other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 5(c) hereof.

Section 9. Indemnification.

(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith), as incurred, arising by reason
of any person acquiring any Class C shares, which may be based upon the
Securities Act, or on any other statute or at common law, on the ground that
the registration statement or related prospectus and statement of additional
information, as from time to time amended and supplemented, or an annual or
interim report to Class C shareholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and
in conformity with, information furnished to the Fund in connection therewith
by or on behalf of the Distributor; provided, however, that in no case (i)
<PAGE> 12
is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of the reckless
disregard of their obligations and duties under this Agreement; or (ii) is the
Fund to be liable under its indemnity agreement contained in this paragraph
with respect to any claim made against the Distributor or any such controlling
persons, unless the Distributor or such controlling persons, as the case may
be, shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling persons
(or after the Distributor or such controlling persons shall have received
notice of such service on any designated agent), but failure to notify the
Fund of any such claim shall not relieve it from any liability which it may
have to the person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Fund will
be entitled to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but if the Fund elects to assume the defense, such defense shall be
<PAGE> 13
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the
event the Fund elects to assume the defense of any such suit and retain such
counsel, the Distributor or such controlling person or persons, defendant or
defendants in the suit shall bear the fees and expenses, as incurred, of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses, as incurred, of any counsel retained by them.
The Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any of the Class C shares.

Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment
Company Act. To the extent that the applicable law of the State of New York,
or any
<PAGE> 16
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
-------------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
-------------------------------------------
Title: President
<PAGE> 17
EXHIBIT A

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

CLASS C SHARES OF COMMON STOCK

SELECTED DEALER AGREEMENT

Gentlemen:

Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an
agreement with Merrill Lynch Fundamental Growth Fund, Inc., a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class C shares of common stock, par value $0.10 per share (herein
referred to as the "Class C shares"), of the Fund and as such has the right to
distribute Class C shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class C shares being offered to the public are registered
under the Securities Act of 1933, as amended. You have received a copy of the
Class C Shares Distribution Agreement (the "Distribution Agreement") between
ourself and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" as used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
which is part of the most recent effective registration statement pursuant to
the Securities Act of 1933, as amended. We offer to sell to you, as a member
of the Selected Dealers Group, Class C shares of the Fund upon the following
terms and conditions:

1. In all sales of these Class C shares to the public, you shall act
as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.

2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 4 hereof and
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum ini-
<PAGE> 18
tial and subsequent purchase requirements are as set forth in the current
Prospectus and Statement of Additional Information of the Fund.

3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish
to any person any information relating to the Class C shares of the Fund which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any
public place without our consent and the consent of the Fund.

4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and (ii) to
tender Class C shares directly to the Fund or its agent for redemption subject
to the applicable terms and conditions set forth in Section 4 of the
Distribution Agreement.

6. No person is authorized to make any representations concerning
Class C shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall
<PAGE> 19
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.

8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class C shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this Agreement upon notice to the other party.

11. Upon application to us, we will inform you as to the states in which
we believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.

12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
<PAGE> 20
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Fund will represent your acceptance of this Agreement.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
----------------------------------------------
(Authorized Signature)

Please return one signed copy
of this Agreement to:

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011

Accepted:

Firm Name:
---------------------------------------
By: [SIG]
----------------------------------------------
Address:
-----------------------------------------

-------------------------------------------------
Date:
--------------------------------------------

<PAGE> 1
CLASS D SHARES

DISTRIBUTION AGREEMENT

W I T N E S S E T H :

WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and

WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class D shares
of common stock in the Fund.

NOW, THEREFORE, the parties agree as follows:

Section 1. Appointment of the Distributor. The Fund hereby appoints
the Distributor as the principal underwriter and distributor of the Fund to
sell Class D shares of common stock in the Fund (sometimes herein referred to
as "Class D shares") to the public and hereby agrees during the term of this
Agreement to
<PAGE> 2
sell Class D shares of the Fund to the Distributor upon the terms and
conditions herein set forth.

Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:

(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate,
but this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.

(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Fund or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding Class D shares of any
such company by the Fund.

(c) Such exclusive right also shall not apply to Class D shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
<PAGE> 3
(d) Such exclusive right also shall not apply to Class D shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.

Section 3. Purchase of Class D Shares from the Fund.

(a) It is contemplated that the Fund will commence an offering of its
Class D shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class D shares needed, but not more than the Class D shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class D shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class D shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class D shares. The price
which the Distributor shall pay for the Class D shares so purchased from the
Fund shall be the net asset value, determined as set forth in Section 3(d)
hereof, used in determining the public offering price on which such orders were
based.

(b) The Class D shares are to be resold by the Distributor to
investors at the public offering price, as set forth in Section 3(c) hereof, or
to securities dealers having agreements
<PAGE> 4
with the Distributor upon the terms and conditions set forth in Section 7
hereof.

(c) The public offering price(s) of the Class D shares, i.e., the
price per share at which the Distributor or selected dealers may sell Class D
shares to the public, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class D
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class D shares, plus a sales charge not to exceed 5.25% of the
public offering price (5.54% of the net amount invested), subject to reductions
for volume purchases. Class D shares may be sold to certain Directors,
officers and employees of the Fund, directors and employees of Merrill Lynch &
Co., Inc. and its subsidiaries, and to certain other persons described in the
prospectus and statement of additional information, without a sales charge or
at a reduced sales charge, upon terms and conditions set forth in the
prospectus and statement of additional information. If the public offering
price does not equal an even cent, the public offering price may be adjusted to
the nearest cent. All payments to the Fund hereunder shall be made in the
manner set forth in Section 3(f).

(d) The net asset value of Class D shares shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional
<PAGE> 5
information of the Fund and guidelines established by the Directors.

(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend
the sale of its Class D shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event,
which, in the judgment of the Fund, makes it impracticable or inadvisable to
sell the Class D shares.

(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class D shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class D shares. The Fund (or
its agent) will confirm orders upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts or certificates for such Class D shares pursuant to
the instructions of the Distributor. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
<PAGE> 6
Section 4. Repurchase or Redemption of Class D Shares by the Fund.

(a) Any of the outstanding Class D shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class D
shares so tendered in accordance with its obligations as set forth in Article
VI of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information. The price to be paid to redeem or
repurchase the Class D shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(d) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the Fund.
All payments by the Fund hereunder shall be made in the manner set forth below.
The redemption or repurchase by the Fund of any of the Class D shares
purchased by or through the Distributor will not affect the sales charge
secured by the Distributor or any selected dealer in the course of the
original sale, except that if any Class D shares are tendered for redemption
or repurchase within seven business days after the date of the confirmation of
the original purchase, the right to the sales charge shall be forfeited by the
Distributor and the selected dealer which sold such Class D shares.

The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of
<PAGE> 7
the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the
Fund as follows: (i) any applicable CDSC shall be paid to the Distributor, and
(ii) the balance shall be paid to or for the account of the shareholder, in
each case in accordance with the applicable provisions of the prospectus and
statement of additional information.

(b) Redemption of Class D shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or during any other period
when the Securities and Exchange Commission, by order, so permits.

Section 5. Duties of the Fund.

(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class D
shares of the Fund, and this shall include, upon request by the Distributor,
one certified copy of all financial statements prepared for the Fund by
independent public accountants. The Fund shall make available to the
Distributor
<PAGE> 8
such number of copies of the prospectus and statement of additional information
as the Distributor shall reasonably request.

(b) The Fund shall take, from time to time, but subject to any
necessary approval of the Class D shareholders, all necessary action to fix the
number of authorized Class D shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class D shares as the Distributor may
reasonably be expected to sell.

(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve.
Any such qualification may be withheld, terminated or withdrawn by the Fund at
any time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.

(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.

Section 6. Duties of the Distributor.

(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The
<PAGE> 9
services of the Distributor to the Fund hereunder are not to be deemed
exclusive and nothing herein contained shall prevent the Distributor from
entering into like arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.

(b) In selling the Class D shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither
the Distributor nor any selected dealer, as defined in Section 7 hereof, nor
any other person is authorized by the Fund to give any information or to make
any representations, other than those contained in the registration statement
or related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.

Section 7. Selected Dealers Agreements.

(a) The Distributor shall have the right to enter into selected
dealers agreements with securities dealers of its choice
<PAGE> 10
("selected dealers") for the sale of Class D shares and fix therein the portion
of the sales charge which may be allocated to the selected dealers; provided
that the Fund shall approve the forms of agreements with dealers and the dealer
compensation set forth therein. Class D shares sold to selected dealers shall
be for resale by such dealers only at the public offering price(s) set forth
in the prospectus and statement of additional information. The form of
agreement with selected dealers to be used during the continuous offering of
the Class D shares is attached hereto as Exhibit A.

(b) Within the United States, the Distributor shall offer and sell
Class D shares only to such selected dealers as are members in good standing of
the NASD.

Section 8. Payment of Expenses.

(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and interim reports and proxy materials to
Class D shareholders (including but not limited to the expense of setting in
type any such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
<PAGE> 11
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments
of sales commissions to financial consultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are to
be used in connection with the offering of Class D shares to selected dealers
or investors pursuant to this Agreement. The Distributor shall bear the costs
and expenses of preparing, printing and distributing any other literature used
by the Distributor or furnished by it for use by selected dealers in connection
with the offering of the Class D shares for sale to the public and any expenses
of advertising incurred by the Distributor in connection with such offering.
It is understood and agreed that so long as the Fund's Class D Shares
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
remains in effect, any expenses incurred by the Distributor hereunder in
connection with account maintenance activities may be paid from amounts
recovered by it from the Fund under such plan.

(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund
<PAGE> 12
and the Distributor pursuant to Section 5(c) hereof and the cost and expenses
payable to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5(c) hereof.

Section 9. Indemnification.

(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel fees incurred in connection therewith), as incurred, arising by reason
of any person acquiring any Class D shares, which may be based upon the
Securities Act, or on any other statute or at common law, on the ground that
the registration statement or related prospectus and statement of additional
information, as from time to time amended and supplemented, or an annual or
interim report to shareholders of the Fund, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Fund in favor of the Distributor and any such controlling persons to be deemed
to protect such Distributor or any such controlling persons thereof against any
liability to the
<PAGE> 13
Fund or its security holders to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of their duties or by reason of the
reckless disregard of their obligations and duties under this Agreement; or
(ii) is the Fund to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or such controlling persons, as
the case may be, shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Distributor or such
controlling persons (or after the Distributor or such controlling persons
shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the
<PAGE> 14
Distributor or such controlling person or persons, defendant or defendants in
the suit shall bear the fees and expenses of any additional counsel retained
by them, but in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor
of the commencement of any litigation or proceedings against it or any of its
officers or Directors in connection with the issuance or sale of any of the
Class D shares.

Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment
Company Act. To the extent that the applicable law of the State of New York,
or any
<PAGE> 17
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
-----------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
-----------------------------------------
Title: President
<PAGE> 18
EXHIBIT A

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

CLASS D SHARES OF COMMON STOCK

SELECTED DEALERS AGREEMENT

Gentlemen:

Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an
agreement with Merrill Lynch Fundamental Growth Fund, Inc., a Maryland
corporation (the "Fund"), pursuant to which it acts as the distributor for the
sale of Class D shares of common stock, par value $0.10 per share (herein
referred to as "Class D shares"), of the Fund and as such has the right to
distribute Class D shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class D shares being offered to the public are registered
under the Securities Act of 1933, as amended. You have received a copy of the
Class D Shares Distribution Agreement (the "Distribution Agreement") between
ourself and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
which is part of the most recent effective registration statement pursuant to
the Securities Act of 1933, as amended. We offer to sell to you, as a member
of the Selected Dealers Group, Class D shares of the Fund upon the following
terms and conditions:

1. In all sales of these Class D shares to the public, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.

2. Orders received from you will be accepted through us only at
the public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 5 hereof and
instructions which we or the Fund shall forward from time to time to you. All
<PAGE> 19
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the current Prospectus and Statement of
Additional Information of the Fund.

3. The sales charges for sales to the public, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:

$25,000 but less
than $50,000........ 4.75% 4.99% 4.50%

$50,000 but less
than $100,000....... 4.00% 4.17% 3.75%

$100,000 but less
than $250,000....... 3.00% 3.09% 2.75%

$250,000 but less
than $1,000,000.. 2.00% 2.04% 1.80%

$1,000,000 and over**.. 0.00% 0.00% 0.00%
</TABLE>

* Rounded to the nearest one-hundredth percent.

** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Infomation.
<PAGE> 20
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for
a single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class D shares of the Fund or Class D shares of other registered
investment companies at a discount; provided, however, that it shall not
include purchases by any group of individuals whose sole organizational nexus
is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.

The reduced sales charges are applicable through a right of
accumulation under which eligible investors are permitted to purchase Class D
shares of the Fund at the offering price applicable to the total of (a) the
public offering price of the shares then being purchased plus (b) an amount
equal to the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares
of the Fund and of any other investment company with an initial sales charge
for which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.

You agree to advise us promptly at our request as to amounts of any
sales made by you to the public qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
<PAGE> 21
4. You shall not place orders for any of the Class D shares unless
you have already received purchase orders for such Class D shares at the
applicable public offering prices and subject to the terms hereof and of the
Distribution Agreement. You agree that you will not offer or sell any of the
Class D shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class D shares you will furnish to each person to whom
any such sale or offer is made a copy of the Prospectus and, if requested, the
Statement of Additional Information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class D shares of the
Fund which is inconsistent in any respect with the information contained in the
Prospectus and Statement of Additional Information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.

5. As a selected dealer, you are hereby authorized (i) to place
orders directly with the Fund for Class D shares of the Fund to be resold by us
to you subject to the applicable terms and conditions governing the placement
of orders by us set forth in Section 3 of the Distribution Agreement and
subject to the compensation provisions of Section 3 hereof and (ii) to tender
Class D shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.

7. If any Class D shares sold to you under the terms of this
Agreement are repurchased by the Fund or by us for the account of the Fund or
are tendered for redemption within seven business days after the date of the
confirmation of the original purchase by you, it is agreed that you shall
forfeit your right to, and refund to us, any discount received by you on such
Class D shares.

8. No person is authorized to make any representations concerning
Class D shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or
<PAGE> 22
responsibility to you in these respects unless expressly assumed in connection
therewith.

10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely or to certain
persons or entities in a class or classes specified by us. Each party hereto
has the right to cancel this agreement upon notice to the other party.

13. Upon application to us, we will inform you as to the states in
which we believe the Class D shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class D
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class D shares, if necessary.

14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.

15. Your first order placed pursuant to this Agreement for the
purchase of Class D shares of the Fund will represent your acceptance of this
Agreement.

<PAGE> 23

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
------------------------------------
(Authorized Signature)

Please return one signed copy
of this agreement to:

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011

Accepted:

Firm Name:
-----------------------------------------------------
By: [SIG]
------------------------------------------------------------
Address:
-------------------------------------------------------

---------------------------------------------------------------
Date:
----------------------------------------------------------

<PAGE> 1
Ex-99.8

[LOGO CHASE]

GLOBAL
CUSTODY
AGREEMENT
<PAGE> 2

This AGREEMENT is effective December 24, 1992, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and MERRILL LYNCH FUNDAMENTAL GROWTH FUND,
INC. (the "Customer").

1. Customer Accounts.

The Bank agrees to establish and maintain the following accounts
("Accounts"):

(a) a custody account in the name of the Customer ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes, mortgages
or other obligations for the payment of money, bullion, coin and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase or subscribe for the same or evidencing or representing any
other rights or interests therein and other similar property whether
certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and

(b) a deposit account in the name of the Customer ("Deposit
Account") for any and all cash in any currency received by the Bank or its
Subcustodian for the account of the Customer, which cash shall not be subject
to withdrawal by draft or check.

The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. The Bank may deliver
securities of the same class in place of those deposited in the Custody
Account.

Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.

2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.

Unless Instructions specifically require another location acceptable to
the Bank:

(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and

(b) cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.

Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.

If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement,
signed by the Bank and the Customer.

3. Subcustodians and Securities Depositories.

The Bank may act under this Agreement through the subcustodians listed
in Schedule A of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank to
hold Assets in the Accounts in accounts which the Bank has established with one
or more of its branches or Subcustodians. The Bank and Subcustodians are
authorized to hold any of the Securities in their account with any securities
depository in which they participate.

The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of any
amendment to Schedule A. Upon request by the Customer, the Bank will identify
the name, address and principal place of business of any Subcustodian of the
Customer's Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.

4. Use of Subcustodian.

(a) The Bank will identify Assets on its books as belonging to the
Customer.

(b) A Subcustodian will hold Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of the
Bank.

(c) Any Assets in the Accounts held by a Subcustodian will be
subject only to the instructions of the Bank or its agent. Any Securities held
in a securities depository for the account of a Subcustodian will be subject
only to the instructions of such Subcustodian.

(d) Any agreement the Bank enters into with a Subcustodian for
holding its customer's assets shall provide that such assets will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of such Subcustodian except for safe custody or administration, and that
the beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration. The
foregoing shall not apply to the extent of any special agreement or arrangement
made by the Customer with any particular Subcustodian.
<PAGE> 3
5. Deposit Account Transactions.

(a) The Bank or its Subcustodians will make payments from the
Deposit Account upon receipt of Instructions which include all information
required by the Bank.

(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed a
loan payable on demand, bearing interest at the rate customarily charged by the
Bank on similar loans.

(c) If the Bank credits the Deposit Account on a payable date, or
at any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary course
of business or (ii) that such amount was incorrectly credited. If the Customer
does not promptly return any amount upon such notification, the Bank shall be
entitled, upon oral or written notification to the Customer, to reverse such
credit by debiting the Deposit Account for the amount previously credited. The
Bank or its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may
act for the Customer upon instructions after consultation with the Customer.

6. Custody Account Transactions.

(a) Securities will be transferred, exchanged or delivered by the
Bank or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.

(b) The Bank, in its discretion, may credit or debit the Accounts
on a contractual settlement date with cash or Securities with respect to any
sale, exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.

(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to
settle within a reasonable period, determined by the Bank in
its discretion, after the contractual settlement date for the
related transaction.

(ii) If any Securities delivered pursuant to this Section 6
are returned by the recipient thereof, the Bank may reverse
the credits and debits of the particular transaction at any
time.

7. Actions of the Bank.

The Bank shall follow Instructions received regarding Assets held in
the Accounts. However, until it receives Instructions to the contrary, the
Bank will perform the following functions.

(a) Present for payment any Securities which are called, redeemed
or retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that the Bank or
Subcustodian is actually aware of such opportunities.

(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.

(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.

(e) Issue statements to the Customer, at times mutually agreed
upon, identifying the Assets in the Accounts.

The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer sends the Bank a written exception or objection
to any Bank statement within sixty days of receipt, the Customer shall be
deemed to have approved such statement. In such event, or where the Customer
has otherwise approved any such statement, the Bank shall, to the extent
permitted by law, be released, relieved and discharged with respect to all
matters set forth in such statement or reasonably implied therefrom as though
it had been settled by the decree of a court of competent jurisdiction in an
action where the Customer and all persons having or claiming an interest in
the Customer or the Customer's Accounts were parties.
<PAGE> 4
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. The Bank shall have no liability for any loss occasioned by delay in
the actual receipt of notice by the Bank or by its Subcustodians of any
payment, redemption or other transaction regarding Securities in the Custody
Account in respect of which the Bank has agreed to take any action under this
Agreement.

8. Corporate Actions; Proxies.

Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.

When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
instructions from the Customer or its Authorized Person, as defined in Section
10, but if Instructions are not received in time for the Bank to take timely
action, or actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.

The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing.
Such proxies shall be executed in the appropriate nominee name relating to
Securities in the Custody Account registered in the name of such nominee but
without indicating the manner in which such proxies are to be voted; and where
bearer Securities are involved, proxies will be delivered in accordance with
Instructions.

9. Nominees.

Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may, without notice to the Customer,
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to be
fair and equitable. The Customer agrees to hold the Bank, Subcustodians, and
their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.

10. Authorized Persons.

As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an Authorized
Person.

11. Instructions.

The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.

Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold
the Bank harmless for the failure of an Authorized Person to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time. Either Party may electronically record
any Instructions given by telephone, and any other telephone discussions with
respect to the Custody Account. The Customer shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its Authorized Persons.
<PAGE> 5
12. Standard of Care; Liabilities.

(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement.

(i) The Bank will use reasonable care with respect
to its obligations under this Agreement and the safekeeping of
Assets. The Bank shall be liable to the Customer for any loss
which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank
would be liable to the Customer if the Bank were holding such
Assets in New York. In the event of any loss to the Customer
by reason of the failure of the Bank or its Subcustodian to
utilize reasonable care, the Bank shall be liable to the
Customer only to the extent of the Customer's direct damages,
to be determined based on the market value of the property
which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or
circumstances.

(ii) The Bank will not be responsible for any act,
omission, default or for the solvency of any broker or agent
which it or a Subcustodian appoints unless such appointment was
made negligently or in bad faith.

(iii) The Bank shall be indemnified by, and without
liability to the Customer for any action taken or omitted by
the Bank whether pursuant to Instructions or otherwise within
the scope of this Agreement if such act or omission was in good
faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any
document which it believes in good faith to have been validly
executed.

(iv) The Customer agrees to pay for and hold the
Bank harmless from any liability or loss resulting from the
imposition or assessment of any taxes or other governmental
charges, and any related expenses with respect to income from
or Assets in the Accounts.

(v) The Bank shall be entitled to rely, and may act
upon the advice of counsel (who may be counsel for the
Customer) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice.

(vi) The Bank need not maintain any insurance for
the benefit of the Customer.

(vii) Without limiting the foregoing, the Bank shall
not be liable for any loss which results from: 1) the general
risk of investing, or 2) investing or holding Assets in a
particular country including, but not limited to, losses
resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations;
and market conditions which prevent the orderly execution of
securities transactions or affect the value of Assets.

(viii) Neither party shall be liable to the other for
any loss due to forces beyond their control including, but not
limited to strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation,
or acts of God.

(b) Consistent with and without limiting the first paragraph of
this Section 12, it is specifically acknowledged that the Bank shall have no
duty or responsibility to:

(i) question Instructions or make any suggestions
to the Customer or an Authorized Person regarding such
Instructions;

(ii) supervise or make recommendations with respect
to investments or the retention of Securities;

(iii) advise the Customer or an Authorized Person
regarding any default in the payment of principal or income of
any security other than as provided in Section 5(c) of this
Agreement;

(iv) evaluate or report to the Customer or an
Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered
or payments are made pursuant to this Agreement; or

(v) review or reconcile trade confirmations
received from brokers. The Customer or its Authorized Persons
issuing Instructions shall bear any responsibility to review
such confirmations against Instructions issued to and
statements issued by the Bank.

(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any
of the activities listed herein.
<PAGE> 6
13. Fees and Expenses.

The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing, together with the
Bank's reasonable out-of-pocket or incidental expenses, including, but not
limited to legal fees. The Bank shall have a lien on and is authorized to
charge any Accounts of the Customer for any amount owing to the Bank under any
provision of this Agreement.

14. Miscellaneous.

(a) Foreign Exchange Transactions. To facilitate the
administration of the Customer's trading and investment activity, the Bank is
authorized to enter into spot or forward foreign exchange contracts with the
Customer or an Authorized Person for the Customer and may also provide foreign
exchange through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its subsidiaries,
affiliates or Subcustodians enter into a foreign exchange contract related to
Accounts, the terms and conditions of the then current foreign exchange
contract of the Bank, its subsidiary, affiliate or Subcustodian and, to the
extent not inconsistent, this Agreement, shall apply to such transaction.

(b) Certification of Residency, etc. The Customer certifies that
it is a resident of the United States and agrees to notify the Bank of any
changes in residency. The Bank may rely upon this certification or the
certification of such other facts as may be required to administer the Bank's
obligations under this Agreement. The Customer will indemnify the Bank against
all losses, liability, claims or demands arising directly or indirectly from
any such certifications.

(c) Access to Records. The Bank shall allow the Customer's
independent public accountants reasonable access to the records of the Bank
relating to the Assets as is required in connection with their examination of
books and records pertaining to the Customer's affairs. Subject to
restrictions under applicable law, the Bank shall also obtain an undertaking to
permit the Customer's independent public accountants reasonable access to the
records of any Subcustodian which has physical possession of any Assets as may
be required in connection with the examination of the Customer's books and
records.

(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.

(e) Entire Agreement; Applicable Riders. Customer represents that
the Assets deposited in the Accounts are (check one):

_____ employee benefit plan or other assets subject to the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA");

__x__ mutual fund assets subject to Securities and Exchange
Commission ("SEC") rules and regulations;

_____ neither of the above.

This Agreement consists exclusively of this document together with
Schedule A and the following rider(s) [check applicable rider(s)]:

_____ ERISA

__x__ MUTUAL FUND

_____ SPECIAL TERMS AND CONDITIONS

There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.

(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of any such provision and the remaining provisions,
under other circumstances or in other jurisdictions will not in any way be
affected or impaired.
<PAGE> 7
(g) Waiver. Except as otherwise provided in this Agreement, no
failure or delay on the part of either party in exercising any power or right
under this Agreement operates as a waiver, nor does any single or partial
exercise of any power or right preclude any other or further exercise thereof,
or the exercise of any other power or right. No waiver by a party of any
provision d this Agreement, or waiver of any breach or default, is effective
unless in writing and signed by the party against whom the waiver is to be
enforced.

(h) Notices. All notices under this Agreement shall be effective
when actually received. Any notices or other communications which may be
required under this Agreement are to be sent to the parties at the following
addresses or such other addresses as may subsequently be given to the other
party in writing:

Bank: The Chase Manhattan Bank, N.A.
4 Chase Metrotech Center
Brooklyn, New York 11245

Attention: Global Custody Division

Customer: Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attn: Merill Lynch Fundamental Growth Fund, Inc.

(i) Termination. This Agreement may be terminated by the Customer
or the Bank by giving sixty days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the Bank
shall deliver the Assets in the Accounts. If notice of termination is given by
the Bank, the Customer shall, within sixty days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver
the Assets to the persons so specified, after deducting any amounts which the
Bank determines in good faith to be owed to it under Section 13. If within
sixty days following receipt of a notice of termination by the Bank, the Bank
does not receive Instructions from the Customer specifying the names of the
persons to whom the Bank shall deliver the Assets, the Bank, at its election,
may deliver the Assets to a bank or trust company doing business in the State
of New York to be held and disposed of pursuant to the provisions of this
Agreement, or to Authorized Persons, or may continue to hold the Assets until
Instructions are provided to the Bank.

Merrill Lynch Phoenix, Fund, Inc.

By: /s/ GERALD M. RICHARD
---------------------------------

Treasurer
---------------------------------
Title

THE CHASE MANHATTAN BANK, N.A.

By: /s/ MICHAEL RAVENSBERGEN
---------------------------------

Vice President
---------------------------------
Title
<PAGE> 8

STATE OF )
: ss.
COUNTY OF )

On this 24th day of December , 1992, before me personally
came Gerald M. Richard, to me known, who being by me duly sworn, did depose
and say that he resides in Belle Mead, NJ at _______________________; that
he is Treasurer of Merrill Lynch Fundamental Growth Fund, Inc.
("Customer"), the Customer which executed the foregoing Agreement; that he/she
knows the seal of the Customer; that the seal affixed to the Agreement is such
seal; that it was affixed by order of the Customer, and that he/she signed
his/her name thereto by like order.

/s/ GERALD M. RICHARD
---------------------

Sworn to before me this 24th
day of December , 1992

/s/ CATHERINE O'BRIEN
---------------------
Notary

STATE OF New York )
: ss.

COUNTY OF New York )

On this 24th day of December , 1992 , before me personally
came Michael Ravensbergen , to me known, who being by me duly sworn, did
depose and say that he resides in Hackensack, New Jersey at 14 Brock St. ;
that he is a Vice President of THE CHASE MANHATTAN BANK, N.A. ("Bank"), the
Bank which executed the foregoing Agreement; that he knows the seal of the
Bank; that the seal affixed to the Agreement is such corporate seal; that it
was so affixed by order of the Board of Directors of the Bank, and that he
signed his name thereto by like order.

/s/ Michael Ravensbergen
------------------------

Sworn to before me this 24th
day of December , 1992 .

/s/ CATHERINE O'BRIEN
---------------------
Notary

<PAGE> 9
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Merrill Lynch Fundamental Growth Fund, Inc.
effective December 24, 1992.

Customer represents that the Assets being placed in the Bank's custody
are subject to the Investment Company Act of 1940 (the "Act"), as the same may
be amended from time to time.

Except to the extent that the Bank has specifically agreed to comply
with a condition of a rule, regulation or interpretation promulgated by or
under the authority of the SEC or the Exemptive Order applicable to accounts of
this nature issued to the Bank (Investment Company Act of 1940, Release No.
12053, November 20, 1981), as amended, or unless the Bank has otherwise
specifically agreed, the Customer shall be solely responsible to assure that
the maintenance of Assets under this Agreement complies with such rules,
regulations, interpretations or exemptive order promulgated by or under the
authority of the Securities Exchange Commission.

The following modifications are made to the Agreement:

Section 3. Subcustodians and Securities Depositories.

Add the following language to the end of Section 3:

The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:

(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as
defined in Rule 17f-5 under the Act;

(b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders'
equity in excess of $100 million in U.S. currency (or a foreign currency
equivalent thereof), (iii) a banking institution or trust company incorporated
or organized under the laws of a country other than the United States or a
majority owned direct or indirect subsidiary of a qualified U.S. bank or bank
holding company that is incorporated or organized under the laws of a country
other than the United States which has such other qualifications as shall be
specified in Instructions and approved by the Bank or (iv) any other entity
that shall have been so qualified by exemptive order, rule or other appropriate
action of the SEC; and

(c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the central
system for handling securities or equivalent book-entries in that country or
(ii) a transnational system for the central handling of securities or
equivalent book-entries.

The Customer represents that its Board of Directors has approved each
of the Subcustodians listed in Schedule A to this Agreement and the terms of
the subcustody agreements between the Bank and each Subcustodian, which are
attached as Exhibits 1 through of Schedule A, and further represents that
its Board has determined that the use of each Subcustodian and the terms of
each subcustody agreement are consistent with the best interests of the
Customer's fund(s) and its (their) shareholders. The Bank will supply the
Customer with any amendment to Schedule A for approval. The Customer has
supplied or will supply the Bank with certified copies of its Board of
Directors resolution(s) with respect to the foregoing prior to placing Assets
with any Subcustodian so approved.

Section 11. Instructions.

Add the following language to the end of Section 11:

Account transactions made pursuant to Sections 5 and 6 of this
Agreement may be made only for the purposes listed below. Instructions must
specify the purpose for which any transaction is to be made and the Customer
shall be solely responsible to assure that Instructions are in accord with any
limitations or restrictions applicable to the Customer by law or as may be set
forth in its prospectus.
<PAGE> 10
(a) In connection with the purchase or sale of Securities at
prices as confirmed by Instructions.

(b) When Securities are called, redeemed or retired, or otherwise
become payable.

(c) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.

(d) Upon conversion of Securities pursuant to their terms into
other securities.

(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.

(f) For the payment of interest, taxes, management or supervisory
fees, distributions or operating expenses.

(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.

(h) In connection with any loans, but only against receipt of
adequate collateral as specified in Instructions which shall reflect any
restrictions applicable to the Customer.

(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.

(j) For the purpose of redeeming in kind shares of the Customer
against delivery of the shares to be redeemed to the Bank, its Subcustodian or
the Customer's transfer agent.

(k) For delivery in accordance with the provisions of any agreement
among the Customer, the Bank and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Customer.

(l) For release of Securities to designated brokers under covered
call options, provided, however, that such Securities shall be released only
upon payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due
other than to make proper request for such return.

(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.

(n) For other proper purposes as may be specified in Instructions
issued by an officer of the Customer which shall include a statement of the
purpose for which the delivery or payment is to be made, the amount of the
payment or specific Securities to be delivered, the name of the person or
persons to whom delivery or payment is to be made, and a certification that the
purpose is a proper purpose under the instruments governing the Customer

(o) Upon the termination of this Agreement as set forth in Section
14(i).

Section 12. Standard of Care; Liabilities.

Add the following subsection (d) to Section 12:

(d) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign custodian
and each eligible foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford protection for such Securities at
least equal to that afforded by the Bank's established procedures with respect
to similar securities held by the Bank and its securities depositories in New
York.

Section 14. Access to Records.

Add the following language to the end of Section 14(c):

Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar
reports as it may reasonably request with respect to each Subcustodian and
securities depository holding the Customer's assets.

<PAGE> 11

CHASE MANHATTAN BANK - GLOBAL CUSTODY NETWORK
17-5 QUALIFIED AGENT BANKS
September, 1992

<TABLE>
<CAPTION>
COUNTRY AGENT BANK
- ------- ----------
<S> <C>
Argentina The Chase Manhattan Bank, N.A.
Australia The Chase Manhattan Bank, N.A.
Austria Creditanstalt - Bankverein
Belgium General Banque
Brazil Banco Chase Manhattan, S.A.
Canada Royal Bank of Canada
Canada Canada Trust Company
Chile The Chase Manhattan Bank, N.A.
China Standard Chartered Bank
Colombia Cititrust Colombia S.A. Sociedad Fiduciaria
Denmark Den Danske Bank
Finland Kansallis-Osake-Pankki
France Banque Paribas
Germany Chase Bank, A.G.
Greece National Bank of Greece, S.A.
Hong Kong The Chase Manhattan Bank, N.A.
Hungary Citibank Budapest Rt.
Indonesia Standard Chartered Bank
Ireland Bank of Ireland
Italy The Chase Manhattan Bank, N.A.
Japan The Chase Manhattan Bank, N.A.
Jordan Arab Bank, PLC
Luxembourg Cedel, S.A.
Malaysia The Chase Manhattan Bank, N.A.
Mexico The Chase Manhattan Bank, N.A.
Mexico Banco Nacional de Mexico
Netherlands ABN-AMRO Bank N.V.
New Zealand National Nominees Limited
Norway Den Norske Bank
Pakistan Citibank N.A.
Peru Citibank, N.A.
Philippines Hongkong and Shanghai Banking Corp.
Portugal Banco Bilbao Vizcaya (Portugal ), S.A.
Portugal Banco Espirito Santo E Comercial de Lisboa
Singapore The Chase Manhattan Bank, N.A.
South Korea Hongkong & Shanghai Banking Corp.
Spain The Chase Manhattan Bank, N.A.
Spain Banque Bruxelles Lambert
Sri Lanka Hongkong & Shangai Banking Corp.
</TABLE>
<PAGE> 12

<TABLE>
<S> <C>
Sweden Skandinaviska Enskilda
Switzerland Union Bank of Switzerland
Taiwan The Chase Manhattan Bank, N.A.
Thailand The Chase Manhattan Bank, N.A.
Turkey The Chase Manhattan Bank, N.A.
United Kingdom The Chase Manhattan Bank, N.A.
United Kingdom First National Bank of Chicago (for gilts only)
United States The Chase Manhattan Bank, N.A.
Venezuela Citibank N.A.
</TABLE>

<PAGE> 1
Ex-99.9(a)

TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT

THIS AGREEMENT made as of the 18th day of August, 1992 by and
between Merrill Lynch Fundamental Growth Fund, Inc., a Maryland corporation
(the "Fund") and Financial Data Services, Inc. ("FDS"), a New Jersey
corporation.

WITNESSETH:

WHEREAS, the Fund wishes to appoint FDS to be the Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent upon, and
subject to, the terms and provisions of this Agreement, and FDS is desirous of
accepting such appointment upon, and subject to, such terms and provisions:

NOW THEREFORE, in consideration of mutual covenants contained
in this Agreement, the Fund and FDS agree as follows:

1. Appointment of FDS as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent.

(a) The Fund hereby appoints FDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject
to, the terms and provisions of this Agreement.

(b) FDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to
act as such upon, and subject to, the terms and provisions of this Agreement.

2. Definitions.

(a) In this Agreement:

(i) The term "Act" means the Investment Company Act of 1940 as
amended from time to time and any rule or regulation thereunder;

(ii) The term "Account" means any account of a Shareholder,
or, if the shares are held in an account in the name of MLPF&S for benefit of
an identified customer, such account, including a Plan Account, any account
under a plan (by whatever name referred to in the Prospectus) pursuant to the
Self-Employed Individuals Retirement Act of 1962 ("Keogh Act Plan") and any
plan (by whatever name referred to in the Prospectus) in conjunction with
Section 401 of the Internal Revenue Code ("Corporation Master Plan");
<PAGE> 2
(iii) The term "application" means an application made by a
Shareholder or prospective Shareholder respecting the opening of an Account;

(iv) The term "MLFD" means Merrill Lynch Funds Distributor,
Inc., a Delaware corporation;

(v) The term "MLPF&S" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated, a Delaware corporation;

(vi) The term "Officer's Instruction" means an instruction in
writing given on behalf of the Fund to FDS, and signed on behalf of the Fund by
the President, any Vice President, the Secretary or the Treasurer of the Fund;

(vii) The term "Prospectus" means the Prospectus and the
Statement of Additional Information of the Fund as from time to time in effect;

(viii) The term "Shares" means shares of stock or beneficial
interest, as the case may be, of the Fund, irrespective of class or series;

(ix) The term "Shareholder" means the holder of record of
Shares;

(x) The term "Plan Account" means an account opened by a
Shareholder or prospective Shareholder in respect to an open account, monthly
payment or withdrawal plan (in each case by whatever name referred to in the
Prospectus), and may also include an account relating to any other plan if and
when provision is made for such plan in the Prospectus.

3. Duties of FDS as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent.

(a) Subject to the succeeding provisions of the Agreement, FDS hereby
agrees to perform the following functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund;

(i) Issuing, transferring and redeeming Shares;

(ii) Opening, maintaining, servicing and closing Accounts;

(iii) Acting as agent for the Fund Shareholders and/or
customers of MLPF&S in connection with Plan Accounts, upon the terms and
subject to the conditions contained in the Prospectus and application relating
to the specific Plan Account;
<PAGE> 3
(iv) Acting as agent of the Fund and/or MLPF&S, maintaining
such records as may permit the imposition of such contingent deferred sales
charges as may be described in the Prospectus, including such reports as may be
reasonably requested by the Fund with respect to such Shares as may be subject
to a contingent deferred sales charge;

(v) Upon the redemption of Shares subject to such a contingent
deferred sales charge, calculating and deducting from the redemption proceeds
thereof the amount of such charge in the manner set forth in the Prospectus.
FDS shall pay, on behalf of MLFD, to MLPF&S such deducted contingent deferred
sales charges imposed upon all Shares maintained in the name of MLPF&S, or
maintained in the name of an account identified as a customer account of
MLPF&S. Sales charges imposed upon any other Shares shall be paid by FDS to
MLFD.

(vi) Exchanging the investment of an investor into, or from
the shares of other open-end investment companies or other series portfolios of
the Fund, if any, if and to the extent permitted by the Prospectus at the
direction of such investor.

(vii) Processing redemptions;

(viii) Examining and approving legal transfers;

(ix) Replacing lost, stolen or destroyed certificates
representing Shares, in accordance with, and subject to, procedures and
conditions adopted by the Fund;

(x) Furnishing such confirmations of transactions relating to
their Shares as required by applicable law;

(xi) Acting as agent for the Fund and/or MLPF&S, furnishing
such appropriate periodic statements relating to Accounts, together with
additional enclosures, including appropriate income tax information and income
tax forms duly completed, as required by applicable law;

(xii) Acting as agent for the Fund and/or MLPF&S, mailing
annual, semi-annual and quarterly reports prepared by or on behalf of the Fund,
and mailing new Prospectuses upon their issue to Shareholders as required by
applicable law;

(xiii) Furnishing such periodic statements of transactions
effected by FDS, reconciliations, balances and summaries as the Fund may
reasonably request;

(xiv) Maintaining such books and records relating to
transactions effected by FDS as are required by the Act, or by any other
applicable provision of law, rule or regulation, to be maintained by the Fund
or its transfer agent with respect to such
<PAGE> 4
transactions, and preserving, or causing to be preserved any such books and
records for such periods as may be required by any such law, rule or
regulation and as may be agreed upon from time to time between FDS and the
Fund. In addition, FDS agrees to maintain and preserve master files and
historical computer tapes on a daily basis in multiple separate locations a
sufficient distance apart to insure preservation of at least one copy of such
information;

(xv) Withholding taxes on non-resident alien Accounts,
preparing and filing U.S. Treasury Department Form 1099 and other appropriate
forms as required by applicable law with respect to dividends and
distributions; and

(xvi) Reinvesting dividends for full and fractional shares and
disbursing cash dividends, as applicable.

(b) FDS agrees to act as proxy agent in connection with the holding of
annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Fund the results of such tabulation accompanied by
appropriate certifications, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, in such form and containing such
information as may be required by the Fund.

(c) FDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of FDS under this
Agreement with respect to Accounts.

(d) FDS agrees to furnish to the Fund such information and at such
intervals as is necessary for the Fund to comply with the registration and/or
the reporting requirements (including applicable escheat laws) of the
Securities and Exchange Commission, Blue Sky authorities or other governmental
authorities.

(e) FDS agrees to provide to the Fund such information as may
reasonably be required to enable the Fund to reconcile the number of
outstanding Shares between FDS's records and the account books of the Fund.

(f) Notwithstanding anything in the foregoing provisions of this
paragraph, FDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular class
of cases) as may from time to time be contained in an Officer's Instruction.
<PAGE> 5
4. Compensation.

The charges for services described in this Agreement, including
"out-of-pocket" expenses, will be set forth in the Schedule of Fees attached
hereto.

5. Right of Inspection.

FDS agrees that it will in a timely manner make available to,
and permit, any officer, accountant, attorney or authorized agent of the Fund
to examine and make transcripts and copies (including photocopies and computer
or other electronical information storage media and print-outs) of any and all
of its books and records which relate to any transaction or function performed
by FDS under or pursuant to this Agreement.

6. Confidential Relationship.

FDS agrees that it will, on behalf of itself and its officers
and employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Fund, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Fund by way of
an Officer's Instruction.

7. Indemnification.

The Fund shall indemnify and hold FDS harmless from any loss,
costs, damage and reasonable expenses, including reasonable attorney's fees
(provided that such attorney is appointed with the Fund's consent, which
consent shall not be unreasonably withheld), incurred by it resulting from any
claim, demand, action, or suit in connection with the performance of its duties
hereunder, provided that this indemnification shall not apply to actions or
omissions of FDS in cases of willful misconduct, failure to act in good faith
or negligence by FDS, its officers, employees or agents, and further provided,
that prior to confessing any claim against it which may be subject to this
indemnification, FDS shall give the Fund reasonable opportunity to defend
against said claim in its own name or in the name of FDS. An action taken by
FDS upon any Officer's Instruction reasonably believed by it to have been
properly executed shall not constitute willful misconduct, failure to act in
good faith or negligence under this Agreement.

<PAGE> 6

8. Regarding FDS.

(a) FDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and
capabilities as may be reasonably determined by the Fund to be necessary for
the satisfactory performance of the duties and responsibilities of FDS. FDS
warrants and represents that its officers and supervisory personnel charged
with carrying out its functions as Transfer Agent, Dividend Disbursing Agent
and Shareholder Servicing Agent for the Fund possess the special skill and
technical knowledge appropriate for that purpose. FDS shall at all times
exercise due care and diligence in the performance of its functions as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund.
FDS agrees that, in determining whether it has exercised due care and
diligence, its conduct shall be measured by the standard applicable to persons
possessing such special skill and technical knowledge.

(b) FDS warrants and represents that is duly authorized and permitted
to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing
Agent under all applicable laws and that it will immediately notify the Fund of
any revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.

9. Termination.

(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or FDS (without penalty to the Fund or FDS) provided
that the terminating party gives the other party written notice of such
termination at least sixty (60) days in advance, except that the Fund may
terminate this Agreement immediately upon written notice to FDS if the
authority or permission of FDS to act as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent has been revoked or if any proceeding or
other action which the Fund reasonably believes will lead to such revocation
has been commenced.

(b) Upon termination of this Agreement, FDS shall deliver all unissued
and cancelled stock certificates representing Shares remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments and
other documents (including computerized or other electronically stored
information) made or accumulated in the performance of its duties as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund
along with a certified locator document clearly indicating the complete
contents therein, to such successor as may be specified in a notice of
termination or Officer's Instruction;

<PAGE> 7
and the Fund assumes all responsibility for failure thereafter to produce any
paper, record or documents so delivered and identified in the locator document,
if and when required to be produced.

10. Amendment.

Except to the extent that the performance by FDS or its
functions under this Agreement may from time to time be modified by an
Officer's Instruction, this Agreement may be amended or modified only by
further written Agreement between the parties.

11. Governing Law.

This Agreement shall be governed by the laws of the State of
New Jersey.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective duly authorized officers and their
respective corporate seals hereunto duly affixed and attested, as of the day
and year above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By: /s/ ARTHUR ZEIKEL
----------------------------------
Title: President
-------------------------------

FINANCIAL DATA SERVICES, INC.

By: [SIG]
----------------------------------
Title: Vice President
-------------------------------
<PAGE> 8

Schedule of Fees

The Fund will pay to FDS an annual fee of $11.00 per Class A and Class
D Shareholder Account and $14.00 per Class B and Class C Shareholder Account in
addition to reimbursement for the out-of-pocket expenses incurred by FDS
pursuant to this Agreement.

<PAGE> 1
Ex-99.9(b)

LICENSE AGREEMENT RELATING TO USE OF NAME

AGREEMENT made as of the 18th day of July, 1992, by, between MERRILL
LYNCH & CO., INC. a Delaware corporation ("ML&Co."), and MERRILL LYNCH
FUNDAMENTAL GROWTH FUND, INC., a Maryland corporation (the "Fund");

W I T N E S S E T H :

WHEREAS, ML&Co. was incorporated under the laws of the State of
Delaware on March 27, 1973 under the corporate name "Merrill Lynch & Co.,
Inc." and has used such name at all times thereafter;

WHEREAS, ML&Co. was duly qualified as a foreign corporation under the
laws of the State of New York on April 25, 1973 and has remained so qualified
at all times thereafter;

WHEREAS, the Fund was incorporated under laws of the State of Maryland
on April 30, 1992; and

WHEREAS, the Fund desires to qualify as a foreign corporation under
the laws of the State of New York and has requested ML&Co. to give its consent
to the use of the name "Merrill Lynch" in the Fund's corporate name.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, ML&Co. and the Fund hereby agree as follows:

1. ML&Co. hereby grants the Fund a non-exclusive license to use the
words "Merrill Lynch" in its corporate name.

2. ML&Co. hereby consents to the qualification of the Fund as a foreign
corporation under the laws of the State of New York with the words "Merrill
Lynch" in its corporate name and agrees to execute such formal consents as may
be necessary in connection with such filing.

3. The non-exclusive license hereinabove referred to has been given
and is given by ML&Co. on the condition that it may at any time, in its sole
and absolute discretion, withdraw the non-exclusive license to the use of the
words "Merrill Lynch" in the name of the Fund; and, as soon as practicable
after receipt by the Fund of written notice of the withdrawal of such
non-exclusive license, and in no event later than ninety days thereafter, the
Fund will change its name so that such name will not thereafter include the
words "Merrill Lynch" or any variation thereof.

4. ML&Co. reserves and shall have the right to grant to any other
company, including without limitation, any other investment company, the right
to use the words "Merrill Lynch" or variations thereof in its name and no
consent or permission of the Fund shall be necessary; but, if required by an
applicable law of any state, the Fund will forthwith grant all requisite
consents.
<PAGE> 3
5. The Fund will not grant to any other company the right to use a
name similar to that of the Fund or ML&Co. without the written consent of ML&Co.

6. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Merrill Lynch" or any variation thereof from such name,
the Fund hereby grants to ML&Co. the right to cause the incorporation of other
corporations or the organization of voluntary associations which may have
names similar to that of the Fund or to that to which the Fund may change its
names and to own all or any portion of the shares of such other corporations
or associations and to enter into contractual relationships with such other
corporations or associations, subject to any requisite approval of a majority
of the Fund's shareholders and the Securities and Exchange Commission and
subject to the payment of a reasonable amount to be determined at the time of
use, and the Fund agrees to give and execute any such formal consents or
agreements as may be necessary in connection therewith.

(i) This Agreement may be amended at any time by a writing signed by
the parties hereto.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

MERRILL LYNCH & CO., INC.

By /s/ ARTHUR ZEIKEL
---------------------------
Executive Vice President

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ TERRY K. GLENN
---------------------------
Executive Vice President

<PAGE> 1
Ex-99.13

CERTIFICATE OF SOLE SHAREHOLDER

Merrill Lynch Asset Management, Inc., (doing business as Merrill Lynch
Asset Management ("MALM")), the holder of 5,000 Class A shares of common stock,
par value $0.10 per share, and 5,000 Class B shares of common stock, par value
$0.10 per share, of Merrill Lynch Fundamental Growth Fund, Inc. (the "Fund"), a
Maryland corporation, does hereby confirm to the Fund its representation that
it purchased such shares for investment purposes, with no present intention of
redeeming or reselling any portion thereof, and does further agree that if it
redeems any portion of such shares prior to the amortization of the Fund's
organizational expenses, the proceeds thereof will be reduced by the
proportionate amount of unamortized organizational expenses which the number of
shares being redeemed bears to the number of shares initially purchased and
outstanding at the time of redemption. MLAM further agrees that in the event
such shares are sold or otherwise transferred to any other party, that prior to
such sale or transfer MLAM will obtain on behalf of the Fund an agreement from
such other party to comply with the foregoing as to the reduction of redemption
proceeds and to obtain a similar agreement from any transferee of such party.

MERRILL LYNCH ASSET MANAGEMENT, INC.

By /s/ PHILIP L. KIRSTEIN
---------------------------------

Dated: September 30, 1992

<PAGE> 1
CLASS B SHARES

DISTRIBUTION PLAN

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

PURSUANT TO RULE 12b-1

DISTRIBUTION PLAN made as of the 21st day of October, 1994, by and
between Merrill Lynch Fundamental Growth Fund, Inc., a Maryland corporation
(the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").

W I T N E S S E T H:

WHEREAS, the Fund intends to engage in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and

WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and

WHEREAS, the Fund has entered into a Distribution Agreement with MLFD,
pursuant to which MLFD acts as the exclusive distributor and representative of
the Fund in the offer and sale of Class B shares of common stock (the "Class B
shares"), of the Fund to the public; and

WHEREAS, the Fund desires to adopt this Distribution Plan pursuant to
Rule 12b-1 under the Investment Company Act, pursuant to which the Fund will
pay a distribution fee to MLFD in connection with the distribution of Class B
shares; and

WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its Class B shareholders;

NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby
agrees to the terms of, this Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act on the following terms and
conditions:
<PAGE> 2
I. The Fund shall pay MLFD a distribution fee under the Plan at the
end of each month at the annual rate of 1.0% of average daily net asset value
of the Class B shares of the Fund to compensate MLFD and securities firms with
which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph 2 hereof for providing sales and promotional activities and services.
Such activities and services will relate to the sale, promotion and marketing
of the Class B shares of the Fund and payments related to the furnishing of
services to Class B shareholders by sales and marketing personnel. Such
expenditures may consist of sales commissions to financial consultants for
selling Class B shares of the Fund, compensation, sales incentives and payments
to sales and marketing personnel, and the payment of expenses incurred in its
sales and promotional activities including advertising expenditures related to
the Class B shares of the Fund, the costs of preparing and distributing
promotional materials and the costs of providing services to Class B
shareholders including assistance in connection with inquiries related to Class
B shareholder accounts. Only distribution expenditures properly attributable
to the sale of Class B shares will be used to justify any fee paid pursuant to
this Plan.

II. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraph 1. MLFD may
reallocate all or a portion of its distribution fee to such Securities Firms as
compensation for the above-mentioned activities and services. Such
Sub-Agreement shall provide that the Securities Firms shall provide MLFD with
such information as is reasonably necessary to permit MLFD to comply with the
reporting requirements set forth in Paragraph 3 hereof.

III. MLFD shall provide the Fund for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-l regarding the disbursement of the
distribution fee during such period.

IV. This Plan shall not take effect until it has been approved by a
vote of at least a majority, as defined in the Investment Company Act, of the
outstanding Class B voting securities of the Fund.

V. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of a majority of both (a) the
Directors of the Fund and (b) those Directors of the Fund who are not
"interested persons" of the

<PAGE> 3
Fund, as defined in the Investment Company Act, and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to
it (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Plan and such related agreements.

VI. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 5.

VII. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Directors, or by vote of a majority of the outstanding Class B
voting securities of the Fund.

VIII. This Plan may not be amended to increase materially the rate of
distribution payments provided for in Paragraph 1 hereof unless such amendment
is approved in the manner provided for initial approval in Paragraphs 4 and 5
hereof, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval and annual renewal of Paragraph 5 hereof.

IX. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.

X. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Paragraph 3 hereof, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.

IN WITNESS WHEREOF, the parties hereto have executed this Distribution
Plan as of the date first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
------------------------------------------
President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
------------------------------------------
President
<PAGE> 4
CLASS B SHARES

DISTRIBUTION PLAN SUB-AGREEMENT

AGREEMENT made as of the 21st day of October, 1994, by and between
Merrill Lynch Funds Distributor, Inc., a Delaware corporation (the
"Distributor"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a
Delaware corporation ("Securities Firm").

W I T N E S S E T H:

WHEREAS, the Distributor has entered into an agreement with Merrill
Lynch Fundamental Growth Fund, Inc., a Maryland corporation (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of Class B
shares of common stock (the "Class B shares") of the Fund; and

WHEREAS, the Distributor and the Fund have entered into a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "Act") pursuant to which the Distributor receives a distribution fee
from the Fund at the annual rate of 1.0% of average daily net asset value of
the Class B shares of the Fund for providing sales and promotional activities
and services related to the distribution of Class B shares of the Fund; and

WHEREAS, the Distributor desires the Securities Firm to perform certain
sales and promotional activities and services for the Fund's Class B
shareholders, and the Securities Firm is willing to perform such services;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:

1. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class B shares of the Fund, and
incur distribution expenditures, of the types referred to in Paragraph 1 of
the Plan.

2. As compensation for its services performed under this
Sub-Agreement, the Distributor shall pay the Securities Firm a fee at the end
of each calendar month in an amount agreed upon by the parties hereto.

3. The Securities Firm shall provide the Distributor, at least
quarterly, such information as reasonably requested by the Distributor to
enable the Distributor to comply with the report-

<PAGE> 5
ing requirements of Rule 12b-1 regarding the disbursement of the fee during
such period referred to in Paragraph 3 of the Plan.

4. This Sub-Agreement shall not take effect until it has been approved
by votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it, cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.

5. This Sub-Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 5.

6. This Sub-Agreement shall automatically terminate in the event of
its assignment or in the event of the termination of the Plan or any amendment
to the Plan that requires such termination.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
------------------------------------
President

MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By [SIG]
------------------------------------
Vice President

<PAGE> 1
CLASS C DISTRIBUTION PLAN

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

PURSUANT TO RULE 12b-1

DISTRIBUTION PLAN made as of the 21st day of October 1994, by and
between Merrill Lynch Fundamental Growth Fund, Inc., a Maryland corporation
(the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").

W I T N E S S E T H:

WHEREAS, the Fund is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and

WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and

WHEREAS, the Fund proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of
the Fund to the public; and

WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class C shares; and

WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.

NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the
terms of, the Plan in accordance with Rule 12b-1 under the Investment Company
Act on the following terms and conditions:

1. The Fund shall pay MLFD an account maintenance fee under the Plan
at the end of each month at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares to compensate MLFD and securities
firms with which MLFD enters
<PAGE> 2
into related agreements pursuant to Paragraph 3 hereof ("Sub-Agreements") for
providing account maintenance activities with respect to Class C shareholders
of the Fund. Expenditures under the Plan may consist of payments to financial
consultants for maintaining accounts in connection with Class C shares of the
Fund and payment of expenses incurred in connection with such account
maintenance activities including the costs of making services available to
shareholders including assistance in connection with inquiries related to
shareholder accounts.

2. The Fund shall pay MLFD a distribution fee under the Plan at the
end of each month at the annual rate of 0.75% of average daily net assets of
the Fund relating to Class C shares to compensate MLFD and securities firms
with which MLFD enters into related Sub-Agreements for providing sales and
promotional activities and services. Such activities and services will relate
to the sale, promotion and marketing of the Class C shares of the Fund. Such
expenditures may consist of sales commissions to financial consultants for
selling Class C shares of the Fund, compensation, sales incentives and payments
to sales and marketing personnel, and the payment of expenses incurred in its
sales and promotional activities, including advertising expenditures related to
the Fund and the costs of preparing and distributing promotional materials.
The distribution fee may also be used to pay the financing costs of carrying
the unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.

3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub-Agreement shall provide that
the Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.

4. MLFD shall provide the Fund for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
<PAGE> 3
5. This Plan shall not take effect until it has been approved by a
vote of at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the Fund.

6. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of a majority of both (a) the
Directors of the Fund and (b) those Directors of the Fund who are not
"interested persons" of the Fund, as defined in the Investment Company Act, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting or meetings called for the purpose of voting on the Plan and such
related agreements.

7. The Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 6.

8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C
voting securities of the Fund.

9. The Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class C
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.

10. While the Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.

11. The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Paragraph 4 hereof, for a period
of not less than six years from the date of the Plan, or the agreements or
such report, as the case may be, the first two years in an easily accessible
place.

<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Distribution
Plan as of the date first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
----------------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
----------------------------------------------
Title: President
<PAGE> 5
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT

AGREEMENT made as of the 21st day of October 1994, by and between
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm").

W I T N E S S E T H :

WHEREAS, MLFD has entered into an agreement with Merrill Lynch
Fundamental Growth Fund, Inc., a Maryland corporation (the "Fund"), pursuant to
which it acts as the exclusive distributor for the sale of Class C shares of
common stock, par value $0.10 per share (the "Class C shares"), of the Fund;
and

WHEREAS, MLFD and the Fund have entered into a Class C Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an
account maintenance fee from the Fund at the annual rate of 0.25% of average
daily net assets of the Fund relating to Class C shares for account maintenance
activities related to Class C shares of the Fund and a distribution fee from
the Fund at the annual rate of 0.75% of average daily net assets of the Fund
relating to Class C shares for providing sales and promotional activities and
services related to the distribution of Class C shares; and

WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for
the Fund's Class C shareholders and the Securities Firm is willing to perform
such activities and services;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:

1. The Securities Firm shall provide account maintenance activities
and services with respect to the Class C shares of the Fund and incur
expenditures in connection with such activities and services of the types
referred to in Paragraph 1 of the Plan.

2. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class C shares of the Fund, and
incur distribution expenditures, of the types referred to in Paragraph 2 of
the Plan.
<PAGE> 6
3. As compensation for its activities and services performed under
this Agreement, MLFD shall pay the Securities Firm an account maintenance fee
and a distribution fee at the end of each calendar month in an amount agreed
upon by the parties hereto.

4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.

5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.

6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.

7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
-------------------------------------
Title: President

MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By [SIG]
-------------------------------------
Title: Vice President

<PAGE> 1
CLASS D DISTRIBUTION PLAN

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

PURSUANT TO RULE 12b-1

DISTRIBUTION PLAN made as of the 21st day of October 1994, by and
between Merrill Lynch Fundamental Growth Fund, Inc., a Maryland corporation (the
"Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").

W I T N E S S E T H :

WHEREAS, the Fund is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and

WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and

WHEREAS, the Fund proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class D
shares of common stock, par value $0.10 per share (the "Class D shares"), of
the Fund to the public; and

WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee to MLFD with respect to the
Fund's Class D shares; and

WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.

NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the
terms of, the Plan in accordance with Rule 12b-1 under the Investment Company
Act on the following terms and conditions:

1. The Fund shall pay MLFD an account maintenance fee under the Plan
at the end of each month at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares to compensate MLFD and securities
firms with which MLFD enters

<PAGE> 2
into related agreements ("Sub-Agreements") pursuant to Paragraph 2 hereof for
providing account maintenance activities with respect to Class D shareholders
of the Fund. Expenditures under the Plan may consist of payments to financial
consultants for maintaining accounts in connection with Class D shares of the
Fund and payment of expenses incurred in connection with such account
maintenance activities including the costs of making services available to
shareholders including assistance in connection with inquiries related to
shareholder accounts.

2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as
is reasonably necessary to permit MLFD to comply with the reporting
requirements set forth in Paragraph 3 hereof.

3. MLFD shall provide the Fund for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee during such period.

4. This Plan shall not take effect until it has been approved by a
vote of at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund.

5. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of a majority of both (a) the
Directors of the Fund and (b) those Directors of the Fund who are not
"interested persons" of the Fund, as defined in the Investment Company Act, and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting or meetings called for the purpose of voting on the Plan and such
related agreements.

6. The Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.

7. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D
voting securities of the Fund.
<PAGE> 3
8. The Plan may not be amended to increase materially the rate of
payments provided for in Paragraph 1 hereof unless such amendment is approved
by at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund, and by the Directors of the
Fund in the manner provided for in Paragraph 5 hereof, and no material
amendment to the Plan shall be made unless approved in the manner provided for
approval and annual renewal in Paragraph 5 hereof.

9. While the Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.

10. The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Paragraph 3 hereof, for a period
of not less than six years from the date of the Plan, or the agreements or
such report, as the case may be, the first two years in an easily accessible
place.

IN WITNESS WHEREOF, the parties hereto have executed this Distribution
Plan as of the date first above written.

MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

By /s/ ARTHUR ZEIKEL
----------------------------------------------
Title: President

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
----------------------------------------------
Title: President
<PAGE> 4
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT

AGREEMENT made as of the 21st day of October 1994, by and between
Merrill Lynch Funds Distributor, Inc. a Delaware corporation ("MLFD"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm").

W I T N E S S E T H :

WHEREAS, MLFD has entered into an agreement with Merrill Lynch
Fundamental Growth Fund, Inc., a Maryland corporation (the "Fund"), pursuant to
which it acts as the exclusive distributor for the sale of Class D shares of
common stock, par value $0.10 per share (the "Class D shares"), of the Fund;
and

WHEREAS, MLFD and the Fund have entered into a Class D Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an
account maintenance fee from the Fund at the annual rate of 0.25% of average
daily net assets of the Fund relating to Class D shares for providing account
maintenance activities and services with respect to Class D shares; and

WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Fund's Class D shareholders
and the Securities Firm is willing to perform such services;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:

1. The Securities Firm shall provide account maintenance activities
and services with respect to the Class D shares of the Fund and incur
expenditures in connection with such activities and services, of the types
referred to in Paragraph 1 of the Plan.

2. As compensation for its services performed under this Agreement,
MLFD shall pay the Securities Firm a fee at the end of each calendar month in
an amount agreed upon by the parties hereto.

3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule
<PAGE> 5
12b-1 regarding the disbursement of the fee during such period referred to in
Paragraph 3 of the Plan.

4. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.

5. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 5.

6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.

MERRILL LYNCH FUNDS DISTRIBUTOR, INC.

By /s/ TERRY K. GLENN
--------------------------------------
President

MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By [SIG]
--------------------------------------
Vice President

<PAGE> 1

EXHIBIT 16(c)

Fundamental Growth-Class C (Formerly Class B)
12/24/92 - 8/31/93

<TABLE>
<CAPTION>
Since
Inception Since
Avg. Annual Inception
Return Total Return*
------ ------------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 10.00 10.00
--------- ---------
Equals Shares Purchased 100.00 100.00
Plus Shares Acquired
through Dividend
Reinvestment 0.00 0.00
--------- ---------
Equals Shares Held
at 8/31/93 100.00 100.00
Multiplied by Net Asset
Value at 8/31/93 9.86 9.86
--------- ---------
Equals Ending Value before
deduction for
contingent deferred
sales charge 986.00 986.00
Less deferred sales charge (39.40) 0.00
--------- ---------
Equals Ending Redeemable
Value at $1000
Investment (ERV) $946.60 $986.00
--------- ---------
Divided by $1,000 (P) 0.9466 0.9860
Subtract 1 -0.0534 -0.0140
Expressed as a percentage
equals the Aggregate
Total Return for the
Period (T) -5.34%
==========
Expressed as a percentage
equals the Aggregate
Total Return for the
Period -1.40%
==========
ERV divided by P 0.9466
Raise to the power of 1.4613
Equals 0.9229
</TABLE>

<PAGE> 2
EXHIBIT 16(c)

Fundamental Growth-Class C (Formerly Class B)
12/24/92 - 8/31/93

<TABLE>
<CAPTION>
Since
Inception Since
Avg. Annual Inception
Return Total Return*
----------- ------------
<S> <C> <C>
Subtract 1 -0.0771

Expressed as a percentage
equals the Average
Annualized Total Return -7.71%
========
</TABLE>

- ---------
*Does not include sales
charge for the Period.

<PAGE> 1
EXHIBIT 16(d)

Fundamental Growth-Class D (Formerly Class A)
12/24/92 - 8/31/93

<TABLE>
<CAPTION>
Since
Inception Since
Avg. Annual Inception
Return Total Return*
------ ------------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00

Divided by Initial Maximum
Offering Price 10.70
---------

Divided by Net Asset Value 10.00
---------
Equals Shares Purchased 93.46 100.00

Plus Shares Acquired
through Dividend
Reinvestment 0.00 0.00
--------- ---------
Equals Shares Held
at 8/31/93 93.46 100.00

Multiplied by Net Asset
Value at 8/13/93 9.91 9.91
--------- ---------
Equals Ending Redeemable
Value at $1000
Investment (ERV) at
8/31/93 $ 926.60 991.00

Divided by $1000 (P) 0.9266 0.9910

Subtract 1 -0.0734 -0.0090

Expressed as a percentage
equals the Aggregate
Total Return for the
Period (T) -7.34%
==========

Expressed as a percentage
equals the Aggregate
Total Return for the
Period -0.90%
==========

ERV divided by P 0.9266

Raise to the power of 1.4607

Equals 0.8946

Subtract 1 -0.1054

Expressed as a percentage
equals the Average
Annualized Total Return -10.54%
==========
</TABLE>

- ------------
*Does not include sales
charge for the Period.

<PAGE> 1
EXHIBIT 11

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" and "General Information - Independent Auditors" and to the use of
our report dated September 29, 1995, in this Registration Statement on Form
N-1A under the Securities Act of 1933 (File No. 33-47875) and under the
Investment Company Act of 1940 (File No. 811-6669) of Merrill Lynch
Fundamental Growth Fund, Inc.

ERNST & YOUNG LLP

Princeton, New Jersey
December 19, 1995

<PAGE> 1
EXHIBIT 16(a)

FUNDAMENTAL GROWTH FUND--CLASS A
10/21/94 - 8/31/95

<TABLE>
<CAPTION>
SINCE SINCE
INCEPTION INCEPTION
AVERAGE ANNUAL TOTAL
TOTAL RETURN RETURN*
-------------- ---------
<S> <C> <C>
Initial Investment................ $1,000.00 $1,000.00

Divided by Initial Maximum
Offering Price.................. 10.54
---------
Divided by Net Asset Value........ 9.99
---------
Equals Shares Purchased........... 94.845 100.100

Plus Shares Acquired through
Dividend Reinvestment........... 3.112 3.285
--------- ---------

Equals Shares Held at 8/31/95..... 97.958 103.385

Multiplied by Net Asset Value
at 8/31/95...................... 11.66 11.66
---------- ---------

Equals Ending Redeemable Value at
$1000 Investment (ERV)
at 8/31/95..................... 1,142.19 1,205.47

Divided by $1,000 (P)............. 1.1422 1.2055

Subtract 1........................ 0.1422 0.2055

Expressed as a percentage equals
the Aggregate Total Return for
the Period (T).................. 14.22%
==========

Expressed as a percentage equals
the Aggregate Total Return for
the Period...................... 20.55%
=========
ERV divided by P.................. 1.1422

Raise to the power of............. 1.1624

Equals............................ 1.1671

Subtract 1........................ 0.1671

Expressed as a percentage equals
the Average Annualized Total
Return 16.71%
========

</TABLE>
* Does not include sales charge for the period.

<PAGE> 1
EXHIBIT 16(b)

FUNDAMENTAL GROWTH FUND - CLASS B
10/21/94 - 8/31/95

<TABLE>
<CAPTION>
SINCE SINCE
INCEPTION INCEPTION
AVERAGE ANNUAL TOTAL
TOTAL RETURN RETURN*
-------------- ---------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00

Divided by Net Asset Value 9.85 9.85
--------- ---------
Equals Shares Purchased 101.523 101.523

Plus Shares Acquired through
Dividend Reinvestment 3.386 3.386
--------- ---------
Equals Shares Held at 8/31/95 104.909 104.909

Multiplied by Net Asset Value at 8/31/95 11.40 11.40
--------- ---------
Equals Ending Value before deduction for
contingent deferred sales charge 1,195.96 1,195.96

Less deferred sales charge (40.00) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 8/31/95 1,155.96 1,195.96
--------- ---------
Divided by $1,000 (P) 1.1560 1.1960

Subtract 1 0.1560 0.1960

Expressed as a percentage equals the
Aggregate Total Return for the Period (T) 15.60%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period 19.60%
=========

ERV divided by P 1.1560

Raise to the power of 1.1624

Equals 1.1835

Subtract 1 0.1835

Expressed as a percentage equals the
Average Annualized Total Return 18.35%
=========
</TABLE>

* Does not include sales charge for the period.

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000887509
<NAME> MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131,194,975
<INVESTMENTS-AT-VALUE> 146,134,603
<RECEIVABLES> 5,451,558
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 112,665
<TOTAL-ASSETS> 151,698,826
<PAYABLE-FOR-SECURITIES> 8,245,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 966,404
<TOTAL-LIABILITIES> 9,212,126
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,825,324
<SHARES-COMMON-STOCK> 1,825,560
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (647,006)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,368,754
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,939,628
<NET-ASSETS> 21,287,507
<DIVIDEND-INCOME> 863,232
<INTEREST-INCOME> 468,462
<OTHER-INCOME> 0
<EXPENSES-NET> 1,978,700
<NET-INVESTMENT-INCOME> (647,006)
<REALIZED-GAINS-CURRENT> 2,630,765
<APPREC-INCREASE-CURRENT> 15,920,146
<NET-CHANGE-FROM-OPS> 17,903,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 81,095
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,009,549
<NUMBER-OF-SHARES-REDEEMED> 192,250
<SHARES-REINVESTED> 8,261
<NET-CHANGE-IN-ASSETS> 86,600,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,674,743
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 560,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,978,700
<AVERAGE-NET-ASSETS> 7,367,211
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.98
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.66
<EXPENSE-RATIO> 1.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000887509
<NAME> MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131,194,975
<INVESTMENTS-AT-VALUE> 146,134,603
<RECEIVABLES> 5,451,558
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 112,665
<TOTAL-ASSETS> 151,698,826
<PAYABLE-FOR-SECURITIES> 8,245,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 966,404
<TOTAL-LIABILITIES> 9,212,126
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,825,324
<SHARES-COMMON-STOCK> 5,593,805
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (647,006)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,368,754
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,939,628
<NET-ASSETS> 63,748,494
<DIVIDEND-INCOME> 863,232
<INTEREST-INCOME> 468,462
<OTHER-INCOME> 0
<EXPENSES-NET> 1,978,700
<NET-INVESTMENT-INCOME> (647,006)
<REALIZED-GAINS-CURRENT> 2,630,765
<APPREC-INCREASE-CURRENT> 15,920,146
<NET-CHANGE-FROM-OPS> 17,903,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 445,476
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,004,244
<NUMBER-OF-SHARES-REDEEMED> 2,457,052
<SHARES-REINVESTED> 46,613
<NET-CHANGE-IN-ASSETS> 86,600,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,674,743
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 560,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,978,700
<AVERAGE-NET-ASSETS> 34,291,813
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 1.95
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 2.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000887509
<NAME> MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131,194,975
<INVESTMENTS-AT-VALUE> 146,134,603
<RECEIVABLES> 5,451,558
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 112,665
<TOTAL-ASSETS> 151,698,826
<PAYABLE-FOR-SECURITIES> 8,245,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 966,404
<TOTAL-LIABILITIES> 9,212,126
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,825,324
<SHARES-COMMON-STOCK> 3,880,283
<SHARES-COMMON-PRIOR> 4,746,084
<ACCUMULATED-NII-CURRENT> (647,006)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,368,754
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,939,628
<NET-ASSETS> 44,220,150
<DIVIDEND-INCOME> 863,232
<INTEREST-INCOME> 468,462
<OTHER-INCOME> 0
<EXPENSES-NET> 1,978,700
<NET-INVESTMENT-INCOME> (647,006)
<REALIZED-GAINS-CURRENT> 2,630,765
<APPREC-INCREASE-CURRENT> 15,920,146
<NET-CHANGE-FROM-OPS> 17,903,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,196,817
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,740,277
<NUMBER-OF-SHARES-REDEEMED> 3,721,745
<SHARES-REINVESTED> 115,667
<NET-CHANGE-IN-ASSETS> 86,600,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,674,743
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 560,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,978,700
<AVERAGE-NET-ASSETS> 40,948,797
<PER-SHARE-NAV-BEGIN> 9.96
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 1.84
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.40
<EXPENSE-RATIO> 2.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000887509
<NAME> MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 131,194,975
<INVESTMENTS-AT-VALUE> 146,134,603
<RECEIVABLES> 5,451,558
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 112,665
<TOTAL-ASSETS> 151,698,826
<PAYABLE-FOR-SECURITIES> 8,245,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 966,404
<TOTAL-LIABILITIES> 9,212,126
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125,825,324
<SHARES-COMMON-STOCK> 1,136,577
<SHARES-COMMON-PRIOR> 854,827
<ACCUMULATED-NII-CURRENT> (647,006)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,368,754
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,939,628
<NET-ASSETS> 13,230,549
<DIVIDEND-INCOME> 863,232
<INTEREST-INCOME> 468,462
<OTHER-INCOME> 0
<EXPENSES-NET> 1,978,700
<NET-INVESTMENT-INCOME> (647,006)
<REALIZED-GAINS-CURRENT> 2,630,765
<APPREC-INCREASE-CURRENT> 15,920,146
<NET-CHANGE-FROM-OPS> 17,903,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 213,366
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 707,881
<NUMBER-OF-SHARES-REDEEMED> 445,171
<SHARES-REINVESTED> 19,040
<NET-CHANGE-IN-ASSETS> 86,600,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,674,743
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 560,426
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,978,700
<AVERAGE-NET-ASSETS> 9,432,429
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.87
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.64
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>