Prospectus

<R>May 28, 2003</R>

Merrill Lynch Mid Cap Value Fund

This Prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

Table of Contents     [ICON]

		PAGE
[ICON]	KEY FACTS
	Merrill Lynch Mid Cap Value Fund at a Glance	3
	Risk/Return Bar Chart	5
	Fees and Expenses	7
[ICON]	DETAILS ABOUT THE FUND
	How the Fund Invests	9
	Investment Risks	11
[ICON]	YOUR ACCOUNT
	Merrill Lynch Select Pricing SM System	18
	How to Buy, Sell, Transfer and Exchange Shares	24
	Participation in Fee-Based Programs	28
[ICON]	MANAGEMENT OF THE FUND
	Merrill Lynch Investment Managers	31
	Financial Highlights	32
[ICON]	FOR MORE INFORMATION
	Shareholder Reports	Back Cover
	Statement of Additional Information	Back Cover

 

MERRILL LYNCH MID CAP VALUE FUND

Key Facts     [ICON]

In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the highlighted terms in this prospectus in the sidebar.

<R> Equity Securities — common stock, preferred stock, securities convertible into common stock or securities or other instruments whose price is linked to the value of common stock.

Mid Cap Companies — mid cap companies are those whose market capitalization is similar to the market capitalization of companies in the Russell Mid Cap ® Index or the S&P Mid Cap ® 400 Index at the time of the Fund’s investment. Companies whose capitalization no longer meets this definition after purchase continue to be considered mid cap companies for purposes of the Fund’s 80% investment policy. As of March 31, 2003, the Russell Mid Cap ® included companies with capitalizations up to $10.8 billion and the S&P Mid Cap ® included companies with capitalizations up to $8.26 billion. The market capitalizations of the companies in each index change with market conditions and the composition of the index.

Common Stock — securities representing shares of ownership of a corporation.</R>

MERRILL LYNCH MID CAP VALUE FUND AT A GLANCE

What is the Fund’s investment objective?

The investment objective of the Fund is to seek capital appreciation and, secondarily, income, by investing in securities, primarily in equity securities that Fund management believes are undervalued and therefore represent an investment value.

What are the Fund’s main investment strategies?

<R>In seeking to meet its objective, the Fund normally invests at least 80% of its assets in equity securities of mid cap companies . The Fund purchases securities that Fund management believes have long term potential to grow in size or to become more profitable or that the stock market may value more highly in the future. Fund management places particular emphasis on stocks trading at the low end of one or more historical valuation measures, such as price/book value, price/sales or price/earnings ratios. Such companies also may have particular qualities that affect the outlook for such companies, including an attractive market niche. The Fund purchases primarily common stock of U.S. companies in trying to meet its objective. The Fund may also invest in securities issued by foreign companies and in securities denominated in currencies other than the U.S. dollar.</R>

What are the main risks of investing in the Fund?

<R>The Fund cannot guarantee that it will achieve its objective.

As with any fund, the value of the Fund’s investments — and therefore the value of Fund shares — may fluctuate. These changes may occur because the stock market in which the Fund invests is rising or falling. Also, Fund management may select securities that underperform the stock market, the relevant indices or other funds with similar investment objectives and investment strategies. If the value of the Fund’s investments goes down, you may lose money.</R>

The Fund will invest primarily in mid cap companies which may be less liquid and more volatile than larger capitalization companies.

<R>The Fund may invest in foreign securities. Foreign investing involves special risks - including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. Foreign securities may also be less liquid and harder to value than U.S. securities.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

3

[ICON]   Key Facts

Who should invest?

<R>Investors should consider their own investment goals, time horizon, and risk tolerance before investing in the Fund. An investment in the Fund may not be appropriate for all investors and is not intended to be a complete investment program.</R>

The Fund may be an appropriate investment for you if you:<R>

•

Are investing to achieve long term goals

•

Want a professionally managed and diversified portfolio of equity securities issued by mid cap companies</R>

•

Are willing to accept the risk that the value of your investment may decline in order to seek capital appreciation

•

Are not looking for a significant amount of current income

 

4

MERRILL LYNCH MID CAP VALUE FUND

RISK/RETURN BAR CHART

<R>The bar chart and table shown below provide an indication of the risks of investing in the Fund. The bar chart shows changes in the Fund’s performance for Class B shares for each complete calendar year since the Fund’s inception. Sales charges are not reflected in the bar chart. If these amounts were reflected, returns would be less than those shown. The table compares the average annual total returns of each class of the Fund’s shares with the Standard & Poor’s (S&P) Mid Cap 400 Index, a broad measure of market performance. How the Fund performed in the past (before and after taxes) is not necessarily an indication of how the Fund will perform in the future.</R>

<R>During the period shown in the bar chart, the highest return for a quarter was 23.68% (quarter ended December 31, 2001) and the lowest return for a quarter was -19.57% (quarter ended September 30, 2002). The year-to-date return as of March 31, 2003 was -4.55%.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

5

[ICON]   Key Facts

<R>After-tax returns are shown only for Class B shares and will vary for other classes. The after-tax returns are calculated using the historical highest marginal Federal individual income tax rates in effect during the periods measured and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts or through tax advantaged education savings accounts.

Average Annual Total Returns (for the periods ended December 31, 2002)‡		One Year		Five Years		Life of Fund†
Merrill Lynch Mid Cap Value Fund	Class A#
Return Before Taxes*		-28.87	%	3.58	%	9.38	%
Merrill Lynch Mid Cap Value Fund	Class B
Return Before Taxes*		-28.44	%	3.52	%	9.21	%
Return After Taxes on Distributions*		-29.09	%	2.00	%	7.30	%
Return After Taxes on Distributions and
Sale of Fund Shares*		-17.42	%	2.52	%	7.02	%
Merrill Lynch Mid Cap Value Fund	Class C
Return Before Taxes*		-26.23	%	3.82	%	9.20	%
Merrill Lynch Mid Cap Value Fund	Class I#
Return Before Taxes*		-28.69	%	3.85	%	9.65	%
S&P MidCap 400 ® Index**		-14.51	%	6.41	%	13.24	%††

‡

The inception date for Class R shares was February 4, 2003; therefore, information with respect to Class R shares is not included.

#

Prior to April 14, 2003, Class A shares were designated Class D and Class I shares were designated Class A.</R>

*

Includes all applicable fees and sales charges.

**

<R>The S&P MidCap 400 ® Index is a widely recognized, unmanaged index of common stock prices in the middle capitalization range. The index is unmanaged and does not include fund expenses. Performance of the index does not include the deduction of fees, expenses or taxes. Past performance is not predictive of future performance.</R>

†

Inception date February 1, 1995.

††

<R> Since February 28, 1995.</R>

 

6

MERRILL LYNCH MID CAP VALUE FUND

UNDERSTANDING EXPENSES

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

Expenses paid directly by the shareholder:

Shareholder Fees — these fees include sales charges that you may pay when you buy or sell shares of the Fund.

Expenses paid indirectly by the shareholder:

Annual Fund Operating Expenses — expenses that cover the costs of operating the Fund.

Management Fee — a fee paid to the Investment Adviser for managing the Fund.

Distribution Fees — fees used to support the Fund’s marketing and distribution efforts, such as compensating Financial Advisors and other financial intermediaries, advertising and promotion.

Service (Account Maintenance) Fees — fees used to compensate securities dealers and other financial intermediaries for account maintenance activities.

FEES AND EXPENSES

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

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

<R>
Shareholder Fees (Fees paid directly from    your investment)(a):	Class A*		Class B(b)		Class C		Class I*		Class R
Maximum Sales Charge (Load) imposed on   purchases (as a percentage of offering price)	5.25%	(c)	None		None		5.25%	(c)	None
Maximum Deferred Sales Charge (Load)    (as a percentage of original purchase price or     redemption proceeds, whichever is lower)	None	(d)	4.0%	(c)	1.0%	(c)	None	(d)	None
Maximum Sales Charge (Load) imposed on   Dividend Reinvestments	None		None		None		None		None
Redemption Fee	None		None		None		None		None
Exchange Fee	None		None		None		None		None
Annual Fund Operating Expenses (expenses  that are deducted from Fund assets):
Management Fee	0.65%		0.65%		0.65%		0.65%		0.65%
Distribution and/or Service (12b-1) Fees (e)	0.25%		1.00%		1.00%		None		0.50%
Other Expenses (including transfer agency   fees)(f)	0.47%		0.52%		0.54%		0.47%		0.47%
Total Annual Fund Operating Expenses	1.37%		2.17%		2.19%		1.12%		1.62%

*

Prior to April 14, 2003, Class A shares were designated Class D and Class I shares were designated Class A.

(a)

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

(b)

Class B shares automatically convert to Class A shares approximately eight years after you buy them and will no longer be subject to distribution fees.

(c)

Some investors may qualify for reductions in or waivers of the sales charge (load).</R>

(d)

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

(e)

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

(f)

Financial Data Services, Inc., an affiliate of the Investment Adviser, provides transfer agency services to the Fund. The Fund pays a fee for these services. The Investment Adviser or its affiliates also provide certain accounting services to the Fund and the Fund reimburses the Investment Adviser or its affiliates for such services.

 

MERRILL LYNCH MID CAP VALUE FUND

7

[ICON]   Key Facts

Examples:

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

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

EXPENSES IF YOU DID REDEEM YOUR SHARES:

<R>	1 Year	3 Years	5 Years	10 Years
Class A*	$657	$936	$1,236	$2,085
Class B	$620	$979	$1,364	$2,313	**
Class C	$322	$685	$1,175	$2,524
Class I*	$633	$862	$1,110	$1,817
Class R	$165	$511	$   881	$1,922

</R>

EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

<R>	1 Year	3 Years	5 Years	10 Years
Class A*	$657	$936	$1,236	$2,085
Class B	$220	$679	$1,164	$2,313	**
Class C	$222	$685	$1,175	$2,524
Class I*	$633	$862	$1,110	$1,817
Class R	$165	$511	$   881	$1,922

*

Prior to April 14, 2003, Class A shares were designated Class D and Class I shares were designated Class A.

**

Assumes conversion to Class A shares approximately eight years after purchase. See note (b) to the Fees and Expenses table on the previous page.</R>

 

8

MERRILL LYNCH MID CAP VALUE FUND

Details About the Fund     [ICON]

ABOUT THE PORTFOLIO MANAGER

<R>R. Elise Baum is a Vice President and the Portfolio Manager of the Fund. Ms. Baum was Director of Merrill Lynch Investment Managers from 1997 to 1999, First Vice President from 1999 to 2000, and Managing Director since 2000. Ms. Baum has been the Fund’s portfolio manager since 2000.</R>

ABOUT THE INVESTMENT ADVISER

The Fund is managed by Merrill Lynch Investment Managers.

HOW THE FUND INVESTS

<R>The Fund’s objective is to seek capital appreciation and, secondarily, income by investing in securities, primarily in equity securities that Fund management believes are undervalued and therefore represent an investment value.

Outlined below are the main strategies the Fund uses in seeking to achieve its investment objective.

The Fund tries to achieve its objective by investing primarily in a diversified portfolio of equity securities. Under normal circumstances, the Fund will invest at least 80% of its assets in equity securities of mid cap companies. This policy is a non-fundamental investment policy of the Fund and may not be changed without 60 days prior notice to shareholders.

In selecting securities, Fund management emphasizes common stock and, to a lesser extent, securities convertible into common stock, that it believes are undervalued. A company’s stock is believed to be undervalued when the stock’s current price is less than what Fund management believes a share of the company is worth. A company’s worth can be assessed by several factors, such as financial resources, value of tangible and intangible assets, sales and earnings growth rates, return on capital, product development, quality of management, and overall business prospects. A company’s stock may become undervalued when most investors fail to perceive the company’s strengths in one or more of these areas. Fund management may also determine that a company is undervalued if its stock price is down because of temporary factors from which Fund management believes the company will recover.</R>

Fund management seeks to invest in mid cap companies that:

•

are trading at the low end of their historical valuation ranges based on one or more measures, such as price/book value or price/earnings or price/sales ratios;

•

have strong management;

•

have particular qualities that affect the outlook for that company, such as strong research capabilities, new or unusual products or occupation of an attractive market niche; or

•

have the potential to increase earnings over an extended period of time.

 

MERRILL LYNCH MID CAP VALUE FUND

9

[ICON]   Details About the Fund

Short sale — a transaction in which the Fund sells a security it does not own in anticipation of a decline in the market price of that security.

<R>Fund management also considers other factors, including the level of competition in an industry or the extent of government regulation. The Fund may also purchase the stock of a company that has suffered a recent earnings decline if Fund management believes that the decline is temporary or cyclical and will not significantly affect the company’s long term growth prospects.</R>

The Fund may sell a security if, for example, the stock price increases to the high end of its historical valuation range based on one or more measures, such as price/book value, price/sales or price/earnings ratios. Fund management may also sell a security if it determines that the issuer no longer meets the criteria it has established for the purchase of such securities, or if Fund management thinks there is a more attractive investment opportunity elsewhere.

The Fund may also invest in preferred stocks and non-convertible debt securities. The Fund may invest up to 30% of its total assets in the securities of foreign companies.

<R> In addition to the main strategies discussed above, the Fund may use certain other investment strategies.

Under normal circumstances, the Fund may invest up to 20% of its total assets in equity securities of large cap or small cap companies, including emerging growth companies.</R>

The Fund may use derivatives to increase returns or to hedge the portfolio against interest rate and currency risks. The derivatives that the Fund may use include indexed and inverse securities, options, futures and forward foreign exchange transactions.

As a temporary measure for defensive purposes, the Fund may invest without limit in short term investment grade debt securities, such as commercial paper or Treasury bill agreements. The Fund may also increase its investment in these securities when Fund management is unable to find enough attractive long term investments, to reduce exposure to long term investments when Fund management believes it is advisable to do so on a temporary basis, or to meet redemptions. Short term investments may, therefore, limit the potential for the Fund to achieve its investment objective.

<R>The Fund may also engage in short sales of securities, either as a hedge against potential declines in value of a portfolio security or to realize appreciation when a security that the Fund does not own declines in value.

The Fund may also lend its portfolio securities and invest uninvested cash balances in affiliated money market funds.</R>

 

10

MERRILL LYNCH MID CAP VALUE FUND

INVESTMENT RISKS

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

<R> Set forth below are the main risks of investing in the Fund: </R>

Market Risk and Selection Risk — Market risk is the risk that the equity markets will go down in value, including the possibility that the equity markets will go down sharply and unpredictably. Selection risk is the risk that the stocks that Fund management selects will underperform the stock market, the relevant indices or other funds with similar investment objectives and investment strategies.

Mid Cap Securities — The securities of mid cap companies generally trade in lower volumes and are generally subject to greater and less predictable price changes than the securities of larger capitalization companies.

<R> Value Investing Style Risk — The Fund follows a basic contrary opinion, value investment style. Historically, value stocks have performed best during periods of economic recovery. Therefore, the value investment style may over time go in and out of favor. At times when the value investing style is out of favor, the Fund may underperform other equity funds that use different investment styles.

Foreign Market Risk — Since the Fund may invest in foreign securities, it may offer the potential for more diversification than a fund that invests only in the United States. This is because securities traded on foreign markets have often (though not always) performed differently than securities traded in the United States. However, such investments involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. In particular, the Fund is subject to the risk that because there are generally fewer investors on foreign exchanges and a smaller number of securities traded each day, it may make it difficult for the Fund to buy and sell securities on those exchanges. In addition, prices of foreign securities may go up and down more than prices of securities traded in the United States.</R>

Foreign Economy Risk — The economies of certain foreign markets often do not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. Certain such economies may rely heavily on particular industries or foreign capital and are more

 

MERRILL LYNCH MID CAP VALUE FUND

11

[ICON]   Details About the Fund

vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers and other protectionist or retaliatory measures.

Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. In addition, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain industries. Any of these actions could severely affect security prices, impair the Fund’s ability to purchase or sell foreign securities or transfer the Fund’s assets or income back into the United States, or otherwise adversely affect the Fund’s operations.

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

Currency Risk — Securities in which the Fund invests may be denominated or quoted in currencies other than the U.S. dollar. Changes in foreign currency exchange rates affect the value of the Fund’s portfolio. Generally, when the U.S. dollar rises in value against a foreign currency, a security denomination in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. This risk, generally known as “currency risk,” means that a strong U.S. dollar will reduce returns for U.S. investors while a weak U.S. dollar will increase those returns.

<R> The Fund may also be subject to certain other risks associated with its investments and investment strategies, including: </R>

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

 

12

MERRILL LYNCH MID CAP VALUE FUND

Warrants — A warrant gives the Fund the right to buy a quantity of stock. The warrant specifies the amount of underlying stock, the purchase (or “exercise”) price, and the date the warrant expires. The Fund has no obligation to exercise the warrant and buy the stock. A warrant has value only if the Fund can exercise it or sell it before it expires. If the price of the underlying stock does not rise above the exercise price before the warrant expires, the warrant generally expires without any value and the Fund loses any amount it paid for the warrant. Thus, investments in warrants may involve substantially more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock.

Small Cap and Emerging Growth Securities — Small cap or emerging growth companies may have limited product lines or markets. They may be less financially secure than larger, more established companies. They may depend on a small number of key personnel. If a product fails, or if management changes, or there are other adverse developments, the Fund’s investment in a small cap or emerging growth company may lose substantial value.

The securities of small cap and emerging growth companies generally trade in lower volumes and are subject to greater and less predictable price changes than securities of larger, more established companies. Investing in smaller and emerging growth companies requires a long term view.

Depositary Receipts — The Fund may invest in securities of foreign issuers in the form of Depositary Receipts. American Depositary Receipts are receipts typically issued by an American bank or trust company that show evidence of underlying securities issued by a foreign corporation. European Depositary Receipts evidence a similar ownership arrangement. The Fund may also invest in unsponsored Depositary Receipts. The issuers of such unsponsored Depositary Receipts are not obligated to disclose material information in the United States. Therefore, there may be less information available regarding such issuers and there may not be a correlation between such information and the market value of Depositary Receipts.

<R> Short Sales — When the Fund makes a short sale, it borrows the security sold short and delivers it to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Fund may have to pay a fee to borrow particular securities and is often obligated to turn over any payments received on such borrowed securities to the lender of the securities.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

13

[ICON]   Details About the Fund

<R>The Fund’s obligation to replace the borrowed security will be secured by collateral deposited with the broker-dealer, usually cash, U. S. Government securities or other liquid securities similar to those borrowed. With respect to uncovered short positions, the Fund will also be required to deposit similar collateral with its custodian to the extent, if any, necessary so that the value of both collateral deposits in the aggregate is at all times equal to at least 100% of the current market value of the security sold short. Depending on arrangements made with the broker-dealer from which it borrowed the security, regarding payment over of any payments received by the Fund on such security, the Fund may not receive any payments (including interest) on its collateral deposited with such broker-dealer.

If the price of a security increases between the time of a short sale and the time the Fund must deliver the security, the Fund will incur a loss. Although the Fund’s gain in a short sale is limited to the price at which it sold the security short, its potential loss is limited only by the maximum price the security may attain, less the price at which the security was sold. The Fund may also pay transaction costs and borrowing fees in connection with short sales.

Because making short sales in securities that it does not own exposes the Fund to risks associated with those securities, such short sales involve speculative exposure risk. As a result, if the Fund makes short sales in securities that increase in value, it will likely underperform similar mutual funds that do not make short sales in securities they do not own. The Fund will incur a loss as a result of a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those dates. There can be no assurance that the Fund will be able to close out a short sale position at any particular time or at an acceptable price. Although the Fund’s gain is limited to the amount at which it sold a security short, its potential loss is limited only by the maximum attainable price of the security, less the price at which the security was sold.

The Fund will not make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 5% of the value of its total assets.</R>

Derivatives — The Fund may use derivative instruments including futures, forwards, options, indexed and inverse securities. Derivatives allow the Fund to increase or decrease its risk exposure more quickly and efficiently than other types of instruments.

 

14

MERRILL LYNCH MID CAP VALUE FUND

Derivatives are volatile and involve significant risks, including:

Credit risk — the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Fund.

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

Leverage risk — the risk associated with certain types of investments or trading strategies (such as borrowing money to increase the amount of the investments) that relatively small market movements may result in large changes in the value of an investment. Certain investments or trading strategies that involve leverage can result in losses that greatly exceed the amount originally invested.

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

<R>The Fund may use derivatives for hedging purposes, including anticipatory hedges. Hedging is a strategy in which the Fund uses a derivative to offset the risk associated with other Fund holdings. While hedging can reduce losses, it can also reduce or eliminate gains or cause losses if the market moves in a different manner than anticipated by the Fund or if the cost of the derivative outweighs the benefit of the hedge. Hedging also involves the risk that changes in the value of the derivative will not match those of the holdings being hedged as expected by the Fund, in which case any losses on the holdings being hedged may not be reduced and may be increased. There can be no assurance that the Fund’s hedging strategy will reduce risk or that hedging transactions will be either available or cost effective. The Fund is not required to use hedging and may choose not to do so.

Indexed and Inverse Securities — The Fund may invest in securities whose potential returns are directly related to changes in an underlying index, known as indexed securities. The return on indexed securities will rise when the underlying index rises and fall when the index falls. The Fund may also invest in securities whose return is inversely related to changes in an index (“inverse securities”). In general, the return on inverse securities will decrease when the underlying index goes up and increase when that index</R>

 

MERRILL LYNCH MID CAP VALUE FUND

15

[ICON]   Details About the Fund

<R>goes down. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index.</R>

Covered Call Options — The Fund can sell covered call options which are options that give the purchaser the right to require the Fund to sell a security owned by the Fund to the purchaser at a specified price within a limited time period. The Fund will receive a premium (an upfront payment) for selling a covered call option, and if the option expires unexercised because the price of the underlying security has gone down the premium received by the Fund will partially offset any losses on the underlying security. By writing a covered call option, however, the Fund limits its ability to sell the underlying security and gives up the opportunity to profit from any increase in the value of the underlying security beyond the sale price specified in the option.

Repurchase Agreements — The Fund may enter into repurchase agreements. Under a repurchase agreement, the seller agrees to repurchase a security at a mutually agreed upon time and price. If the other party to a repurchase agreement defaults on its obligation, the Fund may suffer delays and incur costs or even lose money in exercising its rights under the agreement.

When Issued Securities, Delayed Delivery Securities and Forward Commitments — When issued and delayed delivery securities and forward commitments involve the risk that a security the Fund buys will lose value prior to its delivery to the Fund. There also is the risk that the security will not be issued or that the other party will not meet its obligation. If this occurs, the Fund both loses the investment opportunity for the assets it has set aside to pay for the security and any gain in the security’s price.

<R> Borrowing and Leverage Risk — The Fund may borrow for temporary emergency purposes including to meet redemptions. Borrowing may exaggerate changes in the net asset value of Fund shares and in the return on the Fund’s portfolio. Borrowing will cost the Fund interest expense and other fees. The costs of borrowing may reduce the Fund’s return. Certain securities that the Fund buys may create leverage including, for example, derivatives, when issued securities, forward commitments and options.</R>

 

16

MERRILL LYNCH MID CAP VALUE FUND

Illiquid Securities — The Fund may invest up to 15% of its net assets in illiquid securities that it cannot easily sell within seven days at current value or that have contractual or legal restrictions on resale. If the Fund buys illiquid securities it may be unable to quickly resell them or may be able to sell them only at a price below current value.

Restricted Securities — Restricted securities have contractual or legal restrictions on their resale. They include private placement securities that the Fund buys directly from the issuer. Private placement and other restricted securities may not be listed on an exchange and may have no active trading market.

Restricted securities may be illiquid. The Fund may be unable to sell them on short notice or may be able to sell them only at a price below current value. The Fund may get only limited information about the issuer, so it may be less able to predict a loss. In addition, if Fund management receives material adverse nonpublic information about the issuer, the Fund will not be able to sell the securities.

Rule 144A Securities — Rule 144A securities are restricted securities that can be resold to qualified institutional buyers but not to the general public. Rule 144A securities may have an active trading market, but carry the risk that the active trading market may not continue.

<R> Securities Lending — The Fund may lend securities with a value up to 33 1 / 3 % of its total assets to financial institutions that provide cash or securities issued or guaranteed by the U.S. Government as collateral. Securities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, the Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences to the Fund.</R>

STATEMENT OF ADDITIONAL INFORMATION

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

 

MERRILL LYNCH MID CAP VALUE FUND

17

Your Account     [ICON]

MERRILL LYNCH SELECT PRICING SM SYSTEM

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

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

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

<R>If you select Class B, Class C or Class R shares, you will invest the full amount of your purchase price, but you will be subject to a distribution fee of 0.75% for Class B and Class C shares and 0.25% for Class R shares and an account maintenance fee of 0.25% for all three classes. Because these fees are paid out of a Fund’s assets on an ongoing basis, over time these fees increase the cost of your investment and may cost you more than paying other types of sales charges. In addition, you may be subject to a deferred sales charge when you sell Class B or Class C shares.</R>

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

 

18

MERRILL LYNCH MID CAP VALUE FUND

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

<R>		Class A		Class B		Class C		Class I		Class R
Availability		Generally available through Merrill Lynch. Limited availability through selected securities dealers and other financial intermediaries.		Generally available through Merrill Lynch. Limited availability through selected securities dealers and other financial intermediaries.		Generally available through Merrill Lynch. Limited availability through selected securities dealers and other financial intermediaries.		Limited to certain investors including: • Current Class I    shareholders • Certain    Retirement    Plans •  Participants in    certain Merrill    Lynch-    sponsored    programs •  Certain    affiliates of    Merrill Lynch,    selected    securities    dealers and    other financial    intermediaries.		Available only to certain retirement plans.
Initial Sales Charge?		Yes. Payable at time of purchase. Lower sales charges available for larger investments.		No. Entire purchase price is invested in shares of the Fund.		No. Entire purchase price is invested in shares of the Fund.		Yes. Payable at time of purchase. Lower sales charges available for larger investments.		No. Entire purchase price is invested in the shares of the Fund.
Deferred Sales Charge?		No. (May be charged for purchases over $1 million that are redeemed within one year.)		Yes. Payable if you redeem within six years of purchase.		Yes. Payable if you redeem within one year of purchase.		No. (May be charged for purchases over $1 million that are redeemed within one year.)		No.
Account Maintenance and Distribution Fees?		0.25% Account Maintenance Fee. No Distribution Fee.		0.25% Account Maintenance Fee. 0.75% Distribution Fee.		0.25% Account Maintenance Fee. 0.75% Distribution Fee.		No.		0.25% Account Maintenance Fee. 0.25% Distribution Fee
Conversion to Class A shares?		N/A		Yes, automatically after approximately eight years.		No.		No.		No.

</R>

 

MERRILL LYNCH MID CAP VALUE FUND

19

[ICON]   Your Account

<R> Right of Accumulation — permits you to pay the sales charge that would apply to the cost or value (whichever is higher) of all qualifying shares you own in the Merrill Lynch mutual funds that offer Select Pricing SM options.

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

Class A and Class I Shares — Initial Sales Charge Options

If you select Class A or Class I shares, you will pay a sales charge at the time of purchase as shown in the following table.</R>

Your Investment	As a % of Offering Price	As a % of Your Investment*	Dealer Compensation as a % of Offering Price
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%

*

Rounded to the nearest one-hundredth percent.

**

<R>If you invest $1,000,000 or more in Class A or Class I shares, you may not pay an initial sales charge. In that case, the Investment Adviser compensates the selling dealer or other financial intermediary from its own funds. If you redeem your shares within one year after purchase, you may be charged a deferred sales charge. This charge is 1.00% of the lesser of the original cost of the shares being redeemed or your redemption proceeds. A sales charge of 0.75% will be charged on purchases of $1,000,000 or more of Class A and Class I shares by certain employer-sponsored retirement or savings plans.

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

A reduced or waived sales charge on a purchase of Class A or Class I shares may apply for:</R>

•

Purchases under a Right of Accumulation or Letter of Intent

•

TMA SM Managed Trusts

•

Certain Merrill Lynch investment or central asset accounts

•

Certain employer-sponsored retirement or savings plans

•

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

 

20

MERRILL LYNCH MID CAP VALUE FUND

•

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

•

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

<R>Only certain investors are eligible to buy Class I shares. Your Merrill Lynch Financial Advisor can help you determine whether you are eligible to buy Class I shares or to participate in any of these programs.

If you decide to buy shares under the initial sales charge alternative and you are eligible to buy both Class A and Class I shares, you should buy Class I shares since Class A shares are subject to a 0.25% account maintenance fee, while Class I shares are not.

If you redeem Class I or Class A shares and within 30 days buy new shares of the same class, you will not pay a sales charge on the new purchase amount. The amount eligible for this “Reinstatement Privilege” may not exceed the amount of your redemption proceeds. To exercise the privilege, contact your Merrill Lynch Financial Advisor, selected securities dealer, other financial intermediary or contact the Fund’s Transfer Agent at 1-800-MER-FUND.</R>

Class B and Class C Shares — Deferred Sales Charge Options

If you select Class B or Class C shares, you do not pay an initial sales charge at the time of purchase. However, if you redeem your Class B shares within six years after purchase or Class C shares within one year after purchase, you may be required to pay a deferred sales charge. You will also pay distribution fees of 0.75% and account maintenance fees of 0.25% each year under distribution plans that the Fund has adopted under Rule 12b-1. Because these fees are paid out of the Fund’s assets on an ongoing basis, over time these fees increase the cost of your investment and may cost you more than paying other types of sales charges. The Distributor uses the money that it receives from the deferred sales charge and the distribution fees to cover the costs of marketing, advertising and compensating the Merrill Lynch Financial Advisor, selected securities dealer or other financial intermediary who assists you in your decision in purchasing Fund shares.

 

MERRILL LYNCH MID CAP VALUE FUND

21

[ICON]   Your Account

Class B Shares

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

	Years Since Purchase	Sales Charge*
	0 - 1	4.00%
	1 - 2	4.00%
	2 - 3	3.00%
	3 - 4	3.00%
	4 - 5	2.00%
	5 - 6	1.00%
	6 and thereafter	None

*

The percentage charge will apply to the lesser of the original cost of the shares being redeemed or the proceeds of your redemption. Shares acquired by dividend reinvestment are not subject to a deferred sales charge. For shares acquired before June 1, 2001, the four-year deferred sales charge in effect at that time will apply. Merrill Lynch funds may not all have identical deferred sales charge schedules. In the event of an exchange for the shares of another Merrill Lynch fund, the higher charge would apply.

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

•

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

•

<R>Redemption by certain eligible 401(a) and 401(k) plans, certain related accounts and certain retirement plan rollovers</R>

•

Redemption in connection with participation in certain fee-based programs of Merrill Lynch or other financial intermediaries that have agreements with the Distributor or its affiliates, or in connection with involuntary termination of an account in which Fund shares are held

•

Withdrawals resulting from shareholder death or disability as long as the waiver request is made within one year after death or disability or, if later, reasonably promptly following completion of probate

 

22

MERRILL LYNCH MID CAP VALUE FUND

 

•

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

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

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

Class C Shares

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

Class C shares do not offer a conversion privilege.

Class R Shares

<R>Class R Shares are available only to certain retirement plans. If you buy Class R shares, you will not pay either an initial sales charge or a contingent deferred sales charge. However, Class R shares are subject to a distribution fee of 0.25% and an account maintenance fee of 0.25%. Because these fees are paid out of the Fund’s assets on an ongoing basis, over time these fees</R>

 

MERRILL LYNCH MID CAP VALUE FUND

23

[ICON]   Your Account

<R>increase the cost of your investment and may cost you more than paying other types of sales charges. Class R shares do not offer a conversion privilege.</R>

HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES

<R>The chart on the following pages summarizes how to buy, sell, transfer and exchange shares through Merrill Lynch, a selected securities dealer, broker, investment adviser, service provider or other financial intermediary. You may also buy, sell, transfer and exchange shares through the Transfer Agent. To learn more about buying, selling, transferring or exchanging shares through the Transfer Agent, call 1-800-MER-FUND. Because the selection of a mutual fund involves many considerations, your Merrill Lynch Financial Advisor may help you with this decision.</R>

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

 

24

MERRILL LYNCH MID CAP VALUE FUND

 

If You Want To		Your Choices		Information Important for You to Know
Buy shares		First, select the share class appropriate for you		Please refer to the Merrill Lynch Select Pricing table on page 19. Be sure to read this Prospectus carefully.
		Next, determine the amount of your investment		The minimum initial investment for the Fund is $1,000 for all accounts except:   •  $250 for certain Merrill Lynch fee-based programs   •  $100 for retirement plans (The minimums for initial investments may be waived under certain circumstances.)
		Have your Merrill Lynch Financial Advisor, selected securities dealer or other financial intermediary submit your purchase order		The price of your shares is based on the next calculation of net asset value after your order is placed. Any purchase orders placed prior to the close of business on the New York Stock Exchange (generally, 4:00 p.m. Eastern time) will be priced at the net asset value determined that day. Certain financial intermediaries, however, may require submission of orders prior to that time. Purchase orders placed after that time will be priced at the net asset value determined on the next business day. The Fund may reject any order to buy shares and may suspend the sale of shares at any time. Selected securities dealers or other financial intermediaries, including Merrill Lynch, may charge a processing fee to confirm a purchase. Merrill Lynch currently charges a fee of $5.35.
		Or contact the Transfer Agent		To purchase shares directly, call the Transfer Agent at 1-800 MER-FUND and request a purchase application. Mail the completed purchase application to the Transfer Agent at the address on the inside back cover of this Prospectus.
Add to Your Investment		Purchase additional shares		The minimum investment for additional purchases is generally $50 except that retirement plans have a minimum additional purchase of $1 and certain programs, such as automatic investment plans, may have higher minimums. (The minimum for additional purchases may be waived under certain circumstances.)
		Acquire additional shares through the automatic dividend reinvestment plan		All dividends are automatically reinvested without a sales charge.
		Participate in the automatic investment plan		You may invest a specific amount on a periodic basis through certain Merrill Lynch investment or central asset accounts.

 

MERRILL LYNCH MID CAP VALUE FUND

25

[ICON]   Your Account

If You Want To		Your Choices		Information Important for You to Know
Transfer Shares To Another Securities Dealer or Other Financial Intermediary		Transfer to a participating securities dealer or other financial intermediary		You may transfer your Fund shares only to another securities dealer that has entered into an agreement with Merrill Lynch. Certain shareholder services may not be available for the transferred shares. You may only purchase additional shares of funds previously owned before the transfer. All future trading of these shares must be coordinated by the receiving firm.
		Transfer to a non-participating securities dealer or other financial intermediary		You must either:   •  Transfer your shares to an account with the Transfer      Agent; or   •  Sell your shares, paying any applicable deferred sales      charge.
Sell Your Shares		Have your Merrill Lynch Financial Advisor, selected securities dealer or other financial intermediary submit your sales order		The price of your shares is based on the next calculation of net asset value after your order is placed. For your redemption request to be priced at the net asset value on the day of your request, you must submit your request to your dealer or other financial intermediary prior to that day’s close of business on the New York Stock Exchange (generally 4:00 p.m. Eastern time). Certain financial intermediaries, however, may require submission of orders prior to that time. Any redemption request placed after that time will be priced at the net asset value at the close of business on the next business day. Securities dealers or other financial intermediaries, including Merrill Lynch, may charge a fee to process a redemption of shares. Merrill Lynch currently charges a fee of $5.35. No processing fee is charged if you redeem shares directly through the Transfer Agent. The Fund may reject an order to sell shares under certain circumstances.
		Sell through the Transfer Agent		You may sell shares held at the Transfer Agent by writing to the Transfer Agent at the address on the inside back cover of this Prospectus. All shareholders on the account must sign the letter. A signature guarantee generally will be required but may be waived in certain limited circumstances. You can obtain a signature guarantee from a bank, securities dealer, securities broker, credit union, savings association, national securities exchange and registered securities association. A notary public seal will not be acceptable. If you hold stock certificates, return the certificates with the letter. The Transfer Agent will normally mail redemption proceeds within seven days following receipt of a properly completed request. If you make a redemption request before the Fund has collected payment for the purchase of shares, the Fund or the Transfer Agent may delay mailing your proceeds. This delay usually will not exceed ten days. You may also sell shares held at the Transfer Agent by telephone request if the amount being sold is less than $50,000 and if certain other conditions are met. Contact the Transfer Agent at 1-800-MER-FUND for details.

 

26

MERRILL LYNCH MID CAP VALUE FUND

 

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

<R>The Fund reserves the right to reject any purchase order, including exchanges. Short-term or excessive trading into and out of the Fund, particularly in larger amounts, may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, the Fund may reject purchase orders, including exchanges, from market timers or investors that Fund management has determined are short-term or excessive or that will be disruptive to the Fund. For these purposes, Fund management may consider an investor’s trading history in the Fund or other Merrill Lynch funds, and accounts under common ownership or control.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

27

[ICON]   Your Account

Net Asset Value — the market value of the Fund’s total assets after deducting liabilities, divided by the number of shares outstanding.

HOW SHARES ARE PRICED

When you buy shares, you pay the net asset value , plus any applicable sales charge. This is the offering price. Shares are also redeemed at their net asset value, minus any applicable deferred sales charge. The Fund calculates its net asset value (generally by using market quotations) each day the New York Stock Exchange is open as of the close of business on the Exchange based on prices at the time of closing. The Exchange generally closes at 4:00 p.m. Eastern time. If events that are expected to materially affect the value of securities traded in other markets occur between the close of those markets and the close of business on the New York Stock Exchange, those securities may be valued at their fair value. The net asset value used in determining your share price is the next one calculated after your purchase or redemption order is placed. Foreign securities owned by the Fund may trade on weekends or other days when the Fund does not price its shares. As a result, the Fund’s net asset value may change on days when you will not be able to purchase or redeem Fund shares.

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

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

PARTICIPATION IN FEE-BASED PROGRAMS

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

 

28

MERRILL LYNCH MID CAP VALUE FUND

Dividends — ordinary income and capital gains paid to shareholders. Dividends may be reinvested in additional Fund shares as they are paid.

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

If you leave one of these programs, your shares may be redeemed or automatically exchanged into another class of Fund shares or into a money market fund. The class you receive may be the class you originally owned when you entered the program, or in certain cases, a different class. If the exchange is into Class B shares, the period before conversion to Class A shares may be modified. Any redemption or exchange will be at net asset value. However, if you participate in the program for less than a specified period, you may be charged a fee in accordance with the terms of the program.

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

DIVIDENDS AND TAXES

<R>The Fund will distribute net investment income and net realized capital gains, if any, at least annually. The Fund may also pay a special distribution at the end of the calendar year to comply with Federal tax requirements. If you would like to receive dividends in cash, contact your Merrill Lynch Financial Advisor, selected securities dealer, other financial intermediary or the Transfer Agent. Although this cannot be predicted with any certainty, the Fund anticipates that the majority of its dividends, if any, will consist of capital gains. Capital gains may be taxable to you at different rates, depending, in part, on how long the Fund held the assets sold.

You will pay tax on dividends from the Fund whether you receive them in cash or additional shares. If you redeem Fund shares or exchange them for shares of another fund, you generally will be treated as having sold your shares and any gain on the transaction may be subject to tax. Capital gain dividends are generally taxed at different rates from ordinary income dividends.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

29

[ICON]   Your Account

“BUYING A DIVIDEND”

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

If you are neither a lawful permanent resident nor a citizen of the U.S. or if you are a foreign entity, the Fund’s ordinary income dividends (which include distributions of the excess of net short term capital gains over net long term capital losses) will generally be subject to a 30% U.S. withholding tax, unless a lower treaty rate applies.

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

By law, your dividends and redemption proceeds will be subject to a withholding tax if you have not provided a taxpayer identification number or social security number or if the number you have provided is incorrect.

This section summarizes some of the consequences under current Federal tax law of an investment in the Fund. It is not a substitute for personal tax advice. Consult your personal tax adviser about the potential tax consequences of an investment in the Fund under all applicable tax laws.

<R> ELECTRONIC DELIVERY

The Fund is now offering electronic delivery of communications to its shareholders. In order to receive this service, you must register your account and provide us with e-mail information. To sign up for this service, simply access this website http://www.icsdelivery.com/live/ and follow the instructions. When you visit the site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time.</R>

 

30

MERRILL LYNCH MID CAP VALUE FUND

Management of the Fund     [ICON]

MERRILL LYNCH INVESTMENT MANAGERS

<R>Merrill Lynch Investment Managers, the Fund’s Investment Adviser, manages the Fund’s investments under the overall supervision of The Asset Program’s Board of Directors. The Investment Adviser has the responsibility for making all investment decisions for the Fund. The Investment Adviser has a sub-advisory agreement with Merrill Lynch Asset Management U.K. Limited, an affiliate, under which the Investment Adviser may pay a fee for services it receives. For the fiscal year ended January 31, 2003, the Investment Adviser received a fee at the annual rate of 0.65% of the Fund’s average daily net assets.

Merrill Lynch Investment Managers was organized as an investment adviser in 1976 and offers investment advisory services to more than 50 registered investment companies. Merrill Lynch Asset Management U.K. Limited was organized as an investment adviser in 1986 and acts as sub-adviser to more than 50 registered investment companies. Merrill Lynch Investment Managers and its affiliates had approximately $442 billion in investment company and other portfolio assets under management as of March 2003.</R>

 

MERRILL LYNCH MID CAP VALUE FUND

31

[ICON]   Management of the Fund

FINANCIAL HIGHLIGHTS

<R>The Financial Highlights table is intended to help you understand the Fund’s financial performance for the last five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends). The information has been audited by Deloitte & Touche LLP , whose report, along with the Fund’s financial statements, is included in the Fund’s Annual Report, which is available upon request. Since the inception date for Class R shares was February 4, 2003, information for Class R shares is not included.

	Class A*										Class B
Increase (Decrease) in   Net Asset Value:	For the Year Ended January 31,										For the Year Ended January 31,
	2003		2002		2001		2000		1999		2003		2002		2001		2000		1999
Per Share Operating Performance:
Net asset value, beginning of year	$17.04		$16.14		$14.05		$14.13		$13.94		$16.64		$15.86		$13.72		$13.92		$13.75
Investment income (loss) — net†	(.04	)	—	#	—	#	.11		.07		(.15	)	(.12	)	(.11	)	(.02	)	(.05	)
Realized and unrealized gain (loss) on    investments and foreign currency     transactions — net	(4.40	)	1.60		4.27		.22		1.04		(4.29	)	1.56		4.17		.22		1.03
Total from investment operations	(4.44	)	1.60		4.27		.33		1.11		(4.44	)	1.44		4.06		.20		.98
Less distributions from realized gain    on investments — net	(.31	)	(.70	)	(2.18	)	(.41	)	(.92	)	(.30	)	(.66	)	(1.92	)	(.40	)	(.81	)
Net asset value, end of year	$12.29		$17.04		$16.14		$14.05		$14.13		$11.90		$16.64		$15.86		$13.72		$13.92
Total Investment Return:**
Based on net asset value per share	(26.12	%)	10.31	%	33.66	%	2.35	%	8.19	%	(26.75	%)	9.45	%	32.50	%	1.45	%	7.32	%
Ratios to Average Net Assets:
Expenses	1.37	%	1.36	%	1.78	%	1.67	%	1.70	%	2.17	%	2.17	%	2.62	%	2.51	%	2.55	%
Investment income (loss) — net	(.26	%)	(.02	%)	.02	%	.73	%	.50	%	(1.05	%)	(.78	%)	(.80	%)	(.11	%)	(.35	%)
Supplemental Data:
Net assets, end of year (in thousands)	$31,504		$36,225		$7,757		$5,913		$6,236		$115,748		$162,316		$67,062		$59,736		$62,419
Portfolio turnover	73.90	%	98.94	%	153.48	%	52.89	%	40.10	%	73.90	%	98.94	%	153.48	%	52.89	%	40.10	%

*

Prior to April 14, 2003, Class A shares were designated Class D.

**

Total investment returns exclude the effects of sales charges.</R>

†

Based on average shares outstanding.

#

Amount is less than $.01 per share.

 

32

MERRILL LYNCH MID CAP VALUE FUND

FINANCIAL HIGHLIGHTS (concluded)

<R>	Class C										Class I*
Increase (Decrease) in   Net Asset Value:	For the Year Ended January 31,										For the Year Ended January 31,
	2003		2002		2001		2000		1999		2003		2002		2001		2000		1999
Per Share Operating Performance:
Net asset value, beginning of year	$16.61		$15.84		$13.70		$13.91		$13.75		$17.12		$16.20		$14.13		$14.18		$13.98
Investment income (loss) — net†	(.15	)	(.12	)	(.12	)	(.02	)	(.06	)	—	#	.03		—	#	.15		.11
Realized and unrealized gain (loss) on    investments and foreign currency    transactions — net	(4.27	)	1.55		4.18		.21		1.03		(4.42	)	1.62		4.33		.22		1.05
Total from investment operations	(4.42	)	1.43		4.06		.19		.97		(4.42	)	1.65		4.33		.37		1.16
Less distributions from realized gain    on investments — net	(.31	)	(.66	)	(1.92	)	(.40	)	(.81	)	(.32	)	(.73	)	(2.26	)	(.42	)	(.96	)
Net asset value, end of year	$11.88		$16.61		$15.84		$13.70		$13.91		$12.38		$17.12		$16.20		$14.13		$14.18
Total Investment Return:**
Based on net asset value per share	(26.73	%)	9.38	%	32.55	%	1.38	%	7.23	%	(25.92	%)	10.56	%	34.01	%	2.57	%	8.51	%
Ratios to Average Net Assets:
Expenses	2.19	%	2.19	%	2.65	%	2.55	%	2.58	%	1.12	%	1.10	%	1.47	%	1.41	%	1.45	%
Investment income (loss) — net	(1.07	%)	(.79	%)	(.84	%)	(.15	%)	(.39	%)	(.01	%)	.19	%	(.01	%)	.98	%	.75	%
Supplemental Data:
Net assets, end of year (in thousands)	$67,233		$80,227		$37,475		$32,543		$31,188		$59,125		$72,570		$3,770		$369		$359
Portfolio turnover	73.90	%	98.94	%	153.48	%	52.89	%	40.10	%	73.90	%	98.94	%	153.48	%	52.89	%	40.10	%

*

Prior to April 14, 2003, Class I shares were designated Class A.

**

Total investment returns exclude the effects of sales charges.</R>

†

Based on average shares outstanding.

#

Amount is less than $.01 per share.

 

MERRILL LYNCH MID CAP VALUE FUND

33

(This page intentionally left blank)

 

MERRILL LYNCH MID CAP VALUE FUND

 

[1]	POTENTIAL INVESTORS Open an account (two options).	[2]
MERRILL LYNCH FINANCIAL ADVISOR OR SECURITIES DEALER Advises shareholders on their Fund investments.		TRANSFER AGENT 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 Performs recordkeeping and reporting services.
	DISTRIBUTOR FAM Distributors, Inc. P.O. Box 9081 Princeton, New Jersey 08543-9081 Arranges for the sale of Fund shares.
COUNSEL Sidley Austin Brown & Wood LLP <R>787 Seventh Avenue New York, New York 10019-6018</R> Provides legal advice to the Fund.	THE FUND The Board of Directors oversees the Fund.	CUSTODIAN The Bank of New York <R>100 Church Street</R> New York, New York 10007 Holds the Fund’s assets for safekeeping.
INDEPENDENT AUDITORS Deloitte & Touche LLP <R>750 College Road East Princeton, New Jersey 08540 Audits the financial statements of the Fund. </R>	ACCOUNTING SERVICES PROVIDER State Street Bank and Trust Company 500 College Road East Princeton, New Jersey 08540 Provides certain accounting services to the Fund.	INVESTMENT ADVISER Merrill Lynch Investment Managers, L.P. ADMINISTRATIVE OFFICES 800 Scudders Mill Road Plainsboro, New Jersey 08536 MAILING ADDRESS P.O. Box 9011 Princeton, New Jersey 08543-9011 TELEPHONE NUMBER 1-800-MER-FUND Manages the Fund’s day-to-day activities. Merrill Lynch Asset Management U.K. Limited 33 King William Street London, EC4R 9AS, England Sub-Advisor to the Fund.

 

MERRILL LYNCH MID CAP VALUE FUND

[ICON]   For More Information

Shareholder Reports

<R>Additional information about the Fund’s investments will be available in the Fund’s Annual and Semi-Annual Reports. In the Fund’s Annual Report you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year. You may obtain these reports at no cost by calling 1-800-MER-FUND.</R>

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

Statement of Additional Information

<R>The Statement of Additional Information contains further information about the Fund. The portions of the Statement of Additional Information relating to the Fund are incorporated by reference into (legally considered part of) this Prospectus. The portions of the Statement of Additional Information that do not relate to the Fund are not incorporated by reference, are not part of this Prospectus, and should not be relied on by investors in the Fund. You may request a free copy by writing the Fund at Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289 or by calling 1-800-MER-FUND.

Information about the Fund (including the Statement of Additional Information) can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-202-942-8090 for information on the operation of the public reference room. This information is also available on the SEC’s Internet Site at http://www.sec.gov and copies may be obtained upon payment of a duplicating fee by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the Public Reference Section of the SEC, Washington, D.C. 20549-0102.</R>

You should rely only on the information contained in this Prospectus. No one is authorized to provide you with information that is different from the information contained in this Prospectus.

Investment Company Act file #811-7177. <R>Code # 19092-05-03</R> © Merrill Lynch Investment Managers, L.P.

Prospectus

<R> May 28, 2003 </R>

Merrill Lynch Mid Cap Value Fund

This Prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

www.mlim.ml.com

STATEMENT OF ADDITIONAL INFORMATION

M ERRILL L YNCH M ID C AP V ALUE F UND

P.O. Box 9011, Princeton, New Jersey 08543-9011 • Phone No. (609) 282-2800

This Statement of Additional Information of Merrill Lynch Mid Cap Value Fund (the “Fund”) is not a prospectus and should be read in conjunction with the Prospectus of the Fund, dated May 28, 2003, which has been filed with the Securities and Exchange Commission (the “Commission”) and can be obtained, without charge, by calling 1-800-MER-FUND or by writing to the Fund at the above address. The Fund’s Prospectus is incorporated by reference into this Statement of Additional Information, and Part I of this Statement of Additional Information and the portions of Part II of this Statement of Additional Information that relate to the Fund have been incorporated by reference into the Fund’s Prospectus. The portions of Part II of this Statement of Additional Information that do not relate to the Fund do not form a part of the Fund’s Statement of Additional Information, have not been incorporated by reference into the Fund’s Prospectus and should not be relied upon by investors in the Fund. The Fund’s audited financial statements are incorporated by reference into this Statement of Additional Information by reference to the Fund’s 2003 Annual Report. You may request a copy of the Annual Report at no charge by calling 1-800-637-3863 between 8:30 a.m. and 5:30 p.m. Eastern time on any business day.

M ERRILL L YNCH I NVESTMENT M ANAGERS , L.P. — I NVESTMENT A DVISER

F AM D ISTRIBUTORS , I NC . — D ISTRIBUTOR

The date of this Statement of Additional Information is May 28, 2003

Table Of Contents

Part I
Investment Objectives and Policies		I-1
Investment Restrictions		I-1
Information on Officers and Directors		I-3
Management and Advisory Arrangements		I-7
Information on Sales Charges and Distribution Related Expenses		I-9
Computation of Offering Price		I-10
Portfolio Transactions and Brokerage		I-11
Fund Performance		I-11
General Information		I-11
Financial Statements		I-12
Part II
Investment Risks and Considerations		II-1
Management and other Service Arrangements		II-27
Purchase of Shares		II-30
Redemption of Shares		II-38
Shareholder Services		II-39
Pricing of Shares		II-44
Portfolio Transactions and Brokerage		II-45
Dividends and Taxes		II-48
Performance Data		II-51
General Information		II-53
Appendix A		A-1

PART I: SPECIAL INFORMATION ABOUT MERRILL LYNCH MID CAP VALUE FUND

Part I of this Statement of Additional Information sets forth information about Merrill Lynch Mid Cap Value Fund (the “Fund”), a series of The Asset Program, Inc. (the “Program”). It includes information about the Program’s Board of Directors, the advisory services provided to and the management fees paid by the Fund, performance data for the Fund, and information about other fees paid by and services provided to the Fund. This Part I should be read in conjunction with the Fund’s Prospectus and those portions of Part II of this Statement of Additional Information that pertain to the Fund.

I. Investment Objectives and Policies

The Fund’s investment objective is to seek capital appreciation and, secondarily, income by investing in securities, primarily in equity securities, that Merrill Lynch Investment Managers, L.P. (“MLIM” or the “Investment Adviser”) believes are undervalued and therefore represent an investment value. The investment objective of the Fund is a fundamental policy of the Fund and may not be changed without the approval of a majority of the Fund’s outstanding voting securities as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Fund is classified as diversified under the Investment Company Act.

Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities of mid cap companies. For this purpose, net assets include any borrowings for investment purposes. The Fund purchases securities that Fund management believes have long term potential to grow in size or to become more profitable or that the stock market may value more highly in the future. Fund management places particular emphasis on stocks trading at the low end of one or more historical valuation measures, such as price/book value, price/sales or price/earnings ratios. Such companies also may have particular qualities that affect the outlook for such companies, including an attractive market niche. The Fund purchases primarily common stocks of U.S. companies in trying to meet its objective. The Fund may also invest in securities issued by foreign companies and in securities denominated in currencies other than the U.S. dollar. The Fund may invest up to 30% of its total assets, taken at market value at the time of acquisition, in the securities of foreign issuers. There can be no assurance that the objectives of the Fund will be achieved.

A company’s stock is believed to be undervalued when the stock’s current price is less than what Fund management believes a share of the company is worth. A company’s worth can be assessed by several factors, such as financial resources, value of tangible and intangible assets, sales and earnings growth rates, return on capital, product development, quality of management, and overall business prospects. A company’s stock may become undervalued when most investors fail to perceive the company’s strengths in one or more of these areas. Fund management may also determine that a company is undervalued if its stock price is down because of temporary factors from which Fund management believes the company will recover.

The Fund may also invest up to 20% of its assets in equity securities of large cap or small cap companies, including emerging growth companies when such companies are expected to provide a higher total return than other equity investments. Such emerging growth companies are characterized by rapid historical growth rates, above-average returns on equity or special investment value in terms of their products or services, research capabilities or other unique attributes. The Investment Adviser will seek to identify small and emerging growth companies that possess superior management, marketing ability, research and product development skills and sound balance sheets.

Investment emphasis is on equities, primarily common stock and, to a lesser extent, securities convertible into common stock. The Fund also may invest in preferred stock and non-convertible debt securities.

Temporary Investments. For temporary or defensive purposes or in anticipation of redemptions, the Fund is authorized to invest up to 100% of its assets in money market instruments (short term, high quality debt instruments), including obligations of or guaranteed by the U.S. Government or its instrumentalities or agencies, certificates of deposit, bankers’ acceptances and other bank obligations, commercial paper rated in the highest category by a nationally recognized rating agency or other fixed income securities deemed by the Investment Adviser to be consistent with the objectives of the Fund, or the Fund may hold its assets in cash.

II. Investment Restrictions

The Fund has adopted restrictions and policies relating to the investment of the Fund’s assets and its activities. Certain of the restrictions are fundamental policies of the Fund and may not be changed without the approval of the holders of a majority of the Fund’s outstanding voting securities (which for this purpose

 

I-1

and under the Investment Company Act, means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares). The Fund has also adopted certain non-fundamental investment restrictions, which may be changed by the Board of Directors without shareholder approval.

Set forth below are the Fund’s fundamental and non-fundamental investment restrictions. Unless otherwise provided, all references below to the assets of the Fund are in terms of current market value.

Under its fundamental investment restrictions, the Fund may not:

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

(2) 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).

(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 that 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 governmental obligations, commercial paper, pass-through instruments, certificates of deposit, bankers’ acceptances, repurchase agreements, purchase and sale contracts or any similar instruments shall not be deemed to be the making of a loan, and except further that the Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Fund’s Prospectus and 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 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 this Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.

Under its 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. As a matter of policy, however, the Fund will not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on Section 12 (d) (1) (F) or (G) (the “fund of funds” provisions) of the Investment Company Act, at any time its shares are owned by another investment company that is part of the same group of investment companies as the Program.

(b) Make short sales of securities or maintain a short position, except to the extent permitted under the Prospectus and Statement of Additional Information and by applicable law.

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

 

I-2

more than 15% of its net assets would be invested in such securities. This restriction shall not apply to securities that mature within seven days or securities that the Board of Directors of the Program have otherwise determined to be liquid pursuant to applicable law. Securities purchased in accordance with Rule 144A under the Securities Act (which are restricted securities that can be resold to qualified institutional buyers, but not to the general public) and determined to be liquid by the Board of Directors of the Program are not subject to the limitations set forth in this investment restriction.

(d) Notwithstanding fundamental investment restriction (7) above, borrow amounts in excess of 10% of its total assets, taken at market value, and then only from banks as a temporary measure for extraordinary or emergency purposes such as redemption of Fund shares. The Fund will not purchase securities while borrowings exceed 5% (taken at market value) of its total assets.

(e) Change its policy of investing, under normal circumstances, at least 80% of its assets, at the time of initial purchase, in equity securities of mid cap companies as defined in the Prospectus, unless the Fund provides shareholders with at least 60 days prior written notice of such change.

If a percentage restriction on the investment or use of assets set forth above is adhered to at the time a transaction is effected, later changes in percentages resulting from changing values will not be considered a violation.

For purposes of investment restriction (2) above, industry means any one or more of the industry sub-classifications used by one or more widely recognized market indices or ratings group indices, and/or as defined by Fund management.

III. Information on Directors and Officers

The Directors of the Program consist of eight individuals, seven of whom are not “interested persons” of the Program as defined in the Investment Company Act (the “non-interested Directors”). The Directors are responsible for the overall supervision of the operations of the Program and perform the various duties imposed on the directors of investment companies by the Investment Company Act.

Each non-interested Director is a member of the Program’s Audit Committee (the “Committee”). The principal responsibilities of the Committee are the appointment, compensation and oversight of the Fund’s independent accountants, including the resolution of disagreements regarding financial reporting between the Fund, management and such independent accountants. The Committee’s responsibilities include, without limitation, to (i) review with the independent accountants the arrangements for and scope of annual and special audits and any other services provided by the independent accountants to the Fund; (ii) discuss with the independent accountants certain matters relating to the Fund’s financial statements, including any adjustment to such financial statements recommended by such independent accountants or any other results of any audit; (iii) ensure that the independent accountants submit on a periodic basis a formal written statement with respect to their independence, discuss with the independent accountants any relationships or services disclosed in the statement that may impact the objectivity and independence of the Fund’s independent accountants and recommend that the Board take appropriate action in response thereto to satisfy itself of the independent accountants’ independence; and (iv) consider the comments of the independent accountants with respect to the quality and adequacy of the Fund’s accounting and financial reporting policies and practices and internal controls and Fund management’s responses thereto. The Board has adopted a written charter for the Committee. The Committee also reviews and nominates candidates to serve as non-interested Directors. The Committee generally will not consider nominees recommended by shareholders. The Committee has retained independent legal counsel to assist it in connection with these duties. The Committee met four times during the fiscal year ended January 31, 2003.

Biographical Information

Certain biographical and other information relating to the non-interested Directors of the Program is set forth below, including their ages, their principal occupations for at least the last five years, the length of time served, the total number of portfolios overseen in the complex of funds advised by the Investment Adviser and its affiliate, Fund Asset Management, L.P. (“FAM”), (“MLIM/FAM-advised funds”) and other public directorships.

 

I-3

Name, Address* and Age of Director		Position(s) Held with the Program		Term of Office**and Length of Time Served		Principal Occupation During Past Five Years		Number of MLIM/FAM-Advised Funds and Portfolios Overseen		Public Directorships
James H. Bodurtha (59)		Director		Director since 2002		Director and Executive Vice President, The China Business Group, Inc. since 1995; Chairman and Chief Executive Officer, China Enterprise Management Corporation from 1993 to 1996; Chairman, Berkshire Holdings Corporation since 1980; Partner, Squire, Sanders & Dempsey from 1980 to 1993.		42 registered investment companies consisting of 60 portfolios		None
Joe Grills (68)		Director		Director since 1994		Member of the Committee of Investment of Employee Benefit Assets of the Association of Financial Professionals (“CIEBA”) since 1986; Member of CIEBA’s Executive Committee since 1988 and its Chairman from 1991 to 1992; Assistant Treasurer of International Business Machines Corporation (“IBM”) and Chief Investment Officer of IBM Retirement Funds from 1986 to 1993; Member of the Investment Advisory Committee of the State of New York Common Retirement Fund since 1989; Member of the Investment Advisory Committee of the Howard Hughes Medical Institute from 1997 to 2000; Director, Duke Management Company since 1992 and Vice Chairman thereof since 1998; Director, LaSalle Street Fund from 1995 to 2001; Director, Kimco Realty Corporation since 1997; Member of the Investment Advisory Committee of the Virginia Retirement System since 1998 and Vice Chairman thereof since 2002; Director, Montpelier Foundation since 1998 and its Vice Chairman since 2000; Member of the Investment Committee of the Woodberry Forest School since 2000; Member of the Investment Committee of the National Trust for Historic Preservation since 2000.		42 registered investment companies consisting of 60 portfolios		Kimco Realty Corporation
Herbert I. London (64)		Director		Director since 2002		John M. Olin Professor of Humanities, New York University since 1993 and Professor thereof since 1980; President, Hudson Institute since 1997 and Trustee thereof since 1980; Dean, Gallatin Division of New York University from 1976 to 1993; Distinguished Fellow, Herman Kahn Chair, Hudson Institute from 1984 to 1985; Director, Damon Corp. from 1991 to 1995; Overseer, Center for Naval Analyses from 1983 to 1993; Limited Partner, Hypertech LP since 1996.		42 registered investment companies consisting of 60 portfolios		None

 

I-4

Name, Address* and Age of Director		Position(s) Held with the Program		Term of Office**and Length of Time Served		Principal Occupation During Past Five Years		Number of MLIM/FAM-Advised Funds and Portfolios Overseen		Public Directorships
André F. Perold (51)		Director		Director since 2002		Harvard Business School: George Gund Professor of Finance and Banking since 2000; Senior Associate Dean, Director of Faculty Recruiting since 2001; Finance Area Chair from 1996 to 2001; Sylvan C. Coleman Professor of Financial Management from 1993 to 2000; Director, Genbel Securities Limited and Gensec Bank since 1999; Director, Stockback, Inc. since 2000; Director, Sanlam Limited since 2001; Trustee, Commonfund from 1989 to 2001; Director, Sanlam Investment Management from 1999 to 2001; Director, Bulldogresearch.com from 2000 to 2001; Director, Quantec Limited 1991 to 1999; Director and Chairman of the Board of UNX, Inc. since 2003.		42 registered investment companies consisting of 60 portfolios		None
Roberta Cooper Ramo (60)		Director		Director since 2002		Shareholder, Modrall, Sperling, Roehl, Harris & Sisk, P.A. since 1993; President, American Bar Association from 1995 to 1996 and Member of the Board of Governors thereof from 1994 to 1997; Shareholder, Poole, Kelly & Ramo, Attorneys at Law, P.C. from 1977 to 1993; Director, Coopers, Inc. since 1999; Director of ECMC Group (service provider to students, schools and lenders) since 2001; Director, United New Mexico Bank (now Wells Fargo) from 1983 to 1988; Director, First National Bank of New Mexico (now Wells Fargo) from 1975 to 1976.		42 registered investment companies consisting of 60 portfolios		None
Robert S. Salomon, Jr. (66)		Director		Director since 1995		Principal of STI Management since 1994; Chairman and CEO of Salomon Brothers Asset Management from 1992 to 1995; Chairman of Salomon Brothers equity mutual funds from 1992 to 1995; regular columnist with Forbes magazine from 1992 to 2001; Director of Stock Research and U.S. Equity Strategist at Salomon Brothers from 1975 to 1991; Trustee, Commonfund from 1980 to 2001.		42 registered investment companies consisting of 60 portfolios		None
Stephen B. Swensrud (69)		Director		Director since 1994		Chairman of Fernwood Advisors (investment adviser) since 1996; Principal of Fernwood Associates (financial consultant) since 1975; Chairman of RPP Corporation (manufacturing) since 1978; Director, International Mobile Communications, Inc. (telecommunications) since 1998.		43 registered investment companies consisting of 61 portfolios		None

*

The address of each non-interested Director is P.O. Box 9095, Princeton, New Jersey 08543-9095.

**

Each Director serves until his or her successor is elected and qualified, or until his or her death or resignation, or removal as provided in the Fund’s by-laws or charter or by statute, or until December 31 of the year in which her or she turns 72.

Certain biographical and other information relating to the Director who is an officer and an “interested person” of the Program as defined in the Investment Company Act (the “interested Director”) and the other officers of the Program with respect to the Fund is set forth below, including their ages, their principal occupations for at least the last five years, the length of time served, the total number of portfolios overseen in MLIM/FAM-advised funds and public directorships held.

 

I-5

Name, Address* and Age		Position(s) Held with the Program		Term of Office**and Length of Time Served		Principal Occupation During Past Five Years		Number of MLIM/FAM-Advised Funds and Portfolios Overseen		Public Directorships
Terry K. Glenn (62)***		Director and President		Director**** and President since 1999		President and Chairman of the MLIM/FAM-advised funds since 1999; Chairman of MLIM (Americas Region) from 2000 to 2002; Executive Vice President of MLIM and FAM (which terms as used herein include their corporate predecessors) from 1983 to 2000; President of FAM Distributors, Inc. (“FAMD” or the “Distributor” ) from 1986 to 2002 and Director thereof from 1991 to 2002; Executive Vice President and Director of Princeton Services, Inc. (“Princeton Services”) from 1993 to 2002; President of Princeton Administrators, L.P. from 1988 to 2002; Director of Financial Data Services, Inc. from 1985 to 2002.		117 registered investment companies consisting of 161 portfolios		None
Robert C. Doll, Jr. (47)		Senior Vice President		Senior Vice President since 1999		President of FAM and MLIM since 2001; Co-head (Americas Region) of MLIM from 2000 to 2002 and Senior Vice President thereof from 1999 to 2001; Director of Princeton Services since 1999; Chief Investment Officer of Oppenheimer Funds, Inc. in 1999 and Executive Vice President thereof from 1991 to 1999.		45 registered investment companies consisting of 69 portfolios		None
R. Elise Baum (42)		Vice President and Portfolio Manager		Vice President since 2000		Managing Director of MLIM since 2000; First Vice President of MLIM from 1999 to 2000; Director of MLIM from 1997 to 1999; Vice President of MLIM from 1995 to 1997.		4 registered investment companies consisting of 3 portfolios		None
Donald C. Burke (42)		Vice President and Treasurer		Vice President since 1994 and Treasurer since 1999		First Vice President of FAM and MLIM since 1997 and the Treasurer thereof since 1999; Senior Vice President and Treasurer of Princeton Services since 1999; Vice President of FAMD since 1999; Vice President of FAM and MLIM from 1990 to 1997; Director of Taxation of MLIM since 1990.		116 registered investment companies consisting of 160 portfolios		None
Phillip S. Gillespie (39 )		Secretary		Secretary since 2003		First Vice President of MLIM since 2001; Director of MLIM from 2000 to 2001; Vice President of MLIM from 1999 to 2000; Attorney associated with MLIM since 1998; Assistant General Counsel of Chancellor LGT Asset Management Inc. from 1997 to 1998; Senior Counsel and Attorney in the Division of Investment Management and the Office of General Counsel at the U.S. Securities and Exchange Commission from 1993 to 1997.		21 registered investment companies consisting of 30 portfolios		None

*

The address of each officer is P.O. Box 9011, Princeton, New Jersey 08543-9011.

**

Elected by and serves at the pleasure of the Directors of the Program.

***

Mr. Glenn is an “interested person,” as defined in the Investment Company Act, of the Fund based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators L.P.

****

As a Director, Mr. Glenn serves until his successor is elected and qualified or until the earlier of his death or resignation, or removal as provided in the Fund’s by-laws or charter or by statute, or until December 31 of the year in which he turns 72.

 

I-6

Share Ownership

Information relating to each Director’s share ownership in the Fund and in all registered funds in the Merrill Lynch family of funds that are overseen by the respective Director (“Supervised Merrill Lynch Funds”) as of December 31, 2002 is set forth in the chart below:

Name	Aggregate Dollar Range of Equity in the Program	Aggregate Dollar Range of Securities in Supervised Merrill Lynch Funds
Interested Director:
Terry K. Glenn	$50,001-$100,000	Over $100,000
Non-Interested Directors:
James H. Bodurtha	None	$50,001-$100,000
Joe Grills	None	Over $100,000
Herbert I. London	None	Over $100,000
André F. Perold	None	None
Roberta Cooper Ramo	$1-10,000	$50,001-$100,000
Robert S. Salomon, Jr.	None	None
Stephen B. Swensrud	None	None