As filed with the Securities and Exchange Commission on April 20,
2000
Securities Act
File No. 333-1663
Investment Company
Act File No. 811-7561
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
N-1A
| REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
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x
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| Pre-Effective
Amendment No.
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¨
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Post-Effective
Amendment No. 5
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x
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and/or
| REGISTRATION
STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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x
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(Check appropriate
box or boxes)
Merrill Lynch
Global Value Fund, Inc.
(Exact Name of
Registrant as Specified in Charter)
800 Scudders Mill
Road, Plainsboro, New Jersey 08536
(Address of
Principal Executive Offices)
Registrant’s
telephone number, including Area Code (609) 282-2800
Terry K.
Glenn
Merrill Lynch
Global Value Fund, Inc.
800 Scudders Mill
Road
Plainsboro, New
Jersey
Mailing Address:
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address
of Agent for Service)
Copies
to:
| Counsel for the
Fund
BROWN & WOOD
LLP
One World Trade
Center
New York, New
York 10048-0557
Attention: John
A. MacKinnon, Esq.
|
|
Michael J.
Hennewinkel, Esq.
MERRILL
LYNCH
ASSET
MANAGEMENT
P.O. Box
9011
Princeton, New
Jersey 08543-9011
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It is proposed that this filing will become
effective (check appropriate box)
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x
immediately upon filing pursuant to paragraph (b)
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¨ on
(date) pursuant to paragraph (b)
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¨ 60 days
after filing pursuant to paragraph (a)(1)
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¨ on
(date) pursuant to paragraph (a)(1)
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¨ 75 days
after filing pursuant to paragraph (a)(2)
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¨ on
(date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following
box:
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¨ This
post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
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Title of
Securities Being Registered: Common Stock, par value $.10 per
share.
[LOGO] Merrill
Lynch
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Merrill Lynch
Global Value Fund, Inc.
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April 20, 2000
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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.
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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.
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Prospectus
Table of
Contents
[GRAPHIC]
[GRAPHIC]
[GRAPHIC]
[GRAPHIC]
[GRAPHIC]
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Key
Facts
In an effort to help you
better understand the many concepts involved in making an investment
decision, we have defined highlighted terms in this prospectus in the
sidebar.
Equity
Securities — common
stock or securities whose price is linked to the value of common
stock.
Common Stock
— securities
representing shares of ownership of a corporation.
MERRILL LYNCH GLOBAL VALUE FUND AT A GLANCE
What is the Fund’s
investment objective?
The investment
objective of the Fund is to seek long term capital appreciation by investing
primarily in equity securities of issuers located in various
foreign countries and the United States that the Manager believes represent
investment value.
What are the Fund’s main
investment strategies?
The Fund’s
investment strategy is to search for stocks that, in the Manager’s
opinion, are worth more than they are trading for. The Manager searches for
companies with depressed stock prices, as well as for companies whose future
prospects are not fully appreciated by the market. In the Manager’s
opinion, the market may not be correctly valuing these companies, including
their future prospects, future earnings, earnings growth, cash flow and/or
assets. The Manager uses a variety of valuation techniques, economic
measurements and ratios. In searching for companies that are trading for
less than they are worth, there are three general categories of companies in
which the Fund invests: (a) companies that are classic “value”
stocks meaning that they are trading at lower multiples than those of
comparable companies, but which the Manager believes can appreciate towards
the average valuation for these comparable companies, (b) companies that can
improve their profitability, return on capital, cash flow or various other
measures through restructuring efforts, and (c) companies whose attractive
position within their industry or future prospects for growth in cash flow,
earnings or some other measure are not fully recognized by the
market.
The Fund will
emphasize equity securities, primarily common stock. Under
normal market conditions, at least 65% of the Fund’s total assets will
be invested in equity securities of issuers from at least three different
countries.
The Fund may seek to
gain exposure to equity markets or to hedge all or a portion of its
portfolio against interest rate, market and currency risks through the use
of “derivative” securities including swap agreements, indexed and
inverse securities, options, futures, options on futures and currency
transactions. The Fund cannot guarantee that it will achieve its
objective.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Key
Facts
What are the main risks of
investing in the Fund?
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 a particular stock market in which the Fund invests is rising or
falling. At other times, there are specific factors that may affect the
value of a particular investment. If the value of the Fund’s
investments goes down, you may lose money.
The Fund will invest
most of its assets 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. These risks are greater for investments in emerging
markets.
Derivatives may be
volatile and subject to liquidity, leverage and credit risks. 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 a
non-diversified fund, which means that it may invest more of its assets in
securities of a single issuer than if it were a diversified fund. If the
Fund invests in a smaller number of issuers, the Fund’s risk is
increased because developments affecting an individual issuer have a greater
impact on the Fund’s performance.
Who should
invest?
The Fund may be an
appropriate investment for you if you:
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Are looking for
capital appreciation for long term goals,
such as retirement or funding a child’s education
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Want a
professionally managed portfolio
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Are looking for
exposure to a variety of foreign markets
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Are willing to
accept the risks of foreign investing in order
to seek long term capital appreciation
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Are not looking for
a significant amount of current income
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MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Key
Facts
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 for each class of the Fund’s shares for the
periods shown with those of the Morgan Stanley Capital International (MSCI)
World Index. How the Fund performed in the past is not necessarily an
indication of how the Fund will perform in the future.
[BAR CHART]
1997 1998 1999
---- ---- ----
22.80% 25.76% 9.29%
During the period shown in
the bar chart, the highest return for a quarter was 19.34% (quarter ended
December 31, 1999) and the lowest return for a quarter was -6.69% (quarter ended
September 30, 1998).
Average Annual Total
Returns (as of the
calendar year ended December 31, 1999) |
|
Past
One Year |
|
Since
Inception |
|
| Merrill
Lynch Global Value Fund* A |
|
4.64% |
|
17.80% |
† |
| MSCI
World Index** |
|
24.93% |
|
21.81% |
†† |
|
| Merrill
Lynch Global Value Fund* B |
|
5.29% |
|
18.38% |
† |
| MSCI
World Index** |
|
24.93% |
|
21.81% |
†† |
|
| Merrill
Lynch Global Value Fund* C |
|
8.29% |
|
18.60% |
† |
| MSCI
World Index** |
|
24.93% |
|
21.81% |
†† |
|
| Merrill
Lynch Global Value Fund* D |
|
4.45% |
|
17.52% |
† |
| MSCI
World Index** |
|
24.93% |
|
21.81% |
†† |
|
**
|
This unmanaged
market capitalization-weighted index is comprised of a representative
sampling of stocks of large, medium, and small-capitalization companies in
22 countries, including the United States. Past performance is not
predictive of future performance.
|
†
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Inception date is
November 1, 1996.
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†
†
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Since October 31,
1996.
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Key
Facts
UNDERSTANDING
EXPENSES
Fund investors pay various
fees and expenses, either directly or indirectly. Listed below are some of
the main types of expenses, which all mutual funds may charge:
Expenses paid
directly by the shareholder:
Shareholder
Fees — these
include sales charges which you may pay when you buy or sell shares of the
Fund.
Expenses paid
indirectly by the shareholder:
Annual Fund
Operating Expenses — expenses
that cover the costs of operating the Fund.
Management
Fee — a fee paid
to the Manager for managing the Fund.
Distribution
Fees — fees used
to support the Fund’s marketing and distribution efforts, such as
compensating Financial Consultants, advertising and promotion.
Service (Account
Maintenance) Fees — fees used
to compensate securities dealers for account maintenance
activities.
The Fund offers four
different classes of shares. Although your money will be invested the same
way no matter which class of shares you buy, there are differences among the
fees and expenses associated with each class. Not everyone is eligible to
buy every class. After determining which classes you are eligible to buy,
decide which class best suits your needs. Your Merrill Lynch Financial
Consultant can help you with this decision.
This table shows the
different fees and expenses that you may pay if you buy and hold the
different classes of shares of the Fund. Future expenses may be greater or
less than those indicated below.
Shareholder Fees
(fees paid directly
from your investment)(a): |
|
Class A |
|
Class
B(b) |
|
Class C |
|
Class D |
|
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of offering
price) |
|
5.25%(c) |
|
None |
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None |
|
5.25%(c) |
|
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) |
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None(d) |
|
Maximum Sales Charge (Load) imposed on
Dividend Reinvestments |
|
None |
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None |
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None |
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None |
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Redemption Fee |
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None |
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None |
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None |
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None |
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|
Exchange Fee |
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None |
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None |
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None |
|
None |
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Annual
Fund Operating Expenses (expenses
that are deducted from your investment): |
|
|
|
|
Management Fee |
|
0.75% |
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0.75% |
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0.75% |
|
0.75% |
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Distribution and/or Service (12b-1) Fees(e) |
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None |
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1.00% |
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1.00% |
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0.25% |
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Other Expenses (including transfer agency
fees)(f) |
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0.16% |
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0.18% |
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0.19% |
|
0.16% |
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| Total Annual
Fund Operating Expenses |
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0.91% |
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1.93% |
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1.94% |
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1.16% |
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(a)
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In addition,
Merrill Lynch may charge clients a processing fee (currently $5.35) when a
client buys or sells shares. See “How to Buy, Sell, Transfer and
Exchange Shares.”
|
(b)
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Class B shares
automatically convert to Class D shares about eight years after you buy
them and will no longer be subject to distribution fees.
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(c)
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Some investors may
qualify for reductions in the sales charge (load).
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(d)
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You may pay a
deferred sales charge if you purchase $1 million or more and you redeem
within one year.
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(e)
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The Fund calls the
“Service Fee” an “Account Maintenance Fee.” Account
Maintenance Fee is the term used in this Prospectus and in all other Fund
materials. If you hold Class B or Class C shares for a long time, it may
cost you more in distribution (12b-1) fees than the maximum sales charge
that you would have paid if you had bought one of the other
classes.
|
(f)
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The Fund pays the
Transfer Agent $11.00 for each Class A and Class D shareholder account and
$14.00 for each Class B and Class C shareholder account and reimburses the
Transfer Agent’s out-of-pocket expenses. The Fund pays a 0.10% fee
for certain accounts that participate in the Merrill Lynch Mutual Fund
Advisor program. The Fund also pays a $0.20 monthly closed account charge,
which is assessed upon all accounts that close during the year. This fee
begins the month following the month the account is closed and ends at the
end of the calendar year. For the fiscal year ended December 31, 1999, the
Fund paid the Transfer Agent fees totaling $3,324,919. The Manager
provides accounting services to the Fund at its cost. For the fiscal year
ended December 31, 1999, the Fund reimbursed the Manager $302,370 for
these services.
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
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 this example. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
EXPENSES IF YOU DID
REDEEM YOUR SHARES:
| |
|
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
| Class
A |
|
$613 |
|
$800 |
|
$1,002 |
|
$1,586 |
|
| Class
B |
|
$596 |
|
$806 |
|
$1,042 |
|
$2,059* |
|
| Class
C |
|
$297 |
|
$609 |
|
$1,047 |
|
$2,264 |
|
| Class
D |
|
$637 |
|
$874 |
|
$1,130 |
|
$1,860 |
|
|
| EXPENSES IF YOU DID
NOT REDEEM YOUR SHARES: |
|
| |
|
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
|
| Class
A |
|
$613 |
|
$800 |
|
$1,002 |
|
$1,586 |
|
| Class
B |
|
$196 |
|
$606 |
|
$1,042 |
|
$2,059* |
|
| Class
C |
|
$197 |
|
$609 |
|
$1,047 |
|
$2,264 |
|
| Class
D |
|
$637 |
|
$874 |
|
$1,130 |
|
$1,860 |
|
*
|
Assumes conversion
to Class D shares approximately eight years after purchase. See note (b)
to the Fees and Expenses table above.
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Details About the
Fund
|
ABOUT THE
PORTFOLIO MANAGER
|
|
Stephen I. Silverman is a
Senior Vice President and portfolio manager of the Fund. Mr. Silverman
has been a First Vice President of Merrill Lynch Asset Management since
1997, a portfolio manager of Merrill Lynch Asset Management since 1983
and a Vice President from 1983 to 1997.
|
|
The Fund is managed by
Merrill Lynch Asset Management.
|
The Fund will
invest in a portfolio primarily consisting of equity securities of various
countries. The Fund will generally invest at least 65% of its assets in
equity securities of issuers from at least three different countries. The
Fund may invest in equity securities such as:
|
Ÿ
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rights to
subscribe for common stock
|
The Fund will focus
on investments in common stock.
Securities of
foreign companies may be in the form of American Depositary Receipts,
European Depositary Receipts, Global Depositary Receipts or other
securities convertible into equities of foreign companies.
Convertible
securities are generally debt securities or preferred stocks that may be
converted into common stock.
The Fund may borrow
money from banks in amounts up to 33 1
/3% of the Fund’s
total assets temporarily for extraordinary or emergency purposes, including
to meet redemptions or to settle securities transactions.
The Fund may invest
up to 15% of its net assets in illiquid securities that it cannot easily
resell. These securities may include securities for which there is no
readily available market and certain asset-backed and receivable-backed
securities. Other possibly illiquid securities in which the Fund may invest
are securities that have contractual or legal restrictions on resale, known
as restricted securities, including Rule 144A securities that can be resold
to qualified institutional buyers but not to the general
public.
The Fund may use
derivatives to hedge its portfolio against interest rate and currency
risks. Derivatives are financial instruments whose value is derived from
another security, a commodity (such as oil or gold), or an index such as
the Standard & Poor’s 500 Index. The derivatives that the Fund may
use include indexed and inverse securities, options on portfolio positions
or currencies, financial and currency futures, options on such futures,
forward foreign currency transactions and swaps.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
The Fund may as a
temporary defensive measure, and without limitation, hold in excess of 35%
of its total assets in cash or cash equivalents and investment grade, short
term securities including money market instruments denominated in U.S.
dollars or foreign currencies. Normally a portion of the Fund’s assets
would be held in these securities in anticipation of investment in equities
or to meet redemptions. Short term investments and temporary defensive
positions can be easily sold and have limited risk of loss but may limit
the Fund’s ability to meet its investment objective.
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 goals or that the Fund’s performance will be positive for any
period of time.
Market and Selection
Risk —
Market risk is the risk that the stock market in one or more
countries in which the Fund invests will go down in value, including the
possibility that the market will go down sharply and unpredictably.
Selection risk is the risk that the securities that Fund management selects
will underperform the stock market or other funds with similar investment
objectives and investment strategies.
Foreign Market
Risk —
Since the Fund invests in foreign securities, it offers the potential
for more diversification than an investment only in the United States. This
is because securities traded on foreign markets have often (though not
always) performed differently than securities 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 shares 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.
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 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 are usually 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 denominated 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.
Governmental
Supervision and Regulation/Accounting Standards —Many
foreign governments supervise and regulate stock exchanges, brokers and the
sale of securities less than the United States does. Some countries may not
have laws to protect investors the way that the U.S. securities laws do.
For example, some countries may have no laws or rules against insider
trading. Insider trading occurs when a person buys or sells a company
’s securities based on nonpublic information about that company.
Accounting standards in other countries are not necessarily the same as in
the United
States. If the accounting standards in another country do not require as much
detail as U.S. accounting standards, it may be harder for Fund management
to completely and accurately determine a company’s financial
condition. Also, brokerage commissions and other costs of buying or selling
securities often are higher in foreign countries than they are in the
United States. This reduces the amount the Fund can earn on its
investments.
Certain Risks of
Holding Fund Assets Outside the United States —The Fund
generally holds its foreign securities and cash in foreign banks and
securities depositories. Some foreign banks and securities depositories may
be recently organized or new to the foreign custody business. In addition,
there may be limited or no regulatory oversight over their operations.
Also, the laws of certain countries may put limits on the Fund’s
ability to recover its assets if a foreign bank, depository or issuer of a
security, or any of their agents, goes bankrupt. In addition, it is often
more expensive for the Fund to buy, sell and hold securities in certain
foreign markets than in the United States. The increased expense of
investing in foreign markets reduces the amount the Fund can earn on its
investments and typically results in a higher operating expense ratio for
the Fund than investment companies invested only in the United
States.
Settlement
Risk —
Settlement and clearance procedures in certain foreign markets differ
significantly from those in the United States. Foreign settlement
procedures and trade regulations also may involve certain risks (such as
delays in payment for or delivery of securities) not typically generated by
the settlement of U.S. investments. Communications between the United
States and emerging market countries may be unreliable, increasing the risk
of delayed settlements or losses of security certificates. Settlements in
certain foreign countries at times have not kept pace with the number of securities
transactions; these problems may make it difficult for the Fund to carry
out transactions. If the Fund cannot settle or is delayed in settling a
purchase of securities, it may miss attractive investment opportunities and
certain of its assets may be uninvested with no return earned thereon for
some period. If the Fund cannot settle or is delayed in settling a sale of
securities, it may lose money if the value of the security then declines
or, if it has contracted to sell the security to another party, the Fund
could be liable to that party for any losses incurred.
European Economic and
Monetary Union (EMU) —
Certain European countries have entered into EMU in an effort to,
among other things, reduce barriers between countries, increase competition
among companies, reduce
government subsidies
in certain industries, and reduce or eliminate currency fluctuations among
these countries. EMU established a single common European currency (the
“euro”) that was introduced on January 1, 1999 and is expected to
replace the existing national currencies of all EMU participants by July 1,
2002. Certain securities (beginning with government and corporate bonds)
were redenominated in the euro, and are listed, trade and make dividend and
other payments only in euros. Although EMU is generally expected to have a
beneficial effect, it could negatively affect the Fund in a number of
situations, including as follows:
|
Ÿ
|
If the transition
to euro, or EMU as a whole, does not
proceed as planned, the Fund’s investments could be
adversely affected. For example, sharp currency
fluctuations, exchange rate volatility and other disruptions
of the markets could occur.
|
|
Ÿ
|
Withdrawal from
EMU by a participating country could
also have a negative effect on the Fund’s investments, for
example if securities redenominated in euros are transferred
back into that country’s national currency.
|
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 yield on the Fund’s portfolio. Borrowing
will cost the Fund interest expense and other fees. The cost of borrowing
may reduce the Fund’s return. Certain securities that the Fund buys
may create leverage including, for example, when issued securities, forward
commitments, options and warrants.
Non-Diversification
Risk —
The Fund is a non-diversified fund. If the Fund invests in securities
of a smaller number of issuers, the Fund’s risk is increased because
developments affecting an individual issuer have a greater impact on the
Fund’s performance.
Securities
Lending —
The Fund may lend securities to financial institutions that provide
government securities 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 the value of the collateral falls. These
events could trigger adverse tax consequences to the Fund.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
Risks
associated with certain types of securities in which the Fund may invest
include:
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 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.
Illiquid
Securities —
The Fund may invest up to 15% of its net assets in illiquid securities that
it cannot easily resell 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 may 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 security.
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.
Derivatives —
The Fund may use
derivative instruments including indexed and inverse securities, options on
portfolio positions or currencies, financial and currency futures, options
on such futures, forward foreign currency transactions and swaps.
Derivatives allow the Fund to increase or decrease its
risk exposure more
quickly and efficiently than other types of instruments. 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 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.
|
The Fund may use
derivatives for hedging purposes, including anticipatory hedges and to seek
to increase its return. Hedging is a strategy in which the Fund uses a
derivative to offset the risk that other Fund holdings may decrease in
value. While hedging can reduce losses, it can also reduce or eliminate
gains 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.
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
Floating Rate Securities —
The Fund may invest in securities whose potential returns are
directly related to changes in an underlying index or interest rate, known
as indexed securities. The return on indexed securities will rise when the
underlying index or interest rate rises
and fall when the
index or interest rate falls. The Fund may also invest in securities whose
return is inversely related to changes in an interest rate (inverse
floaters). In general, income on inverse floaters will decrease when
interest rates increase and increase when interest rates decrease.
Investments in inverse floaters may subject the Fund to the risks of
reduced or eliminated interest payments and losses of principal. In
addition, certain indexed securities and inverse floaters may increase or
decrease in value at a greater rate than the underlying interest rate,
which effectively leverages the Fund’s investment. Indexed securities
and inverse floaters are derivative securities and can be considered
speculative. Indexed and inverse securities involve credit risk and certain
indexed and inverse securities may involve currency risk, leverage risk and
liquidity risk.
Swap
Agreements —
Swap agreements involve the risk that the party with whom the Fund
has entered into the swap will default on its obligation to pay the Fund
and the risk that the Fund will not be able to meet its obligations to pay
the other party to the agreement.
Standby Commitment
Agreements —
Standby commitment agreements involve the risk that the security will
lose value prior to its delivery to the Fund. These agreements also involve
the risk that if the security goes up in value, the counterparty will
decide not to issue the security, in which case the Fund has lost the
investment opportunity for the assets it had set aside to pay for the
security and any gain in the security’s price.
When Issued
Securities, Delayed Delivery Securities and Forward
Commitments —
When issued and delayed delivery securities and forward commitments
involve the risk that the security the Fund buys will lose value prior to
its delivery to the Fund. There also is the risk that the security will not
be issued or that the other party will not meet its obligation. 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.
Depositary
Receipts —
The Fund may invest in securities of foreign issuers in the form of
Depositary Receipts or other securities that are convertible into
securities of foreign issuers. 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 and Global Depositary Receipts each 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 the Depositary
Receipts.
Repurchase Agreements;
Purchase and Sale Contracts —
The Fund may enter into certain types of repurchase agreements or
purchase and sale contracts. Under a repurchase agreement, the seller
agrees to repurchase a security (typically a security issued or guaranteed
by the U.S. Government) at a mutually agreed upon time and price. This
insulates the Fund from changes in the market value of the security during
the period, except for currency fluctuations. A purchase and sale contract
is similar to a repurchase agreement, but purchase and sale contracts
provide that the purchaser receives any interest on the security paid
during the period. If the seller fails to repurchase the security in either
situation and the market value declines, the Fund may lose
money.
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 exercises 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.
STATEMENT OF ADDITIONAL
INFORMATION
If you would like
further information about the Fund, including how it invests, please see
the Statement of Additional Information.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Your
Account
MERRILL LYNCH SELECT PRICING
SM
SYSTEM
The Fund offers
four share classes, each with its own sales charge and expense structure,
allowing you to invest in the way that best suits your needs. Each share
class represents 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 Consultant can help you determine which share class is best
suited to your personal financial goals.
For example, if you
select Class A or D shares, you generally pay a sales charge at the time of
purchase. If you buy Class D shares, you also pay an ongoing account
maintenance fee of 0.25%. You may be eligible for a sales charge reduction
or waiver.
If you select Class
B or C shares, you will invest the full amount of your purchase price, but
you will be subject to a distribution fee of 0.75% 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 increase the cost
of your investment and may cost you more than paying an initial sales
charge. In addition, you may be subject to a deferred sales charge when you
sell Class B or C shares.
The Fund’s
shares are distributed by Merrill Lynch Funds Distributor, a division of
Princeton Funds Distributor, Inc., an affiliate of Merrill
Lynch.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Your
Account
The table below
summarizes key features of the Merrill Lynch Select Pricing
SM
System.
| |
|
Class
A |
|
Class
B |
|
Class
C |
|
Class
D |
|
| Availability |
|
Limited to certain
investors including:
Ÿ Current Class A
shareholders
Ÿ Certain
Retirement
Plans
Ÿ Participants in
certain Merrill Lynch-
sponsored programs
Ÿ Certain affiliates of
Merrill Lynch. |
|
Generally available
through Merrill Lynch.
Limited
availability through
other securities
dealers. |
|
Generally available
through Merrill Lynch.
Limited
availability through
other securities
dealers. |
|
Generally available
through Merrill Lynch.
Limited availability
through other
securities dealers. |
| |
|
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. |
|
Deferred Sales
Charge? |
|
No. (May be charged
for purchases over
$1 million that are
redeemed within
one year.) |
|
Yes. Payable if you
redeem within four
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.) |
| |
|
Account
Maintenance and
Distribution Fees? |
|
No. |
|
0.25% Account
Maintenance Fee
0.75% Distribution
Fee. |
|
0.25% Account
Maintenance Fee
0.75% Distribution
Fee. |
|
0.25% Account
Maintenance Fee
No Distribution Fee. |
|
Conversion to
Class D shares? |
|
No. |
|
Yes, automatically
after approximately
eight years. |
|
No. |
|
No. |
| |
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
Right of
Accumulation — permits
you to pay the sales charge that would apply to the cost or value
(whichever is higher) of all shares you own in the Merrill Lynch mutual
funds that offer Select Pricing
SM
options.
Letter of
Intent — permits
you to pay the sales charge that would be applicable if you add up all
shares of Merrill Lynch Select Pricing
SM
System funds that you
agree to buy within a 13 month period. Certain restrictions
apply.
Class A and Class D
Shares — Initial Sales Charge Options
If you select Class
A or Class D shares, you will pay a sales charge at the time of
purchase.
| 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.
|
**
|
If you invest
$1,000,000 or more in Class A or Class D shares, you may not pay an
initial sales charge. In that case, the Manager compensates the selling
dealer from its own funds. However, if you redeem your shares within one
year after purchase, you may be charged a deferred sales charge. This
charge is 1% of the lesser of the original cost of the shares being
redeemed or your redemption proceeds. A sales charge of 0.75% will be
charged on purchases of $1,000,000 or more of Class A or Class D shares
by certain employer- sponsored retirement or savings plans.
|
No initial sales
charge applies to Class A or Class D shares that you buy through
reinvestment of dividends.
A reduced or waived
sales charge on a purchase of Class A or Class D shares may apply
for:
|
Ÿ
|
Purchases under a
Right of Accumulation or Letter of
Intent
|
|
Ÿ
|
Certain Merrill
Lynch investment or central asset accounts
|
|
Ÿ
|
Certain
employer-sponsored retirement or savings plans
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Your
Account
|
Ÿ
|
Purchases using
proceeds from the sale of certain Merrill
Lynch closed-end funds under certain circumstances
|
|
Ÿ
|
Certain
investors, including directors or trustees of Merrill
Lynch mutual funds and Merrill Lynch employees
|
|
Ÿ
|
Certain Merrill
Lynch fee-based programs
|
Only certain
investors are eligible to buy Class A shares. Your Merrill Lynch Financial
Consultant can help you determine whether you are eligible to buy Class A
shares or to participate in any of these programs.
If you decide to
buy shares under the initial sales charge alternative and you are eligible
to buy both Class A and Class D shares, you should buy Class A since Class
D shares are subject to a 0.25% account maintenance fee, while Class A
shares are not.
If you redeem Class
A or Class D shares and within 30 days buy new shares of the same class,
you will not pay a sales charge on the new purchase amount. The amount
eligible for this “Reinstatement Privilege” may not exceed the
amount of your redemption proceeds. To exercise the privilege, contact
your Merrill Lynch Financial Consultant or the Fund’s Transfer Agent
at 1-800-MER-FUND.
Class B and Class C
Shares — Deferred Sales Charge Options
If you select Class
B or Class C shares, you do not pay an initial sales charge at the time of
purchase. However, if you redeem your Class B shares within four years
after purchase or your Class C shares within one year after purchase, you
may be required to pay a deferred sales charge. You will also pay
distribution fees of 0.75% 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 an initial sales charge. The Distributor uses
the money that it receives from the deferred sales charges and the
distribution fees to cover the costs of marketing, advertising and
compensating the Merrill Lynch Financial Consultant or other securities
dealer who assists you in purchasing Fund shares.
20
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
Class B
Shares
If you redeem Class
B shares within four years after purchase, you may be charged a deferred
sales charge. The amount of the charge gradually decreases as you hold
your shares over time, according to the following schedule:
| Years Since
Purchase |
|
Sales
Charge* |
|
| 0 –
1 |
|
4.00% |
|
| 1 –
2 |
|
3.00% |
|
| 2 –
3 |
|
2.00% |
|
| 3 –
4 |
|
1.00% |
|
| 4 and
thereafter |
|
0.00% |
|
*
|
The percentage
charge will apply to the lesser of the original cost of the shares being
redeemed or the proceeds of your redemption. Shares acquired through
reinvestment of dividends are not subject to a deferred sales charge.
Not all Merrill Lynch funds have identical deferred sales charge
schedules. If you exchange your shares for shares of another fund, the
higher charge will apply.
|
The deferred sales
charge relating to Class B shares may be reduced or waived in certain
circumstances, such as:
|
Ÿ
|
Certain
post-retirement withdrawals from an IRA or other
retirement plan if you are over 59 1
/2 years old
|
|
Ÿ
|
Redemption by
certain eligible 401(a) and 401(k) plans,
certain related accounts and certain retirement plan
rollovers
|
|
Ÿ
|
Redemption in
connection with participation in certain
Merrill Lynch fee-based programs
|
|
Ÿ
|
Withdrawals
resulting from shareholder death or disability
as long as the waiver request is made within one year of
death or disability or, if later, reasonably promptly
following completion of probate, or in connection with
involuntary termination of an account in which Fund shares
are held
|
|
Ÿ
|
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
|
Your Class B shares
convert automatically into Class D 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
D shares are subject to lower annual expenses than Class B shares. The
conversion of Class B to Class D shares is not a taxable event for Federal
income tax purposes.
Different
conversion schedules apply to Class B shares of different Merrill Lynch
mutual funds. For example, Class B shares of a fixed income fund 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 both the original and exchanged Class B
shares in both funds will count toward the conversion schedule. The
conversion schedule may be modified in certain other cases as
well.
Class C
Shares
If you redeem Class
C shares within one year after purchase, you may be charged a deferred
sales charge of 1.00%. The charge will apply to the lesser of the original
cost of the shares being redeemed or the proceeds of your redemption. You
will not be charged a deferred sales charge when you redeem shares that
you acquire through reinvestment of Fund dividends. The deferred sales
charge relative to Class C shares may be reduced or waived in connection
with involuntary termination of an account in which Fund shares are held
and withdrawals through the Merrill Lynch Systematic Withdrawal
Plan.
Class C shares do
not offer a conversion privilege.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES
The chart on the
following pages summarizes how to buy, sell, transfer and exchange shares
through Merrill Lynch or other securities dealers. You may also buy shares
through the Transfer Agent. To learn more about buying, selling,
transferring or exchanging shares through the Transfer Agent, call
1-800-MER-FUND. Because the selection of a mutual fund involves many
considerations, your Merrill Lynch Financial Consultant may help you with
this decision.
Because of the high
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.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Your
Account
| If You Want
To |
|
Your
Choices |
|
Information Important
for You to Know |
|
| Buy Shares |
|
First, select the share
class
appropriate for you |
|
Refer to the Merrill
Lynch Select Pricing table on page 18. 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:
Ÿ $250 for certain
Merrill Lynch fee-based programs
Ÿ $100 for retirement
plans. |
|
|
|
|
|
|
|
(The minimums for initial
investments may be waived under certain
circumstances.) |
|
|
|
|
Have your Merrill Lynch
Financial Consultant or
securities dealer 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. |
|
|
| |
|
|
|
Purchase orders placed
after that time will be priced at the net
asset value determined on the next business day. The Fund may
reject any order to buy shares and may suspend the sale of shares
at any time. Merrill Lynch may charge a processing fee to confirm a
purchase. This fee is currently $5.35. |
|
|
|
|
Or contact the Transfer
Agent |
|
To purchase shares
directly, call the Transfer Agent at 1-800-MER-
FUND and request a purchase application. Mail the completed
purchase application to the Transfer Agent at the address on the
inside back cover of this Prospectus. |
|
Add to Your
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
programs, 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. |
|
Transfer Shares to
Another Securities
Dealer |
|
Transfer to a
participating
securities dealer |
|
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 assets must be
coordinated by the receiving firm. |
|
| |
|
Transfer to a non-
participating securities
dealer |
|
You must either:
Ÿ Transfer your
shares to an account with the Transfer Agent; or
Ÿ Sell your shares,
paying any applicable deferred sales charge. |
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
| If You Want
To |
|
Your
Choices |
|
Information Important
for You to Know |
|
| Sell Your
Shares |
|
Have your Merrill Lynch
Financial Consultant or
securities dealer 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 prior to that day’s close of
business on the New York Stock Exchange (generally 4:00 p.m.
Eastern 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,
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 will generally be required but may be waived
in certain limited circumstances. You can obtain a signature
guarantee from a bank, securities dealer, securities broker, credit
union, savings association, national securities exchange or
registered securities association. A notary public seal 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 will
usually 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. |
| |
|
Sell Shares
Systematically |
|
Participate in the Fund
’s
Systematic Withdrawal Plan |
|
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®, CBA® 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 C shares your
total annual withdrawals cannot be more than 10% per year of the
value of your shares at the time your plan is established. The
deferred sales charge is waived for systematic redemptions. Ask
your Merrill Lynch Financial Consultant for details. |
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Your
Account
| If You Want
To |
|
Your
Choices |
|
Information Important
for You to Know |
|
Exchange Your
Shares |
|
Select the fund into which
you want to exchange. Be
sure to read that fund’s
prospectus |
|
You can exchange your
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. |
|
|
| |
|
|
|
Each class of Fund shares
is generally exchangeable for shares of the
same class of another fund. If you own Class A shares and wish to
exchange into a fund in which you have no Class A shares (and are
not eligible to purchase Class A shares), you will exchange into Class
D shares. |
|
|
| |
|
|
|
Some of the Merrill Lynch
mutual funds impose a different initial or
deferred sales charge schedule. If you exchange Class A or D shares
for shares of a fund with a higher initial sales charge than you
originally paid, you will be charged the difference at the time of
exchange. If you exchange Class B shares for shares of a fund with a
different deferred sales charge schedule, the higher schedule will
apply. The time you hold Class B or C shares in both funds will count
when determining your holding period for calculating a deferred
sales charge at redemption. If you exchange Class A or D shares for
money market fund shares, you will receive Class A shares of Summit
Cash Reserves Fund. Class B or C shares of the Fund will be
exchanged for Class B shares of Summit. |
|
|
| |
|
|
|
To exercise the exchange
privilege contact your Merrill Lynch
Financial Consultant or call the Transfer Agent at
1-800-MER-FUND |
|
|
|
|
|
|
|
Although there is
currently no limit on the number of exchanges
that you can make, the exchange privilege may be modified or
terminated at any time in the future. |
| |
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
Net Asset
Value — the
market value of the Fund’s total assets after deducting liabilities,
divided by the number of shares outstanding.
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. The net asset value used in
determining your price is the next one calculated after your purchase or
redemption order is placed. Foreign securities owned by the Fund may trade
on weekends or other days when the Fund does not price its shares. As a
result, the Fund’s net asset value may change on days when you will
not be able to purchase or redeem the Fund’s shares.
Generally, Class A
shares will have the highest net asset value because that class has the
lowest expenses, and Class D shares will have a higher net asset value
than Class B or Class C shares. Also dividends paid on Class A and Class D
shares will generally be higher than dividends paid on Class B and Class C
shares because Class A and Class D shares have lower expenses.
PARTICIPATION IN MERRILL
LYNCH FEE-BASED PROGRAMS
If you participate
in certain fee-based programs offered by Merrill Lynch, you may be able to
buy Class A shares at net asset value, including by exchanges from other
share classes. Sales charges on the shares being exchanged may be reduced
or waived under certain circumstances.
You generally
cannot transfer shares held through a fee-based program into another
account. Instead, you will have to redeem your shares held through the
program and purchase shares of another class, which may be subject to
distribution and account maintenance fees. This may be a taxable event and
you will pay any applicable sales charges.
If you leave one of
these programs, your shares may be redeemed or automatically exchanged
into another class of Fund shares or into a money market fund. The class
you receive may be the class you originally owned when you entered the
program, or in certain cases, a different class. If the
exchange is into Class B shares, the period before conversion to Class D
shares may be modified. Any redemption or exchange will be at net asset
value. However, if you participate in the program for less than a
specified period, you may be charged a fee in accordance with the terms of
the program.
Details about these
features and the relevant charges are included in the client agreement for
each fee-based program and are available from your Merrill Lynch Financial
Consultant.
DIVIDENDS AND
TAXES
The Fund will
distribute at least annually any net investment income and any net
realized long-term capital gains. The Fund may also pay a special
distribution at the end of the calendar year to comply with Federal tax
requirements. If your account is with Merrill Lynch and you would like to
receive dividends in cash, contact your Merrill Lynch
Financial Consultant. If your account is with the Transfer Agent and you
would like to receive dividends in cash, contact the Transfer Agent.
Although this cannot be predicted with certainty, the Fund anticipates
that the majority of its dividends will consist of capital gains. Capital
gains may be taxable to you at different rates, depending, in part, on how
long the Fund has 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 than ordinary income
dividends.
If you are neither
a lawful permanent resident nor a citizen of the United States or if you
are a foreign entity, the Fund’s ordinary income dividends (which
include distributions of net short-term capital gains) will generally be
subject to a 30% U.S. withholding tax, unless a lower treaty rate
applies.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
“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.
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. You may be able
to claim a credit or take a deduction for foreign taxes paid by the Fund
if certain requirements are met.
By law, the Fund
must withhold 31% of your dividends and redemption proceeds if you have
not provided a taxpayer identification number or social security number or
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.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Management of the
Fund
MERRILL LYNCH ASSET MANAGEMENT
Merrill Lynch
Asset Management, the Fund’s Manager, manages the Fund’s
investments and its business operations under the overall supervision of
the Fund’s Board of Directors. The Manager has the responsibility for
making all investment decisions for the Fund. The Manager has a
sub-advisory agreement with Merrill Lynch Asset Management U.K. Limited,
an affiliate, under which the Manager may pay a fee for services it
receives. The Fund pays the Manager a fee at the annual rate of 0.75% of
the average daily net assets of the Fund.
Merrill Lynch Asset
Management was organized as an investment adviser in 1977 and offers
investment advisory services to more than 40 registered investment
companies. Merrill Lynch Asset Management is part of the Asset Management
Group of ML & Co. The Asset Management Group had approximately $559
billion in investment company and other portfolio assets under management
as of February 2000. This amount includes assets managed for Merrill Lynch
affiliates.
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
The Financial
Highlights table is intended to help you understand the Fund’s
financial performance for the periods shown. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends). This 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 to shareholders, which is available upon
request.
| |
|
Class A†
†
|
|
Class B†
†
|
| |
|
For the Year
Ended Dec. 31,
|
|
For the Period
Nov. 1, 1997
to Dec. 31,
1997 |
|
For the
Year Ended
Oct. 31,
1997† |
|
For the Year
Ended Dec. 31,
|
|
For the Period
Nov. 1, 1997
to Dec. 31,
1997 |
|
For the
Year Ended
Oct. 31,
1997† |
Increase (Decrease) in
Net Asset Value: |
|
1999 |
|
1998 |
|
|
|
1999 |
|
1998 |
|
| Per Share
Operating Performance: |
|
| Net asset
value, beginning of period |
|
$13.67 |
|
|
$12.01 |
|
|
$11.83 |
|
|
$10.00 |
|
|
$13.61 |
|
|
$11.97 |
|
|
$11.72 |
|
|
$10.00 |
|
|
| Investment
income (loss) — net |
|
.07 |
|
|
.18 |
|
|
.01 |
|
|
.17 |
|
|
(.07 |
) |
|
.06 |
|
|
(.01 |
) |
|
.09 |
|
|
Realized and
unrealized gain on
investments and foreign currency
transactions— net |
|
1.32 |
|
|
3.00 |
|
|
.72 |
|
|
1.71 |
|
|
1.30 |
|
|
2.96 |
|
|
.73 |
|
|
1.67 |
|
|
| Total from
investment operations |
|
1.39 |
|
|
3.18 |
|
|
.73 |
|
|
1.88 |
|
|
1.23 |
|
|
3.02 |
|
|
.72 |
|
|
1.76 |
|
|
| Less
dividends and distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income — net |
|
(.04 |
) |
|
(.14 |
) |
|
(.11 |
) |
|
(.05 |
) |
|
(.04 |
) |
|
(.08 |
) |
|
(.03 |
) |
|
(.04 |
) |
|
In excess of investment income —
net |
|
— |
|
|
(.20 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(.12 |
) |
|
— |
|
|
— |
|
|
Realized gain on investments — net |
|
(.30 |
) |
|
(1.18 |
) |
|
(.44 |
) |
|
— |
|
|
(.30 |
) |
|
(1.18 |
) |
|
(.44 |
) |
|
— |
|
|
| Total
dividends and distributions |
|
(.34 |
) |
|
(1.52 |
) |
|
(.55 |
) |
|
(.05 |
) |
|
(.34 |
) |
|
(1.38 |
) |
|
(.47 |
) |
|
(.04 |
) |
|
| Net asset
value, end of period |
|
$14.72 |
|
|
$13.67 |
|
|
$12.01 |
|
|
$11.83 |
|
|
$14.50 |
|
|
$13.61 |
|
|
$11.97 |
|
|
$11.72 |
|
|
| Total
Investment Return:** |
|
| Based on net
asset value per share |
|
10.44 |
% |
|
27.10 |
% |
|
6.19 |
%# |
|
18.91 |
% |
|
9.29 |
% |
|
25.76 |
% |
|
6.14 |
%# |
|
17.62 |
% |
|
| Ratios to
Average Net Assets: |
|
|
Expenses |
|
.91 |
% |
|
.90 |
% |
|
.96 |
%* |
|
.97 |
% |
|
1.93 |
% |
|
1.92 |
% |
|
1.98 |
%* |
|
1.99 |
% |
|
| Investment
income (loss) — net |
|
.51 |
% |
|
1.32 |
% |
|
.54 |
%* |
|
1.88 |
% |
|
(.51 |
)% |
|
.44 |
% |
|
(.49 |
%)* |
|
.84 |
% |
|
|
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets,
end of period (in thousands) |
|
$
195,511 |
|
|
$202,980 |
|
|
$63,075 |
|
|
$53,776 |
|
|
$1,818,746 |
|
|
$1,988,580 |
|
|
$1,251,956 |
|
|
$1,179,125 |
|
|
| Portfolio
turnover |
|
70.93 |
% |
|
44.94 |
% |
|
24.49 |
% |
|
77.65 |
% |
|
70.93 |
% |
|
44.94 |
% |
|
24.49 |
% |
|
77.65 |
% |
|
**
|
Total investment
returns exclude the effects of sales charges.
|
†
|
The Fund
commenced operations on November 1, 1996.
|
†
†
|
Based on average
shares outstanding.
|
#
|
Aggregate total
investment return.
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[GRAPHIC] Management of the
Fund
FINANCIAL HIGHLIGHTS
(concluded)
| |
|
Class C†
†
|
|
Class D†
†
|
| |
|
For the Year
Ended Dec. 31
|
|
For the Period
Nov. 1, 1997
to Dec. 31,
1997 |
|
For the
Year Ended
Oct. 31,
1997† |
|
For the Year
Ended Dec. 31,
|
|
For the Period
Nov. 1, 1997
to Dec. 31,
1997 |
|
For the
Year Ended
Oct. 31,
1997† |
Increase (Decrease) in
Net Asset Value: |
|
1999 |
|
1998 |
|
|
|
1999 |
|
1998 |
|
| Per Share
Operating Performance: |
|
| Net asset
value, beginning of period |
|
$13.61 |
|
|
$11.97 |
|
|
$11.72 |
|
|
$10.00 |
|
|
$13.65 |
|
|
$12.00 |
|
|
$11.80 |
|
|
$10.00 |
|
|
| Investment
income (loss) — net |
|
(.07 |
) |
|
.06 |
|
|
(.01 |
) |
|
.09 |
|
|
.03 |
|
|
.16 |
|
|
.01 |
|
|
.18 |
|
|
Realized and
unrealized gain on
investments and foreign currency
transactions— net |
|
1.30 |
|
|
2.96 |
|
|
.73 |
|
|
1.67 |
|
|
1.33 |
|
|
2.98 |
|
|
.72 |
|
|
1.67 |
|
|
| Total from
investment operations |
|
1.23 |
|
|
3.02 |
|
|
.72 |
|
|
1.76 |
|
|
1.36 |
|
|
3.14 |
|
|
.73 |
|
|
1.85 |
|
|
| Less
dividends and distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income — net |
|
(.04 |
) |
|
(.08 |
) |
|
(.03 |
) |
|
(.04 |
) |
|
(.04 |
) |
|
(.12 |
) |
|
(.09 |
) |
|
(.05 |
) |
|
In excess of investment income—net |
|
— |
|
|
(.12 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(.19 |
) |
|
— |
|
|
— |
|
|
Realized gain on investments — net |
|
(.30 |
) |
|
(1.18 |
) |
|
(.44 |
) |
|
— |
|
|
(.30 |
) |
|
(1.18 |
) |
|
(.44 |
) |
|
— |
|
|
| Total
dividends and distributions |
|
(.34 |
) |
|
(1.38 |
) |
|
(.47 |
) |
|
(.04 |
) |
|
(.34 |
) |
|
(1.49 |
) |
|
(.53 |
) |
|
(.05 |
) |
|
| Net asset
value, end of period |
|
$14.50 |
|
|
$13.61 |
|
|
$11.97 |
|
|
$11.72 |
|
|
$14.67 |
|
|
$13.65 |
|
|
$12.00 |
|
|
$11.80 |
|
|
| Total
Investment Return:** |
|
| Based on net
asset value per share |
|
9.29 |
% |
|
25.73 |
% |
|
6.14 |
%# |
|
17.62 |
% |
|
10.23 |
% |
|
26.72 |
% |
|
6.20 |
%# |
|
18.56 |
% |
|
| Ratios to
Average Net Assets: |
|
|
Expenses |
|
1.94 |
% |
|
1.92 |
% |
|
1.98 |
%* |
|
1.99 |
% |
|
1.16 |
% |
|
1.15 |
% |
|
1.21 |
%* |
|
1.22 |
% |
|
| Investment
income (loss) — net |
|
(.52 |
%) |
|
.43 |
% |
|
(.49 |
%)* |
|
.83 |
% |
|
.25 |
% |
|
1.19 |
% |
|
.28 |
%* |
|
1.62 |
% |
|
|
Supplemental Data: |
|
| Net assets,
end of period (in thousands) |
|
$324,169 |
|
|
$363,134 |
|
|
$229,601 |
|
|
$217,341 |
|
|
$418,499 |
|
|
$427,113 |
|
|
$258,868 |
|
|
$237,791 |
|
|
| Portfolio
turnover |
|
70.93 |
% |
|
44.94 |
% |
|
24.49 |
% |
|
77.65 |
% |
|
70.93 |
% |
|
44.94 |
% |
|
24.49 |
% |
|
77.65 |
% |
|
**
|
Total investment
returns exclude the effects of sales charges.
|
†
|
The Fund
commenced operations on November 1, 1996.
|
†
†
|
Based on average
shares outstanding.
|
#
|
Aggregate total
investment return.
|
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[This page intentionally
left blank]
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[This page intentionally
left blank]
MERRILL LYNCH GLOBAL VALUE
FUND, INC.
[FLOW CHART]
----------------------------------
\ POTENTIAL /
-------- INVESTORS --------
| / \ |
| Open an account (two options). |
| ---------------------------------- |
\|/ \|/
1 2
---------------------------------- ----------------------------------
MERRILL LYNCH TRANSFER AGENT
FINANCIAL CONSULTANT
OR SECURITIES DEALER Financial Data Services, Inc.
Advises shareholders on their ADMINISTRATIVE OFFICES
Fund investments. 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 |
| Merrill Lynch Funds Distributor, |
| \ a division of Princeton Funds Distributor, Inc. / |
------ P.O. Box 9081 ------
/ Princeton, New Jersey 08543-9081 \
Arranges for the sale of Fund shares.
-----------------------------------------------------
|
|
\|/
----------------------------- -------------- --------------------------
COUNSEL THE FUND CUSTODIAN
Brown & Wood LLP / \ The Board of / \ Brown Brothers
One World Trade Center ---- Directors ---- Harriman & Co.
New York, New York 10048-0557 \ / oversees the \ / 40 Water Street
Fund. Boston, Massachusetts
Provides legal advice -------------- 02109
to the Fund. /|\ /|\
----------------------------- | | Holds the Fund's assets
| | for safekeeping.
| | --------------------------
-------------------------------------- ------------------------------------
INDEPENDENT AUDITORS MANAGER
Deloitte & Touche LLP Merrill Lynch
Princeton Forrestal Village Asset Management, L.P.
116-300 Village Boulevard
Princeton, New Jersey 08540-6400 ADMINISTRATIVE OFFICES
800 Scudders Mill Road
Audits the financial Plainsboro, New Jersey 08536
statements of the Fund on behalf of
the shareholders. 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 GLOBAL VALUE
FUND, INC.
[GRAPHIC] For More
Information
|
Additional information
about the Fund’s investments is available in the Fund’s annual
and semi-annual reports to shareholders. In the Fund’s annual
report you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund’s
performance during its last fiscal year. You may obtain these reports at
no cost by calling 1-800-MER-FUND.
|
|
The Fund will send you
one copy of each shareholder report and certain other mailings,
regardless of the number of Fund accounts you have. To receive separate
shareholder reports for each account, call your Merrill Lynch Financial
Consultant or write to the Transfer Agent at its mailing address.
Include your name, address, tax identification number and Merrill Lynch
brokerage or mutual fund account number. If you have any questions,
please call your Merrill Lynch Financial Consultant or the Transfer
Agent at 1-800-MER-FUND.
|
|
Statement of Additional Information
|
|
The Fund’s Statement
of Additional Information contains further information about the
|
Fund and is incorporated by
reference (legally considered to be part of this prospectus). You may
request a free copy by writing the Fund at Financial Data Services, Inc.,
P.O. Box 45289, Jacksonville, Florida 32232-5289 or by calling
1-800-MER-FUND.
Contact your Merrill Lynch
Financial Consultant or the Fund, at the telephone number or address
indicated above, if you have any questions.
Information about the Fund
(including the Statement of Additional Information) can be reviewed and
copied at the SEC’s Public Reference Room in Washington, D.C. Call
1-202-942-8090 for information on the operation of the public reference
room. This information is also avail-able 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:
[email protected], or by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-0102.
You should rely only on
the information contained in this Prospectus. No one is authorized to
provide you with information that is different from information contained
in this Prospectus.
Investment Company Act file
#811-7561
Code
#19001-04-00
©
Merrill Lynch Asset Management, L.P.
Prospectus
STATEMENT OF
ADDITIONAL INFORMATION
Merrill Lynch
Global Value Fund, Inc.
P.O. Box 9011,
Princeton, New Jersey 08543-9011 Ÿ Phone No. (609)
282-2800
Merrill Lynch Global Value Fund, Inc. (the
“Fund”) is a non-diversified, open-end management investment
company that seeks long-term capital appreciation by investing primarily
in equity securities of issuers located in various foreign countries and
the United States that Merrill Lynch Asset Management, L.P., the manager
of the Fund (“MLAM” or the “Manager”), believes
represent investment value. The Manager will seek to identify securities
whose market prices are low when compared to certain valuation
measurements, and, therefore, represent investment value. The Fund may
employ a variety of techniques, including derivative investments, to hedge
against market and currency risk or gain exposure to equity markets. There
can be no assurance that the Fund’s investment objective will be
achieved. For more information on the Fund’s investment objective and
policies, see “Investment Objective and Policies.”
Pursuant to the Merrill Lynch Select
Pricing
SM
System, the Fund
offers four classes of shares, each with a different combination of sales
charges, ongoing fees and other features. The Merrill Lynch Select
Pricing
SM
System permits an
investor to choose the method of purchasing shares that the investor
believes is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares and other relevant
circumstances. See “Purchase of Shares.”
This Statement of Additional Information of
the Fund is not a prospectus and should be read in conjunction with the
Prospectus of the Fund, dated April 20, 2000 (the “Prospectus”),
which has been filed with the Securities and Exchange Commission (the
“Commission”) and can be obtained, without charge, by calling
(800) MER-FUND or by writing the Fund at the above address. The Prospectus
is incorporated by reference into this Statement of Additional
Information, and this Statement of Additional Information is incorporated
by reference into the Prospectus. The Fund’s audited financial
statements are incorporated in this Statement of Additional Information by
reference to its 1999 annual report to shareholders. You may request a
copy of the annual report at no charge by calling (800) 456-4587 ext. 789
between 8:00 a.m. and 8:00 p.m. Eastern time on any business
day.
Merrill Lynch
Asset Management — Manager
Merrill Lynch
Funds Distributor — Distributor
The date of this
Statement of Additional Information is April 20, 2000.
TABLE OF
CONTENTS
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to
seek long-term capital appreciation by investing primarily in equity
securities of issuers located in various foreign countries and the United
States that the Manager believes represent investment value.
For purposes of the Fund’s investment
objective, an issuer ordinarily would be considered to be located in the
country under the laws of which it is organized or where the primary
trading market of its securities is located. The Fund, however, may
consider an issuer to be located in a country, without reference to its
domicile or to the primary trading market of its securities, when at least
50% of its non-current assets, capitalization, gross revenues or profits
in any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in such
country. The Fund also may consider a security that is denominated in a
particular country’s currency to be a security of an issuer in such
country without reference to the principal trading market of the security
or to the location of its issuer. Additionally, the Fund may consider a
derivative product tied to securities or issuers located in a particular
country to be the security of an issuer in that country. The Fund also may
consider investment companies to be located in the country or countries in
which they primarily make their portfolio investments.
The securities markets of many countries at
times in the past have moved relatively independently of one another due
to different economic, financial, political and social factors. When such
lack of correlation, or negative correlation, in movements of these
securities markets occurs, it may reduce risk for the Fund’s
portfolio as a whole. This negative correlation also may offset unrealized
gains the Fund has derived from movements in a particular market. To the
extent the various markets move independently, total portfolio volatility
is reduced when the various markets are combined into a single portfolio.
Of course, movements in the various securities markets may be offset by
changes in foreign currency exchange rates. Exchange rates frequently move
independently of securities markets in a particular country. As a result,
gains in a particular securities market may be affected by changes in
exchange rates.
The Fund’s ability and decisions to
purchase or sell portfolio securities may be affected by laws or
regulations relating to the convertibility and repatriation of assets.
Because the shares of the Fund are redeemable on a daily basis on each day
the Fund determines its net asset value in U.S. dollars, the Fund intends
to manage its portfolio so as to give reasonable assurance that it will be
able to obtain U.S. dollars to the extent necessary to meet anticipated
redemptions. Under present conditions, the Manager does not believe that
these considerations will have any significant effect on its portfolio
strategy, although there can be no assurance in this regard.
The U.S. Government has from time to time in
the past imposed restrictions, through taxation and otherwise, on foreign
investments by U.S. investors such as the Fund. If such restrictions
should be reinstituted, it might become necessary for the Fund to invest
all or substantially all of its assets in U.S. securities. In such event,
the Fund would review its investment objective and investment policies to
determine whether changes are appropriate. Any changes in the investment
objective or fundamental policies set forth under “Investment
Restrictions” below would require the approval of the holders of a
majority of the Fund’s outstanding voting securities.
The Fund’s ability and decisions to
purchase or sell foreign portfolio securities may be affected by laws or
regulations relating to the convertibility and repatriation of assets.
Because the shares of the Fund are redeemable on a daily basis on each day
the Fund determines its net asset value in U.S. dollars, the Fund intends
to manage its portfolio so as to give reasonable assurance that it will be
able to obtain U.S. dollars to the extent necessary to meet anticipated
redemptions. See “Redemption of Shares.” Under present
conditions, the Manager does not believe that these considerations will
have any significant effect on its portfolio strategy, although there can
be no assurance in this regard.
Description of Certain Investments
Temporary Investments.
The Fund reserves the right, as a temporary defensive measure,
to hold in excess of 35% of its total assets in cash or cash equivalents
in U.S. dollars or foreign currencies and investment grade,
short-term securities including money market securities denominated in U.S.
dollars or foreign currencies (“Temporary Investments”). Under
certain adverse investment conditions, the Fund may restrict the markets
in which its assets will be invested and may increase the proportion of
assets invested in Temporary Investments. Investments made for defensive
purposes will be maintained only during periods in which the Manager
determines that economic or financial conditions are adverse for holding
or being fully invested in equity securities. A portion of the Fund
normally would be held in Temporary Investments in anticipation of
investment in equity securities or to provide for possible
redemptions.
Depositary Receipts.
The Fund may invest in the securities of foreign issuers in the form
of Depositary Receipts or other securities convertible into securities of
foreign issuers. Depositary Receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. American Depositary Receipts (“ADRs”) are receipts
typically issued by an American bank or trust company that evidence
ownership of underlying securities issued by a foreign corporation.
European Depositary Receipts (“EDRs”) are receipts issued in
Europe that evidence a similar ownership arrangement. Global Depositary
Receipts (“GDRs”) are receipts issued throughout the world that
evidence a similar arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets, and EDRs, in bearer form,
are designed for use in European securities markets. GDRs are tradeable
both in the U.S. and in Europe and are designed for use throughout the
world. The Fund may invest in unsponsored Depositary Receipts. The issuers
of unsponsored Depositary Receipts are not obligated to disclose material
information in the United States, and 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 the
Depositary Receipts.
Warrants.
The Fund may invest in warrants, which are securities
permitting, but not obligating, the warrant holder to subscribe for other
securities. Buying a warrant does not make the Fund a shareholder of the
underlying stock. The warrant holder has no right to dividends or votes on
the underlying stock. A warrant does not carry any right to assets of the
issuer, and for this reason investment in warrants may be more speculative
than other equity-based investments.
Convertible Securities.
Convertible securities entitle the holder to receive interest
payments on corporate debt securities or the dividend preference on a
preferred stock until such time as the convertible security matures or is
redeemed or until the holder elects to exercise the conversion
privilege.
The characteristics of convertible
securities include the potential for capital appreciation as the value of
the underlying common stock increases, the relatively high yield received
from dividend or interest payments as compared to common stock dividends
and decreased risks of decline in value relative to the underlying common
stock due to their fixed-income nature. As a result of the conversion
feature, however, the interest rate or dividend preference on a
convertible security is generally less than would be the case if the
securities were issued in nonconvertible form.
In analyzing convertible securities, the
Manager will consider both the yield on the convertible security relative
to its credit quality and the potential capital appreciation that is
offered by the underlying common stock, among other things.
Convertible securities are issued and traded
in a number of securities markets. For the past several years, the
principal markets have been the United States, the Euromarket and Japan.
Issuers during this period have included major corporations domiciled in
the United States, Japan, France, Switzerland, Canada and the United
Kingdom. Even in cases where a substantial portion of the convertible
securities held by the Fund are denominated in United States dollars, the
underlying equity securities may be quoted in the currency of the country
where the issuer is domiciled. With respect to convertible securities
denominated in a currency different from that of the underlying equity
securities, the conversion price may be based on a fixed exchange rate
established at the time the security is issued. As a result, fluctuations
in the exchange rate between the currency in which the debt security is
denominated and the currency in which the share price is quoted will
affect the value of the convertible security. As described herein, the
Fund is authorized to enter into foreign currency hedging transactions in
which it may seek to reduce the effect of such fluctuations.
Apart from currency considerations, the
value of convertible securities is influenced by both the yield of
nonconvertible securities of comparable issuers and by the value of the
underlying common stock. The value of a convertible security viewed
without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its “investment value.
” To the extent interest rates change, the investment value of the
convertible security typically will fluctuate. However, at the same time,
the value of the convertible security will be influenced by its
“conversion value,” which is the market value of the underlying
common stock that would be obtained if the convertible security were
converted. Conversion value fluctuates directly with the price of the
underlying common stock. If, because of a low price for the underlying
common stock the conversion value is substantially below the investment
value of the convertible security, the price of the convertible security
is governed principally by its investment value.
To the extent the conversion value of a
convertible security increases to a point that approximates or exceeds its
investment value, the price of the convertible security will be influenced
principally by its conversion value. A convertible security will sell at a
premium over the conversion value to the extent investors place value on
the right to acquire the underlying common stock while holding a
fixed-income security. The yield and conversion premium of convertible
securities issued in Japan and the Euromarket are frequently determined at
levels that cause the conversion value to affect their market value more
than the securities’ investment value.
Holders of convertible securities generally
have a claim on the assets of the issuer prior to the common stockholders
but may be subordinated to other debt securities of the same issuer. A
convertible security may be subject to redemption at the option of the
issuer at a price established in the charter provision, indenture or other
governing instrument pursuant to which the convertible security was
issued. If a convertible security held by the Fund is called for
redemption, the Fund will be required to redeem the security, convert it
into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at
a premium over the stated principal amount of the debt security under
certain circumstances.
Illiquid or Restricted Securities.
The Fund may invest up to 15% of its net assets in
securities that lack an established secondary trading market or otherwise
are considered illiquid. Liquidity of a security relates to the ability to
dispose easily of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for
a comparable more liquid security. Illiquid securities may trade at a
discount from comparable, more liquid investments. Investment of the Fund
’s assets in illiquid securities may restrict the ability of the Fund
to dispose of its investments in a timely fashion and for a fair price as
well as its ability to take advantage of market opportunities. The risks
associated with illiquidity will be particularly acute where the Fund
’s operations require cash, such as when the Fund redeems shares or
pays dividends, and could result in the Fund borrowing to meet short-term
cash requirements or incurring capital losses on the sale of illiquid
investments.
The Fund may invest in securities that are
not registered (“restricted securities”) under the Securities
Act of 1933, as amended (the “Securities Act”). Restricted
securities may be sold in private placement transactions between the
issuers and their purchasers and may be neither listed on an exchange nor
traded in other established markets. In many cases, privately placed
securities may not be freely transferable under the laws of the applicable
jurisdiction or due to contractual restrictions on resale. As a result of
the absence of a public trading market, privately placed securities may be
less liquid and more difficult to value than publicly traded securities.
To the extent that privately placed securities may be resold in privately
negotiated transactions, the prices realized from the sales, due to
illiquidity, could be less than those originally paid by the Fund or less
than their fair market value. In addition, issuers whose securities are
not publicly traded may not be subject to the disclosure and other
investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed securities held
by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to
bear the expenses of registration. Certain of the Fund’s investments
in private placements may consist of direct investments and may include
investments in smaller, less-seasoned issuers, which may involve greater
risks. These issuers may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. In
making investments in such securities, the Fund may obtain access to
material nonpublic information which may restrict the Fund’s ability
to conduct portfolio transactions in such securities.
144A Securities.
The Fund may purchase restricted securities that can
be offered and sold to “qualified institutional buyers” under
Rule 144A under the Securities Act. The Board of Directors has determined
to treat as liquid Rule 144A securities that are either freely tradable in
their primary markets offshore or have been determined to be liquid in
accordance with the policies and procedures adopted by the Fund’s
Board. The Board has adopted guidelines and delegated to the Manager the
daily function of determining and monitoring liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
ultimately responsible for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities
sold and offered under Rule 144A will continue to develop, the Board will
carefully monitor the Fund’s investments in these securities. This
investment practice could have the effect of increasing the level of
illiquidity in the Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these securities.
Investment in Other Investment
Companies. The Fund may invest in other
investment companies whose investment objectives and policies are
consistent with those of the Fund. In accordance with the Investment
Company Act, the Fund may invest up to 10% of its total assets in
securities of other investment companies. In addition, under the
Investment Company Act the Fund may not own more than 3% of the total
outstanding voting stock of any investment company and not more than 5% of
the value of the Fund’s total assets may be invested in the
securities of any investment company. If the Fund acquires shares in
investment companies, shareholders would bear both their proportionate
share of expenses in the Fund (including management and advisory fees)
and, indirectly, the expenses of such investment companies (including
management and advisory fees). Investments by the Fund in wholly owned
investment entities created under the laws of certain countries will not
be deemed an investment in other investment companies.
European Economic and
Monetary Union. For a number of years, certain
European countries have been seeking economic unification that would,
among other things, reduce barriers between countries, increase
competition among companies, reduce government subsidies in certain
industries, and reduce or eliminate currency fluctuations among these
European countries. The Treaty on European Union (the “Maastricht
Treaty”) set out a framework for the European Economic and Monetary
Union (“EMU”) among the countries that comprise the European
Union (“EU”). EMU established a single common European currency
(the “euro”) that was introduced on January 1, 1999 and is
expected to replace the existing national currencies of all EMU
participants by July 1, 2002. EMU took effect for the initial EMU
participants as of January 1, 1999. Certain securities issued in
participating EU countries (beginning with government and corporate bonds)
were redenominated in the euro, and are listed, traded and make dividend
and other payments only in euros.
No assurance can be given that EMU will take
full effect, that all the changes planned for the EU can be successfully
implemented, or that these changes will result in the economic and
monetary unity and stability intended. There is a possibility that EMU
will not be completed, or will be completed but then partially or
completely unwound. Because any participating country may opt out of EMU
within the first three years, it is also possible that a significant
participant could choose to abandon EMU, which could diminish its
credibility and influence. Any of these occurrences could have adverse
effects on the markets of both participating and non-participating
countries, including sharp appreciation or depreciation of participants
’ national currencies and a significant increase in exchange rate
volatility, a resurgence in economic protectionism, an undermining of
confidence in the European markets, an undermining of European economic
stability, the collapse or slowdown of the drive toward European economic
unity, and/or reversion of the attempts to lower government debt and
inflation rates that were introduced in anticipation of EMU. Also,
withdrawal from EMU by an initial participant could cause disruption of
the financial markets as securities redenominated in euros are transferred
back into that country’s national currency, particularly if the
withdrawing country is a major economic power. Such developments could
have an adverse impact on the Fund’s investments in Europe generally
or in specific countries participating in EMU. Gains or losses from euro
conversions may be taxable to Fund shareholders under foreign or, in
certain limited circumstances, U.S. tax laws.
The Fund may use instruments referred to as
“Derivatives.” Derivatives are financial instruments the value
of which is derived from another security, a commodity (such as gold or
oil) or an index ( a measure of value or rates, such as the Standard &
Poor’s 500 Index or the prime lending rate). Derivatives allow the
Fund to increase or decrease the level of risk to which the Fund is
exposed more quickly and efficiently than transactions in other types of
instruments.
Hedging.
The Fund may use Derivatives for hedging purposes. Hedging is a
strategy in which a Derivative is used to offset the risk that other Fund
holdings may decrease in value. Losses on the other investment may be
substantially reduced by gains on a Derivative that reacts in an opposite
manner to market movements. While hedging can reduce losses, it can also
reduce or eliminate gains 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.
The Fund may use Derivative instruments and
trading strategies including the following:
Indexed and Inverse Securities.
The Fund may invest in securities the potential
return of which is based on an index. As an illustration, the Fund may
invest in a debt security that pays interest based on the current value of
an interest rate index, such as the prime rate. The Fund may also invest
in a debt security which returns principal at maturity based on the level
of a securities index or a basket of securities, or based on the relative
changes of two indices. In addition, the Fund may invest in securities the
potential return of which is based inversely on the change in an index,
that is, a security the value of which will move in the opposite direction
of changes to an index. For example, the Fund may invest in securities
that pay a higher rate of interest when a particular index decreases and
pay a lower rate of interest (or do not fully return principal) when the
value of the index increases. If the Fund invests in such securities, it
may be subject to reduced or eliminated interest payments or loss of
principal in the event of an adverse movement in the relevant index or
indices. Indexed and inverse securities involve credit risk, and certain
indexed and inverse securities may involve currency risk, leverage risk
and liquidity risk. The Fund may invest in indexed and inverse securities
for hedging purposes only. When used for hedging purposes, indexed and
inverse securities involve correlation risk.
Options on
Securities and Securities Indices
Purchasing Put Options.
The Fund may purchase put options on securities held in
its portfolio or on securities or interest rate indices which are
correlated with securities held in its portfolio. When the Fund purchases
a put option, in consideration for an upfront payment (the “option
premium”) the Fund acquires a right to sell to another party
specified securities owned by the Fund at a specified price (the
“exercise price”) on or before a specified date (the
“expiration date”), in the case of an option on securities, or
to receive from another party a payment based on the amount a specified
securities index declines below a specified level on or before the
expiration date, in the case of an option on a securities index. The
purchase of a put option limits the Fund’s risk of loss in the event
of a decline in the market value of the portfolio holdings underlying the
put option prior to the option’s expiration date. If the market value
of the portfolio holdings associated with the put option increases rather
than decreases, however, the Fund will lose the option premium and will
consequently realize a lower return on the portfolio holdings than would
have been realized without the purchase of the put. Purchasing a put
option may involve correlation risk, and may also involve liquidity and
credit risk.
Purchasing Call Options.
The Fund may also purchase call options on securities it
intends to purchase or securities or interest rate indices, which are
correlated with the types of securities it intends to purchase. When the
Fund purchases a call option, in consideration for the option premium the
Fund acquires a right to purchase from another party specified securities
at the exercise price on or before the expiration date, in the case of an
option on securities, or to receive from another party a payment based on
the amount a specified securities index increases beyond a specified level
on or before the expiration date, in the case of an option on a securities
index. The purchase of a call option may protect the Fund from having to
pay more for a security as a consequence of increases in the market value
for the security during a period when the Fund is contemplating its
purchase, in the
case of an option on a security, or attempting to identify specific
securities in which to invest in a market the Fund believes to be
attractive, in the case of an option on an index (an “anticipatory
hedge”). In the event the Fund determines not to purchase a security
underlying a call option, however, the Fund may lose the entire option
premium. Purchasing a call option involves correlation risk, and may also
involve liquidity and credit risk.
The Fund is also authorized to purchase put
or call options in connection with closing out put or call options it has
previously sold.
Writing Call Options.
The Fund may write (i.e., sell) call options on
securities held in its portfolio or securities indices the performance of
which correlates with securities held in its portfolio. When the Fund
writes a call option, in return for an option premium the Fund gives
another party the right to buy specified securities owned by the Fund at
the exercise price on or before the expiration date, in the case of an
option on securities, or agrees to pay to another party an amount based on
any gain in a specified securities index beyond a specified level on or
before the expiration date, in the case of an option on a securities
index. The Fund may write call options to earn income, through the receipt
of option premiums. In the event the party to which the Fund has written
an option fails to exercise its rights under the option because the value
of the underlying securities is less than the exercise price, the Fund
will partially offset any decline in the value of the underlying
securities through the receipt of the option premium. By writing a call
option, however, the Fund limits its ability to sell the underlying
securities, and gives up the opportunity to profit from any increase in
the value of the underlying securities beyond the exercise price, while
the option remains outstanding. Writing a call option may involve
correlation risk.
Writing Put Options.
The Fund may also write put options on securities or securities
indices. When the Fund writes a put option, in return for an option
premium the Fund gives another party the right to sell to the Fund a
specified security at the exercise price on or before the expiration date,
in the case of an option on a security, or agrees to pay to another party
an amount based on any decline in a specified securities index below a
specified level on or before the expiration date, in the case of an option
on a securities index. The Fund may write put options to earn income,
through the receipt of option premiums. In the event the party to which
the Fund has written an option fails to exercise its rights under the
option because the value of the underlying securities is greater than the
exercise price, the Fund will profit by the amount of the option premium.
By writing a put option, however, the Fund will be obligated to purchase
the underlying security at a price that may be higher than the market
value of the security at the time of exercise as long as the put option is
outstanding, in the case of an option on a security, or make a cash
payment reflecting any decline in the index, in the case of an option on
an index. Accordingly, when the Fund writes a put option it is exposed to
a risk of loss in the event the value of the underlying securities falls
below the exercise price, which loss potentially may substantially exceed
the amount of option premium received by the Fund for writing the put
option. The Fund will write a put option on a security or a securities
index only if the Fund would be willing to purchase the security at the
exercise price for investment purposes (in the case of an option on a
security) or is writing the put in connection with trading strategies
involving combinations of options — for example, the sale
and purchase of options with identical expiration dates on the same
security or index but different exercise prices (a technique called a
“spread”). Writing a put option may involve substantial leverage
risk.
The Fund is also authorized to sell call or
put options in connection with closing out call or put options it has
previously purchased.
Other than with respect to closing
transactions, the Fund will only write call or put options that are
“covered.” A call or put option will be considered covered if
the Fund has segregated assets with respect to such option in the manner
described in “Risk Factors in Derivatives” below. A call option
will also be considered covered if the Fund owns the securities it would
be required to deliver upon exercise of the option (or, in the case of an
option on a securities index, securities which substantially correlate
with the performance of such index) or owns a call option, warrant or
convertible instrument which is immediately exercisable for, or
convertible into, such security.
The Fund may write put options on underlying
securities exceeding 50% of its net assets, taken at market value. The
Fund will not purchase options on securities (including stock index
options) if as a result of such purchase, the aggregate cost of all
outstanding options on securities held by the Fund would exceed 5% of the
market value of the Fund’s total assets.
Types of Options.
The Fund may engage in transactions in options on
securities or securities indices on exchanges and in the over-the-counter (
“OTC”) markets. In general, exchange-traded options have
standardized exercise prices and expiration dates and require the parties
to post margin against their obligations, and the performance of the
parties’ obligations in connection with such options is guaranteed by
the exchange or a related clearing corporation. OTC options have more
flexible terms negotiated between the buyer and the seller, but generally
do not require the parties to post margin and are subject to greater
credit risk. OTC options also involve greater liquidity risk. See
“Additional Risk Factors of OTC Transactions; Limitation on the Use
of OTC Derivatives” below.
Futures
The Fund may engage in transactions in
futures and options thereon. Futures are standardized, exchange-traded
contracts which obligate a purchaser to take delivery, and a seller to
make delivery, of a specific amount of an asset at a specified future date
at a specified price. No price is paid upon entering into a futures
contract. Rather, upon purchasing or selling a futures contract the Fund
is required to deposit collateral (“margin”) equal to a
percentage (generally less than 10%) of the contract value. Each day
thereafter until the futures position is closed, the Fund will pay
additional margin representing any loss experienced as a result of the
futures position the prior day or be entitled to a payment representing
any profit experienced as a result of the futures position the prior day.
Futures involve substantial leverage risk.
The sale of a futures contract limits the
Fund’s risk of loss through a decline in the market value of
portfolio holdings correlated with the futures contract prior to the
futures contract’s expiration date. In the event the market value of
the portfolio holdings correlated with the futures contract increases
rather than decreases, however, the Fund will realize a loss on the
futures position and a lower return on the portfolio holdings than would
have been realized without the purchase of the futures
contract.
The purchase of a futures contract may
protect the Fund from having to pay more for securities as a consequence
of increases in the market value for such securities during a period when
the Fund was attempting to identify specific securities in which to invest
in a market the Fund believes to be attractive. In the event that such
securities decline in value or the Fund determines not to complete an
anticipatory hedge transaction relating to a futures contract, however,
the Fund may realize a loss relating to the futures position.
The Fund will limit transactions in futures
and options on futures to financial futures contracts (i.e.,
contracts for which the underlying asset is a currency or securities
or interest rate index) purchased or sold for hedging purposes (including
anticipatory hedges). The Fund will further limit transactions in futures
and options on futures to the extent necessary to prevent the Fund from
being deemed a “commodity pool” under regulations of the
Commodity Futures Trading Commission.
Swaps. The
Fund is authorized to enter into equity swap agreements, which are OTC
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified equity security, basket of equity
securities or equity index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different equity security, basket of equity securities or equity index.
Swap agreements may be used to obtain exposure to an equity or market
without owning or taking physical custody of securities in circumstances
in which direct investment is restricted by local law or is otherwise
impractical.
The Fund will enter into an equity swap
transaction only if, immediately following the time the Fund enters into
the transaction, the aggregate notional principal amount of equity swap
transactions to which the Fund is a party would not exceed 5% of the Fund
’s net assets.
Swap agreements entail the risk that a party
will default on its payment obligations to the Fund thereunder. The Fund
will seek to lessen the risk to some extent by entering into a transaction
only if the counterparty meets the current credit requirements for OTC
option counterparties. Swap agreements also bear the risk that the Fund
will not be able to meet its obligation to the counterparty. The Fund,
however, will deposit in a segregated account with its custodian, liquid
securities or cash or cash equivalents or other assets permitted to be so
segregated by the Commission in an amount equal to or greater than the
market value of the liabilities under the swap agreement or
the amount it would cost the Fund initially to make an equivalent direct
investment, plus or minus any amount the Fund is obligated to pay or is to
receive under the swap agreement.
Foreign Exchange
Transactions
The Fund may engage in spot and forward
foreign exchange transactions and currency swaps, purchase and sell
options on currencies and purchase and sell currency futures and related
options thereon (collectively, “Currency Instruments”) for
purposes of hedging against the decline in the value of currencies in
which its portfolio holdings are denominated against the U.S.
dollar.
Forward Foreign Exchange Transactions.
Forward foreign exchange transactions are OTC
contracts to purchase or sell a specified amount of a specified currency
or multinational currency unit at a price and future date set at the time
of the contract. Spot foreign exchange transactions are similar but
require current, rather than future, settlement. The Fund will enter into
foreign exchange transactions only for purposes of hedging either a
specific transaction or a portfolio position. The Fund may enter into a
foreign exchange transaction for purposes of hedging a specific
transaction by, for example, purchasing a currency needed to settle a
security transaction or selling a currency in which the Fund has received
or anticipates receiving a dividend or distribution. The Fund may enter
into a foreign exchange transaction for purposes of hedging a portfolio
position by selling forward a currency in which a portfolio position of
the Fund is denominated or by purchasing a currency in which the Fund
anticipates acquiring a portfolio position in the near future. The Fund
may also hedge portfolio positions through currency swaps, which are
transactions in which one currency is simultaneously bought for a second
currency on a spot basis and sold for the second currency on a forward
basis. Forward foreign exchange transactions involve substantial currency
risk, and also involve credit and liquidity risk.
Currency Futures.
The Fund may also hedge against the decline in the value of a
currency against the U.S. dollar through use of currency futures or
options thereon. Currency futures are similar to forward foreign exchange
transactions except that futures are standardized, exchange-traded
contracts. See “Futures”. Currency futures involve substantial
currency risk, and also involve leverage risk.
Currency Options.
The Fund may also hedge against the decline in the value of a
currency against the U.S. dollar through the use of currency options.
Currency options are similar to options on securities, but in
consideration for an option premium the writer of a currency option is
obligated to sell (in the case of a call option) or purchase (in the case
of a put option) a specified amount of a specified currency on or before
the expiration date for a specified amount of another currency. The Fund
may engage in transactions in options on currencies either on exchanges or
OTC markets. See “Types of Options” above and “Additional
Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives
” below. Currency options involve substantial currency risk, and may
also involve credit, leverage or liquidity risk.
Limitations on Currency Hedging.
The Fund will not speculate in Currency Instruments.
Accordingly, the Fund will not hedge a currency in excess of the aggregate
market value of the securities which it owns (including receivables for
unsettled securities sales), or has committed to or anticipates
purchasing, which are denominated in such currency. The Fund may, however,
hedge a currency by entering into a transaction in a Currency Instrument
denominated in a currency other than the currency being hedged (a
“cross-hedge”). The Fund will only enter into a cross-hedge if
the Manager believes that (i) there is a demonstrable high correlation
between the currency in which the cross-hedge is denominated and the
currency being hedged, and (ii) executing a cross-hedge through the
currency in which the cross-hedge is denominated will be significantly
more cost-effective or provide substantially greater liquidity than
executing a similar hedging transaction by means of the currency being
hedged.
Risk Factors in Hedging Foreign
Currency Risks. Hedging transactions involving
Currency Instruments involve substantial risks, including correlation
risk. While the Fund’s use of Currency Instruments to effect hedging
strategies is intended to reduce the volatility of the net asset value of
the Fund’s shares, the net asset value of the Fund’s shares will
fluctuate. Moreover, although Currency Instruments will be used with the
intention of hedging against adverse currency movements, transactions in
Currency Instruments involve the risk that anticipated currency movements
will not be accurately predicted and that the Fund’s hedging
strategies will be ineffective. To the extent that the Fund hedges against
anticipated currency movements which do not occur, the
Fund may realize losses, and decreases its total return, as the result of
its hedging transactions. Furthermore, the Fund will only engage in
hedging activities from time to time and may not be engaging in hedging
activities when movements in currency exchange rates occur.
It may not be possible for the Fund to hedge
against currency exchange rate movements, even if correctly anticipated,
in the event that (i) the currency exchange rate movement is so generally
anticipated that the Fund is not able to enter into a hedging transaction
at an effective price, or (ii) the currency exchange rate movement relates
to a market with respect to which Currency Instruments are not available
and it is not possible to engage in effective foreign currency
hedging.
Risk Factors in
Derivatives
Derivatives are volatile and involve
significant risks, including:
Credit Risk — the
risk that the counterparty 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 two 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 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.
Use of Derivatives for hedging purposes
involves correlation risk. If the value of the Derivative moves more or
less than the value of the hedged instruments the Fund will experience a
gain or loss which will not be completely offset by movements in the value
of the hedged instruments.
The Fund intends to enter into transactions
involving Derivatives only if there appears to be a liquid secondary
market for such instruments or, in the case of illiquid instruments traded
in OTC transactions, such instruments satisfy the criteria set forth below
under “Additional Risk Factors of OTC Transactions; Limitations on
the Use of OTC Derivatives.” However, there can be no assurance that,
at any specific time, either a liquid secondary market will exist for a
Derivative or the Fund will otherwise be able to sell such instrument at
an acceptable price. It may therefore not be possible to close a position
in a Derivative without incurring substantial losses, if at
all.
Certain transactions in Derivatives (such as
futures transactions or sales of put options) involve substantial leverage
risk and may expose the Fund to potential losses, which exceed the amount
originally invested by the Fund. When the Fund engages in such a
transaction, the Fund will deposit in a segregated account at its
custodian liquid securities with a value at least equal to the Fund’s
exposure, on a mark-to-market basis, to the transaction (as calculated
pursuant to requirements of the Commission). Such segregation will ensure
that the Fund has assets available to satisfy its obligations with respect
to the transaction, but will not limit the Fund’s exposure to
loss.
Additional Risk
Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives
Certain Derivatives traded in OTC markets,
including indexed securities, swaps and OTC options, involve substantial
liquidity risk. The absence of liquidity may make it difficult or
impossible for the Fund to sell such instruments promptly at an acceptable
price. The absence of liquidity may also make it more difficult for the
Fund to ascertain a market value for such instruments. The Fund will
therefore acquire illiquid OTC instruments (i) if the agreement pursuant
to which the instrument is purchased contains a formula price at which the
instrument may be terminated or sold, or (ii) for which the Manager
anticipates the Fund can receive on each business day at least two
independent bids or offers, unless a quotation from only one dealer is
available, in which case that dealer’s quotation may be
used.
Because Derivatives traded in OTC markets
are not guaranteed by an exchange or clearing corporation and generally do
not require payment of margin, to the extent that the Fund has unrealized
gains in such instruments or has deposited collateral with its
counterparty the Fund is at risk that its counterparty will become
bankrupt or otherwise fail to honor its obligations. The Fund will attempt
to minimize the risk that a counterparty will become bankrupt or otherwise
fail to honor its obligations by engaging in transactions in Strategic
Instruments traded in OTC markets only with financial institutions which
have substantial capital or which have provided the Fund with a
third-party guaranty or other credit enhancement.
Other Investment Policies and Practices
Securities Lending.
The Fund may lend securities with a value not exceeding
33 1
/3% of its total
assets to banks, brokers and other financial institutions. In return, the
Fund receives collateral in cash or securities issued or guaranteed by the
U.S. Government which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
This limitation is a fundamental policy and it may not be changed without
the approval of the holders of a majority of the Fund’s outstanding
voting securities, as defined in the Investment Company Act. During the
period of such a loan, the Fund typically receives the income on both the
loaned securities and the collateral and thereby increases its yield. In
certain circumstances, the Fund may receive a flat fee for its loans. Such
loans are terminable at any time and the borrower, after notice, is
required to return borrowed securities within five business days. The Fund
may pay reasonable finder’s, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any
other reason, the Fund could experience delays and costs in gaining access
to the collateral and could suffer a loss to the extent the value of the
collateral falls below the market value of the borrowed securities.
When-Issued Securities, Delayed
Delivery Securities and Forward Commitments.
The Fund may purchase or sell securities that it is entitled to
receive on a when-issued basis. The Fund may also purchase or sell
securities on a delayed delivery basis. The Fund may also purchase or sell
securities through a forward commitment. These transactions involve the
purchase or sale of securities by the Fund at an established price with
payment and delivery taking place in the future. The Fund enters into
these transactions to obtain what is considered an advantageous price to
the Fund at the time of entering into the transaction. The Fund has not
established any limit on the percentage of its assets that may be
committed in connection with these transactions. When the Fund purchases
securities in these transactions, the Fund segregates liquid securities in
an amount equal to the amount of its purchase commitment.
There can be no assurance that a security
purchased on a when-issued basis will be issued or that a security
purchased or sold through a forward commitment will be delivered. The
value of securities in these transactions on the delivery date may be more
or less than the Fund’s purchase price. The Fund may bear the risk of
a decline in the value of the security in these transactions and may not
benefit from an appreciation in the value of the security during the
commitment period.
Standby Commitment Agreements.
The Fund may enter into standby commitment
agreements. These agreements commit the Fund, for a stated period of time,
to purchase a stated amount of securities which may be issued and sold to
the Fund at the option of the issuer. The price of the security is fixed
at the time of the commitment. At the time of entering into the agreement
the Fund is paid a commitment fee, regardless of whether or not the
security is ultimately issued. The Fund will enter into such agreements
for the purpose of investing in the security underlying the commitment at
a price that is considered advantageous to the Fund. The Fund will not
enter into a standby commitment with a remaining term in excess of 45 days
and will limit its investment in such commitments so that the aggregate
purchase price of securities subject to such commitments, together with
the value of portfolio securities subject to legal restrictions on resale
that affect their marketability, will not exceed 15% of its net assets
taken at the time of the commitment. The Fund segregates liquid assets in
an aggregate amount equal to the purchase price of the securities
underlying the commitment.
There can be no assurance that the
securities subject to a standby commitment will be issued, and the value
of the security, if issued, on the delivery date may be more or less than
its purchase price. Since the issuance of
the security underlying the commitment is at the option of the issuer, the
Fund may bear the risk of a decline in the value of such security and may
not benefit from an appreciation in the value of the security during the
commitment period.
The purchase of a security subject to a
standby commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be expected to
be issued, and the value of the security thereafter will be reflected in
the calculation of the Fund’s net asset value. The cost basis of the
security will be adjusted by the amount of the commitment fee. In the
event the security is not issued, the commitment fee will be recorded as
income on the expiration date of the standby commitment.
Repurchase Agreements and Purchase and
Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale
contracts. Repurchase agreements and purchase and sale contracts may be
entered into only with financial institutions which (i) have, in the
opinion of the Manager, substantial capital relative to the Fund’s
exposure, or (ii) have provided the Fund with a third-party guaranty or
other credit enhancement. Under a repurchase agreement or a purchase and
sale contract, the seller agrees, upon entering into the contract with the
Fund, to repurchase the security at a mutually agreed-upon time and price
in a specified currency, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period although it may be affected by
currency fluctuations. In the case of repurchase agreements, the price at
which the trades are conducted do not reflect accrued interest on the
underlying obligation; whereas, in the case of purchase and sale
contracts, the prices take into account accrued interest. Such agreements
usually cover short periods, such as under one week. Repurchase agreements
may be construed to be collateralized loans by the purchaser to the seller
secured by the securities transferred to the purchaser. In the case of a
repurchase agreement, as a purchaser, the Fund will require the seller to
provide additional collateral if the market value of the securities falls
below the repurchase price at any time during the term of the repurchase
agreement; the Fund does not have the right to seek additional collateral
in the case of purchase and sale contracts. In the event of default by the
seller under a repurchase agreement construed to be a collateralized loan,
the underlying securities are not owned by the Fund but only constitute
collateral for the seller’s obligation to pay the repurchase price.
Therefore, the Fund may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. A purchase
and sale contract differs from a repurchase agreement in that the contract
arrangements stipulate that the securities are owned by the Fund. In the
event of a default under such a repurchase agreement or under a purchase
and sale contract, instead of the contractual fixed rate, the rate of
return to the Fund shall be dependent upon intervening fluctuations of the
market value of such securities and the accrued interest on the
securities. In such event, the Fund would have rights against the seller
for breach of contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform. While the
substance of purchase and sale contracts is similar to repurchase
agreements, because of the different treatment with respect to accrued
interest and additional collateral, management believes that purchase and
sale contracts are not repurchase agreements as such term is understood in
the banking and brokerage community. The Fund may not invest more than 15%
of its net assets in repurchase agreements or purchase and sale contracts
maturing in more than seven days together with all other illiquid
investments.
Suitability.
The economic benefit of an investment in the Fund depends upon
many factors beyond the control of the Fund, the Manager and its
affiliates. Because of its emphasis on foreign securities, the Fund should
be considered a vehicle for diversification and not as a balanced
investment program. The suitability for any particular investor of a
purchase of shares in the Fund will depend upon, among other things, such
investor’s investment objectives and such investor’s ability to
accept the risks associated with investing in foreign securities,
including the risk of loss of principal.
The Fund has adopted a number of fundamental
and non-fundamental investment restrictions and policies relating to the
investment of its assets and its activities. The fundamental policies set
forth below may not be changed without the approval of the holders of a
majority of the Fund’s outstanding voting securities (which for this
purpose and under the Investment Company Act of 1940, as amended (the
“Investment Company Act”)
means the lesser of (i) 67% of the Fund’s shares present at a meeting
at which more than 50% of the outstanding shares of the Fund are
represented or (ii) more than 50% of the Fund’s outstanding shares).
The Fund may not:
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(1) Invest more than 25% of its
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).
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(2) Make investments for the
purpose of exercising control or management. Investments by the Fund in
wholly-owned investment entities created under the laws of certain
countries will not be deemed to be the making of investments for the
purpose of exercising control or management.
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(3) Purchase or sell real
estate, except that, to the extent permitted by applicable law, the Fund
may invest in securities directly or indirectly secured by real estate
or interests therein or issued by companies which invest in real estate
or interests therein.
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(4) Make loans to other
persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit,
bankers’ acceptances and repurchase agreements and 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 Prospectus and this Statement of Additional
Information, as they may be amended from time to time.
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(5) Issue senior securities to
the extent such issuance would violate applicable law.
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(6) 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 the Prospectus and this 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.
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(7) Underwrite securities of
other issuers, except insofar as the Fund technically may be deemed an
underwriter under the Securities Act, in selling portfolio
securities.
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(8) Purchase or sell
commodities or contracts on commodities, except to the extent that the
Fund may do so in accordance with applicable law and the Fund’s
Prospectus and Statement of Additional Information, as they may be
amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
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In addition, the Fund has adopted
non-fundamental investment restrictions that may be changed by the Board
of Directors without shareholder approval. Under the Fund’s
non-fundamental investment restrictions, the Fund may not:
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(a) Purchase securities of
other investment companies, except to the extent such purchases are
permitted by applicable law. Applicable law currently allows the Fund to
purchase the securities of other investment companies if immediately
thereafter not more than (i) 3% of the total outstanding voting stock of
such company is owned by the Fund, (ii) 5% of the Fund’s total
assets, taken at market value, would be invested in any one such
company, (iii) 10% of the Fund’s total assets, taken at market
value, would be invested in such securities, and (iv) the Fund, together
with other investment companies having the same investment adviser and
companies controlled by such companies, owns not more than 10% of the
total outstanding stock of any one closed-end investment company.
Investments by the Fund in wholly-owned investment entities created
under the laws of certain countries will not be deemed an investment in
other investment companies.
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 the Fund
’s shares are owned by another investment company that is part of
the same group of investment companies as the Fund.
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(b) Make short sales of
securities or maintain a short position, except to the extent permitted
by applicable law. The Fund does not, however, currently intend to
engage in short sales, except short sales “against the box.
”
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(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 to a
third party, if at the time of acquisition 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 Fund has otherwise determined to be liquid
pursuant to applicable law. Securities purchased in accordance with Rule
144A under the Securities Act and determined to be liquid by the Board
of Directors are not subject to the limitations set forth in this
investment restriction.
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(d) Notwithstanding fundamental
investment restriction (6) above, borrow money or pledge its assets,
except that the Fund (a) may borrow from a bank as a temporary measure
for extraordinary or emergency purposes or to meet redemptions in
amounts not exceeding 33 1
/3% (taken at
market value) of its total assets and pledge its assets to secure such
borrowings, (b) may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities and (c)
may purchase securities on margin to the extent permitted by applicable
law. However, at the present time, applicable law prohibits the Fund
from purchasing securities on margin. The deposit or payment by the Fund
of initial or variation margin in connection with financial futures
contracts or options transactions is not considered to be the purchase
of a security on margin. The purchase of securities while borrowings are
outstanding will have the effect of leveraging the Fund. Such leveraging
or borrowing increases the Fund’s exposure to capital risk, and
borrowed funds are subject to interest costs which will reduce net
income. The Fund will not purchase securities while borrowings exceed 5%
of its total assets.
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Portfolio securities of the Fund generally
may not be purchased from, sold or loaned to the Manager or its affiliates
or any of their directors, officers or employees, acting as principal,
unless pursuant to a rule or exemptive order under the Investment Company
Act.
The staff of the Commission has taken the
position that purchased OTC options and the assets used as cover for
written OTC options are illiquid securities. Therefore, the Fund has
adopted an investment policy pursuant to which it will not purchase or
sell OTC options if, as a result of any such transaction, the sum of the
market value of OTC options currently outstanding that are held by the
Fund, the market value of the underlying securities covered by OTC call
options currently outstanding that were sold by the Fund and margin
deposits on the Fund’s existing OTC options on financial futures
contracts exceeds 15% of the net assets of the Fund, taken at market
value, together with all other assets of the Fund that are illiquid or are
not otherwise readily marketable. However, if the OTC option is sold by
the Fund to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and if the Fund has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of
the underlying securities as is equal to the repurchase price less the
amount by which the option is “in-the-money” (i.e.,
current market value of the underlying securities minus the option’s
strike price). The repurchase price with the primary dealers is typically
a formula price which is generally based on a multiple of the premium
received for the option, plus the amount by which the option is
“in-the-money.” This policy as to OTC options is not a
fundamental policy of the Fund and may be amended by the Board of
Directors of the Fund without the approval of the Fund’s
shareholders. However, the Fund will not change or modify this policy
prior to the change or modification by the Commission staff of its
position.
In addition, as a non-fundamental policy
which may be changed by the Board of Directors and to the extent required
by the Commission or its staff, the Fund will, for purposes of investment
restriction (1), treat securities issued or guaranteed by the government
of any one foreign country as the obligations of a single
issuer.
As another non-fundamental policy, the Fund
will not invest in securities that are subject to material legal
restrictions on repatriation of assets or (b) cannot be readily resold
because of legal or contractual restrictions or which are not otherwise
readily marketable, including repurchase agreements and purchase and sale
contracts maturing in more than seven days, if, regarding all such
securities, more than 15% of its net assets, taken at market value, would
be invested in such securities.
Because of the affiliation of Merrill Lynch,
Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) with
the Manager, the Fund is prohibited from engaging in certain transactions
involving Merrill Lynch or its affiliates except for brokerage
transactions permitted under the Investment Company Act involving only
usual and customary commissions or transactions permitted pursuant to an
exemptive order under the Investment Company Act. See “Portfolio
Transactions.” Without such an exemptive order, the Fund is
prohibited from engaging in portfolio transactions with Merrill Lynch or
its affiliates acting as principal.
Non-Diversified
Status
The Fund is classified as
non-diversified within the meaning of the Investment Company Act, which
means that the Fund is not limited by such Act in the proportion of its
assets that it may invest in securities of a single issuer. The Fund
’s investments are limited, however, in order to allow the Fund to
qualify as a “regulated investment company” under the Internal
Revenue Code of 1986, as amended (the “Code”). See
“Dividends and Taxes — Taxes.” To qualify, the
Fund complies with certain requirements, including limiting its
investments so that at the close of each quarter of the taxable year (i)
not more than 25% of the market value of the Fund’s total assets will
be invested in the securities of a single issuer and (ii) with respect to
50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a
single issuer. The tax-related limitations may be changed by the Directors
of the Fund to the extent necessary to comply with changes to the Federal
tax requirements. A fund that elects to be classified as “diversified
” under the Investment Company Act must satisfy the foregoing 5% and
10% requirements with respect to 75% of its total assets. To the extent
that the Fund assumes large positions in the securities of a small number
of issuers, the Fund’s net asset value may fluctuate to a greater
extent than that of a diversified company as a result of changes in the
financial condition or in the market’s assessment of the issuers, and
the Fund may be more susceptible to any single economic, political or
regulatory occurrence than a diversified company.
The Manager will effect portfolio
transactions without regard to the time the securities have been held, if,
in its judgment, such transactions are advisable in light of a change in
circumstances of a particular company or within a particular industry or
in general market, financial or economic conditions. As a result of its
investment policies, the Fund may engage in a substantial number of
portfolio transactions and the Fund’s portfolio turnover rate may
varty greatly from year to year or during periods within a year. The
portfolio turnover rate is calculated by dividing the lesser of the Fund
’s annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. A high portfolio turnover may
result in negative tax consequences, such as an increase in capital gain
dividends. High portfolio turnover may also involve correspondingly
greater transaction costs in the form of dealer spreads and brokerage
commissions, which are borne directly by the Fund.
The Board of Directors of the Fund consists
of six individuals, four of whom are not “interested persons” of
the Fund as defined in the Investment Company Act (the
“non-interested Directors”). The Directors are responsible for
the overall supervision of the operations of the Fund and perform the
various duties imposed on the directors of investment companies by the
Investment Company Act.
Information about the
Directors, executive officers and the portfolio manager of the Fund,
including their ages and their principal occupations for at least the last
five years, is set forth below. Unless otherwise noted, the address of
each Director, executive officer and the portfolio manager is P.O. Box
9011, Princeton, New Jersey 08543-9011.
TERRY
K. GLENN
(59) — President and Director(1)(2) —
Executive Vice President of the Manager and Fund Asset Management,
L.P. (“FAM”) (which terms as used herein include their corporate
predecessors) since 1983; President of Princeton Funds Distributor, Inc. (
“PFD”) since 1986 and Director thereof since 1991; Executive
Vice President and Director of Princeton Services, Inc. (“Princeton
Services”) since 1993; President of Princeton Administrators, L.P.
since 1988.
CHARLES
C. REILLY
(68) — Director(2)(3) — 9 Hampton
Harbor Road, Hampton Bays, New York 11946. Self-employed financial
consultant since 1990; President and Chief Investment Officer of Verus
Capital, Inc. from 1979 to 1990; Senior Vice President of Arnhold and S.
Bleichroeder, Inc. from 1973 to 1990; Adjunct Professor, Columbia
University Graduate School of Business from 1990 to 1991; Adjunct
Professor, Wharton School, University of Pennsylvania from 1989 to 1990;
Partner, Small Cities Cable Television from 1986 to 1997.
ROSCOE
S. SUDDARTH
(64) — Director(2)(3) — 1761 N Street,
N.W., Washington D.C. 20036. President, Middle East Institute, since 1995;
Foreign Service Officer, United States Foreign Service, 1961 to 1995;
Career Minister, 1989 to 1995; U.S. Ambassador to the Hashemite Kingdom of
Jordan, 1987 to 1990; Deputy Inspector General, U.S. Department of State,
1991 to 1994.
RICHARD
R. WEST
(62) — Director(2)(3) — Box 604, Genoa,
Nevada 89411. Professor of Finance since 1984, Dean from 1984 to 1993 and
currently Dean Emeritus of New York University Leonard N. Stern School of
Business Administration; Director of Bowne & Co., Inc. (financial
printers), Vornado Realty Trust, Inc. (real estate holding company) and
Alexander’s, Inc. (real estate company).
ARTHUR
ZEIKEL
(67) — Director(1)(2) — 300 Woodland
Avenue, Westfield, New Jersey 07090. Chairman of the Manager and FAM from
1997 to 1999 and President thereof from 1977 to 1997; Chairman of
Princeton Services from 1997 to 1999, Director thereof from 1993 to 1999
and President thereof from 1993 to 1997; Executive Vice President of
Merrill Lynch & Co., Inc. (“ML & Co.”) from 1990 to
1999.
EDWARD
D. ZINBARG
(65) — Director(2)(3) — 5 Hardwell
Road, Short Hills, New Jersey 07078-2117. Executive Vice President of The
Prudential Insurance Company of America from 1988 to 1994; Former Director
of Prudential Reinsurance Company and former Trustee of the Prudential
Foundation.
ROBERT
C. DOLL
, JR
. (45) — Senior Vice President(1)(2) —
Senior Vice President of the Manager and FAM since 1999; Senior Vice
President of Princeton Services since 1999; Chief Investment Officer of
OppenheimerFunds, Inc. in 1999 and Executive Vice President thereof from
1991 to 1999.
STEPHEN
I. SILVERMAN
(49) — Senior Vice President and Portfolio
Manager(1)(2) — First Vice President of the Manager
since 1997; Vice President of the Manager from 1983 to 1997; Portfolio
Manager of the Manager since 1983.
DONALD
C. BURKE
(39) — Vice President and Treasurer(1)(2) —
Senior Vice President and Treasurer of the Manager and FAM since
1999; Senior Vice President and Treasurer of Princeton Services since
1999; Vice President of PFD since 1999; First Vice President of the
Manager from 1997 to 1999; Vice President of the Manager from 1990 to
1997; Director of Taxation of the Manager since 1990.
LORI
A. MARTIN
(38) — Secretary(1)(2) — Vice President
of the Manager since 1998; Attorney in private practice from 1989 to
1998.
(1)
|
Interested
person, as defined in the Investment Company Act, of the
Fund.
|
(2)
|
Such Director or
officer is a trustee, director or officer of certain other investment
companies for which the Manager or FAM acts as the investment adviser or
manager.
|
(3)
|
Member of the Fund
’s Audit and Nominating Committee, which is responsible for the
selection of the independent auditors and the selection and nomination
of non-interested Directors.
|
As of April 1, 2000, the
Directors and officers of the Fund as a group (10 persons) owned an
aggregate of less than 1% of the outstanding shares of the Fund. At such
date, Mr. Zeikel, a Director of the Fund, Mr. Glenn, a Director and
officer of the Fund, and the other officers of the Fund owned an aggregate
of less than 1% of the outstanding shares of common stock of ML &
Co.
Compensation of Directors
The Fund pays each non-interested Director a
fee of $3,500 per year plus $500 per Board meeting attended. The Fund also
compensates each member of the Audit and Nominating Committee (the
“Committee”), which consists of the non-interested Directors, at
a rate of $500 per Committee meeting attended. The Fund pays the Chairman
of the Committee an additional fee of $250 per Committee meeting attended.
The Fund reimburses each non-interested Director for his out-of-pocket
expenses relating to attendance at Board and Committee
meetings.
The following table shows the compensation
earned by the non-interested Directors for the fiscal year ended December
31, 1999 and the aggregate compensation paid to them by all registered
investment companies advised by the Manager and its affiliate, FAM (
“MLAM/FAM-advised funds”), for the calendar year ended December
31, 1999.
Name
|
|
Position
with
Fund
|
|
Compensation
From Fund
|
|
Pension or
Retirement Benefits
Accrued as Part of
Fund Expense
|
|
Estimated
Annual
Benefits upon
Retirement
|
|
Aggregate
Compensation from
Fund and Other
MLAM/FAM-
Advised Funds(1)
|
| Charles C.
Reilly |
|
Director |
|
$7,500 |
|
None |
|
None |
|
$400,025 |
| Roscoe S.
Suddarth
(2)
|
|
Director |
|
—
|
|
None |
|
None |
|
—
|
| Richard R.
West |
|
Director |
|
$7,500 |
|
None |
|
None |
|
$388,775 |
| Edward D.
Zinbarg |
|
Director |
|
$7,500 |
|
None |
|
None |
|
$140,875 |
(1)
|
The Directors
serve on the boards of MLAM/FAM-advised funds as follows: Mr. Reilly (56
registered investment companies consisting of 67 portfolios); Mr.
Suddarth (6 registered investment companies consisting of 4 portfolios);
Mr. West (66 registered investment companies consisting of 70
portfolios); and Mr. Zinbarg (21 registered investment companies
consisting of 19 portfolios).
|
(2)
|
Mr. Suddarth was
elected a Director of the Fund and director of certain other
MLAM/FAM-advised funds on January 20, 2000.
|
Directors of the Fund may purchase Class A
shares of the Fund at net asset value. See “Purchase of Shares
—Initial Sales Charge Alternatives — Class A and Class
D Shares — Reduced Initial Sales Charges —
Purchase Privilege of Certain Persons.”
Management and Advisory Arrangements
Management Services.
The Manager provides the Fund with investment advisory and
management services. Subject to the supervision of the Directors, the
Manager is responsible for the actual management of the Fund’s
portfolio and constantly reviews the Fund’s holdings in light of its
own research analysis and that from other relevant sources. The
responsibility for making decisions to buy, sell or hold a particular
security rests with the Manager. The Manager performs certain of the other
administrative services and provides all the office space, facilities,
equipment and necessary personnel for management of the Fund.
Management Fee.
The Fund has entered into a management agreement with the Manager
(the “Management Agreement”), pursuant to which the Manager
receives for its services to the Fund monthly compensation at the annual
rate of 0.75% of the average daily net assets of the Fund. The table below
sets forth information about the total management fees paid by the Fund to
the Manager for the periods indicated.
Period
|
|
Management
Fee
|
| Fiscal year ended
December 31, 1999 |
|
$21,139,630 |
| Fiscal year ended
December 31, 1998 |
|
$18,489,427 |
| November 1, 1997
to December 31, 1997 |
|
$
2,189,146 |
| Fiscal year ended
October 31, 1997 |
|
$
9,957,530 |
The Manager has entered into
a sub-advisory agreement with Merrill Lynch Asset Management U.K. Limited (
“MLAM U.K.”) pursuant to which MLAM U.K. provides investment
advisory services to the Manager with respect to the Fund. The Manager
paid no fees to MLAM U.K. in the fiscal year ended October 31, 1997, the
period November 1, 1997 to December 31, 1997 and the fiscal years ended
December 31, 1998 and 1999.
Payment of Fund Expenses.
The Management Agreement obligates the Manager to
provide investment advisory services and to pay all compensation of and
furnish office space for officers and employees of the Fund connected with
investment and economic research, trading and investment management of the
Fund, as well as the fees of all Directors of the Fund who are affiliated
persons of the Manager. The Fund pays all other expenses incurred in the
operation of the Fund, including among other things: taxes, expenses for
legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports, prospectuses and statements of
additional information, except to the extent paid by Merrill Lynch Funds
Distributor, a division of PFD (the “Distributor”); charges of
the custodian and sub-custodian, and the transfer agent; expenses of
redemption of shares; SEC fees; expenses of registering the shares under
Federal, state or foreign laws; fees and expenses of non-interested
Directors; accounting and pricing costs (including the daily calculations
of net asset value); insurance; interest; brokerage costs; litigation and
other extraordinary or non-recurring expenses; and other expenses properly
payable by the Fund. Accounting services are provided for the Fund by the
Manager and the Fund reimburses the Manager for its costs in connection
with such services on a semi-annual basis. The Distributor will pay
certain promotional expenses of the Fund incurred in connection with the
offering of shares of the Fund. Certain expenses will be financed by the
Fund pursuant to distribution plans in compliance with Rule 12b-1 under
the Investment Company Act. See “Purchase of Shares —
Distribution Plans.”
Organization of the Manager.
The Manager is a limited partnership, the partners of
which are ML & Co., a financial services holding company and the
parent of Merrill Lynch, and Princeton Services. ML & Co. and
Princeton Services are “controlling persons” of the Manager as
defined under the Investment Company Act because of their ownership of its
voting securities or their power to exercise a controlling influence over
its management or policies.
The following entities may be considered
“controlling persons” of MLAM U.K.: Merrill Lynch Europe PLC
(MLAM U.K.’s parent), a subsidiary of Merrill Lynch International
Holdings, Inc., a subsidiary of Merrill Lynch International, Inc., a
subsidiary of ML & Co.
Duration and Termination.
Unless earlier terminated as described herein, the
Management Agreement and sub-advisory agreement will continue in effect
for a period of two years from the date of execution and will remain in
effect from year to year if approved annually (a) by the Directors of the
Fund or by a majority of the outstanding shares of the Fund and (b) by a
majority of the Directors who are not parties to such contract or
interested persons (as defined in the Investment Company Act) of any such
party. Such contracts are not assignable and may be terminated without
penalty on 60 days’ written notice at the option of either party or
by vote of the shareholders of the Fund.
Transfer Agency Services.
Financial Data Services, Inc. (the “Transfer Agent
”), a subsidiary of ML & Co., acts as the Fund’s Transfer
Agent pursuant to a Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement (the “Transfer Agency Agreement
”). Pursuant to the Transfer Agency Agreement, the Transfer Agent is
responsible for the issuance, transfer and redemption of shares and the
opening and maintenance of shareholder accounts. Pursuant to the Transfer
Agency Agreement, the Transfer Agent receives a fee of $11.00 per Class A
or Class D account and $14.00 per Class B or Class C account and is
entitled to reimbursement for certain transaction charges and
out-of-pocket expenses incurred by the Transfer Agent under the Transfer
Agency Agreement. Additionally, a $.20 monthly closed account charge will
be assessed on all accounts which close during the calendar year.
Application of this fee will commence the month following the month the
account is closed. At the end of the calendar year, no further fees will
be due. For purposes of the Transfer Agency Agreement, the term
“account” includes a shareholder account maintained directly by
the Transfer Agent and any other account representing the beneficial
interest of a person in the relevant share class on a recordkeeping
system, provided the recordkeeping system is maintained by a subsidiary of
ML & Co.
Distribution Expenses.
The Fund has entered into four separate distribution
agreements with the Distributor in connection with the continuous offering
of each class of shares of the Fund (the “Distribution Agreements
”). The Distribution Agreements obligate the Distributor to pay
certain expenses in connection with the offering of each class of shares
of the Fund. After the prospectuses, statements of additional information
and periodic reports have been prepared, set in type and mailed to
shareholders, the Distributor pays for the printing and distribution of
copies thereof used in connection with the offering to dealers and
investors. The Distributor also pays for other supplementary sales
literature and advertising costs. The Distribution Agreements are subject
to the same renewal requirements and termination provisions as the
Management Agreement described above.
The Board of Directors of the Fund has
approved a Code of Ethics under Rule 17j-1 of the Investment Company Act
that covers the Fund and the Fund’s Manager and Distributor (the
“Code of Ethics”). The Code of Ethics significantly restricts
the personal investing activities of all employees of the Manager and
Distributor and, as described below, imposes additional more onerous,
restrictions on fund investment personnel.
The Code of Ethics requires that all
employees of the Manager and Distributor preclear any personal securities
investments (with limited exceptions, such as mutual funds, high-quality
short-term securities and direct obligations of the U.S. government). The
preclearance requirement and associated procedures are designed to
identify any substantive prohibition or limitation applicable to the
proposed investment. The substantive restrictions applicable to all
employees of the Manager and Distributor include a ban on acquiring any
securities in a “hot” initial public offering and a prohibition
from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security that at the time is being
purchased or sold (as the case may be), or to the knowledge of the
employee is being considered for purchase or sale, by any fund advised by
the Manager. Furthermore, the Code of Ethics provides for trading
“blackout periods” which prohibit trading by investment
personnel of the Fund within seven calendar days before or after trading
by the Fund in the same or equivalent security.
Reference is made to “How to Buy, Sell,
Transfer and Exchange Shares” in the Prospectus.
The Fund offers four classes of shares under
the Merrill Lynch Select Pricing
SM
System: shares of
Class A and Class D are sold to investors choosing the initial sales
charge alternatives and shares of Class B and Class C are sold to
investors choosing the deferred sales charge alternatives. Each Class A,
Class B, Class C or Class D share of the Fund represents an identical
interest in the investment portfolio of the Fund and has the same rights,
except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees (also known as service fees) and Class B
and Class C shares bear the expenses of the ongoing distribution fees and
the additional incremental transfer agency costs resulting from the
deferred sales charge arrangements. The contingent deferred sales charges (
“CDSCs”), distribution fees and account maintenance fees that
are imposed on Class B and Class C shares, as well as the account
maintenance fees that are imposed on Class D shares, are imposed directly
against those classes and not against all assets of the Fund and,
accordingly, such charges do not affect the net asset value of any other
class or have any impact on investors choosing another sales charge
option. Dividends paid by the Fund for each class of shares are calculated
in the same manner at the same time and differ only to the extent that
account maintenance and distribution fees and any incremental transfer
agency costs relating to a particular class are borne exclusively by that
class. Each class has different exchange privileges. See “Shareholder
Services — Exchange Privilege.”
Investors should understand that the purpose
and function of the initial sales charges with respect to the Class A and
Class D shares are the same as those of the CDSCs and distribution fees
with respect to the Class B and Class C shares in that the sales charges
and distribution fees applicable to each class provide for the financing
of the distribution of the shares of the Fund. The distribution-related
revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of
shares.
The Merrill Lynch Select
Pricing
SM
System is used by
more than 50 registered investment companies advised by the Manager or
FAM. Funds advised by the Manager or FAM that use the Merrill Lynch Select
Pricing
SM
System are
referred to herein as “Select Pricing Funds.”
The Fund offers its shares at a public
offering price equal to the next determined net asset value per share plus
any sales charge applicable to the class of shares selected by the
investor. The applicable offering price for purchase orders is based upon
the net asset value of the Fund next determined after receipt of the
purchase order by the Distributor. As to purchase orders received by
securities dealers prior to the close of business on the New York Stock
Exchange (the “NYSE”) (generally 4:00 p.m., Eastern time) which
includes orders received after the determination of net asset value on the
previous day, the applicable offering price will be based on the net asset
value on the day the order is placed with the Distributor, provided that
the orders are received by the Distributor prior to 30 minutes after the
close of business on the NYSE on that day. If the purchase orders are not
received prior to 30 minutes after the close of business on the NYSE on
that day, such orders shall be deemed received on the next business day.
Dealers have the responsibility of submitting purchase orders to the Fund
not later than 30 minutes after the close of business on the NYSE in order
to purchase shares at that day’s offering price.
The Fund or the Distributor may suspend the
continuous offering of the Fund’s shares of any class at any time in
response to conditions in the securities markets or otherwise and may
thereafter resume such offering from time to time. Any order may be
rejected by the Fund or the Distributor. Neither the Distributor nor the
dealers are permitted to withhold placing orders to benefit themselves by
a price change. Merrill Lynch may charge its customers a processing fee
(presently $5.35) to confirm a sale of shares to such customers. Purchases
made directly through the Transfer Agent are not subject to the processing
fee.
Initial Sales Charge Alternatives — Class A and Class D
Shares
Investors who prefer an initial sales charge
alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase
Class A shares rather than Class D shares because there is an account
maintenance fee imposed on Class D shares. Investors qualifying for
significantly reduced initial sales charges may find the initial sales
charge alternative particularly attractive because similar sales charge
reductions are not available with respect to the deferred sales charges
imposed in connection with purchases of Class B or Class C shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time also may elect to
purchase Class A or Class D shares, because over time the accumulated
ongoing account maintenance and distribution fees on Class B or Class C
shares may exceed the initial sales charges and, in the case of Class D
shares, the account maintenance fee. Although some investors who
previously purchased Class A shares may no longer be eligible to purchase
Class A shares of other Select Pricing Funds, those previously purchased
Class A shares, together with Class B, Class C and Class D share holdings,
will count toward a right of accumulation which may qualify the investor
for a reduced initial sales charge on new initial sales charge purchases.
In addition, the ongoing Class B and Class C account maintenance and
distribution fees will cause Class B and Class C shares to have higher
expense ratios, pay lower dividends and have lower total returns than the
initial sales charge shares. The ongoing Class D account maintenance fees
will cause Class D shares to have a higher expense ratio, pay lower
dividends and have a lower total return than Class A shares.
The term “purchase,” as used in
the Prospectus and this Statement of Additional Information in connection
with an investment in Class A and Class D shares of the Fund, refers to a
single purchase by an individual or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual,
his or her spouse and their children under the age of 21 years purchasing
shares for his, her or their own account and to single purchases by a
trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account although more than one beneficiary is involved.
The term “purchase” also includes purchases by any “company,
” as that term is defined in the Investment Company Act, but does not
include purchases by any such company that has not been in existence for
at least six months or which has no purpose other than the purchase of
shares of the Fund or shares of other registered investment companies at a
discount; provided, however, that it shall not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser.
Eligible Class
A Investors
Class A shares are offered to a limited
group of investors and also will be issued upon reinvestment of dividends
on outstanding Class A shares. Investors who currently own Class A shares
in a shareholder’s account, are entitled to purchase additional Class
A shares of the Fund in that account. Certain employee-sponsored
retirement or savings plans, including eligible 401(k) plans, may purchase
Class A shares at net asset value provided such plans meet the required
minimum number of eligible employees or required amount of assets advised
by MLAM or any of its affiliates. Class A shares are available at net
asset value to corporate warranty insurance reserve fund programs and U.S.
branches of foreign banking institutions provided that the program or bank
has $3 million or more initially invested in Select Pricing Funds. Also
eligible to purchase Class A shares at net asset value are participants in
certain investment programs including TMA
SM
Managed Trusts to
which Merrill Lynch Trust Company provides discretionary trustee services,
collective investment trusts for which Merrill Lynch Trust Company serves
as trustee and certain purchases made in connection with certain fee-based
programs. In addition, Class A shares are offered at net asset value to ML
& Co. and its subsidiaries and their directors and employees and to
members of the Boards of MLAM/FAM-advised investment companies. Certain
persons who acquired shares of certain MLAM/FAM-advised closed-end funds
in their initial offerings who wish to reinvest the net proceeds from a
sale of their closed-end fund shares of common stock in shares of the Fund
also may purchase Class A shares of the Fund if certain conditions are
met. In addition, Class A shares of the Fund and certain other Select
Pricing Funds are offered at net asset value to shareholders of Merrill
Lynch Senior Floating Rate Fund, Inc. and, if certain conditions are met,
to shareholders of Merrill Lynch Municipal Strategy Fund, Inc. and Merrill
Lynch High Income Municipal Bond Fund, Inc. who wish to reinvest the net
proceeds from a sale of certain of their shares of common stock pursuant
to a tender offer conducted by such funds in shares of the Fund and
certain other Select Pricing Funds.
Class A and
Class D Sales Charge Information
| Class A
Shares |
|
For the
Period
|
|
Gross Sales
Charges
Collected
|
|
Sales Charges
Retained by
Distributor
|
|
Sales Charges
Paid to
Merrill Lynch
|
|
CDSCs
Received on
Redemption of
Load-Waived Shares
|
| Fiscal Year Ended
December 31, 1999 |
|
$
3,984 |
|
$
220 |
|
$
3,764 |
|
$
0 |
| Fiscal Year Ended
December 31, 1998 |
|
$
7,485 |
|
$
456 |
|
$
7,029 |
|
$
0 |
| November 1, 1997
to December 31, 1997 |
|
$
142 |
|
$
3 |
|
$
139 |
|
$
0 |
| Fiscal Year Ended
October 31, 1997 |
|
$
914 |
|
$
49 |
|
$
865 |
|
$
0 |
|
| Class D
Shares |
|
For the
Period
|
|
Gross Sales
Charges
Collected
|
|
Sales Charges
Retained by
Distributor
|
|
Sales Charges
Paid to
Merrill Lynch
|
|
CDSCs
Received on
Redemption of
Load-Waived Shares
|
| Fiscal Year Ended
December 31, 1999 |
|
$
347,289 |
|
$24,624 |
|
$
322,665 |
|
$
4,102 |
| Fiscal Year Ended
December 31, 1998 |
|
$1,013,254 |
|
$66,544 |
|
$
946,710 |
|
$
0 |
| November 1, 1997
to December 31, 1997 |
|
$
78,699 |
|
$
4,932 |
|
$
73,767 |
|
$
0 |
| Fiscal Year Ended
October 31, 1997 |
|
$1,442,391 |
|
$96,252 |
|
$1,346,139 |
|
$10,000 |
The Distributor may reallow discounts to
selected dealers and retain the balance over such discounts. At times the
Distributor may reallow the entire sales charge to such dealers. Since
securities dealers selling Class A and Class D shares of the Fund will
receive a concession equal to most of the sales charge, they may be deemed
to be underwriters under the Securities Act.
Reduced Initial Sales Charges
Reductions in or exemptions from the
imposition of a sales load are due to the nature of the investors and/or
the reduced sales efforts that will be needed to obtain such
investments.
Reinvested Dividends.
No initial sales charges are imposed upon Class A and Class D
shares issued as a result of the automatic reinvestment of
dividends.
Right of Accumulation.
Reduced sales charges are applicable through a right of
accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering
price applicable to the total of (a) the public offering price of the
shares then being purchased plus (b) an amount equal to the then current
net asset value or cost, whichever is higher, of the purchaser’s
combined holdings of all classes of shares of the Fund and of any other
Select Pricing Funds. For any such right of accumulation to be made
available, the Distributor must be provided at the time of purchase, by
the purchaser or the purchaser’s securities dealer, with sufficient
information to permit confirmation of qualification. Acceptance of the
purchase order is subject to such confirmation. The right of accumulation
may be amended or terminated at any time. Shares held in the name of a
nominee or custodian under pension, profit-sharing or other employee
benefit plans may not be combined with other shares to qualify for the
right of accumulation.
Letter of Intent.
Reduced sales charges are applicable to purchases aggregating
$25,000 or more of the Class A or Class D shares of the Fund or any Select
Pricing Funds made within a 13-month period starting with the first
purchase pursuant to a Letter of Intent. The Letter of Intent is available
only to investors whose accounts are established and maintained at the Fund
’s Transfer Agent. The Letter of Intent is not available to employee
benefit plans for which Merrill Lynch provides plan participant
recordkeeping services. The Letter of Intent is not a binding obligation
to purchase any amount of Class A or Class D shares; however, its
execution will result in the purchaser paying a lower sales charge at the
appropriate quantity purchase level. A purchase not originally made
pursuant to a Letter of Intent may be included under a subsequent Letter
of Intent executed within 90 days of such purchase if the Distributor is
informed in writing of this intent within such 90-day period. The value of
Class A and Class D shares of the Fund and of other Select Pricing Funds
presently held, at cost or maximum offering price (whichever is higher),
on the date of the first purchase under the Letter of Intent, may be
included as a credit toward the completion of such Letter, but the reduced
sales charge applicable to the amount covered by such Letter will be
applied only to new purchases. If the total amount of shares does not
equal the amount stated in the Letter of Intent (minimum of $25,000), the
investor will be notified and must pay, within 20 days of the expiration
of such Letter, the difference between the sales charge on the Class A or
Class D shares purchased at the reduced rate and the sales charge
applicable to the shares actually purchased through the Letter. Class A or
Class D shares equal to at least 5.0% of the intended amount will be held
in escrow during the 13-month period (while remaining registered in the
name of the purchaser) for this purpose. The first purchase under the
Letter of Intent must be at least 5.0% of the dollar amount of such
Letter. If a purchase during the term of such Letter would otherwise be
subject to a further reduced sales charge based on the right of
accumulation, the purchaser will be entitled on that purchase and
subsequent purchases to the further reduced percentage sales charge that
would be applicable to a single purchase equal to the total dollar value
of the Class A or Class D shares then being purchased under such Letter,
but there will be no retroactive reduction of the sales charge on any
previous purchase.
The value of any shares redeemed or
otherwise disposed of by the purchaser prior to termination or completion
of the Letter of Intent will be deducted from the total purchases made
under such Letter. An exchange from the Summit Cash Reserves Fund into the
Fund that creates a sales charge will count toward completing a new or
existing Letter of Intent from the Fund.
TMA
SM
Managed
Trusts. Class A shares are offered at net asset
value to TMA
SM
Managed Trusts to
which Merrill Lynch Trust Company provides discretionary trustee
services.
Employee Access
SM
Accounts.
Provided applicable threshold requirements are
met, either Class A or Class D shares are offered at net asset value to
Employee Access
SM
Accounts available
through authorized employers. The initial minimum investment for such
accounts is $500, except that the initial minimum investment for shares
purchased for such accounts pursuant to the Automatic Investment Program
is $50.
Purchase Privilege of Certain
Persons. Directors of the Fund, members of the
Boards of other MLAM/FAM-advised investment companies, ML & Co. and
its subsidiaries (the term “subsidiaries,” when used herein with
respect to ML & Co., includes MLAM, FAM and certain other entities
directly or indirectly wholly owned and controlled by ML & Co.) and
their directors and employees, and any trust, pension, profit-sharing or
other benefit plan for such persons, may purchase Class A shares of the
Fund at net asset value. The Fund realizes economies of scale and
reduction of sales-related expenses by virtue of the familiarity of these
persons with the Fund. Employees and directors or trustees wishing to
purchase shares of the Fund must satisfy the Fund’s suitability
standards.
Class D shares of the Fund are offered at
net asset value, without a sales charge, to an investor that has a
business relationship with a Financial Consultant who joined Merrill Lynch
from another investment firm within six months prior to the date of
purchase by such investor, if the following conditions are satisfied:
first, the investor must advise Merrill Lynch that it will purchase Class
D shares of the Fund with proceeds from a redemption of shares of a mutual
fund that was sponsored by the Financial Consultant’s previous firm
and was subject to a sales charge either at the time of purchase or on a
deferred basis; and, second, the investor must establish that such
redemption had been made within 60 days prior to the investment in the
Fund and the proceeds from the redemption had been maintained in the
interim in cash or a money market fund.
Class D shares of the Fund are also offered
at net asset value, without a sales charge, to an investor that has a
business relationship with a Merrill Lynch Financial Consultant and that
has invested in a mutual fund sponsored by a non-Merrill Lynch company for
which Merrill Lynch has served as a selected dealer and where Merrill
Lynch has either received or given notice that such arrangement will be
terminated (“notice”) if the following conditions are satisfied:
first, the investor must purchase Class D shares of the Fund with proceeds
from a redemption of shares of such other mutual fund and the shares of
such other fund were subject to a sales charge either at the time of
purchase or on a deferred basis; and, second, such purchase of Class D
shares must be made within 90 days after such notice.
Class D shares of the Fund are offered at
net asset value, without a sales charge, to an investor that has a
business relationship with a Merrill Lynch Financial Consultant and that
has invested in a mutual fund for which Merrill Lynch has not served as a
selected dealer if the following conditions are satisfied: first, the
investor must advise Merrill Lynch that it will purchase Class D shares of
the Fund with proceeds from the redemption of shares of such other mutual
fund and that such shares have been outstanding for a period of no less
than six months; and, second, such purchase of Class D shares must be made
within 60 days after the redemption and the proceeds from the redemption
must be maintained in the interim in cash or a money market
fund.
Closed-End Fund Investment Option.
Class A shares of the Fund and certain other
Select Pricing Funds (“Eligible Class A Shares”) are offered at
net asset value to shareholders of certain closed-end funds advised by FAM
or MLAM who purchased such closed-end fund shares prior to October 21,
1994 (the date the Merrill Lynch Select Pricing
SM
System commenced
operations) and wish to reinvest the net proceeds from a sale of their
closed-end fund shares of common stock in Eligible Class A Shares, if the
conditions set forth below are satisfied. Alternatively, closed-end fund
shareholders who purchased such shares on or after October 21, 1994 and
wish to reinvest the net proceeds from a sale of their closed-end fund
shares are offered Class A shares (if eligible to buy Class A shares) or
Class D shares of the Fund and other Select Pricing Funds (“Eligible
Class D Shares”), if the following conditions are met. First, the
sale of closed-end fund shares must be made through Merrill Lynch, and the
net proceeds therefrom must be immediately reinvested in Eligible Class A
or Eligible Class D Shares. Second, the closed-end fund shares must either
have been acquired in the initial public offering or be shares
representing dividends from shares of common stock acquired in such
offering. Third, the closed-end fund shares must have been continuously
maintained in a Merrill Lynch securities account. Fourth, there must be a
minimum purchase of $250 to be eligible for the investment
option.
Shareholders of certain MLAM/FAM-advised
continuously offered closed-end funds may reinvest at net asset value the
net proceeds from a sale of certain shares of common stock of such funds
in shares of the Fund. Upon exercise of this investment option,
shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. will receive
Class A shares of the Fund and shareholders of Merrill Lynch Municipal
Strategy Fund, Inc. and Merrill Lynch High Income Municipal Bond Fund,
Inc. will receive Class D shares of the Fund, except that shareholders
already
owning Class A shares of the Fund will be eligible to purchase additional
Class A shares pursuant to this option, if such additional Class A shares
will be held in the same account as the existing Class A shares and the
other requirements pertaining to the reinvestment privilege are met. In
order to exercise this investment option, a shareholder of one of the
above-referenced continuously offered closed-end funds (an “eligible
fund”) must sell his or her shares of common stock of the eligible
fund (the “eligible shares”) back to the eligible fund in
connection with a tender offer conducted by the eligible fund and reinvest
the proceeds immediately in the designated class of shares of the Fund.
This investment option is available only with respect to eligible shares
as to which no Early Withdrawal Charge or CDSC (each as defined in the
eligible fund’s prospectus) is applicable. Purchase orders from
eligible fund shareholders wishing to exercise this investment option will
be accepted only on the day that the related tender offer terminates and
will be effected at the net asset value of the designated class of the
Fund on such day.
Acquisition of Certain Investment
Companies. Class D shares may be offered at net
asset value in connection with the acquisition of the assets of or merger
or consolidation with a personal holding company or a public or private
investment company.
Deferred Sales Charge Alternatives — Class B and Class C
Shares
Investors choosing the deferred sales charge
alternatives should consider Class B shares if they intend to hold their
shares for an extended period of time and Class C shares if they are
uncertain as to the length of time they intend to hold their assets in
Select Pricing Funds.
Because no initial sales charges are
deducted at the time of the purchase, Class B and Class C shares provide
the benefit of putting all of the investor’s dollars to work from the
time the investment is made. The deferred sales charge alternatives may be
particularly appealing to investors that do not qualify for the reduction
in initial sales charges. Both Class B and Class C shares are subject to
ongoing account maintenance fees and distribution fees; however, the
ongoing account maintenance and distribution fees potentially may be
offset to the extent any return is realized on the additional funds
initially invested in Class B or Class C shares. In addition, Class B
shares will be converted into Class D shares of the Fund after a
conversion period of approximately eight years, and thereafter investors
will be subject to lower ongoing fees.
The public offering price of Class B and
Class C shares for investors choosing the deferred sales charge
alternatives is the next determined net asset value per share without the
imposition of a sales charge at the time of purchase. See “Pricing of
Shares — Determination of Net Asset Value”
below.
Contingent
Deferred Sales Charges — Class B Shares
Class B shares that are redeemed within four
years of purchase may be subject to a CDSC at the rates set forth below
charged as a percentage of the dollar amount subject thereto. In
determining whether a CDSC is applicable to a redemption, the calculation
will be determined in the manner that results in the lowest applicable
rate being charged. The charge will be assessed on an amount equal to the
lesser of the proceeds of redemption or the cost of the shares being
redeemed. Accordingly, no CDSC will be imposed on increases in net asset
value above the initial purchase price. In addition, no CDSC will be
assessed on shares derived from reinvestment of dividends. It will be
assumed that the redemption is first of shares held for over four years or
shares acquired pursuant to reinvestment of dividends and then of shares
held longest during the four-year period. A transfer of shares from a
shareholder’s account to another account will be assumed to be made
in the same order as a redemption.
The following table sets forth the Class B
CDSC:
Year Since
Purchase Payment Made
|
|
CDSC as
a Percentage
of Dollar Amount
Subject to Charge
|
| 0
–1 |
|
4.0% |
| 1
–2 |
|
3.0% |
| 2
–3 |
|
2.0% |
| 3
–4 |
|
1.0% |
| 4 and
thereafter |
|
None |
To provide an example, assume an investor
purchased 100 shares at $10 per share (at a cost of $1,000) and in the
third year after purchase, the net asset value per share is $12 and,
during such time, the investor has acquired 10 additional shares upon
dividend reinvestment. If at such time the investor makes his or her first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject
to a CDSC because of dividend reinvestment. With respect to the remaining
40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate
of 2.0% (the applicable rate in the third year after
purchase).
The Class B CDSC may be waived on
redemptions of shares in connection with certain post-retirement
withdrawals from an Individual Retirement Account (“IRA”) or
other retirement plan or following the death or disability (as defined in
the Internal Revenue Code of 1986, as amended) of a shareholder (including
one who owns the Class B shares as joint tenant with his or her spouse),
provided the redemption is requested within one year of the death or
initial determination of disability or, if later, reasonably promptly
following completion of probate. The Class B CDSC also may be waived on
redemptions of shares by certain eligible 401(a) and 401(k) plans. The
CDSC may also be waived for any Class B shares that are purchased by
eligible 401(k) or eligible 401(a) plans that are rolled over into a
Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such account at the time of redemption. The Class B CDSC may be waived for
any Class B shares that were acquired and held at the time of the
redemption in an Employee Access
SM
Account available
through employers providing eligible 401(k) plans. The Class B CDSC may
also be waived for any Class B shares that are purchased by a Merrill
Lynch rollover IRA that was funded by a rollover from a terminated 401(k)
plan managed by the MLAM Private Portfolio Group and held in such account
at the time of redemption. The Class B CDSC may also be waived or its
terms may be modified in connection with certain fee-based programs. The
Class B CDSC may also be waived in connection with involuntary termination
of an account in which Fund shares are held or for withdrawals through the
Merrill Lynch Systematic Withdrawal Plan. See “Shareholder Services
— Fee Based Programs” and “—
Systematic Withdrawal Plan.”
Employer-Sponsored Retirement or
Savings Plans and Certain Other Arrangements.
Certain employer-sponsored retirement or savings plans and
certain other arrangements may purchase Class B shares with a waiver of
the CDSC upon redemption, based on the number of employees or number of
employees eligible to participate in the plan, the aggregate amount
invested by the plan in specified investments and/or the services provided
by Merrill Lynch to the plan. Such Class B shares will convert into Class
D shares approximately ten years after the plan purchases the first share
of any Select Pricing Fund. Minimum purchase requirements may be waived or
varied for such plans. Additional information regarding purchases by
employer-sponsored retirement or savings plans and certain other
arrangements is available toll-free from Merrill Lynch Business Financial
Services at (800) 237-7777.
Conversion of Class B Shares to Class
D Shares. After approximately eight years (the
“Conversion Period”), Class B shares will be converted
automatically into Class D shares of the Fund. Class D shares are subject
to an ongoing account maintenance fee of 0.25% of the average daily net
assets but are not subject to the distribution fee that is borne by Class
B shares. Automatic conversion of Class B shares into Class D shares will
occur at least once each month (on the “Conversion Date”) on the
basis of the relative net asset value of the shares of the two classes on
the Conversion Date, without the imposition of any sales load, fee or
other charge. Conversion of Class B shares to Class D shares will not be
deemed a purchase or sale of the shares for Federal income tax
purposes.
In addition, shares purchased through
reinvestment of dividends on Class B shares also will convert
automatically to Class D shares. The Conversion Date for dividend
reinvestment shares will be calculated taking into account the length of
time the shares underlying such dividend reinvestment shares were
outstanding. If at the Conversion Date the conversion of Class B shares to
Class D shares of the Fund in a single account will result in less than
$50 worth of Class B shares being left in the account, all of the Class B
shares of the Fund held in the account on the Conversion Date will be
converted to Class D shares of the Fund.
In general, Class B shares of equity Select
Pricing Funds will convert approximately eight years after initial
purchase and Class B shares of taxable and tax-exempt fixed income Select
Pricing Funds will convert approximately ten years after initial purchase.
If, during the Conversion Period, a shareholder exchanges Class B
shares with an eight-year Conversion Period for Class B shares with a
ten-year Conversion Period, or vice versa, the Conversion Period
applicable to the Class B shares acquired in the exchange will apply and
the holding period for the shares exchanged will be tacked on to the
holding period for the shares acquired. The Conversion Period also may be
modified for investors that participate in certain fee-based programs. See
“Shareholder Services — Fee-Based Programs.
”
Class B shareholders of the Fund exercising
the exchange privilege described under “Shareholder Services
—Exchange Privilege” will continue to be subject to the Fund
’s CDSC schedule if such schedule is higher than the CDSC schedule
relating to the Class B shares acquired as a result of the
exchange.
Share certificates for Class B shares of the
Fund to be converted must be delivered to the Transfer Agent at least one
week prior to the Conversion Date applicable to those shares. In the event
such certificates are not received by the Transfer Agent at least one week
prior to the Conversion Date, the related Class B shares will convert to
Class D shares on the next scheduled Conversion Date after such
certificates are delivered.
Contingent
Deferred Sales Charges — Class C Shares
Class C shares that are redeemed within one
year of purchase may be subject to a 1.0% CDSC charged as a percentage of
the dollar amount subject thereto. In determining whether a Class C CDSC
is applicable to a redemption, the calculation will be determined in the
manner that results in the lowest possible rate being charged. The charge
will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no Class
C CDSC will be imposed on increases in net asset value above the initial
purchase price. In addition, no Class C CDSC will be assessed on shares
derived from reinvestment of dividends. It will be assumed that the
redemption is first of shares held for over one year or shares acquired
pursuant to reinvestment of dividends and then of shares held longest
during the one-year period. A transfer of shares from a shareholder’s
account to another account will be assumed to be made in the same order as
a redemption. The Class C CDSC may be waived in connection with
involuntary termination of an account in which Fund shares are held and
withdrawals through the Merrill Lynch Systematic Withdrawal Plans. See
“Shareholder Services—Systematic Withdrawal Plan.” The
Class C CDSC of the Fund and certain other Select Pricing Funds may be
waived with respect to Class C shares purchased by an investor with the
net proceeds of a tender offer made by certain MLAM/FAM-advised closed end
funds, including Merrill Lynch Senior Floating Rate Fund II, Inc. Such
waiver is subject to the requirement that the tendered shares shall have
been held by the investor for a minimum of one year and to such other
conditions as are set forth in the prospectus for the related closed end
fund.
Class B and
Class C Sales Charge Information
Class B
Shares*
|
For the
Period
|
|
CDSCs Received
by Distributor
|
|
CDSCs Paid to
Merrill Lynch
|
| Fiscal Year Ended
December 31, 1999 |
|
$4,816,873 |
|
$4,816,873 |
| Fiscal Year Ended
December 31, 1998 |
|
$3,036,541 |
|
$3,036,541 |
| November 1,
1997 to December 31, 1997 |
|
$
295,557 |
|
$
295,557 |
| Fiscal Year Ended
October 31, 1997 |
|
$1,162,975 |
|
$1,162,975 |
|
|
* Additional Class B
CDSCs payable to the Distributor may have been waived or converted to a
contingent obligation in connection with a shareholder’s
participation in certain fee-based programs. |
|
Class C
Shares
|
For the
Period
|
|
CDSCs Received
by Distributor
|
|
CDSCs Paid
to
Merrill Lynch
|
| Fiscal Year
Ended December 31, 1999 |
|
$
110,169 |
|
$
110,169 |
| Fiscal Year
Ended December 31, 1998 |
|
$
74,482 |
|
$
74,482 |
| November 1,
1997 to December 31, 1997 |
|
$
9,766 |
|
$
9,766 |
| Fiscal Year
Ended October 31, 1997 |
|
$
122,657 |
|
$
122,657 |
Merrill Lynch compensates
its Financial Consultants for selling Class B and Class C shares at the
time of purchase from its own funds. Proceeds from the CDSC and the
distribution fee are paid to the Distributor and are used in whole or in
part by the Distributor to defray the expenses of dealers (including
Merrill Lynch) related to providing distribution-related services to the
Fund in connection with the sale of the Class B and Class C shares, such
as the payment of compensation to financial consultants for selling Class
B and Class C shares from the dealer’s own funds. The combination of
the CDSC and the ongoing distribution fee facilitates the ability of the
Fund to sell the Class B and Class C shares without a sales charge being
deducted at the time of purchase. See “Distribution Plans”
below. Imposition of the CDSC and the distribution fee on Class B and
Class C shares is limited by the National Association of Securities
Dealers, Inc. (the “NASD”) asset-based sales charge rule. See
“Limitations on the Payment of Deferred Sales Charges”
below.
Reference is made to “Fees and Expenses
” in the Prospectus for certain information with respect to the
separate distribution plans for Class B, Class C and Class D shares
pursuant to Rule 12b-1 under the Investment Company Act (each a
“Distribution Plan”) with respect to the account maintenance
and/or distribution fees paid by the Fund to the Distributor with respect
to such classes.
The Distribution Plans for Class B, Class C
and Class D shares each provides that the Fund pay the Distributor an
account maintenance fee relating to the shares of the relevant class,
accrued daily and paid monthly, at the annual rate of 0.25% of the
average daily net assets of the Fund attributable to shares of the
relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) in connection with account maintenance
activities with respect to Class B, Class C and Class D shares. Each of
those classes has exclusive voting rights with respect to the
Distribution Plan adopted with respect to such class pursuant to which
account maintenance and/or distribution fees are paid (except that Class
B shareholders may vote upon any material changes to expenses charged
under the Class D Distribution Plan).
The Distribution Plans for Class B and
Class C shares each provides that the Fund also pay the Distributor a
distribution fee relating to the shares of the relevant class, accrued
daily and paid monthly, at the annual rate of 0.75% of the average daily
net assets of the Fund attributable to the shares of the relevant class
in order to compensate the Distributor and Merrill Lynch (pursuant to a
sub-agreement) for providing shareholder and distribution services and
bearing certain distribution-related expenses of the Fund, including
payments to financial consultants for selling Class B and Class C shares
of the Fund. The Distribution Plans relating to Class B and Class C
shares are designed to permit an investor to purchase Class B and Class C
shares through dealers without the assessment of an initial sales charge
and at the same time permit the dealer to compensate its financial
consultants in connection with the sale of the Class B and Class C
shares.
The Fund’s Distribution Plans are
subject to the provisions of Rule 12b-1 under the Investment Company Act.
In their consideration of each Distribution Plan, the Directors must
consider all factors they deem relevant, including information as to the
benefits of the Distribution Plan to the Fund and each related class of
shareholders. Each Distribution Plan further provides that, so long as
the Distribution Plan remains in effect, the selection and nomination of
non-interested Directors shall be committed to the discretion of the
non-interested Directors then in office. In approving each Distribution
Plan in accordance with Rule 12b-1, the non-interested Directors
concluded that there is reasonable likelihood that each Distribution Plan
will benefit the Fund and its related class of shareholders. Each
Distribution Plan can be terminated at any time, without penalty, by the
vote of a majority of the non-interested Directors or by the vote of the
holders of a majority of the outstanding related class of voting
securities of the Fund. A Distribution Plan cannot be amended to increase
materially the amount to be spent by the Fund without the approval of the
related class of shareholders and all material amendments are required to
be approved by the vote of Directors, including a majority of the
non-interested Directors who have no direct or indirect financial
interest in the Distribution Plan, cast in person at a meeting called for
that purpose. Rule 12b-1 further requires that the Fund preserve copies
of the Distribution Plan and any report made pursuant to such plan for a
period of not less than six years from the date of the Distribution Plan
or such report, the first two years in an easily accessible
place.
Among other things, each Distribution Plan
provides that the Distributor shall provide and the Directors shall
review quarterly reports of the disbursement of the account maintenance
and/or distribution fees paid to the Distributor. Payments under the
Distribution Plans are based on a percentage of average daily net assets
attributable to the shares regardless of the amount of expenses incurred
and, accordingly, distribution-related revenues from the Distribution
Plans may be more or less than distribution-related expenses. Information
with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with
their deliberations as to the continuance of the Class B and Class C
Distribution Plans annually, as of December 31 of each year, on a
“fully allocated accrual” basis and quarterly on a “direct
expense and revenue/cash” basis. On the fully allocated accrual
basis, revenues consist of the account maintenance fees, distribution
fees, the CDSCs and certain other related revenues, and expenses consist
of financial consultant compensation, branch office and regional
operation center selling and transaction processing expenses,
advertising, sales promotion and marketing expenses, corporate overhead
and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and
CDSCs and the expenses consist of financial consultant
compensation.
As of December 31, 1999, the fully
allocated accrual expenses incurred by the Distributor and Merrill Lynch
for the period since the commencement of operations of Class B shares
exceeded the fully allocated accrual revenues by approximately
$16,106,000 (81% of Class B net assets at that date). As of December 31,
1999, direct cash revenues for the period since the commencement of
operations of Class B shares exceeded direct cash expenses by $33,122,720
(.16% of Class B net assets at that date). As of December 31, 1999, the
fully allocated accrual expenses incurred by the Distributor and Merrill
Lynch for the period since the commencement of operations of Class C
shares exceeded the fully allocated accrual revenues by approximately
$673,000 (.19% of Class C net assets at that date). As of December 31,
1999, direct cash revenues for the period since the commencement of
operations of Class C shares exceeded direct cash expenses by $5,950,940
(1.84% of Class C net assets at that date).
For the fiscal year ended December 31,
1999, the Fund paid the Distributor $18,802,926 pursuant to the Class B
Distribution Plan (based on average daily net assets subject to such
Class B Distribution Plan of approximately $1.9 billion), all of which
was paid to Merrill Lynch for providing account maintenance and
distribution-related activities and services in connection with Class B
shares. For the fiscal year ended December 31, 1999, the Fund paid the
Distributor $3,341,948 pursuant to the Class C Distribution Plan (based
on average daily net assets subject to such Class C Distribution Plan of
approximately $334.2 million), all of which was paid to Merrill Lynch for
providing account maintenance and distribution-related activities and
services in connection with Class C shares. For the fiscal year ended
December 31, 1999, the Fund paid the Distributor $1,024,409 pursuant to
the Class D Distribution Plan (based on average daily net assets subject
to such Class D Distribution Plan of approximately $409.8 million), all
of which was paid to Merrill Lynch for providing account maintenance
activities in connection with Class D shares.
Limitations on the Payment of Deferred Sales Charges
The maximum sales charge rule in the
Conduct Rules of the NASD imposes a limitation on certain asset-based
sales charges such as the distribution fee and the CDSC borne by the
Class B and Class C shares but not the account maintenance fee. The
maximum sales charge rule is applied separately to each class. As
applicable to the Fund, the maximum sales charge rule limits the
aggregate of distribution fee payments and CDSCs payable by the Fund to
(1) 6.25% of eligible gross sales of Class B shares and Class C shares,
computed separately (defined to exclude shares issued pursuant to
dividend reinvestments and exchanges), plus (2) interest on the unpaid
balance for the respective class, computed separately, at the prime rate
plus 1% (the unpaid balance being the maximum amount payable minus
amounts received from the payment of the distribution fee and the CDSC).
In connection with the Class B shares, the Distributor has voluntarily
agreed to waive interest charges on the unpaid balance in excess of 0.50%
of eligible gross sales. Consequently, the maximum amount payable to the
Distributor (referred to as the “voluntary maximum”) in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any
time. To the extent payments would exceed the voluntary maximum, the Fund
will not make further payments of the distribution fee with respect to
Class B shares and any CDSCs will be paid to the Fund rather than to the
Distributor; however, the Fund will continue to
make payments of the account maintenance fee. In certain circumstances the
amount payable pursuant to the voluntary maximum may exceed the amount
payable under the NASD formula. In such circumstances payment in excess
of the amount payable under the NASD formula will not be
made.
The following table sets forth comparative
information as of December 31, 1999 with respect to the Class B and Class
C shares of the Fund indicating the maximum allowable payments that can
be made under the NASD maximum sales charge rule and, with respect to the
Class B shares, the Distributor’s voluntary maximum.
|
|
|
Data
Calculated as of December 31, 1999
|
|
|
|
(in
thousands) |
|
|
|
Eligible
Gross
Sales(1)
|
|
Allowable
Aggregate
Sales Charge(2)
|
|
Allowable
Interest on
Unpaid
Balance(3)
|
|
Maximum
Amount
Payable
|
|
Amounts
Previously
Paid to
Distributor(4)
|
|
Aggregate
Unpaid
Balance
|
|
Annual
Distribution
Fee at
Current Net
Asset
Level(5)
|
Class B
Shares for the period
November 1, 1996 (commencement of
operations) to December 31, 1999 |
| Under NASD Rule
as Adopted |
|
$1,397,943 |
|
$87,648 |
|
$16,230 |
|
$103,878 |
|
$45,286 |
|
$58,592 |
|
$13,641 |
| Under Distributor
’s Voluntary Waiver |
|
$1,397,943 |
|
$87,371 |
|
$
6,990 |
|
$
94,361 |
|
$45,286 |
|
$49,075 |
|
$13,641 |
|
|
Class C
Shares, for the period
November 1, 1996 (commencement of
operations) to December 31, 1999 |
| Under NASD Rule
as Adopted |
|
$
334,176 |
|
$21,057 |
|
$
3,998 |
|
$
25,055 |
|
$
6,691 |
|
$18,364 |
|
$
2,431 |
(1)
|
Purchase price
of all eligible Class B or Class C shares sold during the periods
indicated other than shares acquired through dividend reinvestment and
the exchange privilege.
|
(2)
|
Includes amounts
attributable to exchanges from Summit Cash Reserves Fund (“Summit
”) which are not reflected in Eligible Gross Sales. Shares of
Summit can only be purchased by exchange from another fund (the
“redeemed fund”). Upon such an exchange, the maximum
allowable sales charge payment to the redeemed fund is reduced in
accordance with the amount of the redemption. This amount is then added
to the maximum allowable sales charge payment with respect to Summit.
Upon an exchange out of Summit, the remaining balance of this amount is
deducted from the maximum allowable sales charge payment to Summit and
added to the maximum allowable sales charge payment to the fund into
which the exchange is made.
|
(3)
|
Interest is
computed on a monthly basis based upon the prime rate, as reported
in The Wall Street Journal, plus 1.0%, as permitted under the
NASD Rule.
|
(4)
|
Consists of CDSC
payments, distribution fee payments and accruals. See “What are
the Fund’s fees and expenses?” in the Prospectus. This figure
may include CDSCs that were deferred when a shareholder redeemed shares
prior to the expiration of the applicable CDSC period and invested the
proceeds, without the imposition of a sales charge, in Class A shares
in conjunction with the shareholder’s participation in the Merrill
Lynch Mutual Fund Advisor (Merrill Lynch MFA
SM
) Program (the
“MFA Program”). The CDSC is booked as a contingent obligation
that may be payable if the shareholder terminates participation in the
MFA Program.
|
(5)
|
Provided to
illustrate the extent to which the current level of distribution fee
payments (not including any CDSC payments) is amortizing the unpaid
balance. No assurance can be given that payments of the distribution
fee will reach either the voluntary maximum (with respect to Class B
shares) or the NASD maximum (with respect to Class B and Class C
shares).
|
Reference is made to “How to Buy,
Sell, Transfer and Exchange Shares” in the Prospectus.
The Fund is required to redeem for cash all
shares of the Fund upon receipt of a written request in proper form. The
redemption price is the net asset value per share next determined after
the initial receipt of proper notice of redemption. Except for any CDSC
that may be applicable, there will be no charge for redemption if the
redemption request is sent directly to the Transfer Agent. Shareholders
liquidating their holdings will receive upon redemption all dividends
reinvested through the date of redemption.
The right to redeem shares or to receive
payment with respect to any such redemption may be suspended for more
than seven days only for any period during which trading on the New York
Stock Exchange (the “NYSE”) is restricted as determined by the
Commission or the NYSE is closed (other than customary weekend and
holiday closings), for any period during which an emergency exists as
defined by the Commission as a result of which disposal of portfolio
securities or determination of the net asset value of the Fund is not
reasonably practicable, and for such other periods as the Commission may
by order permit for the protection of shareholders of the
Fund.
The value of shares at the time of
redemption may be more or less than the shareholder’s cost,
depending in part on the market value of the securities held by the Fund
at such time.
The Fund has entered into a joint committed
line of credit with other investment companies advised by the Manager and
its affiliates and a syndicate of banks that is intended to provide the
Fund with a temporary source of
cash to be used to
meet redemption requests from Fund shareholders in extraordinary or
emergency circumstances.
A shareholder wishing to redeem shares held
with the Transfer Agent may do so without charge by tendering the shares
directly to the Transfer Agent at Financial Data Services, Inc., P.O. Box
45289, Jacksonville, Florida 32232-5289. Redemption requests delivered
other than by mail should be delivered to Financial Data Services, Inc.,
4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper
notice of redemption in the case of shares deposited with the Transfer
Agent may be accomplished by a written letter requesting redemption.
Proper notice of redemption in the case of shares for which certificates
have been issued may be accomplished by a written letter as noted above
accompanied by certificates for the shares to be redeemed. Redemption
requests should not be sent to the Fund. The redemption request in either
event requires the signature(s) of all persons in whose name(s) the
shares are registered, signed exactly as such name(s) appear(s) on the
Transfer Agent’s register. The signature(s) on the redemption
requests may require a guarantee by an “eligible guarantor
institution” as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”), the existence and
validity of which may be verified by the Transfer Agent through the use
of industry publications. The signatures on the redemption request may
require a guarantee by an “eligible guarantor institution” as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934 (the
“Exchange Act”), the existence and validity of which may be
verified by the Transfer Agent through the use of industry publications.
In the event a signature guarantee is required, notarized signatures are
not sufficient. In general, signature guarantees are waived on
redemptions of less than $50,000 as long as the following requirements
are met: (i) all requests require the signature(s) of all persons in
whose name(s) shares are recorded on the Transfer Agent’s register;
(ii) all checks must be mailed to the stencil address of record on the
Transfer Agent’s register and (iii) the stencil address must not
have changed within 30 days. Certain rules may apply regarding certain
account types such as but not limited to UGMA/UTMA accounts, Joint
Tenancies With Rights of Survivorship, contra broker transactions, and
institutional accounts. In certain instances, the Transfer Agent may
require additional documents such as, but not limited to, trust
instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority.
A shareholder may also redeem shares held
with the Transfer Agent by telephone request. To request a redemption
from your account, call the Transfer Agent at 1-800-MER-FUND. The request
must be made by the shareholder of record and be for an amount less than
$50,000. Before telephone requests will be honored, signature approval
from all shareholders of record on the account must be obtained. The
shares being redeemed must have been held for at least 15 days. Telephone
redemption requests will not be honored in the following situations: the
accountholder is deceased, the proceeds are to be sent to someone other
than the shareholder of record, funds are to be wired to the client
’s bank account, a systematic withdrawal plan is in effect, the
request is by an individual other than the accountholder of record, the
account is held by joint tenants who are divorced, the address on the
account has changed within the last 30 days or share certificates have
been issued on the account.
Since this account feature involves a risk
of loss from unauthorized or fraudulent transactions, the Transfer Agent
will take certain precautions to protect your account from fraud.
Telephone redemption may be refused if the caller is unable to provide:
the account number, the name and address registered on the account and
the social security number registered on the account. The Fund or the
Transfer Agent may temporarily suspend telephone transactions at any
time.
For shareholders redeeming directly with
the Transfer Agent, payments will be mailed within seven days of receipt
of a proper notice of redemption. At various times the Fund may be
requested to redeem shares for which it has not yet received good payment
(e.g., cash, Federal funds or certified check drawn on a U.S.
bank). The Fund may delay or cause to be delayed the mailing of a
redemption check until such time as it has assured itself
that good payment (e.g., cash, Federal funds or certified check
drawn on a U.S. bank) has been collected for the purchase of such Fund
shares, which usually will not exceed 10 days. In the event that a
shareholder account held directly with the Transfer Agent contains a
fractional share balance, such fractional share balance will be
automatically redeemed by the Fund.
The Fund also will repurchase Fund shares
through a shareholder’s listed securities dealer. The Fund normally
will accept orders to repurchase Fund shares by wire or telephone from
dealers for their customers at the net asset value next computed after
the order is placed. Shares will be priced at the net asset value
calculated on the day the request is received, provided that the request
for repurchase is submitted to the dealer prior to the close of business
on the NYSE (generally, the NYSE closes at 4:00 p.m., Eastern time) and
such request is received by the Fund from such dealer not later than 30
minutes after the close of business on the NYSE on the same day. Dealers
have the responsibility of submitting such repurchase requests to the
Fund not later than 30 minutes after the close of business on the NYSE,
in order to obtain that day’s closing price.
The foregoing repurchase arrangements are
for the convenience of shareholders and do not involve a charge by the
Fund (other than any applicable CDSC). Securities firms that do not have
selected dealer agreements with the Distributor, however, may impose a
transaction charge on the shareholder for transmitting the notice of
repurchase to the Fund. Merrill Lynch may charge its customers a
processing fee (presently $5.35) to confirm a repurchase of shares to
such customers. Repurchases made directly through the Transfer Agent on
accounts held at the Transfer Agent are not subject to the processing
fee. The Fund reserves the right to reject any order for repurchase,
which right of rejection might adversely affect shareholders seeking
redemption through the repurchase procedure. However, a shareholder whose
order for repurchase is rejected by the Fund may redeem Fund shares as
set forth above.
Reinstatement Privilege — Class A and Class D
Shares
Shareholders who have redeemed their Class
A or Class D shares of the Fund have a privilege to reinstate their
accounts by purchasing Class A or Class D shares, as the case may be, of
the Fund at net asset value without a sales charge up to the dollar
amount redeemed. The reinstatement privilege may be exercised by sending
a notice of exercise along with a check for the amount to be reinstated
to the Transfer Agent within 30 days after the date the request for
redemption was accepted by the Transfer Agent or the Distributor.
Alternatively, the reinstatement privilege may be exercised through the
investor’s Merrill Lynch Financial Consultant within 30 days after
the date the request for redemption was accepted by the Transfer Agent or
the Distributor. The reinstatement will be made at the net asset value
per share next determined after the notice of reinstatement is received
and cannot exceed the amount of the redemption proceeds.
Determination of Net Asset Value
Reference is made to “How Shares are
Priced” in the Prospectus.
The net asset value of the shares of all
classes of the Fund is determined once daily Monday through Friday as of
the close of business on the NYSE on each day the NYSE is open for
trading based on prices at the time of closing. The NYSE generally closes
at 4:00 p.m., Eastern time. Any assets or liabilities initially expressed
in terms of non-U.S. dollar currencies are translated into U.S. dollars
at the prevailing market rates as quoted by one or more banks or dealers
on the day of valuation. The NYSE is not open for trading on New Year
’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Net asset value is computed by dividing the
value of the securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time, rounded to the nearest cent. Expenses,
including the fees payable to the Manager and Distributor are accrued
daily.
The per share net asset value of Class B,
Class C and Class D shares generally will be lower than the per share net
asset value of Class A shares, reflecting the daily expense accruals of
the account maintenance, distribution and higher transfer agency fees
applicable with respect to Class B and Class C shares, and the daily
expense accruals of the account maintenance fees applicable with respect
to the Class D shares; moreover, the per share net asset value of the
Class B and Class C shares generally will be lower than the per share net
asset value of Class D shares reflecting the daily expense accruals of
the distribution fees and higher transfer agency fees applicable with
respect to Class B and Class C shares of the Fund. It is expected,
however, that the per share net asset value of the four classes will tend
to converge (although not necessarily meet) immediately after the payment
of dividends, which will differ by approximately the amount of the
expense accrual differentials between the classes.
Portfolio securities including ADRs, EDRs
and GDRs that are traded on stock exchanges are valued at the last sale
price (regular way) on the exchange on which such securities are traded
as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price for long
positions, and at the last available ask price for short positions. In
cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the
authority of the Directors as the primary market. Long positions in
securities traded in the OTC market are valued at the last available bid
price in the OTC market prior to the time of valuation. Short positions
in securities traded in the OTC market are valued at the last available
ask price in the OTC market prior to the time of valuation. Portfolio
securities that are traded both in the OTC market and on a stock exchange
are valued according to the broadest and most representative market. When
the Fund writes an option, the amount of the premium received is recorded
on the books of the Fund as an asset and an equivalent liability. The
amount of the liability is subsequently valued to reflect the current
market value of the option written, based upon the last sale price in the
case of exchange-traded options or, in the case of options traded in the
OTC market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options
or, in the case of options traded in the OTC market, the last bid price.
Other investments, including financial futures contracts and related
options, are stated at market value. Securities and assets for which
market quotations are not readily available are stated at fair value as
determined in good faith by or under the direction of the Directors of
the Fund. Such valuations and procedures will be reviewed periodically by
the Directors.
Generally, trading in non-U.S. securities,
as well as U.S. Government securities and money market instruments, is
substantially completed each day at various times prior to the close of
business on the NYSE. The values of such securities used in computing the
net asset value of the Fund’s shares are determined as of such
times. Foreign currency exchange rates are also generally determined
prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business
on the NYSE that may not be reflected in the computation of the Fund
’s net asset value.
Computation of Offering Price Per Share
An illustration of the computation of the
offering price for Class A, Class B, Class C and Class D shares of the
Fund based on the value of the Fund’s net assets and number of
shares outstanding on December 31, 1999 is set forth below.
|
|
|
Class
A
|
|
Class
B
|
|
Class
C
|
|
Class
D
|
| Net
Assets |
|
$195,510,520 |
|
$1,818,746,476 |
|
$324,169,335 |
|
$418,498,625 |
| |
|
|
|
|
|
|
|
|
| Number of Shares
Outstanding |
|
13,281,215 |
|
125,391,911 |
|
22,349,705 |
|
28,531,791 |
| |
|
|
|
|
|
|
|
|
Net Asset Value
Per Share (net assets divided by
number of shares outstanding) |
|
$
14.72 |
|
$
14.50 |
|
$
14.50 |
|
$
14.67 |
Sales Charge
(for Class A and Class D shares:
5.25% of offering price; 5.54% of net asset
value per share)* |
|
.82 |
|
** |
|
** |
|
.81 |
| |
|
|
|
|
|
|
|
|
| Offering
Price |
|
$
15.54 |
|
$
14.50 |
|
$
14.50 |
|
$
15.48 |
| |
|
|
|
|
|
|
|
|
*
|
Rounded to the
nearest one-hundredth percent; assumes maximum sales charge is
applicable.
|
**
|
Class B and
Class C shares are not subject to an initial sales charge but may be
subject to a CDSC on redemption of shares. See “Purchase of Shares
—
Deferred Sales
Charge Alternatives — Class B and Class C Shares”
herein.
|
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the
Board of Directors of the Fund, the Manager is primarily responsible for
the execution of the Fund’s portfolio transactions and the
allocation of brokerage. The Fund has no obligation to deal with any
broker or group of brokers in the execution of transactions in portfolio
securities and does not use any particular broker or dealer. In executing
transactions with brokers and dealers, the Manager seeks to obtain the
best net results for the Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm and
the firm’s risk in positioning a block of securities. While the
Manager generally seeks reasonably competitive commission rates, the Fund
does not necessarily pay the lowest spread or commission available. In
addition, consistent with the Conduct Rules of the NASD and policies
established by the Board of Directors of the Fund, the Manager may
consider sales of shares of the Fund as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund;
however, whether or not a particular broker or dealer sells shares of the
Fund neither qualifies nor disqualifies such broker or dealer to execute
transactions for the Fund.
Subject to obtaining the best price and
execution, brokers who provide supplemental investment research services
to the Manager may receive orders for transactions by the Fund. Such
supplemental research services ordinarily consist of assessments and
analyses of the business or prospects of a company, industry or economic
sector. Information so received will be in addition to and not in lieu of
the services required to be performed by the Manager under the Management
Agreement, and the expenses of the Manager will not necessarily be
reduced as a result of the receipt of such supplemental information. If
in the judgment of the Manager the Fund will benefit from supplemental
research services, the Manager is authorized to pay brokerage commissions
to a broker furnishing such services that are in excess of commissions
that another broker may have charged for effecting the same transaction.
Certain supplemental research services may primarily benefit one or more
other investment companies or other accounts for which the Manager
exercises investment discretion. Conversely, the Fund may be the primary
beneficiary of the supplemental research services received as a result of
portfolio transactions effected for such other accounts or investment
companies.
The Fund anticipates that its brokerage
transactions involving securities of issuers domiciled in countries other
than the United States generally will be conducted primarily on the
principal stock exchanges of such countries. Brokerage commissions and
other transaction costs on foreign stock exchange transactions generally
are higher than in the United States, although the Fund will endeavor to
achieve the best net results in effecting its portfolio transactions.
There generally is less government supervision and regulation of foreign
stock exchanges and brokers than in the United States.
Foreign equity securities may be held by
the Fund in the form of ADRs, EDRs, GDRs or other securities convertible
into foreign equity securities. ADRs, EDRs and GDRs may be listed on
stock exchanges, or traded in over-the-counter markets in the United
States or Europe, as the case may be. ADRs, like other securities traded
in the United States, will be subject to negotiated commission
rates.
The Fund’s ability and decisions to
purchase or sell portfolio securities of foreign issuers may be affected
by laws or regulations relating to the convertibility and repatriation of
assets. Because the shares of the Fund are redeemable on a daily basis in
United States dollars, the Fund intends to manage its portfolio so as to
give reasonable assurance that it will be able to obtain United States
dollars to the extent necessary to meet anticipated redemptions. Under
present conditions, it is not believed that these considerations will
have any significant effect on its portfolio strategy.
Information about the brokerage commissions
paid by the Fund, including commissions paid to Merrill Lynch, is set
forth in the following table:
Period
|
|
Aggregate
Brokerage
Commissions Paid
|
|
Commissions
Paid
to Merrill Lynch
|
| Fiscal year
ended December 31, 1999 |
|
$5,794,487 |
|
$538,795 |
| Fiscal year
ended December 31, 1998 |
|
$4,401,184 |
|
$194,091 |
| November 1, 1997
to December 31, 1997 |
|
$1,277,757 |
|
$175,875 |
| Fiscal year
ended October 31, 1997 |
|
$6,527,182 |
|
$396,160 |
For the fiscal year ended December 31,
1999, the brokerage commissions paid to Merrill Lynch represented 9.30%
of the aggregate brokerage commissions paid and involved 9.70% of the Fund
’s dollar amount of transactions involving payment of brokerage
commissions.
The Fund may invest in certain securities
traded in the OTC market and intends to deal directly with the dealers
who make a market in securities involved, except in those circumstances
in which better prices and execution are available elsewhere. Under the
Investment Company Act, persons affiliated with the Fund and persons who
are affiliated with such affiliated persons are prohibited from dealing
with the Fund as principal in the purchase and sale of securities unless
a permissive order allowing such transactions is obtained from the
Commission. Since transactions in the OTC market usually involve
transactions with the dealers acting as principal for their own accounts,
the Fund will not deal with affiliated persons, including Merrill Lynch
and its affiliates, in connection with such transactions. However, an
affiliated person of the Fund may serve as its broker in OTC transactions
conducted on an agency basis provided that, among other things, the fee
or commission received by such affiliated broker is reasonable and fair
compared to the fee or commission received by non-affiliated brokers in
connection with comparable transactions. In addition, the Fund may not
purchase securities during the existence of any underwriting syndicate
for such securities of which Merrill Lynch is a member or in a private
placement in which Merrill Lynch serves as placement agent except
pursuant to procedures approved by the Board of Directors of the Fund
that either comply with rules adopted by the Commission or with
interpretations of the Commission staff. See “Investment Objective
and Policies — Investment Restrictions.”
Section 11(a) of the Exchange Act generally
prohibits members of the United States national securities exchanges from
executing exchange transactions for their affiliates and institutional
accounts that they manage unless the member (i) has obtained prior
express authorization from the account to effect such transactions, (ii)
at least annually furnishes the account with the aggregate compensation
received by the member in effecting such transactions, and (iii) complies
with any rules the Commission has prescribed with respect to the
requirements of clauses (i) and (ii). To the extent Section 11(a) would
apply to Merrill Lynch acting as a broker for the Fund in any of its
portfolio transactions executed on any such securities exchange of which
it is a member, appropriate consents have been obtained from the Fund and
annual statements as to aggregate compensation will be provided to the
Fund.
The Board of Directors of the Fund has
considered the possibility of seeking to recapture for the benefit of the
Fund brokerage commissions and other expenses of possible portfolio
transactions by conducting portfolio transactions through affiliated
entities. For example, brokerage commissions received by affiliated
brokers could be offset against the advisory fee paid by the Fund to the
Manager. After considering all factors deemed relevant,
the Board of Directors made a determination not to seek such recapture. The
Board will reconsider this matter from time to time.
Because of different objectives or other
factors, a particular security may be bought for one or more clients of
the Manager or an affiliate when one or more clients of the Manager or an
affiliate are selling the same security. If purchases or sales of
securities arise for consideration at or about the same time that would
involve the Fund or other clients or funds for which the Manager or an
affiliate acts as manager transactions in such securities will be made,
insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of
more than one client of the Manager or an affiliate during the same
period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on
price.
The Fund offers a number of shareholder
services and investment plans described below that are designed to
facilitate investment in shares of the Fund. Full details as to each of
such services, copies of the various plans and instructions as to how to
participate in the various services or plans, or how to change options
with respect thereto, can be obtained from the Fund, by calling the
telephone number on the cover page hereof, or from the Distributor or
Merrill Lynch. Certain of these services are available only to U.S.
investors.
Each shareholder whose account is
maintained at the Transfer Agent has an Investment Account and will
receive statements, at least quarterly, from the Transfer Agent. These
statements will serve as transaction confirmations for automatic
investment purchases and the reinvestment of dividends. The statements
will also show any other activity in the account since the preceding
statement. Shareholders will also receive separate confirmations for each
purchase or sale transaction other than automatic investment purchases
and the reinvestment of dividends. A shareholder with an account held at
the Transfer Agent may make additions to his or her Investment Account at
any time by mailing a check directly to the Transfer Agent. A shareholder
may also maintain an account through Merrill Lynch. Upon the transfer of
shares out of a Merrill Lynch brokerage account, an Investment Account in
the transferring shareholder’s name may be opened automatically at
the Transfer Agent.
Share certificates are issued only for full
shares and only upon the specific request of a shareholder who has an
Investment Account. Issuance of certificates representing all or only
part of the full shares in an Investment Account may be requested by a
shareholder directly from the Transfer Agent.
Shareholders may transfer their Fund shares
from Merrill Lynch to another securities dealer that has entered into a
selected dealer agreement with Merrill Lynch. Certain shareholder
services may not be available for the transferred shares. After the
transfer, the shareholder may purchase additional shares of funds owned
before the transfer and all future trading of these assets must be
coordinated by the new firm. If a shareholder wishes to transfer his or
her shares to a securities dealer that has not entered into a selected
dealer agreement with Merrill Lynch, the shareholder must either (i)
redeem his or her shares, paying any applicable CDSC or (ii) continue to
maintain an Investment Account at the Transfer Agent for those shares.
The shareholder may also request the new securities dealer to maintain
the shares in an account at the Transfer Agent registered in the name of
the securities dealer for the benefit of the shareholder whether the
securities dealer has entered into a selected dealer agreement or
not.
Shareholders considering transferring a
tax-deferred retirement account, such as an individual retirement
account, from Merrill Lynch to another securities dealer should be aware
that, if the firm to which the retirement account is to be transferred
will not take delivery of shares of the Fund, a shareholder must either
redeem the shares, paying any applicable CDSC, so that the cash proceeds
can be transferred to the account at the new firm, or such shareholder
must continue to maintain a retirement account at Merrill Lynch for those
shares.
U.S. shareholders of each class of shares
of the Fund have an exchange privilege with certain other Select Pricing
Funds and Summit Cash Reserves Fund (“Summit”), a series of
Financial Institutions Series Trust, which is a Merrill Lynch-sponsored
money market fund specifically designated for exchange by holders of
Class A, Class B, Class C and Class D shares of Select Pricing Funds.
Shares with a net asset value of at least $100 are required to qualify
for the exchange privilege and any shares utilized in an exchange must
have been held by the shareholder for at least 15 days. Before effecting
an exchange, shareholders should obtain a currently effective prospectus
of the fund into which the exchange is to be made. Exercise of the
exchange privilege is treated as a sale of the exchanged shares and a
purchase of the acquired shares for Federal income tax
purposes.
Exchanges of Class A and Class D
Shares.
Class A
shareholders may exchange Class A shares of the Fund for Class A shares
of a second Select Pricing Fund if the shareholder holds any Class A
shares of the second fund in the account in which the exchange is made at
the time of the exchange or is otherwise eligible to purchase Class A
shares of the second fund. If the Class A shareholder wants to exchange
Class A shares for shares of a second Select Pricing Fund, but does not
hold Class A shares of the second fund in his or her account at the time
of the exchange and is not otherwise eligible to acquire Class A shares
of the second fund, the shareholder will receive Class D shares of the
second fund as a result of the exchange. Class D shares also may be
exchanged for Class A shares of a second Select Pricing Fund at any time
as long as, at the time of the exchange, the shareholder holds Class A
shares of the second fund in the account in which the exchange is made or
is otherwise eligible to purchase Class A shares of the second fund.
Class D shares are exchangeable with shares of the same class of other
Select Pricing Funds.
Exchanges of Class A or Class D shares
outstanding (“outstanding Class A or Class D shares”) for Class
A or Class D shares of other Select Pricing Funds or for Class A shares
of Summit, (“new Class A or Class D shares”) are transacted on
the basis of relative net asset value per Class A or Class D share,
respectively, plus an amount equal to the difference, if any, between the
sales charge previously paid on the outstanding Class A or Class D shares
and the sales charge payable at the time of the exchange on the new Class
A or Class D shares. With respect to outstanding Class A or Class D
shares as to which previous exchanges have taken place, the “sales
charge previously paid” shall include the aggregate of the sales
charges paid with respect to such Class A or Class D shares in the
initial purchase and any subsequent exchange. Class A or Class D shares
issued pursuant to dividend reinvestment are sold on a no-load basis in
each of the funds offering Class A or Class D shares. For purposes of the
exchange privilege, Class A or Class D shares acquired through dividend
reinvestment shall be deemed to have been sold with a sales charge equal
to the sales charge previously paid on the Class A or Class D shares on
which the dividend was paid. Based on this formula, Class A and Class D
shares generally may be exchanged into the Class A or Class D shares,
respectively, of the other funds with a reduced sales charge or without a
sales charge.
Exchanges of Class B and Class C
Shares. Certain Select Pricing Funds with
Class B or Class C shares outstanding (“outstanding Class B or Class
C shares”) offer to exchange their Class B or Class C shares for
Class B or Class C shares, respectively, of certain other Select Pricing
Funds or for Class B shares of Summit (“new Class B or Class C shares
”) on the basis of relative net asset value per Class B or Class C
share, without the payment of any CDSC that might otherwise be due on
redemption of the outstanding shares. Class B shareholders of the Fund
exercising the exchange privilege will continue to be subject to the Fund
’s CDSC schedule if such schedule is higher than the CDSC schedule
relating to the new Class B shares acquired through use of the exchange
privilege. In addition, Class B shares of the Fund acquired through use
of the exchange privilege will be subject to the Fund’s CDSC
schedule if such schedule is higher than the CDSC schedule relating to
the Class B shares of the fund from which the exchange has been made. For
purposes of computing the CDSC that may be payable on a disposition of
the new Class B or Class C shares, the holding period for the outstanding
Class B or Class C shares is “tacked” to the holding period of
the new Class B or Class C shares. For example, an investor may exchange
Class B shares of the Fund for those of Merrill Lynch Special Value Fund,
Inc. (“Special Value Fund”) after having held the Fund’s
Class B shares for two and a half years. The 2% CDSC that generally would
apply to a redemption would not apply to the exchange. Three years later
the investor may decide to redeem the Class B shares of Special Value
Fund and receive cash. There will be no CDSC due on this redemption,
since by
“tacking” the two and a half year holding period of Fund Class B
shares to the three-year holding period for the Special Value Fund Class
B shares, the investor will be deemed to have held the Special Value Fund
Class B shares for more than five years.
Exchanges for Shares of a Money
Market Fund. Class A and Class D shares are
exchangeable for Class A shares of Summit and Class B and Class C shares
are exchangeable for Class B shares of Summit. Class A shares of Summit
have an exchange privilege back into Class A or Class D shares of Select
Pricing Funds; Class B shares of Summit have an exchange privilege back
into Class B or Class C shares of Select Pricing Funds and, in the event
of such an exchange, the period of time that Class B shares of Summit are
held will count toward satisfaction of the holding period requirement for
purposes of reducing any CDSC and toward satisfaction of any Conversion
Period with respect to Class B shares. Class B shares of Summit will be
subject to a distribution fee at an annual rate of 0.75% of average daily
net assets of such Class B shares. This exchange privilege does not apply
with respect to certain Merrill Lynch fee-based programs for which
alternative exchange arrangements may exist. Please see your Merrill
Lynch Financial Consultant for further information.
Prior to October 12, 1998, exchanges from
the Fund and other Select Pricing Funds into a money market fund were
directed to certain Merrill Lynch-sponsored money market funds other than
Summit. Shareholders who exchanged Select Pricing Fund shares for shares
of such other money market funds and subsequently wish to exchange those
money market fund shares for shares of the Fund will be subject to the
CDSC schedule applicable to such Fund shares, if any. The holding period
for the money market fund shares will not count toward satisfaction of
the holding period requirement for reduction of the CDSC imposed on such
shares, if any, and, with respect to Class B shares, toward satisfaction
of the Conversion Period. However, the holding period for Class B or
Class C shares received in exchange for such money market fund shares
will be aggregated with the holding period for the fund shares originally
exchanged for such money market fund shares for purposes of reducing the
CDSC or satisfying the Conversion Period.
Exchanges by Participants in the MFA
Program. The exchange privilege is modified
with respect to certain retirement plans which participate in the MFA
Program. Such retirement plans may exchange Class B, Class C or Class D
shares that have been held for at least one year for Class A shares of
the same fund on the basis of relative net asset values in connection
with the commencement of participation in the MFA Program, i.e.,
no CDSC will apply. The one year holding period does not apply to shares
acquired through reinvestment of dividends. Upon termination of
participation in the MFA Program, Class A shares will be re-exchanged for
the class of shares originally held. For purposes of computing any CDSC
that may be payable upon redemption of Class B or Class C shares so
reacquired, or the Conversion Period for Class B shares so reacquired,
the holding period for the Class A shares will be “tacked” to
the holding period for the Class B or Class C shares originally held. The
Fund’s exchange privilege is also modified with respect to purchases
of Class A and Class D shares by non-retirement plan investors under the
MFA Program. First, the initial allocation of assets is made under the
MFA Program. Then, any subsequent exchange under the MFA Program of Class
A or Class D shares of a Select Pricing Fund for Class A or Class D
shares of the Fund will be made solely on the basis of the relative net
asset values of the shares being exchanged. Therefore, there will not be
a charge for any difference between the sales charge previously paid on
the shares of the other Select Pricing Fund and the sales charge payable
on the shares of the Fund being acquired in the exchange under the MFA
Program.
Exercise of the Exchange
Privilege. To exercise the exchange privilege,
a shareholder should contact his or her Merrill Lynch Financial
Consultant, who will advise the Fund of the exchange. Shareholders of the
Fund, and shareholders of the other Select Pricing Funds with shares for
which certificates have not been issued, may exercise the exchange
privilege by wire through their securities dealers. The Fund reserves the
right to require a properly completed Exchange Application.
Telephone exchange requests are also
available in accounts held with the Transfer Agent for amounts up to
$50,000. To request an exchange from your account, call the Transfer
Agent at 1-800-MER-FUND. The request must be from the shareholder of
record. Before telephone requests will be honored, signature approval
from all shareholders of record must be obtained. The shares being
exchanged must have been held for at least 15 days. Telephone requests
for an exchange will not be honored in the following situations: the
accountholder is deceased, the request is by an individual other than the
accountholder of record, the account is held by joint tenants who are
divorced or the address on the account has changed within the last 30
days. Telephone exchanges may be refused
if the caller is unable to provide: the account number, the name and
address registered on the account and the social security number
registered on the account. The Fund or the Transfer Agent may temporarily
suspend telephone transactions at any time. This exchange privilege may
be modified or terminated in accordance with the rules of the Commission.
The Fund reserves the right to limit the number of times an investor may
exercise the exchange privilege. Certain funds may suspend the continuous
offering of their shares to the general public at any time and may
thereafter resume such offering from time to time. The exchange privilege
is available only to U.S. shareholders in states where the exchange
legally may be made. It is contemplated that the exchange privilege may
be applicable to other new mutual funds whose shares may be distributed
by the Distributor.
Certain Merrill Lynch fee-based programs,
including pricing alternatives for securities transactions (each referred
to in this paragraph as a “Program”), may permit the purchase
of Class A shares at net asset value. Under specified circumstances,
participants in certain Programs may deposit other classes of shares
which will be exchanged for Class A shares. Initial or deferred sales
charges otherwise due in connection with such exchanges may be waived or
modified, as may the Conversion Period applicable to the deposited
shares. Termination of participation in a Program may result in the
redemption of shares held therein or the automatic exchange thereof to
another class at net asset value, which may be shares of a money market
fund. In addition, upon termination of participation in a Program, shares
that have been held for less than specified periods within such Program
may be subject to a fee based upon the current value of such shares.
These Programs also generally prohibit such shares from being transferred
to another account at Merrill Lynch, to another broker-dealer or to the
Transfer Agent. Except in limited circumstances (which may also involve
an exchange as described above), such shares must be redeemed and another
class of shares purchased (which may involve the imposition of initial or
deferred sales charges and distribution and account maintenance fees) in
order for the investment not to be subject to Program fees. Additional
information regarding a specific Program (including charges and
limitations on transferability applicable to shares that may be held in
such Program) is available in such Program’s client agreement and
from the Transfer Agent at 1-800-MER-FUND or 1-800-637-3863.
Retirement and Education Savings Plans
Individual retirement accounts and other
retirement and education savings plans are available from Merrill Lynch.
Under these plans, investments may be made in the Fund and certain of the
other mutual funds sponsored by Merrill Lynch as well as in other
securities. There may be fees associated with investing through these
plans. Information with respect to these plans is available on request
from Merrill Lynch.
Capital gains and ordinary income received
in each of the plans referred to above are exempt from Federal taxation
until distributed from the plans. Different tax rules apply to Roth IRA
plans and education savings plans. Investors considering participation in
any retirement or education savings plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such
plan.
Automatic Investment Plans
A shareholder may make additions to an
Investment Account at any time by purchasing Class A shares (if he or she
is an eligible Class A investor) or Class B, Class C or Class D shares at
the applicable public offering price. These purchases may be made either
through the shareholder’s securities dealer, or by mail directly to
the Transfer Agent, acting as agent for such securities dealer. Voluntary
accumulation also can be made through a service known as the Fund’s
Automatic Investment Plan. The Fund would be authorized, on a regular
basis, to provide systematic additions to the Investment Account of such
shareholder through charges of $50 or more to the regular bank account of
the shareholder by either pre-authorized checks or automated clearing
house debits. Alternatively, an investor that maintains a CMA® or CBA
® Account may arrange to have periodic investments made in the Fund
in amounts of $100 ($1 or more for retirement accounts) or more through
the CMA® or CBA® Automated Investment Program.
Automatic Dividend Reinvestment Plan
Unless specific instructions are given as
to the method of payment, dividends will be automatically reinvested,
without sales charge, in additional full and fractional shares of the
Fund. Such reinvestment will be at the net asset value of shares of the
Fund determined as of the close of business on the NYSE on the monthly
payment date for such dividends. No CDSC will be imposed upon redemption
of shares issued as a result of the automatic reinvestment of
dividends.
Shareholders may, at any time, by written
notification to Merrill Lynch if their account is maintained with Merrill
Lynch, or by written notification or by telephone (1-800-MER-FUND) to the
Transfer Agent, if their account is maintained with the Transfer Agent,
elect to have subsequent dividends paid in cash, rather than reinvested
in shares of the Fund or vice versa (provided that, in the event that a
payment on an account maintained at the Transfer Agent would amount to
$10.00 or less, a shareholder will not receive such payment in cash and
such payment will automatically be reinvested in additional shares).
Commencing ten days after the receipt by the Transfer Agent of such
notice, those instructions will be effected. The Fund is not responsible
for any failure of delivery to the shareholder’s address of record
and no interest will accrue on amounts represented by uncashed dividend
checks. Cash payments can also be directly deposited to the shareholder
’s bank account.
Systematic Withdrawal Plan
A shareholder may elect to receive
systematic withdrawals from his or her Investment Account by check or
through automatic payment by direct deposit to his or her bank account on
either a monthly or quarterly basis as provided below. Quarterly
withdrawals are available for shareholders that have acquired shares of
the Fund having a value, based on cost or the current offering price, of
$5,000 or more, and monthly withdrawals are available for shareholders
with shares having a value of $10,000 or more.
At the time of each withdrawal payment,
sufficient shares are redeemed from those on deposit in the shareholder
’s account to provide the withdrawal payment specified by the
shareholder. The shareholder may specify the dollar amount and the class
of shares to be redeemed. Redemptions will be made at net asset value
determined as of the close of business on the NYSE (generally, the NYSE
closes at 4:00 p.m., Eastern time) on the 24th day of each month or the
24th day of the last month of each quarter, whichever is applicable. If
the NYSE is not open for business on such date, the shares will be
redeemed as of the close of business on the NYSE on the following
business day. The check for the withdrawal payment will be mailed or the
direct deposit of the withdrawal payment will be made on the next
business day following redemption. When a shareholder is making
systematic withdrawals, dividends on all shares in the Investment Account
are reinvested automatically in Fund shares. A shareholder’s
Systematic Withdrawal Plan may be terminated at any time, without charge
or penalty, by the shareholder, the Fund, the Transfer Agent or the
Distributor.
With respect to redemptions of Class B or
Class C shares pursuant to a systematic withdrawal plan, the maximum
number of Class B or Class C shares that can be redeemed from an account
annually shall not exceed 10% of the value of shares of such class in
that account at the time the election to join the systematic withdrawal
plan was made. Any CDSC that otherwise might be due on such redemption of
Class B or Class C shares will be waived. Shares redeemed pursuant to a
systematic withdrawal plan will be redeemed in the same order as Class B
or Class C shares are otherwise redeemed. See “Purchase of Shares
— Deferred Sales Charge Alternatives —Class B
and Class C Shares.” Where the systematic withdrawal plan is applied
to Class B shares, upon conversion of the last Class B shares in an
account to Class D shares, the systematic withdrawal plan will be applied
thereafter to Class D shares if the shareholder so elects. If an investor
wishes to change the amount being withdrawn in a systematic withdrawal
plan the investor should contact his or her Merrill Lynch Financial
Consultant.
Withdrawal payments should not be
considered as dividends. Each withdrawal is a taxable event. If periodic
withdrawals continuously exceed reinvested dividends, the shareholder
’s original investment may be reduced correspondingly. Purchases of
additional shares concurrent with withdrawals are ordinarily
disadvantageous to the shareholder because of sales charges and tax
liabilities. The Fund will not knowingly accept purchase orders for
shares of the Fund from investors that maintain a Systematic Withdrawal
Plan unless such purchase is equal to at least one year’s scheduled
withdrawals or $1,200, whichever is greater. Automatic investments may
not be made into an Investment Account in which the shareholder has
elected to make systematic withdrawals.
Alternatively, a
shareholder whose shares are held within a CMA®, CBA® or
Retirement Account may elect to have shares redeemed on a monthly,
bimonthly, quarterly, semiannual or annual basis through the CMA® or
CBA® Systematic Redemption Program. The minimum fixed dollar amount
redeemable is $50. The proceeds of systematic redemptions will be posted
to the shareholder’s account three business days after the date the
shares are redeemed. All redemptions are made at net asset value. A
shareholder may elect to have his or her shares redeemed on the first,
second, third or fourth Monday of each month, in the case of monthly
redemptions, or of every other month, in the case of bimonthly
redemptions. For quarterly, semiannual or annual redemptions, the
shareholder may select the month in which the shares are to be redeemed
and may designate whether the redemption is to be made on the first,
second, third or fourth Monday of the month. If the Monday selected is
not a business day, the redemption will be processed at net asset value
on the next business day. The CMA® or CBA® Systematic Redemption
Program is not available if Fund shares are being purchased within the
account pursuant to the Automated Investment Program. For more
information on the CMA® or CBA® Systematic Redemption Program,
eligible shareholders should contact their Merrill Lynch Financial
Consultant.
The Fund intends to distribute
substantially all of its net investment income, if any. Dividends from
such net investment income will be paid at least annually. All net
realized capital gains, if any, will be distributed to the Fund’s
shareholders at least annually. From time to time, the Fund may declare a
special distribution at or about the end of the calendar year in order to
comply with Federal tax requirements that certain percentages of its
ordinary income and capital gains be distributed during the year. If in
any fiscal year, the Fund has net income from certain foreign currency
transactions, such income will be distributed at least
annually.
See “Shareholder Services —
Automatic Dividend Reinvestment Plan” for information
concerning the manner in which dividends may be reinvested automatically
in shares of the Fund. A shareholder whose account is maintained at the
Transfer Agent or whose account is maintained through Merrill Lynch may
elect in writing to receive any such dividends in cash. Dividends are
taxable to shareholders, as discussed below, whether they are reinvested
in shares of the Fund or received in cash. The per share dividends on
Class B and Class C shares will be lower than the per share dividends on
Class A and Class D shares as a result of the account maintenance,
distribution and higher transfer agency fees applicable with respect to
the Class B and Class C shares; similarly, the per share dividends on
Class D shares will be lower than the per share dividends on Class A
shares as a result of the account maintenance fees applicable with
respect to the Class D shares. See “Pricing of Shares
—Determination of Net Asset Value.”
The Fund intends to continue to qualify for
the special tax treatment afforded regulated investment companies (
“RICs”) under the Internal Revenue Code of 1986, as amended
(the “Code”). As long as it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of
its net ordinary income and net realized capital gains that it
distributes to Class A, Class B, Class C and Class D shareholders
(together, the “shareholders”). The Fund intends to distribute
substantially all of such income.
The Code requires a RIC to pay a
nondeductible 4% excise tax to the extent the RIC does not distribute,
during each calendar year, 98% of its ordinary income, determined on a
calendar year basis, and 98% of its capital gains, determined, in
general, on an October 31 year end, plus certain undistributed amounts
from previous years. While the Fund intends to distribute its income and
capital gains in the manner necessary to minimize imposition of the 4%
excise tax, there can be no assurance that sufficient amounts of the Fund
’s taxable income and capital gains will be distributed to avoid
entirely the imposition of the tax. In such event, the Fund will be
liable for the tax only on the amount by which it does not meet the
foregoing distribution requirements.
Dividends paid by the Fund from its
ordinary income or from an excess of net short-term capital gains over
net long-term capital losses (together referred to hereafter as
“ordinary income dividends”) are taxable to shareholders as
ordinary income. Distributions made from an excess of net long-term
capital gains over net short-term capital
losses (including gains or losses from certain transactions in warrants,
futures and options) (“capital gain
dividends”)
are taxable to shareholders as long-term capital gains, regardless of the
length of time the shareholder has owned Fund shares. Certain categories
of capital gains are taxable at different rates. Any loss upon the sale
or exchange of Fund shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends
received by the shareholder. Distributions in excess of the Fund’s
earnings and profits will first reduce the adjusted tax basis of a holder
’s shares and, after such adjusted tax basis is reduced to zero,
will constitute capital gains to such holder (assuming the shares are
held as a capital asset). Generally not later than 60 days after the
close of its taxable year, the Fund will provide its shareholders with a
written notice designating the amount of any capital gain dividends as
well as any amount of capital gain dividends in the different categories
of capital gain referred to above.
Dividends are taxable to shareholders even
though they are reinvested in additional shares of the Fund. A portion of
the Fund’s ordinary income dividends may be eligible for the
dividends received deduction allowed to corporations under the Code, if
certain requirements are met. For this purpose, the Fund will allocate
dividends eligible for the dividends received deduction among the Class
A, Class B, Class C and Class D shareholders according to a method (which
it believes is consistent with the Commission rule permitting the
issuance and sale of multiple classes of stock) that is based on the
gross income allocable to Class A, Class B, Class C and Class D
shareholders during the taxable year, or such other method as the
Internal Revenue Service may prescribe. If the Fund pays a dividend in
January that was declared in the previous October, November or December
to shareholders of record on a specified date in one of such months, then
such dividend will be treated for tax purposes as being paid by the Fund
and received by its shareholders on December 31 of the year in which such
dividend was declared.
No gain or loss will be recognized by Class
B shareholders on the conversion of their Class B shares into Class D
shares. A shareholder’s basis in the Class D shares acquired will be
the same as such shareholder’s basis in the Class B shares
converted, and the holding period of the acquired Class D shares will
include the holding period for the converted Class B shares.
If a shareholder exercises an exchange
privilege within 90 days of acquiring the shares, then the loss the
shareholder can recognize on the exchange will be reduced (or the gain
increased) to the extent any sales charge paid to the Fund on the
exchanged shares reduces any sales charge the shareholder would have owed
upon the purchase of the new shares in the absence of the exchange
privilege. Instead, such sales charge will be treated as an amount paid
for the new shares.
A loss realized on a sale or exchange of
shares of the Fund will be disallowed if other Fund shares are acquired
(whether through the automatic reinvestment of dividends or otherwise)
within a 61-day period beginning 30 days before and ending 30 days after
the date that the shares are disposed of. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed
loss.
Ordinary income dividends paid to
shareholders who are nonresident aliens or foreign entities will be
subject to a 30% U.S. withholding tax under existing provisions of the
Code applicable to foreign individuals and entities unless a reduced rate
of withholding or a withholding exemption is provided under applicable
treaty law. Nonresident shareholders are urged to consult their own tax
advisers concerning the applicability of the U.S. withholding
tax.
Under certain provisions of the Code, some
shareholders may be subject to a 31% withholding tax on ordinary income
dividends, capital gain dividends and redemption payments (“backup
withholding”). Generally, shareholders subject to backup withholding
will be those for whom no certified taxpayer identification number is on
file with the Fund or who, to the Fund’s knowledge, have furnished
an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that
such investor is not otherwise subject to backup withholding.
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. Shareholders may be able to
claim United States foreign tax credits with respect to such taxes,
subject to certain conditions and limitations contained in the Code. For
example, certain retirement accounts cannot claim foreign
tax credits on investments in foreign securities held in the Fund. In
addition, a foreign tax credit may be claimed with respect to withholding
tax on a dividend only if the shareholder meets certain holding period
requirements. The Fund also must meet these holding period requirements,
and if the Fund fails to do so, it will not be able to “pass through
” to shareholders the ability to claim a credit or a deduction for
the related foreign taxes paid by the Fund. If the Fund satisfies the
holding period requirements and if more than 50% in the value of its
total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible, and intends, to file an
election with the Internal Revenue Service pursuant to which shareholders
of the Fund will be required to include their proportionate shares of
such withholding taxes in their United States income tax returns as gross
income, treat such proportionate shares as taxes paid by them, and deduct
such proportionate shares in computing their taxable incomes or,
alternatively, use them as foreign tax credits against their United
States income taxes. No deductions for foreign taxes, moreover, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign
corporation may be subject to United States withholding tax on the income
resulting from the Fund’s election described in this paragraph but
may not be able to claim a credit or deduction against such United States
tax for the foreign taxes treated as having been paid by such
shareholder. The Fund will report annually to its shareholders the amount
per share of such withholding taxes and other information needed to claim
the foreign tax credit. For this purpose, the Fund will allocate foreign
source income among the Class A, Class B, Class C and Class D
shareholders according to a method similar to that described above for
the allocation of dividends eligible for the dividends received
deduction.
The Fund may invest up to 10% of its total
assets in securities of other investment companies. If the Fund purchases
shares of an investment company (or similar investment entity) organized
under foreign law, the Fund will be treated as owning shares in a passive
foreign investment company (“PFIC”) for U.S. Federal income tax
purposes. The Fund may be subject to U.S. Federal income tax, and an
additional tax in the nature of interest (the “interest charge
”), on a portion of the distributions from such a company and on
gain from the disposition of the shares of such a company (collectively
referred to as “excess distributions”), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. The
Fund may be eligible to make an election with respect to certain PFICs in
which it owns shares that will allow it to avoid the taxes on excess
distributions. However, such election may cause the Fund to recognize
income in a particular year in excess of the distributions received from
such PFICs. Alternatively, the Fund could elect to “mark to market
” at the end of each taxable year all shares that it holds in PFICs.
If it made this election, the Fund would recognize as ordinary income any
increase in the value of such shares over their adjusted basis and as
ordinary loss any decrease in such value to the extent it did not exceed
prior increases included in income. By making the mark-to-market
election, the Fund could avoid imposition of the interest charge with
respect to its distributions from PFICs, but in any particular year might
be required to recognize income in excess of the distributions it
received from PFICs and its proceeds from dispositions of PFIC
stock.
Tax Treatment of Options and Futures Transactions
The Fund may write, purchase or sell
options, futures and forward foreign exchange contracts. Options and
futures contracts that are “Section 1256 contracts” will be
“marked to market” for Federal income tax purposes at the end
of each taxable year, i.e., each such option or futures contract
will be treated as sold for its fair market value on the last day of the
taxable year. Unless such contract is a forward foreign exchange
contract, or is a non-equity option or a regulated futures contract for a
non-U.S. currency for which the Fund elects to have gain or loss treated
as ordinary gain or loss under Code Section 988 (as described below),
gain or loss from Section 1256 contracts will be 60% long-term and 40%
short-term capital gain or loss. Application of these rules to Section
1256 contracts held by the Fund may alter the timing and character of
distributions to shareholders. The mark-to-market rules outlined above,
however, will not apply to certain transactions entered into by the Fund
solely to reduce the risk of changes in price or interest or currency
exchange rates with respect to its investments.
A forward foreign exchange contract that is
a Section 1256 contract will be marked to market, as described above.
However, the character of gain or loss from such a contract will
generally be ordinary under Code Section 988. The Fund may, nonetheless,
elect to treat the gain or loss from certain forward foreign exchange
contracts as capital. In this case, gain or loss realized in connection
with a forward foreign exchange contract that is a Section 1256 contract
will be characterized as 60% long-term and 40% short-term capital gain or
loss.
Code Section 1092, which
applies to certain “straddles,” may affect the taxation of the
Fund’s sales of securities and transactions in equity swaps,
options, futures and forward foreign exchange contracts. Under Section
1092, the Fund may be required to postpone recognition for tax purposes
of losses incurred in certain sales of securities and certain closing
transactions in equity swaps, options, futures and forward foreign
contracts.
Special Rules for Certain Foreign Currency Transactions
In general, gains from “foreign
currencies” and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stocks, securities or foreign currencies will be qualifying income for
purposes of determining whether the Fund qualifies as a RIC. It is
currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, futures, or
forward foreign exchange contracts will be valued for purposes of the RIC
diversification requirements applicable to the Fund.
Under Code Section 988, special rules are
provided for certain transactions in a foreign currency other than the
taxpayer’s functional currency (i.e., unless certain special
rules apply, currencies other than the U.S. dollar). In general, foreign
currency gains or losses from certain debt instruments, from certain
forward contracts, from futures contracts that are not “regulated
futures contracts” and from unlisted options will be treated as
ordinary income or loss under Code Section 988. In certain circumstances,
the Fund may elect capital gain or loss treatment for such transactions.
Regulated futures contracts, as described above, will be taxed under Code
Section 1256 unless application of Section 988 is elected by the Fund. In
general, however, Code Section 988 gains or losses will increase or
decrease the amount of the Fund’s investment company taxable income
available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would not be able to make
any ordinary income dividend distributions, and all or a portion of
distributions made before the losses were realized but in the same
taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each shareholder’s Fund
shares and resulting in a capital gain for any shareholder who received a
distribution greater than such shareholder’s basis in Fund shares
(assuming the shares were held as a capital asset). These rules and the
mark-to-market rules described above, however, will not apply to certain
transactions entered into by the Fund solely to reduce the risk of
currency fluctuations with respect to its investments.
The foregoing is a general and abbreviated
summary of the applicable provisions of the Code and Treasury regulations
presently in effect. For the complete provisions, reference should be
made to the pertinent Code sections and the Treasury regulations
promulgated thereunder. The Code and the Treasury regulations are subject
to change by legislative, judicial or administrative action either
prospectively or retroactively.
Ordinary income and capital gain dividends
may also be subject to state and local taxes.
Certain states exempt from state income
taxation dividends paid by RICs that are derived from interest on U.S.
Government obligations. State law varies as to whether dividend income
attributable to U.S. Government obligations is exempt from state income
tax.
Shareholders are urged to consult their own
tax advisers regarding specific questions as to Federal, foreign, state
or local taxes. Foreign investors should consider applicable foreign
taxes in their evaluation of an investment in the Fund.
From time to time the Fund may include its
average annual total return and other total return data in advertisements
or information furnished to present or prospective shareholders. Total
return figures are based on the Fund’s historical performance and
are not intended to indicate future performance. Average annual total
return is determined separately for Class A, Class B, Class C and Class D
shares in accordance with formulas specified by the
Commission.
Average annual total return quotations for
the specified periods are computed by finding the average annual
compounded rates of return (based on net investment income and any
realized and unrealized capital gains or losses on portfolio investments
over such periods) that would equate the initial amount invested to the
redeemable value of such investment at the end of each period. Average
annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and
nonrecurring expenses, including the maximum sales charge in the case of
Class A and Class D shares and the CDSC that would be applicable to a
complete redemption of the investment at the end of the specified period
as in the case of Class B and Class C shares and the maximum sales charge
in the case of Class A and D shares. Dividends paid by the Fund with
respect to all shares, to the extent any dividends are paid, will be
calculated in the same manner at the same time on the same day and will
be in the same amount, except that account maintenance and distribution
charges and any incremental transfer agency costs relating to each class
of shares will be borne exclusively by that class. The Fund will include
performance data for all classes of shares of the Fund in any
advertisement or information including performance data of the
Fund.
The Fund also may quote annual, average
annual and annualized total return and aggregate total return performance
data, both as a percentage and as a dollar amount based on a hypothetical
$1,000 investment, for various periods other than those noted below. Such
data will be computed as described above, except that (1) as required by
the periods of the quotations, actual annual, annualized or aggregate
data, rather than average annual data, may be quoted and (2) the maximum
applicable sales charges will not be included with respect to annual or
annualized rates of return calculations. Aside from the impact on the
performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the
average rates of return reflect compounding of return; aggregate total
return data generally will be higher than average annual total return
data since the aggregate rates of return reflect compounding over a
longer period of time.
Set forth below is total return information
for the Class A, Class B, Class C and Class D shares of the Fund for the
periods indicated.
|
|
|
Class A
Shares
|
|
Class B
Shares
|
| Period |
|
Expressed
as
a percentage
based on a
hypothetical
$1,000 investment
|
|
Redeemable
value
of a hypothetical
$1,000 investment
at the end of
the period
|
|
Expressed
as
a percentage
based on a
hypothetical
$1,000 investment
|
|
Redeemable
value
of a hypothetical
$1,000 investment
at the end of
the period
|
|
|
|
|
|
Average
Annual Total Return |
|
|
|
(including
maximum applicable sales charges) |
| One Year Ended
December 31, 1999 |
|
4.64% |
|
$1,046.40 |
|
5.29% |
|
$1,052.90 |
Inception
(November 1, 1996) to
December 31, 1999 |
|
17.80% |
|
$1,679.40 |
|
18.38% |
|
$1,705.70 |
|
|
|
|
Annual
Total Return |
|
|
|
(excluding
maximum applicable sales charges) |
| Year Ended
December 31, |
|
|
|
|
|
|
|
|
|
1999 |
|
10.44% |
|
$1,104.40 |
|
9.29% |
|
$1,092.90 |
|
1998 |
|
27.10% |
|
$1,271.00 |
|
25.76% |
|
$1,257.60 |
|
1997 |
|
24.01% |
|
$1,240.10 |
|
22.80% |
|
$1,228.00 |
Inception
(November 1, 1996) to
December 31, 1996 |
|
1.82% |
|
$1,018.20 |
|
1.66% |
|
$1,016.60 |
|
|
|
|
Aggregate
Total Return |
|
|
|
(including
maximum applicable sales charges) |
Inception
(November 1, 1996) to
December 31, 1999 |
|
67.94% |
|
$1,679.40 |
|
70.57% |
|
$1,705.70 |
|
|
|
Class C
Shares
|
|
Class D
Shares
|
| Period |
|
Expressed
as
a percentage
based on a
hypothetical
$1,000 investment
|
|
Redeemable
value
of a hypothetical
$1,000 investment
at the end of
the period
|
|
Expressed
as
a percentage
based on a
hypothetical
$1,000 investment
|
|
Redeemable
value
of a hypothetical
$1,000 investment
at the end of
the period
|
|
|
|
|
|
Average
Annual Total Return |
|
|
|
(including
maximum applicable sales charges) |
| One Year Ended
December 31, 1999 |
|
8.29% |
|
$1,082.90 |
|
4.45% |
|
$1,044.50 |
Inception
(November 1, 1996) to
December 31, 1999 |
|
18.60% |
|
$1,715.50 |
|
17.52% |
|
$1,666.50 |
|
|
|
|
Annual
Total Return |
|
|
|
(excluding
maximum applicable sales charges) |
| Year Ended
December 31, |
|
|
|
|
|
|
|
|
|
1999 |
|
9.29% |
|
$1,092.90 |
|
10.23% |
|
$1,102.30 |
|
1998 |
|
25.73% |
|
$1,257.30 |
|
26.72% |
|
$1,267.20 |
|
1997 |
|
22.80% |
|
$1,228.00 |
|
23.71% |
|
$1,237.10 |
Inception
(November 1, 1996) to
December 31, 1996 |
|
1.66% |
|
$1,016.60 |
|
1.78% |
|
$1,017.80 |
|
|
|
|
Aggregate
Total Return |
|
|
|
(including
maximum applicable sales charges) |
Inception
(November 1, 1996) to
December 31, 1999 |
|
71.55% |
|
$1,715.50 |
|
66.65% |
|
$1,666.50 |
Total return figures are based on the Fund
’s historical performance and are not intended to indicate future
performance. The Fund’s total return will vary depending on market
conditions, the securities comprising the Fund’s portfolio, the Fund
’s operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in
the Fund will fluctuate and an investor’s shares, when redeemed, may
be worth more or less than their original cost.
In order to reflect the reduced sales
charges in the case of Class A or Class D shares, or the waiver of the
CDSC in the case of Class B or Class C shares applicable to certain
investors, as described under “Purchase of Shares,” the total
return data quoted by the Fund in advertisements directed to such
investors may take into account the reduced, and not the maximum, sales
charge or may not take into account the CDSC, and therefore may reflect
greater total return since, due to the reduced sales charges or the
waiver of CDSCs, a lower amount of expenses may be deducted.
On occasion, the Fund may compare its
performance to various indices including the MSCI World Index, the
Standard & Poor’s 500 Index, the Dow Jones Industrial Average,
or to performance data published by Lipper Analytical Services, Inc.,
Morningstar Publications, Inc. (“Morningstar”), CDA Investment
Technology, Inc., Money Magazine, U.S. News & World Report,
Business Week, Forbes Magazine, Fortune Magazine or other industry
publications. When comparing its performance to a market index, the Fund
may refer to various statistical measures derived from the historic
performance of the Fund and the index, such as standard deviation and
beta. In addition, from time to time, the Fund may include the Fund
’s Morningstar risk-adjusted performance ratings in advertisements
or supplemental sales literature. As with other performance data,
performance comparisons should not be considered indicative of the Fund
’s relative performance for any future period.
The Fund was incorporated under Maryland
law on March 8, 1996. As of the date of this Statement of Additional
Information, the Fund has an authorized capital of 600,000,000 shares of
Common Stock, par value $0.10 per share, divided into four classes,
designated Class A, Class B, Class C and Class D Common Stock. Class A,
Class C and Class D each consists of 100,000,000 shares and Class B
consists of 300,000,000 shares. Shares of Class A, Class B, Class C and
Class D Common Stock represent interests in the same assets of the Fund
and have identical voting, dividend, liquidation and other rights and the
same terms and conditions except that the Class B, Class C and Class D
shares bear certain expenses related to the account maintenance and/or
distribution
of such shares and have exclusive voting rights with respect to matters
relating to such account maintenance and/or distribution expenditures.
The Board of Directors of the Fund may classify and reclassify the shares
of the Fund into additional classes of Common Stock at a future
date.
Shareholders are entitled to one vote for
each full share held and fractional votes for fractional shares held in
the election of Directors and any other matter submitted to a shareholder
vote. The Fund does not intend to hold annual meetings of shareholders in
any year in which the Investment Company Act does not require
shareholders to act upon any of the following matters: (i) election of
Directors; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of selection
of independent accountants. Also, the by-laws of the Fund require that a
special meeting of shareholders be held upon the written request of at
least 25% of the outstanding shares of the Fund entitled to vote at such
meeting, if they comply with applicable Maryland law. Voting rights for
Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive rights. Each share of Class A,
Class B, Class C and Class D Common Stock is entitled to participate
equally in dividends and distributions declared by the Fund and in the
net assets of the Fund upon liquidation or dissolution after satisfaction
of outstanding liabilities. Stock certificates will be issued by the
Transfer Agent only on specific request. Certificates for fractional
shares are not issued in any case.
The Manager provided the initial capital
for the Fund by purchasing 10,000 shares of common stock (2,500 shares
each of Class A, Class B, Class C and Class D) of the Fund for $100,000.
Such shares were acquired for investment and can only be disposed of by
redemption. The organizational expenses of the Fund were paid by the Fund
and will be amortized over a period not exceeding five years. The
proceeds realized by the Manager upon the redemption of any of the shares
initially purchased by it will be reduced by the proportional amount of
the unamortized organizational expenses that the number of such initial
shares being redeemed bears to the number of shares initially
purchased.
Deloitte & Touche LLP, Princeton
Forrestal Village, 116-300 Village Boulevard, Princeton, New Jersey 08540
has been selected as the independent auditors of the Fund. The selection
of independent auditors is subject to approval by the non-interested
Directors of the Fund. The independent auditors are responsible for
auditing the annual financial statements of the Fund.
Brown Brothers Harriman & Co. (the
“Custodian”), 40 Water Street, Boston, Massachusetts 02109,
acts as the custodian of the Fund’s assets. Under its contract with
the Fund, the Custodian is authorized, among other things, to establish
separate accounts in foreign currencies and to cause foreign securities
owned by the Fund to be held in its offices outside of the United States
and with certain foreign banks and securities depositories. The Custodian
is responsible for safeguarding and controlling the Fund’s cash and
securities, handling the receipt and delivery of securities and
collecting interest and dividends on the Fund’s
investments.
Financial Data Services, Inc., 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Fund
’s Transfer Agent. The Transfer Agent is responsible for the
issuance, transfer and redemption of shares and the opening, maintenance
and servicing of shareholder accounts. See “How to Buy, Sell,
Transfer and Exchange Shares — Through the Transfer Agent
” in the Prospectus.
Brown & Wood LLP, One World Trade
Center, New York, New York 10048-0557, is counsel for the
Fund.
The fiscal year of the Fund ends on
December 31 of each year. The Fund sends to its shareholders at least
semi-annually reports showing the Fund’s portfolio and other
information. An annual report, containing financial statements audited by
independent auditors, is sent to shareholders each year. After the end of
each year, shareholders will receive Federal income tax information
regarding dividends.
Shareholder inquiries may be addressed to
the Fund at the address or telephone number set forth on the cover page
of this Statement of Additional Information.
The Prospectus and this Statement of
Additional Information do not contain all the information set forth in
the Registration Statement and the exhibits relating thereto, which the
Fund has filed with the Securities and Exchange Commission, Washington,
D.C., under the Securities Act and the Investment Company Act, to which
reference is hereby made.
Under a separate agreement, ML & Co.
has granted the Fund the right to use the “Merrill Lynch” name
and has reserved the right to withdraw its consent to the use of such
name by the Fund at any time or to grant the use of such name to any
other company, and the Fund has granted ML & Co. under certain
conditions, the use of any other name it might assume in the future, with
respect to any corporation organized by ML & Co.
To the knowledge of the Fund, the following
entity owned beneficially 5% or more of a class of the Fund’s shares
as of April 1, 2000:
Name
|
|
Address
|
|
Percentage
and Class
|
| Merrill Lynch
Trust Company(1) |
|
PO Box 30532
New Brunswick, NJ 08989 |
|
60.9% of Class
A |
(1)
|
Merrill Lynch
Trust Company is the record holder on behalf of certain employee
retirement, personal trust or savings plan accounts for which it acts
as trustee.
|
The Fund’s audited financial
statements are incorporated in this Statement of Additional Information
by reference to its 1999 annual report to shareholders. You may request a
copy of the annual report at no charge by calling (800) 456-4587 ext. 789
between 8:00 a.m. and 8:00 p.m. on any business day.
[This page
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CODE #: 19002-04-00
PART C.
OTHER INFORMATION
Item 23.
Exhibits.
Exhibit
Number
|
|
|
|
1(a) |
|
—
Articles of Incorporation of the Registrant, dated March 7,
1996.(a) |
|
(b) |
|
—
Articles Supplementary to the Articles of Incorporation of the
Registrant, dated February 19, 1997.(b) |
|
2 |
|
—
Amended and Restated By-Laws of the Registrant.(c) |
|
3 |
|
—
Portions of the Articles of Incorporation and the By-Laws of the
Registrant defining the rights of
holders of shares of the Registrant.(d) |
|
4(a) |
|
— Form
of Management Agreement between the Registrant and Merrill Lynch Asset
Management, L.P.
(the “Manager”).(e) |
|
(b) |
|
—
Sub-Advisory Agreement between the Manager and Merrill Lynch
Asset Management U.K.
Limited.(b) |
|
5(a) |
|
— Form
of Class A Shares Distribution Agreement between the Registrant and
Merrill Lynch Funds
Distributor, Inc. (now known as Princeton Funds Distributor, Inc.) (the
“Distributor”) (including
Form of Selected Dealers Agreement).(e) |
|
(b) |
|
— Form
of Class B Shares Distribution Agreement between the Registrant and the
Distributor
(including Form of Selected Dealers Agreement).(e) |
|
(c) |
|
— Form
of Class C Shares Distribution Agreement between the Registrant and the
Distributor
(including Form of Selected Dealers Agreement).(e) |
|
(d) |
|
— Form
of Class D Shares Distribution Agreement between the Registrant and the
Distributor
(including Form of Selected Dealers Agreement).(e) |
|
6 |
|
—
None. |
|
7 |
|
— Form
of Custody Agreement between the Registrant and Brown Brothers Harriman
& Co., Inc.(e) |
|
8(a) |
|
— Form
of Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency
Agreement between the Registrant and Merrill Lynch Financial Data
Services, Inc. (now known as
Financial Data Services, Inc.) (the “Transfer Agent
”).(e) |
|
(b) |
|
—
Agreement relating to use of name between the Registrant and
Merrill Lynch & Co., Inc.
(“ML & Co”).(e) |
|
(c) |
|
—Credit
Agreement between the Registrant and a syndicate of
banks.(g) |
|
9 |
|
—
Opinion of Brown & Wood LLP, counsel for
the registrant.(e) |
| 10 |
|
—
Consent of Deloitte & Touche LLP, independent
auditors for the Registrant. |
| 11 |
|
—
None. |
| 12 |
|
—
Certificate of the Manager.(e) |
| 13(a) |
|
— Form
of Class B Shares Distribution Plan and Class B Shares Distribution
Plan Sub-Agreement of
the Registrant.(e) |
|
(b) |
|
— Form
of Class C Shares Distribution Plan and Class C Shares Distribution
Plan Sub-Agreement of
the Registrant.(e) |
|
(c) |
|
— Form
of Class D Shares Distribution Plan and Class D Shares Distribution
Plan Sub-Agreement of
the Registrant.(e) |
| 14 |
|
—
Merrill Lynch Select Pricing
SM
System Plan
Pursuant to Rule 18f-3.(f) |
| 15 |
|
—Code of
Ethics(h) |
(a)
|
Filed on March
12, 1996 as an Exhibit to the Registrant’s Registration Statement
on Form N-1A (File No. 333-1663) under the Securities Act of 1933, as
amended (the “Registration Statement”).
|
(b)
|
Filed on
February 28, 1997 as an Exhibit to Post-Effective Amendment No. 1 to
the Registration Statement.
|
(c)
|
Filed on
February 27, 1998 as an Exhibit to Post-Effective Amendment No. 2 to
the Registration Statement.
|
(d)
|
Reference is
made to Articles IV, V (Sections 3, 5, 6 and 7), VI, VII and IX of the
Registrant’s Articles of Incorporation, as supplemented, filed as
Exhibit 1(a) and Exhibit 1(b) to the Registration Statement and to
Articles II, III (Sections 1, 3, 5 and 6), VI, VII, XIII and XIV of the
Registrant’s Amended and Restated By-Laws, filed as Exhibit 2 to
the Registration Statement.
|
(e)
|
Filed on
September 3, 1996 as an Exhibit to Pre-Effective Amendment No. 1 to the
Registration Statement.
|
(f)
|
Incorporated by
reference to Exhibit 18 to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A under the Securities Act of 1933,
as amended, filed on January 25, 1996 relating to shares of Merrill
Lynch New York Municipal Bond Fund series of Merrill Lynch Multi-State
Municipal Series Trust (File No. 2-99473).
|
(g)
|
Incorporated by
reference to Exhibit 8(b) to the Registration Statement on Form N-1A of
Master Premier Growth Trust (File No. 811-09733), filed on December 21,
1999.
|
(h)
|
Incorporated by
reference to Exhibit 15 to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A of Merrill Lynch Middle East/Africa
Fund, Inc. (File No. 811-07155), filed on March 29, 2000.
|
Item 24.
Persons Controlled by or under Common Control with
Registrant.
The Registrant is not controlled by or
under common control with any other person.
Item 25.
Indemnification.
Reference is made to Article VI of
Registrant’s Articles of Incorporation, Article VI of Registrant
’s By-Laws, Section 2-418 of the Maryland General Corporation Law
and Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements.
Article VI of the By-Laws provides that
each officer and director of the Registrant shall be indemnified by the
Registrant to the full extent permitted under the General Laws of the
State of Maryland, except that such indemnity shall not protect any such
person against any liability to the Registrant or any stockholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeaseance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office, the decision by the Registrant to indemnify such person must
be based upon the reasonable determination of independent counsel or
non-party independent directors, after review of the facts, that such
officer or director is not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Each officer and director of the Registrant
claiming indemnification within the scope of Article VI of the By-Laws
shall be entitled to advances from the Registrant for payment of the
reasonable expenses incurred by him in connection with proceedings to
which he is a party in the manner and to the full extent permitted under
the General Laws of the State of Maryland; provided, however, that the
person seeking indemnification shall provide to the Registrant a written
affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Registrant has been met and a
written undertaking to repay any such advance, if it should ultimately be
determined that the standard of conduct has not been met, and provided
further that at least one of the following additional conditions is met:
(a) the person seeking indemnification shall provide a security in form
and amount acceptable to the Registrant for his undertaking; (b) the
Registrant is insured against losses arising by reason of the advance;
(c) a majority of a quorum of non-party independent directors, or
independent legal counsel in a written opinion, shall determine, based on
a review of facts readily available to the Registrant at the time the
advance is proposed to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found to be entitled to
indemnification.
The Registrant may purchase insurance on
behalf of an officer or director protecting such person to the full
extent permitted under the General Laws of the State of Maryland from
liability arising from his activities as officer or director of the
Registrant. The Registrant, however, may not purchase insurance on behalf
of any officer or director of the Registrant that protects or purports to
protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his
office.
The Registrant may indemnify, make advances
or purchase insurance to the extent provided in Article VI of the By-Laws
on behalf of an employee or agent who is not an officer or director of
the Registrant.
In Section 9 of the Class A, Class B, Class
C and Class D Distribution Agreements relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and
each person, if any, who controls the Distributor within the meaning of
the Securities Act of 1933 (the “1933 Act”), against certain
types of civil liabilities arising in connection with the Registration
Statement or Prospectus and Statement of Additional
Information.
Insofar as indemnification for liabilities
arising under the 1933 Act may be permitted to Directors, officers and
controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Director,
officer, or controlling person of the Registrant and the principal
underwriter in connection with the successful defense of any action, suit
or proceeding) is asserted by such Director, officer or controlling
person or the principal underwriter in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
Item 26.
Business and Other Connections of Investment
Adviser.
Merrill Lynch Asset Management, L.P. (the
“Manager” or “MLAM”), acts as the investment adviser
for the following open-end registered investment companies: Master Global
Financial Services Trust, Mercury Global Holdings, Inc., Merrill Lynch
Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income
Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset
Income Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
Convertible Fund, Inc., Merrill Lynch Developing Capital Markets Fund,
Inc., Merrill Lynch Disciplined Equity Fund, Inc., Merrill Lynch Dragon
Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental Growth
Fund, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Financial Services Fund, Inc., Merrill Lynch Global Growth Fund, Inc.,
Merrill Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund,
Inc., Merrill Lynch Global Technology Fund, Inc., Merrill Lynch Global
Utility Fund, Inc., Merrill Lynch Global Value Fund, Inc., Merrill Lynch
Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch Index
Funds, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill
Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal
Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Real Estate Fund, Inc., Merrill Lynch
Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend
Fund, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A.
Government Reserves, Merrill Lynch Utility Income Fund, Inc., Merrill
Lynch Variable Series Funds, Inc., The Asset Program, Inc. and Hotchkis
and Wiley funds (advised by Hotchkis and Wiley, a division of MLAM); and
for the following closed-end registered investment companies: Merrill
Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Senior
Floating Rate Fund, Inc. and Merrill Lynch Senior Floating Rate Fund II,
Inc. MLAM also acts as sub-adviser to Merrill Lynch World Strategy
Portfolio and Merrill Lynch Basic Value Equity Portfolio, two investment
portfolios of EQ Advisors Trust.
Fund Asset Management, L.P. (“FAM
”), an affiliate of the Manager, acts as the investment adviser for
the following open-end registered investment companies: CBA Money Fund,
CMA Government Securities Fund, CMA Money Fund, CMA Multistate Municipal
Series Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund
Accumulation Program, Inc., Financial Institutions Series Trust, Master
Focus Twenty Trust, Master Large Cap Series Trust, Master Premier Growth
Trust, Mercury Global Holdings, Inc., Merrill Lynch Basic Value Fund,
Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc., Merrill Lynch Corporate High Yield Fund, Inc.,
Merrill Lynch Emerging Tigers Fund, Inc., Merrill Lynch Federal
Securities Trust, Merrill Lynch Funds for Institutions Series, Merrill
Lynch Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch
Multi-State Municipal Series Trust, Merrill Lynch Municipal Bond Fund,
Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund,
Inc., Merrill Lynch World Income Fund, Inc., The Asset Program, Inc. and
The Municipal Fund Accumulation Program, Inc.; and for the following
closed-end registered investment companies: Apex Municipal Fund, Inc.,
Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc.,
Corporate High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt
Strategies Fund II, Inc., Debt Strategies Fund III, Inc., Income
Opportunities Fund 2000, Inc., Merrill Lynch Municipal Strategy Fund,
Inc., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniHoldings Fund,
Inc., MuniHoldings Fund II, Inc., MuniHoldings California Insured Fund
II, Inc., MuniHoldings California Insured Fund V, Inc., MuniHoldings
Florida Insured Fund, MuniHoldings Florida Insured Fund V, MuniHoldings
Insured Fund, Inc., MuniHoldings Insured Fund II, Inc., MuniHoldings
Insured Fund III, Inc., MuniHoldings Insured Fund IV, Inc., MuniHoldings
Michigan Insured Fund II, Inc., MuniHoldings New Jersey Insured Fund,
Inc., MuniHoldings New Jersey Insured Fund IV, Inc., MuniHoldings New
York Insured Fund, Inc., MuniHoldings New York Insured Fund IV, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc.,
MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield
California Insured Fund, Inc., MuniYield California Insured Fund II,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield
Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Michigan Fund, Inc.,
MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc.,
MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured Fund,
Inc., MuniYield Pennsylvania Insured Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc. and
Worldwide DollarVest Fund, Inc.
The address of each of these registered
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011,
except that the address of Merrill Lynch Funds for Institutions Series
and Merrill Lynch Intermediate Government Bond Fund is One Financial
Center, 23rd Floor, Boston, Massachusetts 02111-2665. The address of the
Manager, FAM, Princeton Services, Inc. (“Princeton Services”)
and Princeton Administrators, L.P. (“Princeton Administrators”)
is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of
Princeton Funds Distributor, Inc., (“PFD”) and of Merrill Lynch
Funds Distributor (“MLFD”) is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“Merrill Lynch”) and ML & Co. is World
Financial Center, North Tower, 250 Vesey Street, New York, New York
10281-1201. The address of the Fund’s transfer agent, Financial Data
Services, Inc. (“FDS”), is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive
officer and partner of the Manager indicating each business, profession,
vocation or employment of a substantial nature in which each such person
or entity has been engaged since January 1, 1998 for his, her or its own
account or in the capacity of director, officer, partner or trustee. In
addition, Mr. Glenn is President and Mr. Burke is Vice President and
Treasurer of all or substantially all of the investment companies
described in the first two paragraphs of this Item 26, and Messrs. Doll,
Giordano and Monagle are officers of one or more of such
companies.
Name
|
|
Position(s)
with the Manager
|
|
Other
Substantial Business,
Profession, Vocation or Employment
|
| ML &
Co. |
|
Limited
Partner |
|
Financial
Services Holding Company;
Limited Partner of FAM |
| Princeton
Services |
|
General
Partner |
|
General Partner
of FAM |
| Jeffrey M.
Peek |
|
President |
|
President of
FAM; President and Director of Princeton
Services; Executive Vice President of ML & Co.; Managing
Director and Co-Head of the Investment Banking Division of
Merrill Lynch in 1997; Senior Vice President and Director of
the Global Securities in Economics Division of Merrill Lynch
from 1995 to 1997 |
| Terry K.
Glenn |
|
Executive Vice
President |
|
Executive Vice
President of FAM; Executive Vice President
and Director of Princeton Services; President and Director of
PFD; Director of FDS; President of Princeton Administrators |
| Gregory A.
Bundy |
|
Chief Operating
Officer and
Managing Director |
|
Chief Operating
Officer and Managing Director of FAM;
Chief Operating Officer and Managing Director of Princeton
Services; Co-CEO of Merrill Lynch Australia from 1997 to
1999 |
| Donald C.
Burke |
|
Senior Vice
President,
Treasurer and Director
of Taxation |
|
Senior Vice
President and Treasurer of FAM; Senior Vice
President and Treasurer of Princeton Services; Vice President
of PFD; First Vice President of the Manager from 1997 to
1999; Vice President of the Manager from 1990 to 1997 |
| Michael G.
Clark |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President of
Princeton Services; Treasurer and Director of PFD; First Vice
President of the Manager from 1997 to 1999; Vice President
of the Manager from 1996 to 1997 |
| Robert C. Doll,
Jr. |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President of
Princeton Services; Chief Investment Officer of Oppenheimer
Funds, Inc. in 1999 and Executive Vice President thereof
from 1991 to 1999 |
Name
|
|
Position(s)
with the Manager
|
|
Other
Substantial Business,
Profession, Vocation or Employment
|
| Linda L.
Federici |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services |
| Vincent R.
Giordano |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services |
| Michael J.
Hennewinkel |
|
Senior Vice
President,
Secretary and General
Counsel |
|
Senior Vice
President, Secretary and General Counsel
of FAM; Senior Vice President of Princeton Services |
| Philip L.
Kirstein |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President,
Secretary, General Counsel and Director of Princeton
Services |
| Debra W.
Landsman-Yaros |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services; Vice President of PFD |
| Stephen M. M.
Miller |
|
Senior Vice
President |
|
Executive Vice
President of Princeton Administrators;
Senior Vice President of Princeton Services |
| Joseph T.
Monagle, Jr. |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services |
| Gregory D.
Upah |
|
Senior Vice
President |
|
Senior Vice
President of FAM; Senior Vice President
of Princeton Services |
Merrill Lynch Asset Management U.K. Limited
(“MLAM U.K.”) acts as sub-adviser for the following registered
investment companies: The Corporate Fund Accumulation Program, Inc.,
Corporate High Yield Fund, Inc., Corporate High Yield II, Inc., Corporate
High Yield Fund III, Inc., Debt Strategies Fund, Inc., Debt Strategies
Fund II, Inc., Debt Strategies Fund III, Inc., Income Opportunities Fund
2000, Inc., Master Large Cap Series Trust, Mercury Global Holdings, Inc.,
Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Basic
Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill Lynch
Convertible Fund, Inc., Merrill Lynch Corporate Bond Fund, Inc., Merrill
Lynch Developing Capital Markets Fund, Inc., Merrill Lynch Disciplined
Equity Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch
Emerging Tigers Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Global Allocation Fund,
Inc., Merrill Lynch Global Bond Fund for Investment and Retirement,
Merrill Lynch Global Growth Fund, Inc., Merrill Lynch Global Resources
Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch Global
Technology Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch International Equity Fund, Merrill
Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa Fund,
Inc., Merrill Lynch Pacific Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Real Estate Fund, Inc., Merrill Lynch Series Fund, Inc.,
Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Senior
Floating Rate Fund II, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Utility Income Fund, Inc., Merrill Lynch
Variable Series Funds, Inc., Merrill Lynch World Income Fund, Inc., The
Asset Program, Inc., The Municipal Fund Accumulation Program, Inc. and
Worldwide DollarVest Fund, Inc. The address of each of these registered
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011.
The address of MLAM U.K. is 33 King William Street, London EC4R 9AS,
England.
Set forth below is a list
of each executive officer and director of MLAM U.K. indicating each
business, profession, vocation or employment of a substantial nature in
which each such person has been engaged since January 1, 1998, for his or
her own account or in the capacity of director, officer, partner or
trustee. In addition, Messrs. Glenn and Burke are officers of one or more
of the registered investment companies listed in the first two paragraphs
of this Item 26.
Name
|
|
Position with
MLAM U.K.
|
|
Other
Substantial Business,
Profession, Vocation or Employment
|
| Terry K.
Glenn |
|
Director and
Chairman |
|
Executive Vice
President of the Manager and FAM;
Executive Vice President and Director of Princeton
Services; President and Director of PFD; President of
Princeton Administrators |
| Nicholas C.D.
Hall |
|
Director |
|
Director of
Mercury Asset Management Ltd. and the
Institutional Liquidity Fund PLC; First Vice President
and General Counsel for Merrill Lynch Mercury Asset
Management |
| James T.
Stratford |
|
Alternate
Director |
|
Director of
Mercury Asset Management Group Ltd.;
Head of Compliance, Merrill Lynch Mercury Asset
Management |
| Donald C.
Burke |
|
Treasurer |
|
Senior Vice
President and Treasurer of MLAM and
FAM; Director of Taxation of MLAM; Senior Vice
President and Treasurer of Princeton Services; Vice
President of PFD; First Vice President of MLAM from
1997 to 1999. |
| Carol Ann
Langham |
|
Company
Secretary |
|
None |
| Debra Anne
Searle |
|
Assistant
Company Secretary |
|
None |
Item 27.
Principal Underwriters.
(a) MLFD, a division of PFD,
acts as the principal underwriter for the Registrant and for each of the
open-end registered investment companies referred to in the first two
paragraphs of Item 26 except CBA Money Fund, CMA Government Securities
Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc. and The Municipal Fund Accumulation Program, Inc. MLFD also
acts as the principal underwriter for the following closed-end registered
investment companies: Merrill Lynch High Income Municipal Bond Fund,
Inc., Merrill Lynch Municipal Strategy Fund, Inc., Merrill Lynch Senior
Floating Rate Fund, Inc. and Merrill Lynch Senior Floating Rate Fund II,
Inc. A separate division of PFD acts as the principal underwriter of a
number of other investment companies.
(b) Set forth below is
information concerning each director and officer of PFD. The principal
business address of each such person is P.O. Box 9081, Princeton, New
Jersey 08543-9081, except that the address of Messrs. Breen, Crook,
Fatseas and Wasel is One Financial Center, 23rd Floor, Boston,
Massachusetts 02111-2665.
Name
|
|
Position(s)
and Office(s)
with PFD
|
|
Position(s)
and Office(s) with
Registrant
|
| Terry K.
Glenn |
|
President and
Director |
|
President and
Director |
| Michael G.
Clark |
|
Treasurer and
Director |
|
None |
| Thomas J.
Verage |
|
Director |
|
None |
| Robert W.
Crook |
|
Senior Vice
President |
|
None |
| Michael J.
Brady |
|
Vice
President |
|
None |
| William M.
Breen |
|
Vice
President |
|
None |
| Donald C.
Burke |
|
Vice
President |
|
Vice President
and Treasurer |
| James T.
Fatseas |
|
Vice
President |
|
None |
| Debra W.
Landsman-Yaros |
|
Vice
President |
|
None |
| Michelle T.
Lau |
|
Vice
President |
|
None |
| Salvatore
Venezia |
|
Vice
President |
|
None |
| William
Wasel |
|
Vice
President |
|
None |
| Robert
Harris |
|
Secretary |
|
None |
(c) Not applicable.
Item 28.
Location of Accounts and
Records.
All accounts, books and other documents
required to be maintained by Section 31(a) of the Investment Company Act
of 1940, as amended (the “1940 Act”) and the rules thereunder
are maintained at the offices of the Registrant (800 Scudders Mill Road,
Plainsboro, New Jersey 08536), and its transfer agent, Financial Data
Services, Inc. (4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484).
Item 29.
Management Services.
Other than as set forth under the caption
“Management of the Fund — Merrill Lynch Asset
Management” in the Prospectus constituting Part A of the
Registration Statement and under “Management of the Fund —
Management and Advisory Arrangements” in the Statement of
Additional Information constituting Part B of the Registration Statement,
the Registrant is not a party to any management-related service
contract.
Item 30.
Undertakings.
Not applicable.
SIGNATURES
Pursuant to the requirements of the
Securities Act and the Investment Company Act, the Registrant certifies
that it meets all the requirements for effectiveness of this registration
statement under Rule 485(b) under the Securities Act and has duly caused
this registration statement to be signed on its behalf by the
undersigned, duly authorized, in the Township of Plainsboro, and State of
New Jersey, on the 20th day of April, 2000.
|
MERRILL
LYNCH
GLOBAL
VALUE
FUND
, INC
.
|
|
Donald C.
Burke, Vice President and Treasurer
|
Pursuant to the requirements of the
Securities Act of 1933, this Post-Effective Amendment to the Registration
Statement has been signed below by the following persons in the
capacities and on the date(s) indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
TERRY
K. GLENN
*
(Terry K.
Glenn) |
|
President and
Director
(Principal Executive Officer ) |
|
|
|
|
|
DONALD
C. BURKE
*
(Donald C.
Burke) |
|
Vice President
and Treasurer
(Principal Financial
and Accounting Officer) |
|
|
|
|
|
CHARLES
C. REILLY
*
(Charles C.
Reilly) |
|
Director |
|
|
|
|
|
ROSCOE
S. SUDDARTH
*
(Roscoe S.
Suddarth) |
|
Director |
|
|
|
|
|
RICHARD
R. WEST
*
(Richard R.
West) |
|
Director |
|
|
|
|
|
ARTHUR
ZEIKEL
*
(Arthur
Zeikel) |
|
Director |
|
|
|
|
|
EDWARD
D. ZINBARG
*
(Edward D.
Zinbarg) |
|
Director |
|
|
|
|
|
/s/
DONALD
C. BURKE
*By:
(Donald
C. Burke, Attorney-in-Fact)
|
|
|
|
April 20,
2000 |
|
|
POWER OF ATTORNEY
The undersigned, a director of Merrill
Lynch Global Value Fund, Inc., a Maryland corporation, and Merrill Lynch
Global Technology Fund, Inc., a Maryland corporation, (together referred
to as the “Funds”), hereby authorizes Terry K. Glenn, Donald C.
Burke, Lori Martin, Robert E. Putney, III and Michael J. Hennewinkel, or
any of them, as attorney-in-fact, to sign on his behalf any amendments to
the Registration Statement for the Funds and to file the same, with all
exhibits thereto, with the Securities and Exchange
Commission.
Dated: April 7,
2000
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
| 10 |
|
Consent of
Deloitte & Touche LLP, independent
auditors for the Registrant. |
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