As filed with the Securities and Exchange Commission on December 7,
1999
Securities Act File No. 333-32899
Investment Company Act File No. 811-8327
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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¨ |
| Post-Effective
Amendment No. 4 |
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| and/or |
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| REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 |
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x |
| Amendment No.
5 |
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(Check appropriate box or boxes)
Merrill Lynch Global Growth 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 Growth Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address: P.O. Box 9011, Princeton, New Jersey
08543-9011
(Name and Address of Agent for Service)
Copies to:
| Counsel for
the Fund
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048-0557
Attention: John A. MacKinnon, Esq.
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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: Shares of Common Stock,
par value $.10 per share.
P r o
s p e c t u s
[LOGO] Merrill Lynch
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Merrill Lynch Global
Growth Fund, Inc.
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December 7, 1999
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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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Table
of Contents
MERRILL LYNCH GLOBAL GROWTH 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.
Common Stock — shares of ownership of a
corporation.
MERRILL LYNCH GLOBAL GROWTH FUND AT A GLANCE
What is the Fund’s investment objective?
The investment objective of the Fund is to seek long term growth of
capital.
What
are the Fund’s main investment strategies?
The Fund invests primarily in common stock of companies
located in various foreign countries and the United States that Fund
management believes have shown above average growth rates in earnings. In
selecting securities, Fund management emphasizes companies with medium to
large stock market capitalizations.
We cannot guarantee that the Fund will achieve its
objective.
What
are the main risks of investing in the Fund?
As with any mutual fund, the value of the Fund’s investments
— and therefore the value of Fund shares —
may go up or down. These changes may occur because a particular stock
market is rising or falling. At other times, there are specific factors that
may affect the value of a particular investment.
The Fund may invest most of its assets in non-U.S. 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. Securities of
companies with above average earnings growth rates tend to have higher stock
market valuations and therefore may be more vulnerable to price declines
from unexpected adverse developments than securities of other companies. If
the value of the Fund’s investments goes down, you may lose
money.
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 and diversified 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 growth of
capital.
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Are not looking for a
significant amount of current income.
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MERRILL LYNCH GLOBAL GROWTH 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.
Merrill Lynch Global Growth Fund — Class B Annual
Total Returns
During the period shown in the bar chart, the highest return for
a quarter was 24.71% (quarter ended December 31, 1998) and the lowest return
for a quarter was -15.46% (quarter ended September 30, 1998). The fund’s
year-to-date return as of September 30, 1999 was 3.64%.
Average Annual Total Returns (for the
calendar year ended December 31, 1998) |
|
Past
One Year |
|
Since
Inception |
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| Merrill Lynch
Global Growth Fund* — Class A |
|
25.37% |
|
21.48 |
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%† |
| MSCI World
Index** |
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24.34% |
|
23.59 |
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%†† |
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| Merrill Lynch
Global Growth Fund* — Class B |
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27.08% |
|
23.51 |
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%† |
| MSCI World
Index** |
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24.34% |
|
23.59 |
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%†† |
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| Merrill Lynch
Global Growth Fund* — Class C |
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30.04% |
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25.96 |
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%† |
| MSCI World
Index** |
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24.34% |
|
23.59 |
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%†† |
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| Merrill Lynch
Global Growth Fund* — Class D |
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25.05% |
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21.22 |
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%† |
| MSCI World
Index** |
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24.34% |
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23.59 |
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%†† |
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**
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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
predicative of future performance.
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†
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Inception date is October
31, 1997.
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††
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Since October 31,
1997.
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MERRILL LYNCH GLOBAL GROWTH FUND, INC.
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) |
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Class A |
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Class B(b) |
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Class C |
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Class D |
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Maximum
Sales Charge (Load) imposed on
purchases (as a percentage of offering
price) |
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5.25%(c) |
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None |
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None |
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5.25%(c) |
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Maximum
Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) |
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None(d) |
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4.0%(c) |
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1.0%(c) |
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None(d) |
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Maximum
Sales Charge (Load) imposed on
Dividend Reinvestments |
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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 |
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None |
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Annual Fund
Operating Expenses (expenses
that are deducted from Fund assets): |
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Management Fee(e) |
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0.74% |
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0.74% |
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0.74% |
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0.74% |
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Distribution and/or Service (12b-1) Fees(f) |
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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)(g) |
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0.16% |
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0.17% |
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0.18% |
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0.15% |
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| Total Annual Fund
Operating Expenses |
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0.90% |
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1.91% |
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1.92% |
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1.14% |
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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.
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(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 pays the Manager
a fee at the annual rate of 0.75% of the average daily net assets of the
Fund not exceeding $1.5 billion and 0.725% of the average daily net assets
in excess of $1.5 billion. For the fiscal year ended August 31, 1999, the
Manager received a fee equal to 0.74% of the Fund’s average daily net
assets.
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(f)
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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 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.
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(g)
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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
(Footnotes continued from previous page)
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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 August 31, 1999, the Fund paid
the Transfer Agent fees totaling $2,660,324. The Manager provides
accounting services to the Fund at its cost. For the fiscal year ended
August 31, 1999, the Fund reimbursed the Manager $212,458 for these
services.
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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 |
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$612 |
|
$797 |
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$ 997 |
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$1,575 |
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| Class B |
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$594 |
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$800 |
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$1,032 |
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$2,038* |
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| Class C |
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$295 |
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$603 |
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$1,037 |
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$2,243 |
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| Class D |
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$635 |
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$868 |
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$1,120 |
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$1,838 |
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| EXPENSES IF YOU DID NOT REDEEM YOUR SHARES: |
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| |
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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| Class A |
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$612 |
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$797 |
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$ 997 |
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$1,575 |
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| Class B |
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$194 |
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$600 |
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$1,032 |
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$2,038* |
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| Class C |
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$195 |
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$603 |
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$1,037 |
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$2,243 |
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| Class D |
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$635 |
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$868 |
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$1,120 |
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$1,838 |
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*
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Assumes
conversion to Class D shares approximately eight years after purchase.
See note (b) to the Fees and Expenses table above.
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MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Details About the Fund
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ABOUT THE
PORTFOLIO MANAGER
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Lawrence R. Fuller is a
Senior Vice President and portfolio manager of the Fund. Mr. Fuller has
been a First Vice President of Merrill Lynch Asset Management since 1997
and was a Vice President with Merrill Lynch Asset Management from 1992
to 1997.
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The Fund is managed by
Merrill Lynch Asset Management.
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The Fund’s main objective is long term growth of capital. The Fund
tries to achieve its goal by investing in a diversified portfolio
consisting primarily of common stocks of companies worldwide. Generally,
the Fund invests at least 65% of its total assets in common stocks of
companies from at least three different countries. In selecting
securities, Fund management emphasizes companies that have experienced
above average growth rates in earnings.
A company may achieve above average growth rates in earnings
from:
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Above average
growth rates in sales
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Improvement in
its profit margin
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Proprietary or
niche products or services
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Fund management believes that companies that possess above average
earnings growth frequently provide the opportunity for above average stock
market returns. On the other hand, such companies tend to have higher
stock market valuations. As a result, their shares may be more vulnerable
to price declines from unexpected adverse developments.
In selecting securities, Fund management emphasizes companies with
medium to large stock market capitalizations. These companies typically
have market values of $2 billion or more. However, the Fund may invest in
some companies with lower market capitalizations.
The Fund may also invest in convertible securities, preferred stock
and rights offerings. The Fund will normally invest a portion of its
assets in short term debt securities such as commercial paper. These
securities can be sold easily and generally have limited risk of loss but
earn only limited returns. The Fund may also invest, without limitation,
in short term debt securities when Fund management is unable to find
enough attractive long term investments and to reduce exposure to common
stock when management believes it is advisable to do so on a temporary
basis. Investments in short term debt securities may also be used to meet
redemptions. Short term investments and temporary defensive positions may
limit the potential for the Fund to achieve its goal of long term growth
of capital.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Details About the Fund
This section contains a summary discussion of the general risks of
investing in the Fund. As with any mutual 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.
Stock Market and Selection Risk —
Stock market risk is the risk that the stock market will go down in
value, including the possibility that the market will go down sharply and
unpredictably. Selection risk is the risk that the investments 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
securities traded each day, it may make it difficult for the Fund to buy
and sell securities on those exchanges. In addition, prices of foreign
securities may go up and down more than prices of securities traded in the
United States.
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 may be denominated or quoted in
currencies other than the U.S. dollar. Changes in foreign currency
exchange rates affect the value of the Fund’s portfolio. Generally,
when the U.S. dollar rises in value against a foreign currency, a security
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 stronger U.S.
dollar will reduce returns for U.S. investors while a weak U.S. dollar
will increase those returns.
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 or for 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.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Details About the Fund
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 foreign 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 the 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 U.S. 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 U.S.
European Economic and Monetary Union (“EMU
”) — Certain European countries have agreed to
enter 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:
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If the
transition to the 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.
|
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|
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 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.
Risks associated with certain types of securities in which the Fund
may invest include:
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.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Details About the Fund
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 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.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
144A: Description and Risk — 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 futures, forwards and options.
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.
|
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Details About the Fund
The Fund may use derivatives for hedging purposes, including
anticipatory hedges. Hedging is a strategy in which the Fund uses a
derivative to offset the risk 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.
Securities Lending — The Fund
may lend securities to financial institutions which 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.
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. 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 loses the investment opportunity for the assets it has set aside to
pay for the security and any gain in the security’s
price.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
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 and therefore, there may be less
information available regarding such issuers.
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 GROWTH 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 GROWTH FUND, INC.
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 GROWTH FUND, INC.
[GRAPHIC] Your Account
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 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. 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
|
|
Ÿ
|
Purchases
using proceeds from the sale of certain Merrill Lynch closed-end funds
under certain circumstances
|
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
|
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.
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[GRAPHIC] Your Account
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
|
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
20
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 Plans.
Class C shares do not offer a conversion privilege.
HOW TO BUY, SELL, TRANSFER AND EXCHANGE SHARES
The chart below 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 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.
MERRILL LYNCH GLOBAL GROWTH 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 17. 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 order 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
for all accounts except that retirement plans have a minimum
additional purchase of $1 and certain programs, such as automatic
investment plans, may have higher minimum. |
| |
| |
|
|
|
(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 GROWTH 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 and
registered securities association. A notary public seal will not be
acceptable. If you hold stock certificates, return the certificates with
the letter. The Transfer Agent will normally mail redemption
proceeds within seven days following receipt of a properly
completed request. If you make a redemption request before the
Fund has collected payment for the purchase of shares, the Fund or
the Transfer Agent may delay mailing your proceeds. This delay will
usually not exceed ten days. |
| |
| |
|
|
|
If you hold share certificates,
they must be delivered to the Transfer
Agent before they can be converted. Check with the Transfer Agent
or your Merrill Lynch Financial Consultant for details. |
| |
|
Sell Shares
Systematically |
|
Participate in the Fund’s
Systematic Withdrawal
Plans |
|
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 have 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 GROWTH 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. |
| |
| |
|
|
|
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 GROWTH FUND, INC.
Net Asset Value — the market
value of the Fund’s total assets after deducting liabilities,
divided by the number of shares outstanding.
HOW SHARES ARE PRICED
When you buy shares, you pay the net asset value, plus any
applicable sales charge. This is the offering price. Shares are also
redeemed at their net asset value, minus any applicable deferred sales
charge. The Fund calculates its net asset value (generally by using
market quotations) each day the New York Stock Exchange is open after the
close of business on the Exchange (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.
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, any gain on the transaction may be
subject to tax. Capital gains are taxed at different rates than ordinary
income.
If you are neither a lawful permanent resident nor a citizen of
the U.S. or if you are a foreign entity, the Fund’s ordinary income
dividends (which include distributions of 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 GROWTH 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 proceeds
if you have not provided a taxpayer identification number or social
security number or if the number you have provided is
incorrect.
This section summarizes some of the consequences under current
Federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. Consult your personal tax adviser about the
potential tax consequences of an investment in the Fund under all
applicable tax laws.
MERRILL LYNCH GLOBAL GROWTH 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 not exceeding $1.5
billion and 0.725% of the average daily net assets of the Fund in excess
of $1.5 billion. For the fiscal year ended August 31, 1999, the Manager
received a fee equal to 0.74% of the Fund’s average daily net
assets.
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., which had approximately $518
billion in investment company and other portfolio assets under management
as of October 1999. This amount includes assets managed for Merrill Lynch
affiliates.
A Note About Year 2000
Many computer systems were designed using only two digits to
designate years. These systems may not be able to distinguish the Year
2000 from the Year 1900 (commonly known as the “Year 2000 Problem
”). The Fund could be adversely affected if the computer systems
used by Fund management or other Fund service providers do not properly
address this problem before January 1, 2000. Fund management expects to
have addressed this problem before then, and does not anticipate that the
services it provides will be adversely affected. The Fund’s other
service providers have told Fund management that they also expect to
resolve the Year 2000 Problem, and Fund management will continue to
monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively
affected. The Year 2000 Problem could also have a negative impact on the
issuers of securities in which the Fund invests. This negative impact may
be greater for smaller companies and companies in foreign markets,
particularly emerging markets, since they may be less prepared for the
Year 2000 Problem than larger domestic companies and markets. If the
companies in which the Fund invests have Year 2000 Problems, the Fund
’s returns could be adversely affected.
MERRILL LYNCH GLOBAL GROWTH 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 Ernst & Young 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.
| Increase (Decrease)
in |
|
For the Year Ended August
31, 1999
|
|
For the Period October 31,
1997† to
August 31, 1998
|
| Net Asset Value: |
|
Class A††
† |
|
Class B††
† |
|
Class C††
† |
|
Class D††
† |
|
Class A |
|
Class B |
|
Class C |
|
Class D |
|
| Per Share
Operating Performance: |
|
| Net asset value,
beginning of period |
|
$ 10.78 |
|
|
$
10.68 |
|
|
$ 10.68 |
|
|
$ 10.75 |
|
|
$ 10.00 |
|
|
|
$
10.00 |
|
|
|
$ 10.00 |
|
|
|
$ 10.00 |
|
|
|
| Investment income
(loss) — net |
|
.11 |
|
|
(.03 |
) |
|
(.04 |
) |
|
.07 |
|
|
.06 |
|
|
|
— |
|
†† |
|
— |
|
†† |
|
.07 |
|
|
|
Realized and
unrealized gain (loss) on
investments and foreign currency
transactions — net |
|
2.93 |
|
|
2.92 |
|
|
2.93 |
|
|
2.94 |
|
|
.72 |
|
|
|
.68 |
|
|
|
.68 |
|
|
|
.68 |
|
|
|
| Total from
investment operations |
|
3.04 |
|
|
2.89 |
|
|
2.89 |
|
|
3.01 |
|
|
.78 |
|
|
|
.68 |
|
|
|
.68 |
|
|
|
.75 |
|
|
|
| Less dividends and
distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In excess of investment income — net |
|
(.09 |
) |
|
— |
†† |
|
— |
|
|
(.07 |
) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Realized gain on investments — net |
|
(.18 |
) |
|
(.18 |
) |
|
(.18 |
) |
|
(.18 |
) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
| Total dividends and
distributions |
|
(.27 |
) |
|
(.18 |
) |
|
(.18 |
) |
|
(.25 |
) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
| Net asset value,
end of period |
|
$ 13.55 |
|
|
$
13.39 |
|
|
$ 13.39 |
|
|
$ 13.51 |
|
|
$ 10.78 |
|
|
|
$
10.68 |
|
|
|
$ 10.68 |
|
|
|
$ 10.75 |
|
|
|
| Total Investment
Return:** |
|
| Based on net asset
value per share |
|
28.46 |
% |
|
27.27 |
% |
|
27.23 |
% |
|
28.21 |
% |
|
7.80 |
|
%# |
|
6.80 |
|
%# |
|
6.80 |
|
%# |
|
7.50 |
|
%# |
|
| Ratios to
Average Net Assets: |
|
| Expenses |
|
.90 |
% |
|
1.91 |
% |
|
1.92 |
% |
|
1.14 |
% |
|
.98 |
|
%* |
|
1.99 |
|
%* |
|
1.99 |
|
%* |
|
1.22 |
|
%* |
|
| Investment income
(loss) — net |
|
.88 |
% |
|
(.27 |
)% |
|
(.30 |
)% |
|
.51 |
% |
|
1.00 |
|
%* |
|
.05 |
|
%* |
|
.04 |
|
%* |
|
.82 |
|
%* |
|
| Supplemental
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets, end of
period (in thousands) |
|
$171,140 |
|
|
$1,677,022 |
|
|
$302,247 |
|
|
$301,552 |
|
|
$80,525 |
|
|
|
$1,261,129 |
|
|
|
$249,208 |
|
|
|
$212,274 |
|
|
|
| Portfolio
turnover |
|
46.91 |
% |
|
46.91 |
% |
|
46.91 |
% |
|
46.91 |
% |
|
29.67 |
|
% |
|
29.67 |
|
% |
|
29.67 |
|
% |
|
29.67 |
|
% |
|
**
|
Total
investment returns exclude the effects of sales charges.
|
†
|
Commencement
of operations.
|
†
†
|
Amount is less
than $.01 per share.
|
††
†
|
Based on
average shares outstanding.
|
#
|
Aggregate
total investment return.
|
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
[This page intentionally left blank]
MERRILL LYNCH GLOBAL GROWTH FUND, INC.
------------------------------
POTENTIAL
_____________ INVESTORS ____________
| Open an account (two options). |
| ------------------------------ |
1 2
| |
----------------------- --------------------------------
MERRILL LYNCH TRANSFER AGENT
FINANCIAL CONSULTANT FINANCIAL DATA SERVICES, INC.
OR SECURITIES DEALER ADMINISTRATIVE OFFICES
Advises shareholders on 4800 Deer Lake Drive East
their Fund investments. 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 --------------------- CUSTODIAN
Brown & Wood LLP ___ THE FUND ___ STATE STREET BANK AND TRUST
One World Trade Center The Board of Trustees COMPANY
New York, New York 10048-0557 oversees the Fund. P.O. Box 351
Provides legal advice --------------------- Boston, Massachusetts 02101
to the Fund | | Holds the Fund's assets
---------------------- | | for safekeeping.
| | -----------------------------
| |
_____________| |_________________
| |
---------------------------------- -----------------------------------------
INDEPENDENT AUDITORS MANAGER
Ernst & Young LLP MERRILL LYNCH
99 Wood Avenue South ASSET MANAGEMENT, L.P.
Iselin, New Jersey 08830-0471 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 GROWTH FUND, INC.
PROSPECTUS
[LOGO] Merrill Lynch
|
Merrill Lynch
Global
Growth Fund, Inc.
|
December 7, 1999
[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 1-800-SEC-0330 for
information on the operation of the public reference room. This
information is also available on the SEC’s Internet site at
http://www.sec.gov and copies may be obtained upon payment of a
duplicating fee by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
You should rely only on the information contained in this
Prospectus. No one is authorized to provide you with information that is
different from the information contained in this
Prospectus.
Investment Company Act file #811-8327
Code #19012-12-99
©Merrill Lynch Asset Management, L.P.
STATEMENT OF ADDITIONAL INFORMATION
Merrill Lynch Global Growth Fund, Inc.
P.O. Box 9011, Princeton, New Jersey 08543-9011 Ÿ Phone No. (609)
282-2800
Merrill Lynch
Global Growth Fund, Inc. (the “Fund”) is a diversified,
open-end management investment company that seeks to provide shareholders
with long-term growth of capital. The Fund will seek to achieve its
investment objective by investing in a diversified portfolio of equity
securities of issuers located in various foreign countries and the United
States, placing particular emphasis on companies that have exhibited
above-average growth rates in earnings. The Fund may employ a variety of
techniques, including derivative investments, to hedge against market and
currency risk or to gain exposure to equity markets. The Fund should be
considered as a means of diversifying an investment portfolio and not in
itself a balanced investment program. 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 December 7, 1999
(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. on any
business day.
Merrill Lynch Asset Management —
Manager
Merrill Lynch Funds Distributor —
Distributor
The date of this Statement of Additional Information is December
7, 1999
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES
The investment
objective of the Fund is to seek long-term growth of capital. The Fund
will seek to achieve its investment objective by investing in a
diversified portfolio of equity securities of issuers located in various
foreign countries and the United States, placing particular emphasis on
companies that have exhibited above-average growth rates in earnings. The
Fund may employ a variety of techniques, including derivative
investments, to hedge against market and currency risk, to enhance total
return or to gain exposure to equity markets. The Fund should be
considered as a means of diversifying an investment portfolio and not in
itself a balanced investment program. There can be no assurance that the
Fund’s investment objective will be achieved. The investment
objective of the Fund set forth in the first sentence of this paragraph
is a fundamental policy of the Fund that may not be changed without a
vote of a majority of its outstanding shares as defined below. Reference
is made to “How the Fund Invests” and “Investment Risks
” in the Prospectus. The Fund is classified as a diversified fund
under the Investment Company Act.
Issuers may
achieve above-average growth rates in earnings from a variety of factors
including, but not limited to, above-average growth rates in sales,
profit margin improvement, proprietary or niche products or services,
leading market shares, and underlying strong industry growth. Management
of the Fund believes that companies which possess above-average earnings
growth frequently provide the prospect of above-average stock market
returns, although such companies tend to have higher relative stock
market valuations. Emphasis also will be given to companies having medium
to large stock market capitalizations ($2 billion or more). Investment in
companies with lower market capitalizations, especially those under $1
billion, may involve special risks including limited product lines,
market or financial resources or a limited management group. In addition,
many smaller company stocks trade less frequently and in smaller volume,
and may be subject to more abrupt or erratic price movements or may be
more sensitive to market fluctuations, than stocks of larger
companies.
The Fund will
emphasize investments in equity securities, primarily common stock, and,
to a lesser extent, securities convertible into common stock, preferred
stock, rights to subscribe for common stock and other investments the
return on which is determined by the performance of a common stock or a
basket or index of common stocks. 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
reserves the right, as a defensive measure and to provide for
redemptions, to hold other types of securities, including non-convertible
preferred stocks and debt securities rated investment grade by a
nationally recognized statistical rating organization, U.S. Government
and money market securities, including repurchase agreements, or cash, in
such proportions as, in the opinion of Merrill Lynch Asset Management,
L.P., the Fund’s manager (the “Manager”), prevailing
market or economic conditions warrant.
Description of Certain Investments
Temporary
Investments. Without limitation, 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
tradable 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.
Buying a warrant does not make the Fund a
shareholder of the underlying stock. The warrant holder has no right to
dividends on the underlying stock or to vote the underlying common stock.
A warrant does not carry any right to the 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 paid 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 and the potential capital appreciation that is
offered by the underlying common stock.
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 and
Restricted Securities. The Fund may invest up
to 15% of its total 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.
Rule 144A
Securities. Notwithstanding the above
limitations on Illiquid or Restricted 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 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. 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.
Foreign Market
Risk. Since the Fund may invest 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 fluctuate
more than prices of securities traded in the United States.
Foreign Economy
Risk. The economics of certain foreign markets
often do not compare favorably with that 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
and Exchange Risk. Securities in which the
Fund invests may be denominated or quoted in currencies other than the
U.S. dollar. Changes in foreign currency exchange rates will 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 stronger U.S. dollar will reduce
returns for U.S. investors while a weak U.S. dollar will increase those
returns.
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 on January 1, 1999. Certain securities
issued in participating EU countries (beginning with government and
corporate bonds) will be 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 effect, that 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 conversion may
be taxable to Fund shareholders under foreign or, in certain limited
circumstances, U.S. tax laws.
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 foreign 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 non-public
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 portfolio
manager 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 or 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 it is in the
U.S. 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.
Dividends or
interest on, or proceeds from the sale of, foreign securities may be
subject to foreign withholding and other taxes.
Other Investment Policies, Practices and Risk Factors
Portfolio
Strategies Involving Options, Futures and Foreign Exchange
Transactions. The Fund is authorized to engage
in certain investment practices involving the use of options, futures and
foreign exchange, which may expose the Fund to certain risks. These
investment practices and the associated risks are described in detail in
the Appendix attached to this Statement of Additional
Information.
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 or 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 will maintain a segregated account of cash, cash
equivalents, U.S. Government securities or other liquid securities
denominated in U.S. dollars or non-U.S. currencies in an aggregate amount
equal to the amount of its commitment in connection with such purchase
transactions.
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; Purchase and Sales Contracts. The
Fund may invest in securities pursuant to repurchase agreements or
purchase and sale contracts. Under a repurchase agreement, 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 insulates the Fund from market fluctuations during such period,
although, to the extent the repurchase agreement is not denominated in
U.S. dollars, the Fund’s return may be affected by currency
fluctuations. Repurchase agreements 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. A purchase and sale contract is similar to a repurchase
agreement, but purchase and sale contracts, unlike repurchase agreements,
allocate interest on the underlying security to the purchaser during the
term of the agreement. The Fund does not have the right to seek
additional collateral in the case of purchase and sale contracts. If the
seller were to default on its obligation to repurchase a security under a
repurchase agreement or purchase and sale contract and the market value
of the underlying security at such time was less than the Fund had paid
to the seller, the Fund would realize a loss. 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 securities.
Lending of
Portfolio Securities. The Fund may from time
to time lend securities from its portfolio, with a value not exceeding
33 1
/3% of its total assets, to banks, brokers and other financial
institutions and receive collateral in cash or securities issued or
guaranteed by the 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. Such loans are terminable at any time, and
the borrower, after notice, will be required to return borrowed
securities within five business days. In the event that the borrower
defaults on its obligation to return borrowed securities because of
insolvency or otherwise, the Fund could experience delays and costs in
gaining access to the collateral and could suffer a loss to the extent
the value of the collateral falls below the market value of the borrowed
securities.
While it is the
policy of the Fund generally not to engage in trading for short-term
gains, the Manager will effect portfolio transactions without regard to
holding period, 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 the general market, economic or financial
conditions. The portfolio turnover rate is calculated by dividing the
lesser of the Fund’s annual sales or purchases of portfolio
securities (exclusive of purchases or sales of all securities whose
maturities at the time of acquisition were one year or less) by the
monthly average value of the securities in the portfolio during the year.
Higher portfolio turnover may contribute to higher transactional costs
and negative tax consequences, such as an increase in capital gain
dividends. See “Dividends and Taxes.”
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:
|
(1) Make any investment
inconsistent with the Fund’s classification as a diversified
company under the Investment Company Act.
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|
(2) Invest more than 25%
of its assets, taken at market value, in the securities of issuers in
any particular industry (excluding the U.S. Government and its agencies
and instrumentalities).
|
|
(3) 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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(4) Purchase or sell
real estate, except that, to the extent permitted by applicable law,
the Fund may invest in securities directly or indirectly secured by
real estate or interests therein or issued by companies which invest in
real estate or interests therein and may hold and sell real estate
acquired by the Fund as a result of the ownership of
securities.
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(5) Make loans to other
persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit,
bankers’ acceptances 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 Fund’s Prospectus and this Statement of
Additional Information, as they may be amended from time to
time.
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(6) Issue senior
securities to the extent such issuance would violate applicable
law.
|
|
(7) Borrow money, except
that (i) the Fund may borrow from banks (as defined in the Investment
Company Act) in amounts up to 33 1
/3% of its total assets (including the amount borrowed), (ii) the
Fund may, to the extent permitted by applicable law, borrow up to an
additional 5% of its total assets for temporary
purposes, (iii) the Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio
securities and (iv) the Fund may purchase securities on margin to the
extent permitted by applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the extent permitted by the
Fund’s investment policies as set forth in its Prospectus and
Statement of Additional Information, as they may be amended from time
to time, in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies.
|
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(8) Underwrite
securities of other issuers, except insofar as the Fund technically may
be deemed an underwriter under the Securities Act, in selling portfolio
securities.
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(9) Purchase or sell
commodities or contracts on commodities, except to the extent that the
Fund may do so in accordance with applicable law and the Fund’s
Prospectus and Statement of Additional Information, as they may be
amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
|
Under the
non-fundamental investment restrictions, which may be changed by the
Board of Directors without shareholder approval, the Fund may
not:
|
(a) Purchase securities
of other investment companies, except to the extent such purchases are
permitted by applicable law. As a matter of policy, however, the Fund
will not purchase shares of any registered open-end investment company
or registered unit investment trust, in reliance on Section 12(d)(1)(F)
or (G) (the “fund of funds” provisions) of the Investment
Company Act at any time 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 currently does not 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 a third party, if at the time of acquisition more than
15% of its total assets would be invested in such securities. This
restriction shall not apply to securities 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 (7) 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.
|
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 (2), 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.
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.
The Directors of
the Fund consist of nine individuals, seven 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.
DONALD
CECIL
(72) — Director(2)(3) — 1114 Avenue of
the Americas, New York, New York 10036. Special Limited Partner of
Cumberland Associates (an investment partnership) since 1982; Member of
Institute of Chartered Financial Analysts; Member and Chairman of
Westchester County (N.Y.) Board of Transportation.
M. COLYER
CRUM
(67) — Director(2)(3) — 104 Westcliff
Road, Weston, Massachusetts 02193. Currently James R. Williston Professor
of Investment Management Emeritus, Harvard Business School; James R.
Williston Professor of Investment Management, Harvard Business School,
from 1971 to 1996; Director of Cambridge Bancorp, Copley Properties, Inc.
and Sun Life Assurance Company of Canada.
LAURIE
SIMON
HODRICK
(37) — Director(2)(3) — 809 Uris Hall
3022 Broadway, New York, New York 10027. Professor of Finance and
Economics, Graduate School of Business, Columbia University since 1998;
Associate Professor School of Finance and Economics, Graduate School of
Business, Columbia University from 1996 to 1998; Associate Professor of
Finance, J.L. Kellogg Graduate School of Management, Northwestern
University from 1992 to 1996.
EDWARD
H. MEYER
(72) — Director(2)(3) — 777 Third
Avenue, New York, New York 10017. President of Grey Advertising Inc.
since 1968, Chief Executive Officer since 1970 and Chairman of the Board
of Directors since 1972; Director of Harman International Industries,
Inc. and Ethan Allen Interiors, Inc.
JACK
B. SUNDERLAND
(71) — Director(2)(3) — P.O. Box 7,
West Cornwall, Connecticut 06796. President and Director of American
Independent Oil Company, Inc. (an energy company) since 1987; Member of
Council on Foreign Relations since 1971.
J. THOMAS
TOUCHTON
(61) — Director(2)(3) — Suite 3405,
One Tampa City Center, 201 North Franklin Street, Tampa, Florida 33602.
Managing Partner of The Witt-Touchton Company and its predecessor The
Witt Co. (a private investment partnership) since 1972; Trustee Emeritus
of Washington and Lee University; Director of TECO Energy, Inc. (an
electric utility holding company).
FRED
G. WEISS
(58) — Director(2)(3) — 16450
Maddalena Place, Delray Beach, Florida 33446. Managing Director of FGW
Associates since 1997; Vice President, Planning, Investment, and
Development of Warner-Lambert Co. from 1979 to 1997.
ARTHUR
ZEIKEL
(67) — Director(1)(2) — 300 Woodlawn
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 of Princeton Services from 1993 to 1997; Executive Vice
President of Merrill Lynch & Co., Inc. (“ML & Co.”)
from 1990 to 1999.
ROBERT
C. DOLL
(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 Oppenheimer Funds, Inc. in 1999 and Executive Vice President thereof
from 1991 to 1999.
LAWRENCE
R. FULLER
(58) — Senior Vice President and Portfolio
Manager(1)(2) — First Vice President of the Manager
since 1997; Vice President of the Manager from 1992 to 1997; Senior Vice
President and Director of Benefit Capital Management from 1984 to
1992.
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; First Vice President of the Manager from 1997 to 1999; Vice
President of the Manager from 1990 to 1997; and Director of Taxation of
the Manager since 1990.
THOMAS
D. JONES
, III (34) — Secretary(1)(2) — Vice
President of MLAM since 1998; attorney with the Manager and FAM since
1992.
(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)
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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 November 1,
1999, the Directors and officers of the Fund as a group (14 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 $2,500 per year. The Fund pays the
Chairman of the Committee an additional fee of $1,000 per year. 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 August 31, 1999 and the aggregate compensation paid
to them from all registered investment companies advised by the Manager
and its affiliate, FAM (“MLAM/FAM-advised funds”), for the
calendar year ended December 31, 1998.
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)
|
| Donald Cecil |
|
Director |
|
$9,000 |
|
None |
|
None |
|
$332,808 |
| M. Colyer
Crum |
|
Director |
|
$8,000 |
|
None |
|
None |
|
$116,600 |
| Laurie Simon
Hodrick(2) |
|
Director |
|
$
0 |
|
None |
|
None |
|
$
0 |
| Edward H.
Meyer |
|
Director |
|
$8,000 |
|
None |
|
None |
|
$214,558 |
| Jack B.
Sunderland |
|
Director |
|
$8,000 |
|
None |
|
None |
|
$133,600 |
| J. Thomas
Touchton |
|
Director |
|
$8,000 |
|
None |
|
None |
|
$133,600 |
| Fred G.
Weiss |
|
Director |
|
$8,000 |
|
None |
|
None |
|
$140,842 |
(1)
|
The Directors
serve on the boards of MLAM/FAM-Advised Funds as follows: Mr. Cecil (35
registered investment companies consisting of 35 portfolios); Mr. Crum
(17 registered investment companies consisting of 17 portfolios); Ms.
Hodrick (17 registered investment companies consisting of 17
portfolios); Mr. Meyer (35 registered investment companies consisting
of 35 portfolios); Mr. Sunderland (20 registered investment companies
consisting of 32 portfolios); Mr. Touchton (20 registered investment
companies consisting of 32 portfolios); and Mr. Weiss (17 registered
investment companies consisting of 17 portfolios).
|
(2)
|
Ms. Hodrick
was elected a Director of the Fund and certain other MLAM/FAM Advised
Funds on November 3, 1999.
|
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 Privileges 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 following annual rates: 0.75% of the average
daily net assets of the Fund not exceeding $1.5 billion and 0.725% of the
average daily net assets in excess of $1.5 billion. For the fiscal year
ended August 31, 1999, the Fund paid the Manager total advisory fees of
$16,878,695 and for the period October 31, 1997 (commencement of
operations) to August 31, 1998, the Fund paid the Manager total advisory
fees of $10,274,289.
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 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. For
the fiscal year ended August 31, 1999 and for the period October 31, 1997
(commencement of operations) to August 31, 1998, the Manager paid no fees
to MLAM U.K. pursuant to this agreement.
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 adopted a Code of Ethics under Rule 17j-1 of
the Investment Company Act that incorporates the Code of Ethics of the
Manager (together, the “Codes”). The Codes significantly
restrict the personal investing activities of all employees of the
Manager and, as described below, impose additional, more onerous,
restrictions on fund investment personnel.
The Codes require
that all employees of the Manager pre-clear any personal securities
investment (with limited exceptions, such as government securities). The
pre-clearance requirement and associated procedures are designed to
identify any substantive prohibition or limitation applicable to the
proposed investment. The substantive restrictions applicable to all
employees of the Manager include a ban on acquiring any securities in a
“hot” initial public offering and a prohibition from profiting
on short-term trading in securities. In addition, no employee may
purchase or sell any security 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 Codes provide for trading “blackout periods”
which prohibit trading by investment personnel of the Fund within periods
of trading by the Fund in the same (or equivalent) security (15 or 30
days depending upon the transaction).
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 utilize the
Merrill Lynch Select Pricing
SM
System are referred to herein as “Select Pricing Funds.
”
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 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 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-advised investment companies. Certain persons who acquired
shares of certain MLAM-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 |
|
|
|
Gross Sales
Charges
Collected
|
|
Sales Charges
Retained by
Distributor
|
|
Sales Charges
Paid to
Merrill Lynch
|
|
CDSCs Received on
Redemption of
Load-Waived Shares
|
| For the Fiscal Year
Ended |
|
|
|
|
|
|
|
|
|
August 31, 1999 |
|
$
4,475 |
|
$ 348 |
|
$
4,127 |
|
$ 0 |
| For the Period October
31, 1997 |
|
|
|
|
|
|
|
|
(commencement of operations) to
August 31, 1998 |
|
$
1,287 |
|
$
61 |
|
$
1,226 |
|
$ 0 |
|
| Class D
Shares |
|
| |
|
Gross Sales
Charges
Collected
|
|
Sales Charges
Retained by
Distributor
|
|
Sales Charges
Paid to
Merrill Lynch
|
|
CDSCs Received on
Redemption of
Load-Waived Shares
|
| For the Fiscal Year
Ended |
|
|
|
|
|
|
|
|
|
August 31, 1999 |
|
$
398,337 |
|
$26,372 |
|
$
371,965 |
|
$ 0 |
| For the Period October
31, 1997 |
|
|
|
|
|
|
|
|
(commencement of operations) to
August 31, 1998 |
|
$5,990,287 |
|
$65,235 |
|
$5,925,052 |
|
$8,473 |
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.
Class A and Class
D shares are offered at net asset value to participants in Blueprint
through the Merrill Lynch Directed IRA Rollover Program (the “IRA
Rollover Program”) available from Merrill Lynch Business Financial
Services, a business unit of Merrill Lynch. The IRA Rollover Program is
available to custodian rollover assets from employer-sponsored retirement
and savings plans whose trustee and/or plan sponsor has entered into a
Merrill Lynch Directed IRA Rollover Program Service
Agreement.
Orders for
purchases and redemptions of Class A or Class D shares of the Fund may be
grouped for execution purposes which, in some circumstances, may involve
the execution of such orders two business days following the day such
orders are placed. The minimum initial purchase price is $100, with a $50
minimum for subsequent purchases through Blueprint. There are no minimum
initial or subsequent purchase requirements for participants who are part
of an automatic investment plan. Additional information concerning
purchases through Blueprint, including any annual fees and transaction
charges, is available from Merrill Lynch, Pierce, Fenner & Smith
Incorporated, The Blueprint
SM
Program, P.O. Box 30441, New Brunswick, New Jersey
08989-0441.
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-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 the 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
later, reasonably promptly following completion of probate. The Class B
CDSC may be waived on redemptions of shares by certain eligible 401(a)
and eligible 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 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 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 — Fee-Based Programs” and
“— Systematic Withdrawal Plans.” The Class C CDSC of
the Fund and certain other MLAM-advised mutual 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-advised closed end funds. 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*
|
|
|
CDSCs Received
by Distributor
|
|
CDSCs Paid to
Merrill Lynch
|
| For the Fiscal Year
Ended |
|
|
|
|
|
August 31, 1999 |
|
$4,436,483 |
|
$4,436,483 |
| For the Period October
31, 1997 |
|
|
|
|
(commencement of operations) to
August 31, 1998 |
|
$1,878,234 |
|
$1,878,234 |
|
|
* 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
|
|
|
CDSCs Received
by Distributor
|
|
CDSCs Paid
to
Merrill Lynch
|
| For the Fiscal Year
Ended |
|
|
|
|
|
August 31, 1999 |
|
$
142,120 |
|
$
142,120 |
| For the Period
October 31, 1997 |
|
|
|
|
(commencement of operations) to
August 31, 1998 |
|
$
159,241 |
|
$
159,241 |
|
|
|
|
|
|
|
|
|
|
|
|
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 pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the
annual rate of 0.25% of the average daily net assets of the Fund
attributable to shares of the relevant class in order to compensate the
Distributor and Merrill Lynch (pursuant to a sub-agreement) in
connection with account maintenance activities 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
pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of
0.75% of the average daily net assets of the Fund attributable to the
shares of the relevant class in order to compensate the Distributor and
Merrill Lynch (pursuant to a sub-agreement) for providing shareholder
and distribution services and bearing certain distribution-related
expenses of the Fund, including payments to financial consultants for
selling Class B and Class C shares of the Fund. The Distribution Plans
relating to Class B and Class C shares are designed to permit an
investor to purchase Class B and Class C shares through dealers without
the assessment of an initial sales charge and at the same time permit
the dealer to compensate its financial consultants in connection with
the sale of the Class B and Class C shares.
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, 1998, 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 $2,112,000 (.14% of Class B net assets at
that date). As of August 31, 1999, direct cash revenues for the period
since the commencement of operations of Class B shares exceeded direct
cash expenses by $13,754,353 (.82% of Class B net assets at that date).
As of December 31, 1998, 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 $6,000 (.002% of Class C
net assets at that date). As of August 31, 1999, direct cash revenues
for the period since the commencement of operations of Class C shares
exceeded direct cash expenses by $3,599,223 (1.19% of Class C net
assets at that date).
For the fiscal
year ended August 31, 1999, the Fund paid the Distributor $15,814,131
pursuant to the Class B Distribution Plan (based on average daily net
assets subject to such Class B Distribution Plan of approximately
$1,581.4 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 August 31,
1999, the Fund paid the Distributor $2,960,222 pursuant to the Class C
Distribution Plan (based on average daily net assets subject to such
Class C Distribution Plan of approximately $296.0 million), all of
which was paid to Merrill Lynch for providing account maintenance and
distribution-related activities and services in connection with Class C
shares. For the fiscal year ended August 31, 1999, the Fund paid the
Distributor $685,484 pursuant to the Class D Distribution Plan (based
on average daily net assets subject to such Class D Distribution Plan
of approximately $274.2 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 August 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 August 31, 1999
|
| |
|
(in
thousands) |
| |
|
Eligible
Gross
Sales(1)
|
|
Allowable
Aggregate
Sales Charge
|
|
Allowable
Interest on
Unpaid
Balance(2)
|
|
Maximum
Amount
Payable
|
|
Amounts
Previously
Paid to
Distributor(3)
|
|
Aggregate
Unpaid
Balance
|
|
Annual
Distribution
Fee at
Current Net
Asset
Level(4)
|
Class B Shares for
the period October 31,
1997 (commencement of operations) to
August 31, 1999 |
| Under NASD Rule as
Adopted |
|
$1,229,602 |
|
$76,964 |
|
$9,962 |
|
$86,926 |
|
$25,712 |
|
$61,214 |
|
$12,578 |
| Under Distributor
’s Voluntary Waiver |
|
$1,229,602 |
|
$76,964 |
|
$6,034 |
|
$82,498 |
|
$25,712 |
|
$57,286 |
|
$12,578 |
| |
Class C Shares,
for the period October 31,
1997 (commencement of operations) to
August 31, 1998 |
| Under NASD Rule as
Adopted |
|
$
289,471 |
|
$18,079 |
|
$2,349 |
|
$20,428 |
|
$ 3,969 |
|
$16,459 |
|
$ 2,267 |
(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”)
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.
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
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 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.
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 will not usually exceed 10 days.
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 fifteen minutes after the regular 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 after the close of business on the NYSE on each
day the NYSE is open for trading. 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 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 will not
be reflected in the computation of the Fund’s net asset value. If
events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value
as determined in good faith by the Directors.
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 August 31, 1999 is set
forth below.
| |
|
Class
A
|
|
Class
B
|
|
Class
C
|
|
Class
D
|
| Net Assets |
|
$171,140,536 |
|
$1,677,021,645 |
|
$302,246,698 |
|
$301,552,170 |
| |
|
|
|
|
|
|
|
|
| Number of Shares
Outstanding |
|
12,626,242 |
|
125,224,125 |
|
22,564,433 |
|
22,312,636 |
| |
|
|
|
|
|
|
|
|
Net Asset Value Per
Share (net assets divided by
number of shares outstanding) |
|
$
13.55 |
|
$
13.39 |
|
$
13.39 |
|
$
13.51 |
Sales Charge (for
Class A and Class D shares:
5.25% of offering price; 5.54% of net
asset
value per share)* |
|
.75 |
|
** |
|
** |
|
.75 |
| |
|
|
|
|
|
|
|
|
| Offering
Price |
|
$
14.30 |
|
$
13.39 |
|
$
13.39 |
|
$
14.26 |
| |
|
|
|
|
|
|
|
|
*
|
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 net results, 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.
Information
about the brokerage commissions paid by the Fund, including commissions
paid to Merrill Lynch, is set forth in the following table:
Fiscal Year Ended August
31,
|
|
Brokerage
Commissions
Paid
|
|
Commissions
Paid to
Merrill
Lynch
|
| 1999 |
|
$2,809,478 |
|
$226,138 |
|
|
Period October 31, 1997
(commencement
of operations) to August 31,
|
|
|
| 1998 |
|
$2,622,190 |
|
$110,228 |
For the fiscal
year ended August 31, 1999, the brokerage commissions paid to Merrill
Lynch represented 8.05% of the aggregate brokerage commissions paid and
involved 6.11% 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.”
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.
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 all
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.
Shareholders of Merrill Lynch Senior Floating Rate Fund II, Inc. have
the option to exchange their shares of common stock into Class C shares
of certain Merrill Lynch-sponsored open-end funds (“Eligible Class
C Shares”) at their net asset value, without the imposition of any
CDSC upon any subsequent redemption of eligible Class C Shares. This
investment option is available only with respect to eligible shares of
Merrill Lynch Senior Floating Rate Fund II, Inc. as to which no Early
Withdrawal Charge 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 Class C shares of the fund
on such day.
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 of the Fund 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. 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. Merrill Lynch may charge
an initial establishment fee and an annual custodial fee for each
account. Information with respect to these plans is available on
request from Merrill Lynch.
Dividends
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 advisors 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 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 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 or both dividends and capital gains distributions, 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 mailed, or the direct deposit for withdrawal payment will be made at
net asset value as determined after 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 at the close of business on the
following business day. The check for the withdrawal payment will be
made, on the next business day following redemption. When a shareholder
is making systematic withdrawals, dividends and distributions on all
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® or CBA® 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 as a result of any account maintenance, distribution and
transfer agency fees applicable with respect to such class of 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 amounts 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, recent legislation permits a
foreign tax credit to be claimed with respect to withholding tax on a
dividend paid by the Fund 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, or 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 more than 50% in
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 taxes and
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, under recent legislation, 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
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 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. In advertisements distributed to investors whose purchases are
subject to waiver of the CDSC in the case of Class B and Class C shares
(such as investors in certain retirement plans) or to reduced sales
loads in the case of Class A and Class D shares, the performance data
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 waiver of the
CDSC, a lower amount of expenses is deducted. See “Purchase of
Shares.” The Fund’s total return may be expressed either as a
percentage or as a dollar amount in order to illustrate such total
return on a hypothetical $1,000 investment in the Fund at the beginning
of each specified period.
On occasion, the
Fund may compare its performance to various indices including the
Standard & Poor’s 500 Index, the Dow Jones Industrial Average
or 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, and 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.
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 August
31, 1999 |
|
21.71 |
% |
|
$1,217.10 |
|
23.27 |
% |
|
$1,232.70 |
Inception (October
31, 1997) to
August 31, 1999 |
|
15.97 |
% |
|
$1,312.10 |
|
16.80 |
% |
|
$1,329.20 |
|
| |
|
Annual Total
Return |
| |
|
(excluding
maximum applicable sales charges) |
| Year Ended August 31,
1999 |
|
28.46 |
% |
|
$1,284.60 |
|
27.27 |
% |
|
$1,272.70 |
Inception (October
31, 1997) to
August 31, 1998 |
|
7.80 |
% |
|
$1,078.00 |
|
6.80 |
% |
|
$1,068.00 |
|
| |
|
Aggregate
Total Return |
| |
|
(including
maximum applicable sales charges) |
Inception (October
31, 1997) to
August 31, 1999 |
|
31.21 |
% |
|
$1,312.10 |
|
32.92 |
% |
|
$1,329.20 |
|
| |
|
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 August
31, 1999 |
|
26.23 |
% |
|
$1,262.30 |
|
21.48 |
% |
|
$1,214.80 |
Inception (October
31, 1997) to
August 31, 1999 |
|
18.21 |
% |
|
$1,358.80 |
|
15.68 |
% |
|
$1,305.90 |
|
| |
|
Annual Total
Return |
| |
|
(excluding
maximum applicable sales charges) |
| Year Ended August 31,
1999 |
|
27.23 |
% |
|
$1,272.30 |
|
28.21 |
% |
|
$1,282.10 |
Inception (October
31, 1997) to
August 31, 1998 |
|
6.80 |
% |
|
$1,068.00 |
|
7.50 |
% |
|
$1,075.00 |
|
| |
|
Aggregate
Total Return |
| |
|
(including
maximum applicable sales charges) |
Inception (October
31, 1997) to
August 31, 1999 |
|
35.88 |
% |
|
$1,358.80 |
|
30.59 |
% |
|
$1,305.90 |
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.
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.
The Fund was
incorporated under Maryland law on August 4, 1997. 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 $.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 are identical in all
respects except that the Class B, Class C and Class D shares bear
certain expenses related to the account maintenance and/or distribution
of such shares and have exclusive voting rights with respect to matters
relating to such expenditures except that Class B shares have certain
voting rights with respect to Class D distribution expenditures. The
Fund may issue additional classes or shares if the Board of Directors
deems such issuance to be in the best interests of the Fund. Upon
liquidation of the Fund, shareholders of each class are entitled to
share pro rata in the net assets of the Fund available for distribution
to shareholders, except for any expenses which may be attributable only
to one class. The redemption, exchange and conversion rights are
described elsewhere herein and in the Prospectus.
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, of
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 will be 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.
Ernst &
Young LLP
, 99 Wood Avenue South, Iselin, New Jersey 08830-0471 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.
State Street
Bank and Trust Company (the “Custodian”), P.O. Box 351,
Boston, Massachusetts 02101, 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 August 31 of each year. The Fund sends to its
shareholders at least semi-annually reports showing the Fund’s
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders
each year. After the end of each year, shareholders will receive
Federal income tax information regarding dividends.
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 November 1, 1999:
Name
|
|
Address
|
|
Percent and
Class
|
Merrill Lynch Trust
Company(1) |
|
P.O. Box 30532
New Brunswick, NJ 08989 |
|
54.13% Class A |
Merrill Lynch Trust Company
Trustee FBO MLSIP
Investment Account
Attn: Robert Arimenta, Jr. |
|
P.O. Box 30532
New Brunswick, NJ 08989 |
|
15.65% 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.
INVESTMENT PRACTICES INVOLVING THE USE OF OPTIONS,
FUTURES
AND FOREIGN EXCHANGE
The Fund is
authorized to engage in certain investment practices involving the use
of options, futures and foreign exchange, as described
below.
Derivatives
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 S&P 500 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. Derivatives, however, 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.
The Fund may use
the following types of derivative instruments:
Futures
— exchange-traded contracts involving the obligation of
the seller to deliver, and the buyer to receive, certain assets (or a
money payment based on the change in value of certain assets or an
index) at a specified time. Futures involve leverage risk and may
involve currency risk.
Forwards
— private contracts involving the obligation of the
seller to deliver, and the buyer to receive, certain assets (or a money
payment based on the change in value of certain assets or an index) at
a specified time. Forwards involve credit risk and leverage risk, and
may involve currency risk.
Options
— exchange-traded or private contracts involving the
right of a holder to deliver (a “put”) or receive (a
“call”) certain assets (or a money payment based on the
change of certain assets or an index) from another party at a specified
price within a specified time period. Options involve leverage risk.
Private options also involve credit risk and liquidity risk. Options
may involve currency risk.
The Fund may use
Derivatives for hedging purposes only. 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. This risk is known as
“Correlation Risk.”
The Fund may use
the following types of Derivative instruments and trading
strategies:
Options on Securities and Securities Indices
Purchasing
Options. The Fund may purchase put options
on securities held in its portfolio or 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.
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.
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
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.
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 risks.
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. 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.
Types of
Options. The Fund may engage in transactions
in options on securities or securities indices on exchanges and in the
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.
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 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.
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.
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.
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
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.” 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.
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CODE #: 19013-12-99
PART C. OTHER
INFORMATION
Item 23.
Exhibits.
Exhibit
Number
|
|
|
| 1 |
|
(a) |
|
— Articles
of Incorporation of the Registrant, dated August 4,
1997.(a) |
| |
|
(b) |
|
— Articles
Supplementary to the Articles of Incorporation of the Registrant,
dated November 3, 1997.(b) |
| 2 |
|
|
|
— By-Laws
of the Registrant.(c) |
| 3 |
|
(a) |
|
— 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) |
|
—
Management Agreement between the Registrant and Merrill Lynch
Asset Management, L.P. as
amended (the “Manager
”).(e) |
|
|
(b) |
|
—Sub-Advisory
Agreement between the Manager and Merrill Lynch Asset Management U.K.
Limited.(c) |
| 5 |
|
(a) |
|
— Class A
Shares Distribution Agreement between the Registrant and Merrill
Lynch Funds Distributor,
now a division of Princeton Funds
Distributor, Inc. (the “Distributor”).(c) |
|
|
(b) |
|
— Class B
Shares Distribution Agreement between the Registrant and the
Distributor.(c) |
|
|
(c) |
|
— Class C
Shares Distribution Agreement between the Registrant and the
Distributor.(c) |
|
|
(d) |
|
— Class D
Shares Distribution Agreement between the Registrant and the
Distributor.(c) |
| 6 |
|
|
|
—
None. |
| 7 |
|
|
|
— Custodian
Contract between the Registrant and State Street Bank and Trust
Company.(c) |
| 8 |
|
(a) |
|
— 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
”).(c) |
|
|
(b) |
|
—Agreement
relating to use of name between the Registrant and Merrill Lynch
& Co., Inc.
(“ML & Co”).(c) |
| 9 |
|
|
|
— Opinion
of Brown & Wood LLP, counsel to the
Registrant.(c) |
| 10 |
|
|
|
— Consent
of Ernst & Young LLP
, independent auditors for the Registrant. |
| 11 |
|
|
|
—
None. |
| 12 |
|
|
|
—
Certificate of the Manager.(c) |
| 13 |
|
(a) |
|
— Class B
Shares Distribution Plan and Class B Shares Distribution Plan
Sub-Agreement of the
Registrant.(c) |
|
|
(b) |
|
— Class C
Shares Distribution Plan and Class C Shares Distribution Plan
Sub-Agreement of the
Registrant.(c) |
|
|
(c) |
|
— Class D
Shares Distribution Plan and Class D Shares Distribution Plan
Sub-Agreement of the
Registrant.(c) |
| 14 |
|
|
|
—
None. |
| 15 |
|
|
|
— Merrill
Lynch Select Pricing
SM
System Plan Pursuant to Rule 18f-3.(f) |
(a)
|
Filed on
August 5, 1997 as an Exhibit to the Registrant’s Registration
Statement on Form N-1A (File No. 333-32899) under the Securities Act
of 1933, as amended (the “Registration Statement
”).
|
(b)
|
Filed on
March 6, 1998 as an Exhibit to Post-Effective Amendment No. 1 to the
Registration Statement.
|
(c)
|
Filed on
September 10, 1997 as an Exhibit to Pre-Effective Amendment No. 1 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 By-Laws, filed as Exhibit 2 to the
Registration Statement.
|
(e)
|
Filed on
September 22, 1998 as an Exhibit to Pre-Effective Amendment No. 1 to
the Registration Statement.
|
(f)
|
Incorporated
by reference 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).
|
Item 24. Persons Controlled by or
under Common Control with Registrant.
Not
applicable.
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 Manager.
Merrill Lynch
Asset Management, L.P. (“MLAM” or the “Manager”),
acts as the investment adviser for the following open-end registered
investment companies: Merrill Lynch Adjustable Rate Securities Fund,
Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset
Builder Program, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill
Lynch Asset Income Fund, Inc., Merrill Lynch 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, Inc., Merrill Lynch Global
Growth Fund, Inc., Merrill Lynch Global Holdings, 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
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. and Hotchkis and Wily 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 Multi-State Municipal Series Trust, CMA Tax-Exempt
Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program, Inc.,
Financial Institutions Series Trust, Merrill Lynch Basic Value Fund,
Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch
Corporate Bond Fund, Inc., Merrill Lynch 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., 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 1999, 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, Inc., MuniHoldings
California Insured Fund II, Inc., MuniHoldings California Insured Fund
III, Inc., MuniHoldings California Insured Fund IV, Inc., MuniHoldings
California Insured Fund V, Inc., MuniHoldings Florida Insured Fund,
MuniHoldings Florida Insured Fund II, MuniHoldings Florida Insured Fund
III, MuniHoldings Florida Insured Fund IV, 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, Inc., MuniHoldings
Michigan Insured Fund II, Inc., MuniHoldings New Jersey Insured Fund,
Inc., MuniHoldings New Jersey Insured Fund II, Inc., MuniHoldings New
Jersey Insured Fund III, Inc. MuniHoldings New Jersey Insured Fund IV,
Inc., MuniHoldings New York Fund, Inc., MuniHoldings New York Insured
Fund, Inc., MuniHoldings New York Insured Fund II, Inc., MuniHoldings
New York Insured Fund III, Inc., MuniHoldings New York Insured Fund IV,
Inc., MuniHoldings Pennsylvania Insured Fund, MuniInsured Fund, Inc.,
MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest Florida Fund,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc.,
MuniVest Pennsylvania
Insured Fund, 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 New York Insured
Fund II, Inc., MuniYield Pennsylvania 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 September 1, 1997 for his, her or its own account or in the
capacity of director, officer, partner or trustee. In addition, Mr.
Glenn is President, 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 |
| 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 |
Name
|
|
Position(s) with
the
Manager
|
|
Other Substantial
Business,
Profession, Vocation or Employment
|
| Robert C.
Doll |
|
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 |
| 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 |
| Brian A.
Murdock |
|
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 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 1999, Inc.,
Income Opportunities Fund 2000, Inc., Merrill Lynch Americas Income
Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill
Lynch Basic Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch Consults International Portfolio, Merrill Lynch Convertible Fund,
Inc., Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Corporate
High Yield 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 Holdings, 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 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 July 1, 1997, for his or
her own account or in the capacity of director, officer, partner or
trustee. In addition, Messrs. Glenn, Burke and Albert are officers of
one or more of the registered investment companies listed in the first
two paragraphs of this Item 26.
Name
|
|
Positions with
MLAM U.K.
|
|
Other Substantial
Business,
Profession, Vocation or Employment
|
| Terry K.
Glenn |
|
Director and Chairman |
|
Executive Vice President of MLAM and
FAM;
Executive Vice President and Director of Princeton
Services; President and Director of PFD; President
of Princeton Administrators |
| Alan J.
Albert |
|
Senior Managing Director |
|
Vice President of MLAM |
| Nicholas C.D.
Hall |
|
Director |
|
Director of Merrill Lynch Europe
PLC.; General
Counsel of Merrill Lynch International Private
Banking Group |
| 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; Vice President of MLAM from
1990 to 1997 |
| 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 of the requirements for
effectiveness of this Registration Statement pursuant to 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 the State of New Jersey,
on the 7th day of December, 1999.
|
MERRILL
LYNCH
GLOBAL
GROWTH
FUND
, INC
.
|
|
Donald C.
Burke, Vice President and Treasurer
|
Pursuant to
the requirements of the Securities Act of this Registration Statement
has been signed below by the following persons in the capacities and on
the dates 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) |
|
|
| |
|
DONALD
CECIL
*
(Donald Cecil) |
|
Director |
|
|
| |
|
M. COLYER
CRUM
*
(M. Colyer Crum) |
|
Director |
|
|
| |
|
LAURIE
S. HODRICK
*
(Laurie S. Hodrick) |
|
Director |
|
|
| |
|
EDWARD
H. MEYER
*
(Edward H. Meyer) |
|
Director |
|
|
| |
|
JACK
B. SUNDERLAND
*
(Jack B. Sunderland) |
|
Director |
|
|
| |
|
J. THOMAS
TOUCHTON
*
(J. Thomas Touchton) |
|
Director |
|
|
| |
|
FRED
G. WEISS
*
(Fred G. Weiss) |
|
Director |
|
|
| |
|
/s/
DONALD
C. BURKE
By:
(Donald C. Burke, Attorney-in-Fact)
|
|
|
|
December 7, 1999 |
| |
POWER OF ATTORNEY
The undersigned,
the Directors/Trustees and the Officers of each of the registered
investment companies listed below, hereby authorize Terry K. Glenn,
Donald C. Burke and Joseph T. Monagle, Jr. or any of them, as
attorney-in-fact, to sign on his behalf in the capacities indicated any
Registration Statement or amendment thereto (including post-effective
amendments) for each of the following registered investment companies
and to file the same, with all exhibits thereto, with the Securities
and Exchange Commission: Merrill Lynch Basic Value Fund, Inc.; Merrill
Lynch Capital Fund, Inc.; Merrill Lynch Global Resources Trust; Merrill
Lynch Global Growth Fund, Inc.; Merrill Lynch Special Value Fund, Inc.;
Merrill Lynch Ready Assets Trust; Merrill Lynch U.S.A. Government
Reserves; Merrill Lynch U.S. Treasury Money Fund; MuniVest Florida
Fund; MuniVest Michigan Insured Fund, Inc.; MuniVest New Jersey Fund,
Inc.; MuniYield Florida Insured Fund; MuniYield Pennsylvania Fund;
MuniYield New Jersey Insured Fund, Inc.; MuniYield Michigan Insured
Fund, Inc.
Dated: April 25, 1999
/s/
TERRY
K. GLENN
Terry K. Glenn
(President/Director/Trustee) |
|
|
/s/
DONALD
CECIL
Donald Cecil
(Director/Trustee) |
|
|
/s/
EDWARD
H. MEYER
Edward H. Meyer
(Director/Trustee) |
|
|
/s/
J. THOMAS
TOUCHTON
J. Thomas Touchton
(Director/Trustee) |
|
|
/s/
FRED
G. WEISS
Fred G. Weiss
(Director/Trustee) |
/s/
DONALD
C. BURKE
Donald C. Burke
(Vice President/Treasurer/Principal Financial and
Accounting Officer) |
|
|
|
/s/
M. COLYER
CRUM
M. Colyer Crum
(Director/Trustee) |
|
|
/s/
JACK
B. SUNDERLAND
Jack B. Sunderland
(Director/Trustee) |
|
|
/s/
ARTHUR
ZEIKEL
Arthur Zeikel
(Director/Trustee) |
POWER OF ATTORNEY
The undersigned hereby authorizes Terry K. Glenn, Donald
C. Burke and Joseph T. Monagle, Jr. or any of them, as
attorney-in-fact, to sign on her behalf in the capacities
indicated in any Registration Statement or amendment thereto
(including post-effective amendments) for each of the following
registered investment companies and to file the same, with all
exhibits thereto, with the Securities and Exchange Commission:
Merrill Lynch Basic Value Fund, Inc.; Merrill Lynch Capital
Fund, Inc.; Merrill Lynch Disciplined Equity Fund, Inc.; Merrill
Lynch Global Resources Trust; Merrill Lynch Global Growth Fund,
Inc.; Merrill Lynch Special Value Fund, Inc.; Merrill Lynch
Ready Assets Trust; Merrill Lynch U.S.A. Government Reserves;
Merrill Lynch U.S. Treasury Money Fund; MuniHoldings Michigan
Insured Fund II, Inc.; MuniVest Florida Fund; MuniVest Michigan
Insured Fund, Inc.; MuniVest New Jersey Fund, Inc.; MuniYield
Florida Insured Fund; MuniYield Pennsylvania Fund; MuniYield New
Jersey Insured Fund, Inc.; MuniYield Michigan Insured Fund,
Inc.
Dated: November 22, 1999
|
/S
/ LAURIE
SIMON
HODRiCK
|
|
Laurie Simon Hodrick
(Director/Trustee)
|
EXHIBIT INDEX
Exhibit
Number
|
|
Description
|
| 10 |
|
— Consent
of Ernst & Young LLP, independent
auditors for the Registrant |
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