As filed with the Securities and Exchange Commission on December 22,
1999
Securities Act File No. 333-91227
Investment Company Act File No. 811-09697
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
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Registration Statement under the
Securities Act of 1933
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¨
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Pre-Effective Amendment No.
1
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x
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Post-Effective Amendment
No.
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¨
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and/or
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Registration Statement under
the Investment Company Act of 1940
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¨
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Amendment No. 1
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x
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(Check appropriate box or
boxes)
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MERCURY LARGE CAP SERIES FUNDS, INC.
(Exact name of Registrant as specified in charter)
800 Scudders Mill Road, Plainsboro, New Jersey
08536
(Address of Principal Executive Offices)
Registrants Telephone Number, Including Area Code: (888)
763-2260
TERRY K. GLENN
Mercury Large Cap Series Funds, Inc.
P.O. Box 9011
Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
Approximate Date
of Proposed Public Offering: As soon as
practicable after the effective date of the Registration
Statement.
Copies to:
Counsel for
the Fund:
LAURIN BLUMENTHAL KLEIMAN, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048
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MICHAEL J. HENNEWINKEL, Esq.
Fund Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011
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Title of Securities being registered:
Shares of Common Stock, par value $.10 per share.
The Registrant
hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
Master Large Cap Series Trust has also executed this Registration
Statement.
Mercury Large Cap Series Funds, Inc.
Mercury Large Cap Growth Fund
Mercury Large Cap Value Fund
Mercury Large Cap Core Fund
PROSPECTUS December 22, 1999
(LOGO)
THIS
PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE INVESTING, INCLUDING
INFORMATION ABOUT RISKS. PLEASE READ IT BEFORE YOU INVEST AND KEEP IT FOR
FUTURE REFERENCE.
THE
SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Table
of Contents
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Fund Facts
In
an effort to help you better understand the many concepts involved in making
an investment decision, we have defined the highlighted terms in this
prospectus in the sidebar.
Equity Securities securities representing
ownership of a corporation or securities whose price is linked to the value
of securities that represent company ownership.
Large Cap Companies companies whose market
capitalization is higher than the top 5% of U.S. securities
traded.
Common Stock units of ownership of a
corporation.
Russell 1000® Index an index that measures the
performance of the 1,000 largest companies in the Russell 3000® Index,
which represents approximately 92% of the total market capitalization of the
Russell 3000® Index.
Russell 1000® Growth Index
a subset
of the Russell 1000® Index that consists of those Russell 1000®
securities with a greater than average growth orientation.
Russell 1000® Value Index
a subset
of the Russell 1000® Index that consists of those Russell 1000®
securities with lower price to book ratios and lower forecasted growth
values.
ABOUT THE MERCURY LARGE CAP SERIES FUNDS
What
are the Funds investment objectives?
Mercury Large Cap Series Funds, Inc. is an open end series type
mutual fund that consists of three separate Funds, each of which issues its
own shares:
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Mercury Large Cap Growth
Fund
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Mercury Large Cap Value
Fund
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Mercury Large Cap Core
Fund
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The investment objective of each Fund is long term capital growth. In
other words, each Fund tries to choose investments that will increase in
value. Current income from dividends and interest will not be an important
consideration in selecting portfolio securities.
What
are the Funds main investment strategies?
Each Fund invests primarily in a diversified portfolio of
equity securities of large cap companies located
in the United States. The Large Cap Growth Fund will invest primarily in
equity securities that the Investment Adviser believes have good prospects
for earnings growth. The Large Cap Value Fund will invest primarily in
equity securities that the Investment Adviser believes are undervalued. The
Large Cap Core Fund will use an investment approach that blends growth and
value.
A company whose earnings per share grow faster than inflation and the
economy in general usually has a higher stock price over time than a company
with slower earnings growth. The Funds evaluation of the prospects for
a companys industry or market sector is an important factor in
evaluating a particular companys earnings prospects. A companys
stock is considered to be undervalued when its price is less than what the
Investment Adviser believes it is worth. We cannot guarantee that any Fund
will achieve its objective.
The Investment Adviser uses quantitative models that employ various
factors to look for companies that, in its opinion, are consistent with the
investment strategy of each individual Fund. Each Fund seeks its objective
by investing primarily in common stocks of companies the
Investment Adviser selects from among those included in the Funds
applicable Russell 1000® Index, as follows:
Fund |
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Applicable Index |
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Large Cap Growth Fund |
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Russell 1000® Growth Index |
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Large Cap Value Fund |
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Russell 1000® Value Index |
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Large Cap Core Fund |
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Russell 1000® Index |
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MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Fund Facts
Each Fund is a feeder fund that invests all of its
assets in a corresponding master portfolio (each, a
Portfolio) of the Master Large Cap Series Trust (the Trust
) that has the same objectives as the Fund. All investments will be
made at the Trust level. This structure is sometimes called a
master/feeder structure. Each Funds investment results
will correspond directly to the investment results of the Portfolio in
which it invests. For simplicity, this Prospectus uses the term Fund
to include the Portfolio in which a Fund invests.
What
are the main risks of investing in the Funds?
As with any fund, the value of a Funds investmentsand
therefore the value of Fund sharesmay fluctuate. 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. Each Fund is also subject to the risk that the stocks the
Investment Adviser selects will underperform the stock markets, the
relevant indices or other funds with similar investment objectives and
investment strategies. Since foreign markets may differ significantly from
U.S. markets in terms of both economic conditions and government
regulation, investment in foreign securities involves special risks. If the
value of your Funds investments goes down, you may lose
money.
Who
should invest?
A Fund may be an appropriate investment for you if you:
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Are investing with long
term goals in mind, such as retirement or funding a childs
education
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Want a professionally
managed and diversified portfolio
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Are willing to accept the
risk that the value of your investment may decline in order to seek long
term capital growth
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Are not looking for a
significant amount of current income
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This Prospectus does not include a Risk/Return Bar Chart because, as
of the date of this Prospectus, the Funds have not yet commenced
operations.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Fund Facts
UNDERSTANDING EXPENSES
Fund
investors pay various 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 fees include sales charges
which you may pay when you buy or sell shares of a Fund.
Expenses paid indirectly by the shareholder:
Annual Fund Operating Expenses
expenses that cover the costs of operating a Fund.
Management Fee a fee paid to the Investment
Adviser for managing a Fund.
Distribution Fees fees used to support a Funds
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.
Each 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 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 a 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 I |
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Class A |
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Class B(b) |
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Class C |
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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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5.25 |
%(c) |
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None |
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None |
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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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None |
(d) |
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4.00 |
%(c) |
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1.00 |
%(c) |
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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 the Funds total assets)(e): |
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Management
Fee(f) |
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0.75 |
% |
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0.75 |
% |
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0.75 |
% |
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0.75 |
% |
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Distribution and/or Service
(12b-1) Fees(g) |
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None |
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0.25 |
% |
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1.00 |
% |
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1.00 |
% |
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Other Expenses (including
transfer agency fees)(h) |
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0.80 |
% |
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0.80 |
% |
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0.80 |
% |
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0.80 |
% |
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Total Annual Fund Operating
Expenses |
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1.55 |
% |
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1.80 |
% |
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2.55 |
% |
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2.55 |
% |
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Fee Waiver and/or Expense
Reimbursement(i) |
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0.05 |
% |
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0.30 |
% |
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1.05 |
% |
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1.05 |
% |
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Net Total Operating
Expenses(j) |
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1.50 |
% |
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1.50 |
% |
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1.50 |
% |
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1.50 |
% |
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(a)
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Certain
securities dealers may charge a fee to process a purchase or sale of
shares.
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(b)
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Class B shares
automatically convert to Class A 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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For each Fund,
the fees and expenses include the expenses of both the Fund and the
Portfolio in which it invests.
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(f)
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Paid by each
Portfolio. The Investment Adviser provides accounting services to each
Portfolio at its cost.
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(g)
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The Funds call
the Service Fee an Account Maintenance Fee.
Account Maintenance Fee is the term used elsewhere in this Prospectus and
in all other materials. If you hold Class B or C shares
(Footnotes continued from previous page)
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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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(h)
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Based on
estimated amounts for the current fiscal year. Each Fund pays the
Transfer Agent a fee for each shareholder account and reimburses it for
out-of-pocket expenses. The fee ranges from $11.00 to $23.00 per account
(depending on the level of services required), but is set at 0.10% for
certain accounts that participate in certain fee-based programs. Each
Fund also pays a $0.20 monthly closed account charge, which is assessed
upon all accounts that close during the calendar year. The fee begins the
month following the month the account is closed and ends at the end of
the calendar year.
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(i)
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With respect to
each Fund, the Investment Adviser has entered into a contractual
arrangement with either the Fund or its Portfolio as necessary to assure
that expenses incurred by each class of that Fund will not exceed 1.50%.
This arrangement has a one-year term and is renewable.
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(j)
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The net total
operating expenses reflect the Investment Advisers estimate of
expenses that will actually be incurred during each Funds current
fiscal year, restated to reflect the contractual fee waiver and/or
expense reimbursement currently in effect.
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MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Fund Facts
Example:
These examples are intended to help you compare the cost of
investing in the Funds with the cost of investing in other mutual
funds.
These examples assume that you invest $10,000 in a 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 Funds operating expenses remain the same. This assumption is not
meant to indicate you will receive a 5% annual rate of return. Your annual
return may be more or less than the 5% used in these examples. Although
your actual costs may be higher or lower, based on these assumptions, your
costs would be:
Expenses if you did redeem your shares:*
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Class I |
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Class A |
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Class B |
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Class C |
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One year |
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$670 |
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$ 670 |
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$553 |
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$253 |
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Three years |
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$984 |
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$1,035 |
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$899 |
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$699 |
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Expenses if you did not redeem your
shares:* |
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Class I |
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Class A |
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Class B |
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Class C |
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One year |
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$670 |
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$ 670 |
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$153 |
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$153 |
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Three years |
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$984 |
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$1,035 |
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$699 |
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$699 |
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*
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For each Fund, the
expenses include the expenses of both the Fund and the Portfolio in
which it invests.
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These expenses do not
reflect the continuation of the contractual arrangement between the
Investment Adviser and each Fund that limits expenses incurred by each
class of that Fund to 1.50% beyond the first year. As stated above, this
arrangement has a one-year term and is renewable.
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MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] About the Details
About the Portfolio Manager Robert C. Doll, Jr. is a
Senior Vice President and the Portfolio Manager of the Funds. Mr. Doll has
been a Senior Vice President of Fund Asset Management since 1999. Prior to
joining the Investment Adviser, Mr. Doll was Chief Investment Officer of
OppenheimerFunds, Inc. in 1999 and an Executive Vice President thereof
from 1991 to 1999.
About the Investment Adviser The Funds are managed by
Fund Asset Management.
Each Funds objective is long term capital growth. Each Fund
tries to achieve its objective by investing primarily in a diversified
portfolio of equity securities of large cap companies located in the
United States.
Each Fund seeks its investment objective by investing at least 80%
of its total assets in common stocks of companies the Investment Adviser
selects from among those included in the Funds applicable Russell
1000® index. The Investment Adviser uses a different multi-factor
quantitative model to look for companies within the applicable Russell 1000
® index that, in its opinion, are consistent with the investment
objective of each Fund.
As a large cap fund, each Funds common stock holdings will
have a dollar-weighted market capitalization that exceeds that of the top
5% of U.S. securities traded.
Each Fund will seek to outperform its benchmark:
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The Large Cap
Growth Fund will seek to outperform the Russell 1000® Growth Index
by investing in equity securities that the Investment Adviser believes
have above average earnings prospects. The Russell 1000® Growth
Index (which consists of those Russell 1000® securities with a
greater-than-average growth orientation) is a subset of the Russell 1000
® Index.
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The Large Cap
Value Fund will seek to outperform the Russell 1000® Value Index by
investing in equity securities that the Investment Adviser believes are
selling at below normal valuations. The Russell 1000® Value Index,
another subset of the Russell 1000® Index, consists of those Russell
1000® companies with lower price-to-book ratios and lower forecasted
growth values.
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The Large Cap
Core Fund has a blended investment strategy that emphasizes a mix of
both growth and value and will seek to outperform the Russell 1000®
Index.
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Although the Growth Fund emphasizes growth-oriented investments,
the Value Fund emphasizes value-oriented investments and the Core Fund
uses a blend of growth and value, there are equity investment strategies
common to all three Funds. In selecting securities for a Funds
portfolio from that Funds benchmark universe, the Investment Adviser
uses a different proprietary quantitative model for each Fund. Each model
employs three filters in its initial screens: earnings momentum, earnings
surprise and valuation. For each Fund, the Investment
Adviser looks for strong relative earnings growth, preferring internal
growth and unit growth to growth resulting from a companys pricing
structure. A companys stock price relative to its earnings and book
value is also examined if the Investment Adviser believes
that a company is overvalued, it will not be considered as an investment
for any Fund. After the initial screening is done, the Investment Adviser
relies on fundamental analysis, using both internal and external research,
to optimize its quantitative model to choose companies the Investment
Adviser believes have strong, sustainable earnings growth with current
momentum at attractive price valuations.
Each Fund typically will hold between 60 and 100 stocks from among
those included in its applicable Russell 1000® index. Because a Fund
generally will not hold all the stocks in its applicable index, and
because a Funds investments may be allocated in amounts that vary
from the proportional weightings of the various stocks in that index, the
Funds are not index funds. In seeking to outperform the
relevant benchmark, however, the Investment Adviser reviews potential
investments using certain criteria that are based on the securities in the
relevant index. These criteria currently include the
following:
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Relative price
to earnings and price to book ratios
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Weighted median
market capitalization of a Funds portfolio
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Allocation
among the economic sectors of a Funds portfolio as compared to the
applicable index
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Weighted
individual stocks within the applicable index
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These criteria are explained in detail in the Statement of
Additional Information.
Each Fund also may invest up to 10% of its total assets in
securities of companies organized under the laws of countries other than
the United States that are traded on foreign securities exchanges or in
the foreign over-the-counter markets, including securities of foreign
issuers that are represented by American Depositary Receipts, or
ADRs. Securities of foreign issuers that are represented by
ADRs or that are listed on a U.S. securities exchange or traded in the
U.S. over-the-counter markets are considered foreign securities
for the purpose of the Funds investment allocations. The Fund
anticipates that it would generally limit its foreign securities
investments to ADRs of issuers in developed countries.
Each Fund may invest in investment grade convertible securities,
preferred stocks and U.S. Government debt securities (i.e.,
securities that are direct
obligations of the U.S. Government). There are no restrictions on the
maturity of the debt securities in which a Fund may invest.
As a temporary measure for defensive purposes, each Fund may invest
without limit in cash, cash equivalents or short-term U.S. Government
securities. These investments may include high quality, short-term money
market instruments such as U.S. Treasury and agency obligations,
commercial paper (short-term, unsecured, negotiable promissory notes of a
domestic or foreign company), short-term debt obligations of corporate
issuers and certificates of deposit and bankers acceptances. These
investments may hamper a Funds ability to meet its investment
objective.
This section contains a summary discussion of the general risks of
investing in the Funds. As with any fund, there can be no guarantee that a
Fund will meet its objective, or that a Funds performance will be
positive over any period of time.
Market Risk and Selection Risk
As equity funds, the Funds principal risks are market risk
and selection risk. Market risk is the risk that the equity markets will
go down in value, including the possibility that the equity markets will
go down sharply and unpredictably. Selection risk is the risk that the
stocks that the Investment Adviser selects will underperform the markets
or other funds with similar investment objectives and investment
strategies.
The Funds also may be subject to risks associated with the
following investment strategies.
Derivatives
The Funds may use derivatives such as futures and options for
hedging purposes, including anticipatory hedges and cross-hedges. Hedging
is a strategy in which a 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 any Funds hedging strategy will reduce risk or that
hedging transactions will be
either available or cost effective. The Funds are not required to use
hedging and may choose not to do so.
When Issued and Delayed Delivery Securities and Forward
Commitments
When issued and delayed delivery securities and forward commitments
involve the risk that a security a 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 both loses the investment opportunity for the assets it has set aside
to pay for the security and any gain in the securitys
price.
Borrowing and Leverage
Each Fund may borrow for temporary emergency purposes including to
meet redemptions. Borrowing may exaggerate changes in the net asset value
of a Funds shares and in the yield on a Funds portfolio.
Borrowing will cost a Fund interest expense and other fees. The costs of
borrowing may reduce a Funds return. Certain securities that the
Funds buy may create leverage including, for example, derivatives, when
issued securities, forward commitments and options. The use of investments
that create leverage subjects a Fund to the risk that relatively small
market movements may result in large changes in the value of an investment
and may result in losses that greatly exceed the amount
invested.
Foreign Market Risks
Each Fund may invest in companies located in countries other than
the United States. This may expose each Fund to risks associated with
foreign investments.
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The value of
holdings traded outside the U.S. (and any hedging transactions in
foreign currencies) will be affected by changes in currency exchange
rates
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The costs of
non-U.S. securities transactions tend to be higher than those of U.S.
transactions
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These holdings
may be adversely affected by foreign government action
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International
trade barriers or economic sanctions against certain non-U.S. countries
may adversely affect these holdings
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STATEMENT OF ADDITIONAL INFORMATION
If you would like further information about the Funds, including
how they invest, please see the Statement of Additional
Information.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
Each Fund offers four classes of shares, each with its own sales
charge and expense structure, allowing you to invest in the way that best
suits your needs. Each share class represents an ownership interest in the
same investment portfolio. When you choose your class of shares, you
should consider the size of your investment and how long you plan to hold
your shares. Your financial consultant can help you determine which share
class is best suited to your personal financial goals.
For example, if you select Class I or A shares, you generally pay a
sales charge at the time of purchase. If you buy Class A shares, you also
pay an ongoing account maintenance fee of 0.25%. You may be eligible for a
sales charge reduction or waiver.
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 a Funds 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 Funds shares are distributed by Mercury Funds
Distributor, a division of Princeton Funds Distributor, Inc.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
To better understand the pricing of each Funds shares, we
have summarized the information below:
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Class I |
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Class A |
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Class B |
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Class C |
|
Availability? |
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Limited to certain |
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Generally available |
|
Generally available |
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Generally available |
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investors including: |
|
through selected |
|
through selected |
|
through selected |
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Current Class I
shareholders |
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securities dealers. |
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securities dealers. |
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securities dealers. |
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Certain Retirement
Plans |
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Participants in certain
sponsored programs |
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Certain affiliates or
customers of selected
securities dealers |
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Initial Sales
Charge? |
|
Yes. Payable at time of
purchase. Lower sales
charges available for
certain larger
investments. |
|
Yes. Payable at time of
purchase. Lower sales
charges available for
certain larger
investments. |
|
No. Entire purchase
price is invested in
shares of the Fund. |
|
No. Entire purchase
price is invested in
shares of the Fund. |
|
|
Deferred Sales
Charge? |
|
No. (May be charged
for purchases over $1
million that are
redeemed within
one year.) |
|
No. (May be charged
for purchases over $1
million that are
redeemed within
one year.) |
|
Yes. Payable if you
redeem within six years
of purchase. |
|
Yes. Payable if you
redeem within one
year of purchase. |
|
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Account
Maintenance and
Distribution Fees |
|
No. |
|
0.25% Account
Maintenance Fee.
No Distribution Fee. |
|
0.25% Account
Maintenance Fee.
0.75% Distribution Fee. |
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0.25% Account
Maintenance Fee.
0.75% Distribution Fee. |
|
|
Conversion to
Class A Shares? |
|
No. |
|
No. |
|
Yes, automatically after
approximately eight
years. |
|
No. |
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
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 Mercury mutual funds.
Letter of Intent permits you to pay the sales
charge that would be applicable if you add up all shares of Mercury mutual
funds that you agree to buy within a 13 month period. Certain restrictions
apply.
Class I And A Shares Initial Sales Charge
Options
If you select Class I or A shares, you will pay a sales charge at
the time of purchase as shown in the following table.
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 I or A 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 I and A shares by certain employer sponsored
retirement or savings plans.
|
No initial sales charge applies to Class I or Class A shares that
you buy through reinvestment of dividends.
A reduced or waived sales charge on a purchase of Class I or A
shares may apply for:
|
|
Purchases under
a Right of Accumulation or Letter of
Intent
|
|
|
Certain trusts
managed by banks, thrifts or trust companies including those affiliated
with the Investment Adviser or its affiliates
|
|
|
Certain
employer-sponsored retirement or savings plans
|
|
|
Certain
investors, including directors or trustees of mutual funds sponsored by
the Investment Adviser or its affiliates, employees of the Investment
Adviser and its affiliates and employees or customers of selected
dealers
|
|
|
Certain
fee-based programs managed by the Investment Adviser or its
affiliates
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
|
|
Certain
fee-based programs managed by selected dealers that have an agreement
with the Distributor
|
|
|
Purchases
through certain financial advisers that meet and adhere to standards
established by the Investment Adviser
|
|
|
Purchases
through certain accounts over which the Investment Adviser or an
affiliate exercises investment discretion
|
Only certain investors are eligible to buy Class I shares,
including existing Class I shareholders of the Funds, certain retirement
plans and participants in certain programs sponsored by the Investment
Adviser or its affiliates. Your financial consultant can help you
determine whether you are eligible to buy Class I shares or to participate
in any of these programs.
If you decide to buy shares under the initial sales charge
alternative and you are eligible to buy both Class I and Class A shares,
you should buy Class I shares since Class A shares are subject to a 0.25%
account maintenance fee, while Class I shares are not.
If you redeem Class I or Class A shares and within 30 days buy new
shares of the same class, you will not pay a sales charge on the new
purchase amount. The amount eligible for this Reinstatement Privilege
may not exceed the amount of your redemption proceeds. To exercise
the privilege, contact your financial consultant or the Funds
Transfer Agent at 1-888-763-2260.
Class B and C Shares Deferred Sales Charge
Options
If you select Class B or Class C shares, you do not pay an initial
sales charge at the time of purchase. However, if you redeem your Class B
shares within six years after purchase or Class C shares within one year
after purchase, you may be required to pay a deferred sales charge. You
will also pay distribution fees of 0.75% and account maintenance fees of
0.25% each year under distribution plans that each Fund has adopted under
Rule 12b-1. Because these fees are paid out of the Funds 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 charge
and the distribution fees to cover the costs of marketing, advertising and
compensating the financial consultant or other dealer who assists you in
your decision in purchasing Fund shares.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
Class B Shares
If you redeem Class B shares within six years after purchase, you
may be charged a deferred sales charge. The amount of the charge gradually
decreases as you hold your shares over time, according to the following
schedule:
Year Since Purchase |
|
Sales Charge* |
|
0-1 |
|
4.00% |
|
1-2 |
|
4.00% |
|
2-3 |
|
3.00% |
|
3-4 |
|
3.00% |
|
4-5 |
|
2.00% |
|
5-6 |
|
1.00% |
|
6 and
after |
|
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 by dividend
reinvestment are not subject to a deferred sales charge. Mercury funds
may not all have identical deferred sales charge schedules. In the event
of an exchange for the shares of another Mercury fund, the higher
charge, if any, would apply.
|
The deferred sales charge relating to Class B shares may be reduced
or waived in certain circumstances, such as:
|
|
Certain
post-retirement withdrawals from an IRA or other retirement plan if you
are over 59 1
/2 years old
|
|
|
Redemption by
certain eligible 401(a) and 401(k) plans and certain retirement plan
rollovers
|
|
|
Redemption in
connection with participation in certain fee-based programs managed by
the Investment Adviser or its affiliates
|
|
|
Redemption in
connection with participation in certain fee-based programs managed by
selected dealers that have agreements with the Distributor
|
|
|
Withdrawals
resulting from shareholder death or disability as long as the waiver
request is made within one year after death or disability or, if later,
reasonably promptly following completion of probate, or in connection
with involuntary termination of an account in which Fund shares are
held
|
|
|
Withdrawal
through the Systematic Withdrawal Plan of up to 10% per year of your
Class B account value at the time the plan is established
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
Your Class B shares convert automatically into Class A shares
approximately eight years after purchase. Any Class B shares received
through reinvestment of dividends paid on converting shares will also
convert at that time. Class A shares are subject to lower annual expenses
than Class B shares. The conversion of Class B shares to Class A shares is
not a taxable event for Federal income tax purposes.
Different conversion schedules may apply to Class B shares of
different Mercury mutual funds. If you acquire your Class B shares in an
exchange from another fund with a shorter conversion schedule, the Funds
eight year conversion schedule will apply. If you exchange your
Class B shares in a Fund for Class B shares of a fund with a longer
conversion schedule, the other funds conversion schedule will apply.
The length of time that you hold the original and exchanged Class B shares
in both funds will count toward the conversion schedule.
The conversion schedule may be modified in certain other cases as
well.
Class C Shares
If you redeem Class C shares within one year after purchase, you
may be charged a deferred sales charge of 1.00%. The charge will apply to
the lesser of the original cost of the shares being redeemed or the
proceeds of your redemption. You will not be charged a deferred sales
charge when you redeem shares that you acquire through reinvestment of
Fund dividends. The deferred sales charge relating to Class C shares may
be reduced or waived in connection with involuntary termination of an
account in which Fund shares are held and withdrawals through the
Systematic Withdrawal Plan.
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 certain securities dealers. You may also buy shares through
the Transfer Agent. To learn more about buying shares through the Transfer
Agent, call 1-888-763-2260. Because the selection of a mutual fund
involves many considerations, your financial consultant may help you with
this decision. The Funds do not issue share certificates.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
If you want to |
|
Your choices |
|
Information important for you to know |
|
Buy shares |
|
First, select the share class
appropriate for you |
|
Please refer to the pricing of
shares table on page 12. Be sure to read
this prospectus carefully. |
|
|
|
Next, determine the amount of
your investment |
|
The minimum initial investment
for each Fund is $1,000 for all accounts
except: |
|
|
|
|
$500 for certain fee-based
programs |
|
|
|
|
$100 for retirement
plans |
|
|
|
|
|
(The minimums for initial
investments may be waived or reduced under
certain circumstances.) |
|
|
|
Have your 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 Funds may reject any
order to buy shares and may suspend the sale of shares at any time.
Certain securities dealers may charge a fee to process a purchase. For
example, the fee charged by Merrill Lynch, Pierce, Fenner & Smith
Incorporated is currently $5.35. The fees charged by other securities
dealers may be higher or lower. |
|
|
|
Or contact the Transfer Agent |
|
To purchase shares directly,
call the Transfer Agent at 1-888-763-2260
and request a purchase application. Mail the completed purchase
application to the Transfer Agent at the address on the inside back
cover of this prospectus. |
|
Add to your
investment |
|
Purchase additional shares |
|
The minimum investment for
additional purchases is $100 for all
accounts except: |
|
|
|
|
$50 for certain fee-based
programs |
|
|
|
|
$1 for retirement
plans |
|
|
|
|
|
(The minimums 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 your
securities dealer. |
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
If you want to |
|
Your choices |
|
Information important for you to know |
|
Transfer shares to
another securities
dealer |
|
Transfer to a participating
securities dealer |
|
You may transfer your Fund
shares to another securities dealer if
authorized dealer agreements are in place between the Distributor and
the transferring securities dealer and the Distributor and the receiving
securities dealer. Certain shareholder services may not be available for
all transferred shares. All future trading of these shares must be
coordinated by the receiving securities dealer. |
|
|
|
Transfer to a non-participating
securities dealer |
|
You must either:
Transfer your shares to an account with the Transfer Agent; or
Sell your shares, paying any applicable deferred sales
charge. |
|
Sell your shares |
|
Have your 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 the 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. |
|
|
|
|
|
Certain securities dealers may
charge a fee to process a sale of shares.
For example, the fee charged by Merrill Lynch, Pierce, Fenner & Smith
Incorporated is currently $5.35. The fees charged by other securities
dealers may be higher or lower. |
|
|
|
|
|
The Funds may reject an order to
sell shares under certain
circumstances. |
|
|
|
Sell through the Transfer Agent |
|
You may sell shares held at the
Transfer Agent by writing to the
Transfer Agent at the address on the inside back cover of this
prospectus. All shareholders on the account must sign the letter. A
signature guarantee generally will be required but may be waived in
certain limited circumstances. You can obtain a signature guarantee
from a bank, securities dealer, securities broker, credit union, savings
association, national securities exchange and registered securities
association. A notary public seal will not be acceptable. 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 a Fund has collected payment for the
purchase of shares, the Fund or the Transfer Agent may delay mailing
your proceeds. This delay usually will not exceed ten days. |
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
If you want to |
|
Your choices |
|
Information important for you to know |
|
Sell shares
systematically |
|
Participate in a Funds
Systematic Withdrawal Plan |
|
You can generally arrange
through your selected dealer for systematic
sales of shares 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 financial consultant for details. |
|
Exchange your
shares |
|
Select the fund into which you
want to exchange. Be sure to
read that funds prospectus |
|
You can exchange your shares of
a Fund for shares of other Mercury
mutual funds or for shares of the Summit Cash Reserves Fund. 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 Mercury fund. If you own Class I shares and wish
to exchange into a fund in which you have no Class I shares (and you
are not eligible to buy Class I shares), you will exchange into Class A
shares. If you own Class I or Class A shares and wish to exchange into
Summit, you will exchange into Class A shares of Summit. Class B or
Class C shares can be exchanged for Class B shares of Summit. |
|
|
|
|
|
Some of the Mercury mutual funds
may impose a different initial or
deferred sales charge schedule. If you exchange Class I or Class A
shares for shares of a fund with a higher initial sales charge than you
originally paid, you may be charged the difference at the time of
exchange. If you exchange Class B or Class C 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 Class C shares in both
funds will count when determining your holding period for calculating a
deferred sales charge at redemption. Your time in both funds will also
count when determining the holding period for a conversion from
Class B to Class A shares. |
|
|
|
|
|
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. |
|
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
Net Asset Value the market value in U.S.
dollars of a Funds total assets after deducting liabilities, divided
by the number of shares outstanding.
When you buy shares, you pay the net asset value, plus any
applicable sales charge. This is the offering price. Shares are also
redeemed at their net asset value, minus any applicable deferred sales
charge. The Funds calculate their net asset value (generally by using
market quotations) each day the New York Stock Exchange is open as of the
close of business on the Exchange based on prices at the time of closing.
The Exchange generally closes at 4:00 p.m. Eastern time. The net asset
value used in determining your price is the next one calculated after your
purchase or redemption order is placed. Foreign securities owned by the
Funds may trade on weekends or other days when the Funds do not price
their shares. As a result, the Funds net asset value may change on
days when you will not be able to purchase or redeem Fund
shares.
Generally, Class I shares will have the highest net asset value
because that class has the lowest expenses, and Class A shares will have a
higher net asset value than Class B or Class C shares. Also, dividends
paid on Class I and Class A shares will generally be higher than dividends
paid on Class B and Class C shares because Class I and Class A shares have
lower expenses.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] Account Choices
Dividends ordinary income and capital
gains paid to shareholders. Dividends may be reinvested in additional Fund
shares as they are paid.
If you participate in certain fee-based programs offered by the
Investment Adviser or an affiliate of the Investment Adviser, or by
selected dealers that have an agreement with the Distributor, you may be
able to buy Class I shares at net asset value, including by exchanges from
other share classes. Sales charges on the shares being exchanged may be
reduced or waived under certain circumstances.
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 a Funds shares or into
the Summit fund. The class you receive may be the class you originally
owned when you entered the program, or in certain cases, a different
class. If the exchange is into Class B shares, the period before
conversion to Class A shares may be modified. Any redemption or exchange
will be at net asset value. However, if you participate in the program for
less than a specified period, you may be charged a fee in accordance with
the terms of the program.
Details about these features and the relevant charges are included
in the client agreement for each fee-based program and are available from
your financial consultant or your selected dealer.
The Funds will distribute at least annually any net investment
income and any net realized long or short-term capital gains. The Funds
may also pay a special distribution at the end of the calendar year to
comply with Federal tax requirements. Dividends may be
reinvested automatically in shares of a Fund at net asset value without a
sales charge or may be taken in cash. If your account is with a securities
dealer that has an agreement with the Funds, contact your financial
consultant about which option you would like. If your account is with the
Transfer Agent, and you would like to receive dividends in cash, contact
the Transfer Agent. Although this cannot be predicted with any certainty,
each Fund anticipates that the majority of its dividends, if any, will
consist of capital gains.
You will pay tax on dividends from a 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
gain dividends are generally taxed at different rates than ordinary income
dividends.
If you are neither a lawful permanent resident nor a citizen of the
U.S. or if you are a foreign entity, a Funds 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.
By law, a Fund must withhold 31% of your dividends and redemption
proceeds if you have not provided a taxpayer identification number or
social security number or if the number you have provided is
incorrect.
Dividends and interest received by the Funds 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.
This section summarizes some of the consequences under current
Federal tax law of an investment in a Fund. It is not a substitute for
personal tax advice. Consult your personal tax adviser about the potential
tax consequences of an investment in a Fund under all applicable tax
laws.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] The Management Team
Fund Asset Management, the Funds Investment Adviser, manages
each Portfolios investments under the overall supervision of the
Board of Trustees of the Master Large Cap Series Trust. The Investment
Adviser has the responsibility for making all investment decisions for the
Funds. The Trust pays the Investment Adviser a fee at the annual rate of
0.75% of the average daily net assets of the Trust.
Fund Asset Management was organized as an investment adviser in
1977 and offers investment advisory services to more than 50 registered
investment companies. Fund Asset Management is part of the Asset
Management Group of ML & Co., which had approximately $534 billion in
investment company and other portfolio assets under management as of
November 1999. This amount includes assets managed for affiliates of the
Investment Adviser.
Each Fund is a series of Mercury Large Cap Series Funds, Inc. and
is a feeder fund that invests in a corresponding master
portfolio of the Master Large Cap Series Trust. (Except where
indicated, this prospectus uses the term Fund to mean a feeder
fund and its Portfolio taken together.) Investors in a Fund will acquire
an indirect interest in the corresponding Portfolio.
Each Portfolio accepts investments from other feeder funds, and all
the feeders of a given Portfolio bear the portfolios expenses in
proportion to their assets. This structure may enable the Funds to reduce
costs through economies of scale. A larger investment portfolio may also
reduce certain transaction costs to the extent that contributions to and
redemptions from the Portfolio from different feeders may offset each
other and produce a lower net cash flow.
However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder
could offer access to the same Portfolio on more attractive terms, or
could experience better performance, than another feeder.
Whenever a Portfolio holds a vote of its feeder funds, the Fund
investing in that Portfolio will pass the vote through to its own
shareholders. Smaller feeder funds may be harmed by the actions of larger
feeder funds. For example, a larger feeder fund could have more voting
power than a Fund over the operations of its Portfolio.
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] The Management Team
A Fund may withdraw from its master portfolio at any time and may
invest all of its assets in another pooled investment vehicle or retain an
investment adviser to manage the Funds assets directly.
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 Funds could be adversely affected if the computer systems
used by Fund management or other service providers of the Funds 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
Funds 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 Funds could be negatively
affected. The Year 2000 Problem could also have a negative impact on the
companies in which the Funds invest. This negative impact may be greater
for smaller companies and companies in foreign markets, since they may be
less prepared for the Year 2000 Problem than domestic companies and
markets. If the companies in which the Funds invest have Year 2000
Problems, the Funds returns could be adversely affected.
MERCURY LARGE CAP SERIES FUNDS, INC.
Funds
Mercury Large Cap Growth Fund
Mercury Large Cap Value Fund
Mercury Large Cap Core Fund
of Mercury Large Cap Series Funds, Inc.
P.O. Box 9011
Princeton, New Jersey 08543-9011
(888-763-2260)
Investment Adviser
Administrative Offices:
Fund Asset Management, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
Transfer Agent
Financial Data Services, Inc.
P.O. Box 44062
Jacksonville, Florida 32232-4062
(888-763-2260)
Independent Auditors
Deloitte & Touche LLP
Princeton Forrestal Village
116-300 Village Boulevard
Princeton, New Jersey 08540-6400
Distributor
Mercury Funds Distributor,
a division of Princeton Funds Distributor, Inc.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Counsel
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
MERCURY LARGE CAP SERIES FUNDS, INC.
[GRAPHIC] TO LEARN MORE
Additional information about each Funds investments will be
available in the Funds annual and semi-annual reports to
shareholders. In the Funds annual report you will find a discussion
of the market conditions and investment strategies that significantly
affected each Funds performance during its last fiscal year. You may
obtain these reports at no cost by calling 1-888-763-2260.
Each 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
financial consultant or write to the Transfer Agent at its mailing
address. Include your name, address, tax identification number and
brokerage or mutual fund account number. If you have any questions, please
call your financial consultant or the Transfer Agent at
1-888-763-2260.
ADDITIONAL INFORMATION
The Funds Statement of Additional Information contains
further information about the Funds and is incorporated by reference
(legally considered to be part of this Prospectus). You may request a free
copy by writing or calling the Funds at Financial Data Services, Inc.,
P.O. Box 44062, Jacksonville, Florida 32232-4062 or by calling
1-888-763-2260.
Contact your financial consultant or the Funds at the telephone
number or address indicated above if you have any questions.
Information about the Funds (including the Statement of Additional
Information) can be reviewed and copied at the SECs 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 SECs 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 IN THIS PROSPECTUS.
Investment Company Act File #81109697.
Code #19078-12-99
©Fund Asset Management, L.P.
Mercury Large Cap Series Funds, Inc.
MERCURY LARGE CAP GROWTH FUND
MERCURY LARGE CAP VALUE FUND
MERCURY LARGE CAP CORE FUND
(LOGO)
PROSPECTUS · December 22, 1999
[LOGO OF MERCURY ASSET MANAGEMENT]
Mercury Large Cap Series Funds, Inc.
Mercury Large Cap Growth Fund
Mercury Large Cap Value Fund
Mercury Large Cap Core Fund
P.O. Box 9011, Princeton, New Jersey 08543-9011 Phone No. (888)
763-2260
Mercury Large Cap
Series Funds, Inc. (the Corporation), an open-end management
investment company organized as a Maryland corporation, consists of three
separate series: Mercury Large Cap Growth Fund (the Growth Fund
), Mercury Large Cap Value Fund (the Value Fund) and
Mercury Large Cap Core Fund (the Core Fund). Each series of
the corporation is herein referred to as a Fund.
The main objective
of each Fund is long term capital growth. Each Fund seeks to achieve this
objective through investments primarily in a diversified portfolio of
equity securities of large cap companies that Fund management selects from
among those included in the Funds applicable Russell 1000®
index.
Each Fund is a
feeder fund that invests all of its assets in a corresponding
master portfolio (each, a Portfolio) of the Master
Large Cap Series Trust (the Trust) that has the same
investment objective as the Fund. All investments will be made at the
Trust level. Each Funds investment results will correspond directly
to the investment results of the Portfolio in which it invests. There can
be no assurance that any Fund will achieve its objective.
Each Fund offers
four classes of shares, each with a different combination of sales
charges, ongoing fees and other features. These alternatives permit 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 is not a prospectus and should be read in
conjunction with the Prospectus of the Funds, dated December 22, 1999 (the
Prospectus), which has been filed with the Securities and
Exchange Commission (the Commission) and can be obtained,
without charge, by calling the Funds at 1-888-763-2260 or your financial
consultant, or by writing to the address listed above. 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.
Fund Asset Management Investment Adviser
Mercury Funds Distributor Distributor
The date of this Statement of Additional Information is December
22, 1999.
TABLE OF CONTENTS
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Page
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Investment Objectives and Policies
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2 |
Foreign Securities |
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3 |
Warrants |
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4 |
Borrowing and Leverage |
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4 |
Convertible Securities |
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4 |
Debt Securities |
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4 |
Derivatives |
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4 |
Other Investment Policies and
Practices |
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8 |
Investment Restrictions |
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10 |
Portfolio Turnover |
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12 |
Management of the Funds
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13 |
Directors and Officers |
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13 |
Compensation of
Directors/Trustees |
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14 |
Management and Advisory
Arrangements |
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15 |
Code of Ethics |
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16 |
Purchase of Shares
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17 |
Initial Sales Charge Alternatives
Class I and Class A Shares |
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18 |
Reduced Initial Sales
Charges |
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18 |
Deferred Sales ChargesClass B
and Class C Shares |
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20 |
Distribution Plans |
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22 |
Limitations on the Payment of
Deferred Sales Charges |
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23 |
Redemption of Shares
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23 |
Redemption |
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24 |
Repurchase |
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24 |
Reinstatement PrivilegeClass I
and Class A Shares |
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25 |
Pricing of Shares
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25 |
Determination of Net Asset
Value |
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25 |
Computation of Offering Price Per
Share |
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26 |
Portfolio Transactions and Brokerage
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27 |
Transactions in Portfolio
Securities |
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27 |
Shareholder Services
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28 |
Investment Account |
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28 |
Exchange Privilege |
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29 |
Fee-Based Programs |
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31 |
Retirement Plans |
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31 |
Automatic Investment
Plans |
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31 |
Automatic Dividend Reinvestment
Plan |
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31 |
Systematic Withdrawal
Plans |
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32 |
Dividends and Taxes
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32 |
Dividends |
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32 |
Taxes |
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33 |
Tax Treatment of Options and Futures
Transactions |
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34 |
Special Rules for Certain Foreign
Currency Transactions |
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34 |
Performance Data
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35 |
General Information
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36 |
Description of Shares |
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36 |
Independent Auditors |
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37 |
Custodian |
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37 |
Transfer Agent |
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38 |
Legal Counsel |
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38 |
Reports to Shareholders |
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38 |
Shareholder Inquiries |
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38 |
Additional Information |
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38 |
Independent Auditors
Report |
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39 |
Statements of Assets and
Liabilities |
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40 |
INVESTMENT OBJECTIVES AND POLICIES
The investment
objective of each Fund is long term capital growth. This is a fundamental
policy and cannot be changed without shareholder approval. Each Fund seeks
to achieve this objective through investments primarily in a diversified
portfolio of equity securities of large cap companies located in the
United States. Each Fund also may invest up to 10% of its assets in equity
securities of companies located in countries other than the United States.
Reference is made to How the Funds Invest in the Prospectus
for a discussion of the investment objective and policies of each Fund.
Each Fund is classified as a diversified fund under the Investment Company
Act.
Each Fund is a
feeder fund that invests all of its assets in a corresponding
master portfolio of the Trust that has the same investment
objective as the Fund. All investments will be made at the Trust level.
This structure is sometimes called a master/feeder structure.
Each Funds investment results will correspond directly to the
investment results of the Portfolio in which it invests. For simplicity,
however, this Statement of Additional Information, like the Prospectus,
uses the term Fund to include the underlying Portfolio in
which that Fund invests. Reference is made to the discussion under
How the Funds Invest and Investment Risks in the
Prospectus for information with respect to each Fund and its Trust
portfolios investment objective and policies. There can be no
guarantee that any Funds investment objectives will be
achieved.
As described in the
Prospectus, each Fund generally seeks to invest in companies that have a
dollar-weighted market capitalization greater than the top 5% of U.S.
securities traded. For each Fund, Fund Asset Management, L.P. (the
Investment Adviser) uses a different proprietary multi-factor
quantitative model to look for companies within the applicable Russell 1000
® index that, in the Investment Advisers opinion, are consistent
with the investment objective of each Fund, as follows:
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The Growth
Fund. The Growth Fund seeks to invest in
equity securities that the Investment Adviser believes have above
average earnings prospects; i.e., are likely to experience
consistent earnings growth over time. In seeking to outperform its
benchmark, the Russell 1000® Growth Index, the Fund will allocate
its common stock investments among industry sectors in a manner
generally comparable to the sector weightings in the Russell 1000®
Growth Index, as those sectors are defined in the Standard & Poor
s 500 Index (S&P 500). The Fund also anticipates
that its individual holdings generally will be allocated so that no
individual security held by the Fund is overweighted in the portfolio as
compared to its weighting in the Russell 1000® Growth Index by more
than 1%, and no security held by the Fund is underweighted as compared
to its weighting in the Russell 1000® Growth Index by more than
2%.
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The Value
Fund. The Value Fund seeks to invest in
equity securities that the Investment Adviser believes are selling at
below-normal valuations; i.e., securities with lower
price-to-book ratios and lower price-to-earnings ratios. In seeking to
outperform its benchmark, the Russell 1000® Value Index, the Fund
will allocate its common stock investments among industry sectors in a
manner generally comparable to the sector weightings in the Russell 1000
® Value Index, as those sectors are defined in the S&P 500. The
Fund also anticipates that its individual holdings generally will be
allocated so that no individual security is overweighted in the
portfolio as compared to its weighting in the Russell 1000® Value
Index by more than 1%, and no security is underweighted as compared to
its weighting in the Russell 1000® Value Index by more than
2%.
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The Core
Fund. The Core Fund seeks to invest in
securities that the Investment Adviser believes are undervalued or show
good prospects for earnings growth. The Core Fund seeks securities such
that the sum of the relative (to the S&P 500) price-to-earnings
ratio and price-to-book ratio for a particular security are between 1.75
and 2.25. In seeking to outperform its benchmark, the Russell 1000®
Index, the Fund will allocate its common stock investments among
industry sectors in a manner generally comparable to the sector
weightings in the Russell 1000® Index, as those sectors are defined
in the
S&P 500. The Fund also anticipates that its individual holdings
generally will be allocated so that no individual security held by the
Fund is overweighted in the portfolio as compared to its weighting in
the Russell 1000® Index by more than 1%, and no security held by the
Fund is underweighted as compared to its weighting in the Russell 1000
® Index by more than 1%.
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Each Fund
anticipates that its sector allocations, as a percentage of its common
stock investments, to larger capitalized industries generally will be no
more than two times that sectors weighting in the applicable Russell
1000® index, while its sector allocations to smaller capitalized
industries generally will be no more than three times that sectors
weighting in the Russell 1000® Index. Larger or
smaller capitalized industries for this purpose will be
determined by the relative size of the sector within the applicable
Russell 1000® index, with any sector representing approximately 10% or
more of the index being considered as a larger industry.
Notwithstanding these sector allocation guidelines, each Fund reserves the
right to invest up to 10% of its total assets in any one sector of the
applicable Russell 1000® index; however, the Funds are not limited to
investing only 10% of total assets in any one sector if the sector
allocations listed above permit a larger allocation. While the Investment
Adviser anticipates that each Fund generally will adhere to the targeted
parameters described for each Fund, the implementation may vary in
particular cases, and the Investment Adviser is not required to follow any
or all of these parameters in selecting securities at all times.
Additionally, the Investment Adviser is not required to sell securities if
their value changes and they then fall outside of these
parameters.
Investment emphasis
is on equities, primarily common stock. Each Fund generally will invest at
least 80% of its total assets in equity securities. Each Fund also may
invest in securities convertible into common stock, preferred stock and
rights and warrants to subscribe for common stock. A Fund may invest in
U.S. Government debt securities and, to a lesser extent, in
non-convertible debt securities rated investment grade by a nationally
recognized statistical ratings organization, although it typically will
not invest in any debt securities to a significant extent.
A Fund may hold
assets in cash or cash equivalents and investment grade, short term
securities, including money market securities, in such proportions as, in
the opinion of the Investment Adviser, prevailing market or economic
conditions warrant or for temporary defensive purposes.
Foreign Securities
Each Fund may
invest in companies located in countries other than the United States. As
a result, the Funds investments may include companies organized,
traded or having substantial operations outside the United States. This
may expose the Funds to risks associated with foreign investments. Foreign
investments involve certain risks not typically involved in domestic
investments, including fluctuations in foreign exchange rates, future
political and economic developments, different legal systems and the
existence or possible imposition of exchange controls or other U.S. or
non-U.S. governmental laws or restrictions applicable to such investments.
Securities prices in different countries are subject to different
economic, financial and social factors. Because the Funds may invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may affect the value of
securities in the Portfolios and the unrealized appreciation or
depreciation of investments insofar as U.S. investors are concerned.
Foreign currency exchange rates are determined by forces of supply and
demand in the foreign exchange markets. These forces are, in turn,
affected by international balance of payments and other economic and
financial conditions, government intervention, speculation and other
factors. With respect to certain countries, there may be the possibility
of expropriation of assets, confiscatory taxation, high rates of
inflation, political or social instability or diplomatic developments that
could affect investment in those countries. In addition, certain
investments may be subject to non-U.S. withholding taxes.
European
Economic and Monetary Union. A number of
European countries entered into the European Economic and Monetary Union (
EMU) in an effort to reduce trade barriers between themselves
and eliminate fluctuations in their currencies. EMU established a single
European currency (the euro), which was introduced on January 1, 1999 and
is expected to replace the existing national currencies of all initial EMU
participants by July 1, 2002. Certain securities (beginning with
government and corporate bonds) were redenominated in the euro and will
trade and make dividend and other payments only in euros. Like other
investment companies and business organizations, including the companies
in which the Funds invest, the Funds could be adversely affected if the
transition to the euro, or EMU as a whole, does not proceed as planned or
if a participating country withdraws from EMU.
Warrants
Each Fund may
invest in warrants, which are securities permitting, but not obligating,
the warrant holder to subscribe for other securities. Buying a warrant
does not make a Fund a shareholder of the underlying stock. The warrant
holder has no right to dividends or votes on the underlying stock. A
warrant does not carry any right to assets of the issuer, and for this
reason investment in warrants may be more speculative than other
equity-based investments.
Borrowing and Leverage
Each Fund may
borrow from banks (as defined in the Investment Company Act of 1940, as
amended (the Investment Company Act)) in amounts up to
33 1
/3% of its total assets (including the amount borrowed) and may
borrow up to an additional 5% of its total assets for temporary purposes.
Each Fund may obtain such short term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and may purchase
securities on margin to the extent permitted by applicable law, and may
use borrowing to enable it to meet redemptions. The use of leverage by the
Funds creates an opportunity for greater total return, but, at the same
time, creates special risks. For example, leveraging may exaggerate
changes in the net asset value of Fund shares and in the yield on a Fund
s portfolio. Although the principal of such borrowings will be
fixed, a Funds assets may change in value during the time the
borrowings are outstanding. Borrowings will create interest expenses for
the Fund that can exceed the income from the assets purchased with the
borrowings. To the extent the income or capital appreciation derived from
securities purchased with borrowed funds exceeds the interest a Fund will
have to pay on the borrowings, that Funds return will be greater
than if leverage had not been used. Conversely, if the income or capital
appreciation from the securities purchased with such borrowed funds is not
sufficient to cover the cost of borrowing, the return to the Fund will be
less than if leverage had not been used, and therefore the amount
available for distribution to shareholders as dividends will be reduced.
In the latter case, the Investment Adviser in its best judgment
nevertheless may determine to maintain the Funds leveraged position
if it expects that the benefits to the Funds shareholders of
maintaining the leveraged position will outweigh the current reduced
return.
The Funds at times
may borrow from affiliates of the Investment Adviser, provided that the
terms of such borrowings are no less favorable than those available from
comparable sources of funds in the marketplace.
Convertible Securities
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.
Debt Securities
Debt securities,
such as bonds, involve credit risk. This is the risk that the borrower
will not make timely payments of principal and interest. The degree of
credit risk depends on the issuers financial condition and on the
terms of the bonds. This risk is minimized to the extent a Fund limits its
debt investments to U.S. Government securities. All debt securities,
however, are subject to interest rate risk. This is the risk that the
value of the security may fall when interest rates rise. In general, the
market price of debt securities with longer maturities will go up or down
more in response to changes in interest rates than the market price of
shorter term securities.
Derivatives
The Funds 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 Russell 1000® Index, the S&P 500 or the prime
lending rate). Derivatives allow each Fund to increase or decrease the
level of risk to which the Fund is exposed more quickly and efficiently
than transactions in other types of instruments.
Hedging.
Each Fund may use Derivatives for hedging purposes.
Hedging is a strategy in which a Derivative is used to offset the risk
that other Fund holdings may decrease in value. Losses on the other
investment may be substantially reduced by gains on a Derivative that
reacts in an opposite manner to market movements. While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a
different manner than anticipated by the Fund investing in the Derivative
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
applicable Fund, in which case any losses on the holdings being hedged may
not be reduced. The Funds are not required to use hedging and may choose
not to do so.
The Funds may use
the following types of derivative investments and trading
strategies:
Options on Securities and Securities Indices
Purchasing Put
Options. Each Fund may purchase put options on
securities held in its portfolio or on securities or interest rate indices
which are correlated with securities held in its portfolio. When a Fund
purchases a put option in consideration for an up front payment (the
option premium), that 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 a Funds risk of loss in the event of
a decline in the market value of the portfolio holdings underlying the put
option prior to the options expiration date. If the market value of
the portfolio holdings associated with the put option increases rather
than decreases, however, the Fund will lose the option premium and will
consequently realize a lower return on the portfolio holdings than would
have been realized without the purchase of the put. Purchasing a put
option may involve correlation risk, and may also involve liquidity and
credit risk.
Purchasing Call
Options. Each Fund also may 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 a 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 a Fund
determines not to purchase a security underlying a call option, however,
the Fund may lose the entire option premium. Purchasing a call option
involves correlation risk, and may also involve liquidity and credit
risk.
Each Fund also is
authorized to purchase put or call options in connection with closing out
put or call options it has previously sold.
Writing Call
Options. Each 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 a 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. A Fund may write call options to
earn income, through the receipt of option premiums. In the event the
party to which a 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, a 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.
Each Fund also is
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, a Fund will only write call or put
options that are covered. A call or put option will be
considered covered if the Fund has segregated assets with respect to such
option in the manner described in Risk Factors in Derivatives
below. A call option will also be considered covered if the Fund owns the
securities it would be required to deliver upon exercise of the option
(or, in the case of an option on a securities index, securities which
substantially correlate with the performance of such index) or owns a call
option, warrant or convertible instrument which is immediately exercisable
for, or convertible into, such security.
Types of Options.
The Fund may engage in transactions in options
on securities or securities indices on exchanges and in the
over-the-counter (OTC) markets. In general, exchange-traded
options have standardized exercise prices and expiration dates and require
the parties to post margin against their obligations, and the performance
of the parties obligations in connection with such options is
guaranteed by the exchange or a related clearing corporation. OTC options
have more flexible terms negotiated between the buyer and the seller, but
generally do not require the parties to post margin and are subject to
greater credit risk. OTC options also involve greater liquidity risk. See
Additional Risk Factors of OTC Transactions; Limitations on the Use
of OTC Derivatives below.
Futures
Each Fund may
engage in transactions in futures and options thereon. Futures are
standardized, exchange-traded contracts that 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, a 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 a Funds risk of loss through a decline in
the market value of portfolio holdings correlated with the futures
contract prior to the futures contracts 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 a 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.
Indexed Securities
Each Fund may
invest in securities the potential return of which is based on an index.
As an illustration, a Fund may invest in a debt security that pays
interest based on the current value of an interest rate index, such as the
prime rate. A Fund also may invest in a debt security which returns
principal at maturity based on the level of a securities index or a basket
of securities, or based on the relative changes of two indices. Indexed
securities involve credit risk, and certain indexed securities may involve
leverage risk and liquidity risk. Each Fund may invest in indexed
securities for hedging purposes only. When used for hedging purposes,
indexed securities involve correlation risk.
Risk Factors in Derivatives
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 a 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 that relatively small market movements may result in large
changes in the value of an investment. Certain investments or trading
strategies that involve leverage can result in losses that greatly exceed
the amount originally invested.
Liquidity risk
the risk that certain securities may be difficult or impossible
to sell at the time that the seller would like or at the price that the
seller believes the security is currently worth.
Use of Derivatives
for hedging purposes involves correlation risk. If the value of the
Derivative moves more or less than the value of the hedged instruments,
the Fund using the Derivative will experience a gain or loss that will not
be completely offset by movements in the value of the hedged
instruments.
The Funds intend to
enter into transactions involving Derivatives only if there appears to be
a liquid secondary market for such instruments or, in the case of illiquid
instruments traded in OTC transactions, such instruments satisfy the
criteria set forth below under Additional Risk Factors of OTC
Transactions; Limitations on the Use of OTC Derivatives. However,
there can be no assurance that, at any specific time, either a liquid
secondary market will exist for a Derivative or the Fund will otherwise be
able to sell such instrument at an acceptable price. It may therefore not
be possible to close a position in a Derivative without incurring
substantial losses, if at all.
Certain
transactions in Derivatives (such as futures transactions or sales of put
options) involve substantial leverage risk and may expose a Fund to
potential losses, which exceed the amount originally invested by the Fund.
When a 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 Funds exposure, on a mark-to-market basis, to the
transaction (as calculated pursuant to requirements of the Securities and
Exchange 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 Funds 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 a Fund to sell such instruments
promptly at an acceptable price. The absence of liquidity may also make it
more difficult for a 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 Investment Adviser
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 dealers 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 a 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. Each 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 Derivatives traded in OTC
markets only with financial institutions which have substantial capital or
which have provided the Fund with a third-party guaranty or other credit
enhancement.
Other Investment Policies and Practices
Securities
Lending. Each Fund may lend securities with a
value not exceeding 33 1
/3% of its total assets. In return, the Fund receives collateral in
an amount equal to at least 100% of the current market value of the loaned
securities in cash or securities issued or guaranteed by the U.S.
Government. If cash collateral is received by a Fund, it is invested in
short-term money market securities, and a portion of the yield received in
respect of such investment is retained by that Fund. Alternatively, if
securities are delivered to a Fund as collateral, that Fund and the
borrower negotiate a rate for the loan premium to be received by that Fund
for lending its portfolio securities. In either event, the total yield on
each Funds portfolio is increased by loans of its portfolio
securities. Each Fund may receive a flat fee for its loans. The loans are
terminable at any time and the borrower, after notice, is required to
return borrowed securities within five business days. Each Fund may pay
reasonable finders, administrative and custodial fees in connection
with its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, a 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.
Illiquid or
Restricted Securities. Each Fund may invest up
to 15% of its net assets in securities that lack an established secondary
trading market or otherwise are considered illiquid. Liquidity of a
security relates to the ability to dispose easily of the security and the
price to be obtained upon disposition of the security, which may be less
than would be obtained for a comparable more liquid security. Illiquid
securities may trade at a discount from comparable, more liquid
investments. Investment of a Funds assets in illiquid securities may
restrict the ability of the Fund to dispose of that investment 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 a Funds operations require cash, such as
when a Fund redeems shares or pays dividends, and could result in a Fund
borrowing to meet short-term cash requirements or incurring capital losses
on the sale of illiquid investments.
Each Fund may
invest in securities that are restricted securities.
Restricted securities have contractual or legal restrictions on their
resale and include private placement securities that the Funds
may buy directly from the issuer. Restricted securities may be sold in
private placement transactions between 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 or 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 more difficult
to value than publicly traded securities and may be less liquid, or
illiquid, and therefore may be subject to the risks associated with
illiquid securities, as described in the preceding paragraph. Some
restricted securities, however, may be liquid. 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 a 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 a Fund are required to
be registered under the securities laws of one or more jurisdictions
before being resold, that Fund may be required to bear the expenses
of registration. Certain of a Funds 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 Funds may obtain access to material nonpublic information
which may restrict the Funds ability to conduct portfolio
transactions in such securities.
Repurchase
Agreements. Each Fund may invest in securities
pursuant to repurchase agreements. Under such agreements, the bank or
primary dealer or an affiliate thereof agrees, upon entering into the
contract, to repurchase the security at a mutually agreed upon time and
price, thereby determining the yield during the term of the agreement.
This insulates a Fund from fluctuations in the market value of the
underlying security during such period, although, to the extent the
repurchase agreement is not denominated in U.S. dollars, that Funds
return may be affected by currency fluctuations. A Fund may not invest
more than 15% of its net assets in repurchase agreements maturing in more
than seven days (together with other illiquid securities). Repurchase
agreements may be construed to be collateralized loans by the purchaser to
the seller secured by the securities transferred to the purchaser. A Fund
will require the seller to provide additional collateral if the market
value of the securities falls below the repurchase price at any time
during the term of the repurchase agreement. In the event of default by
the seller under a repurchase agreement with a Fund that is construed to
be a collateralized loan, the underlying securities are not owned by the
Fund but only constitute collateral for the sellers obligation to
pay the repurchase price. Therefore, the Fund may suffer time delays and
incur costs or possible losses in connection with the disposition of the
collateral. In the event of a default under such a repurchase agreement,
instead of the contractual fixed rate of return, the rate of return to a
Fund shall be dependent upon intervening fluctuations of the market value
of such security and the accrued interest on the security. In such event,
the Fund would have rights against the seller for breach of contract with
respect to any losses arising from market fluctuations following the
failure of the seller to perform.
When Issued and
Delayed Delivery Securities and Forward Commitments.
Each Fund may purchase or sell securities that it is entitled to
receive on a when issued or delayed delivery basis. The Funds may also
purchase or sell securities through a forward commitment. These
transactions involve the purchase or sale of securities by a Fund at an
established price with payment and delivery taking place in the future. A
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 Funds have not established any limit on the percentage of
their assets that may be committed in connection with these transactions.
When a Fund is purchasing securities in these transactions, that Fund
maintains a segregated account with its custodian of cash, cash
equivalents, U.S. Government securities or other liquid securities in an
amount equal to the amount of its purchase commitments.
There can be no
assurance that a security purchased on a when-issued basis will be issued,
or 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 a Funds purchase price. A 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. Each Fund may enter into
standby commitment agreements. These agreements commit a Fund, for a
stated period of time, to purchase a stated amount of securities which may
be issued and sold to that 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 a Fund is paid a commitment fee, regardless of
whether or not the security is ultimately issued. A 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 that Fund. A
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. Each
Fund will maintain a segregated account with its custodian of cash, cash
equivalents, U.S. Government securities or other liquid securities 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, a 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 each Funds 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.
144A Securities.
The Funds may purchase restricted securities
that can be offered and sold to qualified institutional buyers
under Rule 144A under the Securities Act. The Funds 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 Funds
Board. The Board has adopted guidelines and delegated to the
Investment Adviser the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain
sufficient oversight and be ultimately responsible for the determinations.
Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will continue
to develop, the Board will carefully monitor the Funds investments
in these securities. This investment practice could have the effect of
increasing the level of illiquidity in each Fund to the extent that
qualified institutional buyers become for a time uninterested in
purchasing these securities.
Other Special
Considerations. The Funds may, without limit,
make short-term investments, purchase high quality bonds or buy or sell
derivatives to reduce exposure to equity securities when the Funds believe
it is advisable to do so (on a temporary defensive basis). Short-term
investments and temporary defensive positions may limit the potential for
growth in the value of shares of each Fund.
Suitability.
The economic benefit of an investment in any
Fund depends upon many factors beyond the control of the Fund, the
Corporation, the Trust, the Investment Adviser and its affiliates. Each
Fund should be considered a vehicle for diversification and not as a
balanced investment program. The suitability for any particular investor
of a purchase of shares in any Fund will depend on, among other things,
such investors investment objectives and such investors
ability to accept the risks associated with investing in securities,
including the risk of loss of principal.
Investment Restrictions
The Corporation has
adopted the following restrictions and policies relating to the investment
of each Funds assets and its activities. The fundamental
restrictions set forth below may not be changed with respect to a Fund
without the approval of the holders of a majority of that Funds
outstanding voting securities (which for this purpose and under the
Investment Company Act means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares). Unless
otherwise provided, all references to the assets of a Fund below are in
terms of current market value. Provided that none of the following
restrictions shall prevent a Fund from investing all of its assets in
shares of another registered investment company with the same investment
objective (in a master/feeder structure), each Fund may not:
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1. Make any investment
inconsistent with each Funds classification as a diversified
company under the Investment Company Act.
|
|
2. Invest more than 25%
of its assets, taken at market value, in the securities of issuers in
any particular industry (excluding the U.S. Government and its agencies
and instrumentalities).
|
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3. Make investments for
the purpose of exercising control or management. Investments by a Fund
in wholly owned investment entities created under the laws of certain
countries will not be deemed 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, a Fund
may invest in securities directly or indirectly secured by real estate
or interests therein or issued by companies that invest in real estate
or interests therein.
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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 governmental obligations,
commercial paper, pass-through instruments, certificates of deposit,
bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that a 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 Funds
Prospectus and 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.
|
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7. Borrow money, except
that (i) a 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) a
Fund may borrow up to an additional 5% of its total assets for temporary
purposes, (iii) a Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio
securities and (iv) a Fund may purchase securities on margin to the
extent permitted by applicable law. A Fund may not pledge its assets
other than to secure such borrowings or, to the extent permitted by each
Funds investment policies as set forth in the Funds
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 a
Fund may do so in accordance with applicable law and the Funds
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.
|
The Trust has
adopted investment restrictions substantially identical to the foregoing,
which are fundamental policies of the Trust and may not be changed with
respect to a Portfolio without the approval of the holders of a majority
of the interests of that Portfolio.
In addition, the
Corporation has adopted non-fundamental restrictions with respect to each
Fund that may be changed by the Board of Directors without shareholder
approval. Like the fundamental restrictions, none of the non-fundamental
restrictions, including but not limited to restriction (a) below, shall
prevent a Fund from investing all of its assets in shares of another
registered investment company with the same investment objective (in a
master/feeder structure). Under the non-fundamental investment
restrictions, each 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, a 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 a Funds 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 Funds currently do 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 net assets would be invested in such securities. This restriction
shall not apply to securities that mature within seven days or
securities that the Directors of the Corporation have otherwise
determined to be liquid pursuant to applicable law. Securities purchased
in accordance with Rule 144A under the Securities Act (which are
restricted securities that can be resold to qualified institutional
buyers, but not to the general public) and determined to be liquid by
the 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 redemption in
amounts not exceeding 33 1
/3% (taken at market value) of its total assets and pledge its
assets to secure such borrowing, (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 Funds from purchasing securities on margin.
The deposit or payment by a 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 borrowing are outstanding will have the effect of
leveraging a Fund. Such leveraging or borrowing increases a Funds
exposure to capital risk and borrowed funds are subject to interest
costs which will reduce net income. A Fund will not purchase securities
while borrowing exceeds 5% of its total assets.
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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 Corporation and Trust have adopted an investment policy
pursuant to which neither a Fund nor its Portfolio will purchase or sell
OTC options (including OTC options on futures contracts) if, as a result
of such transaction, the sum of the market value of OTC options currently
outstanding that are held by a Fund or its Portfolio, the market value of
the underlying securities covered by OTC call options currently
outstanding that were sold by a Fund or its Portfolio and margin deposits
on a Fund or its Portfolios existing OTC options on futures
contracts exceeds 15% of the net assets of such Fund or its Portfolio
taken at market value, together with all other assets of such Fund or its
Portfolio that are illiquid or are not otherwise readily marketable.
However, if the OTC option is sold by a Fund or its Portfolio to a primary
U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and if a Fund or its Portfolio has the unconditional
contractual right to repurchase such OTC option from the dealer at a
predetermined price, then that Fund or its Portfolio 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
options strike price). The repurchase price with the primary dealers
is typically a formula price that 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 each Fund or its Portfolio and may be amended by the
Directors or the Trustees without the approval of the shareholders.
However, the Directors or Trustees 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 that may be changed by the Board of Directors and
to the extent required by the Commission or its staff, each Fund will, for
purposes of fundamental investment restrictions (1) and (2), treat
securities issued or guaranteed by the government of any one foreign
country as the obligations of a single issuer.
Because of the
affiliation of Merrill Lynch, Pierce, Fenner & Smith Incorporated (
Merrill Lynch) with the Investment Adviser, the Funds and the
Trust are 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 pursuant to an exemptive order under
the Investment Company Act. See Portfolio Transactions and Brokerage.
Without such an exemptive order, the Funds and the Trust would be
prohibited from engaging in portfolio transactions with Merrill Lynch or
any of its affiliates acting as principal.
Portfolio Turnover
Generally, the
Funds will not purchase securities for short term trading profits.
However, each Fund may dispose of securities without regard to the time
they have been held when such actions, for defensive or other
reasons, appear advisable to the Investment Adviser in light of a change in
circumstances in general market, economic or financial conditions. As a
result of its investment policies, each Fund may engage in a substantial
number of portfolio transactions. Accordingly, while each Fund anticipates
that its annual portfolio turnover rate should not exceed 100% under
normal conditions, it is impossible to predict portfolio turnover rates.
The portfolio turnover rate is calculated by dividing the lesser of a Fund
s annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of
acquisition were one year or less ) by the monthly average value of the
securities in the portfolio during the year. A high portfolio turnover
rate involves certain tax consequences and correspondingly greater
transaction costs in the form of dealer spreads and brokerage commissions,
which are borne by the Funds.
Directors and Officers
The Directors of
the Corporation consist of seven individuals, five of whom are not
interested persons of the Corporation as defined in the
Investment Company Act. The same individuals serve as Trustees of the
Trust and are sometimes referred to herein as the non-interested
Directors/Trustees. The Directors are responsible for the overall
supervision of the operations of the Funds and perform the various duties
imposed on the directors of investment companies by the Investment Company
Act.
Information about
the Directors and executive officers of the Corporation, 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 executive
officer and Director is P.O. Box 9011, Princeton, New Jersey
08543-9011.
TERRY
K. GLENN
(59)President and Director(1)(2)Executive Vice President
of the Investment Adviser and Merrill Lynch Asset Management, L.P. (
MLAM) (which terms as used herein include their corporate
predecessors) since 1983; Executive Vice President and Director of
Princeton Services, Inc. (Princeton Services) since 1993;
President of Princeton Funds Distributor, Inc. (PFD) since
1986 and Director thereof since 1991; President of Princeton
Administrators, L.P. since 1988.
JAMES
H. BODURTHA
(55) Director (2)(3) 36 Popponesset
Road, Cotuit, Massachusetts 02635. Director and Executive Vice President,
The China Business Group, Inc. since 1996; Chairman and Chief Executive
Officer, China Enterprise Management Corporation from 1993 to 1996;
Chairman, Berkshire Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993.
HERBERT
I. LONDON
(60) Director (2)(3) 2 Washington
Square Village, New York, New York 10012. John M. Olin Professor of
Humanities, New York University since 1993 and Professor thereof since
1980; President, Hudson Institute since 1997 and Trustee thereof since
1980; Dean, Gallatin Division of New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair, Hudson Institute from 1984 to
1985; Director, Damon Corporation from 1991 to 1995; Overseer, Center for
Naval Analyses from 1983 to 1993; Limited Partner, Hypertech LP since
1996.
JOSEPH
L. MAY
(70) Director (2)(3) 424 Church
Street, Suite 2000, Nashville, Tennessee 37219. Attorney in private
practice since 1984; President, May and Athens Hosiery Mills Division,
Wayne-Gossard Corporation from 1954 to 1983; Vice President, Wayne-Gossard
Corporation from 1972 to 1983; Chairman, The May Corporation (personal
holding company) from 1972 to 1983; Director, Signal Apparel Co. from 1972
to 1989.
ANDRÉ
F. PEROLD
(47) Director(2)(3) Morgan Hall,
Soldiers Field, Boston, Massachusetts 02163. Professor, Harvard Business
School since 1989 and Associate Professor from 1983 to 1989; Trustee, The
Common Fund since 1989; Director, Quantec Limited from 1991 to 1999;
Director, TIBCO from 1994 to 1996; Director, Genbel Securities Limited and
Gensec Bank since 1999.
ROBERTA
C. RAMO
(57)Director(2)(3)P.O. Box 2168, 500 Fourth Street, N.W.,
Albuquerque, New Mexico 87103. Shareholder, Modrall, Sperling, Roehl,
Harris & Sisk, P.A. since 1993; President, American Bar Association
from 1995 to 1996 and Member of the Board of Governors thereof from 1994
to 1997; Partner, Poole, Kelly & Ramo, Attorneys at Law, P.C. from
1977 to 1993; Director, Coopers, Inc. since 1999; Director, United New
Mexico Bank (now Wells Fargo) from 1983 to 1988; Director, First National
Bank of New Mexico (now First Security) from 1975 to 1976.
ARTHUR
ZEIKEL
(67) Director(1)(2) 300 Woodland
Avenue, Westfield, New Jersey 07090. Chairman of the Manager and MLAM from
1997 to 1999 and President thereof from 1977 to 1997; Chairman of
Princeton Services from 1997 to 1999, Director thereof from 1993 to 1999
and President thereof from 1993 to 1997; Executive Vice President of
Merrill Lynch & Co., Inc. (ML & Co.) from 1990 to
1999.
ROBERT
C. DOLL
, JR
. (45)Senior Vice President and Portfolio Manager(1)(2)
Senior Vice President of the Investment Adviser and MLAM since 1999;
Senior Vice President of Princeton Services since 1999; Chief Investment
Officer of OppenheimerFunds, Inc. in 1999 and Executive Vice President
thereof from 1991 to 1999.
LINDA
J. GARDNER
(37)Vice President(1)(2)Vice President and Chief
Administrative Officer, Equities of the Investment Adviser since 1999;
Manager of Equity Administration of OppenheimerFunds, Inc. from 1991 to
1999.
DONALD
C. BURKE
(39)Vice President and Treasurer(1)(2)Senior Vice
President and Treasurer of the Investment Adviser and MLAM since 1999;
Senior Vice President and Treasurer of Princeton Services since 1999; Vice
President of PFD since 1999; First Vice President of MLAM from 1997 to
1999; Vice President of MLAM from 1990 to 1997; Director of Taxation of
MLAM since 1990.
ALICE
A. PELLEGRINO
(39)Secretary(1)(2)Vice President of MLAM since 1999;
Attorney associated with MLAM since 1997; Associate with Kirkpatrick &
Lockhart LLP from 1992 to 1997.
(1)
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Interested
person, as defined in the Investment Company Act, of the Trust and the
Corporation.
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(2)
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Such Director
or officer is a trustee, director or officer of other investment
companies for which the Investment Adviser, or one of its affiliates,
acts as investment adviser or manager.
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(3)
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Member of the
Corporations Audit and Nominating Committee, which is responsible
for the selection of the independent auditors and the selection and
nomination of non-interested Directors.
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As of December 1,
1999, the officers and Directors of the Corporation as a group (11
persons) owned an aggregate of less than 1% of the outstanding shares of
common stock of ML & Co. and owned an aggregate of less than 1% of the
outstanding shares of the Corporation.
Compensation of Directors/Trustees
The Trust pays fees
to each non-interested Director/Trustee for service to the Corporation and
the Trust. Each non-interested Director/Trustee receives an aggregate
annual retainer of $100,000 for his or her services to multiple investment
companies advised by the Investment Adviser or its affiliate (
Affiliate-advised funds). The portion of the annual retainer
allocated to each Affiliate-advised fund is determined quarterly based on
the relative net assets of each fund. As of the date of this Statement of
Additional Information, this annual retainer applies to 52
Affiliate-advised funds, including the three Portfolios of the Trust, and
the portion of the annual retainer allocated to each Portfolio is de
minimus. In addition, each non-interested Director/Trustee receives a
fee per in-person board meeting attended and per in-person Audit and
Nominating Committee meeting attended. The annual per meeting fees paid to
non-interested Directors/Trustees aggregate $62,500 for all
Affiliate-advised funds for which the Directors/Trustees serve and are
allocated equally among those funds. The Trust also reimburses the
non-interested Directors/Trustees for actual out-of-pocket expenses
relating to attendance at meetings. The Audit and Nominating Committee
consists of all of the non-interested Directors/Trustees of the
Corporation and the Trust.
The following table
sets forth the estimated compensation to be earned by the non-interested
Directors/Trustees for the fiscal year ended October 31, 2000, based on
net assets at the inception of the Portfolios, and the aggregate
compensation paid to them from all investment companies advised by the
Investment Adviser or Affiliate-advised funds for the calendar year ended
December 31, 1998.
Name
|
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Position with
Corporation/Trust
|
|
Compensation
from
Corporation/Trust
|
|
Pension or
Retirement Benefits
Accrued as Part of
Corporation/
Trust Expense
|
|
Estimated Annual
Benefits upon
Retirement
|
|
Aggregate
Compensation from
Corporation/Trust
and Other Affiliate-
Advised Funds(1)
|
James H.
Bodurtha |
|
Director/Trustee |
|
$3,490 |
|
None |
|
None |
|
$163,500 |
Herbert I.
London |
|
Director/Trustee |
|
$3,490 |
|
None |
|
None |
|
$163,500 |
Joseph L. May
|
|
Director/Trustee |
|
$3,490 |
|
None |
|
None |
|
$163,500 |
André F.
Perold |
|
Director/Trustee |
|
$3,490 |
|
None |
|
None |
|
$163,500 |
Roberta C.
Ramo |
|
Director/Trustee |
|
$6,720 |
|
None |
|
None |
|
None |
(1)
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The
Directors/Trustees serve on boards of affiliate-advised funds as
follows: Mr. Bodurtha (36 registered investment companies consisting of
52 portfolios); Mr. London (36 registered investment companies
consisting of 52 portfolios); Mr. May (36 registered investment
companies consisting of 52 portfolios); Mr. Perold (36 registered
investment companies consisting of 52 portfolios); and Ms. Ramo (29
registered investment companies consisting of 27
portfolios).
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The Directors of
the Corporation and the Trustees of the Trust may be eligible for reduced
sales charges on purchases of Class I shares. See Reduced Initial
Sales ChargesPurchase Privileges of Certain Persons.
Management and Advisory Arrangements
Advisory
Services and Advisory Fee. Each Fund invests
all of its assets in shares of the corresponding Portfolio of the Trust.
Accordingly, the Funds do not invest directly in portfolio securities and
do not require investment advisory services. All portfolio management
occurs at the Trust level. The Trust, on behalf of each Portfolio, has
entered into separate investment advisory agreements with Fund Asset
Management, L.P. as Investment Adviser (the Advisory Agreements
). As discussed in The Management Team in the
Prospectus, the Investment Adviser receives for its services to each
Portfolio monthly compensation at the annual rate of 0.75% of the average
daily net assets of each Portfolio.
Payment of Trust
Expenses. The Advisory Agreements obligate the
Investment Adviser to provide investment advisory services and to pay, or
cause an affiliate to pay, for maintaining its staff and personnel and to
provide office space, facilities and necessary personnel for the Trust.
The Investment Adviser is also obligated to pay, or cause an affiliate to
pay, the fees of all officers, Trustees and Directors who are affiliated
persons of the Investment Adviser or any affiliate. The Trust pays, or
causes to be paid, all other expenses incurred in the operation of each
Portfolio and the Trust (except to the extent paid by Mercury Funds
Distributor, a division of PFD (the Distributor)), including,
among other things, taxes, expenses for legal and auditing services, costs
of printing proxies, shareholder reports, copies of the Registration
Statement, charges of the custodian, any sub-custodian and the transfer
agent, expenses of portfolio transactions, expenses of redemption of
shares, Commission fees, expenses of registering the shares under federal,
state or non-U.S. laws, fees and actual out-of-pocket expenses of Trustees
who are not affiliated persons of the Investment Adviser or an affiliate
of the Investment Adviser, accounting and pricing costs (including the
daily calculation of net asset value), insurance, interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and
other expenses properly payable by the Trust or a Portfolio. Accounting
services are provided to the Trust by the Investment Adviser or an
affiliate of the Investment Adviser, and the Trust reimburses the
Investment Adviser or an affiliate of the Investment Adviser for its costs
in connection with such services.
Payment of
Corporation Expenses. The Corporation pays, or
causes an affiliate to pay, all other expenses incurred in the operation
of the Corporation and each Fund (except to the extent paid by the
Distributor), including, among other things, taxes, expenses for legal and
auditing services, costs of printing proxies, shareholder reports and
prospectuses and statements of additional information, charges of the
custodian, any sub-custodian and the transfer agent, expenses of portfolio
transactions, expenses of redemption of shares, Commission fees, expenses
of registering the shares under federal, state or non-U.S. laws, fees and
actual out-of-pocket expenses of Directors who are not affiliated persons
of the Investment Adviser, or of an affiliate of the Investment Adviser,
accounting and pricing costs (including the daily calculation of net asset
value), insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, and other expenses properly
payable by the Corporation or a Fund. The Distributor will pay certain
promotional expenses of each Fund incurred in connection with the offering
of its shares. Certain expenses will be financed by the Funds pursuant to
distribution plans in compliance with
Rule 12b-1 under the Investment Company Act. Accounting services are
provided to the Corporation and each Fund by the Investment Adviser, and
the Corporation reimburses the Investment Adviser for its costs in
connection with such services.
Organization of
the Investment Adviser. Fund Asset Management,
L.P. 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 Investment Adviser as defined under
the Investment Company Act because of their ownership of its voting
securities and their power to exercise a controlling influence over its
management or policies.
Duration and
Termination. Unless earlier terminated as
described below, the Advisory Agreements will continue in effect for two
years from their effective date. Thereafter, they will remain in effect
from year to year if approved annually (a) by the Board of Trustees or by
a majority of the outstanding shares of the applicable Portfolio and (b)
by a majority of the Trustees 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 with
respect to the applicable Portfolio without penalty on 60 days
written notice at the option of either party thereto or by the vote of the
shareholders of that Portfolio.
Transfer Agency
Services. Financial Data Services, Inc. (the
Transfer Agent), a subsidiary of ML & Co., acts as the
Corporations Transfer Agent with respect to each Fund pursuant to
separate Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreements (the Transfer Agency Agreements).
Pursuant to the Transfer Agency Agreements, 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 Agreements, the Transfer Agent receives a fee of $11.00 per Class I
or Class A 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 Agreements. Additionally, a $.20 monthly closed account charge will
be assessed on all accounts that 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 fee will be
due. For purposes of the Transfer Agency Agreements, 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 Corporation has entered into
separate distribution agreements with the Distributor in connection with
the continuous offering of each class of shares of each 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 each 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
Investment Advisory Agreement described above.
Code of Ethics
The Board of
Trustees of the Trust and the Board of Directors of the Corporation each
have adopted a Code of Ethics under Rule 17j-1 of the Investment Company
Act that incorporates the Code of Ethics of the Investment Adviser
(together, the Codes). The Codes significantly restrict the
personal investing activities of all employees of the Investment Adviser
and, as described below, impose additional, more onerous, restrictions on
fund investment personnel.
The Codes require
that all employees of the Investment Adviser 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 Investment Adviser 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 Investment Adviser. Furthermore, the Codes provide for trading
blackout periods that prohibit trading by investment personnel
of the Funds within periods of trading by the Funds in the same (or
equivalent) security (15 or 30 days depending upon the
transaction).
Reference is made
to Account ChoicesHow to Buy, Sell, Transfer and Exchange
Shares in the Prospectus for certain information as to the purchase
of Fund shares.
Each Fund issues
four classes of shares: shares of Class I and Class A 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 I, Class A, Class B and Class C share of a
Fund represents an identical interest in the investment portfolio of each
Fund, and has the same rights, except that Class A, Class B and Class C
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
A shares, are imposed directly against those classes and not against all
assets of the Funds, 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 each 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 relation to a particular class are borne
exclusively by that class. Class A, Class B and Class C shares each have
exclusive voting rights with respect to the Rule 12b-1 distribution plan
adopted with respect to such class pursuant to which the account
maintenance and/or distribution fees are paid (except that Class B
shareholders may vote upon any material changes to expenses charged under
the distribution plan for Class A Shares). 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 I and Class A 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 each 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.
Each Fund offers
its shares at a public offering price equal to the next determined net
asset value per share plus any sales charge applicable to the class of
shares selected by the investor. The applicable offering price for
purchase orders is based upon the net asset value of a Fund next
determined after receipt of the purchase order by the Distributor. As to
purchase orders received by securities dealers prior to the close of
business on the New York Stock Exchange (the NYSE) (generally
4:00 p.m., Eastern time) which includes orders received after the
determination of net asset value on the previous day, the applicable
offering price will be based on the net asset value on the day the order
is placed with the Distributor, provided that the orders are received by
the Distributor prior to 30 minutes after the close of business on the
NYSE on that day. If the purchase orders are not received prior to 30
minutes after the close of business on the NYSE on that day, such orders
shall be deemed received on the next business day. Dealers have the
responsibility of submitting purchase orders to the Funds not later than
30 minutes after the close of business on the NYSE in order to purchase
shares at that days offering price.
A Fund or the
Distributor may suspend the continuous offering of that Funds 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 a Fund or the Distributor. Neither the
Distributor nor the dealers are permitted to withhold placing orders to
benefit themselves by a price change. Certain securities dealers may
charge a processing fee to confirm a sale of shares to such customers. For
example, the fee currently charged by Merrill Lynch is $5.35. Purchases
made directly through the Transfer Agent are not subject to the processing
fee.
Initial Sales Charge AlternativesClass I and Class A
Shares
Investors choosing
the initial sales charge alternatives who are eligible to purchase Class I
shares should purchase Class I shares rather than Class A shares because
there is an account maintenance fee imposed on Class A shares.
Class I shares are
offered to a limited group of investors and also will be issued upon
reinvestment of dividends paid on outstanding Class I shares. Investors
who currently own Class I shares in a shareholder account are entitled to
purchase additional Class I shares of a Fund in that account. Certain
employer sponsored retirement or savings plans, including eligible 401(k)
plans, may purchase Class I shares at net asset value provided such plans
meet the required minimum number of eligible employees or required amount
of assets advised by Mercury or any of its affiliates. Also eligible to
purchase Class I shares at net asset value are participants in certain
investment programs including certain managed accounts for which a trust
institution, thrift, or bank trust department provides discretionary
trustee services, certain collective investment trusts for which a trust
institution, thrift, or bank trust department serves as trustee, certain
purchases made in connection with certain fee-based programs and certain
purchases made through certain financial advisers that meet and adhere to
standards established by Mercury. In addition, Class I shares are offered
at net asset value to ML & Co. and its subsidiaries and their
directors and employees, to members of the Boards of Mercury and
Affiliate-Advised investment companies, including the Corporation, and to
employees of certain selected dealers. Class I shares may also be offered
at net asset value to certain accounts over which the Investment Adviser
or an affiliate exercises investment discretion.
The term
purchase, as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class I and
Class A shares of a 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 or 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 a 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.
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 I and Class A shares
of a 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 I and Class A shares issued as a result of the automatic
reinvestment of dividends.
Rights of
Accumulation. Reduced sales charges are
applicable through a right of accumulation under which eligible investors
are permitted to purchase shares of each 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
purchasers combined holdings of all classes of shares of each Fund
and of other Mercury mutual 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 purchasers 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 Class I or Class A shares of each
Fund or any other Mercury mutual funds made within a 13-month period
starting with the first purchase pursuant to the Letter of Intent. The
Letter of Intent is available only to investors whose accounts are
established and maintained at the Funds Transfer Agent. The Letter
of Intent is not available to employee benefit plans for which affiliates
of the Investment Adviser provide plan participant record-keeping
services. The Letter of Intent is not a binding obligation to purchase any
amount of Class I or Class A 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 I and Class A shares
of each Fund and of other Mercury mutual 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 execution of such Letter, the difference
between the sales charge on the Class I or Class A shares purchased at the
reduced rate and the sales charge applicable to the shares actually
purchased through the Letter. Class I or Class A shares equal to 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 that further reduced percentage sales
charge but there will be no retroactive reduction of the sales charges on
any previous purchase.
The value of any
shares redeemed or otherwise disposed of by the purchaser prior to
termination or completion of the Letter of Intent will be deducted from
the total purchases made under such Letter. An exchange from the Summit
Cash Reserves Fund (Summit), a series of Financial
Institutions Series Trust, into each Fund that creates a sales charge will
count toward completing a new or existing Letter of Intent from each
Fund.
Employer-Sponsored Retirement or Savings Plans and Certain Other
Arrangements. Certain employer-sponsored
retirement or savings plans and certain other arrangements may purchase
Class I or Class A shares at net asset value, 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. Certain
other plans may purchase Class B shares with a waiver of the CDSC upon
redemption, based on similar criteria. Such Class B shares will convert
into Class A shares approximately ten years after the plan purchases the
first share of any Mercury mutual fund. Minimum purchase requirements may
be waived or varied for such plans. For additional information regarding
purchases by employer-sponsored retirement or savings plans and certain
other arrangements, call your plan administrator or your selected
dealer.
Managed Trusts.
Class I shares are offered at net asset value
to certain trusts to which trust institutions, thrifts, and bank trust
departments provide discretionary trustee services.
Purchase
Privileges of Certain Persons. Directors of the
Corporation and Trustees of the Trust, members of the Boards of other
investment companies advised by the Investment Adviser or its affiliates,
directors and employees of ML & Co. and its subsidiaries (the term
subsidiaries, when used herein with respect to ML & Co.,
includes the Investment Adviser, MLAM, Mercury Asset Management
International, Ltd. and certain other entities directly or indirectly
wholly owned and controlled by ML & Co.), employees of certain
selected dealers, and any trust, pension, profit-sharing or other benefit
plan for such persons, may purchase Class I shares of each Fund at net
asset value. The Funds realize economies of scale and reduction of
sales-related expenses by virtue of the familiarity of these persons with
the Funds. Employees and directors or trustees wishing to purchase shares
of the Funds must satisfy the Funds suitability
standards.
Class I and Class A
shares may also be offered at net asset value to certain accounts over
which the Investment Adviser or an affiliate exercises investment
discretion.
Acquisition of
Certain Investment Companies. Class A shares
may be offered at net asset value in connection with the acquisition of
the assets of or merger or consolidation with a personal holding company
or a public or private investment company.
Purchases
Through Certain Financial Advisers. Reduced
sales charges may be applicable for purchases of Class I or Class A shares
of a Fund through certain financial advisers that meet and adhere to
standards established by FAM from time to time.
Deferred Sales ChargesClass 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 Mercury mutual 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 investors 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 A 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 SharesDetermination of Net Asset Value
below.
Class B shares that
are redeemed within six 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 six years
or shares acquired pursuant to reinvestment of dividends and then of
shares held longest during the six-year period. A transfer of shares from
a shareholders 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 |
|
4.0% |
2-3 |
|
3.0% |
3-4 |
|
3.0% |
4-5 |
|
2.0% |
5-6 |
|
1.0% |
6 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 3.0% (the applicable rate in the third year after
purchase).
As discussed in the
Prospectus under Account ChoicesPricing of SharesClass B
and C SharesDeferred Sales Charge Options, while Class B
shares redeemed within six years of purchase are subject to a CDSC under
most circumstances, the charge may be reduced or waived in certain
instances. These include certain post-retirement withdrawals from an
individual retirement account (IRA) or other retirement plan
or redemption of Class B shares in certain circumstances following the
death of a Class B shareholder. In the case of such withdrawal, the
reduction or waiver applies to: (a) any partial or complete redemption in
connection with a distribution following retirement under a tax-deferred
retirement plan on attaining age 59 1
/2 in the case of an IRA or other retirement plan, or part of a
series of equal periodic payments (not less frequently than annually) made
for life (or life expectancy) or any redemption resulting from the
tax-free return of an excess contribution to an IRA (certain legal
documentation may be required at the time of liquidation establishing
eligibility for qualified distribution); or (b) any partial or complete
redemption following the death or disability (as defined in the Internal
Revenue Code of 1986, as amended (the Code)) of a Class B
shareholder (including one who owns the Class B shares as joint tenant
with his or her spouse), provided the redemption is requested within one
year of the death or initial determination of disability, or if later,
reasonably promptly following completion of probate or in connection with
involuntary termination of an account in which Fund shares are held
(certain legal documentation may be required at the time of liquidation
establishing eligibility for qualified distribution).
The change may also
be reduced or waived in other instances, such as: (a) redemptions by
certain eligible 401(a) and 401(k) plans and certain retirement plan
rollovers; (b) redemptions in connection with participation in certain
fee-based programs managed by the Investment Adviser or its affiliates;
(c) redemptions in connection with participation in certain fee-based
programs managed by selected dealers that have agreements with the
Investment Adviser; or (d) withdrawals through the Systematic Withdrawal
Plan of up to 10% per year of your account value at the time the plan is
established. See Shareholder ServicesFee-Based Programs
and Systematic Withdrawal Plan.
Conversion of
Class B Shares to Class A Shares. After
approximately eight years (the Conversion Period), Class B
shares of each Fund will be converted automatically into Class A shares of
that Fund. Class A shares are subject to an ongoing account maintenance
fee of 0.25% of the average daily net assets of a Fund but are not subject
to the distribution fee that is borne by Class B shares. Automatic
conversion of Class B shares into Class A 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 A 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 A 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 A shares of a 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 that Fund held in the account on the Conversion Date will be
converted to Class A shares of the Fund.
The Conversion
Period may be modified for investors that participate in certain fee-based
programs. See Shareholder ServicesFee-Based Programs.
Class B
shareholders of a Fund exercising the exchange privilege described under
Shareholder ServicesExchange Privilege will continue to
be subject to that Funds CDSC schedule if such schedule is higher
than the CDSC schedule relating to the Class B shares acquired as a result
of the exchange.
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 shareholders 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 Systematic Withdrawal Plans. See Shareholder Services
Systematic Withdrawal Plan.
Class B and
Class C Sales Charge Information. 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 each 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 dealers own funds. The
combination of the CDSC and the ongoing distribution fee facilitates the
ability of each 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.
Distribution Plans
Reference is made
to Account ChoicesPricing of Shares in the Prospectus
for certain information with respect to separate distribution plans for
Class A, Class B, and Class C 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 Funds to
the Distributor with respect to such classes.
The Distribution
Plan for each of the Class A, Class B and Class C shares provides that
each 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 each Fund
attributable to shares of the relevant class in order to compensate the
Distributor and selected dealers (pursuant to sub-agreements) in
connection with account maintenance activities with respect to Class A,
Class B and Class C 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 on any material changes to
expenses charged under the Class A Distribution Plan).
The Distribution
Plans for Class B and Class C shares provide that each 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 each Fund attributable to the shares of the
relevant class in order to compensate the Distributor and selected dealers
(pursuant to sub-agreements) for providing shareholder and distribution
services, and bearing certain distribution-related expenses of each Fund,
including payments to financial consultants for selling Class B and Class
C shares of each Fund. The Distribution Plans relating to Class B and
Class C shares are designed to permit an investor to purchase Class B and
Class C shares through dealers without the assessment of an initial sales
charge and at the same time permit the dealer to compensate its financial
consultants in connection with the sale of the Class B and Class C shares.
In this regard, the purpose and function of the ongoing distribution fees
and the CDSC are the same as those of the initial sales charge with
respect to the Class I and Class A shares of each Fund in that the ongoing
distribution fees and deferred sales charges provide for the financing of
the distribution of each Funds Class B and Class C
shares.
The Funds
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 each Distribution Plan to the applicable
Fund and the 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 such Distribution Plan will benefit each 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 affected Fund. A Distribution
Plan cannot be amended to increase materially the amount to be spent by
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 such Distribution Plan, cast in person at a
meeting called for that purpose. Rule 12b-1 further requires that each
Fund preserve copies of its Distribution Plans and any report made
pursuant to such plan for a period of not less than six years from the
date of such Distribution Plans 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
each Distribution Plan may be more or less than distribution-related
expenses of the related class. 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. This
information is presented 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 basis,
revenues consist of the account maintenance fees, the 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, the distribution fees and CDSCs and the expenses
consist of financial consultant compensation.
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 each Fund, the maximum sales charge rule
limits the aggregate of distribution fee payments and CDSCs payable by
each 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 applicable 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 circumstance payment in excess of the
amount payable under the NASD formula will not be made.
Reference is made
to How to Buy, Sell, Transfer and Exchange Shares in the
Prospectus.
Each Fund is
required to redeem for cash all shares of that 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
NYSE is restricted as determined by the Commission or during which 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 Funds is not reasonably practicable, and for
such other periods as the Commission may by order permit for the
protection of shareholders of the Funds.
The value of shares
of a Fund at the time of redemption may be more or less than the
shareholders cost, depending in part on the market value of the
securities held by that Fund at such time.
Redemption
A shareholder
wishing to redeem shares held with the Transfer Agent may do so without
charge by tendering the shares directly to the Funds Transfer Agent,
Financial Data Services, Inc., P.O. Box 44062, Jacksonville, Florida
32232-4062. 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. Redemption requests should not be
sent to the Corporation, the Trust or the Funds. A 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 Agents 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 in whose name(s)
shares are recorded on the Transfer Agents 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 a
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). That Fund may delay or cause to be delayed the mailing of a
redemption check until such time as 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.
Repurchase
Each Fund also will
repurchase its shares through a shareholders listed securities
dealer. Each Fund normally will accept orders to repurchase shares by wire
or telephone from dealers for their customers at the net asset value next
computed after the order is placed. Shares will be priced at the net asset
value calculated on the day the request is received, provided that the
request for repurchase is submitted to the dealer prior to the close of
business on the NYSE (generally, the NYSE closes at 4:00 p.m., Eastern
time) and such request is received by the Fund from such dealer not later
than 30 minutes after the close of business on the NYSE on the same
day.
Dealers have the
responsibility of submitting such repurchase requests to the Funds not
later than 30 minutes after the close of business on the NYSE in order to
obtain that days closing price.
The foregoing
repurchase arrangements are for the convenience of shareholders and do not
involve a charge by a 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 a Fund. Certain securities
dealers may charge a processing fee to confirm a repurchase of shares. For
example,
the fee currently charged by Merrill Lynch is $5.35. Fees charged by other
securities dealers may be higher or lower. Repurchases made through the
Funds Transfer Agent, on accounts held at the Transfer Agent, are
not subject to the processing fee. Each Fund reserves the right to reject
any order for repurchase, which right of rejection might adversely affect
shareholders seeking redemption through the repurchase procedure. A
shareholder whose order for repurchase is rejected by a Fund, however, may
redeem Fund shares as set forth above.
Reinstatement PrivilegeClass I and Class A
Shares
Shareholders of a
Fund who have redeemed their Class I and Class A shares of that Fund have
a privilege to reinstate their accounts by purchasing Class I or Class A
shares, as the case may be, of that 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 investors 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 each Fund is determined once daily Monday
through Friday as of the close of business on the NYSE on each day the
NYSE is open for trading based on prices at the time of closing. The NYSE
generally closes at 4:00 p.m., Eastern time. Each Fund also will determine
its net asset value on any day in which there is sufficient trading in the
underlying Portfolios portfolio securities that the net asset value
might be affected materially, but only if on any such day a Fund is
required to sell or redeem shares. 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
Years 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 each Portfolio on
behalf of a 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 of the Fund outstanding at
such time, rounded to the nearest cent. Expenses, including the fees
payable to the Investment Adviser and Distributor, are accrued
daily.
The per share net
asset value of Class A, Class B and Class C shares generally will be lower
than the per share net asset value of Class I 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 Class A shares. Moreover, the per share net
asset value of the Class B and Class C shares of a Fund generally will be
lower than the per share net asset value of Class A shares of that Fund,
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 that Fund. It is expected, however, that the per share net asset value
of the four classes of a Fund will tend to converge (although not
necessarily meet) immediately after the payment of dividends or
distributions, which will differ by approximately the amount of the
expense accrual differentials between the classes.
Portfolio
securities, including ADRs, EDRs or GDRs, that are traded on stock
exchanges are valued at the last sale price (regular way) on the exchange
on which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available ask
price for short positions. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by
or under the authority of the Board of Trustees of the
Trust 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 a Portfolio writes an option, the
amount of the premium received is recorded on the books of that Portfolio
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 on the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask
price. Options purchased by a Portfolio 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 Board of Trustees of the Trust. Such valuations and
procedures will be reviewed periodically by the Board of
Trustees.
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 each Funds shares are
determined as of such times. Foreign currency exchange rates also are
generally determined prior to the close of business on the NYSE.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined
and the close of business on the NYSE that may not be reflected in the
computation of each Funds net asset value.
Each investor in
the Trust may add to or reduce its investment in the Portfolio on each day
the NYSE is open for trading. The value of each investors (including
each Funds) interest in the Portfolio will be determined after the
close of business on the NYSE by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, that represents that
investors share of the aggregate interests in the Portfolio. Any
additions or withdrawals to be effected on that day will then be effected.
The investors percentage of the aggregate beneficial interests in
the Portfolio will then be recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investors
investment in the Portfolio as of the time of determination on such day
plus or minus, as the case may be, the amount of any additions to or
withdrawals from the investors investment in the Portfolio effected
on such day, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of such time on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value
of the investors interest in the Portfolio after the close of
business of the NYSE on the next determination of net asset value of the
Portfolio.
Computation of Offering Price Per Share
An illustration of
the computation of the offering price for Class I, Class A, Class B and
Class C shares of each Fund based on the projected value of each Fund
s estimated net assets and projected number of shares outstanding on
the date its shares are offered for sale to public investors is as
follows:
|
|
Class I
|
|
Class A
|
|
Class B
|
|
Class C
|
Net Assets |
|
$125,000 |
|
$125,000 |
|
$125,000 |
|
$125,000 |
|
|
|
|
|
|
|
|
|
Number of Shares
Outstanding |
|
12,500 |
|
12,500 |
|
12,500 |
|
12,500 |
|
|
|
|
|
|
|
|
|
Net Asset Value Per
Share (net assets divided by
number of shares outstanding) |
|
$
10.00 |
|
$
10.00 |
|
$
10.00 |
|
$
10.00 |
Sales Charge (for Class
I and Class A Shares: 5.25%
of Offering Price (5.54% of net amount
invested))* |
|
0.55 |
|
0.55 |
|
**
|
|
**
|
|
|
|
|
|
|
|
|
|
Offering
Price |
|
$
10.55 |
|
$
10.55 |
|
$
10.00 |
|
$
10.00 |
|
|
|
|
|
|
|
|
|
*
|
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. See Purchase of Shares
Deferred Sales ChargesClass B and Class C Shares
herein.
|
PORTFOLIO TRANSACTIONS AND BROKERAGE
Transactions in Portfolio Securities
Because each Fund
will invest exclusively in shares of its corresponding Portfolio of the
Trust, it is expected that all transactions in portfolio securities will
be entered into by the Trust. Subject to policies established by the Board
of Trustees of the Trust, the Investment Adviser is primarily responsible
for the execution of the Trusts portfolio transactions and the
allocation of brokerage. The Trust 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 Investment Adviser seeks to
obtain the best net results for each Portfolio of the Trust, 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 firms risk in positioning
a block of securities. While the Investment Adviser generally seeks
reasonably competitive commission rates, the Trust 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 Trustees of the Trust, the Investment Adviser may consider sales of
shares of a Fund as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Trust; 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
Trust.
Subject to
obtaining the best net results, brokers who provide supplemental
investment research to the Investment Adviser may receive orders for
transactions by the Trust. 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 Investment Adviser under the Investment Advisory Agreements, and the
expenses of the Investment Adviser will not necessarily be reduced as a
result of the receipt of such supplemental information. If in the judgment
of the Investment Adviser the Trust will benefit from supplemental
research services, the Investment Adviser is authorized to pay brokerage
commissions to a broker furnishing such services that are in excess of
commission that another broker may have charged for effecting the same
transactions. Certain supplemental research services may primarily benefit
one or more other investment companies or other accounts for which the
Investment Adviser exercises investment discretion. Conversely, the Trust
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 Trust
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 Trust will endeavor to achieve the best net results in
effecting its portfolio transactions. There generally is less governmental
supervision and regulation of foreign stock exchanges and brokers than in
the United States.
Foreign equity
securities may be held by the Trust 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 Trusts 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 each Fund are redeemable on a daily basis in
U.S. dollars, the Trust intends to manage each Portfolio so as to give
reasonable assurance that it will be able to obtain U.S. dollars to the
extent necessary to meet anticipated redemptions. Under present
conditions, it is not believed that these considerations will have
significant effect on the Trusts portfolio strategies.
Each 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
Trust and persons who are affiliated with such affiliated persons are
prohibited from dealing with the Trust 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 Trust will not deal with affiliated persons,
including Merrill Lynch and its affiliates, in connection with such
transactions. However, an affiliated person of the Trust 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 Trust 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
Trustees of the Trust that either comply with rules adopted by the
Commission or with interpretations of the Commission staff. See
Investment Objective and PoliciesInvestment Restrictions.
Section 11(a) of
the Exchange Act generally prohibits members of the U.S. 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 a
statement setting forth 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 Trust 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 Trust and annual statements as to aggregate
compensation will be provided to the Trust. Securities may be held by, or
be appropriate investments for, the Trust as well as other funds or
investment advisory clients of the Investment Adviser or its
affiliates.
The Board of
Trustees of the Trust has considered the possibility of seeking to
recapture for the benefit of the Funds 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 Trust on behalf of a portfolio to the Investment
Adviser. After considering all factors deemed relevant, the Board of
Trustees 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 Investment Adviser or its affiliates when
one or more clients of the Investment Adviser or its affiliates are
selling the same security. If purchases or sales of securities arise for
consideration at or about the same time that would involve the Trust or
other clients or funds for which the Investment Adviser or an affiliate
act as investment adviser, 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 Investment Adviser or its affiliates during the
same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on
price.
Each Fund offers a
number of shareholder services described below that are designed to
facilitate investment in its shares. Full details as to each such service
and copies of the various plans or how to change options with respect
thereto, can be obtained from the Funds by calling the telephone number on
the cover page hereof, or from the Distributor or your selected dealer.
Certain of these services are available only to U.S.
investors.
Investment Account
Each shareholder
whose account is maintained at the Transfer Agent has an Investment
Account and will receive statements, at least quarterly, from the Transfer
Agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of dividends. The
statements also will show any other activity in the account since the
preceding statement. Shareholders also will receive separate confirmations
for each purchase or sale transaction other than automatic investment
purchases and the reinvestment of 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. The
Funds do not issue share certificates.
Shareholders
considering transferring their Class I or Class A shares from a selected
dealer to another brokerage firm or financial institution should be aware
that, if the firm to which the Class I or Class A shares are to be
transferred will not take delivery of shares of a Fund, a shareholder
either must redeem the Class I or Class A shares so that the cash proceeds
can be transferred to the account at the new firm or such shareholder must
continue to maintain an Investment Account at the Transfer Agent for those
Class I or Class A shares.
Shareholders
interested in transferring their Class B or Class C shares from a selected
dealer and who do not wish to have an Investment Account maintained for
such shares at the Transfer Agent may request their new brokerage firm to
maintain such shares in an account registered in the name of the brokerage
firm for the benefit of the shareholder at the Transfer Agent.
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.
Shareholders
considering transferring a tax-deferred retirement account, such as an
individual retirement account, from a selected dealer to another brokerage
firm or financial institution should be aware that, if the firm to which
the retirement account is to be transferred will not take delivery of
shares of each Fund, a shareholder must either redeem the shares (paying
any applicable CDSC) so that the cash proceeds can be transferred to the
account at the new firm, or such shareholder must continue to maintain a
retirement account at a selected dealer for those shares.
Exchange Privilege
U.S. shareholders
of each class of shares of each Fund have an exchange privilege with
certain other Mercury mutual funds and Summit, a series of Financial
Institutions Series Trust, which is a Merrill Lynch-sponsored money market
fund specifically designated as available for exchange by holders of Class
I, Class A, Class B and Class C shares. Shares with a net asset value of
at least $100 are required to qualify for the exchange privilege and any
shares used 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 I and Class A Shares. Under each Fund
s pricing system, Class I shareholders may exchange Class I shares
of a Fund for Class I shares of a second Mercury mutual fund. If the Class
I shareholder wants to exchange Class I shares for shares of a second
Mercury mutual fund, but does not hold Class I shares of the second fund
in his or her account at the time of exchange and is not otherwise
eligible to acquire Class I shares of the second fund, the shareholder
will receive Class A shares of the second fund as a result of the
exchange. Class A shares also may be exchanged for Class I shares of a
second Mercury mutual fund at any time as long as, at the time of the
exchange, the shareholder is eligible to acquire Class I shares of any
Mercury mutual fund.
Exchanges of Class
I or Class A shares outstanding (outstanding Class I or Class A
shares) for Class I or Class A shares of another Mercury mutual
fund, or for Class A shares of Summit (new Class I or Class A shares
) are transacted on the basis of relative net asset value per Class
I or Class A share, respectively, plus an amount equal to the difference,
if any, between the sales charge previously paid on the outstanding Class
I or Class A shares and the sales charge payable at the time of the
exchange on the new Class I or Class A shares. With respect to outstanding
Class I or Class A 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 I or Class A shares
in the initial purchase and any subsequent exchange. Class I or Class A
shares issued pursuant to dividend reinvestment are sold on a no-load
basis in each of the funds offering Class I or Class A shares. For
purposes of the exchange privilege, Class I and Class A 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 I or
Class A shares on
which the dividend was paid. Based on this formula, Class I and Class A
shares of each Fund generally may be exchanged into the Class I and Class
A shares, respectively, of the other funds with a reduced or without a
sales charge.
Exchanges of
Class B and Class C Shares. In addition, each
of the funds with Class B and Class C shares outstanding (
outstanding Class B or Class C shares) offers to exchange its
Class B or Class C shares for
Class B or Class C shares, respectively, of another Mercury mutual fund 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 a Fund exercising the
exchange privilege will continue to be subject to that Funds 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 a Fund acquired through use of the exchange
privilege will be subject to that Funds CDSC schedule if such
schedule is higher than the CDSC schedule relating to the Class B shares
of the fund from which the exchange was 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 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 a Fund for
those of another Mercury fund (new Mercury Fund) after having
held that Funds Class B shares for two-and-a-half years. The 3% CDSC
that generally would apply to a redemption would not apply to the
exchange. Four years later the investor may decide to redeem the Class B
shares of new Mercury 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 a Funds Class B shares to the four year holding
period for the new Mercury Fund Class B shares, the investor will be
deemed to have held the new Mercury Fund Class B shares for more than six
years.
Exchanges for
Shares of a Money Market Fund. Class I and
Class A 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 I or Class A
shares of Affiliate-Advised Funds; Class B shares of Summit have an
exchange privilege back into Class B or Class C shares of
Affiliate-Advised 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
fee-based programs for which alternative exchange arrangements may exist.
Please see your financial consultant for further information.
Prior to October
12, 1998, exchanges from the Funds and other Affiliated-Advised Funds into
a money market fund were directed to certain Affiliate-Advised money
market funds other than Summit. Shareholders who exchanged
Affiliate-Advised Fund shares for such other money market funds and
subsequently wish to exchange those money market fund shares for shares of
a Fund will be subject to the CDSC schedule applicable to such Fund
shares, if any. The holding period for those 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 a 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.
Exercise of the
Exchange Privilege. To exercise the exchange
privilege, a shareholder should contact his or her financial consultant,
who will advise the relevant Fund of the exchange. Shareholders of each
Fund and shareholders of the other funds described above with shares for
which certificates have not been issued may exercise the exchange
privilege by wire through their securities dealers. Each 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. Each 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.
Fee-Based Programs
Certain fee-based
programs, including pricing alternatives for securities transactions (each
referred to in this paragraph as a Program), may permit the
purchase of Class I shares at net asset value. Under specified
circumstances, participants in certain Programs may deposit other classes
of shares, which will be exchanged for Class I 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 certain Programs may
result in the redemption of shares held therein or the automatic exchange
thereof to another class at net asset value. 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 on the
current value of such shares. These Programs also generally prohibit such
shares from being transferred to another account, 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 certain specific Programs offered through
particular selected dealers (including charges and limitations on
transferability applicable to shares that may be held in such Programs) is
available in each such Programs client agreement and from the
Transfer Agent at 1-888-763-2260.
Retirement Plans
The minimum initial
purchase to establish a retirement plan is $100. Dividends received in
retirement plans are exempt from Federal taxation until distributed from
the plans. Different tax rules apply to Roth IRA plans and educational
savings plans. Investors considering participation in any retirement or
education savings plan should review specific tax laws relating thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan.
Automatic Investment Plans
A shareholder may
make additions to an Investment Account at any time by purchasing Class I
shares (if he or she is an eligible Class I investor) or Class A, Class B
or Class C shares at the applicable public offering price. These purchases
may be made either through the shareholders securities dealer or by
mail directly to the Transfer Agent, acting as agent for such securities
dealer. You may also add to your account by automatically investing a
specific amount in each Fund on a periodic basis through your selected
dealer. The current minimum for such automatic additional investments is
$100. This minimum may be waived or revised under certain
circumstances.
Automatic Dividend Reinvestment Plan
Dividends paid by
the Funds may be taken in cash or automatically reinvested in shares of
the Funds at net asset value without a sales charge. You should consult
with your financial consultant about which option you would like. If you
choose the reinvestment option, dividends paid with respect to a Fund
s shares will be automatically reinvested, without sales charge, in
additional full and fractional shares of that Fund. Such reinvestment will
be at the net asset value of shares of the Fund as determined after 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 their selected dealer if their
account is maintained with a selected dealer, or by written notification
or by telephone (1-888-763-2260) to the Transfer Agent, if their account
is maintained with the Transfer Agent, elect to have subsequent dividends
of ordinary income and/or capital gains paid with respect to shares of a
Fund in cash, rather than reinvested in shares of that Fund (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 Funds are
not responsible for any failure of delivery to the shareholders
address of records and no interest will accrue on amounts represented by
uncashed dividend checks. Cash payments can also be directly deposited to
the shareholders bank account.
Systematic Withdrawal Plans
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 who have acquired
shares of a 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 shareholders account to provide the withdrawal payment
specified by the shareholder. The shareholder may specify the dollar
amount and class of shares to be redeemed. Redemptions 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 net asset value determined after the close of
business on the following business day. The check for the withdrawal
payment will be mailed, or the direct deposit for 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 shareholders systematic withdrawal plan may be terminated
at any time, without a charge or penalty, by the shareholder, each Fund,
the Transfer Agent or the Distributor.
With respect to
redemptions of Class B and 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 SharesDeferred Sales Charge Alternatives
Class B and 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 A shares, a shareholder must make a new election to
join the systematic withdrawal program with respect to the Class A shares.
If an investor wishes to change the amount being withdrawn in a systematic
withdrawal plan the investor should contact his or her financial
consultant.
Withdrawal payments
should not be considered as dividends. Each withdrawal is a taxable event.
If periodic withdrawals continuously exceed reinvested dividends, the
shareholders 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. A Fund will not knowingly accept purchase orders for shares
of that Fund from investors who maintain a systematic withdrawal plan
unless such purchase is equal to at least one years scheduled
withdrawals or $1,200, whichever is greater. Periodic investments may not
be made into an Investment Account in which the shareholder has elected to
make systematic withdrawals.
Dividends
Each 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 each Fund
s shareholders at least annually. From time to time, each 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 Funds have net income from certain foreign
currency transactions, such income will be distributed at least
annually.
See
Shareholder ServicesAutomatic Dividend Reinvestment Plan
for information concerning the manner in which dividends may be reinvested
automatically in shares of a Fund. A shareholder whose account is
maintained at the Transfer Agent or whose account is maintained through
his or her selected dealer 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 each Fund or received in
cash. The per share dividends on Class B and Class C
shares will be lower than the per share dividends on Class I and Class A
shares as a result of the account maintenance, distribution and higher
transfer agency fees applicable with respect to the Class B and Class C
shares; similarly, the per share dividends on Class A shares will be lower
than the per share dividends on Class I shares as a result of the account
maintenance fees applicable with respect to the Class A shares. See
Pricing of SharesDetermination of Net Asset Value.
Taxes
Each Fund intends
to elect and 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 each Fund so
qualifies, such 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 I, Class A, Class B and Class C
shareholders (together, the shareholders). Each Fund intends
to distribute substantially all of such income.
Dividends paid by
each 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. 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 each Funds earnings and
profits will first reduce the adjusted tax basis of a holders 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). Certain categories of capital gains are taxable at different
rates. Generally not later than 60 days after the close of its taxable
year, each Fund will provide its shareholders with a written notice
designating the amount of any capital gain dividends as well as any amount
of capital gain dividends in the different categories of capital gain
referred to above.
Dividends are
taxable to shareholders even though they are reinvested in additional
shares of a Fund. A portion of each Funds 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, each Fund will allocate dividends eligible for the dividends
received deductions among the Class I, Class A, Class B and Class C
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 I, Class A,
Class B and Class C shareholders during the taxable year, or such other
methods as the Internal Revenue Service (IRS) may prescribe.
If a 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 each Fund and received by its shareholders on
December 31 of the year in which such dividend was declared.
Ordinary income
dividends paid to shareholders who are non-resident 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 a Fund or who, to
such Funds 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 each 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.
No gain or loss
will be recognized by Class B shareholders on the conversion of their
Class B shares into Class A shares. A shareholders basis in the
Class A shares acquired will be the same as such shareholders basis
in the Class B shares converted, and the holding period of the acquired
Class A 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 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 a Fund will be disallowed if such 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.
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 each 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 each Funds taxable income and capital gains
will be distributed to avoid entirely the imposition of the tax. In such
event, a Fund will be liable for the tax only on the amount by which it
does not meet the foregoing distribution requirements.
Tax Treatment of Options and Futures
Transactions
The Funds may
write, purchase or sell options and futures. In general, unless an
election is available to the Fund or an exception applies, 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, and any gain or loss attributable to 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 a 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 a Fund solely to reduce the risk of changes in price or
interest or currency exchange rates with respect to its
investments.
Code Section 1092,
which applies to certain straddles, may affect the taxation of
a Funds sales of securities and transactions in options and futures.
Under Section 1092, each Fund may be required to postpone recognition for
tax purposes of losses incurred in certain sales of securities and certain
closing transactions in options and futures.
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 each 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 or
futures will be valued for purposes of the RIC diversification
requirements applicable to each Fund.
Under Code Section
988, special rules are provided for certain transactions in a foreign
currency other than the taxpayers 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, each Fund may elect capital gain or loss treatment
for such transactions. In general, however, Code Section 988 gains or
losses will increase or decrease the amount of each Funds 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 of a Fund during a taxable year, such
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 shareholders 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 each Fund solely to reduce
the risk of currency fluctuations with respect to its
investments.
The Trust will
apply for a private letter ruling from the IRS to the effect that, because
each Portfolio is classified as a partnership for tax purposes, each Fund
will be entitled to look to the underlying assets of the Portfolio in
which it has invested for purposes of satisfying various requirements of
the Code applicable to RICs. If any of the facts upon which such ruling is
premised change in any material respect (e.g., if the Trust were required
to register its interests under the Securities Act) and the Trust is
unable to obtain a private letter ruling from the IRS indicating that each
Portfolio will continue to be classified as a partnership, then the Board
of Directors of the Corporation will determine, in its discretion, the
appropriate course of action for the Funds. One possible course of action
would be to withdraw a Funds investments from its Portfolio and to
retain an investment adviser to manage the Funds assets in
accordance with the investment policies applicable to the Fund. See
Investment Objectives and Policies.
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 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
Funds.
From time to time
each 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 is based on each Funds
historical performance and is not intended to indicate future performance.
Average annual total return is determined separately for Class I, Class A,
Class B and Class C shares in accordance with a formula specified by the
Commission.
Average annual
total return quotations for the specified periods are computed by finding
the average annual compounded rates of return (based on net investment
income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial
amount invested to the redeemable value of such investment at the end of
each period. Average annual total return is computed assuming all
dividends and distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses, including the maximum
sales charge in the case of Class I and Class A 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 I and A shares. Dividends
paid by a 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
the distribution charges and any incremental transfer agency cost relating
to each class of shares will be borne exclusively by that class. The Funds
will include performance data for all classes of shares of the Funds in
any advertisement or information including performance data of the
Funds.
Each 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. Each Funds 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.
In order to reflect
the reduced sales charges in the case of Class I or Class A shares or the
waiver of the CDSC in the case of Class B or Class C shares applicable to
certain investors, as described under Purchase of Shares and
Redemption of Shares, respectively, the total return data
quoted by each Fund in advertisements directed to such investors may take
into account the reduced, and not the maximum, sales charge or may take
into account the CDSC and therefore may reflect greater total return
since, due to the reduced sales charges or the waiver of sales charges, a
lower amount of expenses is deducted.
On occasion, each
Fund may compare its performance to various indices including, among other
things, its applicable Russell 1000® Index, the Standard & Poor
s 500 Index, the Value Line Composite Index, the Dow Jones
Industrial Average, or other published indices, or to data published by
Lipper Analytical Services, Inc., Morningstar Publications, Inc. (
Morningstar), Money Magazine, U.S. News & World
Report, Business Week, Forbes Magazine, Fortune Magazine, CDA
Investment Technology, Inc. or other industry publications. When comparing
its performance to a market index, a Fund may refer to various statistical
measures derived from the historic performance of that Fund and the index,
such as standard deviation and beta. As with other performance data,
performance comparisons should not be considered indicative of a Fund
s relative performance for any future period. From time to time,
each Fund may include its Morningstar risk-adjusted performance rating in
advertisements or supplemental sales literature. Each Fund may from time
to time quote in advertisements or other materials other applicable
measures of performance and may also make reference to awards that may be
given to the Investment Adviser.
Description of Shares
Each Fund is a
series of the Corporation and is a feeder fund that invests in
a corresponding Portfolio. Investors in a Fund will acquire an indirect
interest in the corresponding Portfolio. Each Portfolio accepts
investments from other feeder funds, and all of the feeders of a given
Portfolio bear the Portfolios expenses in proportion to their
assets. This structure may enable the Funds to reduce costs through
economies of scale. A larger investment portfolio also may reduce certain
transaction costs to the extent that contributions to and redemptions from
the Portfolio from different feeders may offset each other and produce a
lower net cash flow. However, each feeder can set its own transaction
minimums, fund-specific expenses, and other conditions. This means that
one feeder could offer access to the same Portfolio on more attractive
terms, or could experience better performance, than another
feeder.
The Corporation is
a Maryland corporation incorporated on October 29, 1999. It has an
authorized capital of 3,000,000,000 shares of Common Stock, par value $.10
per share, divided into three series known as Mercury Large Cap Growth
Fund, Mercury Large Cap Core Fund and Mercury Large Cap Value Fund
(collectively, the Series and each a Series). Each
Series consists of 500,000,000 shares. Each of the Series is divided into
four classes. Class I, Class A and Class C shares of each Series consist
of 100,000,000 shares and Class B shares of each Series consist of
200,000,000 shares.
Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held in the election of Directors (to the extent
hereinafter provided) and on other matters submitted to the vote of
shareholders. All classes and Series vote together as a single class,
except that shareholders of the class bearing distribution expenses as
provided above shall have exclusive voting rights with respect to matters
relating to such distribution expenditures (except that Class B
shareholders may vote upon any material changes to expenses charged under
the Class A Distribution Plan). Voting rights are not cumulative, so that
the holders of more than 50% of the shares voting in the election of
Directors can, if they choose to do so, elect all the Directors of the
Corporation, in which event the holders of the remaining shares would be
unable to elect any person as a Director.
Whenever a
Portfolio holds a vote of its feeder funds, the Fund investing in that
Portfolio will pass the vote through to its own shareholders. Smaller
feeder funds may be harmed by the actions of larger feeder funds. For
example, a larger feeder fund could have more voting power than a Fund
over the operations of its Portfolio. A Fund may withdraw from its
Portfolio at any time and may invest all of its assets in another pooled
investment vehicle or retain an investment adviser to manage the Fund
s assets directly.
There normally will
be no meeting of shareholders for the purpose of electing Directors unless
and until such time as less than a majority of the Directors holding
office have been elected by the shareholders, at which time the Directors
then in office will call a shareholders meeting for the election of
Directors. Shareholders may, in accordance with the terms of the Articles
of Incorporation, cause a meeting of shareholders to be held for the
purpose of voting on the removal of Directors. Also, the Corporation will
be required to call a special meeting of shareholders in accordance with
the requirements of the Investment Company Act to seek approval of new
management and advisory arrangements, of a material increase in account
maintenance fees or of a change in fundamental policies, objectives or
restrictions. Except as set forth above, the Directors of a Series shall
continue to hold office and appoint successor Directors. Each issued and
outstanding share of a Series is entitled to participate equally with
other shares of that Series in dividends and distributions declared and in
net assets upon liquidation or dissolution remaining after satisfaction of
outstanding liabilities, except for any expenses which may be attributable
to only one class. Shares that are issued will be fully-paid and
non-assessable by the Corporation or a Fund.
The Trust consists
of three Portfolios and is organized as a Delaware Business Trust.
Whenever a Fund is requested to vote on any matter relating to its
Portfolio, the Corporation will hold a meeting of that Funds
shareholders and will cast its vote as instructed by that Funds
shareholders.
The Investment
Adviser provided the initial capital for the Corporation by purchasing
150,000 shares of common stock of the Corporation for $1,500,000. Such
shares were acquired for investment and can only be disposed of by
redemption. As of the date of this Statement of Additional Information,
the Investment Adviser owned 100% of the outstanding common stock of the
Corporation. The Investment Adviser may be deemed to control the
Corporation until such time as it owns less than 25% of the outstanding
shares of the Investment Adviser.
Independent Auditors
Deloitte &
Touche LLP
, Princeton Forrestal Village, 116-300 Village Boulevard, Princeton, New
Jersey 08540-6400, has been selected as the independent auditors of the
Corporation and the Trust. The independent auditors are responsible for
auditing the annual financial statements of the Funds.
Custodian
Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109 (the
Custodian), acts as the custodian of the Trusts assets.
Under its contract with the Trust, the Custodian is authorized to
establish separate accounts in foreign currencies and to cause foreign
securities owned by the Trust to be held in its offices outside the United
States and with certain foreign banks and securities depositories. The
custodian is responsible for safeguarding and controlling the Trusts
cash and securities, handling the receipt and delivery of securities and
collecting interest and dividends on the Funds
investments.
Transfer Agent
Financial Data
Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484, which is a wholly owned subsidiary of ML & Co., acts as
the Funds Transfer Agent pursuant to a transfer agency, dividend
disbursing agency and shareholder servicing agency agreement (the
Transfer Agency Agreement). The Transfer Agent is responsible
for the issuance, transfer and redemption of shares and the opening,
maintenance and servicing of shareholder accounts.
Legal Counsel
Brown &
Wood
LLP,
One World Trade Center, New York, New York 10048-0557, is counsel for the
Trust and the Corporation.
Reports to Shareholders
The fiscal year of
the Funds ends on October 31 of each year. The Funds send to their
shareholders at least semi-annually reports showing each Funds
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each
year. After the end of each year, shareholders will receive Federal income
tax information regarding dividends and capital gains
distributions.
Shareholder Inquiries
Shareholder
inquiries may be addressed to the Funds at the address or telephone number
set forth on the cover page of this Statement of Additional
Information.
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 Corporation has filed with the Commission,
Washington, D.C., under the Securities Act and the Investment Company Act,
to which reference is hereby made.
Under a separate
agreement, Mercury Asset Management International Ltd. and Mercury Asset
Management Group Ltd. (Mercury) has granted the Funds the
right to use the Mercury name and has reserved the right to
withdraw its consent to the use of such name by the Funds at any time or
to grant the use of such name to any other company, and the Funds have
granted Mercury under certain conditions, the use of any other name it
might assume in the future, with respect to any corporation organized by
Mercury.
INDEPENDENT AUDITORS REPORT
The Board of Directors and Shareholder,
Mercury Large Cap Series Funds, Inc.:
We have audited the accompanying statements of assets and
liabilities of Mercury Large Cap Growth Fund, Mercury Large Cap Value Fund
and Mercury Large Cap Core Fund of Mercury Large Cap Series Funds, Inc. as
of December 15, 1999. These financial statements are the responsibility of
the Funds management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities present
fairly, in all material respects, the financial position of Mercury Large
Cap Growth Fund, Mercury Large Cap Value Fund and Mercury Large Cap Core
Fund of Mercury Large Cap Series Funds, Inc. as of December 15, 1999 in
conformity with generally accepted accounting principles.
/S
/ DELOITTE &
TOUCHE LLP
Princeton, New Jersey
December 20, 1999
STATEMENT OF ASSETS AND LIABILITIES
Mercury Large Cap Growth Fund
of
Mercury Large Cap Series Funds, Inc.
Statement of Assets and Liabilities
December 15, 1999
ASSETS: |
|
|
Investments in Master Large Cap
Growth Portfolio |
|
$500,000 |
Prepaid registration fees and
offering costs (Note 3) |
|
158,442 |
|
|
|
Total assets |
|
658,442 |
|
|
|
|
|
LIABILITIES: |
|
|
Liabilities and accrued
expenses |
|
158,442 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
|
|
NET ASSETS CONSIST
OF: |
|
|
Class I Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
$
1,250 |
Class A Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
1,250 |
Class B Shares of Common
Stock, $.10 par value, 200,000,000 shares authorized |
|
1,250 |
Class C Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
1,250 |
Paid-in Capital in excess of
par |
|
495,000 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
|
|
NET ASSET
VALUE: |
|
|
Class I- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class A- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class B- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class C- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Notes to Financial Statement.
(1)
|
Mercury
Large Cap Series Funds, Inc. (the Corporation) was
organized as a Maryland corporation on October 29, 1999 and is
registered under the Investment Company Act of 1940 as an open-end
diversified investment company. Mercury Large Cap Growth Fund (the
Fund) is a series of the Corporation. To date, the Fund
has not had any transactions other than those relating to
organizational matters and the sale of 12,500 Class I shares, 12,500
Class A shares, 12,500 Class B shares and 12,500 Class C shares of
Common Stock to Fund Asset Management, L.P. (FAM). The
Fund invests all of its assets in the Master Large Cap Growth
Portfolio (the Portfolio) of the Master Large Cap Series
Trust (the Trust).
|
(2)
|
The Trust,
on behalf of the Portfolio, has entered into an investment advisory
agreement with FAM (the Investment Adviser) and
distribution agreements with Mercury Funds Distributor (the
Distributor), a division of Princeton Funds Distributor,
Inc. (See Management of the FundsManagement and Advisory
Arrangements in the Statement of Additional Information.)
Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Adviser and the Distributor.
|
(3)
|
Prepaid
registration fees are charged to income as the related shares are
issued. Prepaid offering costs consist of legal and printing fees
relating to preparing the initial registration statement, and will be
amortized over a 12 month period beginning with the commencement of
operations of the Fund. The Investment Adviser, on behalf of the
Fund, will incur organization costs estimated at $10,000.
|
Mercury Large Cap Value Fund
of
Mercury Large Cap Series Funds, Inc.
Statement of Assets and Liabilities
December 15, 1999
ASSETS: |
|
|
Investments in Master Large
Cap Value Portfolio |
|
$500,000 |
Prepaid registration fees
and offering costs (Note 3) |
|
158,442 |
|
|
|
Total assets |
|
658,442 |
|
|
|
LIABILITIES: |
|
|
Liabilities and accrued
expenses |
|
158,442 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
|
NET ASSETS CONSIST
OF: |
|
|
Class I Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
$
1,250 |
Class A Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
1,250 |
Class B Shares of Common
Stock, $.10 par value, 200,000,000 shares authorized |
|
1,250 |
Class C Shares of Common
Stock, $.10 par value, 100,000,000 shares authorized |
|
1,250 |
Paid-in Capital in excess
of par |
|
495,000 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
|
NET ASSET
VALUE: |
|
|
Class I- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class A- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class B- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class C- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Notes to Financial Statement.
(1)
|
Mercury
Large Cap Series Funds, Inc. (the Corporation) was
organized as a Maryland corporation on October 29, 1999 and is
registered under the Investment Company Act of 1940 as an open-end
diversified investment company. Mercury Large Cap Value Fund (the
Fund) is a series of the Corporation. To date, the Fund
has not had any transactions other than those relating to
organizational matters and the sale of 12,500 Class I shares, 12,500
Class A shares, 12,500 Class B shares and 12,500 Class C shares of
Common Stock to Fund Asset Management, L.P. (FAM). The
Fund invests all of its assets in the Master Large Cap Value
Portfolio (the Portfolio) of the Master Large Cap Series
Trust (the Trust).
|
(2)
|
The Trust,
on behalf of the Portfolio, has entered into an investment advisory
agreement with FAM (the Investment Adviser) and
distribution agreements with Mercury Funds Distributor (the
Distributor), a division of Princeton Funds Distributor,
Inc. (See Management of the FundsManagement and Advisory
Arrangements in the Statement of Additional Information.)
Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Adviser and the Distributor.
|
(3)
|
Prepaid
registration fees are charged to income as the related shares are
issued. Prepaid offering costs consist of legal and printing fees
related to preparing the initial registration statement, and will be
amortized over a 12 month period beginning with the commencement of
operations of the Fund. The Investment Adviser, on behalf of the
Fund, will incur organization costs estimated at $10,000.
|
Mercury Large Cap Core Fund
of
Mercury Large Cap Series Funds, Inc.
Statement of Assets and Liabilities
December 15, 1999
ASSETS: |
|
|
Investments in Master Large Cap Core Portfolio |
|
$500,000 |
Prepaid registration fees and offering costs (Note
3) |
|
158,442 |
|
|
|
Total assets |
|
658,442 |
|
|
|
LIABILITIES: |
|
|
Liabilities and accrued expenses |
|
158,442 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
NET ASSETS CONSIST
OF: |
|
|
Class I Shares of Common Stock, $.10 par value,
100,000,000 shares authorized |
|
$
1,250 |
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized |
|
1,250 |
Class B Shares of Common Stock, $.10 par value,
200,000,000 shares authorized |
|
1,250 |
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized |
|
1,250 |
Paid-in Capital in excess of par |
|
495,000 |
|
|
|
NET
ASSETS: |
|
$500,000 |
|
|
|
NET ASSET
VALUE: |
|
|
Class I- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class A- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class B- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Class C- Based on net
assets of $125,000 and 12,500 shares outstanding |
|
$
10.00 |
|
|
|
Notes to Financial Statement.
(1)
|
Mercury
Large Cap Series Funds, Inc. (the Corporation) was
organized as a Maryland corporation on October 29, 1999 and is
registered under the Investment Company Act of 1940 as an open-end
diversified investment company. Mercury Large Cap Core Fund (the
Fund) is a series of the Corporation. To date, the Fund
has not had any transactions other than those relating to
organizational matters and the sale of 12,500 Class I shares, 12,500
Class A shares, 12,500 Class B shares and 12,500 Class C shares of
Common Stock to Fund Asset Management, L.P. (FAM). The
Fund invests all of its assets in the Master Large Cap Core Portfolio
(the Portfolio) of the Master Large Cap Series Trust (the
Trust).
|
(2)
|
The Trust,
on behalf of the Portfolio, has entered into an investment advisory
agreement with FAM (the Investment Adviser) and
distribution agreements with Mercury Funds Distributor (the
Distributor), a division of Princeton Funds Distributor,
Inc. (See Management of the FundsManagement and Advisory
Arrangements in the Statement of Additional Information.)
Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Adviser and the Distributor.
|
(3)
|
Prepaid
registration fees are charged to income as the related shares are
issued. Prepaid offering costs consist of legal and printing fees
related to preparing the initial registration statement, and will be
amortized over a 12 month period beginning with the commencement of
operations of the Fund. The Investment Adviser, on behalf of the
Fund, will incur organization costs estimated at $10,000.
|
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CODE #: 19079-1299
PART C. OTHER INFORMATION
Item 23.
Exhibits.
Exhibit
Number
|
1 |
|
Articles of Incorporation
of the Registrant, filed October 29, 1999.(a) |
2 |
|
By-Laws of the
Registrant.(a) |
3(a) |
|
Portions of the
Articles of Incorporation and By-Laws of the Registrant defining the
rights of
holders of shares of common stock of the Registrant.(b) |
4 |
|
Not
Applicable. |
5(a) |
|
Form of Class I
Distribution Agreement between the Registrant and Princeton Funds
Distributor,
Inc. (the Distributor) (including Form of Selected Dealers
Agreement). |
(b) |
|
Form of Class A
Distribution Agreement between the Registrant and the
Distributor. |
(c) |
|
Form of Class B
Distribution Agreement between the Registrant and the
Distributor. |
(d) |
|
Form of Class C
Distribution Agreement between the Registrant and the
Distributor. |
6 |
|
None. |
7 |
|
Form of Custody Agreement
between the Registrant and Brown Brothers Harriman &
Co. |
8(a) |
|
Form of Transfer
Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement between the Registrant and Financial Data Services,
Inc. |
(b) |
|
Form of License
Agreement relating to use of name among Mercury Asset Management
International Ltd., Mercury Asset Management Group Ltd. and the
Registrant. |
9 |
|
Opinion of Brown &
Wood LLP, counsel for the Registrant. |
10 |
|
Consent of Deloitte &
Touche LLP, independent auditors for the Registrant. |
11 |
|
None. |
12 |
|
Certificate of Fund Asset
Management, L.P. |
13(a) |
|
Form of Class A
Distribution Plan of the Registrant and Class A Distribution Plan
Sub-Agreement. |
(b) |
|
Form of Class B
Distribution Plan of the Registrant and Class B Distribution Plan
Sub-Agreement. |
(c) |
|
Form of Class C
Distribution Plan of the Registrant and Class C Distribution Plan
Sub-Agreement. |
14 |
|
None. |
15 |
|
Rule 18f-3
Plan. |
(a)
|
Filed on
November 18, 1999 as an Exhibit to the Registrants Registration
Statement on Form N-1A under the Securities Act of 1933, as amended
(File No. 333-91227) (the Registration Statement
).
|
(b)
|
Reference is
made to Article II, Article IV, Article V (sections 2, 3, 4, 6, 7 and
8), Article VI, Article VII and Article IX of the Registrants
Articles of Incorporation, filed as Exhibit (1), to the Registration
Statement, and to Article II, Article III (sections 1, 3, 5, 6 and
17), Article VI, Article VII, Article XII, Article XIII and Article
XIV of the Registrants By-Laws filed as Exhibit (2) to the
Registration Statement.
|
Item 24. Persons Controlled By Or
Under Common Control With Registrant.
Master Large Cap
Series Trust has sold interests of its three series, Master Large Cap
Growth Portfolio, Master Large Cap Value Portfolio and Master Large Cap
Core Portfolio, to the Registrant. Therefore, the Master Large Cap
Growth Portfolio, Master Large Cap Value Portfolio and Master Large Cap
Core Portfolio of Master Large Cap Series Trust are controlled by the
Registrant.
Item 25.
Indemnification.
Reference is
made to Article VI of the Registrants Articles of Incorporation,
Article VI of the Registrants By-Laws, Section 2-418 of the
Maryland General Corporation Law and Section 9 of the Class I, Class A,
Class B and Class C Distribution Agreements.
Insofar as the
conditional advancing of indemnification moneys for actions based on
the Investment Company Act of 1940, as amended (the 1940 Act
) may be concerned, Article VI of the Registrants By-Laws
provides that such payments will be made only on the following
conditions: (i) advances may be made only on receipt of a written
affirmation of such persons good faith belief that the standard
of conduct necessary for indemnification
has been met and a written undertaking to repay any such advance if it is
ultimately determined that the standard of conduct has not been met;
and (ii) (a) such promise must be secured by a security for the
undertaking in form and amount acceptable to the Registrant, (b) the
Registrant is insured against losses arising by receipt by the advance,
or (c) a majority of a quorum of the Registrants disinterested
non-party Directors, or an independent legal counsel in a written
opinion, shall determine, based upon a review of readily available
facts, that at the time the advance is proposed to be made, there is
reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
In Section 9 of
the Class I, Class A, Class B and Class C Shares Distribution
Agreements relating to the securities being offered hereby, the
Registrant agrees to indemnify the Distributor and each person, if any,
who controls the Distributor within the meaning of the Securities Act
of 1933, as amended (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 The Investment Adviser.
Fund Asset
Management, L.P. (the Investment Adviser or FAM
) 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.
Merrill Lynch
Asset Management, L.P. (MLAM), acts as the investment
adviser for the following open-end registered investment companies:
Master Global Financial Services Trust, 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 Euro Fund,
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 Small Cap Fund, Inc., Merrill Lynch Global Technology
Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch
Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch
Healthcare Fund, Inc., Merrill Lynch Index Funds, Inc., Merrill Lynch
Intermediate Government Bond Fund, Merrill Lynch International Equity
Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle
East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill
Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Real Estate Fund, Inc., Merrill Lynch Retirement Series Trust,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income
Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch U.S.
Treasury Money Fund, Merrill Lynch U.S.A. Government Reserves, Merrill
Lynch Utility Income Fund, Inc. and Merrill Lynch Variable Series
Funds, Inc. and Hotchkis and Wiley funds (advised by Hotchkis and
Wiley, a division of MLAM); and for the following closed-end registered
investment companies: Merrill Lynch High Income Municipal Bond Fund,
Inc. and 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.
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 FAM, MLAM, 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), of Mercury Funds Distributor (
MFD) 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 Merrill Lynch & Co., Inc. (ML
& Co.) is World Financial Center, North Tower, 250 Vesey
Street, New York, New York 10281-1201. The address of the Funds
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 Investment
Adviser indicating each business, profession, vocation or employment of
a substantial nature in which each such person or entity has been
engaged since June 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 and Mr. Burke is Vice President and Treasurer of all
or substantially all of the investment companies described in the first
two paragraphs of this Item 26, and Messrs. Doll, Giordano and Monagle
are officers of one or more of such companies.
Name
|
|
Position(s) with
the
Investment Adviser
|
|
Other Substantial
Business,
Profession, Vocation or Employment
|
ML &
Co |
|
Limited Partner |
|
Financial Services Holding Company;
Limited
Partner of MLAM |
|
|
Princeton
Services |
|
General Partner |
|
General Partner of MLAM |
|
|
Jeffrey M.
Peek |
|
President |
|
President of MLAM; 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 MLAM;
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 MLAM; 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 and
Treasurer |
|
Senior Vice President, Treasurer and
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 |
|
|
Michael G.
Clark |
|
Senior Vice President |
|
Senior Vice President of MLAM; Senior
Vice
President of Princeton Services; Treasurer and
Director of PFD; First Vice President of
MLAM from 1997 to 1999; Vice President of
MLAM from 1996 to 1997 |
|
|
Robert C.
Doll |
|
Senior Vice President |
|
Senior Vice President of MLAM; 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 MLAM; Senior
Vice
President of Princeton Services |
|
|
Vincent R.
Giordano |
|
Senior Vice President |
|
Senior Vice President of MLAM; Senior
Vice
President of Princeton Services |
|
|
Michael J.
Hennewinkel |
|
Senior Vice President, Secretary
and General Counsel |
|
Senior Vice President, Secretary and
General
Counsel of MLAM; Senior Counsel Vice
President of Princeton Services |
|
Name
|
|
Position(s) with
the
Investment Adviser
|
|
Other Substantial
Business,
Profession, Vocation or Employment
|
Philip L.
Kirstein |
|
Senior Vice President |
|
Senior Vice President of MLAM; Senior
Vice
President, Secretary, General Counsel and
Director of Princeton Services |
|
|
Debra W.
Landsman-Yaros |
|
Senior Vice President |
|
Senior Vice President of MLAM; 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 MLAM; Senior
Vice
President of Princeton Services |
|
|
Brian A.
Murdock |
|
Senior Vice President |
|
Senior Vice President of MLAM; Senior
Vice
President of Princeton Services |
|
|
Gregory D.
Upah |
|
Senior Vice President |
|
Senior Vice President of MLAM; Senior
Vice
President of Princeton Services |
Item 27. Principal
Underwriters.
(a)
MFD, a division of PFD, acts as the principal underwriter for the
Registrant and for each of the following open-end investment companies:
Mercury Global Balanced Fund of Mercury Asset Management Funds, Inc.;
Mercury Gold and Mining Fund of Mercury Asset Management Funds, Inc.;
Mercury International Fund of Mercury Asset Management Funds, Inc.;
Mercury U.S. Large Cap Fund of Mercury Asset Management Funds, Inc.;
Mercury U.S. Small Cap Growth Fund of Mercury Asset Management Funds,
Inc.; Mercury Pan-European Growth Fund of Mercury Asset Management
Funds, Inc.; Summit Cash Reserves Fund of Financial Institutions Series
Trust; Mercury V.I. U.S. Large Cap Fund of Mercury Asset Management
V.I. Funds, Inc. A separate division of PFD acts as the principal
underwriter 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 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 Funds in the
Prospectus constituting Part A of the Registration Statement and under
Management of the FundManagement 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 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 21st day of December,
1999.
|
MERCURY
LARGE
CAP
SERIES
FUNDS
, INC
.
|
|
(Donald
C. Burke, Vice President and Treasurer)
|
Each person
whose signature appears below hereby authorizes Terry K. Glenn, Donald
C. Burke, or Robert C. Doll, Jr., or any of them, as attorney-in-fact,
to sign on his or her behalf, individually and in each capacity stated
below, any amendments to the Registration Statement (including
post-effective amendments) and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission. Pursuant to the
requirements of the Securities Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
/S
/ TERRY
K. GLENN
(Terry K. Glenn) |
|
President and Director
(Principal Executive Officer) |
|
December 21, 1999 |
|
|
/S
/ DONALD
C. BURKE
(Donald C. Burke) |
|
Vice President and Treasurer
(Principal Financial and
Accounting Officer) |
|
December 21, 1999 |
|
|
/S
/ JAMES
H. BODURTHA
(James H. Bodurtha) |
|
Director |
|
December 21, 1999 |
|
|
/S
/ HERBERT
I. LONDON
(Herbert I. London) |
|
Director |
|
December 21,
1999 |
|
|
/S
/ JOSEPH
L. MAY
(Joseph L. May) |
|
Director |
|
December 21,
1999 |
|
|
(André F. Perold) |
|
Director |
|
|
|
|
/S
/ ROBERTA
C. RAMO
(Roberta C. Ramo) |
|
Director |
|
December 21,
1999 |
|
|
/S
/ ARTHUR
ZEIKEL
(Arthur Zeikel) |
|
Director |
|
December 21,
1999 |
Master Large Cap Series Trust has duly caused this
Registration Statement of Mercury Large Cap Series Funds, Inc.
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Plainsboro, and State of New
Jersey, on the 21st day of December, 1999.
|
MASTER
LARGE
CAP
SERIES
TRUST
|
|
(Terry K. Glenn, President and
Trustee)
|
Each person whose signature appears below hereby
authorizes Terry K. Glenn, Donald C. Burke, or Robert C. Doll,
Jr., or any of them, as attorney-in-fact, to sign on his or her
behalf, individually and in each capacity stated below, any
amendments to the Registration Statement (including
post-effective amendments). This Registration Statement of
Mercury Large Cap Series Funds, Inc. has been signed by the
following persons in the capacities and on the dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
/S
/ TERRY
K. GLENN
(Terry K. Glenn) |
|
President and
Trustee
(Principal Executive Officer) |
|
December 21,
1999 |
|
|
/S
/ DONALD
C. BURKE
(Donald C. Burke) |
|
Vice President
and Treasurer
(Principal Financial and
Accounting Officer) |
|
December 21,
1999 |
|
|
/S
/ JAMES
H. BODURTHA
(James H. Bodurtha) |
|
Trustee |
|
December 21,
1999 |
|
|
/S
/ HERBERT
I. LONDON
(Herbert I. London) |
|
Trustee |
|
December 21,
1999 |
|
|
/S
/ JOSEPH
L. MAY
(Joseph L. May) |
|
Trustee |
|
December 21,
1999 |
|
|
(André F. Perold) |
|
Trustee |
|
|
|
|
/S
/ ROBERTA
C. RAMO
(Roberta C. Ramo) |
|
Trustee |
|
December 21,
1999 |
|
|
/S
/ ARTHUR
ZEIKEL
(Arthur Zeikel) |
|
Trustee |
|
December 21,
1999 |
EXHIBIT INDEX
Exhibit
Number
|
|
Description
|
5(a) |
|
Form of Class
I Distribution Agreement between the Registrant and Princeton
Funds Distributors, Inc.
(the Distributor) (Including Form of Selected Dealer
Agreement). |
(b) |
|
Form of Class
A Distribution Agreement between the Registrant and the
Distributor. |
(c) |
|
Form of Class
B Distribution Agreement between the Registrant and the
Distributor. |
(d) |
|
Form of Class
C Distribution Agreement between the Registrant and the
Distributor. |
7 |
|
Form of
Custody Agreement between the Registrant and Brown Brothers
Harriman & Co. |
8(a) |
|
Form of
Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement
between the Registrant and Financial Data Services,
Inc. |
(b) |
|
Form of
License Agreement relating to use of name among Mercury Asset
Management International
Ltd., Mercury Asset Management Group Ltd. and the
Registrant. |
9 |
|
Opinion of
Brown & Wood LLP
, counsel for the Registrant. |
10 |
|
Consent of
Deloitte & Touche LLP
, independent auditors for the Registrant. |
12 |
|
Certificate of
Fund Asset Management, L.P. |
13(a) |
|
Form of Class
A Distribution Plan of the Registrant and Class A Distribution
Plan Sub-Agreement. |
(b) |
|
Form of Class
B Distribution Plan of the Registrant and Class B Distribution
Plan Sub-Agreement. |
(c) |
|
Form of Class
C Distribution Plan of the Registrant and Class C Distribution
Plan Sub-Agreement. |
15 |
|
Rule 18f-3
Plan. |