<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 21, 1999
SECURITIES ACT FILE NO. 333-89781
INVESTMENT COMPANY ACT FILE NO. 811-09653
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
(Check appropriate box or boxes)
------------------------
MERRILL LYNCH
PREMIER GROWTH FUND, INC.*
(Exact Name of Registrant as Specified in Charter)
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (888) 637-3863
TERRY K. GLENN
MERRILL LYNCH PREMIER GROWTH FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(Name and Address of Agent for Service)
Copies to:
<TABLE>
<S> <C>
Counsel for the Fund:
Frank P. Bruno, Esq. Michael J. Hennewinkel, Esq.
BROWN & WOOD LLP FUND ASSET MANAGEMENT, L.P.
One World Trade Center P.O. Box 9011
New York, New York 10048 Princeton, New Jersey 08543-9011
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
------------------------
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 Premier Growth Trust+ has also executed this Registration Statement.
* Formerly, Merrill Lynch Capital Growth Fund, Inc.
+ Formerly, Master Capital Growth Trust.
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<PAGE> 2
Prospectus
[MERRILL LYNCH LOGO]
Merrill Lynch Premier Growth Fund, Inc.
December 21, 1999
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.
<PAGE> 3
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
[KEY FACTS ICON]
KEY FACTS
- -----------------------------------------------------------------
Merrill Lynch Premier Growth Fund, Inc. at a Glance......... 3
Risk/Return Bar Chart....................................... 4
Fees and Expenses........................................... 5
[DETAILS ABOUT THE FUND ICON]
DETAILS ABOUT THE FUND
- -----------------------------------------------------------------
How the Fund Invests........................................ 7
Investment Risks............................................ 8
About the Portfolio Manager................................. 12
[YOUR ACCOUNT ICON]
YOUR ACCOUNT
- -----------------------------------------------------------------
Merrill Lynch Select Pricing(SM) System..................... 15
How to Buy, Sell, Transfer and Exchange Shares.............. 22
How Shares are Priced....................................... 26
Dividends and Taxes......................................... 26
[MANAGEMENT OF THE FUND ICON]
MANAGEMENT OF THE FUND
- -----------------------------------------------------------------
Fund Asset Management....................................... 28
Master/Feeder Structure..................................... 29
[FOR MORE INFORMATION ICON]
FOR MORE INFORMATION
- -----------------------------------------------------------------
Shareholder Reports....................................Back Cover
Statement of Additional Information....................Back Cover
</TABLE>
MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 4
Key Facts [KEY FACTS ICON]
IN AN EFFORT TO HELP YOU BETTER UNDERSTAND THE MANY CONCEPTS INVOLVED IN MAKING
AN INVESTMENT DECISION, WE HAVE DEFINED THE HIGHLIGHTED TERMS IN THIS PROSPECTUS
IN THE SIDEBAR.
COMMON STOCK -- units of ownership of a corporation.
PREFERRED STOCK -- class of capital stock that often pays dividends at a
specified rate and has preference over common stock in dividend payments and
liquidation of assets.
CONVERTIBLE SECURITIES -- corporate securities (usually preferred stock or
bonds) that are exchangeable for a fixed number of other securities (usually
common stock) at a set price or formula.
WARRANTS -- a security that gives the right to buy a quantity of stock.
MERRILL LYNCH PREMIER GROWTH FUND, INC. AT A GLANCE
- --------------------------------------------------------------------------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to seek long-term capital appreciation.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in COMMON STOCKS of companies that Fund management
believes have strong earnings growth and capital appreciation potential. To a
lesser extent, the Fund also may invest in PREFERRED STOCK, CONVERTIBLE
SECURITIES, WARRANTS and rights to subscribe to common stock of these companies.
We cannot guarantee that the Fund will achieve its investment objective.
Fund management focuses primarily on earnings growth in determining which
securities to buy and when to sell them for the Fund. The Fund may invest in
companies having medium ($1 billion to $5 billion) or large (greater than $5
billion) stock market capitalizations. Normally, Fund management will emphasize
common stocks of companies with large stock market capitalizations.
The Fund is a "feeder" fund that invests all of its assets in a "master"
portfolio, the Master Premier Growth Trust (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. The
Fund's investment results will correspond directly to the investment results of
the Trust. For simplicity, this Prospectus uses the term "Fund" to include the
Trust.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
As with any mutual fund, the value of the Fund's investments -- and therefore
the value of your Fund shares -- may 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. The Fund
is also subject to the risk that the stocks that Fund management selects will
underperform the stock markets, the relevant indices or other funds with similar
investment objectives and investment strategies. If the value of the Fund's
investments goes down, you may lose money.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 3
<PAGE> 5
[KEY FACTS ICON] Key Facts
WHO SHOULD INVEST?
The Fund may be an appropriate investment for you if you:
- Are investing with long-term goals in mind, such as retirement
or funding a child's education.
- Want a professionally managed and diversified portfolio.
- Are willing to accept the risk that the value of your investment
may decline in order to seek long-term capital appreciation.
- Are not looking for a significant amount of current income.
- Are prepared to receive taxable distributions.
RISK/RETURN BAR CHART
- --------------------------------------------------------------------------------
This Prospectus does not include a Risk/Return Bar Chart because as of the date
of this Prospectus the Fund has not yet commenced operations.
4 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 6
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 include sales charges which you may pay when you buy
or sell shares of the Fund.
EXPENSES PAID INDIRECTLY BY THE SHAREHOLDER:
ANNUAL FUND OPERATING EXPENSES -- expenses that cover the costs of operating the
Fund.
MANAGEMENT FEE -- a fee paid to the Manager for managing the Fund.
DISTRIBUTION FEES -- fees used to support the Fund's marketing and distribution
efforts, such as compensating Financial Consultants, advertising and promotion.
SERVICE (ACCOUNT MAINTENANCE) FEES -- fees used to compensate securities dealers
for account maintenance activities.
FEES AND EXPENSES
- --------------------------------------------------------------------------------
The Fund offers four different classes of shares. Although your money will be
invested the same way no matter which class of shares you buy, there are
differences among the fees and expenses associated with each class. Not everyone
is eligible to buy every class. After determining which classes you are eligible
to buy, decide which class best suits your needs. Your Merrill Lynch Financial
Consultant can help you with this decision.
This table shows the different fees and expenses that you may pay if you buy and
hold the different classes of shares of the Fund. Future expenses may be greater
or less than those indicated below.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM
YOUR INVESTMENT)(a): CLASS A CLASS B(b) CLASS C CLASS D
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of offering price) 5.25%(c) None None 5.25%(c)
- -----------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) None(d) 4.00%(c) 1.00%(c) None(d)
- -----------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed on Dividend
Reinvestments
- -----------------------------------------------------------------------------------------------
Redemption Fee None None None None
- -----------------------------------------------------------------------------------------------
Exchange Fee None None None None
- -----------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM THE FUND'S TOTAL ASSETS)(e):
- -----------------------------------------------------------------------------------------------
Management Fee(f) 0.75% 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees(g) None 1.00% 1.00% 0.25%
- -----------------------------------------------------------------------------------------------
Other Expenses (including transfer agency
fees)(h) 0.53% 0.53% 0.53% 0.53%
- -----------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.28% 2.28% 2.28% 1.53%
- -----------------------------------------------------------------------------------------------
</TABLE>
(a) In addition, Merrill Lynch may charge clients a processing fee (currently
$5.35) when a client buys or redeems shares.
(b) Class B shares automatically convert to Class D shares about 8 years after
you buy them and will no longer be subject to distribution fees.
(c) Some investors may qualify for reductions in the sales charge (load).
(d) You may pay a deferred sales charge if you purchase $1 million or more and
you redeem within one year.
(e) The fees and expenses include the expenses of the Fund and the Trust.
(f) Paid by the Trust. The Manager or its affiliates provides accounting
services to the Trust at its cost.
(g) The Fund calls the Service Fee an "Account Maintenance Fee." Account
Maintenance Fee is the term used elsewhere in this Prospectus and in all
other Fund materials. If you hold Class B or Class C shares for a long time,
it may cost you more in distribution (12b-1) fees than the maximum sales
charge that you would have paid if you had bought one of the other classes.
(h) The Fund pays the Transfer Agent $11.00 for each Class A and Class D
shareholder account and $14.00 for each Class B and Class C shareholder
account and reimburses the Transfer Agent's out-of-pocket expenses. The Fund
also pays a $0.20 monthly closed account charge, which is assessed upon all
accounts that close during the year. This fee begins the month following the
month the account is closed and ends at the end of the calendar year.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 5
<PAGE> 7
[KEY FACTS ICON] Key Facts
EXAMPLES:
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
These examples assume that you invest $10,000 in the Fund for the time periods
indicated, that your investment has a 5% return each year, that you pay the
sales charges, if any, that apply to the particular class and that the Fund's
operating expenses remain the same. This assumption is not meant to indicate you
will receive a 5% annual rate of return. Your annual return may be more or less
than the 5% used in these examples. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be:
EXPENSES IF YOU DID REDEEM YOUR SHARES:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ----------------------------------------
<S> <C> <C>
Class A $648 $910
- ----------------------------------------
Class B $631 $912
- ----------------------------------------
Class C $331 $712
- ----------------------------------------
Class D $672 $983
- ----------------------------------------
</TABLE>
EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ----------------------------------------
<S> <C> <C>
Class A $648 $910
- ----------------------------------------
Class B $231 $712
- ----------------------------------------
Class C $231 $712
- ----------------------------------------
Class D $672 $983
- ----------------------------------------
</TABLE>
6 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 8
DETAILS ABOUT THE FUND[DETAILS ABOUT THE FUND ICON]
ABOUT THE PORTFOLIO MANAGER
James D. McCall is a Senior Vice President and the Portfolio Manager of the
Fund. Mr. McCall has been a First Vice President of Merrill Lynch Asset
Management since November 1999. Prior to joining Merrill Lynch Asset Management,
Mr. McCall was a portfolio manager for the PBHG family of mutual funds from 1994
to 1999.
ABOUT THE MANAGER
The Fund is managed by Fund Asset Management.
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------
The Fund's investment objective is to seek long-term capital appreciation. The
Fund tries to achieve its investment objective by investing primarily in common
stocks of companies that Fund management believes have strong earnings growth
and capital appreciation potential. Fund management begins its investment
process by creating a universe of rapidly growing companies that possess certain
growth characteristics. That universe is continually updated. Fund management
then ranks each company within its universe by using research models that focus
on growth characteristics such as positive earnings surprises, upward earnings
estimate revisions, and accelerating sales and earnings growth. Finally, using
its own fundamental research and a bottom-up approach to investing, Fund
management evaluates the quality of each company's earnings and tries to
determine whether the company can sustain or increase its current growth trend.
Fund management believes that this disciplined investment process enables it to
construct a portfolio of investments with strong growth characteristics.
Although the Fund emphasizes investment in common stocks, it may also invest in
other equity securities including, but not limited to, the following:
- Securities convertible into common stock
- Preferred stock
- Rights and warrants to subscribe to common stock
The Fund generally will invest at least 65% of its total assets in equity
securities. The Fund may invest in companies having medium ($1 billion to $5
billion) or large (greater than $5 billion) stock market capitalizations.
Normally, Fund management will emphasize companies with large stock market
capitalizations.
The Fund may invest without limitation in the securities of foreign companies in
the form of American Depositary Receipts ("ADRs"). In addition, the Fund may
invest up to 10% of its total assets in other forms of securities of foreign
companies, including European Depositary Receipts ("EDRs") or other securities
convertible into securities of foreign companies.
The Fund may also lend its portfolio securities.
The Fund may invest in investment grade, non-convertible debt securities and
U.S. Government securities of any maturity although it typically will not do so
to a significant extent. The Fund may invest in excess of 35% of its total
assets in cash or U.S. dollar-denominated high quality short-term debt
MERRILL LYNCH PREMIER GROWTH FUND, INC. 7
<PAGE> 9
[DETAILS ABOUT THE FUND ICON] Details About the Fund
instruments for temporary defensive purposes, to maintain liquidity or when
economic or market conditions are unfavorable for profitable investing.
Normally, a portion of the Fund's assets will be held in these short-term
instruments in anticipation of investment in equities or to meet redemptions.
These types of investments typically have a lower yield than other longer-term
investments and lack the capital appreciation potential of equity securities. In
addition, while these investments are generally designed to limit the Fund's
losses, they can prevent the Fund from achieving its investment objective.
INVESTMENT RISKS
- --------------------------------------------------------------------------------
This section contains a summary discussion of the general risks of investing in
the Fund. As with any mutual fund, there can be no guarantee that the Fund will
meet its objectives, or that the Fund's performance will be positive over any
period of time.
MARKET RISK AND SELECTION RISK -- As an equity fund, the Fund's principal risks
are market risk and selection risk. Market risk is the risk that the U.S. or
foreign equity markets will go down in value, including the possibility that the
U.S. or foreign equity markets will go down sharply and unpredictably. In
particular, the equity securities purchased by the Fund may be particularly
sensitive to changes in earnings or interest rate increases because they
typically have higher price-earnings ratios. Selection risk is the risk that the
stocks that Fund management selects will underperform the markets or other funds
with similar investment objectives and investment strategies.
The Fund also may be subject to risks associated with the following investment
strategies.
CONVERTIBLES -- Convertibles are generally debt securities or preferred stocks
that may be converted into common stock. Convertibles typically pay current
income as either interest (debt security convertibles) or dividends (preferred
stocks). A convertible's value usually reflects both the stream of current
income payments and the value of the underlying common stock. The market value
of a convertible performs like a regular debt security, that is, if market
interest rates rise, the value of a convertible usually falls. Since it is
convertible into common stock, the convertible also has the same types of market
and issuer risk as the underlying common stock.
8 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 10
WARRANTS -- A warrant gives the Fund the right to buy a quantity of stock. The
warrant specifies the amount of underlying stock, the purchase (or "exercise")
price, and the date the warrant expires. The Fund has no obligation to exercise
the warrant and buy the stock.
A warrant has value only if the Fund exercises it before it expires. If the
price of the underlying stock does not rise above the exercise price before the
warrant expires, the warrant generally expires without any value and the Fund
loses any amount it paid for the warrant. Thus, investments in warrants may
involve substantially more risk than investments in common stock. Warrants may
trade in the same markets as their underlying stock; however, the price of the
warrant does not necessarily move with the price of the underlying stock.
FOREIGN MARKET RISK -- Since the Fund may invest in foreign securities, they
offer the potential for more diversification than an investment only in the
United States. This is because stocks traded on foreign markets have often
(though not always) performed differently than stocks in the United States. Such
investments, however, involve special risks not present in U.S. investments that
can increase the chances that the Fund will lose money. For example, investments
in foreign markets may be adversely affected by governmental actions such as the
imposition of capital controls, nationalization of companies or industries,
expropriation of assets, diplomatic developments, the imposition of economic
sanctions, changes in international trading patterns, trade barriers, and other
protectionist or retaliatory measures. The governments of certain countries may
prohibit or impose substantial restrictions on foreign investing in their
capital markets or in certain industries. Other foreign market risks include
foreign exchange controls, difficulties in pricing securities, defaults on
foreign government securities, difficulties in enforcing favorable legal
judgments in foreign courts and political and social instability. Legal remedies
available to investors in some foreign countries may be less extensive than
those available to investors in the United States. Foreign markets may have
different clearance and settlement procedures, which may delay settlement of
transactions involving foreign securities. The Fund may miss investment
opportunities or be unable to sell an investment because of these delays. The
risks of investing in foreign securities are generally greater for investments
in emerging markets.
DEPOSITARY RECEIPTS -- The Fund may invest in securities of foreign issuers in
the form of Depositary Receipts. American Depositary Receipts are receipts
typically issued by an American bank or trust company that show evidence
MERRILL LYNCH PREMIER GROWTH FUND, INC. 9
<PAGE> 11
[DETAILS ABOUT THE FUND ICON] Details About the Fund
of underlying securities issued by a foreign corporation. European Depositary
Receipts evidence a similar ownership arrangement. The Fund may also invest in
unsponsored Depositary Receipts. The issuers of such unsponsored Depositary
Receipts are not obligated to disclose material information in the United
States, and therefore, there may be less information available regarding such
issuers.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of its net assets in
illiquid securities that it cannot easily resell within seven days at current
value or that have contractual or legal restrictions on resale. If the Fund buys
illiquid securities it may be unable to quickly resell them or may be able to
sell them only at a price below current value.
RESTRICTED SECURITIES -- Restricted securities have contractual or legal
restrictions on their resale. They may include private placement securities that
the Fund buys directly from the issuer. Private placement and other restricted
securities may not be listed on an exchange and may have no active trading
market.
Restricted securities may be illiquid. The Fund may be unable to sell them on
short notice or may be able to sell them only at a price below current value.
The Fund may get only limited information about the issuer, so they may be less
able to predict a loss. In addition, if Fund management receives material
adverse nonpublic information about the issuer, the Fund will not be able to
sell the security.
RULE 144A SECURITIES -- Rule 144A securities are restricted securities that can
be resold to qualified institutional buyers but not to the general public. Rule
144A securities may have an active trading market, but carry the risk that the
active trading market may not continue.
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 issuer's financial condition
and on the terms of the bonds. These securities are also 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.
SECURITIES LENDING -- Securities lending involves the risk that the borrower to
which the Fund has loaned its securities may not return the securities in a
10 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 12
timely manner or at all. As a result, the Fund might suffer costs and delay in
recovering the securities it loaned. In addition, if the Fund does not get the
securities it loaned back and the value of the collateral the Fund received in
return for the loaned securities falls, the Fund could lose money.
REPURCHASE AGREEMENTS; PURCHASE AND SALE CONTRACTS -- The Fund may enter into
certain types of repurchase agreements or purchase and sale contracts. Under a
repurchase agreement, the seller agrees to repurchase a security (typically a
security issued or guaranteed by the U.S. Government) at a mutually agreed upon
time and price. This insulates the Fund from changes in the market value of the
security during the period, except for currency fluctuations. A purchase and
sale contract is similar to a repurchase agreement, but purchase and sale
contracts provide that the purchaser receives any interest on the security paid
during the period. If the seller fails to repurchase the security in either
situation and the market value declines, the Fund may lose money.
DERIVATIVES -- The Fund may use derivative instruments including futures,
options, indexed securities, inverse securities and swaps. Derivatives are
financial instruments whose value is derived from another security, a commodity
(such as gold or oil), or an index such as Standard & Poor's 500 Index.
Derivatives allow the Fund to increase or decrease their risk exposure more
quickly and efficiently than other types of instruments. Derivatives are
volatile and involve significant risks, including:
Credit risk -- the risk that the counterparty (the party on the
other side of the transaction) on a derivative transaction will be
unable to honor its financial obligation to the Fund.
Currency risk -- the risk that changes in the exchange rate between
currencies will adversely affect the value (in U.S. dollar terms) of
an investment.
Leverage risk -- the risk associated with certain types of
investments or trading strategies (such as borrowing money to
increase the amount of investment) 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.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 11
<PAGE> 13
[DETAILS ABOUT THE FUND ICON] Details About the Fund
Liquidity risk -- the risk that certain securities may be difficult
or impossible to sell at the time that the seller would like or at
the price that the seller believes the security is currently worth.
The Fund may use derivatives for hedging purposes, including anticipatory
hedges. Hedging is a strategy in which the Fund uses a derivative to offset the
risk that other Fund holdings may decrease in value. While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a different
manner than anticipated by the Fund or if the cost of the derivative outweighs
the benefit of the hedge. Hedging also involves the risk that changes in the
value of the derivative will not match those of the holdings being hedged as
expected by the Fund, in which case any losses on the holdings being hedged may
not be reduced. There can be no assurance that the Fund's hedging strategy will
reduce risk or that hedging transactions will be either available or cost
effective. The Fund is not required to use hedging and may choose not to do so.
ABOUT THE PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
James D. McCall, a First Vice President of Merrill Lynch Asset Management, L.P.
since 1999 and a Senior Vice President and the Portfolio Manager of the Fund, is
primarily responsible for the day-to-day management of the Trust's portfolio.
Mr. McCall, a Chartered Financial Analyst, has had 10 years experience as a
portfolio manager. He was a portfolio manager at the PBHG family of mutual funds
from 1994 to 1999. He managed a number of registered mutual funds, including the
PBHG Large Cap Growth Fund series of The PBHG Funds, Inc. from its inception on
April 5, 1995 to May 14, 1999. Mr. McCall also managed the PBHG Large Cap Growth
Portfolio of PBHG Insurance Series Fund, Inc., a variable annuity contract
portfolio, from its inception on May 1, 1997 to May 14, 1999. The investment
objective, policies and strategies of the PBHG Large Cap Growth Fund and the
PBHG Large Cap Growth Portfolio are substantially similar in all material
respects to those of the Fund.
The cumulative total return for the PBHG Large Cap Growth Fund from its
inception on April 5, 1995 through March 31, 1999 was 174.47%. At March 31,
1999, the PBHG Large Cap Growth Fund had approximately $144.2 million in net
assets. The cumulative total return for the PBHG Large Cap Growth Portfolio from
its inception on May 1, 1997 through March 31, 1999 was 61.60%. At March 31,
1999, the PBHG Large Cap
12 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 14
Growth Portfolio had approximately $13.8 million in net assets. As portfolio
manager of the PBHG Large Cap Growth Fund and the PBHG Large Cap Growth
Portfolio for the periods indicated above, Mr. McCall had full discretionary
authority over the selection of investments for each fund and was primarily
responsible for the day-to-day management of each fund. No other person played a
significant role in managing each fund from their respective inception dates
through May 14, 1999. Average annual returns for the one-year and three-year
periods ended March 31, 1999 to the extent applicable and for the entire period
during which Mr. McCall managed the PBHG Large Cap Growth Fund and the PBHG
Large Cap Growth Portfolio compared with the performance of the Standard &
Poor's 500 Index are set forth below.
<TABLE>
<CAPTION>
PBHG LARGE
PRIOR PERFORMANCE OF SIMILAR FUNDS CAP PBHG LARGE LIPPER
PREVIOUSLY MANAGED BY THE GROWTH(1) CAP GROWTH S&P 500 MULTI-CAP
PORTFOLIO MANAGER: FUND PORTFOLIO(2) INDEX(3) GROWTH FUNDS(6)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year Ended March 31, 1999 15.90% 19.62% 18.46% 21.07%
- -----------------------------------------------------------------------------------------------
Three Years Ended March 31, 1999 22.33% N/A 28.08% 21.47%
- -----------------------------------------------------------------------------------------------
PBHG Large Cap Growth Fund
Inception(4) through May 14, 1999 27.25% N/A 29.17% 23.73%
- -----------------------------------------------------------------------------------------------
PBHG Large Cap Growth Portfolio
Inception(5) through May 14, 1999 N/A 25.75% 30.88% 29.82%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Average annual total return reflects changes in share prices and
reinvestment of dividends and is net of fund expenses. From the commencement
of operations through March 31, 1996, Pilgrim Baxter & Associates, Ltd.
("Pilgrim Baxter") voluntarily waived a portion of the annual management fee
payable by the PBHG Large Cap Growth Fund. Without such a waiver, returns
would have been lower. During the periods indicated, PBHG Large Cap Growth
Fund was sold without a front-end sales charge that would reduce returns.
Although a co-manager for the PBIIG Large Cap Growth Fund was named for a
portion of the periods indicated, Mr. McCall was primarily responsible for
the day-to-day management of that fund.
(2) Average annual total return reflects changes in share prices and
reinvestment of dividends and is net of fund expenses. From the commencement
of operations through December 31, 1998, Pilgrim Baxter voluntarily waived a
portion of the annual management fee payable by the PBHG Large Cap Growth
Portfolio and agreed to pay certain expenses of the PBHG Large Cap Growth
Portfolio to the extent necessary to ensure that the total annual operating
expenses of the PBHG Large Cap Growth Portfolio did not exceed 1.10% of its
average daily net assets. Without such waivers, returns would have been
lower. Moreover, average annual total return does not reflect a deduction
for insurance account fees, which if reflected, would also reduce the
returns shown. During the periods indicated, PBHG Large Cap Growth Portfolio
was sold without a front-end sales charge that would reduce returns.
(3) The Standard & Poor's 500 Index is an unmanaged index of common stocks that
is considered to be generally representative of the United States stock
market. The index is adjusted to reflect reinvestment of dividends.
(4) The inception date for the PBHG Large Cap Growth Fund was April 5, 1995.
(5) The inception date for the PBHG Large Cap Growth Portfolio was May 1, 1997.
(6) Lipper Multi-Cap Growth Funds, as classified by Lipper Inc., are funds that,
by portfolio practice, invest in a variety of market capitalization ranges,
without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Multi-Cap funds will
generally have between 25% to 75% of their assets invested in companies with
market capitalization (on a three-year weighted basis) above 300% of the
dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index.
Multi-Cap Growth funds normally invest in companies with long-term earnings
expected to grow significantly faster than the earnings of the stocks
represented in a major unmanaged stock index. These funds will normally have
an above-average price-to-earnings ratio, price-to-book ratio, and
three-year earnings growth figure, compared to the U.S. diversified
multi-cap equity funds universe average.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 13
<PAGE> 15
[DETAILS ABOUT THE FUND ICON] Details About the Fund
HISTORICAL PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. THE PBHG LARGE
CAP GROWTH FUND AND THE PBHG LARGE CAP GROWTH PORTFOLIO ARE SEPARATE FUNDS AND
THEIR HISTORICAL PERFORMANCE IS NOT INDICATIVE OF THE POTENTIAL PERFORMANCE OF
THE FUND. Share prices and investment returns will fluctuate reflecting market
conditions as well as changes in company-specific fundamentals of portfolio
securities.
14 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 16
Your Account [YOUR ACCOUNT ICON]
MERRILL LYNCH SELECT PRICING(SM) SYSTEM
- --------------------------------------------------------------------------------
The 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 Merrill Lynch
Financial Consultant can help you determine which share class is best suited to
your personal financial goals.
For example, if you select Class A or D shares, you generally pay a sales charge
at the time of purchase. If you buy Class D shares, you also pay an ongoing
account maintenance fee of 0.25%. You may be eligible for a sales charge
reduction or waiver.
If you select Class B or C shares, you will invest the full amount of your
purchase price, but you will be subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. Because these fees are paid out of the Fund's
assets on an ongoing basis, over time these fees increase the cost of your
investment and may cost you more than paying an initial sales charge. In
addition, you may be subject to a deferred sales charge when you sell Class B or
C shares.
The Fund's shares are distributed by Merrill Lynch Funds Distributor, a division
of Princeton Funds Distributor, Inc., an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch").
MERRILL LYNCH PREMIER GROWTH FUND, INC. 15
<PAGE> 17
[YOUR ACCOUNT ICON] Your Account
The table below summarizes key features of the Merrill Lynch Select Pricing(SM)
System.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Availability Limited to certain Generally available Generally available
investors including: through Merrill Lynch. through Merrill Lynch.
- Current Class A Limited availability Limited availability
shareholders through other securities through other securities
- Certain affiliates of dealers. dealers.
Merrill Lynch.
- ------------------------------------------------------------------------------------------------------------
Initial Sales Yes. Payable at time of No. Entire purchase No. Entire purchase
Charge? purchase. Lower sales price is invested in price is invested in
charges available for shares of the Fund. shares of the Fund.
larger investments.
- ------------------------------------------------------------------------------------------------------------
Deferred Sales No. (May be charged for Yes. Payable if you Yes. Payable if you
Charge? purchases over $1 redeem within four years redeem within one year
million that are of purchase. of purchase.
redeemed within one
year.)
- ------------------------------------------------------------------------------------------------------------
Account No. 0.25% Account 0.25% Account
Maintenance and Maintenance Fee 0.75% Maintenance Fee 0.75%
Distribution Fees? Distribution Fee. Distribution Fee.
- ------------------------------------------------------------------------------------------------------------
Conversion to No. Yes, automatically after No.
Class D shares? approximately eight
years.
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS D
- ---------------------------------------------------
<S> <C>
Availability Generally available
through Merrill Lynch.
Limited availability
through other securities
dealers.
- ---------------------------------------------------
Initial Sales Yes. Payable at time of
Charge? purchase. Lower sales
charges available for
larger investments.
- ---------------------------------------------------
Deferred Sales No. (May be charged for
Charge? purchases over $1
million that are
redeemed within one
year.)
- ---------------------------------------------------
Account 0.25% Account
Maintenance and Maintenance Fee No
Distribution Fees? Distribution Fee.
- ---------------------------------------------------
Conversion to No.
Class D shares?
- ---------------------------------------------------
</TABLE>
16 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 18
SUBSCRIPTION OFFERING
You will initially be able to buy shares of the Fund during the subscription
period, which is expected to end on February 22, 2000. During the subscription
period, the Distributor, Merrill Lynch and other securities dealers that have
entered into agreements with the Distributor will solicit subscriptions. The
subscriptions will be payable on the third business day after the end of the
subscription period. At that time, the Fund will begin operations and will issue
the Class A, Class B, Class C and Class D shares.
The Fund and the Distributor may agree to extend the subscription period, but
either the Fund or the Distributor also may terminate the subscription offering
at any time. If the subscription offering is terminated, the Fund will not begin
operations and will not issue any shares, or will issue only a limited number of
shares.
The minimum initial purchase for Class A, Class B, Class C or Class D shares
during the subscription period is $1,000, except for retirement plans where the
minimal initial purchase is $100. If you purchase Class A or Class D shares
during the subscription period you will pay the following public offering price,
which includes a sales charge:
<TABLE>
<CAPTION>
SUBSCRIPTION PERIOD
---------------------------------------------------------------------
SECURITIES DEALERS'
SALES CHARGE CONCESSION
-------------------------- --------------------------
PERCENTAGE* PERCENTAGE*
PUBLIC OF PUBLIC OF PUBLIC
OFFERING DOLLAR OFFERING DOLLAR OFFERING
PRICE AMOUNT PRICE AMOUNT PRICE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $25,000 $10.554 $.554 5.25% $.554 5.25%
- --------------------------------------------------------------------------------------------------
$25,000 but less than
$50,000 10.499 .499 4.75 .499 4.75
- --------------------------------------------------------------------------------------------------
$50,000 but less than
$100,000 10.417 .417 4.00 .417 4.00
- --------------------------------------------------------------------------------------------------
$100,000 but less than
$250,000 10.309 .309 3.00 .309 3.00
- --------------------------------------------------------------------------------------------------
$250,000 but less than
$1,000,000 10.204 .204 2.00 .204 2.00
- --------------------------------------------------------------------------------------------------
$1,000,000 and over** 10.000 .000 0.00 .000 0.00
- --------------------------------------------------------------------------------------------------
</TABLE>
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more. If the sales charge is waived, such purchases will be
subject to a deferred sales charge of 1.0% if the shares are redeemed within
one year after purchase. 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.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 17
<PAGE> 19
[YOUR ACCOUNT ICON] Your Account
The Fund receives $10.00 per share from the sale of all Class A and Class D
shares sold during the subscription period.
You will pay a public offering price of $10.00 per share for any Class B or
Class C shares you purchase during the subscription period. Please see "Class B
and Class C Shares -- Deferred Sales Charge Options" below, however, for
information on deferred sales charges and ongoing account maintenance and
distribution fees that may apply to such shares.
CONTINUOUS OFFERING
After the subscription offering ends, the Distributor and other eligible
securities dealers (including Merrill Lynch) will offer shares of the Fund to
the public on a continuous basis.
18 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 20
CLASS A AND D SHARES -- INITIAL SALES CHARGE OPTIONS
If you select Class A or D shares, you will pay a sales charge at the time of
purchase as shown in the following table. Securities dealers' compensation will
be as shown in the last column.
<TABLE>
<CAPTION>
DEALER
COMPENSATION
AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT* OFFERING PRICE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.25% 5.54% 5.00%
- -----------------------------------------------------------------------------------
$25,000 but less than
$50,000 4.75% 4.99% 4.50%
- -----------------------------------------------------------------------------------
$50,000 but less than
$100,000 4.00% 4.17% 3.75%
- -----------------------------------------------------------------------------------
$100,000 but less than
$250,000 3.00% 3.09% 2.75%
- -----------------------------------------------------------------------------------
$250,000 but less than
$1,000,000 2.00% 2.04% 1.80%
- -----------------------------------------------------------------------------------
$1,000,000 and over** 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------
</TABLE>
* Rounded to the nearest one-hundredth percent.
** If you invest $1,000,000 or more in Class A or D shares, you may not pay an
initial sales charge. However, if you redeem your shares within one year
after purchase, you may be charged a deferred sales charge. This charge is 1%
of the lesser of the original cost of the shares being redeemed or your
redemption proceeds. A sales charge of 0.75% will be charged on purchases of
$1,000,000 or more of Class A and D shares by certain employer sponsored
retirement or savings plans.
No initial sales charge applies to Class A or Class D shares that you buy
through reinvestment of dividends.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 19
<PAGE> 21
[YOUR ACCOUNT ICON] Your Account
RIGHT OF ACCUMULATION -- permits you to pay the sales charge applicable 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 Merrill Lynch Select Pricing(SM) funds that you
agree to buy within a 13 month period. Certain restrictions apply.
A reduced or waived sales charge on a purchase of Class A or D shares may apply
for:
- Purchases under a RIGHT OF ACCUMULATION or LETTER OF INTENT
- Purchases using proceeds from the sale of certain Merrill Lynch
closed-end funds under certain circumstances
- Certain investors, including directors or trustees of Merrill Lynch
mutual funds and Merrill Lynch employees
Only certain investors are eligible to buy Class A shares. Your Merrill Lynch
Financial Consultant can help you determine whether you are eligible to buy
Class A shares or to participate in any of these programs.
If you decide to buy shares under the initial sales charge alternative and you
are eligible to buy both Class A and Class D shares, you should buy Class A
since Class D shares are subject to 0.25% account maintenance fee, while Class A
shares are not.
If you redeem Class A or Class D shares and within 30 days buy new shares of the
same class, you will not pay a sales charge on the new purchase amount. The
amount eligible for this "Reinstatement Privilege" may not exceed the amount of
your redemption proceeds. To exercise the privilege, contact your Merrill Lynch
Financial Consultant or the Fund's Transfer Agent at 1-800-MER-FUND.
CLASS B AND C SHARES -- DEFERRED SALES CHARGE OPTIONS
If you select Class B or Class C shares, you do not pay an initial sales charge
at the time of purchase. However, if you redeem your Class B shares within four
years after purchase or 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 a distribution
plan that the Fund has adopted under Rule 12b-1. Because these fees are paid out
of the Fund's assets on an ongoing basis, over time these fees increase the cost
of your investment and may cost you more than paying an initial sales charge.
The Distributor uses the money that it receives from the deferred sales charge
and the distribution fees to cover the costs of marketing, advertising and
compensating the Merrill Lynch Financial Consultant or other securities dealer
who assists you in purchasing Fund shares.
20 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 22
CLASS B SHARES
If you redeem Class B shares within four years after purchase, you may be
charged a deferred sales charge. The amount of the charge gradually decreases as
you hold your shares over time, according to the following schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE SALES CHARGE*
- ------------------------------------------
<S> <C>
0 - 1 4.00%
- ------------------------------------------
1 - 2 3.00%
- ------------------------------------------
2 - 3 2.00%
- ------------------------------------------
3 - 4 1.00%
- ------------------------------------------
4 AND THEREAFTER 0.00%
- ------------------------------------------
</TABLE>
* The percentage charge will apply to the lesser of the original cost of the
shares being redeemed or the proceeds of your redemption. Shares acquired
through reinvestment of dividends are not subject to a deferred sales charge.
Not all Merrill Lynch funds have identical deferred sales charge schedules. If
you exchange your shares for shares of another fund, the higher charge will
apply.
The deferred sales charge relating to Class B shares may be reduced or waived in
certain circumstances, such as:
- Certain post-retirement withdrawals from an IRA or other
retirement plan if you are over 59 1/2 years old
- Certain retirement plan rollovers
- Withdrawals resulting from shareholder death or disability as
long as the waiver request is made within one year of death or
disability or, if later, reasonably promptly following
completion of probate, or in connection with involuntary
termination of an account in which Fund shares are held
- Withdrawal through the Merrill Lynch Systematic Withdrawal Plan
of up to 10% per year of your Class B or Class C account value
at the time the plan is established
Your Class B shares convert automatically into Class D shares approximately
eight years after purchase. Any Class B shares received through reinvestment of
dividends paid on converting shares will also convert at that time. Class D
shares are subject to lower annual expenses than Class B shares. The conversion
of Class B shares to Class D shares is not a taxable event for Federal income
tax purposes.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 21
<PAGE> 23
[YOUR ACCOUNT ICON] Your Account
Different conversion schedules apply to Class B shares of different Merrill
Lynch mutual funds. For example, Class B shares of a fixed-income fund typically
convert approximately ten years after purchase compared to approximately eight
years for equity funds. If you acquire your Class B shares in an exchange from
another fund with a shorter conversion schedule, the Fund's eight year
conversion schedule will apply. If you exchange your Class B shares in the Fund
for Class B shares of a fund with a longer conversion schedule, the other fund's
conversion schedule will apply. The length of time that you hold both the
original and exchanged Class B shares in both funds will count toward the
conversion schedule. The conversion schedule may be modified in certain other
cases as well.
CLASS C SHARES
If you redeem Class C shares within one year after purchase, you may be charged
a deferred sales charge of 1.00%. The charge will apply to the lesser of the
original cost of the shares being redeemed or the proceeds of your redemption.
You will not be charged a deferred sales charge when you redeem shares that you
acquire through reinvestment of Fund dividends. The deferred sales charge
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 Merrill Lynch 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 Merrill Lynch or other securities dealers during the continuous offering
of the Fund's shares, which will begin immediately after the end of the
subscription offering. You may also buy shares through the Transfer Agent. To
learn more about buying shares through the Transfer Agent, call 1-800-MER-FUND.
Because the selection of a mutual fund involves many considerations, your
Merrill Lynch Financial Consultant may help you with this decision.
22 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 24
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Buy Shares First, select the share class Refer to the Merrill Lynch Select Pricing table on page 16.
appropriate for you Be sure to read this prospectus carefully.
------------------------------------------------------------------------------------------------------
Next, determine the amount of your The minimum initial investment for the Fund is $1,000 for
investment all accounts except that it is $100 for retirement plans.
(The minimums for initial investments may be waived under
certain circumstances.)
------------------------------------------------------------------------------------------------------
Have your Merrill Lynch Financial The price of your shares is based on the next calculation
Consultant or securities dealer of net asset value after your order is placed. Any purchase
submit your purchase order orders placed prior to the close of business on the New
York Stock Exchange (generally, 4:00 p.m. Eastern time)
will be priced at the net asset value determined that day.
Purchase orders placed after that time will be priced at
the net asset value determined on the next business day.
The Fund may reject any order to buy shares and may suspend
the sale of shares at any time. Merrill Lynch may charge a
processing fee to confirm a purchase. This fee is currently
$5.35.
------------------------------------------------------------------------------------------------------
Or contact the Transfer Agent To purchase shares directly, call the Transfer Agent at
1-800-MER-FUND and request a purchase application. Mail the
completed purchase application to the Transfer Agent at the
address on the inside back cover of this Prospectus.
- --------------------------------------------------------------------------------------------------------------------------------
Add to Your Purchase additional shares The minimum investment for additional purchases is
Investment generally $50 for all accounts.
(The minimums for additional purchases may be waived under
certain circumstances.)
------------------------------------------------------------------------------------------------------
Acquire additional shares through All dividends are automatically reinvested without a sales
the automatic dividend reinvestment charge.
plan
------------------------------------------------------------------------------------------------------
Participate in the automatic You may invest a specific amount on a periodic basis
investment plan through certain Merrill Lynch investment or central asset
accounts.
- --------------------------------------------------------------------------------------------------------------------------------
Transfer Shares to Transfer to a participating You may transfer your Fund shares only to another
Another Securities securities dealer securities dealer that has entered into an agreement with
Dealer Merrill Lynch. Certain shareholder services may not be
available for the transferred shares. You may only purchase
additional shares of funds previously owned before the
transfer. All future trading of these assets must be
coordinated by the receiving firm.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERRILL LYNCH PREMIER GROWTH FUND, INC.23
<PAGE> 25
[YOUR ACCOUNT ICON] Your Account
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transfer Shares to Transfer to a non-participating You must either:
Another Securities securities dealer - Transfer your shares to an account with the Transfer
Dealer (continued) Agent; or
- Sell your shares, paying any applicable deferred
sales charge.
- --------------------------------------------------------------------------------------------------------------------------------
Sell Your Shares Have your Merrill Lynch Financial The price of your shares is based on the next calculation
Consultant or securities dealer of net asset value after your order is placed. For your
submit your sales order redemption request to be priced at the net asset value on
the day of your request, you must submit your request to
your dealer prior to that day's close of business on the
New York Stock Exchange (generally 4:00 p.m. Eastern time).
Any redemption request placed after that time will be
priced at the net asset value at the close of business on
the next business day.
Securities dealers, including Merrill Lynch, may charge a
fee to process a redemption of shares. Merrill Lynch
currently charges a fee of $5.35. No processing fee is
charged if you redeem shares directly through the Transfer
Agent.
The Fund may reject an order to sell shares under certain
circumstances.
------------------------------------------------------------------------------------------------------
Sell through the Transfer Agent You may sell shares held at the Transfer Agent by writing
to the Transfer Agent at the address on the inside back
cover of this prospectus. All shareholders on the account
must sign the letter. A signature guarantee will generally
be required but may be waived in certain limited
circumstances. You can obtain a signature guarantee from a
bank, securities dealer, securities broker, credit union,
savings association, national securities exchange and
registered securities association. A notary public seal
will not be acceptable. If you hold stock certificates,
return the certificates with the letter. The Transfer Agent
will normally mail redemption proceeds within seven days
following receipt of a properly completed request. If you
make a redemption request before the Fund has collected
payment for the purchase of shares, the Fund or the
Transfer Agent may delay mailing your proceeds. This delay
will usually not exceed ten days.
If you hold share certificates, they must be delivered to
the Transfer Agent before they can be converted. Check with
the Transfer Agent or your Merrill Lynch Financial
Consultant for details.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 26
<TABLE>
<CAPTION>
IF YOU WANT TO YOUR CHOICES INFORMATION IMPORTANT FOR YOU TO KNOW
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sell Shares Participate in the Fund's Systematic You can choose to receive systematic payments from your
Systematically Withdrawal Plan Fund account either by check or through direct deposit to
your bank account on a monthly or quarterly basis. If you
have a Merrill Lynch CMA(R), CBA(R) or Retirement Account
you can arrange for systematic redemptions of a fixed
dollar amount on a monthly, bi-monthly, quarterly,
semi-annual or annual basis, subject to certain conditions.
Under either method you must have dividends automatically
reinvested. For Class B and C shares your total annual
withdrawals cannot be more than 10% per year of the value
of your shares at the time your plan is established. The
deferred sales charge is waived for systematic redemptions.
Ask your Merrill Lynch Financial Consultant for details.
- --------------------------------------------------------------------------------------------------------------------------------
Exchange Your Select the fund into which you want You can exchange your shares of the Fund for shares of many
Shares to exchange. Be sure to read that other Merrill Lynch mutual funds. You must have held the
fund's prospectus shares used in the exchange for at least 15 calendar days
before you can exchange to another fund.
Each class of Fund shares is generally exchangeable for
shares of the same class of another fund. If you own Class
A shares and wish to exchange into a fund in which you have
no Class A shares (and are not eligible to purchase Class A
shares), you will exchange into Class D shares.
Some of the Merrill Lynch mutual funds impose a different
initial or deferred sales charge schedule. If you exchange
Class A or D shares for shares of a fund with a higher
initial sales charge than you originally paid, you will be
charged the difference at the time of exchange. If you
exchange Class B shares for shares of a fund with a
different deferred sales charge schedule, the higher
schedule will apply. The time you hold Class B or C shares
in both funds will count when determining your holding
period for calculating a deferred sales charge at
redemption. If you exchange Class A or D shares for money
market fund shares, you will receive Class A shares of
Summit Cash Reserves Fund. Class B or C shares of the Fund
will be exchanged for Class B shares of Summit.
Although there is currently no limit on the number of
exchanges that you can make, the exchange privilege may be
modified or terminated at any time in the future.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERRILL LYNCH PREMIER GROWTH FUND, INC. 25
<PAGE> 27
[YOUR ACCOUNT ICON] Your Account
Net Asset Value -- the market value in U.S. dollars of the Fund's total assets
after deducting liabilities, divided by the number of shares outstanding.
DIVIDENDS -- ordinary income and capital gains paid to shareholders. Dividends
may be reinvested in additional Fund shares as they are paid.
"BUYING A DIVIDEND"
Unless your investment is in a tax-deferred account, you may want to avoid
buying shares shortly before the Fund pays a dividend. The reason? If you buy
shares when a fund has realized but not yet distributed ordinary income or
capital gains, you will pay the full price for the shares and then receive a
portion of the price back in the form of a taxable dividend. Before investing
you may want to consult your tax advisor.
HOW SHARES ARE PRICED
- --------------------------------------------------------------------------------
When you buy shares, you pay the NET ASSET VALUE, plus any applicable sales
charge. This is the offering price. Shares are also redeemed at their net asset
value, minus any applicable deferred sales charge. The Fund calculates its net
asset value (generally by using market quotations) each day the New York Stock
Exchange is open as of the close of business on the Exchange based on prices at
the time of closing. The Exchange generally closes at 4:00 p.m. Eastern time.
The net asset value used in determining your price is the next one calculated
after your purchase or redemption order is placed. Foreign securities owned by
the Fund may trade on weekends or other days when the Fund does not price its
shares. As a result, the Fund's net asset value may change on days when you will
not be able to purchase or redeem the Fund's shares.
Generally, Class A shares will have the highest net asset value because that
class has the lowest expenses, and Class D shares will have a higher net asset
value than Class B or Class C shares. Also dividends paid on Class A and Class D
shares will generally be higher than dividends paid on Class B and Class C
shares because Class A and Class D shares have lower expenses.
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
The Fund will distribute at least annually any net investment income and any net
realized long- or short-term capital gains. The Fund may also pay a special
distribution at the end of the calendar year to comply with Federal tax
requirements. If your account is with Merrill Lynch and you would like to
receive DIVIDENDS in cash, contact your Merrill Lynch Financial Consultant. If
your account is with the Transfer Agent and you would like to receive dividends
in cash, contact the Transfer Agent. Although this cannot be predicted with any
certainty, the Fund anticipates that the majority of its dividends, if any, will
consist of capital gains.
You will pay tax on dividends from the Fund whether you receive them in cash or
additional shares. If you redeem Fund shares or exchange them for shares of
another fund, any gain on the transaction may be subject to tax. Capital gain
dividends are generally taxed at different rates than ordinary income dividends.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
If you are neither a lawful permanent resident nor a citizen of the U.S. or if
you are a foreign entity, the Fund's ordinary income dividends (which
26 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 28
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, the Fund must withhold 31% of your dividends and redemption proceeds if
you have not provided a taxpayer identification number or social security number
or if the number you have provided is incorrect.
This section summarizes some of the consequences under current Federal tax law
of an investment in the Fund. It is not a substitute for personal tax advice.
Consult your personal tax advisor about the potential tax consequences of an
investment in the Fund under all applicable tax laws.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 27
<PAGE> 29
Management of the Fund [MANAGEMENT OF THE FUND ICON]
FUND ASSET MANAGEMENT
- --------------------------------------------------------------------------------
Fund Asset Management, L.P., the Fund's Manager, manages the master portfolio's
investments under the overall supervision of the Board of Trustees of the Trust.
The advisory agreements between the Trust and the Manager give the Manager the
responsibility for making all investment decisions for the Fund. The Manager has
a sub-advisory agreement with Merrill Lynch Asset Management U.K. Limited, an
affiliate, under which the Manager may pay a fee for services it receives. The
Trust pays the Manager a fee at the annual rate of 0.75% of the average daily
net assets of the Trust.
Fund Asset Management, L.P. was organized as an investment adviser in 1977 and
offers investment advisory services to more than 50 registered investment
companies. Merrill Lynch Asset Management U.K. Limited was organized as an
investment adviser in 1986 and acts as sub-adviser to more than 50 registered
investment companies. Fund Asset Management, L.P. is part of the Asset
Management Group of Merrill Lynch & Co., Inc., which had approximately $534
billion in investment company and other portfolio assets under management as of
November 1999. This amount includes assets managed for Merrill Lynch affiliates.
28 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 30
MASTER/FEEDER STRUCTURE
- --------------------------------------------------------------------------------
The Fund is a "feeder" fund that invests all of its assets in the Trust. (Except
where indicated, this prospectus uses the term "Fund" to mean this feeder fund
and the Trust taken together.) Investors in the Fund will acquire an indirect
interest in the Trust.
The Trust may accept investments from other feeder funds, and all the feeders of
the Trust bear the portfolio's expenses in proportion to their assets. This
structure may enable the Fund 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 master 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 Trust on more attractive terms, or could experience better performance, than
another feeder. Information about other feeders is available by calling
1-800-MER-FUND.
Whenever the Trust holds a vote of its feeder funds, the Fund 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 the Fund over the operations of the master portfolio.
The Fund may withdraw from the Trust 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.
MERRILL LYNCH PREMIER GROWTH FUND, INC. 29
<PAGE> 31
[MANAGEMENT OF THE FUND ICON] Management of the Fund
A Note About Year 2000
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the year 2000 from the year 1900
(commonly known as the "Year 2000 Problem"). The Fund could be adversely
affected if the computer systems used by Fund management or other service
providers of the Fund do not properly address this problem before January 1,
2000. Fund management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told Fund management that they also
expect to resolve the Year 2000 Problem, and the Fund management will continue
to monitor the situation as the year 2000 approaches. However, if the problem
has not been fully addressed, the Fund could be negatively affected. The Year
2000 Problem could also have a negative impact on the companies in which the
Fund invests. This negative impact may be greater for companies in non-U.S.
markets, since they may be less prepared for the Year 2000 Problem than domestic
companies and markets. If the companies in which the Fund invests have Year 2000
Problems, the Fund's returns could be adversely affected.
30 MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 32
<TABLE>
<S> <C>
POTENTIAL
INVESTORS
Open an account (two options).
1 2
MERRILL LYNCH TRANSFER AGENT
FINANCIAL CONSULTANT
OR SECURITIES DEALER FINANCIAL DATA SERVICES, INC.
ADMINISTRATIVE OFFICES
Advises shareholders on their Trust investments. 4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
MAILING ADDRESS
P.O. Box 45289
Jacksonville, Florida 32232-5289
Performs shareholder
recordkeeping and reporting services.
DISTRIBUTOR
MERRILL LYNCH FUNDS DISTRIBUTOR,
A DIVISION OF PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Arranges for the sale of Trust shares.
COUNSEL CUSTODIAN
BROWN & WOOD LLP THE TRUST THE BANK OF NEW YORK
One World Trade Center 90 Washington Street
New York, New York 10048-0557 The Board of Directors 12th Floor
oversees the Trust. New York, New York 10286
Provides legal advice to the Trust.
Holds the Trust's assets for safekeeping.
INDEPENDENT AUDITORS MANAGER
DELOITTE & TOUCHE LLP FUND ASSET MANAGEMENT, L.P.
Princeton Forrestal Village ADMINISTRATIVE OFFICES
116-300 Village Boulevard 800 Scudders Mill Road
Princeton, New Jersey 08540-6400 Plainsboro, New Jersey 08536
Audits the financial MAILING ADDRESS
statements of the Trust on behalf of P.O. Box 9011
the shareholders. Princeton, New Jersey 08543-9011
TELEPHONE NUMBER
1-800-MER-FUND
Manages the Fund's day-to-day activities.
MERRILL LYNCH ASSET MANAGEMENT U.K. LIMITED
33 King William Street
London, EC4R9AS
England
Sub-Adviser to the Trust.
</TABLE>
MERRILL LYNCH PREMIER GROWTH FUND, INC.
<PAGE> 33
For More Information [FOR MORE INFORMATION ICON]
SHAREHOLDER REPORTS
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's annual
report you will find a discussion of the relevant market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. You may obtain these reports at no cost by calling
1-800-MER-FUND.
If you hold your Fund shares through a brokerage account or directly at the
Transfer Agent, you may receive only one copy of each shareholder report and
certain other mailings regardless of the number of Fund accounts you have. If
you prefer to receive separate shareholder reports for each account (or if you
are receiving multiple copies and prefer to receive only one), call your Merrill
Lynch Financial Consultant or write to the Transfer Agent at its mailing
address. Include your name, address, tax identification number and Merrill Lynch
brokerage or mutual fund account number. If you have any questions, please call
your Merrill Lynch Financial Consultant or the Transfer Agent at 1-800-MER-FUND.
STATEMENT OF ADDITIONAL INFORMATION
The Fund's Statement of Additional Information contains further information
about the Fund and is incorporated by reference (legally considered to be part
of this Prospectus). You may request a free copy by writing or calling the Fund
at Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida
32232-5289 or by calling 1-800-MER-FUND.
Contact your Merrill Lynch Financial Consultant or the Fund at the telephone
number or address indicated on the inside back cover of this Prospectus if you
have any questions.
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Call 1-800-SEC-0330 for information on the operation of the public
reference room. This information is also available on the SEC's Internet Site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating fee
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO ONE IS
AUTHORIZED TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM THE
INFORMATION IN THIS PROSPECTUS.
Investment Company Act File #811-09653.
Code # -
(C) Fund Asset Management, L.P.
Prospectus
[MERRILL LYNCH LOGO]
Merrill Lynch
Premier Growth
Fund, Inc.
[MERRILL LYNCH ARTWORK]
December 21, 1999
<PAGE> 34
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH PREMIER GROWTH FUND, INC.
P.O. Box 9011, Princeton, New Jersey 08543-9011 - Phone No. (609) 282-2800
------------------------
Merrill Lynch Premier Growth Fund, Inc. (the "Fund") is a diversified,
open-end management investment company that seeks to provide shareholders with
long-term capital appreciation. The Fund will seek to achieve its investment
objective by investing primarily in common stocks of companies that Fund
management believes have strong earnings growth and capital appreciation
potential. There can be no assurance that the investment objective of the Fund
will be realized. For more information on the Fund's investment objective and
policies, see "Investment Objective and Policies."
The Fund is a "feeder" fund that invests all of its assets in the Master
Premier Growth Trust (the "Trust") that has the same investment objective as the
Fund. All investments will be made at the Trust level. The Fund's investment
results will correspond directly to the investment results of the Trust. There
can be no assurance that the Fund will achieve its investment objective.
Pursuant to the Merrill Lynch Select PricingSM System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select PricingSM System permits an
investor to choose the method of purchasing shares that the investor believes is
most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. See
"Purchase of Shares."
------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Fund, dated December 21, 1999
(the "Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained, without charge, by calling
1-800-MER-FUND or your Merrill Lynch 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 -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR -- DISTRIBUTOR
------------------------
The date of this Statement of Additional Information is December 21, 1999
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies........................... 2
European Economic and Monetary Union ("EMU")................ 3
Growth Securities......................................... 4
Derivatives............................................... 4
Convertible Securities.................................... 8
Debt Securities........................................... 10
Warrants.................................................. 10
Other Investment Policies and Practices................... 11
Investment Restrictions................................... 13
Portfolio Turnover........................................ 15
Management of The Fund...................................... 16
Directors and Officers.................................... 16
Compensation of Directors/Trustees........................ 17
Management and Advisory Arrangements...................... 17
Code of Ethics............................................ 19
Purchase of Shares.......................................... 19
Initial Sales Charge Alternatives -- Class A and Class D 20
Shares.................................................
Reduced Initial Sales Charges............................. 21
Deferred Sales Charges -- Class B and Class C Shares...... 23
Distribution Plans........................................ 26
Limitations on the Payment of Deferred Sales Charges...... 27
Redemption of Shares........................................ 27
Redemption................................................ 27
Repurchase................................................ 28
Reinstatement Privilege -- Class A and Class D Shares..... 28
Pricing of Shares........................................... 29
Determination of Net Asset Value.......................... 29
Portfolio Transactions and Brokerage........................ 30
Transactions in Portfolio Securities...................... 30
Shareholder Services........................................ 32
Investment Account........................................ 32
Exchange Privilege........................................ 33
Automatic Investment Plans................................ 34
Automatic Dividend Reinvestment Plan...................... 34
Systematic Withdrawal Plans............................... 35
Dividends and Taxes......................................... 36
Dividends................................................. 36
Taxes..................................................... 36
Tax Treatment of Options, Futures and Forward Foreign 38
Exchange Transactions..................................
Special Rules for Certain Foreign Currency Transactions... 38
Performance Data............................................ 39
General Information......................................... 41
Description of Shares..................................... 41
Computation of Offering Price Per Share................... 42
Independent Auditors...................................... 42
Custodian................................................. 42
Transfer Agent............................................ 42
Legal Counsel............................................. 42
Reports to Shareholders................................... 42
Shareholder Inquiries..................................... 43
Additional Information.................................... 43
</TABLE>
<PAGE> 36
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation. The Fund tries to achieve its investment objective by investing
primarily in common stocks of companies that Fund management believes have
strong earnings growth and capital appreciation potential. Fund management
begins its investment process by creating a universe of rapidly growing
companies that possess certain growth characteristics. That universe is
continually updated. Fund management then ranks each company within its universe
by using research models that focus on growth characteristics such as positive
earnings surprises, upward earnings estimate revisions, and accelerating sales
and earnings growth. Finally, using its own fundamental research and a bottom-up
approach to investing, Fund management evaluates the quality of each company's
earnings and tries to determine whether the company can sustain or increase its
current growth trend. Fund management believes that this disciplined investment
process enables it to construct a portfolio of investments with strong growth
characteristics. The Fund is classified as a diversified fund under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
The Fund is a "feeder" fund that invests all of its assets in the Trust
which 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. The Fund's investment results will correspond directly to the
investment results of the Trust. For simplicity, however, this Statement of
Additional Information, like the Prospectus, uses the term "Fund" to include the
Trust. There can be no assurance that the investment objective of the Fund or
the investment objective of the Trust will be realized. The investment objective
of the Fund is a fundamental policy of the Fund and may not be changed without
the approval of a majority of the Fund's outstanding voting securities as
defined in the Investment Company Act. The investment objective of the Trust is
a fundamental policy of the Trust and may not be changed without the approval of
a majority of the Trust's outstanding voting securities as defined in the
Investment Company Act. Reference is made to the discussion under "How the Fund
Invests" and "Investment Risks" in the Prospectus for information with respect
to the Fund and the Trust's investment objective and policies.
Investment emphasis is placed on equities, primarily common stock and, to a
lesser extent, securities convertible into common stock, preferred stock,
warrants and rights to subscribe for common stock. The Fund generally will
invest at least 65% of its total assets in equity securities. The Fund may
invest in companies of any size but emphasizes equity securities of companies
having a medium stock market capitalization ($1 billion to $5 billion) or a
large stock market capitalization (greater than $5 billion). The Fund may invest
in non-convertible debt securities rated investment grade by a nationally
recognized statistical ratings organization and U.S. Government securities,
although it typically will not do so to a significant extent.
The 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 Fund management, prevailing market or economic conditions
warrant or for temporary defensive purposes.
The Fund may invest up to 10% of its total assets in equity securities of
foreign issuers with the foregoing characteristics. (Purchases of American
Depositary Receipts ("ADRs"), however, are not subject to this restriction.)
Investments in securities of foreign entities and securities denominated in
foreign currencies involve risks not typically involved in domestic investment,
including fluctuations in foreign exchange rates, future foreign political and
economic developments, and the possible imposition of exchange controls or other
foreign or United States governmental laws or restrictions applicable to such
investments. Because the Fund 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 held by the Trust and the unrealized
appreciation or depreciation of investments insofar as the U.S. investors are
concerned. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and the Fund's yield on such assets. Foreign currency exchange
rates are determined by forces of supply and demand 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.
2
<PAGE> 37
With respect to certain foreign 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. There may be less publicly available information
about a foreign financial instrument than about a United States instrument, and
foreign entities may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of United States
entities. In addition, certain foreign investments may be subject to foreign
withholding taxes. Foreign financial markets, while growing in volume, have, for
the most part, substantially less volume than United States markets, and
securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable domestic companies. The foreign markets
also have different clearance and settlement procedures, and in certain markets
there have been times when settlements have been unable to keep pace with the
volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are uninvested and no return is earned thereon. The ability of the
Fund to make intended security purchases due to settlement problems could cause
the Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result either in losses to
the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. Costs associated with transactions in
foreign securities are generally higher than with transactions in United States
securities. There is generally less government supervision and regulation of
exchanges, financial institutions and issuers in foreign countries than there is
in the United States.
The Fund may invest in the securities of foreign issuers in the form of
ADRs, European Depositary Receipts ("EDRs") or other securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, which are issued in registered form, are
designed for use in the United States securities markets, and EDRs, which are
issued in bearer form, are designed for use in European securities markets. The
Fund may invest in unsponsored ADRs. The issuers of unsponsored ADRs are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
such ADRs.
EUROPEAN ECONOMIC AND MONETARY UNION
For a number of years, certain European countries have been seeking
economic unification that would, among other things, reduce barriers between
countries, increase competition among companies, reduce government subsidies in
certain industries, and reduce or eliminate currency fluctuations among these
European countries. The Treaty on European Union (the "Maastricht Treaty") set
out a framework for the European Economic and Monetary Union ("EMU") among the
countries that comprise the European Union ("EU"). EMU established a single
common European currency (the "euro") that was introduced on January 1, 1999 and
is expected to replace the existing national currencies of all EMU participants
by July 1, 2002. EMU took effect for the initial EMU participants on January 1,
1999. Certain securities issued in participating EU countries (beginning with
government and corporate bonds) were redenominated in the euro, and are listed,
traded, and make dividend and other payments only in euros.
No assurance can be given that EMU will take effect, that the changes
planned for the EU can be successfully implemented, or that these changes will
result in the economic and monetary unity and stability intended. There is a
possibility that EMU will not be completed, or will be completed but then
partially or completely unwound. Because any participating country may opt out
of EMU within the first three years, it is also possible that a significant
participant could choose to abandon EMU, which could diminish its credibility
and influence. Any of these occurrences could have adverse effects on the
markets of both participating and non-participating countries, including sharp
appreciation or depreciation of participants' national currencies and a
significant increase in exchange rate volatility, a resurgence in economic
protectionism, an undermining of confidence in the European markets, an
undermining of European economic stability, the collapse or slowdown of the
drive toward European economic unity, and/or reversion of the attempts to lower
government
3
<PAGE> 38
debt and inflation rates that were introduced in anticipation of EMU. Also,
withdrawal from EMU by an initial participant could cause disruption of the
financial markets as securities redenominated in euros are transferred back into
that country's national currency, particularly if the withdrawing country is a
major economic power. Such developments could have an adverse impact on the
Fund's investments in Europe generally or in specific countries participating in
EMU. Gains or losses from euro conversion may be taxable to Fund shareholders
under foreign or, in certain limited circumstances, U.S. tax laws.
GROWTH SECURITIES
As set forth in the Prospectus and this Statement of Additional
Information, the investment objective of the Fund is to seek long-term capital
appreciation. The Fund tries to achieve its investment objective by investing
primarily in common stocks of companies that Fund management believes have
strong earnings growth and capital appreciation potential. These "growth
securities" may be particularly sensitive to changes in earnings or interest
rate increases because they typically have higher price-earnings ratios.
Moreover, the growth securities held by the Trust may never reach what Fund
management believes their full value to be and may even go down in price.
DERIVATIVES
The Fund may use instruments referred to as "Derivatives." Derivatives are
financial instruments the value of which is derived from another security, a
commodity (such as gold or oil) or an index (a measure of value or rates, such
as the Standard & Poor's 500 Index or the prime lending rate). Derivatives allow
the Fund to increase or decrease the level of risk to which the Fund is exposed
more quickly and efficiently than transactions in other types of instruments.
Hedging. The Fund may use Derivatives for hedging purposes. Hedging is a
strategy in which a Derivative is used to offset the risk that other Fund
holdings may decrease in value. Losses on the other investment may be
substantially reduced by gains on a Derivative that reacts in an opposite manner
to market movements. While hedging can reduce losses, it can also reduce or
eliminate gains if the market moves in a different manner than anticipated by
the Fund 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 Fund, in which case any losses on the holdings being hedged may
not be reduced. The Fund is not required to use hedging and may choose not do
so.
The Fund may use the following types of derivative instruments and trading
strategies:
Indexed Securities
The Fund may invest in securities the potential return of which is based on
an index. As an illustration, the Fund may invest in a debt security that pays
interest based on the current value of an interest rate index, such as the prime
rate. The Fund may also invest in a debt security which returns principal at
maturity based on the level of a securities index or a basket of securities, or
based on the relative changes of two indices. Indexed securities involve credit
risk, and certain indexed securities may involve leverage risk, liquidity risk,
and currency risk. The Fund may invest in indexed securities for hedging
purposes only. When used for hedging purposes, indexed securities involve
correlation risk.
Options on Securities and Securities Indices
Purchasing Put Options. The Fund may purchase put options on securities
held in its portfolio or on securities or interest rate indices which are
correlated with securities held in its portfolio. When the Fund purchases a put
option in consideration for an up front payment (the "option premium"), the Fund
acquires a right to sell to another party specified securities owned by the Fund
at a specified price (the "exercise price") on or before a specified date (the
"expiration date"), in the case of an option on securities, or to receive from
another party a payment based on the amount a specified securities index
declines below a specified level on or before the expiration date, in the case
of an option on a securities index. The purchase of a put option limits the
Fund's risk of loss in the event of a decline in the market value of the
portfolio holdings underlying the put
4
<PAGE> 39
option prior to the option's expiration date. If the market value of the
portfolio holdings associated with the put option increases rather than
decreases, however, the Fund will lose the option premium and will consequently
realize a lower return on the portfolio holdings than would have been realized
without the purchase of the put. Purchasing a put option may involve correlation
risk, and may also involve liquidity and credit risk.
Purchasing Call Options. The Fund 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 the
Fund purchases a call option in consideration for the option premium, the Fund
acquires a right to purchase from another party specified securities at the
exercise price on or before the expiration date, in the case of an option on
securities, or to receive from another party a payment based on the amount a
specified securities index increases beyond a specified level on or before the
expiration date, in the case of an option on a securities index. The purchase of
a call option may protect the Fund from having to pay more for a security as a
consequence of increases in the market value for the security during a period
when the Fund is contemplating its purchase, in the case of an option on a
security, or attempting to identify specific securities in which to invest in a
market the Fund believes to be attractive, in the case of an option on an index
(an "anticipatory hedge"). In the event the Fund determines not to purchase a
security underlying a call option, however, the Fund may lose the entire option
premium. Purchasing a call option involves correlation risk, and may also
involve liquidity and credit risk.
The Fund 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. The Fund may write (i.e., sell) call options on
securities held in its portfolio or securities indices the performance of which
correlates with securities held in its portfolio. When the Fund writes a call
option, in return for an option premium, the Fund gives another party the right
to buy specified securities owned by the Fund at the exercise price on or before
the expiration date, in the case of an option on securities, or agrees to pay to
another party an amount based on any gain in a specified securities index beyond
a specified level on or before the expiration date, in the case of an option on
a securities index. The Fund may write call options to earn income, through the
receipt of option premiums. In the event the party to which the Fund has written
an option fails to exercise its rights under the option because the value of the
underlying securities is less than the exercise price, the Fund will partially
offset any decline in the value of the underlying securities through the receipt
of the option premium. By writing a call option, however, the Fund limits its
ability to sell the underlying securities and gives up the opportunity to profit
from any increase in the value of the underlying securities beyond the exercise
price, while the option remains outstanding. Writing a call option may involve
correlation risk.
The Fund 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, the Fund will only write
call or put options that are "covered." A call or put option will be considered
covered if the Fund has segregated assets with respect to such option in the
manner described in "Risk Factors in Derivatives" below. A call option will also
be considered covered if the Fund owns the securities it would be required to
deliver upon exercise of the option (or, in the case of an option on a
securities index, securities which substantially correlate with the performance
of such index) or owns a call option, warrant or convertible instrument which is
immediately exercisable for, or convertible into, such security.
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.
5
<PAGE> 40
Futures
The 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, the
Fund is required to deposit collateral ("margin") equal to a percentage
(generally less than 10%) of the contract value. Each day thereafter until the
futures position is closed, the Fund will pay additional margin representing any
loss experienced as a result of the futures position the prior day or be
entitled to a payment representing any profit experienced as a result of the
futures position the prior day. Futures involve substantial leverage risk.
The sale of a futures contract limits the Fund's risk of loss through a
decline in the market value of portfolio holdings correlated with the futures
contract prior to the futures contract's expiration date. In the event the
market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, the Fund will realize a loss on the
futures position and a lower return on the portfolio holdings than would have
been realized without the purchase of the futures contract.
The purchase of a futures contract may protect the Fund from having to pay
more for securities as a consequence of increases in the market value for such
securities during a period when the Fund was attempting to identify specific
securities in which to invest in a market the Fund believes to be attractive. In
the event that such securities decline in value or the Fund determines not to
complete an anticipatory hedge transaction relating to a futures contract,
however, the Fund may realize a loss relating to the futures position.
The Fund will limit transactions in futures and options on futures to
financial futures contracts (i.e., contracts for which the underlying asset is a
currency or securities or interest rate index) purchased or sold for hedging
purposes (including anticipatory hedges). The Fund will further limit
transactions in futures and options on futures to the extent necessary to
prevent the Fund from being deemed a "commodity pool" under regulations of the
Commodity Futures Trading Commission.
Foreign Exchange Transactions
The Fund may engage in spot and forward foreign exchange transactions and
currency swaps, purchase and sell options on currencies and purchase and sell
currency futures and related options thereon (collectively, "Currency
Instruments") for purposes of hedging against the decline in the value of
currencies in which its portfolio holdings are denominated against the U.S.
dollar.
Forward Foreign Exchange Transactions. Forward foreign exchange
transactions are OTC contracts to purchase or sell a specified amount of a
specified currency or multinational currency unit at a price and future date set
at the time of the contract. Spot foreign exchange transactions are similar but
require current, rather than future, settlement. The Fund will enter into
foreign exchange transactions only for purposes of hedging either a specific
transaction or a position held by the Trust. The Fund may enter into a foreign
exchange transaction for purposes of hedging a specific transaction by, for
example, purchasing a currency needed to settle a security transaction or
selling a currency in which the Fund has received or anticipates receiving a
dividend or distribution. The Fund may enter into a foreign exchange transaction
for purposes of hedging a position held by the Trust by selling forward a
currency in which a position held by the Trust is denominated or by purchasing a
currency in which the Fund anticipates acquiring a position held by the Trust in
the near future. The Fund may also hedge positions held by the Trust through
currency swaps, which are transactions in which one currency is simultaneously
bought for a second currency on a spot basis and sold for the second currency on
a forward basis. Forward foreign exchange transactions involve substantial
currency risk, and also involve credit and liquidity risk.
Currency Futures. The Fund may also hedge against the decline in the value
of a currency against the U.S. dollar through use of currency futures or options
thereon. Currency futures are similar to forward foreign exchange transactions
except that futures are standardized, exchange-traded contracts. See "Futures."
Currency futures involve substantial currency risk, and also involve leverage
risk.
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Currency Options. The Fund may also hedge against the decline in the value
of a currency against the U.S. dollar through the use of currency options.
Currency options are similar to options on securities, but in consideration for
an option premium the writer of a currency option is obligated to sell (in the
case of a call option) or purchase (in the case of a put option) a specified
amount of a specified currency on or before the expiration date for a specified
amount of another currency. The Fund may engage in transactions in options on
currencies either on exchanges or OTC markets. See "Types of Options" above and
"Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives" below. Currency options involve substantial currency risk, and may
also involve credit, leverage or liquidity risk.
Limitations on Currency Hedging. The Fund will not speculate in Currency
Instruments. Accordingly, the Fund will not hedge a currency in excess of the
aggregate market value of the securities which it owns (including receivables
for unsettled securities sales), or has committed to or anticipates purchasing,
which are denominated in such currency. The Fund may, however, hedge a currency
by entering into a transaction in a Currency Instrument denominated in a
currency other than the currency being hedged (a "cross-hedge"). The Fund will
only enter into a cross-hedge if Fund Asset Management, L.P. (the "Manager")
believes that (i) there is a demonstrable high correlation between the currency
in which the cross-hedge is denominated and the currency being hedged, and (ii)
executing a cross-hedge through the currency in which the cross-hedge is
denominated will be significantly more cost-effective or provide substantially
greater liquidity than executing a similar hedging transaction by means of the
currency being hedged.
Risk Factors in Hedging Foreign Currency Risks. Hedging transactions
involving Currency Instruments involve substantial risks, including correlation
risk. While the Fund's use of Currency Instruments to effect hedging strategies
is intended to reduce the volatility of the net asset value of the Fund's
shares, the net asset value of the Fund's shares will fluctuate. Moreover,
although Currency Instruments will be used with the intention of hedging against
adverse currency movements, transactions in Currency Instruments involve the
risk that anticipated currency movements will not be accurately predicted and
that the Fund's hedging strategies will be ineffective. To the extent that the
Fund hedges against anticipated currency movements which do not occur, the Fund
may realize losses, and decreases its total return, as the result of its hedging
transactions. Furthermore, the Fund will only engage in hedging activities from
time to time and may not be engaging in hedging activities when movements in
currency exchange rates occur.
It may not be possible for the Fund to hedge against currency exchange rate
movements, even if correctly anticipated, in the event that (i) the currency
exchange rate movement is so generally anticipated that the Fund is not able to
enter into a hedging transaction at an effective price, or (ii) the currency
exchange rate movement relates to a market with respect to which Currency
Instruments are not available and it is not possible to engage in effective
foreign currency hedging.
Risk Factors in Derivatives
Derivatives are volatile and involve significant risks, including:
Credit risk -- the risk that the counterparty (the party on the other
side of the transaction) on a derivative transaction will be unable to
honor its financial obligation to the Fund.
Currency risk -- the risk that changes in the exchange rate between
two currencies will adversely affect the value (in U.S. dollar terms) of an
investment.
Leverage risk -- the risk associated with certain types of investments
or trading strategies (such as borrowing money to increase the amount of
investment) 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.
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Use of Derivatives for hedging purposes involves correlation risk. If the
value of the Derivative moves more or less than the value of the hedged
instruments the Fund will experience a gain or loss that will not be completely
offset by movements in the value of the hedged instruments.
The Fund intends to enter into transactions involving Derivatives only if
there appears to be a liquid secondary market for such instruments or, in the
case of illiquid instruments traded in OTC transactions, such instruments
satisfy the criteria set forth below under "Additional Risk Factors of OTC
Transactions; Limitations on the Use of OTC Derivatives." However, there can be
no assurance that, at any specific time, either a liquid secondary market will
exist for a Derivative or the Fund will otherwise be able to sell such
instrument at an acceptable price. It may therefore not be possible to close a
position in a Derivative without incurring substantial losses, if at all.
Certain transactions in Derivatives (such as futures transactions or sales
of put options) involve substantial leverage risk and may expose the Fund to
potential losses, which exceed the amount originally invested by the Fund. When
the Fund engages in such a transaction, the Fund will deposit in a segregated
account at its custodian liquid securities with a value at least equal to the
Fund's exposure, on a mark-to-market basis, to the transaction (as calculated
pursuant to requirements of the 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 Fund's
exposure to loss.
Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives
Certain Derivatives traded in OTC markets, including indexed securities,
swaps and OTC options, involve substantial liquidity risk. The absence of
liquidity may make it difficult or impossible for the Fund to sell such
instruments promptly at an acceptable price. The absence of liquidity may also
make it more difficult for the Fund to ascertain a market value for such
instruments. The Fund will therefore acquire illiquid OTC instruments (i) if the
agreement pursuant to which the instrument is purchased contains a formula price
at which the instrument may be terminated or sold, or (ii) for which the Manager
anticipates the Fund can receive on each business day at least two independent
bids or offers, unless a quotation from only one dealer is available, in which
case that dealer's quotation may be used.
Because Derivatives traded in OTC markets are not guaranteed by an exchange
or clearing corporation and generally do not require payment of margin, to the
extent that the Fund has unrealized gains in such instruments or has deposited
collateral with its counterparty, the Fund is at risk that its counterparty will
become bankrupt or otherwise fail to honor its obligations. The Fund will
attempt to minimize the risk that a counterparty will become bankrupt or
otherwise fail to honor its obligations by engaging in transactions in
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.
CONVERTIBLE SECURITIES
Convertible securities entitle the holder to receive interest payments paid
on corporate debt securities or the dividend preference on a preferred stock
until such time as the convertible security matures or is redeemed or until the
holder elects to exercise the conversion privilege. Synthetic convertible
securities may be either (i) a debt security or preferred stock that may be
convertible only under certain contingent circumstances or that may pay the
holder a cash amount based on the value of shares of underlying common stock
partly or wholly in lieu of a conversion right (a "Cash-Settled Convertible") or
(ii) a combination of separate securities chosen by the Manager in order to
create the economic characteristics of a convertible security, i.e., a fixed
income security paired with a security with equity conversion features, such as
an option or warrant (a "Manufactured Convertible").
The characteristics of convertible securities make them appropriate
investments for an investment company seeking a high total return from capital
appreciation and investment income. These characteristics include the potential
for capital appreciation as the value of the underlying common stock increases,
the relatively high yield received from dividend or interest payments as
compared to common stock dividends and decreased risks of decline in value
relative to the underlying common stock due to their fixed-income nature.
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As a result of the conversion feature, however, the interest rate or dividend
preference on a convertible security is generally less than would be the case if
the securities were issued in nonconvertible form.
In analyzing convertible securities, the Manager will consider both the
yield on the convertible security and the potential capital appreciation that is
offered by the underlying common stock.
Convertible securities are issued and traded in a number of securities
markets. For the past several years, the principal markets have been the United
States, the Euromarket and Japan. Issuers during this period have included major
corporations domiciled in the United States, Japan, France, Switzerland, Canada
and the United Kingdom. Even in cases where a substantial portion of the
convertible securities held by the Fund are denominated in United States
dollars, the underlying equity securities may be quoted in the currency of the
country where the issuer is domiciled. With respect to convertible securities
denominated in a currency different from that of the underlying equity
securities, the conversion price may be based on a fixed exchange rate
established at the time the security is issued. As a result, fluctuations in the
exchange rate between the currency in which the debt security is denominated and
the currency in which the share price is quoted will affect the value of the
convertible security. As described below, the Fund is authorized to enter into
foreign currency hedging transactions in which it may seek to reduce the effect
of such fluctuations.
Apart from currency considerations, the value of convertible securities is
influenced by both the yield of nonconvertible securities of comparable issuers
and by the value of the underlying common stock. The value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value." To the
extent interest rates change, the investment value of the convertible security
typically will fluctuate. However, at the same time, the value of the
convertible security will be influenced by its "conversion value," which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock. If, because of a low price of the
common stock the conversion value is substantially below the investment value of
the convertible security, the price of the convertible security is governed
principally by its investment value.
To the extent the conversion value of a convertible security increases to a
point that approximates or exceeds its investment value, the price of the
convertible security will be influenced principally by its conversion value. A
convertible security will sell at a premium over the conversion value to the
extent investors place value on the right to acquire the underlying common stock
while holding a fixed-income security. The yield and conversion premium of
convertible securities issued in Japan and the Euromarket are frequently
determined at levels that cause the conversion value to affect their market
value more than the securities' investment value.
Holders of convertible securities generally have a claim on the assets of
the issuer prior to the common stockholders but may be subordinated to other
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by the Fund is
called for redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security under certain
circumstances.
As indicated above, synthetic convertible securities may include either
Cash-Settled Convertibles or Manufactured Convertibles. Cash-Settled
Convertibles are instruments that are created by the issuer and have the
economic characteristics of traditional convertible securities but may not
actually permit conversion into the underlying equity securities in all
circumstances. As an example, a private company may issue a Cash-Settled
Convertible that is convertible into common stock only if the company
successfully completes a public offering of its common stock prior to maturity
and otherwise pays a cash amount to reflect any equity appreciation.
Manufactured Convertibles are created by the Manager by combining separate
securities that possess one of the two principal characteristics of a
convertible security, i.e., fixed income ("fixed income component") or a right
to acquire equity securities ("convertible component"). The fixed income
component is achieved by investing in nonconvertible fixed income securities,
such as nonconvertible bonds, preferred
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<PAGE> 44
stocks and money market instruments. The convertibility component is achieved by
investing in call options, warrants, LEAPS, or other securities with equity
conversion features ("equity features") granting the holder the right to
purchase a specified quantity of the underlying stocks within a specified period
of time at a specified price or, in the case of a stock index option, the right
to receive a cash payment based on the value of the underlying stock index.
A Manufactured Convertible differs from traditional convertible securities
in several respects. Unlike a traditional convertible security, which is a
single security having a unitary market value, a Manufactured Convertible is
comprised of two or more separate securities, each with its own market value.
Therefore, the total "market value" of such a Manufactured Convertible is the
sum of the values of its fixed-income component and its convertibility
component.
More flexibility is possible in the creation of a Manufactured Convertible
than in the purchase of a traditional convertible security. Because many
corporations have not issued convertible securities, the Manager may combine a
fixed income instrument and an equity feature with respect to the stock of the
issuer of the fixed income instrument to create a synthetic convertible security
otherwise unavailable in the market. The Manager may also combine a fixed income
instrument of an issuer with an equity feature with respect to the stock of a
different issuer when the Manager believes such a Manufactured Convertible would
better promote the Fund's objective than alternative investments. For example,
the Manager may combine an equity feature with respect to an issuer's stock with
a fixed income security of a different issuer in the same industry to diversify
the Fund's credit exposure, or with a U.S. Treasury instrument to create a
Manufactured Convertible with a higher credit profile than a traditional
convertible security issued by that issuer. A Manufactured Convertible also is a
more flexible investment in that its two components may be purchased separately
and, upon purchasing the separate securities, "combined" to create a
Manufactured Convertible. For example, the Fund may purchase a warrant for
eventual inclusion in a Manufactured Convertible while postponing the purchase
of a suitable bond to pair with the warrant pending development of more
favorable market conditions.
The value of a Manufactured Convertible may respond differently to certain
market fluctuations than would a traditional convertible security with similar
characteristics. For example, in the event the Fund created a Manufactured
Convertible by combining a short-term U.S. Treasury instrument and a call option
on a stock, the Manufactured Convertible would likely outperform a traditional
convertible of similar maturity and which is convertible into that stock during
periods when Treasury instruments outperform corporate fixed income securities
and underperform during periods when corporate fixed-income securities
outperform Treasury instruments.
DEBT SECURITIES
Debt securities, such as bonds, involve credit risk. This is the risk that
the issuer will not make timely payments of principal and interest. The degree
of credit risk depends on the issuer's financial condition and on the terms of
the bonds. This risk is reduced to the extent the 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.
WARRANTS
The Fund may invest in warrants. Warrants are securities that permit but do
not require the warrant holder to subscribe for other securities. Buying a
warrant does not make the Fund a shareholder of the underlying stock. The
warrant holder has no right to dividends or votes on the underlying stock. A
warrant does not carry any right to assets of the issuer, and for this reason
investment in warrants may be more speculative than other equity-based
investments.
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OTHER INVESTMENT POLICIES AND PRACTICES
Temporary Investments. The Fund reserves the right, as a temporary
defensive measure, and without limitation, to hold in excess of 35% of its total
assets in cash or cash equivalents and investment grade, short-term securities
including money market securities ("Temporary Investments"). Under certain
adverse investment conditions, the Fund may restrict the markets in which its
assets will be invested and may increase the proportion of assets invested in
Temporary Investments. Investments made for defensive purposes will be
maintained only during periods in which the Manager determines that economic or
financial conditions are adverse for holding or being fully invested in equity
securities. A portion of the Fund normally will be held in Temporary Investments
in anticipation of investment in equity securities or to provide for possible
redemptions.
Illiquid or Restricted Securities. The Fund may invest up to 15% of its
net assets in securities that lack an established secondary trading market or
otherwise are considered illiquid. Liquidity of a security relates to the
ability to dispose easily of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for a
comparable more liquid security. Illiquid securities may trade at a discount
from comparable, more liquid investments. Investment of the Fund's assets in
illiquid securities may restrict the ability of the Fund to dispose of such
investments in a timely fashion and for a fair price as well as its ability to
take advantage of market opportunities. The risks associated with illiquidity
will be particularly acute where the Fund's operations require cash, such as
when the Fund redeems shares or pays dividends, and could result in the Fund
borrowing to meet short-term cash requirements or incurring capital losses on
the sale of illiquid investments.
The Fund may invest in securities that are "restricted securities."
Restricted securities have contractual or legal restrictions on their resale and
include "private placement" securities that the Fund 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. 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 less liquid and more
difficult to value than publicly traded securities. To the extent that privately
placed securities may be resold in privately negotiated transactions, the prices
realized from the sales, due to illiquidity, could be less than those originally
paid by the Fund or less than their fair market value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. In addition, issuers whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements that may be applicable if their securities were publicly
traded. If any privately placed securities held by the Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of registration. Certain
of the Fund's investments in private placements may consist of direct
investments and may include investments in smaller, less seasoned issuers, which
may involve greater risks. These issuers may have limited product lines, markets
or financial resources, or they may be dependent on a limited management group.
In making investments in such securities, the Fund may obtain access to material
nonpublic information which may restrict the Fund's ability to conduct portfolio
transactions in such securities.
144A Securities. The Fund may purchase restricted securities that can be
offered and sold to "qualified institutional buyers" under Rule 144A under the
Securities Act. The Board of Directors has determined to treat as liquid Rule
144A securities that are either freely tradable in their primary markets
offshore or have been determined to be liquid in accordance with the policies
and procedures adopted by the Fund's Board of Directors. The Board of Directors
has adopted guidelines and delegated to the Manager the daily function of
determining and monitoring liquidity of restricted securities. The Board of
Directors, however, will retain sufficient oversight and be ultimately
responsible for the determinations. Since it is not possible to predict with
assurance exactly how this market for restricted securities sold and offered
under Rule 144A will continue to develop, the Board will carefully monitor the
Fund's investments in these securities. This investment practice could have the
effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these securities.
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When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase or sell securities on a delayed delivery basis or a when-issued basis
at fixed purchase terms. These transactions arise when securities are purchased
or sold by the Fund with payment and delivery taking place in the future. The
purchase will be recorded on the date the Fund enters into the commitment and
the value of the obligation will thereafter be reflected in the calculation of
the Fund's net asset value. The value of the obligation on the delivery date may
be more or less than its purchase price. A separate account of the Fund will be
established with its custodian consisting of liquid securities having a market
value at all times at least equal to the amount of the forward commitment.
Repurchase Agreements and Purchase and Sale Contracts. The Fund may invest
in securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements and purchase and sale contracts may be entered into only
with financial institutions which (i) have, in the opinion of Fund management,
substantial capital relative to the Fund's exposure, or (ii) have provided the
Fund with a third-party guaranty or other credit enhancement. Under a repurchase
agreement or a purchase and sale contract, the seller agrees, upon entering into
the contract with the Fund, to repurchase the security at a mutually agreed upon
time and price in a specified currency, thereby determining the yield during the
term of the agreement. This results in a fixed rate of return insulated from
market fluctuations during such period although it may be affected by currency
fluctuations. In the case of repurchase agreements, the price at which the
trades are conducted do not reflect accrued interest on the underlying
obligation; whereas, in the case of purchase and sale contracts, the prices take
into account accrued interest. Such agreements usually cover short periods, such
as under one week. Repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities transferred to
the purchaser. In the case of a repurchase agreement, as a purchaser, the Fund
will require the seller to provide additional collateral if the market value of
the securities falls below the repurchase price at any time during the term of
the repurchase agreement; the Fund does not have the right to seek additional
collateral in the case of purchase and sale contracts. In the event of default
by the seller under a repurchase agreement construed to be a collateralized
loan, the underlying securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs or possible losses in connection
with the disposition of the collateral. A purchase and sale contract differs
from a repurchase agreement in that the contract arrangements stipulate that the
securities are owned by the Fund. In the event of a default under such a
repurchase agreement or under a purchase and sale contract, instead of the
contractual fixed rate, the rate of return to the Fund shall be dependent upon
intervening fluctuations of the market value of such securities and the accrued
interest on the securities. In such event, the Fund would have rights against
the seller for breach of contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform. While the substance
of purchase and sale contracts is similar to repurchase agreements, because of
the different treatment with respect to accrued interest and additional
collateral, Fund management believes that purchase and sale contracts are not
repurchase agreements as such term is understood in the banking and brokerage
community. The Fund may not invest more than 15% of its net assets in repurchase
agreements or purchase and sale contracts maturing in more than seven days
together with all other illiquid investments.
Securities Lending. Subject to the investment restrictions set forth in
the Prospectus and herein, the Fund may, from time to time, lend securities from
its portfolio to approved borrowers and receive therefor collateral in cash or
securities issued or guaranteed by the United States Government. Such collateral
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The purpose of such loans is to
permit the borrower to use such securities for delivery to purchasers when such
borrower has sold short. If cash collateral is received by the 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 the Fund. Alternatively,
if securities are delivered to the Fund as collateral, the Fund and the borrower
negotiate a rate for the loaned premium to be received by the Fund for lending
its portfolio securities. In either event, the total yield on the Fund's
portfolio is increased by loans of its portfolio securities. The Fund will have
the right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. Such loans are terminable at any time, and the
borrower, after notice, will be required to return borrowed securities within
five business days. The Fund may
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<PAGE> 47
pay reasonable finder's, administrative and custodial fees in connection with
such loans. With respect to the lending of portfolio securities, there is the
risk of failure by the borrower to return the securities involved in such
transactions.
Suitability. The economic benefit of an investment in the Fund depends
upon many factors beyond the control of the Trust, the Fund, the Manager and its
affiliates. The Fund should be considered a vehicle for diversification and not
as a balanced investment program. The suitability for any particular investor of
a purchase of shares in the Fund will depend on, among other things, such
investor's investment objectives and such investor's ability to accept the risks
associated with investing in securities, including the risk of loss of
principal.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions and policies relating to
the investment of the Fund's assets and its activities. The fundamental
restrictions set forth below may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities (which for
this purpose 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 Fund's assets below are in terms of
current market value. Provided that none of the following restrictions shall
prevent the Fund from investing all of its assets in shares of another
registered investment company with the same investment objective (in a
master/feeder structure), the Fund may not:
1. Make any investment inconsistent with the Fund's classification as
a diversified company under the Investment Company Act.
2. Invest more than 25% of its total assets, taken at market value at
the time of each investment, in the securities of issuers in any particular
industry (excluding the U.S. Government and its agencies and
instrumentalities).
3. Make investments for the purpose of exercising control or
management. Investments by the 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.
4. Purchase or sell real estate, except that, to the extent permitted
by applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that
invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in
governmental obligations, commercial paper, pass-through instruments,
certificates of deposit, bankers' acceptances, repurchase agreements,
purchase and sale contracts or any similar instruments shall not be deemed
to be the making of a loan, and except further that the Fund may lend its
portfolio securities, provided that the lending of portfolio securities may
be made only in accordance with applicable law and the guidelines set forth
in the Fund's Prospectus and Statement of Additional Information, as they
may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate
applicable law.
7. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the Fund
may purchase securities on margin to the extent permitted by applicable
law. The Fund may not pledge its assets other than to secure such
borrowings or, to the extent permitted by the Fund's investment policies as
set forth in its Prospectus and Statement of Additional Information, as
they may be amended from time to time, in connection with hedging
transactions, short sales, when-issued and forward commitment transactions
and similar investment strategies.
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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 of 1933,
as amended (the "Securities Act") in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to
the extent that the Fund may do so in accordance with applicable law and
the Fund's Prospectus and this Statement of Additional Information, as they
may be amended from time to time, and without registering as a commodity
pool operator under the Commodity Exchange Act.
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 the Trust without the approval of the holders of a
majority of the interests of the Trust.
In addition, the Fund has adopted non-fundamental restrictions that may be
changed by the Board of Directors of the Fund without shareholder approval. Like
the fundamental restrictions, none of the non-fundamental restrictions,
including but not limited to restriction (a) below, shall prevent the 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, the Fund may not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law. As a matter of
policy, however, the Fund will not purchase shares of any registered
open-end investment company or registered unit investment trust, in
reliance on Section 12(d)(1)(F) or (G) (the "fund of funds" provisions) of
the Investment Company Act, at any time its shares are owned by another
investment company that is part of the same group of investment companies
as the Fund.
b. Make short sales of securities or maintain a short position, except
to the extent permitted by applicable law. The Fund currently does not
intend to engage in short sales, except short sales "against the box."
c. Invest in securities 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 Fund have otherwise determined to be
liquid pursuant to applicable law. Securities purchased in accordance with
Rule 144A under the Securities Act (which are restricted securities that
can be resold to qualified institutional buyers, but not to the general
public) and determined to be liquid by the Board of Directors of the Fund
are not subject to the limitations set forth in this investment
restriction.
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 Fund from purchasing securities
on margin. The deposit or payment by the Fund of initial or variation
margin in connection with financial futures contracts or options
transactions is not considered to be the purchase of a security on margin.
The purchase of securities while a borrowing is outstanding will have the
effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk and borrowed funds are subject to interest
costs which will reduce net income. The Fund will not purchase securities
while borrowing exceeds 5% of its total assets.
The staff of the Commission has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities. Therefore, the Fund and the Trust have adopted an investment policy
pursuant to which neither the Fund nor the Trust 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
14
<PAGE> 49
OTC options currently outstanding that are held by the Fund or the Trust, the
market value of the underlying securities covered by OTC call options currently
outstanding that were sold by the Fund or the Trust and margin deposits on the
Fund's or the Trust's existing OTC options on financial futures contracts
exceeds 15% of the net assets of the Fund or the Trust, taken at market value,
together with all other assets of the Fund or the Trust that are illiquid or are
not otherwise readily marketable. However, if the OTC option is sold by the Fund
or the Trust to a primary U.S. Government securities dealer recognized by the
Federal Reserve Bank of New York and if the Fund or the Trust has the
unconditional contractual right to repurchase such OTC option from the dealer at
a predetermined price, then the Fund or the Trust will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price less the
amount by which the option is "in-the-money" (i.e., current market value of the
underlying securities minus the option's strike price). The repurchase price
with the primary dealers is typically a formula price 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 the Fund or the Trust and may be amended by the Board of Directors of
the Fund or the Board of Trustees of the Trust without the approval of the
Fund's shareholders. However, the Directors or the 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, the 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.
As another non-fundamental policy, the Fund will not invest in securities
that are (a) subject to material legal restrictions on repatriation of assets or
(b) cannot be readily resold because of legal or contractual restrictions or
which are not otherwise readily marketable, including repurchase agreements and
purchase and sales contracts maturing in more than seven days, if, regarding all
such securities, more than 15% of its net assets, taken at market value would be
invested in such securities.
Because of the affiliation of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") with the Manager, the Fund 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 Fund 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 Fund will not purchase securities for short-term trading
profits. However, the 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 Manager in light of a change in circumstances in general
market, economic or financial conditions. As a result of its investment
policies, the Fund may engage in a substantial number of portfolio transactions.
Accordingly, while the 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 the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. A high portfolio turnover rate
involves certain tax consequences and correspondingly greater transaction costs
in the form of dealer spreads and brokerage commissions, which are borne by the
Fund.
15
<PAGE> 50
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors of the Fund consist of seven individuals, five of whom are
not "interested persons" of the Fund 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 of the Fund
are responsible for the overall supervision of the operations of the Fund and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act. Information about the Directors and executive
officers of the Fund, their ages and their principal occupations for at least
the last five years are set forth below. Unless otherwise noted, the address of
each executive officer and Director is P.O. Box 9011, Princeton, New Jersey
08543-9011.
TERRY K. GLENN(58) -- President and Director (1)(2) -- Executive Vice
President of the Manager 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) -- 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.
ANDRE 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 COOPER 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.
JAMES D. MCCALL(46) -- Senior Vice President and Portfolio Manager
(1)(2) -- First Vice President of MLAM since 1999; portfolio manager for the
PBHG family of mutual funds from 1994 to 1999.
ROBERT C. DOLL, JR.(45) -- Senior Vice President (1)(2) -- Senior Vice
President of the Manager and MLAM since 1999; Senior Vice President of Princeton
Services since 1999; Chief Investment Officer of Oppenheimer Funds, Inc. in 1999
and Executive Vice President thereof from 1991 to 1999.
16
<PAGE> 51
DONALD C. BURKE(39) -- Vice President and Treasurer (1)(2) -- Senior Vice
President and Treasurer of the Manager 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.
SUSAN B. BAKER(42) -- Secretary (1)(2) -- Director (Legal Advisory) of MLAM
since 1999; Vice President of MLAM from 1993 to 1999; Attorney associated with
MLAM since 1987.
- ---------------
(1) Interested person, as defined in the Investment Company Act, of the Trust
and the Fund.
(2) Such Director or officer is a trustee, director or officer of other
investment companies for which the Manager, or one of its affiliates, acts
as investment adviser or manager.
(3) Member of the Fund's Audit and Nominating Committee, which is responsible
for the selection of the independent auditors and the selection and
nomination of non-interested Directors.
As of December 1, 1999, the officers and Directors of the Fund as a group
(11 persons) owned an aggregate of less than 1% of the outstanding shares of
common stock of Merrill Lynch & Co., Inc. ("ML & Co.") and owned an aggregate of
less than 1% of the outstanding shares of the Fund.
COMPENSATION OF DIRECTORS/TRUSTEES
The Trust pays fees to each non-interested Director/Trustee for service to
the Fund 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 Manager or its affiliate MLAM
("MLAM/FAM-advised funds"). The portion of the annual retainer allocated to each
MLAM/FAM-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 MLAM/FAM-advised funds. 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 MLAM/FAM-advised funds for which the Directors/Trustees serve
and are allocated equally among those funds. The Trust also reimburses the
non-interested 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 Trust.
The following table sets forth the estimated compensation to be earned by
the non-interested Directors/ Trustees for the fiscal year ending November 30,
2000 and the aggregate compensation paid to them from all investment companies
advised by the Manager or its affiliate MLAM ("MLAM/FAM-advised funds") to the
non-affiliated Directors/Trustees for the calendar year ended December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATE
PENSION OR ESTIMATED COMPENSATION FROM
RETIREMENT BENEFITS ANNUAL FUND/TRUST AND OTHER
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON MLAM/FAM-
NAME FUND/TRUST FUND/TRUST EXPENSE RETIREMENT ADVISED FUNDS(1)
- ---- ----------------- ------------------- ------------- --------------------
<S> <C> <C> <C> <C>
James H. Bodurtha.............. $ 2,455 None None $163,500
Herbert I. London.............. $ 2,455 None None $163,500
Joseph L. May.................. $ 2,455 None None $163,500
Andre F. Perold................ $ 2,455 None None $163,500
Roberta Cooper Ramo............ $ 4,625 None None None
</TABLE>
- ---------------
(1) The Directors serve on the boards of MLAM/FAM-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).
The Directors of the Fund and the Trustees of the Trust may be eligible for
reduced sales charges on purchases of Class A shares. See "Reduced Initial Sales
Charges -- Purchase Privileges of Certain Persons."
MANAGEMENT AND ADVISORY ARRANGEMENTS
Management Services and Management Fee. The Fund invests all of its assets
in shares of the Trust. Accordingly, the Fund does not invest directly in
portfolio securities and does not require investment advisory
17
<PAGE> 52
services. All portfolio management occurs at the level of the Trust. The Trust,
has entered into an investment management agreement with Fund Asset Management,
L.P., as Manager (the "Management Agreement"). As discussed in "Management of
the Fund -- Fund Asset Management" in the Prospectus, the Manager receives
monthly compensation at the annual rate of 0.75% of the average daily net assets
of the Trust for its services to the Trust.
The Manager has also entered into a sub-advisory agreement with Merrill
Lynch Asset Management U.K. Limited ("MLAM U.K.") pursuant to which MLAM U.K.
provides investment advisory services to the Manager with respect to the Fund.
The following entities may be considered "controlling persons" of MLAM U.K.:
Merrill Lynch Europe PLC (MLAM U.K.'s parent), a subsidiary of Merrill Lynch
International Holdings, Inc., a subsidiary of Merrill Lynch International, Inc.,
a subsidiary of ML & Co.
Payment of Trust Expenses. The Management Agreement obligates the Manager
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 and the Funds. The Manager 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 Manager or any
affiliate. The Trust pays, or causes to be paid, all other expenses incurred in
the operation of the Trust, 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 Manager or an
affiliate of the Manager, 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. The Distributor will pay certain of the expenses
of the Fund incurred in connection with the continuous offering of the Fund's
shares. Accounting services are provided to the Trust by the Manager or an
affiliate of the Manager, and the Trust reimburses the Manager or an affiliate
of the Manager for its costs in connection with such services.
Payment of Fund Expenses. The Fund pays, or causes an affiliate to pay,
all other expenses incurred in the operation of the Fund (except to the extent
paid by Merrill Lynch 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 and prospectuses and statements
of additional information, charges of the custodian, any sub-custodian and the
transfer agent, 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
Manager, or of an affiliate of the Manager, accounting and pricing costs
(including the daily calculation of net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
and other expenses properly payable by the Fund. The Distributor will pay
certain of the expenses of the Fund incurred in connection with the continuous
offering of its shares. Accounting services are provided to the Fund by the
Manager, and the Fund reimburses the Manager for its costs in connection with
such services.
Organization of the Manager. 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 Manager 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 Management Agreement will remain in effect for two years from its effective
date. Thereafter, it will remain in effect from year to year if approved
annually (a) by the Board of Trustees of the Trust or by a majority of the
outstanding shares of the Trust 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 contract is not assignable and may be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the vote of the shareholders of the Trust.
18
<PAGE> 53
Transfer Agency Services. Financial Data Services, Inc. (the "Transfer
Agent"), a subsidiary of ML & Co., acts as the Fund's Transfer Agent pursuant to
a Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer Agency
Agreement, the Transfer Agent is responsible for the issuance, transfer and
redemption of shares and the opening and maintenance of shareholder accounts.
Pursuant to the Transfer Agency Agreement, the Transfer Agent receives a fee of
$11.00 per Class A or Class D account and $14.00 per Class B or Class C account
and is entitled to reimbursement for certain transaction charges and
out-of-pocket expenses incurred by the Transfer Agent under the Transfer Agency
Agreement. Additionally, a $.20 monthly closed account charge will be assessed
on all accounts 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 Agreement, the term "account" includes a shareholder account maintained
directly by the Transfer Agent and any other account representing the beneficial
interest of a person in the relevant share class on a recordkeeping system,
provided the recordkeeping system is maintained by a subsidiary of ML & Co.
Distribution Expenses. The Fund has entered into separate distribution
agreements with the Distributor in connection with the continuous offering of
each class of shares of the Fund (the "Distribution Agreements"). The
Distribution Agreements obligate the Distributor to pay certain expenses in
connection with the offering of each class of shares of the Fund. After the
prospectuses, statements of additional information and periodic reports have
been prepared, set in type and mailed to shareholders, the Distributor pays for
the printing and distribution of copies thereof used in connection with the
offering to dealers and investors. The Distributor also pays for other
supplementary sales literature and advertising costs. The Distribution
Agreements are subject to the same renewal requirements and termination
provisions as the Management Agreement described above.
CODE OF ETHICS
The Board of Trustees of the Trust and the Board of Directors of the Fund
each have adopted a Code of Ethics under Rule 17j-1 of the Investment Company
Act that incorporates the Code of Ethics of the Manager (together, the "Codes").
The Codes significantly restrict the personal investing activities of all
employees of the Manager and, as described below, impose additional, more
onerous, restrictions on fund investment personnel.
The Codes require that all employees of the Manager pre-clear any personal
securities investment (with limited exceptions, such as government securities).
The pre-clearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Manager include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security that at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Manager.
Furthermore, the Codes provide for trading "blackout periods" that prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security (15 or 30 days depending upon the
transaction).
PURCHASE OF SHARES
Reference is made to "How to Buy, Sell, Transfer and Exchange Shares" in
the Prospectus for certain information as to the purchase of Fund shares.
The Fund issues four classes of shares under the Merrill Lynch Select
PricingSM System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives and shares of Class B and Class C are sold
to investors choosing the deferred sales charge alternatives. Each Class A,
Class B, Class C and Class D share of the Fund represents an identical interest
in the investment portfolio of the Fund and has the same rights, except that
Class B, Class C and Class D shares bear the expenses of the ongoing account
maintenance fees (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
19
<PAGE> 54
charge arrangements. The contingent deferred sales charges ("CDSCs"),
distribution fees and account maintenance fees that are imposed on Class B and
Class C shares, as well as the account maintenance fees that are imposed on
Class D shares, are imposed directly against those classes and not against all
assets of the Fund and, accordingly, such charges do not affect the net asset
value of any other class or have any impact on investors choosing another sales
charge option. Dividends paid by the Fund for each class of shares are
calculated in the same manner at the same time and differ only to the extent
that account maintenance and distribution fees and any incremental transfer
agency costs relating to a particular class are borne exclusively by that class.
Each class has different exchange privileges. See "Shareholder
Services -- Exchange Privilege."
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the CDSCs and distribution fees with respect to the Class B and Class C
shares in that the sales charges and distribution fees applicable to each class
provide for the financing of the distribution of the shares of the Fund. The
distribution-related revenues paid with respect to a class will not be used to
finance the distribution expenditures of another class. Sales personnel may
receive different compensation for selling different classes of shares.
The Merrill Lynch Select PricingSM System is used by more than 50
registered investment companies advised by MLAM or FAM. Funds advised by MLAM or
FAM that utilize the Merrill Lynch Select PricingSM System are referred to
herein as "Select Pricing Funds."
The Fund offers its shares at a public offering price equal to the next
determined net asset value per share plus any sales charge applicable to the
class of shares selected by the investor. The applicable offering price for
purchase orders is based upon the net asset value of the Fund next determined
after receipt of the purchase order by the Distributor. As to purchase orders
received by securities dealers prior to the close of business on the New York
Stock Exchange (the "NYSE") (generally 4:00 p.m., Eastern time) which includes
orders received after the determination of net asset value on the previous day,
the applicable offering price will be based on the net asset value on the day
the order is placed with the Distributor, provided that the orders are received
by the Distributor prior to 30 minutes after the close of business on the NYSE
on that day. If the purchase orders are not received prior to 30 minutes after
the close of business on the NYSE on that day, such orders shall be deemed
received on the next business day. Dealers have the responsibility of submitting
purchase orders to the Fund not later than 30 minutes after the close of
business on the NYSE in order to purchase shares at that day's offering price.
The Fund or the Distributor may suspend the continuous offering of the
Fund's shares of any class at any time in response to conditions in the
securities markets or otherwise and may thereafter resume such offering from
time to time. Any order may be rejected by the Fund or the Distributor. Neither
the Distributor nor the dealers are permitted to withhold placing orders to
benefit themselves by a price change. 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 ALTERNATIVES -- CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible
to purchase Class A shares should purchase Class A shares rather than Class D
shares because there is an account maintenance fee imposed on Class D shares.
Class A shares are offered to a limited group of investors and also will be
issued upon reinvestment of dividends on outstanding Class A shares. Investors
who currently own Class A shares in a shareholder account are entitled to
purchase additional Class A shares of the Fund in that account. In addition,
Class A shares are offered at net asset value to ML & Co. and its subsidiaries
and their directors and employees, to members of the Boards of Merrill Lynch and
MLAM/FAM-advised investment companies including the Fund, and to employees of
certain selected dealers. Certain persons who acquired shares of certain
MLAM/FAM-advised closed-end funds in their initial offerings who wish to
reinvest the net proceeds from a sale of their closed-end fund shares of common
stock in shares of the Fund also may purchase Class A shares of the Fund if
certain conditions are met. In addition, Class A shares of the Fund and certain
other Select Pricing Funds are offered at net asset value to shareholders of
Merrill Lynch Senior Floating Rate Fund, Inc. and, if certain conditions
20
<PAGE> 55
are met, to shareholders of Merrill Lynch Municipal Strategy Fund, Inc. and
Merrill Lynch High Income Municipal Bond Fund, Inc. who wish to reinvest the net
proceeds from a sale of certain of their shares of common stock pursuant to a
tender offer conducted by such funds in shares of the Fund and certain other
Select Pricing Funds.
The term "purchase," as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Fund, refers to a single purchase by an individual or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse and their children under
the age of 21 years purchasing shares for his 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 the Fund or shares of other
registered investment companies at a discount; provided, however, that it shall
not include purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and Class
D shares of the Fund will receive a concession equal to most of the sales
charge, they may be deemed to be underwriters under the Securities Act.
REDUCED INITIAL SALES CHARGES
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be needed
to obtain such investments.
Reinvested Dividends. No initial sales charges are imposed upon Class A
and Class D shares issued as a result of the automatic reinvestment of
dividends.
Rights of Accumulation. Reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of the purchaser's combined holdings of all classes
of shares of the Fund and of any other Select Pricing Funds. For any such right
of accumulation to be made available, the Distributor must be provided at the
time of purchase, by the purchaser or the purchaser's securities dealer, with
sufficient information to permit confirmation of qualification. Acceptance of
the purchase order is subject to such confirmation. The right of accumulation
may be amended or terminated at any time. Shares held in the name of a nominee
or custodian under pension, profit-sharing or other employee benefit plans may
not be combined with other shares to qualify for the right of accumulation.
Letter of Intent. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Fund or any
other Merrill Lynch 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
Fund's Transfer Agent. The Letter of Intent is not available to employee benefit
plans for which affiliates of the Manager provide plan participant record-
keeping services. The Letter of Intent is not a binding obligation to purchase
any amount of Class A or Class D shares; however, its execution will result in
the purchaser paying a lower sales charge at the appropriate quantity purchase
level. A purchase not originally made pursuant to a Letter of Intent may be
included under a subsequent Letter of Intent executed within 90 days of such
purchase if the Distributor is informed in writing of this intent within such
90-day period. The value of Class A and Class D shares of the Fund and other
Select Pricing Funds presently held, at cost or maximum offering price
(whichever is higher), on the date of the first purchase under the Letter of
Intent, may be included as a credit toward the completion of such Letter, but
the reduced sales charge applicable to the amount covered by such Letter will be
applied only to new purchases. If the total amount of shares does not equal the
amount stated in the Letter of Intent
21
<PAGE> 56
(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 A or Class D shares purchased at the reduced rate and the sales charge
applicable to the shares actually purchased through the Letter. Class A or Class
B shares equal to at least 5.0% of the intended amount will be held in escrow
during the 13-month period (while remaining registered in the name of the
purchaser) for this purpose. The first purchase under the Letter of Intent must
be at least 5.0% of the dollar amount of such Letter. If a purchase during the
term of such Letter would otherwise be subject to a further reduced sales charge
based on the right of accumulation, the purchaser will be entitled on that
purchase and subsequent purchases to that further reduced percentage sales
charge but there will be no retroactive reduction of the sales charge on any
previous purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intent will be deducted from
the total purchases made under such Letter. An exchange from the Summit Cash
Reserves Fund into the Fund that creates a sales charge will count toward
completing a new or existing Letter of Intent from the Fund.
Purchase Privileges of Certain Persons. Directors of the Fund, Trustees of
the Trust, members of the Boards of other MLAM/FAM-advised investment companies,
ML & Co. and its subsidiaries (the term "subsidiaries," when used herein with
respect to ML & Co., includes the Manager, MLAM and certain other entities
directly or indirectly wholly owned and controlled by ML & Co.) and their
directors and employees and any trust, pension, profit-sharing or other benefit
plan for such persons, may purchase Class A shares of the Fund at net asset
value. The Fund realizes economies of scale and reduction of sales-related
expenses by virtue of the familiarity of these persons with the Fund. Employees
and directors or trustees wishing to purchase shares of the Fund must satisfy
the Fund's suitability standards.
Class D shares of the Fund are offered at net asset value, without a sales
charge, to an investor that has a business relationship with a Financial
Consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchase by such investor, if the following
conditions are satisfied: first, the investor must advise Merrill Lynch that it
will purchase Class D shares of the Fund with proceeds from a redemption of
shares of a mutual fund that was sponsored by the Financial Consultant's
previous firm and was subject to a sales charge either at the time of purchase
or on a deferred basis; and second, the investor must establish that such
redemption had been made within 60 days prior to the investment in the Fund and
the proceeds from the redemption had been maintained in the interim in cash or a
money market fund.
Class D shares of the Fund are also offered at net asset value, without a
sales charge, to an investor that has a business relationship with a Merrill
Lynch Financial Consultant and that has invested in a mutual fund sponsored by a
non-Merrill Lynch company for which Merrill Lynch has served as a selected
dealer and where Merrill Lynch has either received or given notice that such
arrangement will be terminated ("notice") if the following conditions are
satisfied: first, the investor must purchase Class D shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and the shares of
such other fund were subject to a sales charge either at the time of purchase or
on a deferred basis; and, second, such purchase of Class D shares must be made
within 90 days after such notice.
Class D shares of the Fund are offered at net asset value, without a sales
charge, to an investor that has a business relationship with a Merrill Lynch
Financial Consultant and that has invested in a mutual fund for which Merrill
Lynch has not served as a selected dealer if the following conditions are
satisfied: first, the investor must advise Merrill Lynch that it will purchase
Class D shares of the Fund with proceeds from the redemption of shares of such
other mutual fund and that such shares have been outstanding for a period of no
less than six months; and, second, such purchase of Class D shares must be made
within 60 days after the redemption and the proceeds from the redemption must be
maintained in the interim in cash or a money market fund.
Closed-End Fund Investment Option. Class A shares of the Fund and certain
other Select Pricing Funds ("Eligible Class A Shares") are offered at net asset
value to shareholders of certain closed-end funds advised by FAM or MLAM who
purchased such closed-end fund shares prior to October 21, 1994 (the date the
Merrill Lynch Select PricingSM System commenced operations) and wish to reinvest
the net proceeds from a sale of their closed-end fund shares are offered Class A
shares, if the conditions set forth below are satisfied.
22
<PAGE> 57
Alternatively, closed-end fund shareholders who purchased such shares on or
after October 21, 1994 and wish to reinvest the net proceeds from a sale of
their closed-end fund shares are offered Class A shares (if eligible to buy
Class A shares) or Class D shares of the Fund and other Select Pricing Funds
("Eligible Class D Shares"), if the following conditions are met. First, the
sale of closed-end fund shares must be made through Merrill Lynch, and the net
proceeds therefrom must be immediately reinvested in Eligible Class A or
Eligible Class D Shares. Second, the closed-end fund shares must either have
been acquired in the initial public offering or be shares representing dividends
from shares of common stock acquired in such offering. Third, the closed-end
fund shares must have been continuously maintained in a Merrill Lynch securities
account. Fourth, there must be a minimum purchase of $250 to be eligible for the
investment option.
Shareholders of certain MLAM-advised continuously offered closed-end funds
may reinvest at net asset value the net proceeds from a sale of certain shares
of common stock of such funds in shares of the Fund. Upon exercise of this
investment option, shareholders of Merrill Lynch Senior Floating Rate Fund, Inc.
will receive Class A shares of the Fund and shareholders of Merrill Lynch
Municipal Strategy Fund, Inc. and Merrill Lynch High Income Municipal Bond Fund,
Inc. will receive Class D shares of the Fund, except that shareholders already
owning Class A shares of the Fund will be eligible to purchase additional Class
A shares pursuant to this option, if such additional Class A shares will be held
in the same account as the existing Class A shares and the other requirements
pertaining to the reinvestment privilege are met. In order to exercise this
investment option, a shareholder of one of the above-referenced continuously
offered closed-end funds (an "eligible fund") must sell his or her shares of
common stock of the eligible fund (the "eligible shares") back to the eligible
fund in connection with a tender offer conducted by the eligible fund and
reinvest the proceeds immediately in the designated class of shares of the Fund.
This investment option is available only with respect to eligible shares as to
which no Early Withdrawal charge or CDSC (each as defined in the eligible fund's
prospectus) is applicable. Purchase orders from eligible fund shareholders
wishing to exercise this investment option will be accepted only on the day that
the related tender offer terminates and will be effected at the net asset value
of the designated class of the Fund on such day.
Acquisition of Certain Investment Companies. Class D shares may be offered
at 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.
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be needed
in obtaining such investments.
DEFERRED SALES CHARGE -- CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in Select Pricing Funds.
Because no initial sales charges are deducted at the time of the purchase,
Class B and Class C shares provide the benefit of putting all of the investor's
dollars to work from the time the investment is made. The deferred sales charge
alternatives may be particularly appealing to investors that do not qualify for
the reduction in initial sales charges. Both Class B and Class C shares are
subject to ongoing account maintenance fees and distribution fees; however, the
ongoing account maintenance and distribution fees potentially may be offset to
the extent any return is realized on the additional funds initially invested in
Class B or Class C shares. In addition, Class B shares will be converted into
Class D shares of the Fund after a conversion period of approximately eight
years, and thereafter investors will be subject to lower ongoing fees.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net asset
value per share without the imposition of a sales charge at the time of
purchase. See "Pricing of Shares -- Determination of Net Asset Value" below.
Contingent Deferred Sales Charges -- Class B Shares. Class B shares that
are redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar amount subject thereto. In
determining whether a CDSC is applicable to a redemption, the calculation will
be
23
<PAGE> 58
determined in the manner that results in the lowest applicable rate being
charged. The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed. Accordingly, no
CDSC will be imposed on increases in net asset value above the initial purchase
price. In addition, no CDSC will be assessed on shares derived from reinvestment
of dividends. It will be assumed that the redemption is first of shares held for
over four years or shares acquired pursuant to reinvestment of dividends and
then of shares held longest during the four-year period. A transfer of shares
from a shareholder's account to another account will be assumed to be made in
the same order as a redemption.
The following table sets forth the Class B CDSC:
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
OF DOLLAR AMOUNT
YEAR SINCE PURCHASE PAYMENT MADE SUBJECT TO CHARGE
- -------------------------------- --------------------
<S> <C>
0-1............................................... 4.0%
1-2............................................... 3.0%
2-3............................................... 2.0%
3-4............................................... 1.0%
4 and thereafter.................................. None
</TABLE>
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares upon dividend reinvestment. If at such time the investor makes
his or her first redemption of 50 shares (proceeds of $600), 10 shares will not
be subject to a CDSC because of dividend reinvestment. With respect to the
remaining 40 shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the
applicable rate in the third year after purchase).
The Class B CDSC may be waived on redemptions of shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
("IRA") or other retirement plan or following the death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a shareholder
(including one who owns the Class B shares as joint tenant with his or her
spouse), provided the redemption is requested within one year of the death or
initial determination of disability, or if later, reasonably promptly following
completion of probate. The Class B CDSC also may be waived for any Class B
shares that are purchased by a Merrill Lynch rollover IRA that was funded by a
rollover from a terminated 401(k) plan managed by the MLAM Private Portfolio
Group and held in such account at the time of redemption. The Class B CDSC also
may be waived in connection with involuntary termination of an account in which
Fund shares are held or for withdrawals through the Merrill Lynch Systematic
Withdrawal Plan. See "Shareholder Services -- Fee-Based Programs" and
"-- Systematic Withdrawal Plan."
Conversion of Class B Shares to Class D Shares. After approximately eight
years (the "Conversion Period"), Class B shares will be converted automatically
into Class D shares of the Fund. Class D shares are subject to an ongoing
account maintenance fee of 0.25% of the average daily net assets but are not
subject to the distribution fee that is borne by Class B shares. Automatic
conversion of Class B shares into Class D shares will occur at least once each
month (on the "Conversion Date") on the basis of the relative net asset value of
the shares of the two classes on the Conversion Date, without the imposition of
any sales load, fee or other charge. Conversion of Class B shares to Class D
shares will not be deemed a purchase or sale of the shares for Federal income
tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
outstanding. If at the Conversion Date the conversion of Class B shares to Class
D shares of the Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B
24
<PAGE> 59
shares of the Fund held in the account on the Conversion Date will be converted
to Class D shares of the Fund.
In general, Class B shares of equity Select Pricing Funds will convert
approximately eight years after initial purchase and Class B shares of taxable
and tax-exempt fixed income Select Pricing Funds will convert approximately ten
years after initial purchase. If, during the Conversion Period, a shareholder
exchanges Class B shares with an eight-year Conversion Period for Class B shares
with a ten-year Conversion Period, or vice versa, the Conversion Period
applicable to the Class B shares acquired in the exchange will apply and the
holding period for the shares exchanged will be tacked on to the holding period
for the shares acquired. The Conversion Period also may be modified for
investors that participate in certain fee-based programs. See "Shareholder
Services -- Fee-Based Programs."
Class B shareholders of the Fund exercising the exchange privilege
described under "Shareholder Services -- Exchange Privilege" will continue to be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares acquired as a result of the exchange.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
Contingent Deferred Sales Charges -- Class C Shares. Class C shares that
are redeemed within one year of purchase may be subject to a 1.0% CDSC charged
as a percentage of the dollar amount subject thereto. In determining whether a
Class C CDSC is applicable to a redemption, the calculation will be determined
in the manner that results in the lowest possible rate being charged. The charge
will be assessed on an amount equal to the lesser of the proceeds of redemption
or the cost of the shares being redeemed. Accordingly, no Class C CDSC will be
imposed on increases in net asset value above the initial purchase price. In
addition, no Class C CDSC will be assessed on shares derived from reinvestment
of dividends. It will be assumed that the redemption is first of shares held for
over one year or shares acquired pursuant to reinvestment of dividends and then
of shares held longest during the one-year period. A transfer of shares from a
shareholder's account to another account will be assumed to be made in the same
order as a redemption. The Class C CDSC may be reduced or waived in connection
with involuntary termination of an account in which Fund shares are held and
withdrawals through the Merrill Lynch Systematic Withdrawal Plans. See
"Shareholder Services -- Systematic Withdrawal Plan." The Class C CDSC of the
Fund and certain other MLAM-advised mutual funds may be waived with respect to
Class C shares purchased by an investor with the net proceeds of a tender offer
made by certain MLAM-advised closed end funds, including Merrill Lynch Senior
Floating Rate Fund II, Inc. Such waiver is subject to the requirement that the
tendered shares shall have been held by the investor for a minimum of one year
and to such other conditions as are set forth in the prospectus for the related
closed end fund.
Class B and Class C Sales Charge Information. Merrill Lynch compensates
its Financial Consultants for selling Class B and Class C shares at the time of
purchase from its own funds. Proceeds from the CDSC and the distribution fee are
paid to the Distributor and are used in whole or in part by the Distributor to
defray the expenses of dealers (including Merrill Lynch) related to providing
distribution-related services to the Fund in connection with the sale of the
Class B and Class C shares, such as the payment of compensation to financial
consultants for selling Class B and Class C shares from the dealer's own funds.
The combination of the CDSC and the ongoing distribution fee facilitates the
ability of the Fund to sell the Class B and Class C shares without a sales
charge being deducted at the time of purchase. See "Distribution Plans" below.
Imposition of the CDSC and the distribution fee on Class B and Class C shares is
limited by the National Association of Securities Dealers, Inc. (the "NASD")
asset-based sales charge rule. See "Limitations on the Payment of Deferred Sales
Charges" below.
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<PAGE> 60
DISTRIBUTION PLANS
Reference is made to "Fees and Expenses" in the Prospectus for certain
information with respect to the separate distribution plans for Class B, Class C
and Class D shares of the Fund pursuant to Rule 12b-1 under the Investment
Company Act (each a "Distribution Plan") with respect to the account maintenance
and/or distribution fees paid by the Fund to the Distributor with respect to
such classes.
The Distribution Plan for each of the Class B, Class C and Class D shares
provides that the Fund pays the Distributor an account maintenance fee relating
to the shares of the relevant class, accrued daily and paid monthly, at the
annual rate of 0.25% of the average daily net assets of the Fund attributable to
shares of the relevant class in order to compensate the Distributor and Merrill
Lynch (pursuant to a sub-agreement) in connection with account maintenance
activities with respect to Class B, Class C and Class D shares. Each of those
classes has exclusive voting rights with respect to the Distribution Plan
adopted with respect to such class pursuant to which account maintenance and/or
distribution fees are paid (except that Class B shareholders may vote upon any
material changes to expenses charged under the Class D Distribution Plan).
The Distribution Plan for each of the Class B and Class C shares provides
that the Fund also pays the Distributor a distribution fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual rate
of 0.75% of the average daily net assets of the Fund attributable to the shares
of the relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for providing shareholder and distribution
services and bearing certain distribution-related expenses of the Fund,
including payments to financial consultants for selling Class B and Class C
shares of the Fund. The Distribution Plans relating to Class B and Class C
shares are designed to permit an investor to purchase Class B and Class C shares
through dealers without the assessment of an initial sales charge and at the
same time permit the dealer to compensate its financial consultants in
connection with the sale of the Class B and Class C shares. In this regard, the
purpose and function of the ongoing distribution fees and the CDSC are the same
as those of the initial sales charge with respect to the Class A and Class D
shares of the Fund in that the ongoing distribution fees and deferred sales
charges provide for the financing of the distribution of the Fund's Class B and
Class C shares.
The Fund's Distribution Plans are subject to the provisions of Rule 12b-1
under the Investment Company Act. In their consideration of each Distribution
Plan, the Directors must consider all factors they deem relevant, including
information as to the benefits of the Distribution Plan to the Fund and 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 each Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the non-interested Directors
or by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to increase
materially the amount to be spent by the Fund without the approval of the
related class of shareholders and all material amendments are required to be
approved by the vote of Directors, including a majority of the non-interested
Directors who have no direct or indirect financial interest in the Distribution
Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further
requires that the Fund preserve copies of the Distribution Plan and any report
made pursuant to such plan for a period of not less than six years from the date
of the Distribution Plan or such report, the first two years in an easily
accessible place.
Among other things, each Distribution Plan provides that the Distributor
shall provide and the Directors shall review quarterly reports of the
disbursement of the account maintenance and/or distribution fees paid to the
Distributor. Payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses 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
26
<PAGE> 61
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 accrual 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 the Fund, the maximum sales charge rule limits the aggregate of
distribution fee payments and CDSCs payable by the Fund to (1) 6.25% of eligible
gross sales of Class B shares and Class C shares, computed separately (defined
to exclude shares issued pursuant to dividend reinvestments and exchanges), plus
(2) interest on the unpaid balance for the respective class, computed
separately, at the prime rate plus 1% (the unpaid balance being the maximum
amount payable minus amounts received from the payment of the distribution fee
and the CDSC). In connection with the Class B shares, the Distributor has
voluntarily agreed to waive interest charges on the unpaid balance in excess of
0.50% of eligible gross sales. Consequently, the maximum amount payable to the
Distributor (referred to as the "voluntary maximum") in connection with the
Class B shares is 6.75% of eligible gross sales. The Distributor retains the
right to stop waiving the interest charges at any time. To the extent payments
would exceed the voluntary maximum, the Fund will not make further payments of
the distribution fee with respect to Class B shares and any CDSCs will be paid
to the Fund rather than to the Distributor; however, the Fund will continue to
make payments of the account maintenance fee. In certain circumstances the
amount payable pursuant to the voluntary maximum may exceed the amount payable
under the NASD formula. In such circumstance payment in excess of the amount
payable under the NASD formula will not be made.
REDEMPTION OF SHARES
Reference is made to "How to Buy, Sell, Transfer and Exchange Shares" in
the Prospectus for certain information as to the redemption and purchase of Fund
shares.
The Fund is required to redeem for cash all shares of the Fund upon receipt
of a written request in proper form. The redemption price is the net asset value
per share next determined after the initial receipt of proper notice of
redemption. Except for any 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 Fund is not reasonably practicable,
and for such other periods as the Commission may by order permit for the
protection of shareholders of the Fund.
The value of shares of the Fund at the time of redemption may be more or
less than the shareholder's cost, depending in part on the market value of the
securities held by the Trust 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 Fund's Transfer Agent,
Financial Data Services, Inc., P.O. Box 45289,
27
<PAGE> 62
Jacksonville, Florida 32232-5289. 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 delivered other than by mail should
be delivered to Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484. Proper notice of redemption in the case of
shares deposited with the Transfer Agent may be accomplished by a written letter
requesting redemption. Proper notice of redemption in the case of shares for
which certificates have been issued may be accomplished by a written letter as
noted above accompanied by certificates for the shares to be redeemed.
Redemption requests should not be sent to the Trust or the Fund. 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 Agent's register. The signature(s) on the redemption request may
require a guarantee by an "eligible guarantor institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934 (the "Exchange Act"), the
existence and validity of which may be verified by the Transfer Agent through
the use of industry publications. In the event a signature guarantee is
required, notarized signatures are not sufficient. In general, signature
guarantees are waived on redemptions of less than $50,000 as long as the
following requirements are met: (i) all requests require the signature(s) of all
persons in whose name(s) shares are recorded on the Transfer Agent's register;
(ii) all checks must be mailed to the stencil address of record on the Transfer
Agent's register and (iii) the stencil address must not have changed within 30
days. Certain rules may apply regarding certain account types such as but not
limited to UGMA/UTMA accounts, Joint Tenancies With Rights of Survivorship,
contra broker transactions and institutional accounts. In certain instances, the
Transfer Agent may require additional documents such as, but not limited to,
trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority. For shareholders
redeeming directly with the Transfer Agent, payments will be mailed within seven
days of receipt of a proper notice of redemption.
At various times the Fund may be requested to redeem shares for which it
has not yet received good payment (e.g., cash, Federal funds or certified check
drawn on a U.S. bank). The Fund may delay or cause to be delayed the mailing of
a redemption check until such time as 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 usually not exceed 10 days.
REPURCHASE
The Fund also will repurchase its shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after 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 regular close of business on
the NYSE (generally, the NYSE closes at 4:00 p.m., Eastern time) and such
request is received by the Fund from such dealer not later than 30 minutes after
the close of business on the NYSE on the same day. Dealers have the
responsibility of submitting such repurchase requests to the Funds not later
than 30 minutes after the close of business on the NYSE in order to obtain that
day's closing price.
The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than any applicable
CDSC). Securities firms that do not have selected dealer agreements with the
Distributor, however, may impose a transaction charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its
customers a processing fee (presently, $5.35) to confirm a repurchase of shares
to such customers. Repurchases made directly through the Transfer Agent, on
accounts held at the Transfer Agent, are not subject to the processing fee. The
Fund reserves the right to reject any order for repurchase, which right of
rejection might adversely affect shareholders seeking redemption through the
repurchase procedure. A shareholder whose order for repurchase is rejected by
the Fund, however, may redeem shares as set forth above.
REINSTATEMENT PRIVILEGE -- CLASS A AND CLASS D SHARES
Shareholders of the Fund who have redeemed their Class A or Class D shares
have a privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, of the Fund at net asset value without a sales
charge up to the dollar amount redeemed. The reinstatement privilege may be
exercised by
28
<PAGE> 63
sending a notice of exercise along with a check for the amount to be reinstated
to the Transfer Agent within 30 days after the date the request for redemption
was accepted by the Transfer Agent or the Distributor. Alternatively, the
reinstatement privilege may be exercised through the investor's Merrill Lynch
Financial Consultant within 30 days after the date the request for redemption
was accepted by the Transfer Agent or the Distributor. The reinstatement will be
made at the net asset value per share next determined after the notice of
reinstatement is received and cannot exceed the amount of the redemption
proceeds.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
Reference is made to "How Shares are Priced" in the Prospectus.
The net asset value of the shares of all classes of the Fund is determined
once daily Monday through Friday as of the close of business on the NYSE on each
day the NYSE is open for trading based on prices at the time of closing. The
NYSE generally closes at 4:00 p.m., Eastern time. Any assets or liabilities
initially expressed in terms of non-U.S. dollar currencies are translated into
U.S. dollars at the prevailing market rates as quoted by one or more banks or
dealers on the day of valuation. The NYSE is not open for trading on New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net asset value is computed by dividing the value of the securities held by
the Trust on behalf of the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares of the Fund
outstanding at such time, rounded to the nearest cent. Expenses, including the
fees payable to the Manager and the Distributor, are accrued daily.
The per share net asset value of Class B, Class C and Class D shares
generally will be lower than the per share net asset value of Class A shares,
reflecting the daily expense accruals of the account maintenance, distribution
and higher transfer agency fees applicable with respect to Class B and Class C
shares, and the daily expense accruals of the account maintenance fees
applicable with respect to Class D shares. Moreover, the per share net asset
value of the Class B and Class C shares generally will be lower than the per
share net asset value of Class D shares reflecting the daily expense accruals of
the distribution fees and higher transfer agency fees applicable with respect to
Class B and Class C shares of the Fund. It is expected, however, that the per
share net asset value of the four classes of the Fund will tend to converge
(although not necessarily meet) immediately after the payment of dividends of
distributions, which will differ by approximately the amount of the expense
accrual differentials between the classes.
Securities that are held in the Trust, 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. 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. Short positions in securities
traded in the OTC market are valued at the last available ask price in the OTC
market prior to the time of valuation. Portfolio securities that are traded both
in the OTC market and on a stock exchange are valued according to the broadest
and most representative market. When the Trust writes an option, the amount of
the premium received is recorded on the books of the Trust 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 the Trust 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
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related options, are stated at market value. Securities and assets for which
market quotations are not readily available are valued 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 of the Trust.
Generally, trading in non-U.S. securities, as well as U.S. Government
securities and money market instruments, is substantially completed each day at
various times prior to the close of business on the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates 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 the Fund's net asset value.
Each investor in the Trust may add to or reduce its investment in the Trust
on each day the NYSE is open for trading. The value of each investor's
(including the Fund's) interest in the Trust will be determined after the close
of business on the NYSE by multiplying the net asset value of the Trust by the
percentage, effective for that day, that represents that investor's share of the
aggregate interests in the Trust. The close of business on the NYSE is generally
4:00 p.m., Eastern time. Any additions or withdrawals to be effected on that day
will then be effected. The investor's percentage of the aggregate beneficial
interests in the Trust will then be recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's 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
investor's investment in the Trust effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Trust 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 Trust by all
investors in the Trust. The percentage so determined will then be applied to
determine the value of the investor's interest in the Trust after the close of
business of the NYSE on the next determination of net asset value of the Trust.
PORTFOLIO TRANSACTIONS AND BROKERAGE
TRANSACTIONS IN PORTFOLIO SECURITIES
Because the Fund will invest exclusively in beneficial interests in 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 Manager is primarily responsible for the execution of
the Trust's 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 Manager seeks
to obtain the best net results for 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
firm's risk in positioning a block of securities. While the Manager 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 Manager may consider sales of shares of the Fund as a factor in
the selection of brokers or dealers to execute portfolio transactions for the
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 Manager 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 Manager under the Management Agreement, and the
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information. If in the judgment of the Manager the
Trust will benefit from supplemental research services, the Manager is
authorized to pay brokerage commissions to a
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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 Manager 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 Trust's ability and decisions to purchase or sell portfolio
securities of foreign issuers may be affected by laws or regulations relating to
the convertibility and repatriation of assets. Because the shares of the Fund
are redeemable on a daily basis in U.S. dollars, the Trust intends to manage its
portfolio so as to give reasonable assurance that it will be able to obtain U.S.
dollars to the extent necessary to meet anticipated redemptions. Under present
conditions, it is not believed that these considerations will have significant
effect on the Trust's portfolio strategies.
The Fund may invest in certain securities traded in the OTC market and
intends to deal directly with the dealers who make a market in securities
involved, except in those circumstances in which better prices and execution are
available elsewhere. Under the Investment Company Act, persons affiliated with
the 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 Policies -- Investment
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 Manager or
its affiliates.
The Board of Trustees of the Trust has considered the possibility of
seeking to recapture for the benefit of the Fund brokerage commissions and other
expenses of possible portfolio transactions by conducting portfolio transactions
through affiliated entities. For example, brokerage commissions received by
affiliated brokers could be offset against the advisory fee paid by the Trust on
behalf of the Portfolio to the Manager. After
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considering all factors deemed relevant, the Board of Trustees of the Trust made
a determination not to seek such recapture. The Board of Trustees of the Trust
will reconsider this matter from time to time.
Because of different objectives or other factors, a particular security may
be bought for one or more clients of the Manager or its affiliates when one or
more clients of the Manager 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
Manager 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 Manager or its affiliates during the same
period may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
SHAREHOLDER SERVICES
The 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 Fund, by calling the telephone number on the
cover page hereof, or from the Distributor or Merrill Lynch. Certain of these
services are available only to U.S. investors.
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. Upon the transfer of shares out of a Merrill
Lynch brokerage account, an Investment Account in the transferring shareholder's
name may be opened automatically at the Transfer Agent.
Share certificates are issued only for full shares and only upon the
specific request of a shareholder who has an Investment Account. Issuance of
certificates representing all or only part of the full shares in an Investment
Account may be requested by a shareholder directly from the Transfer Agent.
Shareholders may transfer their Fund shares from Merrill Lynch to another
securities dealer that has entered into a selected dealer agreement with Merrill
Lynch. Certain shareholder services may not be available for the transferred
shares. After the transfer, the shareholder may purchase additional shares of
funds owned before the transfer and all future trading of these assets must be
coordinated by the new firm. If a shareholder wishes to transfer his or her
shares to a securities dealer that has not entered into a selected dealer
agreement with Merrill Lynch, the shareholder must either (i) redeem his or her
shares, paying any applicable CDSC or (ii) continue to maintain an Investment
Account at the Transfer Agent for those shares. The shareholder also may request
the new securities dealer to maintain the shares in an account at the Transfer
Agent registered in the name of the securities dealer for the benefit of the
shareholder whether the securities dealer has entered into a selected dealer
agreement or not.
Shareholders considering transferring a tax-deferred retirement account
such as an individual retirement account, from Merrill Lynch to another
securities dealer should be aware that, if the firm to which the retirement
account is to be transferred will not take delivery of shares of the Fund, a
shareholder must either redeem the shares (paying any applicable CDSC) so that
the cash proceeds can be transferred to the account at the new firm, or such
shareholder must continue to maintain a retirement account at a selected dealer
for those shares.
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EXCHANGE PRIVILEGE
U.S. shareholders of each class of shares of the Fund have an exchange
privilege with certain other Select Pricing Funds and Summit Cash Reserves Fund
("Summit"), a series of Financial Institutions Series Trust, which is a Merrill
Lynch-sponsored money market fund specifically designated as available for
exchange by holders of Class A, Class B, Class C and Class D shares Select
Pricing Funds. 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 A and Class D Shares. Class A shareholders may exchange
Class A shares of the Fund for Class A shares of a second Select Pricing Fund if
the shareholder holds any Class A shares of the second fund in the account in
which the exchange is made at the time of the exchange or is otherwise eligible
to purchase Class A shares of the second fund. If the Class A shareholder wants
to exchange Class A shares for shares of a second Select Pricing Fund, but does
not hold Class A shares of the second fund in his or her account at the time of
exchange and is not otherwise eligible to acquire Class A shares of the second
fund, the shareholder will receive Class D shares of the second fund as a result
of the exchange. Class D shares also may be exchanged for Class A shares of a
second Select Pricing Fund at any time as long as, at the time of the exchange,
the shareholder holds Class A shares of the second fund in the account in which
the exchange is made or is otherwise eligible to purchase Class A shares of the
second fund. Class D shares are exchangeable with shares of the same class of
other Select Pricing Funds.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another Select Pricing Fund,
or for Class A shares of Summit ("new Class A or Class D shares") are transacted
on the basis of relative net asset value per Class A or Class D share,
respectively, plus an amount equal to the difference, if any, between the sales
charge previously paid on the outstanding Class A or Class D shares and the
sales charge payable at the time of the exchange on the new Class A or Class D
shares. With respect to outstanding Class A or Class D shares as to which
previous exchanges have taken place, the "sales charge previously paid" shall
include the aggregate of the sales charges paid with respect to such Class A or
Class D shares in the initial purchase and any subsequent exchange. Class A or
Class D shares issued pursuant to dividend reinvestment are sold on a no-load
basis in each of the funds offering Class A or Class D shares. For purposes of
the exchange privilege, Class A and Class D shares acquired through dividend
reinvestment shall be deemed to have been sold with a sales charge equal to the
sales charge previously paid on the Class A or Class D shares on which the
dividend was paid. Based on this formula, Class A and Class D shares of the Fund
generally may be exchanged into the Class A or Class D shares, respectively, of
the other funds with a reduced sales charge or without a sales charge.
Exchanges of Class B and Class C Shares. Certain Select Pricing Funds with
Class B and Class C shares outstanding ("outstanding Class B or Class C shares")
offer to exchange their Class B or Class C shares for Class B or Class C shares,
respectively, of certain other Select Pricing Funds or for Class B shares of
Summit ("new Class B or Class C shares") on the basis of relative net asset
value per Class B or Class C share, without the payment of any CDSC that might
otherwise be due on redemption of the outstanding shares. Class B shareholders
of the Fund exercising the exchange privilege will continue to be subject to the
Fund's CDSC schedule if such schedule is higher than the CDSC schedule relating
to the new Class B shares acquired through use of the exchange privilege. In
addition, Class B shares of the Fund acquired through use of the exchange
privilege will be subject to the Fund's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the Class B shares of the fund from which the
exchange 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
shares or Class C shares. For example, an investor may exchange Class B shares
of the Fund for those of Merrill Lynch Special Value Fund, Inc. ("Special Value
Fund") after having held the Fund's Class B shares for two-and-a-half years. The
2% CDSC that generally would apply to a redemption would not apply to the
exchange. Three years later the investor may decide to redeem the Class B shares
of Special Value Fund and receive cash.
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There will be no CDSC due on this redemption since by "tacking" the
two-and-a-half year holding period of the Fund Class B shares to the three year
holding period for the Special Value Fund Class B shares, the investor will be
deemed to have held Special Value Fund Class B shares for more than five years.
Exchanges for Shares of a Money Market Fund. Class A and Class D shares
are exchangeable for Class A shares of Summit and Class B and Class C shares are
exchangeable for Class B shares of Summit. Class A shares of Summit have an
exchange privilege back into Class A or Class D shares of Select Pricing Funds;
Class B shares of Summit have an exchange privilege back into Class B or Class C
shares of Select Pricing Funds and, in the event of such an exchange, the period
of time that Class B shares of Summit are held will count toward satisfaction of
the holding period requirement for purposes of reducing any CDSC and toward
satisfaction of any Conversion Period with respect to Class B shares. Class B
shares of Summit will be subject to a distribution fee at an annual rate of
0.75% of average daily net assets of such Class B shares. Please see your
Merrill Lynch Financial Consultant for further information.
Prior to October 12, 1998, exchanges from the Fund and other Select Pricing
Funds into a money market fund were directed to certain Merrill Lynch-sponsored
money market funds other than Summit. Shareholders who exchanged Select Pricing
Funds shares for such other money market funds and subsequently wish to exchange
those money market fund shares for shares of the Fund will be subject to the
CDSC schedule applicable to such Fund shares, if any. The holding period for
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 the Fund
received in exchange for such money market fund shares will be aggregated with
the holding period for the fund shares originally exchanged for such money
market fund shares for purposes of reducing the CDSC or satisfying the
Conversion Period.
Exercise of the Exchange Privilege. To exercise the exchange privilege, a
shareholder should contact his or her Merrill Lynch Financial Consultant, who
will advise the Fund of the exchange. Shareholders of the Fund, and shareholders
of the other Select Pricing Funds described above with shares for which
certificates have not been issued, may exercise the exchange privilege by wire
through their securities dealers. The Fund reserves the right to require a
properly completed Exchange Application. This exchange privilege may be modified
or terminated in accordance with the rules of the Commission. The Fund reserves
the right to limit the number of times an investor may exercise the exchange
privilege. Certain funds may suspend the continuous offering of their shares to
the general public at any time and may thereafter resume such offering from time
to time. The exchange privilege is available only to U.S. shareholders in states
where the exchange legally may be made. It is contemplated that the exchange
privilege may be applicable to other new mutual funds whose shares may be
distributed by the Distributor.
AUTOMATIC INVESTMENT PLANS
A shareholder may make additions to an Investment Account at any time by
purchasing Class A shares (if he or she is an eligible Class A investor) or
Class B, Class C or Class D shares at the applicable public offering price.
These purchases may be made either through the shareholder's securities dealer
or by mail directly to the Transfer Agent, acting as agent for such securities
dealer. Voluntary accumulation also can be made through a service known as the
Fund's Automatic Investment Plan. The Fund would be authorized, on a regular
basis, to provide systematic additions to the Investment Account of such
shareholder through charges of $50 or more to the regular bank account of the
shareholder by either pre-authorized checks or automated clearing house debits.
Alternatively, an investor that maintains a CMA(R) or CBA(R) account may arrange
to have periodic investments made in the Fund in amounts of $100 ($1 for
retirement accounts) or more through the CMA(R) or CBA(R) Automated Investment
Program.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Unless specific instructions are given as to the method of payment,
dividends will be automatically reinvested, without sales charge, in additional
full and fractional shares of the Fund. Such reinvestment will be at the net
asset value of shares of the Fund as determined after the close of business on
the NYSE on the
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monthly payment date for such dividends. No CDSC will be imposed upon redemption
of shares issued as a result of the automatic reinvestment of dividends.
Shareholders may, at any time, by written notification to Merrill Lynch if
their account is maintained with Merrill Lynch, or by written notification or by
telephone (1-800-MER-FUND) to the Transfer Agent, if their account is maintained
with the Transfer Agent, elect to have subsequent dividends of ordinary income
and/or capital gains paid in cash, rather than reinvested in shares of the 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 Fund is not responsible
for any failure of delivery to the shareholder's address of record and no
interest will accrue on amounts represented by uncashed dividend checks. Cash
payments can also be directly deposited to the shareholder's bank account.
SYSTEMATIC WITHDRAWAL 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 the Fund having a value, based on cost or the current offering price,
of $5,000 or more, and monthly withdrawals are available for shareholders with
shares having a value of $10,000 or more.
At the time of each withdrawal payment, sufficient shares are redeemed from
those on deposit in the shareholder's account to provide the withdrawal payment
specified by the shareholder. The shareholder may specify the dollar amount and
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 at 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
shareholder's Systematic Withdrawal Plan may be terminated at any time, without
a charge or penalty, by the shareholder, the 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
Shares -- Deferred Sales Charge Alternatives -- Class B and Class C Shares."
Where the systematic withdrawal plan is applied to Class B shares, upon
conversion of the last Class B shares in an account to Class D shares, a
shareholder must make a new election to join the systematic withdrawal program
with respect to the Class D shares. See "Purchase of Shares -- Deferred Sales
Charge Alternatives -- Conversion of Class B Shares to Class D Shares." If an
investor wishes to change the amount being withdrawn in a systematic withdrawal
plan, the investor should contact his or her Merrill Lynch Financial Consultant.
Withdrawal payments should not be considered as dividends. Each withdrawal
is a taxable event. If periodic withdrawals continuously exceed reinvested
dividends, the shareholder's original investment may be reduced correspondingly.
Purchases of additional shares concurrent with withdrawals are ordinarily
disadvantageous to the shareholder because of sales charges and tax liabilities.
The Fund will not knowingly accept purchase orders for shares of the Fund from
investors who maintain a systematic withdrawal plan unless such purchase is
equal to at least one year's scheduled withdrawals or $1,200, whichever is
greater. Periodic
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investments may not be made into an Investment Account in which the shareholder
has elected to make systematic withdrawals.
Alternatively, a shareholder whose shares are held within a CMA(R) or
CBA(R) Account may elect to have shares redeemed on a monthly, bimonthly,
quarterly, semiannual or annual basis through the CMA(R) or CBA(R) Systematic
Redemption Program. The minimum fixed dollar amount redeemable is $50. The
proceeds of systematic redemptions will be posted to the shareholder's account
three business days after the date the shares are redeemed. All redemptions are
made at net asset value. A shareholder may elect to have his or her shares
redeemed on the first, second, third or fourth Monday of each month, in the case
of monthly redemptions, or of every other month, in the case of bimonthly
redemptions. For quarterly, semiannual or annual redemptions, the shareholder
may select the month in which the shares are to be redeemed and may designate
whether the redemption is to be made on the first, second, third or fourth
Monday of the month. If the Monday selected is not a business day, the
redemption will be processed at net asset value on the next business day. The
CMA(R) or CBA(R) Systematic Redemption Program is not available if Fund shares
are being purchased within the account pursuant to the Automated Investment
Program. For more information on the CMA(R) or CBA(R) Systematic Redemption
Program, eligible shareholders should contact their Merrill Lynch Financial
Consultant.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund intends to distribute substantially all of its net investment
income, if any. Dividends from such net investment income will be paid at least
annually. All net realized capital gains, if any, will be distributed to the
Fund's shareholders at least annually. From time to time, the Fund may declare a
special distribution at or about the end of the calendar year in order to comply
with Federal tax requirements that certain percentages of its ordinary income
and capital gains be distributed during the year. If in any fiscal year, the
Fund have net income from certain foreign currency transactions, such income
will be distributed at least annually. See "Shareholder Services -- Automatic
Dividend Reinvestment Plan" for information concerning the manner in which
dividends may be reinvested automatically in shares of the Fund. A shareholder
whose account is maintained at the Transfer Agent or whose account is maintained
through 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 the Fund or received in cash. The per
share dividends on Class B and Class C shares will be lower than the per share
dividends on Class A and Class D shares as a result of the account maintenance,
distribution and higher transfer agency fees applicable with respect to the
Class B and Class C shares; similarly, the per share dividends on Class D shares
will be lower than the per share dividends on Class A shares as a result of the
account maintenance fees applicable with respect to the Class D shares. See
"Pricing of Shares -- Determination of Net Asset Value."
TAXES
The 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 the Fund so qualifies, the Fund
(but not its shareholders) will not be subject to Federal income tax on the part
of its net ordinary income and net realized capital gains that it distributes to
Class A, Class B, Class C and Class D shareholders (together, the
"shareholders"). The Fund intends to distribute substantially all of such
income.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general on a October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income and
capital gains in the manner necessary to minimize imposition of the 4% excise
tax, there can be no assurance that sufficient amounts of the Fund's taxable
income and capital gains will be distributed to avoid entirely the imposition of
the tax. In such event,
36
<PAGE> 71
the Fund will be liable for the tax only on the amount by which it does not meet
the foregoing distribution requirements.
Dividends paid by the Fund from its ordinary income or from an excess of
net short term capital gains over net long term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net long
term capital gains over net short term capital losses (including gains or losses
from certain transactions in warrants, futures and options) ("capital gain
dividends") are taxable to shareholders as long term capital gains, regardless
of the length of time the shareholder has owned Fund shares. Any loss upon the
sale or exchange of Fund shares held for six months or less will be treated as
long term capital loss to the extent of any capital gain dividends received by
the shareholder. Distributions in excess of the Fund's earnings and profits will
first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming the shares are held as a capital asset). Certain categories of
capital gains are taxable at different rates. Generally not later than 60 days
after the close of its taxable year, the Fund will provide its shareholders with
a written notice designating the amount of any capital gain dividends as well as
any amount of capital gain dividends in the different categories of capital gain
referred to above.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. A portion of the Fund's ordinary income dividends
may be eligible for the dividends received deduction allowed to corporations
under the Code, if certain requirements are met. For this purpose, the Fund will
allocate dividends eligible for the dividends received deduction among the Class
A, Class B, Class C and Class D shareholders according to a method (which it
believes is consistent with the Commission rule permitting the issuance and sale
of multiple classes of stock) that is based on the gross income allocable to
Class A, Class B, Class C and Class D shareholders during the taxable year, or
such other method as the Internal Revenue Service may prescribe. If the Fund
pays a dividend in January that was declared in the previous October, November
or December to shareholders of record on a specified date in one of such months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received by its shareholders on December 31 of the year in which such
dividend was declared.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales charge
paid on the exchanged shares reduces any sales charge the shareholder would have
owed upon the purchase of the new shares in the absence of the exchange
privilege. Instead, such sales charge will be treated as an amount paid for the
new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if 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.
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 United States withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect
37
<PAGE> 72
number. When establishing an account, an investor must certify under penalty of
perjury that such number is correct and that such investor is not otherwise
subject to backup withholding.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes.
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures and forward foreign
exchange contracts. Options and futures contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the end
of each taxable year, i.e., each such option or futures contract will be treated
as sold for its fair market value on the last day of the taxable year. Unless
such contract is a forward foreign exchange contract, or is a non-equity option
or a regulated futures contract for a non-U.S. currency for which the Fund
elects to have gain or loss treated as ordinary gain or loss under Code Section
988 (as described below), gain or loss from Section 1256 contracts will be 60%
long-term and 40% short-term capital gain or loss. Application of these rules to
Section 1256 contracts held by the Fund may alter the timing and character of
distributions to shareholders. The mark-to-market rules outlined above, however,
will not apply to certain transactions entered into by the Fund solely to reduce
the risk of changes in price or interest or currency exchange rates with respect
to its investments.
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. In
certain instances, the Fund may, nonetheless, elect to treat the gain or loss
from certain forward foreign exchange contracts as capital. In this case, gain
or loss realized in connection with a forward foreign exchange contract that is
a Section 1256 contract will be characterized as 60% long-term and 40%
short-term capital gain or loss.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's sales of securities and transactions in options, futures
and forward foreign exchange contracts. Under Section 1092, the Fund may be
required to postpone recognition for tax purposes of losses incurred in certain
sales of securities and certain closing transactions in options, futures and
forward foreign exchange contracts.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS
In general, gains from "foreign currencies" and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stocks, securities or foreign currencies will be
qualifying income for purposes of determining whether the Fund qualifies as a
RIC. It is currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, futures or forward
foreign exchange contracts will be valued for purposes of the RIC
diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain debt instruments, from
certain forward contracts, from futures contracts that are not "regulated
futures contracts" and from unlisted options will be treated as ordinary income
or loss under Code Section 988. In certain circumstances, the Fund may elect
capital gain or loss treatment for such transactions. Regulated futures
contracts, as described above, will be taxed under Code Section 1256 unless
application of Section 988 is elected by the Fund. In general, however, Code
Section 988 gains or losses will increase or decrease the amount of the
investment company taxable income of the Fund available to be distributed to
shareholders as ordinary income. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, the Fund would
not be able to make any ordinary income dividend distributions, and all or a
portion of distributions made before the losses were realized but in the same
taxable year would be recharacterized as a return of capital to shareholders,
thereby reducing the basis of each shareholder's Fund shares and resulting in a
capital gain for any shareholder who received a distribution greater than such
shareholder's basis in Fund shares (assuming the shares were held as a capital
asset). These rules and the mark-to-market rules described above, however,
38
<PAGE> 73
will not apply to certain transactions entered into by the Fund solely to reduce
the risk of currency fluctuations with respect to its investments.
The Trust and the Fund will apply for a private letter ruling from the IRS
to the effect that, because the Trust is classified as a partnership for tax
purposes, the Fund will be entitled to look to the underlying assets of the
Trust 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 it will continue to
be classified as a partnership, then the Board of Directors of the Fund will
determine, in its discretion, the appropriate course of action for the Fund. One
possible course of action would be to withdraw the Fund's investments from the
Trust and to retain an investment adviser to manage the Fund's assets in
accordance with the investment policies applicable to the Fund. See "Investment
Objective 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
Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present or
prospective shareholders. Total return is based on the Fund's historical
performance and is not intended to indicate future performance. Average annual
total return is determined separately for Class A, Class B, Class C and Class D
shares in accordance with a formula specified by the Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charge in the case of Class A and Class D
shares and the CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of Class B and Class C
shares.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average daily number of shares outstanding during the period that were
entitled to receive dividends multiplied by the maximum offering price per share
on the last day of the period. Tax equivalent yield quotations will be computed
by dividing (a) the part of the Fund's yield that is tax-exempt by (b) one minus
a stated tax rate and (c) adding the result to that part, if any, of the Fund's
yield that is not tax-exempt.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and 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
39
<PAGE> 74
(1) as required by the periods of the quotations, actual annual, annualized or
aggregate data, rather than average annual data, may be quoted and (2) the
maximum applicable sales charges will not be included with respect to annual or
annualized rates of return calculations. Aside from the impact on the
performance data calculations of including or excluding the maximum applicable
sales charges, actual annual or annualized total return data generally will be
lower than average annual total return data since the average rates of return
reflect compounding of return; aggregate total return data generally will be
higher than average annual total return data since the aggregate rates of return
reflect compounding over a longer period of time. In advertisements distributed
to investors whose purchases are subject to waiver of the CDSC in the case of
Class B and Class C shares (such as investors in certain retirement plans) or to
reduced sales loads in the case of Class A and Class D shares, the performance
data may take into account the reduced, and not the maximum, sales charge or may
not take into account the CDSC and therefore may reflect greater total return
since, due to the reduced sales charges or waiver of the CDSC, a lower amount of
expenses is deducted. See "Purchase of Shares." The Fund's total return may be
expressed either as a percentage or as a dollar amount in order to illustrate
such total return on a hypothetical $1,000 investment in the Fund at the
beginning of each specified period.
In order to reflect the reduced sales charges in the case of Class A or
Class D shares or the waiver of the CDSC in the case of Class B or Class C
shares applicable to certain investors, as described under "Purchase of Shares"
and "Redemption of Shares," respectively, the total return data quoted by the
Fund in advertisements directed to such investors may take into account the
reduced, and not the maximum, sales charge or may 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, the Fund may compare its performance to, among other things,
the Standard & Poor's 500 Index, the Value Line Composite Index, the Dow Jones
Industrial Average, or to other published indices, or to data contained in
publications published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc. ("Morningstar"), or to data contained in publications such as
Money Magazine, U.S. News & World Report, Business Week, Forbes Magazine,
Fortune Magazine and CDA Investment Technology, Inc. When comparing its
performance to a market index, the Fund may refer to various statistical
measures derived from the historic performance of the Fund and the index, such
as standard deviation and beta. As with other performance data, performance
comparisons should not be considered indicative of the Fund's relative
performance for any future period. From time to time the Fund may include the
Fund's Morningstar risk-adjusted performance ratings assigned by Morningstar in
advertising or supplemental sales literature. From time to time the Fund may
quote in advertisements or other materials other applicable measures of
performance and may also make reference to awards that may be given to the
Manager.
The Fund's total return will vary depending on market conditions, the
securities held by the Trust, the Trust's operating expenses, the Fund's
operating expenses and the amount of realized and unrealized net capital gains
or losses during the period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost.
40
<PAGE> 75
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund is a "feeder" fund that invests in the Trust. Investors in the
Fund will acquire an indirect interest in the Trust. The Trust may accept
investments from other feeder funds, and all of the feeders of the Trust bear
the Trust's expenses in proportion to their assets. This structure may enable
the Fund 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 Trust 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 Trust on more attractive
terms, or could experience better performance, than another feeder.
The Fund was incorporated under Maryland law on October 25, 1999. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and Class
D Common Stock, each of which consists of 100,000,000 shares.
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, 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 D 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 Fund, in which event the
holders of the remaining shares would be unable to elect any person as a
Director.
Whenever the Trust holds a vote of its feeder funds, the Fund 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 the Fund over the operations of the Trust. The Fund may
withdraw from the Trust 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 Fund 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 shall continue to hold office and appoint successor Directors.
Each issued and outstanding share is entitled to participate equally 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 issued are
fully-paid and non-assessable by the Fund. Voting rights for Directors are not
cumulative.
The Trust is organized as a Delaware Business Trust. Whenever the Fund is
requested to vote on any matter relating to the Trust, the Fund will hold a
meeting of its shareholders and will cast its vote as instructed by the Fund's
shareholders.
The Manager provided the initial capital for the Fund by purchasing 10,000
shares of common stock of the Fund for $100,000. 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 Manager owned 100% of the outstanding
common stock of the Fund. The Manager may be deemed to control the Fund until
such time as it owns less than 25% of the outstanding shares of the Fund.
41
<PAGE> 76
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class A, Class
B, Class C and Class D shares of the Fund based on the value of the Fund's net
assets and number of shares outstanding on the date of this Statement of
Additional Information is as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Assets.......................................... $25,000 $25,000 $25,000 $25,000
------- ------- ------- -------
Number of Shares Outstanding........................ 2,500 2,500 2,500 2,500
------- ------- ------- -------
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 A and Class D Shares: 5.25%
of Offering Price (5.54% of net amount
invested))*....................................... .55 ** ** .55
------- ------- ------- -------
Offering Price...................................... $ 10.55 $ 10.00 $ 10.00 $ 10.55
======= ======= ======= =======
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B and Class C shares are not subject to an initial sales charge but may
be subject to a CDSC on redemption. See "Account Choices -- Class B and Class
C shares -- Deferred Sales Charge Options" in the Prospectus and "Redemption
of Shares -- Deferred Sales Charges -- Class B and Class C Shares" herein.
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 Trust and the Fund. The independent auditors are
responsible for auditing the annual financial statements of the Fund.
CUSTODIAN
The Bank of New York, 90 Washington Street, 12(th) Floor, New York, New
York 10286 (the "Custodian") acts as the custodian of the Trust's and the Fund's
assets. Under its contracts with the Trust and the Fund, the Custodian is
authorized to establish separate accounts in foreign currencies and to cause
foreign securities owned by the Trust and the Fund to be held in its offices
outside the United States and with certain foreign banks and securities
depositories. The Custodian is responsible for safeguarding and controlling the
Trust's and the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Trust's and the Fund's
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
Fund's 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 Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on November 30 of each year. The Fund
sends to its shareholders at least semi-annually reports showing information
related to the Trust 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.
42
<PAGE> 77
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Statement of Additional
Information.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the Commission, Washington,
D.C., under the Securities Act and the Investment Company Act, to which
reference is hereby made.
Under a separate agreement, ML & Co. has granted the Fund the right to use
the "Merrill Lynch" name and has reserved the right to withdraw its consent to
the use of such name by the Fund at any time or to grant the use of such name to
any other company, and the Fund has granted ML & Co. under certain conditions,
the use of any other name it might assume in the future, with respect to any
corporation organized by ML & Co.
As of the date of this Statement of Additional Information, the Manager
owned 100% of the outstanding common stock of the Fund. The Manager may be
deemed to control the Fund until such time as it owns less than 25% of the
outstanding shares of the Fund.
43
<PAGE> 78
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Merrill Lynch Premier Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Premier Growth Fund, Inc. as of December 20, 1999. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Merrill Lynch Premier Growth Fund,
Inc. as of December 20, 1999, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 20, 1999
44
<PAGE> 79
MERRILL LYNCH PREMIER GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 20, 1999
<TABLE>
<S> <C>
ASSETS:
Investment in Master Premier Growth Trust................. $100,000
Prepaid registration fees (Note 3)........................ 181,195
Prepaid offering costs (Note 3)........................... 130,000
--------
Total assets........................................... 411,195
LIABILITIES:
Liabilities and accrued expenses.......................... 311,195
--------
NET ASSETS.................................................. $100,000
--------
NET ASSETS CONSIST OF:
Class A Shares of Common Stock, $.10 par value,
100,000,000 shares authorized.......................... $ 250
Class B Shares of Common Stock, $.10 par value,
100,000,000 shares authorized.......................... 250
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized.......................... 250
Class D Shares of Common Stock, $.10 par value,
100,000,000 shares authorized.......................... 250
Paid-in Capital in excess of par.......................... 99,000
--------
NET ASSETS $100,000
========
NET ASSET VALUE:
Class A -- Based on net assets of $25,000 and 2,500 shares
outstanding $ 10.00
Class B -- Based on net assets of $25,000 and 2,500 shares
outstanding $ 10.00
Class C -- Based on net assets of $25,000 and 2,500 shares
outstanding $ 10.00
Class D -- Based on net assets of $25,000 and 2,500 shares
outstanding $ 10.00
========
</TABLE>
- ---------------
Notes to Financial Statement.
(1) Merrill Lynch Premier Growth Fund, Inc. (the "Fund") was organized as a
Maryland corporation on October 25, 1999 and is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company. To date, the Fund has not had any
transactions other than those relating to organizational matters and the
sale of 2,500 Class A shares, 2,500 Class B shares, 2,500 Class C shares and
2,500 Class D shares of Common Stock to Fund Asset Management, L.P. (the
"Manager"). The Fund invests all of its assets in Master Premier Growth
Trust (the "Trust").
(2) The Trust will enter into an investment management agreement with the
Manager. The Fund will enter into distribution agreements with Merrill Lynch
Funds Distributor, a division of Princeton Funds, Distributor, Inc. (the
"Distributor"). (See "Management of the Fund -- Management and Advisory
Arrangements" in the Statement of Additional Information.) Certain officers
and/or trustees of the Trust and certain officers and/or directors of the
Fund are officers and/or directors of the Manager 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 Manager, on behalf of the Fund, will incur organization costs estimated
at $20,375.
45
<PAGE> 80
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S> <C>
1(a) -- Articles of Incorporation.(a)
(b) -- Articles of Amendment to Articles of Incorporation, as
amended on November 5, 1999.(b)
2 -- By-Laws of the Registrant.(b)
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.(c)
4 -- Not Applicable.
5(a) -- Form of Class A Distribution Agreement between the
Registrant and Merrill Lynch Funds Distributor, a division
of Princeton Funds Distributor, Inc. (the "Distributor")
(including Form of Selected Dealers Agreement).
(b) -- Form of Class B Distribution Agreement between the
Registrant and the Distributor.
(c) -- Form of Class C Distribution Agreement between the
Registrant and the Distributor.
(d) -- Form of Class D Distribution Agreement between the
Registrant and the Distributor.
6 -- None.
7 -- Custody Agreement between the Registrant and The Bank of New
York.
8(a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between the Registrant and
Financial Data Services, Inc.
(b) -- License Agreement relating to use of name between the
Registrant and Merrill Lynch & Co.
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 B Distribution Plan of the Registrant and
Class B Distribution Plan Sub-Agreement.
(b) -- Form of Class C Distribution Plan of the Registrant and
Class C Distribution Plan Sub-Agreement.
(c) -- Form of Class D Distribution Plan of the Registrant and
Class D Distribution Plan Sub-Agreement.
14 -- None.
15 -- Merrill Lynch Select Pricing(SM) System Plan pursuant to
Rule 18f-3.
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Filed on October 27, 1999 as an Exhibit to the Registration
Statement on Form N-1A (File No. 333-89781) under the
Securities Act of 1933, as amended, of the Registrant (the
"Registration Statement").
(b) Filed on November 17, 1999 as an Exhibit to Pre-Effective
Amendment No. 1 to the Registration Statement.
(c) 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 Registrant's Articles of Incorporation,
filed as Exhibit (1), to this Registration Statement, and to
Article II, Article III (sections 1, 3, 5, 6 and 17),
Article VI, Article VII, Article XII, and Article XIV of the
Registrant's By-Laws filed as Exhibit (2) to this
Registration Statement.
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant owns 100% of the beneficial interests in Master Premier
Growth Trust (the "Trust"). Fund Asset Management, L.P. (the "Manager" or "FAM")
owns 100% of the shares of common stock of the Registrant. Therefore, the
Registrant and the Trust are under the common control of the Manager.
C-1
<PAGE> 81
ITEM 25. INDEMNIFICATION.
Reference is made to Article VI of the Registrant's Articles of
Incorporation, Article VI of the Registrant's By-Laws, Section 2-418 of the
Maryland General Corporation Law and Section 9 of the Class A, Class B, Class C
and Class D Distribution Agreements.
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 Registrant's 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 person's 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 Registrant's disinterested
non-party Directors, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that 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 A, Class B, Class C and Class D Shares
Distribution Agreements relating to the securities being offered hereby, the
Registrant agrees to indemnify the Distributor and each person, if any, who
controls the Distributor within the meaning of the Securities Act of 1933, 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. 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, MuniHold-
C-2
<PAGE> 82
ings 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 Fund, Inc.,
Merrill Lynch Intermediate Government Bond Fund, Merrill Lynch International
Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle
East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch
Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Real Estate
Fund, Inc., Merrill Lynch Retirement Series Trust, Merrill Lynch Series Fund,
Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A.
Government Reserves, Merrill Lynch Utility Income Fund, Inc. 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 Fund's transfer agent, Financial Data Services, Inc. ("FDS"), is
4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been
C-3
<PAGE> 83
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.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION(S) WITH THE MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ---------------------------- ------------------------------------------
<S> <C> <C>
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 Chief Operating Officer and Managing
Managing Director 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 Senior Vice President, Treasurer and
Treasurer 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, Senior Vice President, Secretary and
Secretary and General General Counsel of MLAM; Senior Vice
Counsel President of Princeton Services
Philip L. Kirstein............. Senior Vice President Senior Vice President of MLAM; Senior Vice
President, Secretary, General Counsel and
Director of Princeton Services Senior Vice
President of MLAM; Senior Vice President
of
Debra W. Landsman-Yaros........ Senior Vice President Princeton Services; Vice President of PFD
</TABLE>
C-4
<PAGE> 84
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION(S) WITH THE MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ---------------------------- ------------------------------------------
<S> <C> <C>
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
</TABLE>
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") acts as
sub-adviser for the following registered investment companies: The Corporate
Fund Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Corporate High Yield Fund III, Inc., Debt Strategies Fund,
Inc., Debt Strategies Fund II, Inc., Debt Strategies Fund III, Inc., Income
Opportunities fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill
Lynch Americas Income Fund, Inc., Merrill Lynch Assets Builder Program, Inc.,
Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc.,
Merrill Lynch Basic Value Fund, Inc., Merrill Lynch Capital Fund, Inc., Merrill
Lynch Consults International Portfolio, Merrill Lynch Convertible Fund, Inc.,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Corporate High Yield
Fund, Inc., Merrill Lynch Developing Capital Markets Fund, Inc., Merrill Lynch
Disciplined Equity Fund, Inc., Merrill Lynch Dragon fund, Inc., Merrill Lynch
Emerging Tigers Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch Fundamental
Growth Fund, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global Growth
Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch Global Resources
Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch Global Technology
Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch Global Value
Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc.,
Merrill Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Real Estate Fund, Inc., Merrill
Lynch Series Fund, Inc, Merrill Lynch Senior Floating Rate Fund, Inc., Merrill
Lynch Senior Floating Rate Fund II Inc., Merrill Lynch Short-Term Global Income
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Utility Income Fund, Inc., Merrill Lynch Variable
Series Funds, Inc., Merrill Lynch World Income Fund, Inc., The Municipal fund
Accumulation Program, Inc. and Worldwide Dollar Vest Fund, Inc. The address of
each of the registered investment companies is P.O. Box 9011, Princeton, New
Jersey 08543-9011. The address of MLAM U.K. is 33 King William Street, London
EC4R 9AS, England.
Set forth below is a list of each executive officer and director of MLAM
U.K. indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since July 1,
1997, for his or her own account or in the capacity of director, officer,
partner or trustee. In addition, Messrs. Glenn, Burke and Albert are officers of
one or more of the registered investment companies listed in the first two
paragraphs of this Item 26.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITIONS WITH MLAM U.K. PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------- ------------------------------------
<S> <C> <C>
Terry K. Glenn................. Director and Chairman Executive Vice President of MLAM and
FAM; Executive Vice President and
Director of Princeton Services;
President and Director of PFD;
President of Princeton
Administrators
Alan J. Albert................. Senior Managing Director Vice President of MLAM
Nicholas C.D. Hall............. Director Director of Merrill Lynch Europe
PLC; General Counsel of Merrill
Lynch International Private Banking
Group
</TABLE>
C-5
<PAGE> 85
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITIONS WITH MLAM U.K. PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------- ------------------------------------
<S> <C> <C>
Donald C. Burke................ Treasurer Senior Vice President and Treasurer
of MLAM and FAM; Director of
Taxation of MLAM; Senior Vice
President and Treasurer of Princeton
Services; Vice President of PFD;
First Vice President of MLAM from
1997 to 1999; Vice President of MLAM
from 1990 to 1997
Carol Ann Langham.............. Company Secretary None
Debra Anne Searle.............. Assistant Company None
Secretary
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
MLFD, a division of PFD, acts as the principal underwriter for the
Registrant and for each of the open-end registered investment companies referred
to in the first two paragraphs of Item 26 except CBA Money Fund, CMA Government
Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax
Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program, Inc.
and the Municipal Fund Accumulation Program, Inc. MLFD also acts as the
principal underwriter for the following closed-end registered investment
companies: Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Municipal Strategy Fund, Inc., Merrill Lynch Senior Floating Rate Fund, Inc, and
Merrill Lynch Senior Floating Rate Fund II, Inc. A separate division of PFD acts
as the principal underwriter of a number of other investment companies.
(b) Set forth below is information concerning each director and officer of
PFD. The principal business address of each such person is P.O. Box 9081,
Princeton, New Jersey 08543-9081, except that the address of Messrs. Breen,
Crook, Fatseas and Wasel is One Financial Center, 23rd Floor, Boston,
Massachusetts 02111-2665.
<TABLE>
<CAPTION>
POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH PFD WITH REGISTRANT
---- ------------------------- -------------------------
<S> <C> <C>
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
</TABLE>
(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).
C-6
<PAGE> 86
ITEM 29. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Fund" in the
Prospectus constituting Part A of the Registration Statement and under
"Management of the Fund -- Management and Advisory Arrangements" in the
Statement of Additional Information constituting Part B of the Registration
Statement, the Registrant is not a party to any management-related service
contract.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-7
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement 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.
MERRILL LYNCH PREMIER GROWTH
FUND, INC. (Registrant)
By: /s/ TERRY K. GLENN
------------------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K. Glenn,
Donald C. Burke and 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
amendment to this 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 of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ TERRY K. GLENN President (Principal December 21, 1999
- ----------------------------------------------------- Executive Officer) and
(Terry K. Glenn) Director
/s/ DONALD C. BURKE Vice President and December 21, 1999
- ----------------------------------------------------- Treasurer (Principal
(Donald C. Burke) Financial and Accounting
Officer)
/s/ JAMES H. BODURTHA Director December 21, 1999
- -----------------------------------------------------
(James H. Bodurtha)
/s/ HERBERT I. LONDON Director December 21, 1999
- -----------------------------------------------------
(Herbert I. London)
/s/ JOSEPH L. MAY Director December 21, 1999
- -----------------------------------------------------
(Joseph L. May)
Director
- -----------------------------------------------------
(Andre F. Perold)
/s/ ROBERTA COOPER RAMO Director December 21, 1999
- -----------------------------------------------------
(Roberta Cooper Ramo)
/s/ ARTHUR ZEIKEL Director December 21, 1999
- -----------------------------------------------------
(Arthur Zeikel)
</TABLE>
C-8
<PAGE> 88
Master Premier Growth Trust has duly caused this Registration Statement of
Merrill Lynch Premier Growth Fund, 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 PREMIER GROWTH TRUST
By: /s/ TERRY K. GLENN
------------------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K. Glenn,
Donald C. Burke and 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
amendment to this 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 of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ TERRY K. GLENN President (Principal December 21, 1999
- ----------------------------------------------------- Executive Officer) and
(Terry K. Glenn) Trustee
/s/ DONALD C. BURKE Vice President and December 21, 1999
- ----------------------------------------------------- Treasurer (Principal
(Donald C. Burke) Financial and Accounting
Officer)
/s/ JAMES H. BODURTHA Trustee December 21, 1999
- -----------------------------------------------------
(James H. Bodurtha)
/s/ HERBERT I. LONDON Trustee December 21, 1999
- -----------------------------------------------------
(Herbert I. London)
/s/ JOSEPH L. MAY Trustee December 21, 1999
- -----------------------------------------------------
(Joseph L. May)
Trustee
- -----------------------------------------------------
(Andre F. Perold)
/s/ ROBERTA COOPER RAMO Trustee December 21, 1999
- -----------------------------------------------------
(Roberta Cooper Ramo)
/s/ ARTHUR ZEIKEL Trustee December 21, 1999
- -----------------------------------------------------
(Arthur Zeikel)
</TABLE>
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<PAGE> 89
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S> <C>
5(a) -- Form of Class A Distribution Agreement between the
Registrant and Merrill Lynch Funds Distributor, a division
of Princeton Funds Distributor, Inc. (the "Distributor")
(including Form of Selected Dealers Agreement)
(b) -- Form of Class B Distribution Agreement between the
Registrant and the Distributor
(c) -- Form of Class C Distribution Agreement between the
Registrant and the Distributor
(d) -- Form of Class D Distribution Agreement between the
Registrant and the Distributor
7 -- Form of Custody Agreement between the Registrant and The
Bank of New York
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 between
the Registrant and Merrill Lynch & Co.
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 B Distribution Plan of the Registrant and
Class B Distribution Plan Sub-Agreement
(b) -- Form of Class C Distribution Plan of the Registrant and
Class C Distribution Plan Sub-Agreement
(c) -- Form of Class D Distribution Plan of the Registrant and
Class D Distribution Plan Sub-Agreement
15 -- Merrill Lynch Select Pricing(SM) System Plan pursuant to
Rule 18f-3
</TABLE>
C-10
<PAGE> 1
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of December__, 1999, between MERRILL LYNCH
PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund"), and PRINCETON
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund; and
WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class A shares of
common stock of the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class A shares of common stock
<PAGE> 2
in the Fund (sometimes herein referred to as "Class A shares") to eligible
investors (as defined below) and hereby agrees during the term of this Agreement
to sell Class A shares of the Fund to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the exclusive
representative of the Fund to act as principal underwriter and distributor,
except that:
(a) The Fund may, upon written notice to the Distributor, from time to time
designate other principal underwriters and distributors of Class A shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
Class A shares in the areas so designated shall terminate, but this Agreement
shall remain otherwise in full effect until terminated in accordance with the
other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A shares
from the Fund shall not apply to Class A shares issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class A shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class A shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A shares issued by the
Fund pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming
2
<PAGE> 3
shareholders or to any other Class A shares as shall be agreed between the Fund
and the Distributor from time to time.
Section 3. Purchase of Class A Shares from the Fund.
(a) Prior to the continuous offering of the Class A shares, commencing on a date
agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for Class A shares during a subscription
period which shall last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within three business days after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an offering of
its Class A shares and thereafter the Distributor shall have the right to buy
from the Fund the Class A shares needed, but not more than the Class A shares
needed (except for clerical errors in transmission) to fill unconditional orders
for Class A shares of the Fund placed with the Distributor by eligible investors
or securities dealers. Investors eligible to purchase Class A shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information," respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class A shares ("eligible
investors"). The price which the Distributor shall pay for the Class A shares so
purchased from the Fund shall be the net asset value, determined as set forth in
Section 3(e) hereof, used in determining the public offering price on which such
orders were based.
3
<PAGE> 4
(c) The Class A shares are to be resold by the Distributor to eligible investors
at the public offering price, as set forth in Section 3(d) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) The public offering price(s) of the Class A shares, i.e., the price per
share at which the Distributor or selected dealers may sell Class A shares to
eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class A shares, plus a sales charge not to exceed 5.25% of the
public offering price (5.54% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain directors, officers
and employees of the Fund, directors and employees of Merrill Lynch & Co., Inc.
and its subsidiaries, and to certain other persons described in the prospectus
and statement of additional information, without a sales charge or at a reduced
sales charge, upon terms and conditions set forth in the prospectus and
statement of additional information. If the public offering price does not equal
an even cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(g).
(e) The net asset value of Class A shares shall be determined by the Fund or any
agent of the Fund in accordance with the method set forth in the prospectus and
statement of additional information of the Fund and guidelines established by
the Directors.
(f) The Fund shall have the right to suspend the sale of its Class A shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof. The Fund shall also have the right to suspend the sale of
its Class A shares if trading on the New
4
<PAGE> 5
York Stock Exchange shall have been suspended, if a banking moratorium shall
have been declared by Federal or New York authorities, or if there shall have
been some other event, which, in the judgment of the Fund, makes it
impracticable or inadvisable to sell the Class A shares.
(g) The Fund, or any agent of the Fund designated in writing by the Fund, shall
be promptly advised of all purchase orders for Class A shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares from eligible investors. The
Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class A shares by the Fund.
(a) Any of the outstanding Class A shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the Class A shares so tendered
in accordance with its obligations as set forth in Article VI of its Articles of
Incorporation, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus and statement of additional
information. The price to be paid to redeem or repurchase the Class A shares
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(e) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other
5
<PAGE> 6
charge(s), if any, set forth in the prospectus and statement of additional
information of the Fund. All payments by the Fund hereunder shall be made in the
manner set forth below. The redemption or repurchase by the Fund of any of the
Class A shares purchased by or through the Distributor will not affect the sales
charge secured by the Distributor or any selected dealer in the course of the
original sale, except that if any Class A shares are tendered for redemption or
repurchase within seven business days after the date of the confirmation of the
original purchase, the right to the sales charge shall be forfeited by the
Distributor and the selected dealer which sold such Class A shares.
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor in New
York Clearing House funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class A shares or payment may be suspended at times when the
New York Stock Exchange is closed, when trading on said Exchange is suspended,
when trading on said Exchange is restricted, when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or during any other period when the Securities and
Exchange Commission, by order, so permits.
6
<PAGE> 7
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class A shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class A shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
7
<PAGE> 8
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect sales of
Class A shares of the Fund but shall not be obligated to sell any specific
number of Class A shares. The services of the Distributor to the Fund hereunder
are not to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class A shares of the Fund, the Distributor shall use its
best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to eligible investors and
selected dealers, the collection of amounts payable by eligible investors and
selected dealers on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the National Association
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
8
<PAGE> 9
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class A shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class A shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the Class A shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell Class A
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees and
disbursements of its counsel and auditors, in connection with the preparation
and filing of any required registration statements and/or prospectuses and
statements of additional information under the Investment Company Act, the
Securities Act, and all amendments and supplements thereto, and preparing and
mailing annual and interim reports and proxy materials to Class A shareholders
(including but not limited to the expense of setting in type any such
registration statements, prospectuses, statements of additional information,
annual or interim reports or proxy materials).
9
<PAGE> 10
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to eligible investors and any
expenses of advertising incurred by the Distributor in connection with such
offering.
(c) The Fund shall bear the cost and expenses of qualification of the Class A
shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Fund as a broker or dealer in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each person,
if any, who controls the Distributor against any loss, liability, claim, damage
or expense (including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damage or expense and reasonable counsel fees
incurred in connection therewith), as incurred, arising by reason of any person
acquiring any Class A shares, which may be based upon the Securities Act,
10
<PAGE> 11
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund
11
<PAGE> 12
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them, but in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of its
Directors and officers and each person, if any, who controls the Fund against
any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class A shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Duration and Termination of this Agreement. This Agreement shall
become effective as of the date first above written and shall remain in force
until two years after
12
<PAGE> 13
the date first above written, and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended by the
parties only if such amendment is specifically approved by (i) the Directors or
by the vote of a majority of outstanding voting securities of the Fund and (ii)
by the vote of a majority of those Directors of the Fund who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
Section 12. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect and the applicable provisions of the Investment Company Act. To
the extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By
------------------------------------------
Name:
Title:
PRINCETON FUNDS DISTRIBUTOR, INC.
By
------------------------------------------
Name:
Title:
14
<PAGE> 15
EXHIBIT A
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Ladies and Gentlemen:
Princeton Funds Distributor, Inc. (the "Distributor"), has an agreement
with Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class A
shares of common stock, par value $0.10 per share (herein referred to as "Class
A shares"), of the Fund, and as such has the right to distribute Class A shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class A shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class A
shares and certain of the terms on which they are being offered are more fully
described in the enclosed prospectus and statement of additional information.
You have received a copy of the Class A shares Distribution Agreement (the
"Distribution Agreement") between yourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to sell
to you, as a member of the Selected Dealers Group, Class A shares of the Fund
for resale to investors identified in the prospectus and statement of additional
information as eligible to purchase Class A shares ("eligible investors") upon
the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through February, 2000. The subscription
period may be extended upon agreement between the Fund and the Distributor.
Subject to the provisions of such Section and the conditions contained herein,
we will sell to you on the third business day following the termination of the
subscription period, or such other date as we may advise (the "Closing Date"),
such number of Class A shares as to which you have placed orders with us not
later than 5:00 P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class A shares to eligible investors, you
shall act as dealer for your own account, and in no transaction shall you have
any authority to act as agent for the Fund, for us or for any other member of
the Selected Dealers Group, except in connection with such special programs as
we from time to time agree, in which case you shall have authority to offer and
sell shares, as agent for the Fund, to participants in such program.
A-1
<PAGE> 16
3. Except as provided in Paragraph 4, below, the public offering
prices, sales charges and the related Selected Dealers' concession are as
follows:
<TABLE>
<CAPTION>
Subscription Period
-------------------
Sales Charge Securities Dealers'
------------ Concession
----------
Public Percentage* Percentage*
Offering Dollar of Public Dollar of Public
Price Amount Offering Amount Offering
----- ------ Price ------ Price
----- -----
<S> <C> <C> <C> <C> <C>
Less than $25,000.......................... $10.554 $.554 5.25% $.554 5.25%
$25,000 but less than $50,000.............. 10.499 .499 4.75 .499 4.75
$50,000 but less than $100,000............. 10.417 .417 4.00 .417 4.00
$100,000 but less than $250,000............ 10.309 .309 3.00 .309 3.00
$250,000 but less than $1,000,000.......... 10.204 .204 2.00 .204 2.00
$1,000,000 and over**...................... 10.000 .000 0.00 .000 0.00
</TABLE>
- ------------------
*Rounded to the nearest one-hundredth percent.
**Initial sales charges may be waived for certain classes of offers as set forth
in the current prospectus and statement of additional information of the Fund.
Such purchases may be subject to a contingent deferred sales charge as set forth
in the current prospectus and statement of additional information.
The proceeds per Class A share to the Fund from the sale of all shares sold
during the subscription period will be $10.00.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of Class A
shares of the Fund or Class A shares of the registered investment companies at a
discount; provided, however, that it shall not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit cardholders of a company, policyholders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of
accumulation under which certain eligible investors are permitted to purchase
Class A shares of the Fund at the offering price applicable to the total of (a)
the dollar amount then being purchased plus (b) an amount
A-2
<PAGE> 17
equal to the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of the Class A, Class B, Class C and Class D
shares of the Fund and of any other open-end investment company advised by
Merrill Lynch Asset Management, L.P. or Fund Asset Management, L.P. (together,
"MLAM-advised 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 you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating
$25,000 or more of Class A shares or of Class D shares or of shares of any other
MLAM-advised mutual fund made through you within a thirteen-month period
starting with the first purchase pursuant to a Letter of Intention in the form
provided in the prospectus. A purchase not originally made pursuant to a Letter
of Intention may be included under a subsequent letter executed within 90 days
of such purchase if the Distributor is informed in writing of this intent within
such 90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at your request as to amounts of any
sales made by you to eligible investors qualifying for reduced sales charges.
Further information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the prospectus and
statement of additional information.
4. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class A shares except for our own investment
purposes or unless you have already received purchase orders for such shares at
the applicable public offering prices, and subject to the terms hereof and of
the Distribution Agreement. All orders are subject to acceptance by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the prospectus, as
amended from time to time. You agree that you will not offer or sell any of the
Class A shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class A shares you will furnish to each person to whom
any such sale or offer is made a copy of the prospectus and, if requested, the
statement of additional information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class A shares of the
Fund which is inconsistent in any respect with the information contained in the
prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
5. All Class A shares purchased by Selected Dealers will be delivered
in the first instance at a settlement price computed on the basis of all sales
having been made in a purchase (as such term is defined above) involving a
public offering price of less than $25,000. All sales to you will be deemed to
have been made in such a transaction unless within 30 days after the Closing
Date you furnish to us, on forms supplied by us for the purpose, a statement
acceptable
A-3
<PAGE> 18
to us setting forth sales in purchases involving a public offering price of
$25,000 or more, in which case we will compute such Selected Dealers'
concessions on the basis of the information set forth in such statement.
6. Payment for Class A shares purchased by you is to be made on such
date as we may advise by wire transfer of immediately available funds to a bank
account designated by us against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Financial Data Services, Inc., as shareholder
servicing agent, acknowledging the deposit with it of the Class A shares so
purchased by you. You agree that as promptly as practicable after the delivery
of such Class A shares you will issue appropriate written transfer instructions
to the Fund or to the shareholder servicing agent as to the purchasers to whom
you sold the Class A shares.
7. If any Class A shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the Closing Date, it is agreed
that you shall forfeit your right to, and refund to us, any discount received by
you on such Class A shares.
8. No person is authorized to make any representations concerning Class
A shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class A shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's prospectus and statement of additional information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class A shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement. Each party hereto has the right to cancel this Agreement upon notice
to the other party.
11. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims
A-4
<PAGE> 19
arising out of any redemption or exchange pursuant to telephone instructions
from any person, or any refusal to execute such instructions for any reason.
12. You and we understand and agree that you are solely responsible for
the recommendation by your sales personnel to your customers of the purchase or
sale of Class A Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
13. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the subscription offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
14. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National Association of
Securities Dealers, Inc., and that you will not offer or sell shares of the
Funds in any state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Fund in jurisdiction
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
15. Upon application to us, we will inform you as to the states in
which we believe the Class A shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell shares in
any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class A shares, if necessary.
16. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
A-5
<PAGE> 20
17. You agree that you will not sell any Class A shares of the Fund to
any account over which you exercise discretionary authority.
18. This Agreement shall terminate at the close of business on the
Closing Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
------------------------------------------
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
----------------------------------
By:
-----------------------------------------
Address:
------------------------------------
--------------------------------------------
Date:
---------------------------------------
A-6
<PAGE> 21
EXHIBIT B
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Ladies and Gentlemen:
Princeton Funds Distributor (the "Distributor"), has an agreement with
Merrill Lynch Premier Growth Fund, Inc., a Maryland Corporation (the "Fund"),
pursuant to which it acts as the distributor for the sale of Class A shares of
common stock, par value $0.10 per share (herein referred to as "Class A
shares"), of the Fund and as such has the right to distribute Class A shares of
the Fund for resale. The Fund is an open-end investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and its Class A shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"). You have received a copy of the Class A Shares
Distribution Agreement (the "Distribution Agreement") between ourselves and the
Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "prospectus" and "statement of additional information" used
herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act. We offer to sell to you, as a member of the Selected Dealers Group, Class A
shares of the Fund for resale to investors identified in the prospectus and
statement of additional information as eligible to purchase Class A shares
("eligible investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you
shall act as dealer for your own account and in no transaction shall you have
any authority to act as agent for the Fund, for us or for any other member of
the Selected Dealers Group, except in connection with such special programs as
we from time to time agree, in which case you shall have authority to offer and
sell shares, as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
prospectus and statement of additional information of the Fund subject in each
case to the delivery prior to or at the time of such sales of the then current
prospectus. The procedure relating to the handling of orders shall be subject to
Section 5 hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by the
Distributor or the Fund in the sole discretion of either and become effective
only upon confirmation by the Distributor. The minimum initial and subsequent
purchase requirements are as set forth in the current prospectus
B-1
<PAGE> 22
and statement of additional information of the Fund and no order for less than
such amounts will be accepted unless such purchase shall be expressly approved
by the Fund in accordance with the then current Prospectus. No conditional order
will be accepted on any basis other than a definitive one.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
As Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- -------- -----
<S> <C> <C> <C>
Less than $25,000.................................. 5.25% 5.54% 5.00%
$25,000 but less than
$50,000............................................ 4.75 4.99 4.50
$50,000 but less than
$100,000........................................... 4.00 4.17 3.75
$100,000 but less than
$250,000........................................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000......................................... 2.00 2.04 1.80
$1,000,000 and over**.............................. 0.00 0.00 0.00
</TABLE>
- -------------------
* Rounded to the nearest one-hundredth percent.
** Initial sales charges may be waived for certain classes of offerees as set
forth in the current prospectus and statement of additional information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as set
forth in the current prospectus and statement of additional information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual,
B-2
<PAGE> 23
his spouse and their children under the age of 21 years purchasing Class A
shares for his or their own account and to single purchases by a trustee or
other fiduciary purchasing Class A shares for a single trust estate or single
fiduciary account although more than one beneficiary is involved. The term
"purchase" also includes purchases by any "company" as that term is defined in
the Investment Company Act but does not include purchases by any such company
which has not been in existence for at least six months or which has no purpose
other than the purchase of Class A shares of the Fund or Class A shares of other
registered investment companies at a discount; provided, however, that it shall
not include purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of
accumulation under which certain eligible investors are permitted to purchase
Class A shares of the Fund at the offering price applicable to the total of (a)
the dollar amount then being purchased plus (b) an amount equal to the then
current net asset value or cost, whichever is higher, of the purchaser's
combined holdings of Class A, Class B, Class C and Class D shares of the Fund
and of any other open-end investment company advised by Merrill Lynch Asset
Management, L.P. or Fund Asset Management, L.P. (together "MLAM-advised 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 you,
with sufficient information to permit confirmation of qualification, and
acceptance of the purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating
$25,000 or more of Class A shares or of Class D shares of any other MLAM-advised
mutual fund made through you within a thirteen-month period starting with the
first purchase pursuant to a Letter of Intention in the form provided in the
prospectus. A purchase not originally made pursuant to a Letter of Intention may
be included under a subsequent letter executed within 90 days of such purchase
if the Distributor is informed in writing of this intent within such 90-day
period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any
sales made by you to eligible investors qualifying for reduced sales charges.
Further information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the prospectus and
statement of additional information.
4. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class A shares except for your own investment
purposes or unless you have already received purchase orders for such Class A
shares at the applicable public offering prices, and subject to the terms hereof
and of the Distribution Agreement. We agree that we will not place orders for
the purchase of shares from the Fund expect to cover purchase orders already
received by us. You agree that
B-3
<PAGE> 24
you will not offer or sell any of the Class A shares except under circumstances
that will result in compliance with the applicable Federal and state securities
laws and that in connection with sales and offers to sell Class A shares you
will furnish to each person to whom any such sale or offer is made a copy of the
prospectus and, if requested, the statement of additional information (as then
amended or supplemented) and will not furnish to any person any information
relating to the Class A shares of the Fund which is inconsistent in any respect
with the information contained in the prospectus and statement of additional
information (as then amended or supplemented) or cause any advertisement to be
published in any newspaper or posted in any public place without our consent and
the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You agree to place orders received from your customers as soon as
practicable after your receipt of such orders. You further agree that you shall
not withhold placing orders received from your customers so as to profit
yourself as a result of such withholding, e.g., by a change in the "net asset
value" from that used in determining the offering price to your customers.
7. Settlement shall be made promptly, but in no case later than the
time customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of which
draft you agree to pay on presentation to you. If payment is not so received or
made, the right is reserved forthwith to cancel the sale or at our option to
resell the shares to the Fund at the then prevailing net asset value in which
latter case you agree to be responsible for any loss resulting to the Fund or to
us from your failure to make payment as aforesaid.
8. If any Class A shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class A shares.
9. No person is authorized to make any representations concerning Class
A shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class A shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional
B-4
<PAGE> 25
information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's prospectus, statement of
additional information, periodic reports and proxy solicitation material is our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
10. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current prospectus and, if requested, the statement
of additional information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
11. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class A shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement.
12. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal to
execute such instructions for any reason.
13. You any we understand and agree that you are solely responsible for
the recommendation by your sales personnel to you customers of the purchase or
sale of Class A Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
14. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
15. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National
B-5
<PAGE> 26
Association of Securities Dealers, Inc., and that you will not offer or sell
shares of the Funds in any state or jurisdiction where they may not lawfully be
offered and/or sold.
If you are offering and selling shares of the Fund in jurisdiction
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
16. Upon application to us, we will inform you as to the states in
which we believe the Class A shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class A
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class A shares, if necessary.
17. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
18. You agree to maintain records of all sales of shares made through
you and to furnish us with copies of each record on request.
19. You and we understand and agree that, except as expressly provided
in this Agreement, in no transaction will you have any authority to take any
action or make any representation binding upon the Fund, us or any other member
of the Selected Dealers Group.
20. This Agreement may be amended by us from time to time by the
following procedure. We will mail a copy of the amendment to you at your address
as specified below. If you do not object to the amendment within fifteen (15)
days after its receipt, the amendment will become a part of the Agreement. Your
objection must be in writing and be received by us within such fifteen days.
21. This Agreement may be terminated upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
B-6
<PAGE> 27
22. Your first order placed pursuant to this Agreement or any amendment
therefor for the purchase of Class A shares of the Fund will represent your
acceptance of this Agreement or any such amendment.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
------------------------------------------
(Authorized Signature)
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
----------------------------------
By:
-----------------------------------------
Address:
------------------------------------
--------------------------------------------
Date:
---------------------------------------
B-7
<PAGE> 1
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of December 1999, between MERRILL LYNCH
PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund"), and PRINCETON
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund; and
WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class B shares of
common stock of the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class B shares of common stock in
<PAGE> 2
the Fund (sometimes herein referred to as "Class B shares") to investors (as
defined below) and hereby agrees during the term of this Agreement to sell Class
B shares of the Fund to the Distributor upon the terms and conditions herein set
forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class B shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class B shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class B shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class B shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive right also shall not apply to Class B shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming
2
<PAGE> 3
shareholders or to any other Class B shares as shall be agreed between the Fund
and the Distributor from time to time.
Section 3. Purchase of Class B Shares from the Fund.
(a) Prior to the continuous offering of the Class B shares, commencing
on a date agreed upon by the Fund and the Distributor, it is contemplated that
the Distributor will solicit subscriptions for Class B shares during a
subscription period which shall last for such period as may be agreed upon by
the parties hereto. The subscriptions will be payable within three business days
after the termination of the subscription period, at which time the Fund will
commence operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class B shares and thereafter the Distributor shall have the
right to buy from the Fund the Class B shares needed, but not more than the
Class B shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class B shares of the Fund placed with the Distributor
by investors or securities dealers. Investors to purchase Class B shares shall
be those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and "statement
of additional information," respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class B shares. The price which
the Distributor shall pay for the Class B shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
3
<PAGE> 4
(c) The Class B shares are to be resold by the Distributor to investors
at the public offering price, as set forth in Section 3(d) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) The net asset value of Class B shares shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class B shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class B shares.
(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class B shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class B shares from investors.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class B shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The
4
<PAGE> 5
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B shares by the Fund.
(a) Any of the outstanding Class B shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class B
shares so tendered in accordance with its obligations as set forth in Article VI
of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information. The price to be paid to redeem or
repurchase the Class B shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(d) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the Fund. All
payments by the Fund hereunder shall be made in the manner set forth below.
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class B shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the
5
<PAGE> 6
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange Commission,
by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class B shares
of the Fund, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such number
of copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any
necessary approval of the Class B shareholders, all necessary action to fix the
number of authorized Class B shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class B shares as the Distributor may
reasonably be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class B shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
6
<PAGE> 7
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund but shall not be obligated to sell any
specific number of Class B shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class B shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National
7
<PAGE> 8
Association of Securities Dealers, Inc. (the "NASD"), as such requirements may
from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class B shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the Class B shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell
Class B shares only to such selected dealers as are members in good standing of
the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class B
shareholders (including but not limited to the expense of setting in type any
such registration
8
<PAGE> 9
statements, prospectuses, statements of additional information, annual or
interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments of
sales commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class B shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class B shares for sale to eligible investors and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that, so long as the Fund's Class B Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor hereunder may be paid from amounts
recovered by it from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class B shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
9
<PAGE> 10
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class B shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor
10
<PAGE> 11
or such controlling persons (or after the Distributor or such controlling
persons shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class B shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each
of its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class B
11
<PAGE> 12
shareholders. In case any action shall be brought against the Fund or any person
so indemnified, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the Fund,
and the Fund and each person so indemnified shall have the rights and duties
given to the Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until two years after the date first above written, and thereafter, but
only for so long as such continuance is specifically approved at least annually
by (i) the Directors or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) by the vote of a majority of those Directors who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those
12
<PAGE> 13
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the Investment Company Act. To the
extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By
---------------------------------------------------------
Name:
Title:
PRINCETON FUNDS DISTRIBUTOR, INC.
By
---------------------------------------------------------
Name:
Title:
13
<PAGE> 14
EXHIBIT A
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Ladies and Gentlemen:
Princeton Funds Distributor, Inc. (the "Distributor"), has an agreement
with Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund") pursuant to which it acts as the distributor for the sale of Class B
shares of common stock, par value $0.10 per share (herein referred to as "Class
B shares"), of the Fund, and as such has the right to distribute Class B shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class B shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class B
shares and certain of the terms on which they are being offered are more fully
described in the enclosed prospectus and statement of additional information.
You have received a copy of the Class B shares Distribution Agreement (the
"Distribution Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to sell
to you, as a member of the Selected Dealers Group, Class B shares of the Fund
for resale to investors identified in the prospectus and statement of additional
information upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through February , 2000. The subscription
period may be extended upon agreement between the Fund and the Distributor.
Subject to the provisions of such Section and the conditions contained herein,
we will sell to you on the third business day following the termination of the
subscription period, or such other date as we may advise (the "Closing Date"),
such number of Class B shares as to which you have placed orders with us not
later than 5:00 P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class B shares to the public, you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
A-1
<PAGE> 15
3. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class B shares except for your own investment
purposes or unless you have already received purchase orders for such Class B
shares at the applicable public offering prices and subject to the terms hereof
and of the Distribution Agreement. All orders are subject to acceptance by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the prospectus, as
amended from time to time. You agree that you will not offer or sell any of the
Class B shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class B shares you will furnish to each person to whom
any such sale or offer is made a copy of the prospectus and, if requested, the
statement of additional information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class B shares of the
Fund which is inconsistent in any respect with the information contained in the
prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
4. Payment for Class B shares purchased by you is to be made on such
date as we may advise by wire transfer of immediately available funds to a bank
account designated by us against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Financial Data Services, Inc., as shareholder
servicing agent, acknowledging the deposit with it of the Class B shares so
purchased by you. You agree that as promptly as practicable after the delivery
of such Class B shares you will issue appropriate written transfer instructions
to the Fund or to the shareholder servicing agent as to the purchasers to whom
you sold the Class B shares.
5. No person is authorized to make any representations concerning Class
B shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class B shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's prospectus and statement of additional information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
6. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
A-2
<PAGE> 16
7. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class B shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement. Each party hereto has the right to cancel this Agreement upon notice
to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the subscription offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
9. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National Association of
Securities Dealers, Inc., and that you will not offer or sell shares of the
Funds in any state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Fund in jurisdictions
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
10. Upon application to us, we will inform you as to the states in
which we believe the Class B shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell shares in
any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You agree that you will not sell any Class B shares of the Fund to
any account over which you exercise discretionary authority.
A-3
<PAGE> 17
13. This Agreement shall terminate at the close of business on the
Closing Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
------------------------------------------
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
-------------------------------------
By:
--------------------------------------------
Address:
---------------------------------------
-----------------------------------------------
Date:
------------------------------------------
A-4
<PAGE> 18
EXHIBIT B
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Ladies and Gentlemen:
Princeton Funds Distributor (the "Distributor"), has an agreement with
Merrill Lynch Premier Growth Fund, Inc., a Maryland Corporation (the "Fund"),
pursuant to which it acts as the distributor for the sale of Class B shares of
common stock, par value $0.10 per share (herein referred to as "Class B
shares"), of the Fund and as such has the right to distribute Class B shares of
the Fund for resale. The Fund is an open-end investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and its Class B shares being offered to the public are registered under the
Securities Act of 1933, as amended (the "Securities Act"). You have received a
copy of the Class B Shares Distribution Agreement (the "Distribution Agreement")
between ourself and the Fund and reference is made herein to certain provisions
of such Distribution Agreement. The terms "prospectus" and "statement of
additional information" used herein refer to the prospectus and statement of
additional information, respectively, on file with the Securities and Exchange
Commission which is part of the most recent effective registration statement
pursuant to the Securities Act. We offer to sell to you, as a member of the
Selected Dealers Group, Class B shares of the Fund upon the following terms and
conditions:
1. In all sales of these Class B shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
prospectus and statement of additional information of the Fund, subject in each
case to the delivery prior to or at the time of such sales to the then current
prospectus. The procedure relating to the handling of orders shall be subject to
Section 4 hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the current prospectus
and statement of additional information of the Fund and no order for less than
such amounts will be accepted unless such purchase shall be expressly approved
by the Fund
B-1
<PAGE> 19
in accordance with the then current prospectus. No conditional order will be
accepted on any basis other than a definite price.
3. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class B shares except for your own investment
purposes or unless you have already received purchase orders for such Class B
shares at the applicable public offering prices and subject to the terms hereof
and of the Distribution Agreement. You agree that you will not offer or sell any
of the Class B shares except under circumstances that will result in compliance
with the applicable Federal and state securities laws and that in connection
with sales and offers to sell Class B shares you will furnish to each person to
whom any such sale or offer is made a copy of the prospectus and, if requested,
the statement of additional information (as then amended or supplemented) and
will not furnish to any person any information relating to the Class B shares of
the Fund, which is inconsistent in any respect with the information contained in
the prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class B shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class B shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You agree to place orders received from your customers as soon as
practicable after your receipt of such orders. You further agree that you shall
not withhold placing orders received from your customers so as to profit
yourself as a result of such withholding, e.g., by a change in the "net asset
value" from that used in determining the offering price to your customers.
6. Settlement shall be made promptly, but in no case later than the
time customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of which
draft you agree to pay on presentation to you. If payment is not so received or
made, the right is reserved forthwith to cancel the sale or at our option to
resell the shares to the Fund at the then prevailing net asset value in which
latter case you agree to be responsible for any loss resulting to the Fund or to
us from your failure to make payment as aforesaid.
7. No person is authorized to make any representations concerning Class
B shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class B shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed
B-2
<PAGE> 20
information which we furnish you other than the Fund's prospectus, statement of
additional information, periodic reports and proxy solicitation material are our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
8. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
9. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class B shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
10. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal to
execute such instructions for any reason.
11. You and we understand and agree that you are solely responsible for
the recommendation by your sales personnel to you customers of the purchase or
sale of Class B Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
12. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
13. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National
B-3
<PAGE> 21
Association of Securities Dealers, Inc., and that you will not offer or sell
shares of the Funds in any state or jurisdiction where they may not lawfully be
offered and/or sold.
If you are offering and selling shares of the Fund in jurisdictionS
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
14. Upon application to us, we will inform you as to the states in
which we believe the Class B shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class B
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class B shares, if necessary.
15. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
16. You agree to maintain records of all sales of shares made through
you and to furnish us with copies of each record on request.
17. You and we understand that, except as expressly provided in this
Agreement, in no transaction will you have any authority to take any action or
make any representation binding upon the Fund, us or any other member of the
Selected Dealers Group.
18. This Agreement may be amended by us from time to time by the
following procedure. We will mail a copy of the amendment to you at your address
as specified below. If you do not object to the amendment within fifteen (15)
days after its receipt, the amendment will become a part of the Agreement. Your
objection must be in writing and be received by us within such fifteen days.
19. This Agreement may be terminated upon written notice by either
party at any time, and shall automatically terminate upon its attempted
assignment by you, whether by operation of law or otherwise, or by us otherwise
than by operation of law.
B-4
<PAGE> 22
20. Your first order placed pursuant to this Agreement for the purchase
of Class B shares of the Fund will represent your acceptance of this Agreement.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
------------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
-------------------------------------
By:
--------------------------------------------
Address:
---------------------------------------
-----------------------------------------------
Date:
------------------------------------------
B-5
<PAGE> 1
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of December 1999, between MERRILL LYNCH
PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund"), and PRINCETON
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund; and
WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class C shares of
common stock of the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class C shares of common stock in
<PAGE> 2
the Fund (sometimes herein referred to as "Class C shares") to investors (as
defined below) and hereby agrees during the term of this Agreement to sell Class
C shares of the Fund to the Distributor upon the terms and conditions herein set
forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class C shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class C shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive right also shall not apply to Class C shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming
2
<PAGE> 3
shareholders or to any other Class C shares as shall be agreed between the Fund
and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
(a) Prior to the continuous offering of the Class C shares, commencing
on a date agreed upon by the Fund and the Distributor, it is contemplated that
the Distributor will solicit subscriptions for Class C shares during a
subscription period which shall last for such period as may be agreed upon by
the parties hereto. The subscriptions will be payable within three business days
after the termination of the subscription period, at which time the Fund will
commence operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class C shares and thereafter the Distributor shall have the
right to buy from the Fund the Class C shares needed, but not more than the
Class C shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class C shares of the Fund placed with the Distributor
by investors or securities dealers. Investors to purchase Class C shares shall
be those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and "statement
of additional information," respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the Class C shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
3
<PAGE> 4
(c) The Class C shares are to be resold by the Distributor to investors
at the public offering price, as set forth in Section 3(d) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) The net asset value of Class C shares shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class C shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class C shares.
(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class C shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class C shares from investors.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class C shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The
4
<PAGE> 5
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C shares by the Fund.
(a) Any of the outstanding Class C shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class C
shares so tendered in accordance with its obligations as set forth in Article VI
of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information. The price to be paid to redeem or
repurchase the Class C shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(d) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the Fund. All
payments by the Fund hereunder shall be made in the manner set forth below.
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the
5
<PAGE> 6
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and Exchange Commission,
by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class C shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class C shareholders, all necessary action to fix the number of
authorized Class C shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class C shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
6
<PAGE> 7
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect sales
of Class C shares of the Fund but shall not be obligated to sell any specific
number of Class C shares. The services of the Distributor to the Fund hereunder
are not to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National
7
<PAGE> 8
Association of Securities Dealers, Inc. (the "NASD"), as such requirements may
from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class C shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the Class C shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration
8
<PAGE> 9
statements, prospectuses, statements of additional information, annual or
interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class C shares for sale to eligible investors and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that, so long as the Fund's Class C Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor hereunder may be paid from amounts
recovered by it from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the Class
C shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Fund as a broker or dealer in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
9
<PAGE> 10
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor
10
<PAGE> 11
or such controlling persons (or after the Distributor or such controlling
persons shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class C
11
<PAGE> 12
shareholders. In case any action shall be brought against the Fund or any person
so indemnified, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the Fund,
and the Fund and each person so indemnified shall have the rights and duties
given to the Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until two years after the date first above written, and thereafter, but
only for so long as such continuance is specifically approved at least annually
by (i) the Directors or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) by the vote of a majority of those Directors who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those
12
<PAGE> 13
Directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the Investment Company Act. To the
extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By
-----------------------------------------
Name:
Title:
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
Name:
Title:
13
<PAGE> 14
EXHIBIT A
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Ladies and Gentlemen:
Princeton Funds Distributor, Inc. (the "Distributor"), has an agreement
with Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund") pursuant to which it acts as the distributor for the sale of Class C
shares of common stock, par value $0.10 per share (herein referred to as "Class
C shares"), of the Fund, and as such has the right to distribute Class C shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class C shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class C
shares and certain of the terms on which they are being offered are more fully
described in the enclosed prospectus and statement of additional information.
You have received a copy of the Class C shares Distribution Agreement (the
"Distribution Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to sell
to you, as a member of the Selected Dealers Group, Class C shares of the Fund
for resale to investors identified in the prospectus and statement of additional
information upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through February , 2000. The subscription
period may be extended upon agreement between the Fund and the Distributor.
Subject to the provisions of such Section and the conditions contained herein,
we will sell to you on the third business day following the termination of the
subscription period, or such other date as we may advise (the "Closing Date"),
such number of Class C shares as to which you have placed orders with us not
later than 5:00 P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class C shares to the public, you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
A-1
<PAGE> 15
3. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class C shares except for your own investment
purposes or unless you have already received purchase orders for such Class C
shares at the applicable public offering prices and subject to the terms hereof
and of the Distribution Agreement. All orders are subject to acceptance by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the prospectus, as
amended from time to time. You agree that you will not offer or sell any of the
Class C shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class C shares you will furnish to each person to whom
any such sale or offer is made a copy of the prospectus and, if requested, the
statement of additional information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class C shares of the
Fund which is inconsistent in any respect with the information contained in the
prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
4. Payment for Class C shares purchased by you is to be made on such
date as we may advise by wire transfer of immediately available funds to a bank
account designated by us against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Financial Data Services, Inc., as shareholder
servicing agent, acknowledging the deposit with it of the Class C shares so
purchased by you. You agree that as promptly as practicable after the delivery
of such Class C shares you will issue appropriate written transfer instructions
to the Fund or to the shareholder servicing agent as to the purchasers to whom
you sold the Class C shares.
5. No person is authorized to make any representations concerning Class
C shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class C shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's prospectus and statement of additional information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
6. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
A-2
<PAGE> 16
7. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement. Each party hereto has the right to cancel this Agreement upon notice
to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the subscription offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
9. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National Association of
Securities Dealers, Inc., and that you will not offer or sell shares of the
Funds in any state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Fund in jurisdictions
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
10. Upon application to us, we will inform you as to the states in
which we believe the Class C shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell shares in
any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You agree that you will not sell any Class C shares of the Fund to
any account over which you exercise discretionary authority.
A-3
<PAGE> 17
13. This Agreement shall terminate at the close of business on the
Closing Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
---------------------------------------------------
By:
----------------------------------------------------------
Address:
-----------------------------------------------------
--------------------------------------------------------------
Date:
--------------------------------------------------------
A-4
<PAGE> 18
EXHIBIT B
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Ladies and Gentlemen:
Princeton Funds Distributor (the "Distributor"), has an agreement with
Merrill Lynch Premier Growth Fund, Inc., a Maryland Corporation (the "Fund"),
pursuant to which it acts as the distributor for the sale of Class C shares of
common stock, par value $0.10 per share (herein referred to as "Class C
shares"), of the Fund and as such has the right to distribute Class C shares of
the Fund for resale. The Fund is an open-end investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and its Class C shares being offered to the public are registered under the
Securities Act of 1933, as amended (the "Securities Act"). You have received a
copy of the Class C Shares Distribution Agreement (the "Distribution Agreement")
between ourself and the Fund and reference is made herein to certain provisions
of such Distribution Agreement. The terms "prospectus" and "statement of
additional information" used herein refer to the prospectus and statement of
additional information, respectively, on file with the Securities and Exchange
Commission which is part of the most recent effective registration statement
pursuant to the Securities Act. We offer to sell to you, as a member of the
Selected Dealers Group, Class C shares of the Fund upon the following terms and
conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
prospectus and statement of additional information of the Fund, subject in each
case to the delivery prior to or at the time of such sales to the then current
prospectus. The procedure relating to the handling of orders shall be subject to
Section 4 hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the current prospectus
and statement of additional information of the Fund and no order for less than
such amounts will be accepted unless such purchase shall be expressly approved
by the Fund
B-1
<PAGE> 19
in accordance with the then current prospectus. No conditional order will be
accepted on any basis other than a definite price.
3. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class C shares except for your own investment
purposes or unless you have already received purchase orders for such Class C
shares at the applicable public offering prices and subject to the terms hereof
and of the Distribution Agreement. You agree that you will not offer or sell any
of the Class C shares except under circumstances that will result in compliance
with the applicable Federal and state securities laws and that in connection
with sales and offers to sell Class C shares you will furnish to each person to
whom any such sale or offer is made a copy of the prospectus and, if requested,
the statement of additional information (as then amended or supplemented) and
will not furnish to any person any information relating to the Class C shares of
the Fund, which is inconsistent in any respect with the information contained in
the prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You agree to place orders received from your customers as soon as
practicable after your receipt of such orders. You further agree that you shall
not withhold placing orders received from your customers so as to profit
yourself as a result of such withholding, e.g., by a change in the "net asset
value" from that used in determining the offering price to your customers.
6. Settlement shall be made promptly, but in no case later than the
time customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of which
draft you agree to pay on presentation to you. If payment is not so received or
made, the right is reserved forthwith to cancel the sale or at our option to
resell the shares to the Fund at the then prevailing net asset value in which
latter case you agree to be responsible for any loss resulting to the Fund or to
us from your failure to make payment as aforesaid.
7. No person is authorized to make any representations concerning Class
C shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class C shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed
B-2
<PAGE> 20
information which we furnish you other than the Fund's prospectus, statement of
additional information, periodic reports and proxy solicitation material are our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
8. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
9. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
10. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal to
execute such instructions for any reason.
11. You and we understand and agree that you are solely responsible for
the recommendation by your sales personnel to you customers of the purchase or
sale of Class C Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
12. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
13. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National
B-3
<PAGE> 21
Association of Securities Dealers, Inc., and that you will not offer or sell
shares of the Funds in any state or jurisdiction where they may not lawfully be
offered and/or sold.
If you are offering and selling shares of the Fund in jurisdictions
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
14. Upon application to us, we will inform you as to the states in
which we believe the Class C shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class C
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class C shares, if necessary.
15. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
16. You agree to maintain records of all sales of shares made through
you and to furnish us with copies of each record on request.
17. You and we understand that, except as expressly provided in this
Agreement, in no transaction will you have any authority to take any action or
make any representation binding upon the Fund, us or any other member of the
Selected Dealers Group.
18. This Agreement may be amended by us from time to time by the
following procedure. We will mail a copy of the amendment to you at your address
as specified below. If you do not object to the amendment within fifteen (15)
days after its receipt, the amendment will become a part of the Agreement. Your
objection must be in writing and be received by us within such fifteen days.
19. This Agreement may be terminated upon written notice by either
party at any time, and shall automatically terminate upon its attempted
assignment by you, whether by operation of law or otherwise, or by us otherwise
than by operation of law.
B-4
<PAGE> 22
20. Your first order placed pursuant to this Agreement for the purchase
of Class C shares of the Fund will represent your acceptance of this Agreement.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
(Authorized Signature)
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
---------------------------------------------------
By:
----------------------------------------------------------
Address:
-----------------------------------------------------
--------------------------------------------------------------
Date:
--------------------------------------------------------
B-5
<PAGE> 1
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of December 1999, between MERRILL LYNCH
PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund"), and PRINCETON
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund; and
WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class D shares of
common stock of the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class D shares of common stock in the Fund (sometimes herein referred to as
"Class D shares") to investors (as defined below)
<PAGE> 2
and hereby agrees during the term of this Agreement to sell Class D shares of
the Fund to the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued
by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive right also shall not apply to Class D shares issued
by the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming
2
<PAGE> 3
shareholders or to any other Class D shares as shall be agreed between the Fund
and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
(a) Prior to the continuous offering of the Class D shares, commencing
on a date agreed upon by the Fund and the Distributor, it is contemplated that
the Distributor will solicit subscriptions for Class D shares during a
subscription period which shall last for such period as may be agreed upon by
the parties hereto. The subscriptions will be payable within three business days
after the termination of the subscription period, at which time the Fund will
commence operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class D shares and thereafter the Distributor shall have the
right to buy from the Fund the Class D shares needed, but not more than the
Class D shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class D shares of the Fund placed with the Distributor
by investors or securities dealers. Investors eligible to purchase Class D
shares shall be those persons so identified in the currently effective
prospectus and statement of additional information of the Fund (the "prospectus"
and "statement of additional information," respectively) under the Securities
Act of 1933, as amended (the "Securities Act"), relating to such Class D shares.
The price which the Distributor shall pay for the Class D shares so purchased
from the Fund shall be the net asset value, determined as set forth in Section
3(e) hereof, used in determining the public offering price on which such orders
were based.
3
<PAGE> 4
(c) The Class D shares are to be resold by the Distributor to investors
at the public offering price, as set forth in Section 3(d) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) The public offering price(s) of the Class D shares, i.e., the price
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 5.25% of the public offering price
(5.54% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain directors, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(g).
(e) The net asset value of Class D shares shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(f) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New
4
<PAGE> 5
York Stock Exchange shall have been suspended, if a banking moratorium shall
have been declared by Federal or New York authorities, or if there shall have
been some other event, which, in the judgment of the Fund, makes it
impracticable or inadvisable to sell the Class D shares.
(g) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class D shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class D shares. The Fund (or its
agent) will confirm orders upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts or certificates for such Class D shares pursuant to the
instructions of the Distributor. Payment shall be made to the Fund in New York
Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class D shares by the Fund.
(a) Any of the outstanding Class D shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem the Class D
shares so tendered in accordance with its obligations as set forth in Article VI
of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
5
<PAGE> 6
shares are tendered for the redemption or repurchase within seven days after the
date of the conformation of the original purchase, the right to the sales charge
shall be forfeited by the Distributor and the selected dealer which sold such
Class D shares.
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor in New
York Clearing House funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class D shares
of the Fund, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such number
of copies of
6
<PAGE> 7
the prospectus and statement of additional information as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, but subject to any
necessary approval of the Class D shareholders, all necessary action to fix the
number of authorized Class D shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class D shares as the Distributor may
reasonably be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
7
<PAGE> 8
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class D shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a)
8
<PAGE> 9
is attached hereto as Exhibit A and the initial form of agreement with selected
dealers to be used in the continuous offering of the Class D shares is attached
hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell
Class D shares only to such selected dealers as are members in good standing of
the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class D
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments of
sales commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class D shares for sale to investors and any expenses of advertising
incurred
9
<PAGE> 10
by the Distributor in connection with such offering. It is understood and agreed
that so long as the Fund's Class D Shares Distribution Plan pursuant to 12b-1
under the Investment Company Act remains in effect, any expenses incurred by the
Distributor hereunder in connection with account maintenance activities may be
paid from amounts recovered by it from the Fund under such plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
10
<PAGE> 11
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them, but in case the Fund
11
<PAGE> 12
does not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any of the Class D shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each
of its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class D shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until two years after the date first above written, and thereafter, but
only for so long as such continuance is specifically approved at least annually
by (i) the Directors or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) by the vote of a majority of those Directors who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
12
<PAGE> 13
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 12. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By
-----------------------------------------
Name:
Title:
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
Name:
Title:
14
<PAGE> 15
EXHIBIT A
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Ladies and Gentlemen:
Princeton Funds Distributor, Inc. (the "Distributor"), has an agreement
with Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class D
shares of common stock, par value $0.10 per share (herein referred to as "Class
D shares"), of the Fund, and as such has the right to distribute Class D shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class D shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class D
shares and certain of the terms on which they are being offered are more fully
described in the enclosed prospectus and statement of additional information.
You have received a copy of the Class D shares Distribution Agreement (the
"Distribution Agreement") between yourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to sell
to you, as a member of the Selected Dealers Group, Class D shares of the Fund
for resale to investors identified in the prospectus and statement of additional
information upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through February , 2000. The subscription
period may be extended upon agreement between the Fund and the Distributor.
Subject to the provisions of such Section and the conditions contained herein,
we will sell to you on the third business day following the termination of the
subscription period, or such other date as we may advise (the "Closing Date"),
such number of Class D shares as to which you have placed orders with us not
later than 5:00 P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class D shares to the public, you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
A-1
<PAGE> 16
3. Except as provided in Paragraph 4, below, the public offering
prices, sales charges and the related Selected Dealers' concession are as
follows:
<TABLE>
<CAPTION>
Subscription Period
-------------------
Securities Dealers'
Sales Charge Concession
------------ ----------
Percentage* Percentage*
Public of Public of Public
Offering Dollar Offering Dollar Offering
Price Amount Price Amount Price
----- ------ ----- ----- --------
<S> <C> <C> <C> <C> <C>
Less than $25,000.......................... $10.554 $.554 5.25% $.554 5.25%
$25,000 but less than $50,000.............. 10.499 .499 4.75 .499 4.75
$50,000 but less than $100,000............. 10.417 .417 4.00 .417 4.00
$100,000 but less than $250,000............ 10.309 .309 3.00 .309 3.00
$250,000 but less than $1,000,000.......... 10.204 .204 2.00 .204 2.00
$1,000,000 and over**...................... 10.000 .000 0.00 .000 0.00
</TABLE>
- ------------------
*Rounded to the nearest one-hundredth percent.
**Initial sales charges may be waived for certain classes of offers as set forth
in the current prospectus and statement of additional information of the Fund.
Such purchases may be subject to a contingent deferred sales charge as set forth
in the current prospectus and statement of additional information.
The proceeds per Class D share to the Fund from the sale of all shares sold
during the subscription period will be $10.00.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of Class D
shares of the Fund or Class D shares of the registered investment companies at a
discount; provided, however, that it shall not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit cardholders of a company, policyholders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of
accumulation under which certain investors are permitted to purchase Class D
shares of the Fund at the offering price applicable to the total of (a) the
dollar amount then being purchased plus (b) an amount equal to
A-2
<PAGE> 17
the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of the Class D, Class B, Class C and Class D
shares of the Fund and of any other open-end investment company advised by
Merrill Lynch Asset Management, L.P. or Fund Asset Management, L.P. (together,
"MLAM-advised 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 you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating
$25,000 or more of Class D shares or of Class D shares or of shares of any other
MLAM-advised mutual fund made through you within a thirteen-month period
starting with the first purchase pursuant to a Letter of Intention in the form
provided in the prospectus. A purchase not originally made pursuant to a Letter
of Intention may be included under a subsequent letter executed within 90 days
of such purchase if the Distributor is informed in writing of this intent within
such 90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at your request as to amounts of any
sales made by you to investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the prospectus and
statement of additional information.
4. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class D shares except for our own investment
purposes or unless you have already received purchase orders for such shares at
the applicable public offering prices, and subject to the terms hereof and of
the Distribution Agreement. All orders are subject to acceptance by the
Distributor or the Fund in the sole discretion of either. The minimum initial
and subsequent purchase requirements are as set forth in the prospectus, as
amended from time to time. You agree that you will not offer or sell any of the
Class D shares except under circumstances that will result in compliance with
the applicable Federal and state securities laws and that in connection with
sales and offers to sell Class D shares you will furnish to each person to whom
any such sale or offer is made a copy of the prospectus and, if requested, the
statement of additional information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class D shares of the
Fund which is inconsistent in any respect with the information contained in the
prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
5. All Class D shares purchased by Selected Dealers will be delivered
in the first instance at a settlement price computed on the basis of all sales
having been made in a purchase (as such term is defined above) involving a
public offering price of less than $25,000. All sales to you will be deemed to
have been made in such a transaction unless within 30 days after the Closing
Date you furnish to us, on forms supplied by us for the purpose, a statement
acceptable
A-3
<PAGE> 18
to us setting forth sales in purchases involving a public offering price of
$25,000 or more, in which case we will compute such Selected Dealers'
concessions on the basis of the information set forth in such statement.
6. Payment for Class D shares purchased by you is to be made on such
date as we may advise by wire transfer of immediately available funds to a bank
account designated by us against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Financial Data Services, Inc., as shareholder
servicing agent, acknowledging the deposit with it of the Class D shares so
purchased by you. You agree that as promptly as practicable after the delivery
of such Class D shares you will issue appropriate written transfer instructions
to the Fund or to the shareholder servicing agent as to the purchasers to whom
you sold the Class D shares.
7. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the Closing Date, it is agreed
that you shall forfeit your right to, and refund to us, any discount received by
you on such Class D shares.
8. No person is authorized to make any representations concerning Class
D shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class D shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's prospectus and statement of additional information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current prospectus and, if requested, the statement of
additional information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class D shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement. Each party hereto has the right to cancel this Agreement upon notice
to the other party.
11. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims
A-4
<PAGE> 19
arising out of any redemption or exchange pursuant to telephone instructions
from any person, or any refusal to execute such instructions for any reason.
12. You and we understand and agree that you are solely responsible for
the recommendation by your sales personnel to your customers of the purchase or
sale of Class D Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
13. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the subscription offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
14. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National Association of
Securities Dealers, Inc., and that you will not offer or sell shares of the
Funds in any state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Fund in jurisdiction
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
15. Upon application to us, we will inform you as to the states in
which we believe the Class D shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell shares in
any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class D shares, if necessary.
16. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
A-5
<PAGE> 20
17. You agree that you will not sell any Class D shares of the Fund to
any account over which you exercise discretionary authority.
A-6
<PAGE> 21
18. This Agreement shall terminate at the close of business on the
Closing Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
(Authorized Signature)
Please return one signed copy of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
---------------------------------------------------
By:
----------------------------------------------------------
Address:
-----------------------------------------------------
--------------------------------------------------------------
Date:
-------------------------------------------------------
A-7
<PAGE> 22
EXHIBIT B
MERRILL LYNCH PREMIER GROWTH FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Ladies and Gentlemen:
Princeton Funds Distributor (the "Distributor"), has an agreement with
Merrill Lynch Premier Growth Fund, Inc., a Maryland Corporation (the "Fund"),
pursuant to which it acts as the distributor for the sale of Class D shares of
common stock, par value $0.10 per share (herein referred to as "Class D
shares"), of the Fund and as such has the right to distribute Class D shares of
the Fund for resale. The Fund is an open-end investment company registered under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and its Class D shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"). You have received a copy of the Class D Shares
Distribution Agreement (the "Distribution Agreement") between ourselves and the
Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "prospectus" and "statement of additional information" used
herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act. We offer to sell to you, as a member of the Selected Dealers Group, Class D
shares of the Fund for resale to investors identified in the prospectus and
statement of additional information upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with such special programs as we from time
to time agree, in which case you shall have authority to offer and sell shares,
as agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
prospectus and statement of additional information of the Fund subject in each
case to the delivery prior to or at the time of such sales of the then current
prospectus. The procedure relating to the handling of orders shall be subject to
Section 5 hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by the
Distributor or the Fund in the sole discretion of either and become effective
only upon confirmation by the Distributor. The minimum initial and subsequent
purchase requirements are as set forth in the current prospectus and statement
of additional information of the Fund and no order for less than such amounts
will
B-1
<PAGE> 23
be accepted unless such purchase shall be expressly approved by the Fund in
accordance with the then current Prospectus. No conditional order will be
accepted on any basis other than a definitive one.
3. The sales charges for sales to investors, computed as percentages of
the public offering price and the amount invested, and the related discount to
Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
As Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- -------- -----
<S> <C> <C> <C>
Less than $25,000.................... 5.25% 5.54% 5.00%
$25,000 but less than
$50,000.............................. 4.75 4.99 4.50
$50,000 but less than
$100,000............................ 4.00 4.17 3.75
$100,000 but less than
$250,000............................. 3.00 3.09 2.75
$250,000 but less than
$1,000,000........................... 2.00 2.04 1.80
$1,000,000 and over**................ 0.00 0.00 0.00
</TABLE>
- -------------------
* Rounded to the nearest one-hundredth percent.
** Initial sales charges may be waived for certain classes of offerees as set
forth in the current prospectus and statement of additional information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as set
forth in the current prospectus and statement of additional information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for
B-2
<PAGE> 24
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 which has not been in existence for at
least six months or which has no purpose other than the purchase of Class D
shares of the Fund or Class D shares of other registered investment companies at
a discount; provided, however, that it shall not include purchases by any group
of individuals whose sole organizational nexus is that the participants therein
are credit cardholders of a company, policyholders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of
accumulation under which certain investors are permitted to purchase Class D
shares of the Fund at the offering price applicable to the total of (a) the
dollar amount then being purchased plus (b) an amount equal to the then current
net asset value or cost, whichever is higher, of the purchaser's combined
holdings of Class D, Class B, Class C and Class D shares of the Fund and of any
other open-end investment company advised by Merrill Lynch Asset Management,
L.P. or Fund Asset Management, L.P. (together "MLAM-advised 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 you, with sufficient
information to permit confirmation of qualification, and acceptance of the
purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating
$25,000 or more of Class D shares or of Class D shares of any other MLAM-advised
mutual fund made through you within a thirteen-month period starting with the
first purchase pursuant to a Letter of Intention in the form provided in the
prospectus. A purchase not originally made pursuant to a Letter of Intention may
be included under a subsequent letter executed within 90 days of such purchase
if the Distributor is informed in writing of this intent within such 90-day
period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any
sales made by you to the public qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the prospectus and
statement of additional information.
4. As an authorized agent to sell shares of the Fund, you agree to
purchase shares of the Fund only through us or from your customers. You shall
not place orders for any of the Class D shares except for your own investment
purposes or unless you have already received purchase orders for such Class D
shares at the applicable public offering prices, and subject to the terms hereof
and of the Distribution Agreement. We agree that we will not place orders for
the purchase of shares from the Fund expect to cover purchase orders already
received by us. You agree that you will not offer or sell any of the Class D
shares except under circumstances that will result in compliance with the
applicable Federal and state securities laws and that in connection with sales
B-3
<PAGE> 25
and offers to sell Class D shares you will furnish to each person to whom any
such sale or offer is made a copy of the prospectus and, if requested, the
statement of additional information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class D shares of the
Fund which is inconsistent in any respect with the information contained in the
prospectus and statement of additional information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You agree to place orders received from your customers as soon as
practicable after your receipt of such orders. You further agree that you shall
not withhold placing orders received from your customers so as to profit
yourself as a result of such withholding, e.g., by a change in the "net asset
value" from that used in determining the offering price to your customers.
7. Settlement shall be made promptly, but in no case later than the
time customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of which
draft you agree to pay on presentation to you. If payment is not so received or
made, the right is reserved forthwith to cancel the sale or at our option to
resell the shares to the Fund at the then prevailing net asset value in which
latter case you agree to be responsible for any loss resulting to the Fund or to
us from your failure to make payment as aforesaid.
8. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class D shares.
9. No person is authorized to make any representations concerning Class
D shares of the Fund except those contained in the current prospectus and
statement of additional information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
prospectus and statement of additional information. In purchasing Class D shares
through us you shall rely solely on the representations contained in the
prospectus and statement of additional information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's prospectus, statement of additional information, periodic reports and
proxy solicitation material is our sole responsibility and not the
B-4
<PAGE> 26
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
10. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current prospectus and, if requested, the statement
of additional information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
prospectus and statement of additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
11. All sales will be subject to receipt of shares by us from the Fund.
We reserve the right in our discretion, without notice, to suspend sales or
withdraw the offering of Class D shares entirely or to certain persons or
entities in a class or classes specified by us or to modify or cancel this
Agreement.
12. We, our affiliates, the Fund (and its officers and directors), and
the Trust (and its officers and trustees) shall not be liable for any loss,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal to
execute such instructions for any reason.
13. You any we understand and agree that you are solely responsible for
the recommendation by your sales personnel to you customers of the purchase or
sale of Class D Shares of the Fund and the suitability of such purchase or sale
for the customer involved.
14. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
15. By accepting this Agreement, you represent that you are registered
as a broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National Association
of Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full force
and effect throughout the term of this Agreement. You further agree to comply
with all applicable Federal laws, the laws of the states or other jurisdictions
concerned, and the rules and regulations promulgated thereunder and with the
Constitution, By-Laws and Conduct Rules of the National Association of
Securities Dealers, Inc., and that you will not offer or sell shares of the
Funds in any state or jurisdiction where they may not lawfully be offered and/or
sold.
B-5
<PAGE> 27
If you are offering and selling shares of the Fund in jurisdiction
outside the several states, territories, and possessions of the United States
and are not otherwise required to be registered, qualified, or a member of the
National Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in which
such offer and/or sale is made, to comply with the full disclosure requirements
of the Securities Act and the regulations promulgated thereunder, to conduct
your business in accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold the
Fund, its investment adviser, and us harmless from loss or damage resulting from
any failure on your part to comply with applicable laws.
16. Upon application to us, we will inform you as to the states in
which we believe the Class D shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class D
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class D shares, if necessary.
17. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
18. You agree to maintain records of all sales of shares made through
you and to furnish us with copies of each record on request.
19. You and we understand and agree that, except as expressly provided
in this Agreement, in no transaction will you have any authority to take any
action or make any representation binding upon the Fund, us or any other member
of the Selected Dealers Group.
20. This Agreement may be amended by us from time to time by the
following procedure. We will mail a copy of the amendment to you at your address
as specified below. If you do not object to the amendment within fifteen (15)
days after its receipt, the amendment will become a part of the Agreement. Your
objection must be in writing and be received by us within such fifteen days.
21. This Agreement may be terminated upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
B-6
<PAGE> 28
22. Your first order placed pursuant to this Agreement or any amendment
therefor for the purchase of Class D shares of the Fund will represent your
acceptance of this Agreement or any such amendment.
PRINCETON FUNDS DISTRIBUTOR, INC.
By
-----------------------------------------
(Authorized Signature)
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
P.O. Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name:
---------------------------------------------------
By:
----------------------------------------------------------
Address:
-----------------------------------------------------
--------------------------------------------------------------
Date:
--------------------------------------------------------
B-7
<PAGE> 1
CUSTODY AGREEMENT
Agreement made as of this day of December, 1999, between
MERRILL LYNCH PREMIER GROWTH FUND, INC., a Maryland corporation organized and
existing under the laws of the State of Maryland, having its principal office
and place of business at 800 Scudders Mill Road, Plainsboro, New Jersey 08536
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at One Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether
or not such person is an officer or employee of the Fund, duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Authorized Persons, and the term Certificate shall also
include Instructions.
<PAGE> 2
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
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<PAGE> 3
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission signed by an Authorized Person and tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
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<PAGE> 4
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets, and agreements
representing corporate loans and interests therein as defined form time to time
in the Fund's prospectus or statement of additional information.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund
listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of capital stock of the Fund, each
of which is, in the case of a Fund having Series, allocated to a particular
Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
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<PAGE> 5
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's
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<PAGE> 6
books to the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of
the person to whom the payment is to be made, the Series account from which
payment is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any
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<PAGE> 7
Securities which it may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold all such Securities
specifically allocated to a Series which are not held in the Book-Entry System
or in the Depository in a separate account in the name of such Series physically
segregated at all times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income, dividends and distributions due or payable;
(b) Give notice to the Fund and present payment and collect the
amount payable upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice of such call
appears in one or more of the publications listed in Appendix C annexed hereto,
which may be amended at any time by the Custodian without the prior notification
or consent of the Fund;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) Deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agreement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
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<PAGE> 8
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate in exchange for other Securities or cash
issued or paid in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or the exercise of
any conversion privilege and receive and hold hereunder specifically allocated
to such Series any cash or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the
Series specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing-out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing-out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission
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<PAGE> 9
merchant, in book-entry form or otherwise, in the name of the Custodian (or any
nominee of the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically
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<PAGE> 10
allocated; (b) the name of the issuer and the title of the Security; (c) the
number of shares or principal amount sold, and accrued interest, if any; (d) the
date of sale; (e) the sale price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker through whom or the person to
whom the sale was made, and the name of the clearing broker, if any; and (h) the
name of the broker to whom the Securities are to be delivered. The Custodian
shall deliver the Securities specifically allocated to such Series to the broker
specified in the Certificate against payment of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total
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<PAGE> 11
amount payable to the Fund, provided that the same conforms to the total amount
payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received.
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<PAGE> 12
The Custodian shall deliver or cause to be delivered, in exchange for receipt of
the premium specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the customs prevailing
among Clearing Members dealing in Covered Call Options and shall impose, or
direct the Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the
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<PAGE> 13
issuer and title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be received; (d) the
total amount payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically allocated to such Series
to be withdrawn from the Collateral Account for such Series and (f) the amount
of cash and/or the amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Account. Upon the
return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the money held for the account of the Series to which
such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
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<PAGE> 14
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e)
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<PAGE> 15
the date the Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going short) on such
Futures Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series; (h) the name of the broker, dealer, or futures commission merchant
through whom the Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker, dealer, or futures
commission merchant to whom such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the
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<PAGE> 16
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
Option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates
of purchase and settlement; (g) the amount of premium to be paid by the Fund
upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the money specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount
- 16 -
<PAGE> 17
payable to the Fund, provided the same conforms to the total amount payable as
set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e)the name of
the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior
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<PAGE> 18
Security Account as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
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<PAGE> 19
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing-out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of
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<PAGE> 20
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Senior Security Account; and (j) the name of the broker through whom the Fund is
effecting such closing-out. The Custodian shall, upon receipt of the net total
amount payable to the Fund upon such closing-out, and the return and/or
cancellation of the receipts, if any, issued by the Custodian with respect to
the short sale being closed-out, pay out of the money held for the account of
the Fund to the broker the net total amount payable to the broker, and make the
withdrawals from the Margin Account and the Senior Security Account, as the same
are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker or dealer through or with whom the Reverse Repurchase
Agreement is entered; (d) the amount and kind of Securities to be delivered by
the Fund to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a Senior
Security Account for such Series in connection with such Reverse Repurchase
Agreement. The Custodian shall, upon receipt of the total amount payable to the
Fund specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
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<PAGE> 21
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior
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<PAGE> 22
Security Account for such Series. In the event that the Fund fails to specify in
a Certificate the Series, the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities to be deposited by
the Custodian into, or withdrawn from, a Senior Securities Account, the
Custodian shall be under no obligation to make any such deposit or withdrawal
and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
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<PAGE> 23
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and price;
and
(b) the amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in
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<PAGE> 24
connection with such issuance upon the receipt of a Certificate specifying the
amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days
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<PAGE> 25
involved) equal to 1/2% over Custodian's prime commercial lending rate in effect
from time to time, such rate to be adjusted on the effective date of any change
in such prime commercial lending rate but in no event to be less than 6% per
annum. In addition, the Fund hereby agrees that the Custodian shall have a
continuing lien, security interest, and security entitlement in and to any
property including any investment property or any financial asset specifically
allocated to such Series at any time held by it for the benefit of such Series
or in which the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby covenants
that on each Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third party, or which next
succeeds a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior
to 9 a.m., New York City time, advise the Custodian, in writing, of each such
borrowing, shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement,(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this
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<PAGE> 26
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund shall use the Software solely for its own internal and
proper business purposes, and not in the operation of a service bureau, and
agrees not to sell, reproduce, lease or otherwise provide, directly or
indirectly, the Software or any portion thereof to any third party without the
prior written consent of the Custodian. The Fund acknowledges that the Custodian
and its suppliers have title and exclusive proprietary rights to the Software,
including any trade secrets or other ideas, concepts, know how, methodologies,
or information incorporated therein and the exclusive rights to any copyrights,
trademarks and patents (including registrations and applications for
registration of either) or statutory or legal protections available with respect
thereof. The Fund further acknowledges that all or a part of the Software may be
copyrighted or trademarked (or a registration or claim made therefor) by the
Custodian or its suppliers. The Fund shall not take any action with respect to
the Software inconsistent with the foregoing acknowledgments, nor shall the Fund
attempt to decompile, reverse engineer or modify the Software. The Fund may not
copy, sell, lease or provide, directly or indirectly, any of the Software or any
portion thereof to any other person or entity without the Custodian's prior
written consent. The Fund may not remove any statutory copyright notice, or
other notice including the software or on any media containing the Software. The
Fund shall reproduce any such notice on any reproduction of the Software and
shall add statutory copyright notice or other notice to the Software or media
upon the Bank's request. Custodian agrees to provide reasonable training,
instruction manuals and access to Custodian's "help desk" in connection with the
Fund's user support necessary to use of the Software. At the Fund's request,
Custodian agrees to permit reasonable testing of the Software by the Fund.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability
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<PAGE> 27
of any such equipment or services or the performance or nonperformance by any
nonparty to this Custody Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be copyrighted
and shall apply to all Information whether or not copyrighted.
4. The Custodian reserves the right to modify, at its own expense, the
Software from time to time without prior notice and the Fund shall install new
releases of the Software as the Custodian may direct. The Fund agrees not to
modify or attempt to modify the Software without the Custodian's prior written
consent. The Fund acknowledges that any modifications to the Software, whether
by the Fund or the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
5. THE CUSTODIAN AND ITS MANUFACTURERS AND SUPPLIERS MAKE NO WARRANTIES
OR REPRESENTATIONS OF ANY KIND WITH REGARD TO THE SOFTWARE OR THE METHOD(S) BY
WHICH THE FUND MAY TRANSMIT INSTRUCTIONS TO THE CUSTODIAN, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
6. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUND AGREES THAT IT WILL NOT UNDER ANY CIRCUMSTANCES RESELL,
DIVERT, TRANSFER, TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM)
IN OR TO ANY OTHER COUNTRY. IF THE CUSTODIAN DELIVERS THE SOFTWARE TO THE FUND
OUTSIDE THE UNITED STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN
ACCORDANCE WITH EXPORT ADMINISTRATIVE REGULATIONS. DIVERSION CONTRARY TO U.S.
LAWS PROHIBITED. The Fund hereby authorizes Custodian to report its name and
address to government agencies to which Custodian is required to provide such
information by law.
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<PAGE> 28
7. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
8. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that it is
fully informed of the protections and risks associated with the various methods
of transmitting Instructions to the Custodian and that there may be more secure
methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
9. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Directors, and that its transmission of Instructions pursuant hereto shall at
all times comply with the Investment Company Act.
10. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
11. Custodian will indemnify and hold harmless the Fund with respect to
any liability, damages, loss or claim incurred by or brought against Fund by
reason any claim or infringement against any patent, copyright, license or other
property right arising out or by reason of the Fund's use of the Software in the
form provided under this Section. Custodian at its own expense will defend such
action or claim brought against Fund to the extent that it is based on a claim
that the Software in the form provided by Custodian infringes any patents,
copyrights, license or other property right, provided that Custodian
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<PAGE> 29
is provided with reasonable written notice of such claim, provided that the Fund
has not settled, compromised or confessed any such claim without the Custodian's
written consent, in which event Custodian shall have no liability or obligation
hereunder, and provided Fund cooperates with and assists Custodian in the
defense of such claim. Custodian shall have the right to control the defense of
all such claims, lawsuits and other proceedings. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Custodian is enjoined from using the Software, or if Custodian believes that the
System is likely to become the subject of a claim of infringement, Custodian at
its option may in its sole discretion either (a) at its expenses procure the
right for the Fund to continue to use the Software, or (b), replace or modify
the Software so as to make it non-infringing, or (c) may discontinue the license
granted herein upon written notice to Fund.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians"). The Fund may
designate any additional foreign sub-custodian with which the Custodian has an
agreement for such entity to act as the Custodian's agent, as its sub-custodian
and any such additional foreign sub-custodian shall be deemed added to Schedule
I. Upon receipt of a Certificate from the Fund, the Custodian shall cease the
employment of any one or more Foreign Sub-Custodians for maintaining custody of
the Fund's assets and such Foreign Sub-Custodian shall be deemed deleted from
Schedule I.
2. Each delivery of a Certificate to the Custodian in connection with a
transaction involving the use of a Foreign Sub-Custodian shall constitute a
representation and warranty by the Fund that its Board of Directors, or its
third party foreign custody manager as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended, if any, has determined that use of
such Foreign Sub-Custodian satisfies the requirements of such Investment Company
Act of 1940 and such Rule 17f-5 thereunder.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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<PAGE> 30
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the
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<PAGE> 31
Currency to be purchased is to be delivered; (e) the date on which the Currency
to be sold is to be delivered; and (f) the name of the person from whom or
through whom such currencies are to be purchased and sold. Unless otherwise
instructed by a Certificate or Oral Instructions, the Custodian shall deliver,
or shall instruct a Foreign Sub-Custodian to deliver, the Currency to be sold on
the date on which such delivery is to be made, as set forth in the Certificate,
and shall receive, or instruct a Foreign Sub-Custodian to receive, the Currency
to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI,
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any
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<PAGE> 32
Margin Account Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. In no event shall the Custodian be liable
to the Fund or any third party for special, indirect or consequential damages or
lost profits or loss of business, arising under or in connection with this
Agreement, even if previously informed of the possibility of such damages and
regardless of the form of action. The Custodian may, with respect to questions
of law arising hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund, or of its own counsel, at
the expense of the Fund, and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice or opinion.
The Custodian shall be liable to the Fund for any loss or damage resulting from
the use of the Book-Entry System or any Depository arising by reason of any
negligence or willful misconduct on the part of the Custodian or any of its
employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by
the Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a broker, dealer, or financial institution or held by it at
any time as a result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might sustain as a result
of such loan. The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or notify the Fund
that the amount of such cash collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
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<PAGE> 33
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
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<PAGE> 34
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series, net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby
- 34 -
<PAGE> 35
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book-Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing
- 35 -
<PAGE> 36
from time to time among brokers or dealers in such Securities. When the
Custodian is instructed to deliver Securities against payment, delivery of such
Securities and receipt of payment therefor may not be completed simultaneously.
The Fund assumes all responsibility and liability for all credit risks involved
in connection with the Custodian's delivery of Securities pursuant to
instructions of the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
- 36 -
<PAGE> 37
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons of the Fund. The Fund
agrees to furnish to the Custodian a new Certificate in similar form in the
event that any such present Authorized Person ceases to be an Authorized Person
of the Fund, or in the event that other or additional Authorized Persons are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement or Oral Instructions upon the signatures of the Authorized Persons as
set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
- 37 -
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
MERRILL LYNCH PREMIER GROWTH
FUND, INC.
[SEAL] By:
------------------------
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:
------------------------
Name:
Title:
Attest:
- -----------------------
<PAGE> 39
APPENDIX A
I, , and I, , of
MERRILL LYNCH PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund"), do
hereby certify that:
The following persons have been duly authorized in conformity
with the Fund's Articles of Incorporation and By-Laws to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
the signatures set forth opposite their respective names are their true and
correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
<S> <C> <C>
- -------------------- -------------------- --------------------
</TABLE>
<PAGE> 40
APPENDIX B
SERIES
<PAGE> 41
APPENDIX C
I, Jorge E. Ramos, a Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 42
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she
is the duly elected and acting of MERRILL LYNCH PREMIER GROWTH
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as of ,
1999, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to deposit in the Book-Entry System, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the Series
to which the same are specifically allocated, and to utilize the Book-Entry
System to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of MERRILL LYNCH PREMIER GROWTH FUND, INC., as of the day of , 1999.
------------------------
[SEAL]
<PAGE> 43
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of MERRILL LYNCH PREMIER GROWTH
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1999, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as of ,
1999, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository, as defined in
the Custody Agreement, all securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated, and to utilize the
Depository to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and returns of
securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of MERRILL LYNCH PREMIER GROWTH FUND, INC., as of the day of ,
1999.
------------------------
[SEAL]
<PAGE> 44
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of MERRILL LYNCH PREMIER
GROWTH FUND, INC., a Maryland corporation (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Directors of the Fund
at a meeting duly held on , 1999, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as of ,
1999, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Participants Trust Company
as Depository, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Participants Trust Company to the extent possible
in connection with its performance thereunder, including, without limitation, in
connection with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of MERRILL LYNCH PREMIER GROWTH FUND, INC., as of the day of ,
1999.
------------------------
[SEAL]
<PAGE> 45
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of MERRILL LYNCH PREMIER
GROWTH FUND, INC., a Maryland corporation (the "Fund"), and further certifies
that the following resolution was adopted by the Board of Directors of the Fund
at a meeting duly held on , 1999, at which a quorum was at all
times present and that such resolution has not been modified or rescinded and is
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as of ,
1999, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of MERRILL LYNCH PREMIER GROWTH FUND, INC., as of the day of ,
1999.
------------------------
[SEAL]
<PAGE> 46
EXHIBIT D
The undersigned, , hereby certifies that he or
she is the duly elected and acting of MERRILL LYNCH PREMIER
GROWTH FUND, INC., a Maryland corporation (the "Fund"), further certifies that
the following resolutions were adopted by the Board of Directors of the Fund at
a meeting duly held on , 1999, at which a quorum was at all times
present and that such resolutions have not been modified or rescinded and are in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
the Custody Agreement between The Bank of New York and the Fund dated as of ,
1999 (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis to act in accordance with, and to rely on Instructions (as defined
in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Authorized Persons of the Fund as defined in
the Custody Agreement, shall establish internal safekeeping procedures to
safeguard and protect the confidentiality and availability of user and access
codes, passwords and authentication keys, and shall use Instructions only in a
manner that does not contravene the Investment Company Act of 1940, as amended,
or the rules and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal
of MERRILL LYNCH PREMIER GROWTH FUND, INC., as of the day of ,
1999.
------------------------
[SEAL]
<PAGE> 1
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY AND
SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT, made as of December 1, 1999, by and between MERRILL
LYNCH PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund") and
FINANCIAL DATA SERVICES, INC., a Florida corporation ("FDS").
WITNESSETH:
WHEREAS, the Corporation wishes to appoint FDS to be the Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund
upon, and subject to, the terms and provisions of this Agreement, and FDS is
desirous of accepting such appointment upon, and subject to, such terms and
provisions;
NOW, THEREFORE, in consideration of mutual covenants contained in
this Agreement, the Corporation and FDS agree as follows:
1. APPOINTMENT OF FDS AS TRANSFER AGENT, DIVIDEND DISBURSING
AGENT AND SHAREHOLDER SERVICING AGENT.
(a) The Corporation hereby appoints FDS to act as Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and
subject to, the terms and provisions of this Agreement.
(b) FDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to act
as such upon, and subject to, the terms and provisions of this Agreement.
2. DEFINITIONS.
(a) In this Agreement:
(I) The term "Act" means the Investment Company Act of 1940 as
amended from time to time and any rule or regulation thereunder;
<PAGE> 2
(II) The term "Account" means any account of a Shareholder, as
defined below, or, if the shares are held in an account in the name of a
Broker-Dealer, as defined below, for the benefit of an identified person, such
account, including a Plan Account, any account under a plan (by whatever name
referred to in the Prospectus) pursuant to the Self-Employed Individuals
Retirement Act of 1962 ("Keogh Act Plan") and any account under a plan (by
whatever name referred to in the Prospectus) pursuant to Section 401(k) of the
Internal Revenue Code ("Corporation Master Plan");
(III) The term "application" means an application made by a
shareholder or prospective shareholder respecting the opening of an Account;
(IV) The term "Fund Distributor" means Princeton Funds
Distributor, Inc., a Delaware corporation;
(V) The term "Broker-Dealer" means a registered broker-dealer
that sells shares of the Fund pursuant to a selected dealer's agreement with the
Corporation;
(VI) The term "Officer's Instruction" means an instruction in
writing given on behalf of the Fund to FDS, and signed on behalf of the Fund by
the President, any Vice President, the Secretary or the Treasurer of the
Corporation;
(VII) The term "Plan Account" means an account opened by a
Shareholder or prospective Shareholder in respect to an open account, monthly
payment or withdrawal plan (in each case by whatever name referred to in the
Prospectus), and may also include an account relating to any other plan if and
when provision is made for such plan in the Prospectus;
(VIII) The term "Prospectus" means the Prospectus and the
Statement of Additional Information of the relevant Fund as from time to time in
effect;
(IX) The term "Shareholder" means a holder of record of
Shares;
(X) The term "Shares" means shares of stock of the Corporation
irrespective of class or series.
2
<PAGE> 3
3. DUTIES OF FDS AS TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND
SHAREHOLDER SERVICING AGENT.
(a) Subject to the succeeding provisions of the Agreement, FDS
hereby agrees to perform the following functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund;
(I) Issuing, transferring and redeeming Shares;
(II) Opening, maintaining, servicing and closing Accounts;
(III) Acting as agent for the Fund's Shareholders and/or
customers of a Broker-Dealer in connection with Plan Accounts, upon the terms
and subject to the conditions contained in the Prospectus and application
relating to the specific Plan Account;
(IV) Acting as agent of the Fund and/or a Broker-Dealer,
maintaining such records as may permit the imposition of such contingent
deferred sales charges as may be described in the Prospectus, including such
reports as may be reasonably requested by the Corporation with respect to such
Shares as may be subject to a contingent deferred sales charge;
(V) Upon the redemption of Shares subject to such a contingent
deferred sales charge, calculating and deducting from the redemption proceeds
thereof the amount of such charge in the manner set forth in the Prospectus. FDS
shall pay, on behalf of the Fund Distributor, to a Broker-Dealer such deducted
contingent deferred sales charges imposed upon all Shares maintained in the name
of that Broker-Dealer, or maintained in the name of an account identified as a
customer account of that Broker-Dealer. Sales charges imposed upon any other
Shares shall be paid by FDS to the Fund Distributor;
(VI) Exchanging the investment of a Shareholder into, or from,
the shares of other open-end investment companies or other series portfolios of
the Corporation, if any, if and to the extent permitted by the Prospectus at the
direction of such Shareholder;
(VII) Processing redemptions;
(VIII) Examining and approving legal transfers;
3
<PAGE> 4
(IX) Furnishing such confirmations of transactions relating to
their Shares as required by applicable law;
(X) Acting as agent for the Corporation with respect to
furnishing each Shareholder such appropriate periodic statements relating to
Accounts, together with additional enclosures, including appropriate income tax
information and income tax forms duly completed, as required by applicable law,
as well as furnishing such information to each Broker-Dealer to enable the
Broker-Dealer to provide such information to its customers;
(XI) Acting as agent for the Corporation with respect to
mailing annual and semi-annual reports prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to each Shareholder as required by
applicable law as well as causing such materials to be mailed to each
Broker-Dealer to enable the Broker-Dealer to deliver such materials to its
customers;
(XII) Furnishing such periodic statements of transactions
effected by FDS, reconciliations, balances and summaries as the Fund may
reasonably request;
(XIII) Maintaining such books and records relating to
transactions effected by FDS as are required by the Act, or by any other
applicable provision of law, rule or regulation, to be maintained by the
Corporation or its transfer agent with respect to such transactions, and
preserving, or causing to be preserved, any such books and records for such
periods as may be required by any such law, rule or regulation and as may be
agreed upon from time to time between FDS and the Corporation. In addition, FDS
agrees to maintain and preserve master files and historical computer tapes on a
daily basis in multiple separate locations a sufficient distance apart to ensure
preservation of at least one copy of such information;
(XIV) Withholding taxes on non-resident alien Accounts,
preparing and filing U.S. Treasury Department Form 1099 and other appropriate
forms as required by applicable law with respect to dividends and distributions;
and
(XV) Reinvesting dividends for full and fractional Shares and
disbursing cash dividends, as applicable, pursuant to instructions received from
the Shareholder at the time an Account is established.
4
<PAGE> 5
(b) FDS agrees to act as proxy agent in connection with the holding
of annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Corporation the results of such tabulation accompanied
by appropriate certificates, and preparing and furnishing to the Corporation
certified lists of Shareholders as of such date, in such form and containing
such information as may be required by the Corporation.
(c) FDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of FDS under this
Agreement with respect to Accounts.
(d) FDS agrees to furnish to the Corporation such information and at
such intervals as is necessary for the Fund to comply with the registration
and/or the reporting requirements (including applicable escheat laws) of the
Securities and Exchange Commission, Blue Sky authorities or other governmental
authorities.
(e) FDS agrees to provide to the Corporation such information as may
reasonably be required to enable the Fund to reconcile the number of outstanding
Shares between FDS' records and the account books of the Corporation.
(f) Notwithstanding anything in the foregoing provisions of this
paragraph, FDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular class
of cases) as may from time to time be agreed in a writing signed by both
parties.
4. COMPENSATION.
(a) The Corporation agrees to pay FDS the fees and charges, as well
as FDS' out of pocket costs, for services described in this Agreement as set
forth in the Schedule of Fees attached hereto.
5
<PAGE> 6
5. RIGHT OF INSPECTION.
(a) FDS agrees that it will, in a timely manner, make available to,
and permit, any officer, accountant, attorney or authorized agent of the
Corporation to examine and make transcripts and copies (including photocopies
and computer or other electronical information storage media and print-outs) of
any and all of its books and records which relate to any transaction or function
performed by FDS under or pursuant to this Agreement.
6. CONFIDENTIAL RELATIONSHIP.
(a) FDS agrees that it will, on behalf of itself and its officers
and employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Corporation, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Corporation by
way of an Officer's Instruction.
7. INDEMNIFICATION.
(a) The Corporation shall indemnify and hold FDS harmless from any
loss, costs, damage and reasonable expenses, including reasonable attorney's
fees (provided that such attorney is appointed with the Corporation's consent,
which consent shall not be unreasonably withheld) incurred by it resulting from
any claim, demand, action or suit in connection with the performance of its
duties hereunder, provided that this indemnification shall not apply to actions
or omissions of FDS in cases of willful misconduct, failure to act in good faith
or negligence by FDS, its officers, employees or agents, and further provided
that prior to confessing any claim against it which may be subject to this
indemnification, FDS shall give the Corporation reasonable opportunity to defend
against said claim in its own name or in the name of FDS. An action taken by FDS
upon any Officer's Instruction reasonably believed by it to have been properly
executed shall not constitute willful misconduct, failure to act in good faith
or negligence under this Agreement.
8. REGARDING FDS.
6
<PAGE> 7
(a) FDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and capabilities
as both parties may mutually determine to be reasonably necessary for the
satisfactory performance of the duties and responsibilities of FDS. FDS warrants
and represents that its officers and supervisory personnel charged with carrying
out its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent for the Corporation possess the special skill and technical
knowledge appropriate for that purpose. FDS shall at all times exercise due care
and diligence in the performance of its functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Corporation. FDS agrees
that, in determining whether it has exercised due care and diligence, its
conduct shall be measured by the standard applicable to persons possessing such
special skill and technical knowledge.
(b) FDS warrants and represents that it is duly authorized and
permitted to act as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent under all applicable laws and that it will immediately notify
the Corporation of any revocation of such authority or permission or of the
commencement of any proceeding or other action which may lead to such
revocation.
9. TERMINATION.
(a) This Agreement shall become effective as of the date first above
written and shall remain in force for two years thereafter and shall thereafter
continue from year to year. This Agreement may be terminated by the Corporation
or FDS (without penalty to the Corporation or FDS) provided that the terminating
party gives the other party written notice of such termination at least sixty
(60) days in advance, except that the Corporation may terminate this Agreement
immediately upon written notice to FDS if the authority or permission of FDS to
act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent
has been revoked or if any proceeding or other action which the Corporation
reasonably believes will lead to such revocation has been commenced.
7
<PAGE> 8
(b) Upon termination of this Agreement, FDS shall deliver all
Shareholder records, books, stock ledgers, instruments and other documents
(including computerized or other electronically stored information) made or
accumulated in the performance of its duties as Transfer Agent, Disbursing Agent
and Shareholder Servicing Agent for the Corporation along with a certified
locator document clearly indicating the complete contents therein, to such
successor as may be specified in a notice of termination or Officer's
Instruction; and the Corporation assumes all responsibility for failure
thereafter to produce any paper, record or document so delivered and identified
in the locator document, if and when required to be produced.
10. AMENDMENT.
(a) Except to the extent that the performance by FDS or its
functions under this Agreement may from time to time be modified by an Officer's
Instruction, this Agreement may be amended or modified only by further written
agreement between the parties.
11. GOVERNING LAW.
(a) This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective duly authorized officers and their respective
corporate seals hereunto duly affixed and attested, as of the day and year above
written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By:
---------------------------------
Name:
Title:
FINANCIAL DATA SERVICES, INC.
By:
---------------------------------
Name: William A. Bridy
8
<PAGE> 9
Title: President
9
<PAGE> 10
SCHEDULE OF FEES
The Fund will pay to FDS:
1. For all accounts other than those detailed below an annual fee of $11.00
per Class A and Class D Shareholder Account and $14.00 per Class B and
Class C Shareholder Account. Additionally, a $.20 monthly closed account
charges will be assessed to all accounts which close during the calendar
year. Application of this fee will commence the month following the month
the account is closed. At the end of the calendar year, the closed account
fee will be waived.
2. For ERISA accounts held in the MFA program or any other program requiring
equalization under ERISA, the Fund will pay an annual fee equal to 10
basis points on the net assets in these accounts instead of the per
account charge.
3. For "Large" and "Mid" market employee benefit plan accounts, the Fund will
pay an annual fee of $11.00 per Class A and Class D Shareholder Account
and $14.00 per Class B and Class C Shareholder Account plus $1.00 per
transaction.
4. For "Small" market employee benefit plans, the Fund will pay per each
Shareholder Account based on the following schedule:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
ACCOUNT SIZE BASE FEE TRANSACTIONS
----------------------------------------------------------------------
<S> <C> <C>
less than $1,000 $7.00 $0.00
----------------------------------------------------------------------
$1,000 less than $2,500 $11.00 $0.00
----------------------------------------------------------------------
greater than $2,500 $11.00 $1.00
----------------------------------------------------------------------
</TABLE>
In addition, the Fund shall reimburse FDS for the following out-of-pocket
expenses incurred by FDS pursuant to this Agreement:
- Postage
- Envelopes/stationery
- Record storage and retrieval
- Telephone (local and long distance)
- Pre-authorized checks
- Returned check fees/charges and other similar fees/charges
- Handling costs (ADP or other similar vendor)
- Fed wire charges (excluding wires to/from the Fund's custody
accounts)
- Forms
- Any other costs agreed in writing by the parties
10
<PAGE> 1
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the __ day of December 1999, by and between
MERRILL LYNCH & CO., INC., a Delaware corporation ("ML & Co."), and MERRILL
LYNCH PREMIER GROWTH FUND, INC., a Maryland corporation (the "Fund").
W I T N E S S E T H :
WHEREAS, ML & Co. was incorporated under the laws of the State of
Delaware on March 27, 1973 under the corporate name "Merrill Lynch & Co., Inc."
and has used such name at all times thereafter;
WHEREAS, ML & Co. was duly qualified as a foreign corporation under the
laws of the State of New York on April 25, 1973 and has remained so qualified at
all times thereafter;
WHEREAS, the Fund was incorporated under the laws of the State of
Maryland on October 25, 1999; and
WHEREAS, the Fund desires to qualify as a foreign corporation under the
laws of the State of New York and has requested ML & Co. to give its consent to
the use of the name "Merrill Lynch" in the Fund's corporate name.
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, ML & Co. and the Fund hereby agree as follows:
1. ML & Co. hereby grants the Fund a non-exclusive license to use the
words "Merrill Lynch" in its corporate name.
2. ML & Co. hereby consents to the qualification of the Fund as a
foreign corporation under the laws of the State of New York with the words
"Merrill Lynch" in its corporate name and agrees to execute such formal consents
as may be necessary in connection with such filing.
3. The non-exclusive license hereinabove referred to has been given and
is given by ML & Co. on the condition that it may at any time, in its sole and
absolute discretion, withdraw the non-exclusive license to the use of the words
"Merrill Lynch" in the name of the Fund; and, as soon as practicable after
receipt by the Fund of written notice of the withdrawal of such non-exclusive
license, and in no event later than ninety days thereafter, the Fund will change
its name so that such name will not thereafter include the words "Merrill Lynch"
or any variation thereof.
4. ML & Co. reserves and shall have the right to grant to any other
company, including without limitation, any other investment company, the right
to use the words "Merrill Lynch" or variations thereof in its name and no
consent or permission of the Fund shall be necessary; but, if required by an
applicable law of any state, the Fund will forthwith grant all requisite
consents.
<PAGE> 2
5. The Fund will not grant to any other company the right to use a name
similar to that of the Fund or ML & Co. without the written consent of ML & Co.
6. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Merrill Lynch" or any variation thereof from such name, the
Fund hereby grants to ML & Co. the right to cause the incorporation of other
corporations or the organization of voluntary associations which may have names
similar to that of the Fund or to that to which the Fund may change its name and
to own all or any portion of the shares of such other corporations or
associations and to enter into contractual relationships with such other
corporations or associations, subject to any requisite approval of a majority of
the Fund's shareholders and the Securities and Exchange Commission and subject
to the payment of a reasonable amount to be determined at the time of use, and
the Fund agrees to give and execute any such formal consents or agreements as
may be necessary in connection therewith.
7. This Agreement may be amended at any time by a writing signed by the
parties hereto.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MERRILL LYNCH & CO., INC.
By:
--------------------------------------
Name:
Title:
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By:
--------------------------------------
Name:
Title:
3
<PAGE> 1
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
December 21, 1999
Merrill Lynch Premier Growth Fund, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Ladies and Gentlemen:
We have acted as counsel for Merrill Lynch Premier Growth Fund, Inc., a
corporation organized under the laws of the State of Maryland (the "Fund"), in
connection with the organization of the Fund and its registration as an open-end
investment company under the Investment Company Act of 1940, as amended. This
opinion is being furnished in connection with the registration of an indefinite
number of shares of common stock, designated Class A, Class B, Class C and Class
D, par value $0.10 per share, of the Fund (the "Shares") under the Securities
Act of 1933, as amended, which registration is being effected pursuant to a
registration statement on Form N-1A (File No. 333-89781), as amended (the
"Registration Statement").
As counsel for the Fund, we are familiar with the proceedings taken by
it in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Articles of Incorporation
of the Fund, the By-Laws of the Fund and such other documents as we have deemed
relevant to the matters referred to in this opinion.
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of common stock of the Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Premier Growth Fund, Inc.:
We consent to the use in Pre-Effective Amendment No. 2 to Registration Statement
No. 333-89781 of our report dated December 20, 1999, to the Board of Directors
and Shareholder of Merrill Lynch Premier Growth Fund, Inc., and to the reference
to us under the caption "Independent Auditors" both of which appear in the
Statement of Additional Information, which is a part of such Registration
Statement.
Deloitte & Touche LLP
Princeton, New Jersey
December 20, 1999
<PAGE> 1
CERTIFICATE OF THE SOLE STOCKHOLDER OF
MERRILL LYNCH PREMIER GROWTH FUND, INC.
Fund Asset Management, L.P., the holder of shares of common stock, par
value $0.10 per share, indicated below, of Merrill Lynch Premier Growth Fund,
Inc., a Maryland corporation (the "Fund"), does hereby confirm to the Fund its
representation that it purchased such shares for investment purposes, with no
present intention of redeeming or reselling any portion thereof.
<TABLE>
<CAPTION>
Number of Number of Number of Number of
Class A Shares Class B Shares Class C Shares Class D Shares
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
2,500 2,500 2,500 2,500
</TABLE>
FUND ASSET MANAGEMENT, L.P.
By: /s/ Terry K. Glenn
--------------------------------
Authorized Officer
Dated: December 21, 1999
<PAGE> 1
CLASS B SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the __ day of December 1999, by and between
Princeton Funds Distributor, Inc., a Delaware corporation ("PFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
WHEREAS, PFD has entered into an agreement with Merrill Lynch Premier
Growth Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it
acts as the exclusive distributor for the sale of Class B shares of common
stock, par value $0.10 per share (the "Class B shares"), of the Fund; and
WHEREAS, PFD and the Fund have entered into a Class B Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") pursuant to which PFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class B shares for account maintenance services
related to the Class B shares of the Fund and a distribution fee from the Fund
at the annual rate of 0.75% of average daily net assets of the Fund relating to
Class B shares for providing sales and promotional activities and services
related to the distribution of Class B shares; and
WHEREAS, PFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class B shareholders and the Securities Firm is willing to perform such
services;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities
with respect to the Class B shares of the Fund of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class B shares of the Fund, and
incur distribution expenditures of the types referred to in paragraph 2 of the
Plan.
3. As compensation for its activities and services performed under this
Agreement, PFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto, and as set forth in a schedule attached hereto, but in any
event not in excess of the amount permitted by the Plan. Such amounts will be
based on the dollar amount of Fund shares which are owned of record by the
Securities Firm as nominee for its customers or which are owned by those
customers of the Securities Firm whose records, as maintained by the Fund or its
agents, designate the Securities Firm as the customer's dealer of record. Any
such payments shall be in addition to the selling concession, if any, allowed to
the Securities Firm pursuant to this Agreement. No such fee will be paid to the
Securities Firm with respect to shares purchased by the Securities Firm and
<PAGE> 2
redeemed by the Fund or by us as agent within seven days after the dates of
confirmation of such purchase. PFD has no obligation to make such payments and
the Securities Firm hereby waives such payments until PFD receives monies
therefor from the Fund.
4. The Securities Firm shall provide PFD, at least quarterly, such
information as reasonably requested by PFD to enable PFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast
in person at a meeting or meetings called for the purpose of voting on this
Agreement.
6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination. In addition, this Agreement may be
terminated at any time, without penalty, with respect to the Plan on not more
than 60 days nor less than 30 days written notice delivered or mailed by
registered mail, postage prepaid, to the other party.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
PRINCETON FUNDS DISTRIBUTOR, INC.
By:
--------------------------------------
Name:
--------------------------
Title:
--------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------------------
Name:
--------------------------
Title:
--------------------------
3
<PAGE> 4
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH PREMIER GROWTH FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the ___ day of December 1999, by and
between Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund"), and Princeton Funds Distributor, Inc., a Delaware corporation ("PFD").
W I T N E S S E T H :
WHEREAS, the Fund intends to engage in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, PFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class B Shares Distribution
Agreement with PFD, pursuant to which PFD will act as the exclusive distributor
and representative of the Fund in the offer and sale of Class B shares of common
stock, par value $0.10 per share (the "Class B shares"), of the Fund to the
public; and
WHEREAS, the Fund desires to adopt this Class B Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which
the Fund will pay an account maintenance fee and a distribution fee to PFD with
respect to the Fund's Class B shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of this Class B Shares Distribution Plan
will benefit the Fund and its shareholders.
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund. All investments will be made at
the Trust level. This structure is sometimes called a "master/feeder" structure.
The Fund's investment results will correspond directly to the investment results
of the Trust. For simplicity, this Distribution Plan uses the term "Fund" to
include the Trust.
NOW, THEREFORE, the Fund hereby adopts, and PFD hereby agrees to the
terms of, this Class B Shares Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay PFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class B shares to compensate PFD and securities firms with
which PFD enters into related agreements
<PAGE> 5
pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account
maintenance activities with respect to Class B shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class B shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay PFD a distribution fee under the Plan at the end
of each month at the annual rate of 0.75% of average daily net assets of the
Fund relating to Class B shares to compensate PFD and securities firms with
which PFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class B shares of the Fund. Such expenditures may
consist of sales commissions to financial consultants for selling Class B shares
of the Fund, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Fund and the costs
of preparing and distributing promotional materials. The distribution fee may
also be used to pay the financing costs of carrying the unreimbursed
expenditures described in this Paragraph 2. Payment of the distribution fee
described in this Paragraph 2 shall be subject to any limitations set forth in
any applicable regulation of the National Association of Securities Dealers,
Inc.
3. The Fund hereby authorizes PFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. PFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub-Agreement shall provide that
the Securities Firms shall provide PFD with such information as is reasonably
necessary to permit PFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. PFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote
of at least a majority, as defined in the Investment Company Act, of the
outstanding Class B voting securities of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Plan and such related
agreements.
2
<PAGE> 6
7. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 6.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class B voting
securities of the Fund.
9. This Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class B
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.
11. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Paragraph 4 hereof, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
3
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of
the date first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
PRINCETON FUNDS DISTRIBUTOR, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
4
<PAGE> 1
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the ____ day of December 1999, by and between
Princeton Funds Distributor, Inc., a Delaware corporation ("PFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
WHEREAS, PFD has entered into an agreement with Merrill Lynch Premier
Growth Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it
acts as the exclusive distributor for the sale of Class C shares of common
stock, par value $0.10 per share (the "Class C shares"), of the Fund; and
WHEREAS, PFD and the Fund have entered into a Class C Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") pursuant to which PFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares for account maintenance services
related to the Class C shares of the Fund and a distribution fee from the Fund
at the annual rate of 0.75% of average daily net assets of the Fund relating to
Class C shares for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, PFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class C shareholders and the Securities Firm is willing to perform such
services;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities
with respect to the Class C shares of the Fund of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class C shares of the Fund, and
incur distribution expenditures of the types referred to in paragraph 2 of the
Plan.
As compensation for its activities and services performed under this
Agreement, PFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto, but in any event not in excess of the amount permitted by
the Plan. Such amounts will be based on the dollar amount of the Fund shares
which are owned of record by the Securities Firm as nominee for its customers or
which are owned by those customers of the Securities Firm whose records, as
maintained by the Fund or its agents, designate the Securities Firm as the
customer's dealer of record. Any such payment shall be in addition to the
selling concession, if any, allowed to the Securities Firm pursuant to this
Agreement. No such fee will be paid to the Securities Firm with respect to
shares purchased by the Securities Firm and redeemed by the Fund or by us as
agent within seven business days
<PAGE> 2
after the dates of confirmation of such purchase. PFD has no obligation to make
such payments and the Securities Firm hereby waives such payments until PFD
received monies therefor from the Fund.
4. The Securities Firm shall provide PFD, at least quarterly, such
information as reasonably requested by PFD to enable PFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast
in person at a meeting or meetings called for the purpose of voting on this
Agreement.
6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination. In addition, this Agreement may be
terminated at any time, without penalty, with respect to the Plan on not more
than 60 days nor less than 30 days written notice delivered or mailed by
registered mail, postage prepaid, to the other party.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
PRINCETON FUNDS DISTRIBUTOR, INC.
By:
--------------------------------------
Name:
-----------------------------
Title:
-----------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------------------
Name:
-----------------------------
Title:
-----------------------------
3
<PAGE> 4
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH PREMIER GROWTH FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the ___ day of December 1999, by and
between Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund"), and Princeton Funds Distributor, Inc., a Delaware corporation ("PFD").
W I T N E S S E T H :
WHEREAS, the Fund intends to engage in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, PFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares Distribution
Agreement with PFD, pursuant to which PFD will act as the exclusive distributor
and representative of the Fund in the offer and sale of Class C shares of common
stock, par value $0.10 per share (the "Class C shares"), of the Fund to the
public; and
WHEREAS, the Fund desires to adopt this Class C Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which
the Fund will pay an account maintenance fee and a distribution fee to PFD with
respect to the Fund's Class C shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of this Class C Shares Distribution Plan
will benefit the Fund and its shareholders.
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund. All investments will be made at
the Trust level. This structure is sometimes called a "master/feeder" structure.
The Fund's investment results will correspond directly to the investment results
of the Trust. For simplicity, this Distribution Plan uses the term "Fund" to
include the Trust.
NOW, THEREFORE, the Fund hereby adopts, and PFD hereby agrees to the
terms of, this Class C Shares Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay PFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class C shares to compensate PFD and securities firms with
which PFD enters into related agreements
<PAGE> 5
pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account
maintenance activities with respect to Class C shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class C shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay PFD a distribution fee under the Plan at the end
of each month at the annual rate of 0.75% of average daily net assets of the
Fund relating to Class C shares to compensate PFD and securities firms with
which PFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares of the Fund. Such expenditures may
consist of sales commissions to financial consultants for selling Class C shares
of the Fund, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Fund and the costs
of preparing and distributing promotional materials. The distribution fee may
also be used to pay the financing costs of carrying the unreimbursed
expenditures described in this Paragraph 2. Payment of the distribution fee
described in this Paragraph 2 shall be subject to any limitations set forth in
any applicable regulation of the National Association of Securities Dealers,
Inc.
3. The Fund hereby authorizes PFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. PFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub-Agreement shall provide that
the Securities Firms shall provide PFD with such information as is reasonably
necessary to permit PFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. PFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote
of at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Plan and such related
agreements.
2
<PAGE> 6
7. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 6.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting
securities of the Fund.
9. This Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class C
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.
11. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Paragraph 4 hereof, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
3
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of
the date first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By:
-------------------------------------------
Name:
---------------------------------
Title:
---------------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
By:
-------------------------------------------
Name:
---------------------------------
Title:
---------------------------------
4
<PAGE> 1
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the ___ day of December 1999, by and between
Princeton Funds Distributor, Inc., a Delaware corporation ("PFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
WHEREAS, PFD has entered into an agreement with Merrill Lynch Premier
Growth Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which it
acts as the exclusive distributor for the sale of Class D shares of common
stock, par value $0.10 per share (the "Class D shares"), of the Fund; and
WHEREAS, PFD and the Fund have entered into a Class D Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") pursuant to which PFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares for account maintenance services
related to the Class D shares of the Fund and a distribution fee from the Fund
at the annual rate of 0.75% of average daily net assets of the Fund relating to
Class D shares for providing sales and promotional activities and services
related to the distribution of Class D shares; and
WHEREAS, PFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class D shareholders and the Securities Firm is willing to perform such
services;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities
with respect to the Class D shares of the Fund of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class D shares of the Fund, and
incur distribution expenditures of the types referred to in paragraph 2 of the
Plan.
3. As compensation for its activities and services performed under this
Agreement, PFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto, but in any event not in excess of the amount permitted by
the Plan. Such amounts will be based on the dollar amount of shares which are
owned of record by the Securities Firm as nominee for its customers or which are
owned by those customers of the Securities Firm whose records, as maintained by
the Fund or its agents, designate the Securities Firm as the customer's dealer
of record. Any such payments shall be in addition to the selling concession, if
any, allowed to the Securities Firm pursuant to this Agreement. No such fee will
be paid to the Securities Firm with respect to shares purchased by the
Securities Firm and redeemed by the Fund or by us as agent within seven business
days
<PAGE> 2
after the dates of confirmation of such purchase. PFD has no obligation to make
such payments and the Securities Firm hereby waives such payments until PFD
receives monies therefor from the Fund.
4. The Securities Firm shall provide PFD, at least quarterly, such
information as reasonably requested by PFD to enable PFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast
in person at a meeting or meetings called for the purpose of voting on this
Agreement.
6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination. In addition, this Agreement may be
terminated at any time, without penalty, with respect to the Plan on not more
than 60 days' nor less than 30 days' written notice delivered or mailed by
registered mail, postage prepaid, to the other party.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
PRINCETON FUNDS DISTRIBUTOR, INC.
By:
--------------------------------------
Name:
-----------------------------
Title:
-----------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------------------
Name:
-----------------------------
Title:
-----------------------------
3
<PAGE> 4
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH PREMIER GROWTH FUND, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the ___ day of December 1999, by and
between Merrill Lynch Premier Growth Fund, Inc., a Maryland corporation (the
"Fund"), and Princeton Funds Distributor, Inc., a Delaware corporation ("PFD").
W I T N E S S E T H :
WHEREAS, the Fund intends to engage in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, PFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares Distribution
Agreement with PFD, pursuant to which PFD will act as the exclusive distributor
and representative of the Fund in the offer and sale of Class D shares of common
stock, par value $0.10 per share (the "Class D shares"), of the Fund to the
public; and
WHEREAS, the Fund desires to adopt this Class D Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which
the Fund will pay an account maintenance fee and a distribution fee to PFD with
respect to the Fund's Class D shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of this Class D Shares Distribution Plan
will benefit the Fund and its shareholders.
WHEREAS, the Fund is a "feeder" fund that invests all of its assets in
a "master" portfolio, the Master Premier Growth Trust, that has the same
investment objective and policies as the Fund. All investments will be made at
the Trust level. This structure is sometimes called a "master/feeder" structure.
The Fund's investment results will correspond directly to the investment results
of the Trust. For simplicity, this Distribution Plan uses the term "Fund" to
include the Trust.
NOW, THEREFORE, the Fund hereby adopts, and PFD hereby agrees to the
terms of, this Class D Shares Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay PFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class D shares to compensate PFD and securities firms with
which PFD enters into related agreements
<PAGE> 5
pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account
maintenance activities with respect to Class D shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class D shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay PFD a distribution fee under the Plan at the end
of each month at the annual rate of 0.75% of average daily net assets of the
Fund relating to Class D shares to compensate PFD and securities firms with
which PFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class D shares of the Fund. Such expenditures may
consist of sales commissions to financial consultants for selling Class D shares
of the Fund, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Fund and the costs
of preparing and distributing promotional materials. The distribution fee may
also be used to pay the financing costs of carrying the unreimbursed
expenditures described in this Paragraph 2. Payment of the distribution fee
described in this Paragraph 2 shall be subject to any limitations set forth in
any applicable regulation of the National Association of Securities Dealers,
Inc.
3. The Fund hereby authorizes PFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. PFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub-Agreement shall provide that
the Securities Firms shall provide PFD with such information as is reasonably
necessary to permit PFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. PFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote
of at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Plan and such related
agreements.
2
<PAGE> 6
7. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in Paragraph 6.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting
securities of the Fund.
9. This Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class D
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.
11. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Paragraph 4 hereof, for a period of
not less than six years from the date of this Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
3
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of
the date first above written.
MERRILL LYNCH PREMIER GROWTH FUND, INC.
By:
-------------------------------------------
Name:
--------------------------------
Title:
--------------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR,
a division of PRINCETON FUNDS DISTRIBUTOR, INC.
By:
-------------------------------------------
Name:
--------------------------------
Title:
--------------------------------
4
<PAGE> 1
MERRILL LYNCH SELECT PRICING(SM) SYSTEM
PLAN PURSUANT TO RULE 18f-3 UNDER THE INVESTMENT COMPANY ACT
The mutual funds participating in the Merrill Lynch Select Pricing(SM)
System (individually a "Fund" and, collectively, the "Funds") offer Class A
Shares, Class B Shares, Class C Shares and Class D Shares as follows:
Account Maintenance and Distribution Fees
Class B Shares, Class C Shares and Class D Shares bear the expenses of
the ongoing account maintenance fees applicable to the particular Class. Class B
Shares and Class C Shares bear the expenses of the ongoing distribution fees
applicable to the particular Class. Specific shareholders within a Class may be
subject to initial or contingent deferred sales charges as set forth in each
Fund's current prospectus and statement of additional information (together, the
"prospectus").
Transfer Agency Expenses
Each Class shall bear any incremental transfer agency cost applicable
to the particular Class.
Voting Rights
Each Class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its account maintenance fees or ongoing
distribution fees, as may be applicable. Each Class shall have separate voting
rights on any matter submitted to shareholders in which the interests of one
Class differ from the interests of any other Class.
Dividends
Dividends paid on each Class will be calculated in the same manner at
the same time and will differ only to the extent that any account maintenance
fee, any distribution fee and any incremental transfer agency cost relates to a
particular Class.
Conversion Features
Holders of Class B Shares will have such conversion features to Class D
Shares as set forth in each Fund's current prospectus. Conversion features may
vary among holders of Class B Shares.
<PAGE> 2
Exchange Privileges
Holders of Class A Shares, Class B Shares, Class C Shares and Class D
Shares shall have such exchange privileges as set forth in each Fund's current
prospectus. Exchange privileges may vary among Classes and among holders of a
Class.
Other Rights and Obligations
Except as otherwise described above, in all respects, each Class shall
have the same rights and obligations as each other Class.
2
