As filed with the Securities and Exchange Commission on October 13, 2000
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No.
(Check appropriate box or boxes.)
MASTER BASIC VALUE TRUST
(Exact Name Of Registrant As Specified In Charter)
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(Address Of Principal Executive Offices)
(888) 637-2260
(Registrants Telephone Number, Including Area Code)
TERRY K. GLENN
Master Basic Value Trust
P.O. Box 9011
Princeton, New Jersey 08543-9011
(Name and address of agent for service)
Copies to:
Counsel for the Trust: |
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Brian M. Kaplowitz, Esq. |
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Michael J. Hennewinkel, Esq. |
BROWN & WOOD LLP
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FUND ASSET MANAGEMENT, L.P. |
One World Trade Center |
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P.O. Box 9011 |
New York, New York 10048 |
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Princeton, New Jersey 08543-9011 |
EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended (the Investment Company Act). However, beneficial interests in the Registrant are not being registered under the Securities Act of 1933, as amended (the 1933 Act), because such interests will be issued solely in private
placement transactions that do not involve any public offering within the meaning of Section 4(2) of the 1933 Act. Investments in the Registrant may be made only by a limited number of institutional investors, including investment companies,
common or commingled trust funds, group trusts and certain other accredited investors within the meaning of Regulation D under the 1933 Act. This Registration Statement does not constitute an offer to sell, or the solicitation of an offer to
buy, any beneficial interests in the Registrant.
This Registration Statement has been prepared as a single document consisting of Parts A, B and C, none of which is to be used
or distributed as a stand alone document.
PART A
October 13, 2000
MASTER BASIC VALUE TRUST
Responses to items 1, 2, 3, 5 and 9 have been omitted pursuant to paragraph 2(b) of instruction B of the General Instructions to Form N-1A.
Master Basic Value Trust (the Trust) is part of a master-feeder structure (as described below). Part A of this
Registration Statement should be read in conjunction with (a) Post-Effective Amendment No. 29 of the Registration Statement on Form N-1A (Securities Act File No. 2-58521 and Investment Company Act File No. 811-2739) of Merrill Lynch Basic Value Fund, Inc.
(the Merrill Lynch Fund), as filed with the Securities and Exchange Commission (the Commission) on October 10, 2000, and as amended from time to time (the Merrill Lynch Registration Statement) and (b) Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-1A (Securities Act File No. 333-38060 and Investment Company Act File No. 811-09957) of Mercury Basic Value Fund, Inc. (the Mercury Fund and, together with the Merrill Lynch Fund, the
Funds), as filed with the Commission on October 10, 2000, and as may be amended from time to time (the Mercury Registration Statement). Part A of the Merrill Lynch Registration Statement includes the prospectus of the Merrill Lynch
Fund. Part A of the Mercury Registration Statement includes the prospectus of the Mercury Fund.
The Funds will invest their respective assets in beneficial interests in the Trust. The Funds will initially be the only
feeder funds that invest in the Trust. The Funds and any other feeder fund that may invest in the Trust are referred to herein as Feeder Funds.
Item 4. Investment Objective, Principal Investment Strategies, and Related Risks.
(a) Investment Objective.
The Trusts investment objective is to seek capital appreciation and, secondarily, income. The Trust tries to achieve its
investment objective by investing in securities, primarily equities that the Investment Adviser believes are undervalued and therefore represent basic investment value.
(b) Implementation of Investment Objective.
Fund Asset Management, L.P. (the Investment Adviser) manages the Trusts investments under the overall
supervision of the Board of Trustees of the Trust. The Investment Adviser places particular emphasis on companies with below average price/earnings ratios that may pay above average dividends. The Trust purchases primarily common stocks of U.S. companies
in trying to meet its goals. The Investment Adviser may also determine a company is undervalued if its stock price is down because of temporary factors that the Investment Adviser believes the company will recover from. The Investment Adviser manages the
Trusts investments under the overall supervision of the Board of Trustees of the Trust.
The Trust follows a basic contrary opinion, out-of-favor investment style. The Investment Adviser believes that favorable
changes in market prices are more likely to occur when:
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Stocks are out of favor
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Company earnings are depressed
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Price/earnings ratios are relatively low
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Investment expectations are limited
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There is no general interest in a security or industry
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On the other hand, the Investment Adviser believes that negative developments are more likely to occur when:
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Investment expectations are generally high
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Stock prices are advancing or have advanced rapidly
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Price/earnings ratios have been inflated
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An industry or security continues to become popular among investors
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In other words, the Investment Adviser believes that stocks with relatively high price/earnings ratios are more vulnerable to
price declines from unexpected adverse developments. At the same time, stocks with relatively low price/earnings ratios are more likely to benefit from favorable but generally unanticipated events. Thus, the Trust may invest a large part of its net assets
in stocks that have weak research ratings.
The Fund may sell a security if, for example, the stock price increases to the high end of the range of its historical
price-book value ratio or if the Fund determines that the issuer no longer meets the criteria Fund management has established for the purchase of such securities or if Fund management thinks there is a more attractive investment opportunity in the same
category.
Although it is not a principal strategy, the Trust may also invest up to 25% of its total assets in the securities of foreign
companies. The Trust concentrates its foreign exposure on established companies in established countries. Although the Trust may invest in emerging markets or underdeveloped countries from time to time, the Trust does not speculate on such markets or
countries. Also as a non-principal strategy, the Trust may lend its securities and may buy securities that are convertible into common stock. The Trust will normally invest a portion of its assets in short-term debt securities, such as commercial paper.
As a temporary measure for defensive purposes, the Trust may invest more heavily in these securities, without limitation. The Trust may also increase its investment in these securities when the Investment Adviser is unable to find enough attractive
long-term investments, to reduce exposure to equities when management believes it is advisable to do so, or to meet redemptions. Investments in short-term debt securities can be sold easily and have limited risk of loss but earn only limited returns.
(c) Risks.
Set forth below is a summary discussion of the general risks of investing in the Trust. As with any mutual fund, no assurance
can be given that the Trust will meet its investment objective, or that the Trusts performance will be positive over any period of time.
The Trusts principal risks are market risk and selection risk.
MARKET AND SELECTION RISKMarket 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 Trust 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 the Investment Adviser selects will underperform the markets or other funds with similar investment objectives and investment strategies.
The Trust also may be subject to the risks described below.
FOREIGN MARKET RISKThe Trust may invest in foreign securities, which 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 Trust will lose money. For example, the economies of certain foreign markets often do not compare favorably with the United States in respect to such issues as growth of gross national product,
reinvestment of capital, resources and balance of payments position. Certain of these economies may rely heavily on particular industries or foreign capital and may be more vulnerable to adverse diplomatic developments, the imposition of economic
sanctions against a particular country or countries, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Investments in foreign markets may be adversely affected by governmental actions such as the
imposition of capital controls, nationalization of companies or industries, expropriation of assets, punitive taxes, 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. Because there are generally fewer investors on foreign exchanges and a smaller number of securities traded each day, it may be difficult for the Fund to buy and sell
securities on those exchanges. In addition, prices of foreign securities may go up and down more than prices of securities traded in the United States. Foreign markets may have different clearance and settlement procedures, which may delay settlement of
transactions involving foreign securities. The Trust 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.
CERTAIN RISKS OF HOLDING FUND ASSETS OUTSIDE THE UNITED STATESThe Trust generally holds its foreign securities and cash
in foreign banks and securities depositories. Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. In addition, there may be limited or no regulatory oversight over their operations. Also, the
laws of certain countries may put limits on the Trusts ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Trust to buy, sell and
hold securities in certain foreign markets than in the U.S. The increased expense of investing in foreign markets reduces the amount the Trust can earn on its investments and typically results in a higher operating expense ratio for the Trust than
investment companies invested only in the U.S.
EUROPEAN ECONOMIC AND MONETARY UNION (EMU)A number of European countries have entered into EMU in an effort
to reduce trade barriers between themselves and eliminate fluctations in their currencies. EMU established a single European currency (the euro), which was introduced on January 1, 1999 and is expected to replace the existing national currencies of all
initial EMU participants by July 1, 2002. Certain securities (beginning with government and corporate bonds) were redenominated in the euro and are traded and make dividend and other payments only in euros. Like other investment companies and business
organizations, including the companies in which the Trust invests, the Trust could be adversely affected if the transition to the euro, or EMU as a whole, does not proceed as planned or if a participating country withdraws from EMU.
BORROWING AND LEVERAGE RISKThe Trust may borrow for temporary emergency purposes including to meet redemptions.
Borrowing may exaggerate changes in the net asset value of Trust shares and in the yield on the Trusts portfolio. Borrowing will cost the Trust interest expense and other fees. The cost of borrowing may reduce the Trusts return. Certain
securities that the Trust may buy may create leverage including, for example, options.
Item 6. Management, Organization, and Capital Structure.
(a)(1) Investment Adviser.
Fund Asset Management, L.P. manages the Trusts investments under the overall supervision of the Board of Trustees of the
Trust. The investment advisory agreement between the Trust and the Investment Adviser gives the Investment Adviser the responsibility for making all investment decisions for the Trust.
The Trust pays the Investment Adviser a fee at the annual rate of 0.60% of the average daily net assets for the first $100
million; 0.50% of the average daily net assets from $100 million to $200 million; and 0.40% of the average daily net assets above $200 million.
The Investment Adviser was organized as an investment adviser in 1977 and offers investment advisory services to more than 50
registered investment companies. The Investment Adviser and its affiliates had approximately $553 billion in investment company and other portfolio assets under management as of July 2000. This amount includes assets managed for affiliates of the
Investment Adviser.
(a)(2) Portfolio Manager.
Kevin Rendino is a Senior Vice President and the Portfolio Manager of the Trust. Mr. Rendino has been a First Vice President
of Merrill Lynch Investment Managers, L.P. (MLIM) since 1997 and was also a Vice President of MLIM from 1993 to 1997.
(b) Capital Stock.
The Trust is an open-end management investment company that was organized on May 2, 2000 as a business trust under the laws of
the State of Delaware. Beneficial interests in the Trust are issued solely in private placement transactions which do not involve any public offering within the meaning of Regulation D under the 1933 Act. Investments in the Trust may be made
only by investment companies or certain other entities which are accredited investors within the meaning of Regulation D under the 1933 Act. This Registration Statement does not constitute an offer to sell, or the solicitation of an offer to
buy, any security within the meaning of the 1933 Act.
Investors in the Trust have no preemptive or conversion rights, and beneficial interests in the Trust are fully paid and
non-assessable. The Trust has no current intention to hold annual meetings of investors, except to the extent required by the Investment Company Act, but will hold special meetings of investors, when in the judgment of the Trustees, it is necessary or
desirable to submit matters for an investor vote. Upon liquidation of the Trust, a Feeder Fund would be entitled to their pro rata share of the assets of the Trust that are available for distribution.
The Trust is organized as a business trust under the laws of the State of Delaware. Each Feeder Fund is entitled to vote in
proportion to its investment in the Trust. Each Feeder Fund will participate in the earnings, dividends and assets of the Trust in accordance with its pro rata interests in the Trust.
Investments in the Trust may not be transferred. A Feeder Fund may withdraw all or any portion of its investment in the Trust
at net asset value on any day on which the New York Stock Exchange (the NYSE) is open, subject to certain exceptions. For more information about the ability of a Feeder Fund to withdraw all or any portion of its investment in the Trust, please
see Item 7 herein.
Item 7. Shareholder Information.
(a) Pricing of Beneficial Interests in the Trust.
The net asset value of the Trust is determined once daily Monday through Friday after the close of business on the NYSE on
each day the NYSE is open for trading based upon prices at the time of closing. The NYSE generally closes at 4:00 p.m., Eastern time. The price at which a purchase or redemption is effected is based on the next calculation of net asset value after such an
order is placed. Any assets or liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by
one or more banks or dealers on the day of valuation. The NYSE is not open for trading on New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value of the Trust is computed by dividing the value of the securities held by the Trust 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 interests in the Trust outstanding at such time, rounded to the nearest cent. Expenses, including the fee
payable to the Investment Adviser, are accrued daily. 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 investors 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 the investors share of the aggregate interests in the Trust. Any additions or withdrawals to be effected on
that day will then be effected. The investors 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 investors investment in
the Trust as of the time of determination on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investors investment in the 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 investors interest in the Trust after the close of business of the NYSE as of which the next determination of net asset value of the Trust takes place.
(b) Purchase of Beneficial Interests in the Trust.
Beneficial interests in the Trust are issued solely in private placement transactions that do not involve any public
offering within the meaning of Section 4(2) of the 1933 Act. Investments in the Trust may only be made by a limited number of institutional investors including investment companies, common or commingled trust funds, group trusts, and certain other
accredited investors within the meaning of Regulation D under the 1933 Act. This Registration Statement does not constitute an offer to sell, or the solicitation of an offer to buy, any security within the meaning of the 1933 Act.
There is no minimum initial or subsequent investment in the Trust. However, because the Trust intends to be as fully invested
at all times as is reasonably consistent with its investment objective and policies in order to enhance the return on its assets, investments by a Feeder Fund must be made in federal funds (i.e., monies credited to the account of the Trusts
custodian bank by a Federal Reserve Bank).
The Trust reserves the right to stop accepting investments from any Feeder Fund or to reject any investment order.
(c) Redemption of Beneficial Interests in the Trust.
A Feeder Fund may withdraw all or any portion of its investment in the Trust on any business day that the NYSE is open at the
net asset value next determined after a withdrawal request in proper form is furnished by the investor to the Trusts transfer agent. When a request is received in proper form, the Trust will redeem a Feeder Funds interests at the next
determined net asset value. The Trust will make payment for all interests redeemed within seven days after receipt by the Trust of a redemption request in proper form, except as provided by the rules of the Commission. The right of a Feeder Fund to
receive payment with respect to any withdrawal may be suspended or the payment of the withdrawal proceeds postponed during any period during which the NYSE is closed (other than weekends or holidays) or trading on the NYSE is restricted, or, to the extent
otherwise permitted by the Investment Company Act, if an emergency exists. Investments in the Trust may not be transferred.
(d) Dividends and Distributions.
(e) Tax Consequences.
Because the Trust intends to operate as a partnership for federal income tax purposes, the Trust will not be subject to any
income tax. Based upon the status of the Trust as a partnership, a Feeder Fund will be taxable on its share of the Trusts ordinary income, capital gains, losses, deductions and credits in determining its income tax liability. The determination of a
Feeder Funds share of the Trusts ordinary income, capital gains, deductions and credits will be made in accordance with the Code.
Item 8. Distribution Arrangements.
(a) Sales Loads. Not Applicable.
(b) 12b-1 Fees. Not Applicable.
(c) Multiple Class and Master Feeder Funds.
The Trust is part of a master/feeder structure. Members of the general public may not purchase beneficial interests in the
Trust. However, the Trust may sell beneficial interests to other affiliated and non-affiliated investment companies and/or institutional investors. Each Feeder Fund acquires an indirect interest in the securities owned by the Trust and will pay a
proportionate share of the Trusts expenses. A Feeder Fund is not required to sell its shares to the public at the same price as another Feeder Fund. Feeder Funds may have different sales commissions and operating expenses. These different sales
commissions and operating expenses may result in differences in returns among the Feeder Funds.
The Trustees of the Trust believe that the master/feeder fund structure may enable the Trust to reduce costs
through economies of scale. A larger investment portfolio for the Trust may reduce certain transaction costs to the extent that contributions to and redemptions from the Trusts portfolio by the various Feeder Funds may offset each other and produce
a lower net cash flow.
A Feeder Funds investment in the Trust may, however, be adversely affected by the actions of other Feeder Funds. For
example, if a large Feeder Fund reduces its investment in the Trust or withdraws from the Trust, the remaining Feeder Funds may bear higher pro rata operating expenses. However, this possibility also exists for traditionally structured funds with large
investors. A Feeder Fund might also withdraw from the Trust if the Trust voted to change its investment objective, policies or limitations in a manner not acceptable to the Directors of that Feeder Fund. The withdrawal of all of a Feeder Funds
assets from the Trust may affect the investment performance of the Feeder Fund and the Trust.
The Trust normally will not hold meetings of investors except as required by the Investment Company Act. Each Feeder Fund will
be entitled to vote in proportion to its interest in the Trust. When a Feeder Fund is requested to vote on matters pertaining to the Trust, the Feeder Fund will hold a meeting of its shareholders and will vote its interest in the Trust proportionately to
the voting instructions received from the shareholders of the Feeder Fund. For more information about the master/feeder structure, please see Part A of the Merrill Lynch Registration Statement and Part A of the Mercury Registration Statement
under Master/Feeder Structure.
PART B
October 13, 2000
MASTER BASIC VALUE TRUST
Item 10.Cover Page and Table of Contents.
This Part B, which is not a prospectus, supplements and should be read in conjunction with the current Part A of Master Basic
Value Trust (the Trust), dated October 13, 2000, as it may be revised from time to time (the Trusts Part A). To obtain a copy of the Trusts Part A, please call the Trust at 1-888-637-3863, or write to the Trust at P.O.
Box 9011, Princeton, New Jersey 08543-9011. The Trusts Part A is incorporated herein by reference and this Part B is incorporated by reference in the Trusts Part A.
As permitted by General Instruction D to Form N-1A, responses to certain Items required to be included in Part B of this
Registration Statement are incorporated herein by reference from (a) Post-Effective Amendment No. 29 of the Registration Statement on Form N-1A (Securities Act File No. 2-58521 and Investment Company Act File No. 811-2739) of Merrill Lynch Basic Value
Fund, Inc. (the Merrill Lynch Fund), as filed with the Securities and Exchange Commission (the Commission) on October 10, 2000 and as amended from time to time (the Merrill Lynch Registration Statement) and (b)
Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A (Securities Act File No. 333-38060 and Investment Company Act File No. 811-09957) of Mercury Basic Value Fund, Inc. (the Mercury Fund and, together with the Merrill Lynch
Fund, the Funds), as filed with the Commission on October 10, 2000, and as may be amended from time to time (the Mercury Registration Statement). Part A of the Merrill Lynch Registration Statement includes the prospectus of the
Merrill Lynch Fund. Part B of the Merrill Lynch Registration Statement includes the statement of additional information of the Merrill Lynch Fund. Part A of the Mercury Registration Statement includes the prospectus of the Mercury Fund. Part B of the
Mercury Registration Statement includes the statement of additional information of the Mercury Fund.
The Trust is part of a master/feeder structure. The Funds will invest their respective assets in beneficial
interests in the Trust. The Funds will initially be the only feeder funds that invest in the Trust. The Funds and any other feeder fund that may invest in the Trust are referred to herein as Feeder Funds.
Information relating to the history of the Trust is incorporated herein by reference from Item 4 of the Trusts Part A.
Item 12.Description of the Trust and Its Investments and Risks.
The following information supplements and should be read conjunction with Item 4 of the Trusts Part A.
Information relating to the fundamental investment restrictions and the non-fundamental investment policies and restrictions
of the Trust, the types of securities purchased by the Trust, the investment techniques used by the
Trust, and certain risks relating thereto, as well as other information relating to the Trusts investment programs, is incorporated herein by reference from the section entitled INVESTMENT OBJECTIVE AND POLICIES in Part B of the Merrill
Lynch Funds Registration Statement and Part B of the Mercury Registration Statement.
Item 13.Management of the Trust.
(a) Board of Trustees of the Trust.
The Trustees of the Trust consist of eight individuals, six of whom are not interested persons of the Trust as
defined in the Investment Company Act of 1940, as amended (the Investment Company Act). The same individuals serve as Directors of the Funds and are sometimes referred to herein as the non-interested Directors/Trustees. The
Trustees of the Trust are responsible for the overall supervision of the operations of the Trust and perform the various duties imposed on the directors of investment companies by the Investment Company Act. Information about the Trustees and executive
officers of the Trust, 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 Trustee is P.O. Box 9011, Princeton, New Jersey 08543-9011.
(b) Management Information.
TERRY
K. GLENN
(60)President and Trustee (1)(2)Executive Vice President of Fund Asset Management, L.P. (the Investment Adviser) and Merrill Lynch Investment Managers, L.P. (MLIM) (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 FAM Distributors, Inc. (FAMD or the Distributor) since 1986 and
Director thereof since 1991; President of Princeton Administrators, L.P. since 1988.
M. COLYER
CRUM
(68)Trustee (2)(3)104 Westcliff Road, Weston, Massachusetts 02193. James R. Williston Professor of Investment Management Emeritus, Harvard Business School since 1996; James R. Williston Professor of Investment Management, Harvard
Business School, from 1971 to 1996; Director of Cambridge Bancorp.
LAURIE
SIMON
HODRICK
(38)Trustee (2)(3)809 Uris Hall, 3022 Broadway, New York, New York 10027. Professor of Finance and Economics, Graduate School of Business, Columbia University since 1998; Associate Professor of Finance and Economics, Graduate School of
Business, Columbia University from 1996 to 1998; Associate Professor of Finance, J.L. Kellogg Graduate School of Management, Northwestern University from 1992 to 1996.
JACK
B. SUNDERLAND
(72)Trustee (2)(3)P.O. Box 7, West Cornwall, Connecticut 06796. President and Director of American Independent Oil Company, Inc. (an energy company) since 1987; Member of Council on Foreign Relations since 1971.
STEPHEN
B. SWENSRUD
(67)Trustee (2)(3)88 Broad Street, 2nd floor, Boston, Massachusetts 02110. Chairman of Fernwood Advisors (investment advisor) since 1996; Principal of Fernwood Associates (financial consultants) since 1975; Chairman of R.P.P.
Corporation (Manufacturing) since 1978; Director of International Mobile Communications, Inc. (Telecommunications) since 1998.
J. THOMAS
TOUCHTON
(61)Trustee (2)(3)Suite 3405, One Tampa City Center, 201 North Franklin Street, Tampa, Florida 33062. Managing Partner of The Witt Touchton Company and its predecessor, The Witt Co. (a private investment partnership), since 1972;
Trustee Emeritus of Washington and Lee University; Director of TECO Energy, Inc. (an electric utility holding company).
FRED
G. WEISS
(59)Trustee (2)(3)16450 Maddalena Place, Delray Beach, Florida 33446. Managing Director of FGW Associates since 1997; Vice President, Planning Investment, and Development of Warner Lambert Co. from 1979 to 1997; Director of Watson
Pharmaceutical, Inc. (a pharmaceutical company) since 2000; Director of the Michael J. Fox Foundation for Parkinsons Research; Director of Laboratories Phoenix USA, Inc. (a private drug delivery company); and Director of Kann Institute for Medical
Careers, Inc. (a private medical education company).
ARTHUR
ZEIKEL
(68)Trustee (1)(2)300 Woodland Avenue, Westfield, New Jersey 07090. Chairman of the Investment Adviser and MLIM from 1997 to 1999 and President thereof from 1977 to 1997; Chairman of Princeton Services, Inc. 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.
KEVIN
RENDINO
(34)Senior Vice President and Portfolio Manager (1)First Vice President of MLIM since 1997; Vice President of MLIM from 1993 to 1997; and Portfolio Manager of MLIM since 1999.
DONALD
C. BURKE
(40)Vice President and Treasurer (1)(2)Senior Vice President and Treasurer of the Investment Adviser and MLIM since 1999; Senior Vice President and Treasurer of Princeton Services since 1999; Vice President of FAMD since 1999; First
Vice President of MLIM from 1997 to 1999; Vice President of MLIM from 1990 to 1997; Director of Taxation of MLIM since 1990.
THOMAS
D. JONES
, III (35)Secretary (1)(2)Director (Legal Advisory) of MLIM since 2000; Vice President of MLIM from 1998 to 2000; attorney with the Investment Adviser and MLIM since 1992.
(1)
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Interested person, as defined in the Investment Company Act, of the Trust and each Fund.
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(2)
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Such Trustee or officer is a trustee, director or officer of other investment companies for which FAM or MLIM acts as investment
adviser or manager.
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(3)
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Member of each Funds and the Trusts Audit and Nominating Committee, which is responsible for the selection of the
independent auditors and the selection and nomination of non-interested Directors/Trustees.
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(d) Compensation.
The Funds and the Trust pay each non-interested Director/Trustee for service to the Funds and the Trust, a combined fee of
$3,500 per year plus $500 per Board meeting attended. The Funds and the Trust also compensate each member of the Audit and Nominating Committee (the Committee), which consists of all of the non-interested Directors/Trustees, at the rate of
$2,500 per year. The Chairman of the Committee receives an additional fee of $750 per year. The Funds and the Trust reimburse each non-interested Director/Trustee for his or her out-of-pocket expenses relating to attendance at Board and Committee meetings.
The following table sets forth the aggregate compensation the Fund and the Trust expect to pay to the non-interested
Directors/Trustees for the first fiscal year and the aggregate compensation by all investment companies advised by the Investment Adviser and its affiliates (MLIM/FAM advised funds) paid to the non-affiliated Directors/Trustees for the
calendar year ended December 31, 1999.
Name
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Position with Fund
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Aggregate
Compensation
from
Fund/Trust
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Pension or
Retirement Benefits
Accrued as Part of
Fund/Trust Expense
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Estimated Annual
Benefits upon
Retirement
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Aggregate
Compensation
from Fund/Trust
and Other
MLIM/FAM-
Advised Funds(1)
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M. Colyer Crum |
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Director/Trustee |
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$8,000 |
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None |
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None |
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$122,975 |
Laurie Simon Hodrick |
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Director/Trustee |
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$8,000 |
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None |
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None |
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$ 53,000 |
Jack B. Sunderland |
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Director/Trustee |
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$8,000 |
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None |
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None |
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$143,975 |
Stephen B. Swensrud |
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Director/Trustee |
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$8,000 |
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None |
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None |
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$232,250 |
J. Thomas Touchton |
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Director/Trustee |
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$8,000 |
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None |
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None |
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$142,725 |
Fred G. Weiss |
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Director/Trustee |
|
$8,000 |
|
None |
|
None |
|
$122,975 |
(1)
|
The Directors/Trustees serve on the boards of MLIM/FAM advised funds as follows: Mr. Crum (25 registered investment companies
consisting of 60 portfolios); Ms. Hodrick (25 registered investment companies consisting of 60 portfolios); Mr. Sunderland (25 registered investment companies consisting of 60 portfolios); Mr. Swensrud (40 registered investment companies consisting of 80
portfolios); Mr. Touchton (25 registered investment companies consisting of 60 portfolios); and Mr. Weiss (25 registered investment companies consisting of 60 portfolios.)
|
(e) Sales Loads. Not Applicable.
Item 14.Control Persons and Principal Holders of Securities.
The Merrill Lynch Fund, a Maryland corporation, owns 100% of the beneficial interests in the Trust.
As of August 31, 2000, the officers and Trustees of the Trust as a group (12 persons) owned an aggregate of less than 1% of
the outstanding shares of common stock of Merrill Lynch & Co., Inc. and owned no beneficial interests in the Trust.
Item 15.Investment Advisory and Other Services.
The following information supplements and should be read in conjunction with Item 4 in the Trusts Part A.
Information relating to the investment management and other services provided to the Trust or on behalf of the Trust is
incorporated herein by reference from the sub-section entitled Management and Advisory Arrangements and from the section entitled GENERAL INFORMATION in Part B of the Merrill Lynch Registration Statement and in Part B of the
Mercury Registration Statement. The following list identifies the specific sections and sub-sections in Part B of each Funds Registration Statement under which the information required by Item 15 of Form N-1A may be found. Each listed section is
incorporated herein by reference.
Form N-1A Item No.
|
|
Sections Incorporated by Reference from Part B
of the Merrill Lynch Registration Statement and
Part B of the Mercury Registration Statement
|
Item 15(a) |
|
Management and Advisory Arrangements |
Item 15(c) |
|
Management and Advisory Arrangements |
Item 15(d) |
|
Management and Advisory Arrangements |
Item 15(e) |
|
Not Applicable |
Item 15(f) |
|
Not Applicable |
Item 15(g) |
|
Not Applicable |
Item 15(h) |
|
GENERAL INFORMATION |
FAM Distributors, Inc. (FAMD), P.O. Box 9011, Princeton, New Jersey, 08543-9081, an affiliate of FAM, acts as
placement agent for the Trust pursuant to a placement agent agreement (the Placement Agent Agreement). Under the Placement Agent Agreement, FAMD receives no compensation for acting as placement agent for the Trust.
Item 16.Brokerage Allocation and Other Practices.
Information relating to portfolio turnover and brokerage allocation for or on behalf of the Trust is incorporated herein by
reference from the section entitled PORTFOLIO TRANSACTIONS AND BROKERAGE in Part B of the Merrill Lynch Registration Statement and Part B of the Mercury Registration Statement.
Item 17.Capital Stock and Other Securities.
The following information supplements and should be read in conjunction with Item 6(b) and Item 7 in the Trusts Part A.
Under the Declaration of Trust, the Trustees are authorized to issue beneficial interests in the Trust. Upon liquidation of the Trust, Feeder Funds would be entitled to share in the assets of the Trust that are available for distribution in proportion to
their investment in the Trust.
The Trust is organized as a business trust under the laws of the State of Delaware. Each Feeder Fund is entitled to a vote in
proportion to its investment in the Trust. Each Feeder Fund will participate in the earnings, dividends and assets of the Trust in accordance with their pro rata interests in the Trust. No certificates are issued.
Each investor is entitled to a vote, with respect to matters affecting the Trust, in proportion to the amount of its
investment in the Trust. Investors in the Trust do not have cumulative voting rights, and investors holding more than 50% of the aggregate beneficial interests in the Trust may elect all of the Trustees of the Trust if they choose to do so and in such
event the other investors in the Trust would not be able to elect any Trustee. The Trust is not required to hold annual meetings of investors but the Trust will hold special meetings of investors when in the
judgment of the Trusts Trustees it is necessary or desirable to submit matters for an investor vote. The Trustees may elect to terminate the Trust without a vote of the interest holders.
Item 18.Purchase, Redemption and Pricing of Securities.
The following information supplements and should be read in conjunction with Item 7 and Item 8 in the Trusts Part A.
(a) Purchase of Beneficial Interests in the Trust.
The net asset value of the Trust is determined once daily Monday through Friday after the close of business on the New York
Stock Exchange (NYSE) on each day the NYSE is open for trading based upon prices at the time of closing. The NYSE generally closes at 4:00 p.m., Eastern time. The price at which a purchase or redemption is effected is based on the next
calculation of net asset value after such an order is placed. Any assets or liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers on
the day of valuation. The NYSE is not open for trading on New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value of the Trust is computed by dividing the value of the securities held by the Trust 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 interests in the Trust outstanding at such time, rounded to the nearest cent. Expenses, including the fee
payable to the Investment Adviser, are accrued daily. 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 investors 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 the investors share of the aggregate interests in the Trust. Any additions or withdrawals to be effected on
that day will then be effected. The investors 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 investors investment in
the Trust as of the time of determination on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investors investment in the 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 investors interest in the Trust after the close of business of the NYSE as of which the next determination of net asset value of the Trust takes place.
Securities that are held by 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 over-the-counter (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 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 interests in the Trust 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 Trusts net asset value.
Beneficial interests in the Trust are issued solely in private placement transactions that do not involve any public
offering within the meaning of Section 4(2) of the 1933 Act. Investments in the Trust may only be made by a limited number of institutional investors including investment companies, common or commingled trust funds, group trusts, and certain other
accredited investors within the meaning of Regulation D under the 1933 Act. This Registration Statement does not constitute an offer to sell, or the solicitation of an offer to buy, any security within the meaning of the 1933 Act.
There is no minimum initial or subsequent investment in the Trust. However, because the Trust intends to be as fully invested
at all times as is reasonably consistent with its investment objectives and policies in order to enhance the return on its assets, investments by a Feeder Fund must be made in Federal funds (i.e., monies credited to the account of the Trusts
custodian bank by a Federal Reserve Bank).
The Trust reserves the right to stop accepting investments from any Feeder Fund or to reject any investment order.
A Feeder Fund may withdraw all or any portion of its investment in the Trust on any business day in which the NYSE is open at
the net asset value next determined after a withdrawal request in proper form is furnished by the investor to the Trusts transfer agent. When a request is received in proper form, the Trust will redeem a Feeder Funds interests at the next
determined net asset value. The Trust will make payment for all interests redeemed within seven days after receipt by the Trusts transfer agent of a redemption request in proper form, except as provided by the rules of the Commission. The right of a
Feeder Fund to receive payment with respect to any withdrawal may be suspended or the payment of the withdrawal proceeds postponed during any period during which the NYSE is closed (other than weekends or holidays) or trading on the NYSE is restricted,
or, to the extent otherwise permitted by the Investment Company Act, if an emergency exists. Investments in the Trust may not be transferred.
(b) Fund Reorganizations. Not Applicable.
(c) Offering Price. Not Applicable.
Item 19.Taxation of the Trust
Because the Trust intends to qualify as a partnership for federal income tax purposes, the Trust should not be subject to any
income tax. Based upon the status of the Trust as a partnership, a Feeder Fund will take into account its share of the Trusts net income, capital gains, losses, deductions and credits in determining its income tax liability. The determination of a
Feeder Funds share of the Trusts ordinary income, capital gains, losses, deductions and credits will be made in accordance with the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the Code).
The Trusts first taxable year end is June 30, 2001. Although the Trust will not be subject to Federal income tax, it
will file appropriate Federal income tax returns.
It is intended that the Trusts assets, income and distributions will be managed in such a way that an investor in the
Trust will be able to satisfy the requirements of Subchapter M of the Code for qualification as a regulated investment company (RIC) assuming that the investor invested all of its investable assets in the Trust. Any prospective Feeder Fund
which is a RIC agrees that, for purposes of determining its required distribution under Code Section 4982(a), it will account for its share of items of income, gain, loss, deduction and credit of the Trust as they are taken into account by the Trust.
The Trust may invest in options. Certain options contracts are section 1256 contracts. Any gains or losses on
section 1256 contracts are generally considered 60% long-term and 40% short-term capital gains or losses (60/40 gains or losses). Also, section 1256 contracts held by the Trust at the end of each taxable year are marked to market, i.e.,
treated for Federal income tax purposes as being sold on the last business day of such taxable year for their fair market value. The resulting mark-to-market gains or losses are also treated as 60/40 gains or losses. When the section 1256 contract is
subsequently disposed of, the resulting actual gain or loss will be adjusted by the amount of any year-end mark-to-market gain or loss previously taken into account.
Foreign currency gains or losses on non-U.S. dollar denominated bonds and other similar debt instruments and on any non-U.S.
dollar denominated options that are not section 1256 contracts generally will be treated as ordinary income or loss.
Certain hedging transactions undertaken by the Trust may result in straddles for Federal income tax purposes. The
straddle rules contained in Code §1092 and the regulations thereunder may affect the character of gains (or losses) realized by the Trust with respect to property held in a straddle. In addition, it may be required that losses realized by the Trust
on positions that are part of a straddle be deferred, rather than taken into account in calculating taxable income for the taxable year in which such losses are realized. The Trust may make one or more of the elections available under the Code which are
applicable to straddles. If the Trust makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to the elections made. The
rules applicable under certain of the elections operate to accelerate the recognition of gains or losses from the affected straddle positions. Additionally, Section 1258 the Code, applicable to conversion transactions or Section 1259,
applicable to constructive sales, may apply to certain Trust transactions (including straddles) to change the character of capital gains to ordinary income or to require the recognition of income prior to the economic recognition of such income.
The Trust may be subject to a tax withheld by a foreign country at the source on dividend or interest income received from
securities of a non-U.S. issuer. The United States has entered into tax treaties with many foreign countries which may entitle the Trust to a reduced rate of tax or exemption from tax on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Trusts assets to be invested within various countries is not known.
The Trust is to be managed in compliance with the provisions of the Code applicable to RICs as though such requirements were
applied at the Trust level. Thus, consistent with its investment objectives, the Trust will meet the income and diversification of assets tests of the Code applicable to RICs. The Trust and the Feeder Funds have received a ruling from the Internal
Revenue Service that feeder funds that are RICs will be treated as owners of their proportionate shares of the Trusts assets and income for purposes of these tests.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent that the RIC does not distribute during each
calendar year 98% of its ordinary income, determined on a calendar year basis, and 98% of its net capital gain, determined, in general, on an October 31 year-end basis plus certain undistributed amounts from previous years. The Trust intends to distribute
its income and capital gains to its RIC investors so as to enable such RICs to minimize imposition of the 4% excise tax. There can be no assurance that sufficient amounts of the Trusts taxable income and capital gains will be distributed to avoid
entirely the imposition of the tax on RIC investors. In such event, a RIC investor will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirements.
Investors are advised to consult their own tax advisers as to the tax consequences of an investment in the Trust.
The placement agent for the Trust is FAMD. FAMD receives no compensation for acting as placement agent for the Trust.
Item 21.Calculation of Performance Data.
Not Applicable.
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Investors,
Master Basic Value Trust:
We have audited the accompanying statement of assets and liabilities of Master Basic Value Trust (the Trust) as of September 26, 2000. This financial statement is
the responsibility of the Trusts management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 Master Basic Value Trust as of September 26,
2000, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Princeton, New Jersey
September 27, 2000
MASTER BASIC VALUE TRUST
STATEMENT OF ASSETS AND LIABILITIES
September 26, 2000
Item 22.Financial Statements.
ASSETS: |
|
|
Cash |
|
$100,100 |
Prepaid offering costs (Note 3) |
|
20,000 |
|
|
|
Total assets
|
|
120,100 |
Less liabilities and accrued expenses |
|
20,000 |
|
|
|
Net Assets applicable to investors interest in the Fund. (Note 1) |
|
$100,100 |
|
|
|
Notes to Financial Statements.
(1)
|
Master Basic Value Trust (the Trust) was organized as a Delaware business trust on May 2, 2000. Merrill Lynch Basic
Value Fund, Inc. and Mercury Basic Value Fund, Inc. will invest their assets in the Trust. To date, the Trust has not had any transactions other than those relating to organizational matters, a $100,000 capital contribution to the Trust by Merrill Lynch
Basic Value Fund, Inc. and a $100 partnership contribution to the Trust by FAM Distributors, Inc. (the Distributor).
|
(2)
|
The Trust will enter into an investment advisory agreement (the Advisory Agreement) with Fund Asset Management, L.P.
(the Investment Adviser). Certain officers and/or Trustees of the Trust are officers and/or directors of the Investment Adviser and the Distributor.
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(3)
|
Prepaid offering costs consist of legal 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 Trust. The Investment Adviser on behalf of the Trust, will incur organization costs estimated at $25,000.
|
PART C. OTHER INFORMATION
Item 23.Exhibits.
Exhibit
Number
|
1 |
|
(a) |
|
|
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Certificate of Trust. |
|
|
|
|
(b) |
|
|
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Declaration of Trust, dated May 2, 2000. |
|
|
2 |
|
|
|
|
|
By-Laws of the Registrant. |
|
|
3 |
|
|
|
|
|
Portions of the Declaration of Trust and By-Laws of the Registrant defining the rights of holders of
interests in the Registrant.(a) |
|
|
4 |
|
|
|
|
|
Form of Investment Advisory Agreement between the Registrant and Fund Asset Management, L.P. |
|
|
5 |
|
|
|
|
|
Omitted pursuant to Paragraph 2(b) of Instruction B of the General Instructions to Form N-1A. |
|
|
6 |
|
|
|
|
|
None. |
|
|
7 |
|
|
|
|
|
Form of Custody Agreement between the Registrant and The Bank of New York. |
|
|
8 |
|
(a) |
|
|
|
Form of Placement Agent Agreement between the Registrant and FAM Distributors, Inc. |
|
|
|
|
(b) |
|
|
|
Form of Subscription Agreement for the acquisition of interests in the Registrant. |
|
|
|
|
(c) |
|
|
|
Credit Agreement between the Registrant and a syndicate of banks. (b) |
|
|
9 |
|
|
|
|
|
Omitted pursuant to Paragraph 2(b) of Instruction B of the General Instructions to Form N-1A. |
|
|
10 |
|
|
|
|
|
Consent of Deloitte & Touche LLP
, independent auditors for the Registrant. |
|
|
11 |
|
|
|
|
|
None. |
|
|
12 |
|
(a) |
|
|
|
Certificate of Merrill Lynch Basic Value Fund, Inc. |
|
|
|
|
(b) |
|
|
|
Certificate of Mercury Basic Value Fund, Inc. |
|
|
13 |
|
|
|
|
|
None. |
|
|
14 |
|
|
|
|
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None. |
(a)
|
Reference is made to Article I (Sections 1.1 and 1.2), Article II (Sections 2.2, 2.4 and 2.7), Article III (Sections 3.2, 3.4, 3.8,
3.10, 3.11 and 3.12), Article V (Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9 and 5.10), Article VI, Article VII (Sections 7.1 and 7.2), Article VIII (Sections 8.1, 8.3 and 8.6), Article IX, Article X (Sections 10.2, 10.3, 10.4 and 10.5) and
Article XI (Sections 11.2, 11.4 and 11.6) of the Registrants Amended and Restated Declaration of Trust, filed as Exhibit 1(b) to the Registration Statement; the Certificate of Trust, filed as Exhibit 1(a) to the Registration Statement; and Article
I, Article III (Sections 3.7 and 3.10) and Article VI (Section 6.2) of the Registrants By-Laws, filed as Exhibit 2 to the Registration Statement.
|
(b)
|
Incorporated by reference to Exhibit 8(b) to the Registration Statement on Form N-1A of Master Premier Growth Trust (File No.
811-09733), filed on December 21, 1999.
|
Item 24.Persons Controlled by or under Common Control with the Trust.
Merrill Lynch Basic Value Fund, Inc. (the Merrill Lynch Fund) owns 100% of the beneficial interests in the
Registrant.
Item 25. Indemnification.
Reference is made to Section 17(h) and (i) of the Investment Company Act of 1940, as amended (the 1940 Act), and
pursuant to Sections 8.2, 8.3 and 8.4, of Article VIII of the Registrants Declaration of Trust (the Declaration of Trust) (Exhibit 1(b) to this Registrant Statement), Trustees, officers, employees and agents of the Trust will be
indemnified to the maximum extent permitted by Delaware law and the 1940 Act.
Article VIII, Section 8.1 provides, inter alia, that no Trustee, officer, employee or agent of the Registrant shall be
liable to the Registrant, its Holders, or to any other Trustee, officer, employee or agent thereof for any action or failure to act (including, without limitation, the failure to compel in any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance, gross negligence or reckless disregard of his duties.
Article VIII, Section 8.2 of the Registrants Declaration of Trust provides:
The Trust shall indemnify each of its Trustees, officers, employees and agents (including persons who serve at its request as
directors, officers or trustees of another organization in which it has any interest, as a shareholder, creditor or otherwise) against all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he may be involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been such a Trustee, officer, employee or agent, except with respect to any matter as to which he shall have been adjudicated to have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties; provided, however, that as to any matter disposed of by a compromise payment by such Person, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless
there has been a determination that such Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other
disposition or, in the absence of a judicial determination, by a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that he did not engage in such conduct, which determination shall be made
by a majority of a quorum of Trustees who are neither Interested Persons of the Trust nor parties to the action, suit or proceeding, or by written opinion from independent legal counsel approved by the Trustees. The rights accruing to any Person under
these provisions shall not exclude any other right to which he may be lawfully entitled; provided that no Person may satisfy any right of indemnity or reimbursement granted herein or to which he may be otherwise entitled except out of the Trust Property.
The Trustees may make advance payments in connection with indemnification under this Section 8.2; provided that any advance payment of expenses by the Trust to any Trustee, officer, employee or agent shall be made only upon the undertaking by such
Trustee, officer, employee or agent to repay the advance unless it is ultimately determined that he is entitled to indemnification as above provided, and only if one of the following conditions is met:
|
(a) the Trustee, officer, employee or agent to be indemnified provides a
security for his undertaking; or
|
|
(b) the Trust shall be insured against losses arising by reason of any
lawful advances; or
|
|
(c) there is a determination, based on a review of readily available
facts, that there is reason to believe that the Trustee, officer, employee or agent to be indemnified ultimately will be entitled to indemnification, which determination shall be made by:
|
|
(i) a majority of a quorum of Trustees who are neither Interested
Persons of the Trust nor parties to the Proceedings; or
|
|
(ii) an independent legal counsel in a written opinion.
|
Article VIII, Section 8.3 of the Registrants Declaration of Trust further provides:
Nothing contained in Sections 8.1 or 8.2 hereof shall protect any Trustee or officer of the Trust from any liability to the
Trust or its Holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Nothing contained in Sections 8.1 or 8.2 hereof or in any
agreement of the character described in Section 4.1 or 4.2 hereof shall protect any Investment Adviser to the Trust against any liability to the Trust to which he would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence
in the performance of his or its duties to the Trust, or by reason of his or its reckless disregard to his or its obligations and duties under the agreement pursuant to which he serves as Investment Adviser to the Trust.
As permitted by Article VIII, Section 8.6, the Registrant may insure its Trustees and officers against certain liabilities,
and certain costs of defending claims against such Trustees and officers, to the extent such Trustees and officers are not found to have committed conduct constituting conflict of interest, intentional non-compliance with
statutes or regulations or dishonest, fraudulent or criminal acts or omissions. The Registrant will purchase an insurance policy to cover such indemnification obligation. The insurance policy also will insure the Registrant against the cost of
indemnification payments to Trustees and officers under certain circumstances. Insurance will not be purchased that protects, or purports to protect, any Trustee or officer from liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Registrant hereby undertakes that it will apply the indemnification provisions of its Declaration of Trust and By-Laws in
a manner consistent with Release No. 11330 of the Securities and Exchange Commission under the 1940 Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain in effect and are consistently applied.
Item 26.Business and Other Connections of the Investment Adviser.
See Item 6 in the Trusts Part A and Item 15 in Part B of the Trusts Registration Statement regarding the business
of the Investment Adviser. Information relating to the business, profession, vocation or employment of a substantial nature engaged in by the Investment Adviser or any of its respective officers and directors during the past two years is incorporated
herein by reference from Item 26 in Part C of the Merrill Lynch Registration Statement on Form N-1A and Item 26 in Part C of the Mercury Registration Statement on Form N-1A.
Item 27.Principal Underwriters.
(a) FAMD 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, Master Focus Twenty Trust, Master Global Financial
Services Trust, Master Internet Strategies Trust, Master Large Cap Series Trust, Master Premier Growth Trust, The Corporate Fund Accumulation Program, Inc. and The Municipal Fund Accumulation Program, Inc. and for each of the following additional open-end
registered investment companies: Mercury Focus Twenty Fund, Inc., Mercury Global Balanced Fund of Mercury Funds, Inc., Mercury Global Financial Services Fund, Inc., Mercury Gold and Mining Fund of Mercury Funds, Inc., Mercury International Fund of Mercury
Funds, Inc., Mercury Internet Strategies Fund, Inc., Mercury Large Cap Series Fund, Inc., Mercury Pan-European Growth Fund of Mercury Funds, Inc., Mercury Premier Growth Fund, Inc., Summit Cash Reserves Fund of Financial Institutions Series Trust, Mercury
U.S. Small Cap Fund of Mercury Funds, Inc., Mercury V.I. U.S. Large Cap Fund of Mercury Asset Management V.I. Funds, Inc., Merrill Lynch Focus Twenty Fund, Inc., Merrill Lynch Global Financial Services Fund, Inc., Merrill Lynch Internet Strategies Fund,
Inc., Merrill Lynch Large Cap Series Fund, Inc. and Merrill Lynch Premier Growth Fund, Inc. FAMD 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.
(b) Set forth below is information concerning each director and officer of FAMD. The principal business address of each such
person is P.O. Box 9081, Princeton, New Jersey 08543-9081, except that the address of Messrs. Breen, Crook, Fatseas and Wasel is One Financial Center, 23rd Floor, Boston, Massachusetts 02111-2665.
Name
|
|
Position(s) and Office(s) with FAMD
|
|
Position(s) and Office(s) with Registrant
|
Terry K. Glenn |
|
President and Director |
|
President and Director |
Michael G. Clark |
|
Treasurer and Director |
|
None |
Thomas J. Verage |
|
Director |
|
None |
Robert W. Crook |
|
Senior Vice President |
|
None |
Michael J. Brady |
|
Vice President |
|
None |
William M. Breen |
|
Vice President |
|
None |
Donald C. Burke |
|
Vice President |
|
Vice President and Treasurer |
James T. Fatseas |
|
Vice President |
|
None |
Debra W. Landsman-Yaros |
|
Vice President |
|
None |
Michelle T. Lau |
|
Vice President |
|
None |
William Wasel |
|
Vice President |
|
None |
Robert Harris |
|
Secretary |
|
None |
(c) Not Applicable.
Item 28.Location of Accounts and Records.
All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as
amended, and the rules thereunder are maintained at the offices of the Registrant (800 Scudders Mill Road, Plainsboro, New Jersey 08536).
Item 29.Management Services.
Other than as set forth or incorporated by reference in Item 6 of the Trusts Part A and Item 13 and Item 15 in Part B of
the Trusts Registration Statement, the Registrant is not a party to any management-related service contract.
Item 30.Undertakings.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the 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 13th day of October, 2000.
|
(Terry K. Glenn, President)
|
INDEX TO EXHIBITS
Exhibit
Number
|
|
Description
|
1 |
|
(a) |
|
|
|
Certificate of Trust. |
|
|
|
|
(b) |
|
|
|
Declaration of Trust, dated May 2, 2000. |
|
|
2 |
|
|
|
|
|
By-Laws of the Registrant. |
|
|
4 |
|
|
|
|
|
Form of Investment Advisory Agreement between the Registrant and Fund Asset
Management, L.P. |
|
|
7 |
|
|
|
|
|
Form of Custody Agreement between the Registrant and The Bank of New York. |
|
|
8 |
|
(a) |
|
|
|
Form of Placement Agent Agreement between the Registrant and FAM Distributors, Inc. |
|
|
|
|
(b) |
|
|
|
Form of Subscription Agreement for the acquisition of interests in the Registrant. |
|
|
10 |
|
|
|
|
|
Consent of Deloitte & Touche LLP
, independent auditors for the Registrant. |
|
|
12 |
|
(a) |
|
|
|
Certificate of Merrill Lynch Basic Value Fund, Inc. |
|
|
|
|
(b) |
|
|
|
Certificate of Mercury Basic Value Fund, Inc. |