<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1994
SECURITIES ACT FILE NO. 2-89834
INVESTMENT COMPANY ACT FILE NO. 811-4351
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 13 /x/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
AMENDMENT NO. 14 /x/
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH INTERNATIONAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH INTERNATIONAL HOLDINGS, INC.
D/B/A MERRILL LYNCH GLOBAL HOLDINGS
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
PHILIP L. KIRSTEIN, ESQ. COUNSEL FOR THE COMPANY:
MERRILL LYNCH ASSET BROWN & WOOD
MANAGEMENT ONE WORLD TRADE CENTER
P.O. BOX 9011 NEW YORK, NEW YORK 10048-0557
PRINCETON, NEW JERSEY 08543-9011 ATTENTION: THOMAS R. SMITH, JR., ESQ.
FRANK P. BRUNO, ESQ.
</TABLE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK
APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b)
/x/ on October 21, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new
effective date for a previously filed
post-effective amendment.
------------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF COMMON
STOCK UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE
REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON JANUARY 21, 1994.
<PAGE>
MERRILL LYNCH INTERNATIONAL HOLDINGS, INC.
DOING BUSINESS AS MERRILL LYNCH GLOBAL HOLDINGS
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- ---------------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page................................... Cover Page
Item 2. Synopsis..................................... Fee Table
Item 3. Condensed Financial Information.............. Financial Highlights; Performance Data
Item 4. General Description of Registrant............ Investment Objective and Policies; Additional
Information
Item 5. Management of the Fund....................... Fee Table; Investment Objective and Policies;
Portfolio Transactions; Management of the
Company; Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance................................ Not Applicable
Item 6. Capital Stock and Other Securities........... Cover Page; Additional Information
Item 7. Purchase of Securities Being Offered......... Cover Page; Fee Table; Merrill Lynch Select
Pricing(Service Mark) System; Purchase of
Shares; Shareholder Services; Additional
Information; Inside Back Cover Page
Item 8. Redemption or Repurchase..................... Fee Table; Merrill Lynch Select
Pricing(Service Mark) System; Shareholder
Services; Purchase of Shares; Redemption of
Shares
Item 9. Pending Legal Proceedings.................... Not Applicable
PART B
Item 10. Cover Page................................... Cover Page
Item 11. Table of Contents............................ Back Cover Page
Item 12. General Information and History.............. General Information
Item 13. Investment Objectives and Policies........... Investment Objective and Policies
Item 14. Management of the Fund....................... Management of the Company
Item 15. Control Persons and Principal Holders of
Securities................................. Management of the Company
Item 16. Investment Advisory and Other Services....... Management of the Company; Purchase of
Shares; General Information
Item 17. Brokerage Allocation and Other Practices..... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities........... General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered................... Purchase of Shares; Redemption of Shares;
Determination of Net Asset Value;
Shareholder Services; General Information
Item 20. Tax Status................................... Dividends and Distributions; Taxes
Item 21. Underwriters................................. Purchase of Shares
Item 22. Calculation of Performance Data.............. Performance Data
Item 23. Financial Statements......................... Financial Statements
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
OCTOBER 21, 1994
MERRILL LYNCH GLOBAL HOLDINGS, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
------------------------
Merrill Lynch Global Holdings, Inc. (the 'Company'), is a diversified,
open-end management investment company seeking the highest total investment
return consistent with prudent risk through worldwide investment in an
internationally diversified portfolio of securities. Total investment return is
the aggregate of income and capital value changes. The Company will utilize a
fully managed investment policy which permits management of the Company to take
a flexible investment approach and vary its policies as to geographic
diversification and types of securities based upon its evaluation of changes in
economic and market trends throughout the world. Accordingly, investments may be
shifted among the various capital markets of the world and among different types
of equity, debt and convertible securities depending upon management's outlook
with respect to prevailing trends and developments. It is presently contemplated
that the Company's assets will be primarily invested in equity securities of
companies located in the United States, Japan and Western Europe.
------------------------
Pursuant to the Merrill Lynch Select Pricing(Service Mark) System, the
Company offers four classes of shares, each with a different combination of
sales charges, ongoing fees and other features. The Merrill Lynch Select
Pricing(Service Mark) 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 'Merrill Lynch Select Pricing(Service Mark)
System' on page 3.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the 'Distributor'), P.O. Box 9011, Princeton, New Jersey 08543-9011 [(609)
282-2800], or from securities dealers which have entered into dealer agreements
with the Distributor, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch'). The minimum initial purchase is $1,000, and the
minimum subsequent purchase is $50, except that for retirement plans the minimum
initial purchase is $100, and the minimum subsequent purchase is $1. Merrill
Lynch may charge its customers a processing fee (presently $4.85) for confirming
purchases and repurchases. Purchases and redemptions directly through the
Company's transfer agent are not subject to the processing fee. See 'Purchase of
Shares' and 'Redemption of Shares'.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus is a concise statement of information about the Company
that is relevant to making an investment in the Company. This Prospectus should
be retained for future reference. A statement containing additional information
about the Company, dated October 21, 1994 (the 'Statement of Additional
Information'), has been filed with the Securities and Exchange Commission and is
available, without charge, by calling or by writing the Company at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
------------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Company follows:
<TABLE>
<CAPTION>
CLASS A(A) CLASS B(B) CLASS C(C) CLASS D(C)
---------- ---------------------------- -------------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).................... 5.25%(d) None None 5.25%(d)
Sales Charge Imposed on Dividend
Reinvestments...................... None None None None
Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower)................ None(e) 4.0% during the first year, 1.0% for one None(e)
decreasing 1.0% annually year
thereafter to 0.0% after the
fourth year
Exchange Fee......................... None None None None
ANNUAL COMPANY OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)(F):
Investment Advisory Fees(g).......... 1.00% 1.00% 1.00% 1.00%
12b-1 Fees(h):
Account Maintenance Fees........... None 0.25% 0.25% 0.25%
Distribution Fees.................. None 0.75% 0.75% None
(Class B shares convert to
Class D shares automatically
after approximately eight
years and cease being
subject to distribution
fees)
Other Expenses:
Custodial Fees..................... 0.07% 0.07% 0.07% 0.07%
Shareholder Servicing Costs(i)..... 0.16% 0.19% 0.19% 0.16%
Other.............................. 0.20% 0.20% 0.20% 0.20%
----- ----- ----- -----
Total Other Expenses............. 0.43% 0.46% 0.46% 0.43%
----- ----- ----- -----
TOTAL COMPANY OPERATING EXPENSES....... 1.43% 2.46% 2.46% 1.68%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) Class A shares are sold to a limited group of investors including existing Class A shareholders, certain
retirement plans and investment programs. See 'Purchase of Shares--Initial Sales Charge Alternatives--Class A
and Class D Shares'--page 21.
(b) Class B shares convert to Class D shares automatically approximately eight years after initial purchase. See
'Purchase of Shares-- Deferred Sales Charge Alternatives--Class B and Class C Shares'--page 23.
(c) Prior to the date of this Prospectus, the Company has not offered its Class C or Class D shares to the public.
(d) Reduced for purchases of $25,000 and over. Class A or Class D purchases of $1,000,000 or more are not subject
to an initial sales charge. See 'Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class D
Shares'--page 21.
(e) Class A and Class D shares are not subject to a contingent deferred sales charge ('CDSC'), except that
purchases of $1,000,000 or more which are not subject to an initial sales charge may instead be subject to a
CDSC of 1.0% of amounts redeemed within the first year of purchase.
(f) Information for Class A and Class B shares is stated for the fiscal year ended November 30, 1993. Information
under 'Other Expenses' for Class C and Class D shares is estimated for the fiscal year ending November 30,
1994.
(g) See 'Management of the Company--Advisory and Management Arrangements'--page 17.
(h) See 'Purchase of Shares--Distribution Plans'--page 26.
(i) See 'Management of the Company--Transfer Agency Services'--page 18.
</TABLE>
2
<PAGE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
--------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment including the maximum $52.50 initial sales charge
(Class A and Class D shares only) and assuming (1) the Total
Company Operating Expenses for each class set forth above; (2) a
5% annual return throughout the periods and (3) redemption at
the end of the period:
Class A...................................................... $66 $ 95 $127 $215
Class B...................................................... $65 $ 97 $131 $261*
Class C...................................................... $35 $ 77 $131 $280
Class D...................................................... $69 $103 $139 $241
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A...................................................... $66 $ 95 $127 $215
Class B...................................................... $25 $ 77 $131 $261*
Class C...................................................... $25 $ 77 $131 $280
Class D...................................................... $69 $103 $139 $241
</TABLE>
- ------------------
* Assumes conversion to Class D shares approximately eight years after purchase.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Company will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES OF
RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN
THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C shareholders who
hold their shares for an extended period of time may pay more in Rule 12b-1
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted under the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. ('NASD'). Merrill Lynch may charge its customers a
processing fee (presently $4.85) for confirming purchases and redemptions.
Purchases and redemptions directly through the Company's transfer agent are not
subject to the processing fee. See 'Purchase of Shares' and 'Redemption of
Shares'.
MERRILL LYNCH SELECT PRICING(Service Mark) SYSTEM
The Company offers four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) System. The shares of each class may be purchased at a
price equal to the next determined net asset value per share subject to the
sales charges and ongoing fee arrangements described below. 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. The Merrill Lynch Select Pricing(Service
Mark) System is used by more than 50 mutual funds advised by Merrill Lynch Asset
Management, L.P. ('MLAM' or the 'Investment Adviser') or an affiliate of MLAM,
Fund Asset Management, L.P. ('FAM'). Funds advised by MLAM or FAM are referred
to herein as 'MLAM-advised mutual funds'.
Each Class A, Class B, Class C or Class D share of the Company represents
an identical interest in the investment portfolio of the Company and has the
same rights, except that Class B, Class C and Class D shares bear the expenses
of the ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements. The
deferred sales charges and account maintenance fees that are imposed on Class B
3
<PAGE>
and Class C shares, as well as the account maintenance fees that are imposed on
the Class D shares, will be imposed directly against those classes and not
against all assets of the Company and, accordingly, such charges will 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 Company for each class of
shares will be calculated in the same manner at the same time and will 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 deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Company. 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 following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select Pricing(Service Mark)
System, followed by a more detailed description of each class and a discussion
of the factors that investors should consider in determining the method of
purchasing
shares under the Merrill Lynch Select Pricing(Service Mark) System that the
investor believes is the most beneficial under his particular circumstances.
More detailed information as to each class of shares is set forth under
'Purchase of Shares'.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(1) FEE FEE CONVERSION FEATURE
<C> <S> <C> <C> <C>
A Maximum 5.25% initial sales No No No
charge(2)(3)
B CDSC for a period of 4 years, at a 0.25% 0.75% B shares convert to D shares
rate of 4.0% during the first year, automatically after approximately
decreasing 1.0% annually to 0.0% eight years(4)
C 1.0% CDSC for one year 0.25% 0.75% No
D Maximum 5.25% initial sales charge(3) 0.25% No No
</TABLE>
(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. Contingent deferred sales charges ('CDSCs') are imposed
if the redemption occurs within the applicable CDSC time period. 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.
(2) Offered only to eligible investors. See 'Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares--Eligible Class A
Investors'.
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more will not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year. See 'Class
A' and 'Class D' below.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Company are exchanged for Class
B shares of another MLAM-advised mutual fund, 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 onto the holding
period for the shares acquired.
4
<PAGE>
Class A: Class A shares incur an initial sales charge when they are purchased
and bear no ongoing distribution or account maintenance fees. 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 that currently own Class A shares in a shareholder account
are entitled to purchase additional Class A shares in that account.
Other eligible investors include certain retirement plans and
participants in certain investment programs. In addition, Class A
shares will be offered to directors and employees of Merrill Lynch &
Co., Inc. and its subsidiaries (the term 'subsidiaries' when used
herein with respect to Merrill Lynch & Co., Inc. includes MLAM, FAM and
certain other entities directly or indirectly wholly owned and
controlled by Merrill Lynch & Co., Inc.) and to members of the Boards
of MLAM-advised mutual funds. The maximum initial sales charge is
5.25%, which is reduced for purchases of $25,000 and over. Purchases of
$1,000,000 or more may not be subject to an initial sales charge, but
if the initial sales charge is waived, such purchases will be subject
to a CDSC of 1.0% if the shares are redeemed within one year after
purchase. Sales charges are also reduced under a right of accumulation
which takes into account the investor's holdings of all classes of all
MLAM-advised mutual funds. See 'Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares.'
Class B: Class B shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25%, an
ongoing distribution fee of 0.75% of the Company's average net assets
attributable to the Class B shares, and a CDSC if they are redeemed
within four years of purchase. Approximately eight years after
issuance, Class B shares will convert automatically into Class D shares
of the Company, which are subject to an account maintenance fee but no
distribution fee; Class B shares of certain other MLAM-advised mutual
funds into which exchanges may be made convert into Class D shares
automatically after approximately ten years. If Class B shares of the
Company are exchanged for Class B shares of another MLAM-advised mutual
fund, 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 onto the holding period for the shares
acquired. Automatic conversion of Class B shares into Class D shares
will occur at least once a month on the basis of the relative net asset
values 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. Shares purchased through
reinvestment of dividends on Class B shares also will convert
automatically to Class D shares. The conversion period for dividend
reinvestment shares and for certain retirement plans is modified as
described under 'Purchase of Shares--Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares
to Class D Shares'.
Class C: Class C shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25% and an
ongoing distribution fee of 0.75% of the Company's average net assets
attributable to the Class C shares. Class C shares are also subject to
a CDSC if they are redeemed within one year of purchase. Although Class
C shares are subject to a 1.0% CDSC for only one year (as compared to
four years for Class B), Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject
to distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Company's Board of
Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
Company's average net assets attributable to Class D shares. Class D
shares are not subject to an ongoing distribution fee or any CDSC when
they are redeemed. Purchases of $1,000,000 or more may not be subject
to an initial sales charge but if the initial sales charge is waived,
such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. The schedule of initial sales
charges and reductions for the Class D shares is the same as the
schedule for Class A shares. Class D shares also will be issued upon
conversion of Class B shares as described above under 'Class B'. See
'Purchase of Shares--Initial Sales Charge Alternatives--Class A and
Class D Shares'.
5
<PAGE>
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing(Service Mark) System that the investor believes is most beneficial under
his particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because of the account maintenance fee imposed
on Class D shares. Investors qualifying for significantly reduced initial sales
charges may find the initial sales charge alternative particularly attractive
because similar sales charge reductions are not available with respect to the
deferred sales charges imposed in connection with purchases of Class B or Class
C shares. Investors not qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time also may elect to
purchase Class A or Class D shares, because over time the accumulated ongoing
account maintenance and distribution fees on Class B or Class C shares may
exceed the initial sales charge and, in the case of Class D shares, the account
maintenance fee. Although some investors that previously purchased Class A
shares may no longer be eligible to purchase Class A shares of other
MLAM-advised mutual funds, those previously purchased Class A shares, together
with Class B, Class C and Class D share holdings, will count toward a right of
accumulation which may qualify the investor for reduced initial sales charges on
new initial sales charge purchases. In addition, the ongoing Class B and Class C
account maintenance and distribution fees will cause Class B and Class C shares
to have higher expense ratios, pay lower dividends and have lower total returns
than the initial sales charge shares. The ongoing Class D account maintenance
fees will cause Class D shares to have a higher expense ratio, pay lower
dividends and have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of 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 who do not qualify for a 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 Company after a
conversion period of approximately eight years, and thereafter investors will be
subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend to
hold their shares for an extended period of time. Investors in Class B shares
should take into account whether they intend to redeem their shares within the
CDSC period and, if not, whether they intend to remain invested until the end of
the conversion period and thereby take advantage of the reduction in ongoing
fees resulting from the conversion into Class D shares. Other investors,
however, may elect to purchase Class C shares if they determine that it is
advantageous to have all their assets invested initially and they are uncertain
as to the length of time they intend to hold their assets in MLAM-advised mutual
funds. Although Class C shareholders are subject to a shorter CDSC period at a
lower rate, they forego the Class B conversion feature, making their investment
subject to account maintenance and distribution fees for an indefinite period of
time. In addition, while both Class B and Class C distribution fees are subject
to the limitations on asset-based sales charges imposed by the NASD, the Class B
distribution fees are further limited under a voluntary waiver of asset-based
sales charges. See 'Purchase of Shares--Limitations on the Payment of Deferred
Sales Charges.'
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below, other than for the six month
period ended May 31, 1994, which is unaudited, has been audited in conjunction
with the annual audits of the financial statements of the Company by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
November 30, 1993, and the independent auditors' report thereon are included in
the Statement of Additional Information; unaudited financial statements for the
six months ended May 31, 1994, are also included in the Statement of Additional
Information. Financial information is not presented for Class C or Class D
shares, since no shares of those classes are publicly issued as of the date of
this Prospectus. Further information about the performance of the Company is
contained in the Company's most recent annual report to shareholders which may
be obtained, without charge, by calling or by writing the Company at the
telephone number or address on the front cover of this Prospectus.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------------------
FOR THE
SEVEN- FOR THE
FOR THE MONTH YEAR ENDED
SIX MONTHS FOR THE YEAR ENDED PERIOD APRIL 30,
ENDED MAY NOVEMBER 30, ENDED ------------------------------------------
31, ------------------------------- NOV. 30, 1990
1994++*** 1993++ 1992++ 1991 1990 && 1989 1988 1987
----------- --------- --------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 13.07 $ 11.78 $ 10.95 $ 10.48 $ 10.91 $ 11.79 $ 12.23 $ 16.90 $ 14.73
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment income
(loss)-- net....... .03 .04 .10 .16 .17 .20 .29 .43 .25
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--net... .93 2.07 1.05 .53 (.30) .62 .88 (1.09) 3.49
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations........... .96 2.11 1.15 .69 (.13) .82 1.17 (.66) 3.74
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Less dividends and
distributions:
Investment
income--net........ (.01) -- (.10) (.21) (.13) (.21) (.34) (.37) (.30)
Realized gain on
investments--net..... (.80) (.82) (.22) (.01) (.17) (1.49) (1.27) (3.64) (1.27)
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions........ (.81) (.82) (.32) (.22) (.30) (1.70) (1.61) (4.01) (1.57)
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end
of period............ $ 13.22 $ 13.07 $ 11.78 $ 10.95 $ 10.48 $ 10.91 $ 11.79 $ 12.23 $ 16.90
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT
RETURN**
Based on net asset
value per share.... 7.65%& 19.16% 10.67% 6.77% (1.45)%& 6.93% 10.99% (4.43)% 28.50%
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance
and distribution
fees............... 1.32%* 1.43% 1.49% 1.48% 1.59%* 1.49% 1.47% 1.31% 1.41%
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Expenses............. 1.32%* 1.43% 1.49% 1.48% 1.59%* 1.49% 1.47% 1.31% 1.41%
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment income
(loss)-- net....... .42%* .32% (.19)% 1.31% 2.63%* 1.65% 2.04% 2.90% 1.78%
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
SUPPLEMENTAL DATA:
Net assets, end of
period (in
thousands)......... $ 333,995 $ 256,203 $ 166,947 $ 165,687 $ 176,898 $ 187,843 $ 195,932 $ 249,736 $ 356,964
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
Portfolio turnover... 22.44% 56.98% 65.93% 63.94% 34.44% 84.21% 102.77% 109.68% 88.54%
----------- --------- --------- --------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
CLASS A CLASS B
-------------------- -----------------------------------------------------------------------------------
FOR THE FOR THE FOR THE
PERIOD FOR THE SEVEN- PERIOD OCT.
JULY 2, SIX MONTHS FOR THE YEAR ENDED MONTH FOR THE 21,
1984 TO ENDED MAY NOVEMBER 30, PERIOD YEAR ENDED 1988+ TO
APRIL 30, 31, ------------------------------- ENDED NOV. APRIL 30, APRIL 30,
1986 1985+++ 1994++*** 1993++ 1992++ 1991 30, 1990 1990&& 1989
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period............... $ 9.77 $ 9.15 $ 12.74 $ 11.62 $ 10.82 $ 10.36 $ 10.82 $ 11.74 $ 11.29
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Investment income
(loss)-- net(1).... .32 .34 (.04) (.08) (.03) .04 .10 .16 .06
Realized and
unrealized gain
(loss) on
investments and
foreign currency
transactions--net... 4.98 .45 .92 2.02 1.05 .54 (.30) .55 .93
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Total from investment
operations........... 5.30 .79 .88 1.94 1.02 .58 (.20) .71 .99
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Less dividends and
distributions:
Investment
income--net........ (.34) (.17) -- -- -- (.11) (.09) (.14) (.15)
Realized gain on
investments--net..... -- -- (.66) (.82) (.22) (.01) (.17) (1.49) (.39)
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Total dividends and
distributions........ (.34) (.17) (.66) (.82) (.22) (.12) (.26) (1.63) (.54)
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Net asset value, end
of period............ $ 14.73 $ 9.77 $ 12.96 $12.74 $ 11.62 $ 10.82 $ 10.36 $ 10.82 $ 11.74
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
TOTAL INVESTMENT
RETURN**
Based on net asset
value per share.... 55.67% 8.69%& 7.12%& 17.87% 9.58% 5.67% (2.08)%& 5.91% 9.10%&
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance
and distribution
fees............... 1.45% 1.40%* 1.34%* 1.46% 1.52% 1.51% 1.63%* 1.53% 1.50%*
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Expenses............. 1.45% 1.40%* 2.34%* 2.46% 2.52% 2.51% 2.63%* 2.53% 2.50%*
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Investment income
(loss)-- net....... 2.71% 4.27%* (.57)%* (.72)% (1.19)% .25% 1.54%* .65% .10%*
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
SUPPLEMENTAL DATA:
Net assets, end of
period (in
thousands)......... $ 282,733 $ 199,760 $ 51,376 $ 34,241 $ 22,925 $ 24,960 $ 22,623 $ 16,342 $ 1,476
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
Portfolio turnover... 72.75% 94.34% 22.44% 56.98% 65.93% 63.94% 34.44% 84.21% 102.77%
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
--------- --------- ----------- --------- --------- --------- ----------- ----------- -----------
</TABLE>
- ------------------------
* Annualized.
** Total investment returns exclude the effects of sales loads.
*** On April 1, 1994, certain of the Company's investment advisory
relationships changed. See 'Management of the Company--Advisory and
Management Arrangements' in the Statement of Additional Information.
+ Commencement of Operations for Class B shares.
++ Based on average shares outstanding during the period.
+++ Commencement of Operations for Class A shares.
& Aggregate total investment return.
&& On February 1, 1990, the Company terminated investment advisory agreements
with Nomura Capital Management, Inc. and Lombard Odier International
Portfolio Management Limited; such agreements were in addition to an
investment advisory agreement with the Investment Adviser.
7
<PAGE>
INTERNATIONAL DIVERSIFICATION
The Company, utilizing the combined purchasing power of its shareholders'
funds, provides the investor with the opportunity to participate with a minimum
investment of $1,000 ($250 for retirement plans) in a diversified portfolio of
securities in foreign markets which typically would require substantially larger
commitments. The Investment Adviser believes that, based upon past performance,
an internationally diversified portfolio offers the possibility of a higher
expected return than a portfolio comprised of securities from one securities
market. The reason for this is that historically the securities markets of many
countries have moved relatively independently of one another due to different
economic, financial, political and social factors. When markets which are moving
in different directions are combined into a single portfolio, there is an
offsetting effect which reduces total portfolio volatility (i.e., risk) without
reducing the total portfolio's expected rate of return. Other advantages include
professional management and administrative convenience.
Investments on an international basis involve certain risks not typically
involved in domestic investments, including fluctuations in foreign exchange
rates, future political and economic developments, and the possible imposition
of exchange controls or other foreign governmental laws or restrictions
applicable to such investments. Securities prices in different countries are
subject to different economic, financial, political and social factors. Since
the Company will invest heavily in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of securities in the portfolio and the unrealized
appreciation or depreciation of investments so far as 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 Company's assets denominated in
that currency and the Company's yield on such assets. The rate of exchange
between the dollar and other currencies is determined by forces of supply and
demand in the foreign exchange markets. These forces are, in turn, affected by
the international balance of payments, the level of interest and inflation rates
and other economic and financial conditions, government intervention,
speculation and other factors. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Also, many of the securities
held by the Company will not be registered with the Securities and Exchange
Commission nor will the issuers thereof be subject to the reporting requirements
of such agency.
With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
of U.S. companies. In addition, certain foreign investments may be subject to
foreign withholding taxes. See 'Additional Information--Taxes'.
Foreign financial markets, while generally growing in volume, typically
have substantially less volume than U.S. 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 Company are
uninvested and no return is earned thereon. The inability of the Company to make
intended security purchases due to settlement problems could cause the Company
to miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Company
due to subsequent declines in value of the portfolio
8
<PAGE>
security or, if the Company has entered into a contract to sell the security,
could result in possible liability to a purchaser. Brokerage commissions and
other transaction costs on foreign securities exchanges are generally higher
than in the United States. There is generally less governmental supervision and
regulation of exchanges, brokers and issuers in foreign countries than there is
in the United States.
The operating expense ratio of the Company can be expected to be higher
than that of an investment company investing exclusively in U.S. securities
since the expenses of the Company, such as custodial costs and the advisory fee,
are higher.
Other special considerations are that the Company may invest up to 5% of
its assets in illiquid or otherwise not readily marketable securities, that
certain foreign investments may be subject to foreign withholding taxes and that
the Company may invest more than 5% of its assets in securities issued or
guaranteed by certain foreign governments.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Company is to seek the highest total
investment return consistent with prudent risk through worldwide investment in
an internationally diversified portfolio of securities. Total investment return
is the aggregate of income and capital value changes. In pursuing this
objective, management of the Company will utilize a fully managed investment
policy which permits the Company to take a flexible investment approach and vary
its policies as to geographic diversification and types of securities based upon
its evaluation of economic and market trends throughout the world. Accordingly,
investments may be shifted among the various capital markets of the world and
among different types of equity, debt and convertible securities depending upon
management's outlook with respect to prevailing trends and developments. The
investment objective of the Company described in this paragraph is a fundamental
policy of the Company and may not be changed without the approval of the holders
of a majority of the Company's outstanding voting securities.
The Company will invest in a diversified international portfolio of
securities of companies located throughout the world. While there are no
prescribed limits on geographic asset distribution and the Company has the
authority to invest in any country in the world, it is expected that the
Company's assets will be invested in several countries, primarily the U.S.,
Japan and Western European nations. The allocation of the Company's assets among
the various securities markets of the world will be determined by the Investment
Adviser as described under 'Management of the Company'. In making the allocation
of assets among the securities markets, the Investment Adviser will consider
such factors as the condition and growth potential of the various economies and
securities markets, currency and taxation considerations and other pertinent
financial, social, national and political factors. Under certain adverse
investment conditions, the Company may restrict the securities markets in which
its assets will be invested and may increase the proportion of assets invested
in the U.S. securities markets.
As of the date of this Prospectus, investment emphasis is placed on equity
securities (i.e., common stocks) or securities convertible into equities.
However, the flexible fully managed investment approach enables the Company to
switch its emphasis to debt and convertible securities or non-convertible
preferred stocks if, in the opinion of the Investment Adviser, prevailing market
or economic conditions warrant. The Investment Adviser will determine the
emphasis among equity and debt securities, including convertible securities,
based upon its
9
<PAGE>
evaluation as to the types of securities presently providing the opportunity for
the highest total investment return consistent with the Company's investment
objective. Accordingly, while investment emphasis is currently on equity
securities, substantial portions of the Company's assets may be invested in debt
or convertible securities. In addition, as described above, the Investment
Adviser will allocate the Company's assets among the various securities markets
of the world. In making these allocations, the Investment Adviser will consider
the factors described in the preceding paragraph in seeking to realize the
Company's investment objective. The Company reserves the right, as a temporary
defensive measure and to provide for redemptions, to hold cash or cash
equivalents (in U.S. dollars or foreign currencies) and short-term securities
including money market securities. The Company may invest in the securities of
foreign issuers in the form of American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or other
securities convertible into securities of foreign issuers.
The Company may purchase securities that are not registered ('restricted
securities') under the Securities Act of 1933, as amended, but can be offered
and sold to 'qualified institutional buyers' under Rule 144A under that Act.
However, the Company will not invest more than 5% of its assets in illiquid
investments, which includes securities for which there is no readily available
market, securities subject to contractual restrictions on resale, certain
investments in asset-backed and receivable-backed securities and restricted
securities, unless the Company's Board of Directors continuously determines,
based on the trading markets for the specific restricted security, that it is
liquid. The Board of Directors may adopt guidelines and delegate to the
Investment Adviser 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 develop, the
Board of Directors will carefully monitor the Company's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Company to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.
HEDGING TECHNIQUES
The Company may engage in various portfolio strategies to hedge its
portfolio against investment, interest rate and currency risks. These strategies
include the use of options on portfolio securities, stock index options, stock
index futures, financial futures, currency futures, options on such futures and
forward foreign exchange transactions. The Company may enter into such
transactions only in connection with its hedging strategies. While the Company's
net asset value will continue to fluctuate and no assurance can be given that
the Company's hedging transactions will be effective, the Investment Adviser
believes that the ability of the Company to engage in these hedging transactions
would enhance the Company's ability to reduce the volatility of the net asset
value of Company shares. Furthermore, the Company will only engage in hedging
activities from time to time and may not necessarily be engaging in hedging
activities when movements in the equity markets, interest rates or currency
exchange rates occur. Reference is made to the Statement of Additional
Information for further information concerning these strategies.
Although certain risks are involved in options and futures transactions (as
discussed below in 'Risk Factors in Options, Futures and Currency
Transactions'), the Investment Adviser believes that, because the Company will
only engage in these transactions for hedging purposes, the options and futures
portfolio strategies of the Company will not subject the Company to the risks
frequently associated with the speculative use of options and
10
<PAGE>
futures transactions. Tax requirements may limit the Company's ability to engage
in the hedging transactions and strategies discussed below.
Set forth below is a description of the hedging instruments the Company may
utilize with respect to investment, interest rate and currency risks.
Writing Covered Call Options. The Company is authorized to write (i.e.,
sell) covered call options on the securities in which it may invest and to enter
into closing purchase transactions with respect to certain of such options. A
covered call option is an option where the Company in return for a premium gives
another party a right to buy specified securities owned by the Company at a
specified future date and price set at the time of the contract. By writing
covered call options, the Company gives up the opportunity, while the option is
in effect, to profit from any price increase in the underlying security above
the option exercise price. In addition, the Company's ability to sell the
underlying security will be limited while the option is in effect unless the
Company effects a closing purchase transaction. A closing purchase transaction
cancels out the Company's position as the writer of an option by means of an
offsetting purchase of an identical option prior to the expiration of the option
it has written. Covered call options serve as a partial hedge against the price
of the underlying security declining.
Purchasing Put Options. The Company is authorized to purchase put options
to hedge against a decline in the market value of its securities. By buying a
put option the Company has a right to sell the underlying security at the stated
exercise price, thus limiting the Company's risk of loss through a decline in
the market value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
costs. Prior to its expiration, a put option may be sold in a closing sale
transaction and profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out the Company's
position as the purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased. The
Company will not purchase put options on securities (including stock index
options discussed below) if as a result of such purchase, the aggregate cost of
all outstanding options on securities held by the Company would exceed 5% of the
market value of the Company's total assets.
Stock Index Options and Futures and Financial Futures. The Company is
authorized to engage in transactions in stock index options and futures and
financial futures and related options on such futures. The Company may purchase
or write put and call options on stock indices to hedge against the risks of
market-wide stock price movements in the securities in which the Company
invests. Options on indices are similar to options on securities except that on
exercise or assignment, the parties to the contract pay or receive an amount of
cash equal to the difference between the closing value of the index and the
exercise price of the option times a specified multiple. The Company may invest
in stock index options based on a broad market index, e.g., the S&P 500 Index,
or on a narrow index representing an industry or market segment, e.g., the AMEX
Oil & Gas Index.
The Company may also purchase and sell stock index futures contracts and
financial futures contracts ('futures contracts') as a hedge against adverse
changes in the market value of its portfolio securities as described below. A
futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract to
sell a security for a set price on a future date. Unlike most other futures
contracts, a stock index futures contract does not require actual delivery of
securities but results in cash settlement based upon the difference in value of
the index between the time the contract was entered into and the time of its
settlement. The Company may effect transactions in stock index futures contracts
11
<PAGE>
in connection with equity securities in which it invests and in financial
futures contracts in connection with the debt securities in which it invests.
Transactions by the Company in stock index futures and financial futures are
subject to limitations as described below under 'Restrictions on the Use of
Futures Transactions'.
The Company is authorized to sell futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of the
Company's securities portfolio that might otherwise result. When the Company is
not fully invested in the securities markets and anticipates a significant
market advance, it would be able to purchase futures in order to gain rapid
market exposure that may in part or entirely offset increases in the cost of
securities that the Company intends to purchase. As such purchases are made, an
equivalent amount of futures contracts will be terminated by offsetting sales.
The Company does not consider purchases of futures contracts to be a speculative
practice under these circumstances. It is anticipated that, in a substantial
majority of these transactions, the Company will purchase such securities upon
termination of the long futures position, whether the long position is the
purchase of a futures contract or the purchase of a call option or the writing
of a put option on a future, but under unusual circumstances (e.g., the Company
experiences a significant amount of redemptions), a long futures position may be
terminated without the corresponding purchase of securities.
The Company also is authorized to purchase and write call and put options
on futures contracts and stock indices in connection with its hedging
activities. Generally, these strategies would be utilized under the same market
and market sector conditions (i.e., conditions relating to specific types of
investments) in which the Company enters into futures transactions. The Company
may purchase put options or write call options on futures contracts and stock
indices rather than selling the underlying futures contract in anticipation of a
decrease in the market value of its securities. Similarly, the Company can
purchase call options, or write put options on futures contracts and stock
indices, as a substitute for the purchase of such futures to hedge against the
increased cost resulting from an increase in the market value of securities
which the Company intends to purchase.
The Company is also authorized to engage in options and futures
transactions on U.S. and foreign exchanges and in options in the
over-the-counter markets ('OTC options'). In general, exchange traded contracts
are third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) with standardized strike
prices and expiration dates. OTC options transactions are two-party contracts
with prices and terms negotiated by the buyer and seller. See 'Restrictions on
OTC Options' below for information as to restrictions on the use of OTC options.
The Company is authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible variations in
foreign exchange rates. Such transactions could be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Company, sold by
the Company but not yet delivered, or committed or anticipated to be purchased
by the Company. As an illustration, the Company may use such techniques to hedge
the stated value in U.S. dollars of an investment in a yen denominated security.
In such circumstances, for example, the Company can purchase a foreign currency
put option enabling it to sell a specified amount of yen for dollars at a
specified price by a future date. To the extent the hedge is successful, a loss
in the value of the yen relative to the dollar will tend to be offset by an
increase in the value of the put option. To offset, in whole or in part, the
cost of acquiring such a put option, the Company may also sell a call option
which, if exercised, requires it to sell a specified amount of yen for dollars
at a specified price by a future date (a technique called a 'straddle'). By
selling such a call option in this illustration, the Company gives up the
opportunity to profit without limit from increases in the relative value of the
yen to the dollar. The Investment Adviser believes that
12
<PAGE>
'straddles' of the type which may be utilized by the Company constitute hedging
transactions and are consistent with the policies described above.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or sell a currency at a fixed price on a future date. A futures contract on
a foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Company will not speculate in foreign currency options,
futures or related options. Accordingly, the Company will not hedge a currency
substantially in excess of the market value of the securities denominated in
such currency which it owns, the expected acquisition price of securities which
it has committed or anticipates to purchase which are denominated in such
currency and, in the case of securities which have been sold by the Company but
not yet delivered, the proceeds thereof in its denominated currency. Further,
the Company will segregate at its custodian U.S. Government or other high
quality securities having a market value substantially representing any
subsequent net decrease in the market value of such hedged positions, including
net positions with respect to cross-currency hedges. The Company will not incur
potential net liabilities of more than 20% of its total assets from foreign
currency options, futures or related options.
Forward Foreign Exchange Transactions. The Company has authority to deal
in forward foreign exchange between currencies of the different countries in
which it will invest as a hedge against possible variations in the foreign
exchange rate between these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
(up to one year) and price set at the time of the contract. The Company's
dealings in forward foreign exchange will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward foreign currency with respect to specific
receivables or payables of the Company accruing in connection with the purchase
and sale of its portfolio securities, the sale and redemption of shares of the
Company or the payment of dividends and distributions by the Company. Position
hedging is the sale of forward foreign currency with respect to portfolio
security positions denominated or quoted in such foreign currency. The Company
will not speculate in forward foreign exchange. The Company will not attempt to
hedge all of its foreign portfolio positions. The Company may not commit more
than 15% of its assets to position hedging contracts.
Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission ('CFTC') applicable to the Company provide
that the futures trading activities described herein will not result in the
Company being deemed a 'commodity pool', as defined under such regulations if
the Company adheres to certain restrictions. In particular, the Company may
purchase and sell futures contracts and options thereon (i) for bona fide
hedging purposes, and (ii) for non-hedging purposes, if the aggregate initial
margin and premiums required to establish positions in such contracts and
options does not exceed 5% of the liquidation value of the Company's portfolio,
after taking into account unrealized profits and unrealized losses on any such
contracts and options.
When the Company purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Company's custodian so that the
amount so segregated, plus the amount of initial and variation margin held in
the account of its broker, equals the market value of the futures contract,
thereby ensuring that the use of such futures contract is unleveraged.
13
<PAGE>
Restrictions on OTC Options. The Company will engage in OTC options,
including over-the-counter stock index options, over-the-counter foreign
currency options and options on foreign currency futures, only with member banks
of the Federal Reserve System and primary dealers in U.S. Government securities
or with affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Company has adopted an investment policy
pursuant to which it will not purchase or sell OTC options (including OTC
options on futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
Company, the market value of the underlying securities covered by OTC call
options currently outstanding which were sold by the Company and margin deposits
on the Company's existing OTC options on futures contracts exceeds 10% of the
net assets of the Company, taken at market value, together with all other assets
of the Company which are illiquid or are not otherwise readily marketable.
However, if an OTC option is sold by the Company to a primary U.S. Government
securities dealer recognized by the Federal Reserve Bank of New York and if the
Company has the unconditional contractual right to repurchase such OTC option
from the dealer at a predetermined price, then the Company 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., the current
market value of the underlying security minus the option's strike price). The
repurchase price with primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option, plus the
amount by which the option is 'in-the-money'. This policy as to OTC options is
not a fundamental policy of the Company and may be amended by the Board of
Directors of the Company without the approval of the Company's shareholders.
However, the Company will not change or modify this policy prior to change or
modification by the Securities and Exchange Commission staff of its position.
Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures and
movements in the price of the securities or currencies which are the subject of
the hedge. If the price of the options or futures moves more or less than the
price of hedged securities or currencies, the Company will experience a gain or
loss which will not be completely offset by movements in the price of the
subject of the hedge. The successful use of options and futures also depends on
the Investment Adviser's ability to correctly predict price movements in the
market involved in a particular options or futures transaction. To compensate
for imperfect correlations, the Company may purchase or sell stock index options
or futures contracts in a greater dollar amount than the hedged securities if
the volatility of the hedged securities is historically greater than the
volatility of the stock index options or futures contracts. Conversely, the
Company may purchase or sell fewer stock index options or futures contracts if
the volatility of the price of the hedged securities is historically less than
that of the stock index options or futures contracts. The risk of imperfect
correlation generally tends to diminish as the maturity date of the stock index
option or futures contract approaches.
The Company intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a liquid
secondary market for such options or futures or, in the case of over-the-counter
transactions, the Investment Adviser believes the Company can receive on each
business day at least two independent bids or offers. However, there can be no
assurance that a liquid secondary market will exist at any specific time. Thus,
it may not be possible to close an options or futures position. The inability to
close options and futures positions also could have an adverse impact on the
Company's ability to hedge effectively its
14
<PAGE>
portfolio. There is also the risk of loss by the Company of margin deposits or
collateral in the event of bankruptcy of a broker with whom the Company has an
open position in an option, a futures contract or related option.
The exchanges on which options on portfolio securities and currency options
are traded have generally established limitations governing the maximum number
of call or put options on the same underlying security or currency (whether or
not covered) which may be written by a single investor, whether acting alone or
in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written in one or more accounts or
through one or more brokers). 'Trading limits' are imposed on the maximum number
of contracts which any person may trade on a particular trading day. The
Investment Adviser does not believe that these trading and position limits will
have any adverse impact on the portfolio strategies for hedging the Company's
portfolio.
Because the Company will engage in the options and futures transactions
described above solely in connection with its hedging activities, the Investment
Adviser does not believe that such options and futures transactions necessarily
will have any significant effect on the Company's portfolio turnover.
OTHER INVESTMENT PRACTICES
Portfolio Transactions. In executing portfolio transactions, the
Investment Adviser seeks to obtain the best net results for the Company, 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 involved and the firm's risk in positioning a
block of securities. While the Investment Adviser generally seeks reasonably
competitive commission rates, the Company does not necessarily pay the lowest
commission or spread available. The Company has no obligation to deal with any
broker or group of brokers in the execution of transactions in portfolio
securities. Under the Investment Company Act, persons affiliated with the
Company and persons who are affiliated with such affiliated persons, including
Merrill Lynch, are prohibited from dealing with the Company as a principal in
the purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the Securities and Exchange Commission. Affiliated
persons of the Company, and affiliated persons of such affiliated persons, may
serve as the Company's broker in transactions conducted on an exchange and in
over-the-counter transactions conducted on an agency basis and may receive
brokerage commissions from the Company. In addition, consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc., the
Company may consider sales of shares of the Company as a factor in the selection
of brokers or dealers to execute portfolio transactions for the Company. It is
expected that the majority of the shares of the Company will be sold by Merrill
Lynch. Brokerage commissions and other transaction costs on foreign stock
exchange transactions are generally higher than in the U.S., although the
Company will endeavor to achieve the best net results in effecting its portfolio
transactions.
Lending of Portfolio Securities. The Company may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. During the period of such a loan,
the Company receives the income on both the loaned securities and the collateral
and thereby increases its yield. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or otherwise, the
Company could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent the value of the collateral falls below
the market value of the borrowed securities.
15
<PAGE>
INVESTMENT RESTRICTIONS
The Company has adopted a number of restrictions and policies relating to
the investment of its assets and its activities, which are fundamental policies
and may not be changed without the approval of the holders of a majority of the
Company's outstanding voting securities, as defined in the Investment Company
Act. Among the more significant restrictions, the Company may not:
- Invest in the securities of any one issuer if, immediately after and as a
result of such investment the value of the holdings of the Company in the
securities of such issuer exceeds 5% of the Company's total assets, taken
at market value, except that such restriction shall not apply to
securities issued or guaranteed by the United States Government or any of
its agencies or instrumentalities or, with respect to 25% of the
Company's total assets, to securities issued or guaranteed by the
government of any country which is a member of the Organisation for
Economic Co-operation and Development (OECD).
- Invest in the securities of any single issuer if, immediately after and
as a result of such investment, the Company owns more than 10% of the
outstanding voting securities of such issuer.
- 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.
Nothing in the foregoing investment restrictions shall be deemed to
prohibit the Company from purchasing the securities of any issuer pursuant to
the exercise of subscription rights distributed to the Company by the issuer,
except that no such purchase may be made if as a result the Company will no
longer be a diversified investment company as defined in the Investment Company
Act or fail to meet the diversification requirements of the Internal Revenue
Code of 1986, as amended.
The Board of Directors of the Company, at a meeting held on August 4, 1994,
approved certain changes to the fundamental and non-fundamental investment
restrictions of the Company. These changes were proposed in connection with the
creation of a set of standard fundamental and non-fundamental investment
restrictions that would be adopted, subject to shareholder approval, by
substantially all of the non-money market mutual funds advised by MLAM or FAM.
The proposed uniform investment restrictions are designed to provide each of
these funds, including the Company, with as much investment flexibility as
possible under the Investment Company Act and applicable state securities
regulations, help promote operational efficiencies and facilitate monitoring of
compliance. The investment objectives and policies of the Company will be
unaffected by the adoption of the proposed investment restrictions.
The full text of the proposed investment restrictions is set forth under
'Investment Objective and Policies--Proposed Uniform Investment Restrictions'
in the Statement of Additional Information. Shareholders of the Company are
currently considering whether to approve the proposed revised investment
restrictions. If such shareholder approval is obtained, the Company's current
investment restrictions will be replaced by the proposed restrictions, and the
Company's Prospectus and Statement of Additional Information will be
supplemented to reflect such change.
16
<PAGE>
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS
The Board of Directors of the Company consists of five individuals, four of
whom are not 'interested persons' of the Company as defined in the Investment
Company Act. The Board of Directors of the Company is responsible for the
overall supervision of the operations of the Company and performs the various
duties imposed on the directors of investment companies by the Investment
Company Act.
The Directors of the Company are:
ARTHUR ZEIKEL*--President and Chief Investment Officer of the Investment
Adviser; President and Director of Princeton Services, Inc.; Executive Vice
President of Merrill Lynch & Co., Inc. ('ML & Co.'); Executive Vice President of
Merrill Lynch; Director of the Distributor.
DONALD CECIL--Special Limited Partner of Cumberland Partners (an investment
partnership).
EDWARD H. MEYER--Chairman of the Board, President and Chief Executive
Officer of Grey Advertising Inc.
CHARLES C. REILLY--Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital, Inc.; former Senior Vice President of
Arnhold and S. Bleichroeder, Inc.; Adjunct Professor, Columbia University
Graduate School of Business.
RICHARD R. WEST--Professor of Finance, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration.
ADVISORY AND MANAGEMENT ARRANGEMENTS
The Company's investment adviser is Merrill Lynch Asset Management, L.P.,
which does business as Merrill Lynch Asset Management (the 'Investment
Adviser'). The investment advisory agreement with the Investment Adviser (the
'Investment Advisory Agreement') provides that, subject to the direction of the
Board of Directors of the Company, the Investment Adviser is responsible for the
actual management of the Company's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Directors.
The Investment Adviser, located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536, is owned and controlled by ML & Co., a financial services holding
company and the parent of Merrill Lynch. The Investment Adviser, or an
affiliate, Fund Asset Management, L.P. ('FAM'), acts as the investment adviser
to more than 100 other registered investment companies and provides investment
advisory services to individual and institutional accounts. As of August 31,
1994, the Investment Adviser and FAM had a total of approximately $165.7 billion
in investment company and other portfolio assets under management, including
accounts of certain affiliates of the Investment Adviser.
As permitted by the Investment Advisory Agreement, the Investment Adviser
had entered into separate investment research agreements with Nomura Capital
Management, Inc. ('NCM') and Lombard Odier International Portfolio Management
Limited ('LOIPM') (the 'Investment Research Agreements') pursuant to which NCM
and LOIPM had furnished the Investment Adviser with economic research,
securities analyses and
- ------------------
* Interested person, as defined in the Investment Company Act, of the Company.
17
<PAGE>
investment recommendations and had reviewed and rendered investment research
with respect to the Company. The Investment Research Agreement between the
Investment Adviser and NCM recognized that NCM could enter into a separate
investment research agreement (the 'Sub-Research Agreement') with Nomura
Investment Management Co., Ltd. ('NIMCO'). The Investment Research Agreements
and related Sub-Research Agreement terminated on April 1, 1994. The Investment
Adviser continues to provide services to the Company pursuant to the Investment
Advisory Agreement.
As compensation for its services to the Company, the Investment Adviser
receives monthly compensation at the annual rate of 1.0% of the average daily
net assets of the Company. This fee is higher than that charged most mutual
funds, but the Company believes it is justified by the special international
nature of the Company. Until April 1, 1994, the Investment Adviser compensated
NCM and LOIPM for investment research pursuant to the Investment Research
Agreements at the annual rates of 0.20% and 0.15%, respectively, of the
Company's average daily net assets. Under the Sub-Research Agreement, NCM
compensated NIMCO for investment research in an amount determined by NCM and
NIMCO, but not in excess of the amount of compensation NCM received from the
Investment Adviser. For the fiscal year ended November 30, 1993, the Investment
Adviser earned fees of $2,329,402, of which $349,410 was paid to LOIPM and
$465,880 was paid to NCM under the terms of their respective Investment Research
Agreements. NCM paid NIMCO $232,948 from the amount earned by NCM. At August 31,
1994, the Company's net assets were approximately $406.1 million. At such level,
the annual advisory fee would aggregate approximately $4.1 million.
Peter A. Lehman is responsible for the day-to-day management of the
Company's portfolio. Mr. Lehman has been a portfolio manager for global natural
resource funds managed by the Investment Adviser since 1994 and was a senior
fund analyst of the Company from 1992 until 1994. Prior thereto, Mr. Lehman was
a global equity and natural resources portfolio manager and basic industry
analyst for the Prudential Insurance Company. Mr. Lehman has been primarily
responsible for the management of the Company's portfolio since June 1994.
The Company pays certain expenses incurred in its operations, including,
among other things, the investment advisory fees, legal and audit fees,
unaffiliated directors' fees and expenses, registration fees, custodian and
transfer agency fees, accounting and pricing costs, and certain of the costs of
printing proxies, shareholder reports, prospectuses and statements of additional
information. Also, accounting services are provided to the Company by the
Investment Adviser, and the Company reimburses the Investment Adviser for its
costs in connection with such services on a semi-annual basis. For the fiscal
year ended November 30, 1993, the amount of such reimbursement was $111,045. For
the fiscal year ended November 30, 1993, the ratio of total expenses to average
net assets for Class A shares was 1.43%, and the ratio of total expenses to
average net assets for Class B shares was 2.46%; no Class C shares or Class D
shares had been issued during that year.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the 'Transfer Agent'), which is a
wholly-owned subsidiary of ML & Co., acts as the Company'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
an annual fee of $11.00 per Class A or Class D shareholder account and $14.00
per Class B or Class C shareholder account, nominal miscellaneous fees (e.g.,
account closing fees) and is entitled to reimbursement for out-of-pocket
expenses incurred by it under the Transfer Agency Agreement. For the fiscal
18
<PAGE>
year ended November 30, 1993, the Company paid $383,431 to the Transfer Agent
pursuant to the Transfer Agency Agreement. At August 31, 1994, the Fund had
43,248 Class A shareholder accounts and 7,263 Class B shareholder accounts
(including certain subaccounts on which the standard annual transfer agency fees
are assessed), no Class C shareholder accounts and no Class D shareholder
accounts. At this level of accounts, the annual fee payable to the Transfer
Agent would aggregate approximately $577,410, plus miscellaneous and out-
of-pocket expenses.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the 'Distributor'), an affiliate of
both the Investment Adviser and Merrill Lynch, acts as the distributor of the
shares of the Company. Shares of the Company are offered continuously for sale
by the Distributor and other eligible securities dealers (including Merrill
Lynch). Shares of the Company may be purchased from securities dealers or by
mailing a purchase order directly to the Transfer Agent. The minimum initial
purchase is $1,000, and the minimum subsequent purchase is $50, except that for
retirement plans, the minimum initial purchase is $100, and the minimum
subsequent purchase is $1.
The Company is offering its shares in four classes at a public offering
price equal to the next determined net asset value per share plus sales charges
imposed either at the time of purchase or on a deferred basis depending upon the
class of shares selected by the investor under the Merrill Lynch Select
Pricing(Service Mark) System, as described below. As to purchase orders received
by securities dealers prior to 4:15 p.m., New York time, which includes orders
received after the determination of the net asset value on the previous day, the
applicable offering price will be based on the net asset value determined as of
4:15 p.m., New York time, on the day the orders are placed with the Distributor,
provided the orders are received by the Distributor prior to 4:30 p.m., New York
time, on that day. The applicable offering price for purchase orders is based
upon the net asset value of the Company next determined after receipt of the
purchase orders by the Distributor. If the purchase orders are not received by
the Distributor prior to 4:30 p.m., New York time, such orders shall be deemed
received on the next business day. The Company or the Distributor may suspend
the continuous offering of the Company'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
Distributor or the Company. Neither the Distributor nor the dealers are
permitted to withhold placing orders to benefit themselves by a price change.
Merrill Lynch may charge its customers a processing fee (presently $4.85) to
confirm a sale of shares to such customers. Purchases directly through the
Transfer Agent are not subject to the processing fee.
Shares of the Company may be purchased by residents of Arizona only if such
investors have (i) a net worth (exclusive of home, home furnishings and
automobiles) of not less than $100,000 or (ii) a net worth (as computed above)
of not less than $30,000 and an annual gross income of not less than $30,000.
The Company issues four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) System, which permits each 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. 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. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Company with the
investment thereafter being subject to a contingent deferred sales charge and
ongoing distribution fees. A discussion of the factors that investors should
19
<PAGE>
consider in determining the method of purchasing shares under the Merrill Lynch
Select Pricing(Service Mark) System is set forth under 'Merrill Lynch Select
Pricing(Service Mark) System' on page 3.
Each Class A, Class B, Class C and Class D share of the Company represents
identical interests in the investment portfolio of the Company and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements. The
deferred sales charges 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, will be imposed directly against those classes and not against
all assets of the Company and, accordingly, such charges will 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 Company for each class of shares will
be calculated in the same manner at the same time and will 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. Class B, Class C and Class D shares each have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted with respect to
such class pursuant to which account maintenance and/or distribution fees are
paid. See 'Distribution Plans' below. 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 Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in that
the sales charges applicable to each class provide for the financing of the
distribution of the shares of the Company. 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. Investors are advised that
only Class A and Class D shares may be available for purchase through securities
dealers, other than Merrill Lynch, which are eligible to sell shares.
The following table sets forth a summary of the distribution arrrangements for
each class of shares under the Merrill Lynch Select Pricing(Service Mark)
System, followed by a more detailed description of each class.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(1) FEE FEE CONVERSION FEATURE
<C> <S> <C> <C> <C>
A Maximum 5.25% initial sales No No No
charge(2)(3)
B CDSC for a period of 0.25% 0.75% B shares convert to
4 years, at a rate of 4.0% D shares automatically
during the first year, decreasing after approximately
1.0% annually to 0.0% eight years(4)
C 1.0% CDSC for one year 0.25% 0.75% No
D Maximum 5.25% initial sales charge(3) 0.25% No No
</TABLE>
(footnotes on following page)
20
<PAGE>
(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. CDSCs may be imposed if the redemption occurs within the
applicable CDSC time period. 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.
(2) Offered only to eligible investors. See 'Initial Sales Charge
Alternatives--Class A and Class D Shares--Eligible Class A Investors'.
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more will not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Company are exchanged for Class
B shares of another MLAM-advised mutual fund, 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 onto the holding
period for the shares acquired.
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.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
SALES LOAD AS DISCOUNT TO
SALES LOAD AS PERCENTAGE* SELECTED DEALERS
PERCENTAGE OF OF THE NET AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED THE 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.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more made on or after October 21, 1994. If the sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. Class A purchases made prior to
October 21, 1994, may be subject to a CDSC if the shares are redeemed within
one year of purchase at the following rates: 1.00% on purchases of $1,000,000
to $2,500,000; 0.60% on purchases of $2,500,001 to $3,500,000; 0.40% on
purchases of $3,500,001 to $5,000,000; and 0.25% on purchases of more than
$5,000,000 in lieu of paying an initial sales charge. 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. A sales charge of 0.75% will be
charged on purchases of $1,000,000 or more of Class A or Class D shares by
certain 401(k) plans.
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 Company will receive a concession equal to most of the sales
charge, they may be deemed to be underwriters under the Securities Act. During
the fiscal year ended November 30, 1993, the Company sold 9,166,536 Class A
shares for aggregate net proceeds of $112,504,555. The gross sales charges for
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<PAGE>
the sale of Class A shares of the Company for that year were $126,144, of which
$7,191 and $118,953 were received by the Distributor and Merrill Lynch,
respectively. For such fiscal year, the Distributor received no CDSCs with
respect to redemption within one year after purchase of Class A shares purchased
subject to front-end sales charge waivers.
Eligible Class A Investors. Class A shares are offered to a limited group of
investors and also will be issued upon reinvestment of dividends on outstanding
Class A shares. Investors who currently own Class A shares in a shareholder
account, including participants in the Merrill Lynch Blueprint(Service Mark)
Program, are entitled to purchase additional Class A shares in that account.
Certain employer sponsored retirement or savings plans, including eligible
401(k) plans, may purchase Class A shares at net asset value provided such plans
meet the required minimum number of eligible employees or required amount of
assets advised by MLAM or any of its affiliates. Class A shares are available at
net asset value to corporate warranty insurance reserve fund programs provided
that the program has $3 million or more initially invested in MLAM-advised
mutual funds. Also eligible to purchase Class A shares at net asset value are
participants in certain investment programs including TMA(Service Mark) Managed
Trusts to which Merrill Lynch Trust Company provides discretionary trustee
services and certain purchases made in connection with the Merrill Lynch Mutual
Fund Adviser program. In addition, Class A shares will be offered at net asset
value to ML & Co. and its subsidiaries and their directors and employees and to
members of the Boards of MLAM-advised investment companies, including the
Company. Certain persons who acquired shares of certain MLAM-advised closed-end
funds who wish to reinvest the net proceeds from a sale of their closed-end fund
shares of common stock in shares of the Company also may purchase Class A shares
of the Company if certain conditions set forth in the Statement of Additional
Information are met. For example, Class A shares of the Company and certain
other MLAM-advised mutual funds are offered at net asset value to shareholders
of Merrill Lynch Senior Floating Rate Fund, Inc. who wish to reinvest the net
proceeds from a sale of certain of their shares of common stock of Merrill Lynch
Senior Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and D sales charges also may
be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A
investors as set forth above under 'Eligible Class A Investors.'
Class D shares are offered at net asset value, without sales charge, to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met. Class D shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies.
Class D shares are offered with reduced sales charges and, in certain
circumstances, at net asset value, to participants in the Merrill Lynch
Blueprint(Service Mark) Program.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement or
Savings Plans, is set forth in the Statement of Additional Information.
22
<PAGE>
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
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. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately eight years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend reinvestment with respect to
those shares, are automatically converted into Class D shares of the Company and
thereafter will be subject to lower continuing fees. See 'Conversion of Class B
Shares to Class D Shares' below. Both Class B and Class C shares are subject to
an account maintenance fee of 0.25% of net assets and a distribution fee of
0.75% of net assets as discussed below under 'Distribution Plans.' The proceeds
from the account maintenance fees are used to compensate Merrill Lynch for
providing continuing account maintenance activities.
Class B and Class C shares are sold without an initial sales charge so that
the Company will receive the full amount of the investor's purchase payment.
Merrill Lynch compensates its financial consultants for selling Class B and
Class C shares at the time of purchase from its own funds. See 'Distribution
Plans' below.
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 Company 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 its own funds. The combination of the CDSC and
the ongoing distribution fee facilitates the ability of the Company to sell the
Class B and Class C shares without a sales charge being deducted at the time of
purchase. Approximately eight years after issuance, Class B shares will convert
automatically into Class D shares of the Company, which are subject to an
account maintenance fee but no distribution fee; Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made convert into Class D
shares automatically after approximately ten years. If Class B shares of the
Company are exchanged for Class B shares of another MLAM-advised mutual fund,
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 onto
the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C
shares is limited by the NASD asset-based sales charge rule. See 'Limitations on
the Payment of Deferred Sales Charges' below. The proceeds from the ongoing
account maintenance fee are used to compensate Merrill Lynch for providing
continuing account maintenance activities. Class B shareholders of the Company
exercising the exchange privilege described under 'Shareholder
Services--Exchange Privilege' will continue to be subject to the Company'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.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which
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.
The charge will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. Accordingly, no CDSC will
be imposed on increases in net asset value
23
<PAGE>
above the initial purchase price. In addition, no CDSC will be assessed on
shares derived from reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO 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>
For the fiscal year ended November 30, 1993, the Distributor received CDSCs of
$33,249 with respect to redemptions of Class B shares, all of which were paid to
Merrill Lynch.
In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over four years or shares acquired pursuant to reinvestment
of dividends or distributions and then of shares held longest during the
four-year period. The charge will not be applied to dollar amounts representing
an increase in the net asset value since the time of purchase. 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.
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 through 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 the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC 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 is 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. The
Class B CDSC also is waived on redemptions of shares by certain eligible 401(a)
and eligible 401(k) plans and in connection with certain group plans placing
orders through the Merrill Lynch Blueprint(Service Mark) Program. The CDSC also
is waived for any Class B shares which are purchased by eligible 401(k) or
eligible 401(a) plans which are rolled over into a Merrill Lynch or Merrill
Lynch Trust Company custodied IRA and held in such account at the time of
redemption. The Class B CDSC also is waived for any Class B shares which 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. Additional information concerning the
waiver of the Class B CDSC is set forth in the Statement of Additional
Information.
24
<PAGE>
Contingent Deferred Sales Charges--Class C Shares. Class C shares which
are redeemed within one year after purchase may be subject to a 1.0% CDSC
charged as a percentage of the dollar amount subject thereto. 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 or capital gains distributions.
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. Therefore, it will be assumed that the redemption is first
of shares held for over one year or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the one-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. 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.
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 Company. Class D shares are subject to an ongoing
account maintenance fee of 0.25% of 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 values 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 a Conversion Date the conversion of Class B shares to Class D
shares of the Company in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the
Company held in the account on the Conversion Date will be converted to Class D
shares of the Company.
Share certificates for Class B shares of the Company 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.
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual 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 onto the holding
period for the shares acquired.
The Conversion Period is modified for shareholders who purchased Class B
shares through certain retirement plans which qualified for a waiver of the CDSC
normally imposed on purchases of Class B shares ('Class B Retirement Plans').
When the first share of any MLAM-advised mutual fund purchased by a Class B
Retirement Plan has been held for ten years (i.e., ten years from the date the
relationship between MLAM-advised mutual funds and the Class B Retirement Plan
was established), all Class B shares of all MLAM-advised mutual funds held in
25
<PAGE>
that Class B Retirement Plan will be converted into Class D shares of the
appropriate funds. Subsequent to such conversion, that Class B Retirement Plan
will be sold Class D shares of the appropriate funds at net asset value.
DISTRIBUTION PLANS
The Company has adopted separate distribution plans for Class B, Class C
and Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each
a 'Distribution Plan') with respect to the account maintenance and/or
distribution fees paid by the Company to the Distributor with respect to such
classes. The Class B and Class C Distribution Plans provide for the payment of
account maintenance fees and distribution fees, and the Class D Distribution
Plan provides for the payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Company 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 Company 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.
The Distribution Plans for Class B and Class C shares each provide that the
Company 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 Company 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 Company,
including payments to financial consultants for selling Class B and Class C
shares of the Company. 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 Company in that the deferred sales charges provide for the
financing of the distribution of the Fund's Class B and Class C shares.
Prior to July 7, 1993, the Company paid the Distributor an ongoing
distribution fee, accrued daily and paid monthly, at the annual rate of 1.00% of
average daily net assets of the Class B shares of the Company under a
distribution plan previously adopted by the Company (the 'Prior Plan') to
compensate the Distributor and Merrill Lynch for providing account maintenance
and distribution-related activities and services to Class B shareholders. The
fee rate payable and the services provided under the Prior Plan are identical to
the aggregate fee rate payable and the services provided under the Class B
Distribution Plan, the difference being that the account maintenance and
distribution services have been unbundled.
For the fiscal year ended November 30, 1993, the Company paid the
Distributor $256,934 pursuant to the Prior Plan and the Class B Distribution
Plan (based on average net assets subject to the Prior Plan and the Class B
Distribution Plan of $25.7 million), all of which was paid to Merrill Lynch for
providing account maintenance and distribution-related activities and services
in connection with Class B shares. The Company did not begin to offer shares of
Class C or Class D publicly until the date of this Prospectus. Accordingly, no
payments have been made pursuant to the Class C or Class D Distribution Plans
prior to the date of this Prospectus. At February 28, 1994, the net assets of
the Company subject to the Distribution Plan aggregated approximately $45.1
million. At
26
<PAGE>
this asset level, the annual fee payable pursuant to the Distribution Plan would
aggregate approximately $450,952.
The payments under the Distribution Plans are based upon a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred, and accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C Distribution
Plans. 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, distribution fees, the CDSCs and certain other
related revenues, and expenses consist of financial consultant compensation,
branch office and regional operation center selling and transaction processing
expenses, advertising, sales promotion and marketing expenses, corporate
overhead and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and CDSCs,
and the expenses consist of financial consultant compensation.
At December 31, 1993, the fully allocated accrual expenses incurred by the
Distributor and Merrill Lynch for the period since the commencement of the
offering of Class B shares exceeded fully allocated accrual revenues for such
period by approximately $513,000 (1.34% of net assets at that date). As of
December 31, 1993, direct cash revenues for the period since commencement of the
offering of Class B shares exceeded direct cash expenses by $593,872 (1.55% of
Class B net assets at that date).
The Company has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with Class B, Class C and Class D shares, and there is no assurance
that the Directors of the Company will approve the continuance of the
Distribution Plans from year to year. However, the Distributor intends to seek
annual continuation of the Distribution Plans. In their review of the
Distribution Plans, the Directors will be asked to take into consideration
expenses incurred in connection with the account maintenance and/or distribution
of each class of shares separately. The initial sales charges, the account
maintenance fee, the distribution fee and/or the CDSCs received with respect to
one class will not be used to subsidize the sale of shares of another class.
Payments of the distribution fee on Class B shares will terminate upon
conversion of those Class B shares into Class D shares as set forth under
'Deferred Sales Charge Alternatives--Class B and Class C Shares--Conversion of
Class B Shares to Class D Shares'.
Limitations on the Payment of Deferred Sales Charges. The maximum sales
charge rule in the Rules of Fair Practice 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 Company, the maximum sales charge rule limits the aggregate of distribution
fee payments and CDSCs payable by the Company to (1) 6 1/4% 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 interest charges at any time. To the extent payments would exceed the
voluntary maximum,
27
<PAGE>
the Company will not make further payments of the distribution fee with respect
to Class B shares, and any CDSC will be paid to the Company rather than to the
Distributor; however, the Company will continue to make payments of the account
maintenance fee. In certain circumstances the amount payable pursuant to the
voluntary maximum may exceed the amount payable under the NASD formula. In such
circumstances payment in excess of the amount payable under the NASD formula
will not be made.
REDEMPTION OF SHARES
The Company is required to redeem for cash all full and fractional shares
of the Company on 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 which 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 value of shares at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Company at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by
tendering the shares directly to the Transfer Agent, Financial Data Services,
Inc., Transfer Agency Mutual Fund Operations, P.O. Box 45289, Jacksonville,
Florida 32232-5289. Redemption requests delivered other than by mail should be
delivered to Financial Data Services, Inc., Transfer Agency Mutual Fund
Operations, 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. The notice in either event requires the signatures of
all persons in whose names the shares are registered, signed exactly as their
names appear on the Transfer Agent's register or on the certificate, as the case
may be. The signature(s) on the redemption request must be guaranteed by an
'eligible guarantor institution' (including, for example, Merrill Lynch branch
offices and certain other financial institutions) as such is defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, the existence and
validity of which may be verified by the Transfer Agent through the use of
industry publications. Notarized signatures are not sufficient. 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, payment will be mailed within seven
days of receipt of a proper notice of redemption.
At various times the Company may be requested to redeem shares for which it
has not yet received good payment. The Company may delay or cause to be delayed
the mailing of a redemption check until such time as good payment (e.g., cash or
certified check drawn on a U.S. bank) has been collected for the purchase of
such shares, which will not exceed 10 days.
28
<PAGE>
REPURCHASE
The Company also will repurchase shares through a shareholder's listed
securities dealer. The Company normally will accept orders to repurchase shares
by wire or telephone from dealers for their customers at the net asset value
next computed after receipt of the order by the dealer, provided that the
request for repurchase is received by the dealer prior to the close of business
on the New York Stock Exchange on the day received and that such request is
received by the Company from such dealer not later than 4:30 p.m., New York
time, on the same day. Dealers have the responsibility of submitting such
repurchase requests to the Company not later than 4:30 p.m., New York time, 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 Company (other than any
applicable CDSC). Securities firms which 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 Company. Merrill
Lynch may charge its customers a processing fee (presently $4.85) to confirm a
repurchase of shares to such customers. Redemptions directly through the
Transfer Agent are not subject to the processing fee. The Company 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 Company
may redeem shares as set forth above.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES
Shareholders who have redeemed their Class A or Class D shares have a
one-time privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, of the Company at net asset value without a sales
charge up to the dollar amount redeemed. The reinstatement privilege may be
exercised by sending a notice of exercise along with a check for the amount to
be reinstated to the Transfer Agent within 30 days after the date the request
for redemption was accepted by the Transfer Agent or the Distributor. 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. The reinstatement privilege is a one-time privilege and
may be exercised by the Class A or Class D shareholder only the first time such
shareholder makes a redemption.
SHAREHOLDER SERVICES
The Company offers a number of shareholder services and investment plans
designed to facilitate investment in shares of the Company. Certain of such
services are not available to investors who place purchase orders for the Fund's
shares through the Merrill Lynch Blueprint Program. Full details as to each of
such services, copies of the various plans described below and instructions as
to how to participate in the various services or plans, or to change options
with respect thereto, can be obtained from the Company 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
ordinary income dividends and long-term capital gain distributions. The
statements will also show any other activity in the account since the preceding
statement. Shareholders will receive separate transaction confirmations for each
purchase or sale transaction other than automatic investment purchases and the
reinvestment of ordinary income
29
<PAGE>
dividends and long-term capital gain distributions. A shareholder may make
additions to his Investment Account at any time by mailing a check directly to
the Transfer Agent. Shareholders also may maintain their accounts through
Merrill Lynch. Upon the transfer of shares out of a Merrill Lynch brokerage
account, an Investment Account in the transferring shareholder's name will be
opened automatically, without charge, at the Transfer Agent. Shareholders
considering transferring their Class A or Class D shares from Merrill Lynch to
another brokerage firm or financial institution should be aware that, if the
firm to which the Class A or Class D shares are to be transferred will not take
delivery of shares of the Fund, a shareholder either must redeem the Class A or
Class D 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 an Investment Account at the Transfer Agent for those Class A or Class
D shares. Shareholders interested in transferring their Class B or Class C
shares from Merrill Lynch and who do not wish to have an Investment Account
maintained for such shares at the Transfer Agent may request their new brokerage
firm to maintain such shares in an account registered in the name of the
brokerage firm for the benefit of the shareholder. If the new brokerage firm is
willing to accommodate the shareholder in this manner, the shareholder must
request that he be issued certificates for his shares and then must turn the
certificates over to the new firm for re-registration as described in the
preceding sentence. Shareholders considering transferring a tax-deferred
retirement account such as an individual retirement account from Merrill Lynch
to another brokerage firm or financial institution should be aware that, if the
firm to which the retirement account is to be transferred will not take delivery
of shares of the Company, a shareholder must either redeem the shares (paying
any applicable CDSC) so that the cash proceeds can be transferred to the account
at the new firm, or such shareholder must continue to maintain a retirement
account at Merrill Lynch for those shares.
Systematic Withdrawals and Automatic Investment Plans. A Class A or Class
D shareholder may elect to receive systematic withdrawal payments from his
Investment Account in the form of payments by check or through automatic payment
by direct deposit to his bank account on either a monthly or quarterly basis. A
Class A or Class D shareholder whose shares are held within a CMA(Registered),
CBA(Registered) or Retirement Account may elect to have shares redeemed on a
monthly, bimonthly, quarterly, semiannual or annual basis through the Systematic
Redemption Program, subject to certain conditions.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C
or Class D shares may be made to an investor's Investment Account by
pre-arranged charges of $50 or more to his regular bank account. Investors who
maintain CMA(Registered) accounts may arrange to have periodic investments made
in the Company in their CMA(Registered) accounts or in certain related accounts
in amounts of $100 or more through the CMA(Registered) Automated Investment
Program.
Automatic Reinvestment of Dividends and Distributions. All dividends and
capital gains distributions are automatically reinvested in full and fractional
shares of the Company, without sales charge, at the net asset value per share
next determined after the close of the New York Stock Exchange on the
ex-dividend date of such dividend or distribution. A shareholder may at any
time, by written notification to Merrill Lynch if the shareholder's account is
maintained with Merrill Lynch or by written notification or by telephone
(1-800-MER-FUND) to the Transfer Agent if the shareholder's account is
maintained with the Transfer Agent, elect to have subsequent dividends, or both
dividends and capital gains distributions, paid in cash rather than reinvested,
in which event payment will be mailed on or about the payment date. Cash
payments can also be directly deposited to the shareholder's bank account. No
CDSC will be imposed on redemptions of shares issued as a result of the
automatic reinvestment of dividends or capital gains distributions. The
Automatic Investment Program is not
30
<PAGE>
available to shareholders whose shares are held in a brokerage account with
Merrill Lynch other than a CMA(Registered) account.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Company have an exchange
privilege with certain other MLAM-advised mutual funds. There is currently no
limitation on the number of times a shareholder may exercise the exchange
privilege. The exchange privilege may be modified or terminated in accordance
with the rules of the Commission.
Under the Merrill Lynch Select Pricing(Service Mark) System, Class A
shareholders may exchange Class A shares of the Company for Class A shares of a
second MLAM-advised mutual fund if the shareholder holds any Class A shares of
the second fund in his 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 MLAM-advised mutual fund, and the shareholder does not hold Class A
shares of the second fund in his account at the time of the exchange and is not
otherwise eligible to acquire Class A shares of the second fund, the shareholder
will receive Class D shares of the second fund as a result of the exchange.
Class D shares also may be exchanged for Class A shares of a second MLAM-advised
mutual 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.
Exchanges of Class A and Class D shares are made on the basis of the
relative net asset values 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 Class A or Class D shares being exchanged and the sales charge payable at
the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchangeable with shares of the
same class of other MLAM-advised mutual funds.
Shares of the Company which are subject to a CDSC will be exchangeable on
the basis of relative net asset value per share without the payment of any CDSC
that might otherwise be due upon redemption of the shares of the Company. For
purposes of computing the CDSC that may be payable upon a disposition of the
shares acquired in the exchange, the holding period for the previously owned
shares of the Company is 'tacked' to the holding period of the newly acquired
shares of the other fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for
shares of certain MLAM-advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares are
held in a money market fund, however, will not count toward satisfaction of the
holding period requirement for reduction of any CDSC imposed on such shares, if
any, and, with respect to Class B shares, toward satisfaction of the Conversion
Period.
Class B shareholders of the Company exercising the exchange privilege will
continue to be subject to the Company's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the new Class B shares. In addition, Class B
shares of the Company acquired through use of the exchange privilege will be
subject to the Company's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares of the MLAM-advised mutual fund from
which the exchange has been made.
31
<PAGE>
Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes. For further information, see 'Shareholder Services--Exchange
Privilege' in the Statement of Additional Information.
The Company's exchange privilege is modified with respect to purchases of
Class A and Class D shares under the Merrill Lynch Mutual Fund Adviser ('MFA')
program. First, the initial allocation of assets is made under the MFA program.
Then, any subsequent exchange under the MFA program of Class A or Class D shares
of a MLAM-advised mutual fund for Class A or Class D shares of the Company will
be made solely on the basis of the relative net asset values of the shares being
exchanged. Therefore, there will not be a charge for any difference between the
sales charge previously paid on the shares of the other MLAM-advised mutual fund
and the sales charge payable on the shares of the Company being acquired in the
exchange under the MFA program.
PERFORMANCE DATA
From time to time the Company may include its average annual total return
for various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed
separately for Class A, Class B, Class C and Class D shares in accordance with a
formula specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any 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
will be computed assuming all dividends and distributions are reinvested and
taking into account all applicable recurring and nonrecurring expenses,
including any CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period such as in the case of Class B and
Class C shares and the maximum sales charge in the case of Class A and Class D
shares. Dividends paid by the Company with respect to all shares, to the extent
any dividends are paid, will be calculated in the same manner at the same time
on the same day and will be in the same amount, except that account maintenance
fees and distribution fees and any incremental transfer agency costs relating to
each class of shares will be borne exclusively by that class. The Company will
include performance data for all classes of shares of the Company in any
advertisement or information including performance data of the Company.
The Company may also quote total return and aggregate total return
performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return, 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 annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over longer
periods of time. In advertisements directed to investors whose purchases are
subject to reduced sales charges in the case of Class A or Class D shares or
waiver of the CDSC in the case of Class B or Class C shares (such as investors
in certain retirement plans), 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 may be deducted. See
'Purchase of Shares'. The Company's total return may be expressed either as a
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percentage or as a dollar amount in order to illustrate the effect of such total
return on a hypothetical $1,000 investment in the Company at the beginning of
each specified period.
Total return figures are based on the Company's historical performance and
are not intended to indicate future performance. The Company's total return will
vary depending on market conditions, the securities comprising the Company's
portfolio, the Company'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 Company will fluctuate, and an investor's shares, when
redeemed, may be worth more or less than their original cost.
On occasion, the Company may compare its performance to the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or to
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA
Investment Technology, Inc., Forbes Magazine, Fortune Magazine or other industry
publications. In addition, from time to time the Company may include the
Company's risk-adjusted performance ratings assigned by Morningstar
Publications, Inc. in advertising or supplemental sales literature. As with
other performance data, performance comparisons should not be considered
representative of the Company's relative performance for any future period.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Company's intention to distribute all its net investment income,
if any. Dividends from such net investment income will be paid at least
annually. All net realized long-or short-term capital gains, if any, will be
distributed to the Company's shareholders at least annually. The per share
dividends and distributions on each class of shares will be reduced as a result
of the account maintenance, distribution and transfer agency fees applicable to
that class. See 'Additional Information--Determination of Net Asset Value'.
Dividends and distributions may be reinvested automatically in shares of the
Company at net asset value without a sales charge. Shareholders may elect in
writing to receive any such dividends or distributions, or both, in cash.
Dividends and distributions are taxable to shareholders as discussed below
whether they are reinvested in shares of the Company or received in cash.
Certain gains or losses attributable to foreign currency gains or losses
from certain forward contracts may increase or decrease the amount of the
Company's income available for distribution to shareholders. If such losses
exceed other income during a taxable year, (a) the Company would not be able to
make any ordinary dividend distributions, and (b) distributions made before the
losses were realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
tax basis in his Company shares for Federal income tax purposes. See 'Additional
Information--Taxes'.
TAXES
The Company intends to continue to qualify for the special tax treatment
afforded regulated investment companies ('RICs') under the Internal Revenue Code
of 1986, as amended (the 'Code'). If it so qualifies, the Company (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 which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the 'shareholders'). The
Company intends to distribute substantially all of such income.
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Dividends paid by the Company from its ordinary income and distributions of
the Company's net realized short-term capital gains (together referred to
hereafter as 'ordinary income dividends') are taxable to shareholders as
ordinary income. Distributions made from the Company's net realized long-term
capital gains (including long-term gains from certain transactions in 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
Company shares. Distributions in excess of the Company'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).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Company. Not later than 60 days after the close of its
taxable year, the Company will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. A portion of the Company's ordinary income dividends may be eligible
for the dividends received deduction allowed to corporations under the Code, if
certain requirements are met. If the Company pays a dividend in January which
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 Company and received by its
shareholders on December 31 of the year in which such dividend was declared.
Ordinary income dividends paid by the Company to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S. withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the U.S.
withholding tax.
Dividends and interest received by the Company 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. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Company. If more than 50% in value of the Company's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Company will be eligible, and intends, to file an election
with the Internal Revenue Service pursuant to which shareholders of the Company
will be required to include their proportionate shares of such withholding taxes
in their U.S. income tax returns as gross income, treat such proportionate
shares as taxes paid by them, and deduct such proportionate shares in computing
their taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation may
be subject to U.S. withholding tax on the income resulting from the Company's
election described in this paragraph but may not be able to claim a credit or
deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. The Company will report annually to its shareholders
the amount per share of such withholding taxes.
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 Company or who, to the Company's knowledge, have
furnished an incorrect number. When
34
<PAGE>
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.
Under Code Section 988, 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 generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the Company's investment company
taxable income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Company would not be able to make any ordinary
income dividend distributions, and any 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
Company shares, and resulting in a capital gain for any shareholder who received
a distribution greater than such shareholder's basis in Company shares (assuming
the shares were held as a capital asset).
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares for Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as the shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales charge
paid to the Company on the exchanged shares reduces any sales charge the
shareholder would have owed upon 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 Company will be
disallowed if other Company shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The 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 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
which 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
Company.
35
<PAGE>
DETERMINATION OF NET ASSET VALUE
Net asset value per share of all classes of the Company is determined once
daily at 4:15 p.m., New York time, on each day during which the New York Stock
Exchange is open for trading. 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 net asset value is computed by dividing the value of the
securities held by the Company plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares outstanding at such time.
Expenses, including the fee payable to the Investment Adviser and any account
maintenance and/or distribution fees payable to the Distributor, are accrued
daily. The per share net asset value of Class A shares will generally be higher
than the per share net asset value of shares of the other classes, reflecting
the daily expense accruals of the account maintenance and transfer agency fees
applicable with respect to the Class B, Class C and Class D shares; in addition,
the per share net asset value of the Class D shares generally will be higher
than the per share net asset value of the Class B and Class C shares, reflecting
the daily expense accruals of the distribution fees applicable with respect to
Class B and Class C shares. It is expected, however, that the per share net
asset value of the classes will tend to converge immediately after the payment
of dividends or distributions which will differ by approximately the amount of
the expense accrual differential between the classes.
Portfolio securities which 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. 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 Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the time
of valuation. When the Company writes a call option, the amount of the premium
received is recorded on the books of the Company as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the
Company are valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last bid price.
Securities and assets for which market quotations are not readily available
are valued at fair market value as determined in good faith by or under the
direction of the Board of Directors of the Company.
ORGANIZATION OF THE COMPANY
The Company was incorporated under Maryland law on March 7, 1984. 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. Shares of Class A,
Class B, Class C and Class D Common Stock represent an interest in the same
assets of the Company and are identical in all respects except that Class B,
Class C and Class D shares bear certain expenses related to the account
maintenance associated with such shares, and Class B and Class C shares bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to account
36
<PAGE>
maintenance and distribution expenditures, as applicable. See 'Purchase of
Shares'. The Company has received an order from the Securities and Exchange
Commission (the 'Commission') permitting the issuance and sale of multiple
classes of Common Stock. The Directors of the Company may classify and
reclassify the shares of the Company into additional classes of Common Stock at
a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter submitted to a shareholder vote. The Company does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
does not require shareholders to act upon any of the following matters: (i)
election of Directors; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of selection of
independent auditors. Voting rights for Directors are not cumulative. Shares
issued are fully paid and non-assessable and have no preemptive rights. Shares
have the conversion rights described in this Prospectus. Each share of Common
Stock is entitled to participate equally in dividends and distributions declared
by the Company and in the net assets of the Company upon liquidation or
dissolution after satisfaction of outstanding liabilities, and except as noted
above, the Class B, Class C and Class D shares bear certain additional expenses.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each indentified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this, please call your Merrill Lynch financial
consultant or Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Company at the address or
telephone number set forth on the cover page of this Prospectus.
37
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<PAGE>
MERRILL LYNCH GLOBAL HOLDINGS, INC.--AUTHORIZATION FORM (PART 1)
- --------------------------------------------------------------------------------
Note: This form may not be used for purchases through the Merrill Lynch
Blueprint(Service Mark) Program. You may request a Merrill Lynch
Blueprint(Service Mark) Program application by calling toll free (800)
637-3766.
- --------------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION
I, being of legal age, wish to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Global Holdings, Inc. and establish an Investment
Account as described in the Prospectus. In the event that I am not eligible to
purchase Class A shares, I understand that Class D shares will be purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data Services,
Inc., as an initial investment (minimum $1,000). I understand that this
purchase will be executed at the applicable offering price next to be
determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the Right of Accumulation as outlined in the Statement of
Additional Information: (Please list all funds. Use a separate sheet of paper
if necessary.)
1...................................... 4......................................
2...................................... 5......................................
3...................................... 6......................................
Name ..........................................................................
First Name Initial Last Name
Name of Co-Owner (if any) .....................................................
First Name Initial Last Name
Address .......................................................................
.................................................. Date .......................
(Zip Code)
Occupation .................. Name and Address of Employer ...................
.................................................
................................... .........................................
Signature of Owner Signature of Co-Owner (if any)
(In the case of co-owner, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.)
- --------------------------------------------------------------------------------
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
Ordinary Income Long-Term Capital Gains
Dividends
Select / / Reinvest Select / / Reinvest
One: / / Cash One: / / Cash
If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU: / / Check or
/ / Direct Deposit to bank account
IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:
I hereby authorize payment of dividend and capital gain distributions by direct
deposit to my bank account and, if necessary, debit entries and adjustments for
any credit entries made to my account in accordance with the terms I have
selected on the Merrill Lynch Global Holdings, Inc. Authorization Form.
SPECIFY TYPE OF ACCOUNT (CHECK ONE) / / checking / / savings
Name on your Account ..........................................................
Bank Name .....................................................................
Bank Number ........................... Account Number ......................
Bank Address ..................................................................
I agree that this authorization will remain in effect until I provide written
notification to Financial Data Services, Inc. amending or terminating this
service.
Signature of Depositor ........................................................
Signature of Depositor ............................. Date ....................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED 'VOID' OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS
APPLICATION.
39
<PAGE>
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3. SOCIAL SECURITY NUMBER OR TAXPAYER INDENTIFICATION NUMBER
/ / / / / / / / / / / /
Social Security Number or Taxpayer Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is my
correct Social Security Number or Taxpayer Identification Number and (2) that I
am not subject to backup withholding (as discussed in the Prospectus under
'Additional Information--Taxes') either because I have not been notified that I
am subject thereto as a result of a failure to report all interest or dividends,
or the Internal Revenue Service ('IRS') has notified me that I am no longer
subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING AND IF
YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS BEEN
TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS CERTIFICATION TO
OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
....................................... ......................................
Signature of Owner Signature of Co-Owner (if any)
- --------------------------------------------------------------------------------
4. LETTER OF INTENTION--CLASS A AND D SHARES ONLY (SEE TERMS AND CONDITIONS IN
THE STATEMENT OF ADDITIONAL INFORMATION)
Dear Sir/Madam:
.............................. , 19 ......
Date of initial purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Global Holdings, Inc. or any other investment company with an
initial sales charge or deferred sales charge for which Merrill Lynch Funds
Distributor, Inc. acts as distributor over the next 13 month period which will
equal or exceed:
/ / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Merrill Lynch Global Holdings,
Inc. Prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc., my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Global Holdings, Inc. held as security.
By..................................... ......................................
Signature of Owner Signature of Co-Owner
(If registered in joint names,
both must sign)
In making purchases under this letter, the following are the related accounts
on which reduced offering prices are to apply:
(1) Name............................... (2) Name...............................
Account Number......................... Account Number.........................
- --------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp.
This form when completed should be mailed to:
Merrill Lynch Global Holdings, Inc.
c/o Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
P.O. Box 45289
Jacksonville, Florida 32232-5289
We hereby authorize Merrill Lynch Funds Distributor, Inc. to act as our agent in
connection with transactions under this authorization form and agree to notify
the Distributor of any purchases made under a Letter of Intention or Systematic
Withdrawal Plan. We guarantee the Shareholder's signature.
...............................................................................
Dealer Name and Address
By .............................................................................
Authorized Signature of Dealer
/ / / / / / / / / .........................
Branch-Code F/C No. F/C Last Name
/ / / / / / / / /
Dealer's Customer Account No.
40
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH GLOBAL HOLDINGS, INC.--AUTHORIZATION FORM (PART 2)
- --------------------------------------------------------------------------------
Note: This form is required to apply for the Systematic Withdrawal or Automatic
Investment Plans only.
- --------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
Name of Owner ................................. / / / / / / / / / / / /
Social Security No. or
Name of Co-Owner (if any) ..................... Taxpayer Identification No.
Address .......................................
................................................ Account Number ................
(if existing account)
- --------------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
MINIMUM REQUIREMENTS: $10,000 for monthly disbursements, $5,000 for
quarterly, of / / Class A or / / Class D shares in Merrill Lynch Global
Holdings, Inc. at cost or current offering price. Withdrawals to be made
either (check one) / / Monthly on the 24th day of each month, or / / Quarterly
on the 24th day of March, June, September and December. If the 24th falls on a
weekend or holiday, the next succeeding business day will be utilized. Begin
systematic withdrawal on ............. (month), or as soon as possible
thereafter.
SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE):
/ / $ ......... or / / ......... % of the current value of / / Class A or
/ / Class D shares in the account.
SPECIFY WITHDRAWAL METHOD: / / check or / / direct deposit to bank account
(check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(a) I hereby authorize payment by check
/ / as indicated in Item 1.
/ / to the order of ........................................................
Mail to (check one)
/ / the address indicated in Item 1.
/ / Name (please print) ......................................................
Address .......................................................................
...........................................................................
Signature of Owner ................................ Date .....................
Signature of Co-Owner (if any) .................................................
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO MY BANK ACCOUNT AND, IF
NECESSARY, DEBIT ENTRIES AND ADJUSTMENTS FOR ANY CREDIT ENTRIES MADE TO MY
ACCOUNT. I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I PROVIDE
WRITTEN NOTIFICATION TO FINANCIAL DATA SERVICES, INC. AMENDING OR TERMINATING
THIS SERVICE.
Specify type of account (check one): / / checking / / savings
Name on your account ..........................................................
Bank Name ......................................................................
Bank Number ........................... Account Number ......................
Bank Address ..................................................................
...............................................................................
Signature of Depositor ................................ Date .................
Signature of Depositor ........................................................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED 'VOID' OR
A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHALL ACCOMPANY THIS APPLICATION.
41
<PAGE>
- --------------------------------------------------------------------------------
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw an automated
clearing house ('ACH') debit on my checking account as described below each
month to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Global Holdings, Inc., subject to the terms set forth
below. In the event that I am not eligible to purchase Class A shares, I
understand that Class D shares will be purchased.
FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw an ACH debit each month on my bank account for
investment in Merrill Lynch Global Holdings, Inc. as indicated below:
Amount of each check or ACH debit $ ...........................................
Account Number ................................................................
Please date and invest ACH debits on the 20th of each month beginning
............................................. or as soon thereafter as possible.
(month)
I agree that you are preparing these ACH debits voluntarily at my request and
that you shall not be liable for any loss arising from any delay in preparing or
failure to prepare any such debit. If I change banks or desire to terminate or
suspend this program, I agree to notify you promptly in writing. I hereby
authorize you to take any action to correct erroneous ACH debits of my bank
account or purchases of fund shares including liquidating shares of the Fund and
credit my bank account. I further agree that if a debit is not honored upon
presentation, Financial Data Services, Inc. is authorized to discontinue
immediately the Automatic Investment Plan and to liquidate sufficient shares
held in my account to offset the purchase made with the dishonored debit.
.................... ..........................................................
Date Signature of Depositor
..........................................................
Signature of Depositor
(If joint account, both must sign)
AUTHORIZATION TO
HONOR ACH DEBITS
DRAWN BY FINANCIAL DATA SERVICES, INC.
To ....................................................................... Bank
(Investor's Bank)
Bank Address ..................................................................
City .................................. State .......... Zip Code .............
As a convenience to me, I hereby request and authorize you to pay and charge to
my account ACH debits drawn on my account by and payable to Financial Data
Services, Inc. I agree that your rights in respect to each such debit shall be
the same as if it were a check drawn on you and signed personally by me. This
authority is to remain in effect until revoked by me in writing. Until you
receive such notice, you shall be fully protected in honoring any such debit. I
further agree that if any such debit be dishonored, whether with or without
cause and whether intentionally or inadvertently, you shall be under no
liability.
.................... ..........................................................
Date Signature of Depositor
.................... ..........................................................
Bank Account Number Signature of Depositor
(If joint account, both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED
'VOID' SHOULD ACCOMPANY THIS APPLICATION.
42
<PAGE>
INVESTMENT ADVISOR
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE INVESTMENT ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
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Fee Table......................................... 2
Merrill Lynch Select Pricing(Service Mark)
System......................................... 3
Financial Highlights.............................. 7
International Diversification..................... 8
Investment Objective and Policies................. 9
Management of the Company......................... 17
Board of Directors.............................. 17
Advisory and Management Arrangements............ 17
Transfer Agency Services........................ 18
Purchase of Shares.............................. 19
Initial Sales Charge Alternatives--Class A and
Class D Shares............................... 21
Deferred Sales Charge Alternatives--Class B and
Class C Shares............................... 23
Distribution Plans................................ 26
Limitations on the Payment of Deferred Sales
Charges......................................... 27
Redemption of Shares.............................. 28
Shareholder Services.............................. 29
Performance Data.................................. 32
Additional Information............................ 33
Dividends and Distributions..................... 33
Taxes........................................... 33
Determination of Net Asset Value................ 36
Organization of the Company..................... 36
Shareholder Reports............................. 37
Shareholder Inquiries........................... 37
Authorization Form................................ 39
</TABLE>
Code # 10244-1094
Prospectus
[INSERT ART HERE]
- ------------------------------------------------------
MERRILL LYNCH
GLOBAL HOLDINGS, INC.
October 21, 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH GLOBAL HOLDINGS, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
----------------------
Merrill Lynch Global Holdings, Inc. (the 'Company'), is a diversified,
open-end management investment company seeking the highest total investment
return consistent with prudent risk through worldwide investment in an
internationally diversified portfolio of securities. Total investment return is
the aggregate of income and capital value changes. The Company will utilize a
fully managed investment policy which permits management of the Company to take
a flexible investment approach and vary its policies as to geographic
diversification and types of securities based upon its evaluation of changes in
economic and market trends throughout the world. Accordingly, investments may be
shifted among the various capital markets of the world and among different types
of equity, debt and convertible securities depending upon management's outlook
with respect to prevailing trends and developments. It is presently contemplated
that the Company's assets will be primarily invested in equity securities of
companies located in the United States, Japan and Western Europe.
Pursuant to the Merrill Lynch Select Pricing(Service Mark) System, the
Company offers four classes of shares each with a different combination of sales
charges, ongoing fees and other features. The Merrill Lynch Select
Pricing(Service Mark) 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.
----------------------
This Statement of Additional Information of the Company is not a prospectus
and should be read in conjunction with the prospectus of the Company, dated
October 21, 1994 (the 'Prospectus'), which has been filed with the Securities
and Exchange Commission and can be obtained, without charge, by calling or
writing the Company at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
----------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
----------------------
The date of this Statement of Additional Information is October 21, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Company is to seek the highest total
investment return consistent with prudent risk through worldwide investment in
an internationally diversified portfolio of securities. Reference is made to
'Investment Objective and Policies' in the Prospectus for a discussion of the
investment objective and policies of the Company.
The securities markets of many countries have at times in the past moved
relatively independently of one another due to different economic, financial,
political and social factors. When such lack of correlation, or negative
correlation, in movements of these securities markets occurs, it may reduce risk
for the Company's portfolio as a whole. This negative correlation also may
offset unrealized gains the Company has derived from movements in a particular
market. To the extent the various markets move independently, total portfolio
volatility is reduced when the various markets are combined into a single
portfolio. Of course, movements in the various securities markets may be offset
by changes in foreign currency exchange rates. Exchange rates frequently move
independently of securities markets in a particular country. As a result, gains
in a particular securities market may be affected by changes in exchange rates.
While it is the policy of the Company generally not to engage in trading
for short-term gains, Merrill Lynch Asset Management, L.P., doing business as
Merrill Lynch Asset Management (the 'Investment Adviser'), will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a particular
company or within a particular industry or in general market, economic or
financial conditions. As a result of the investment policies described in the
Prospectus, including changes in asset allocation under certain market
conditions, the Company's portfolio turnover rate may be higher than that of
other investment companies. Accordingly, while the Company 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 Company'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. For
the fiscal years ended November 30, 1993, and November 30, 1992, the rate of
portfolio turnover was 56.98% and 65.93%, respectively. The Company is subject
to the Federal income tax requirement that less than 30% of the Company's gross
income must be derived from gains from the sale or other disposition of
securities held for less than three months.
The Company may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs) 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. GDRs are
receipts issued throughout the world which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in
European securities markets. GDRs are tradeable both in the U.S. and Europe and
are designed for use throughout the world.
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<PAGE>
HEDGING TECHNIQUES
Reference is made to the discussion under the caption 'Investment Objective
and Policies--Hedging Techniques' in the Prospectus for information with respect
to various portfolio strategies involving options and futures. The Company may
seek to hedge its portfolio against movements in the equity markets, interest
rates and exchange rates between currencies through the use of options and
futures transactions and forward foreign exchange transactions. The Company has
authority to write (i.e., sell) covered call options on its portfolio
securities, purchase put options on securities and engage in transactions in
stock index options, stock index futures and financial futures, and related
options on such futures. The Company may also deal in forward foreign exchange
transactions and foreign currency options and futures, and related options on
such futures. The Company is authorized to enter into such options and futures
transactions either on exchanges or in the over-the-counter ('OTC') markets.
Each of such portfolio strategies is described in the Prospectus. Although
certain risks are involved in options and futures transactions (as discussed in
the Prospectus and below), the Investment Adviser believes that, because the
Company will only engage in these transactions for hedging purposes, the options
and futures portfolio strategies of the Company will not subject the Company to
the risks frequently associated with the speculative use of options and futures
transactions. While the Company's use of hedging strategies is intended to
reduce the volatility of the net asset value of its shares, the net asset value
of the Company's shares will fluctuate. There can be no assurance that the
Company's hedging transactions will be effective. The following is further
information relating to portfolio strategies involving options and futures that
the Company may utilize.
Hedging Investment and Interest Rate Risks. The Company may write (i.e.,
sell) covered call options on the equity securities in which it may invest and
may enter into closing purchase transactions with respect to certain of such
options. Covered call options serve as a partial hedge against the decline in
price of the underlying security. A covered call option is an option where the
Company, in return for a premium, gives another party a right to buy specified
securities owned by the Company at a specified future date and price set at the
time of the contract. By writing covered call options, the Company gives up the
opportunity, while the option is in effect, to profit from any price increase in
the underlying security above the option exercise price. In addition, the
Company's ability to sell the underlying security will be limited while the
option is in effect unless the Company effects a closing purchase transaction. A
closing purchase transaction cancels out the Company's position as the writer of
an option by means of an offsetting purchase of an identical option prior to the
expiration of the option it has written. The writer of a covered call option has
no control over when he may be required to sell his securities since he may be
assigned an exercise notice at any time prior to the termination of his
obligation as a writer. If an option expires unexercised, the writer realizes a
gain in the amount of the premium. Such a gain, of course, may be offset by a
decline in the market value of the underlying security during the option period.
If a call option is exercised, the writer realizes a gain or loss from the sale
of the underlying security.
The Company may also purchase put options to hedge against a decline in the
market value of its equity holdings. By buying a put the Company has a right to
sell the underlying security at the exercise price, thus limiting the Company's
risk of loss through a decline in the market value of the security until the put
option expires. The amount of any appreciation in the value of the underlying
security will be offset partially by the amount of the premium paid for the put
option and any related transaction costs. Prior to its expiration, a put option
may be sold in a closing sale transaction, and profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction cost. A closing sale transaction
cancels out the Company's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased.
3
<PAGE>
The Company also may engage in transactions in stock index options and
futures, financial futures in U.S. and foreign agency and government securities
and corporate debt securities, and related options on such futures. A futures
contract is an agreement between two parties to buy and sell a security or, in
the case of an index-based futures contract, to make and accept a cash
settlement for a set price on a future date. A majority of transactions in
futures contracts, however, do not result in the actual delivery of the
underlying instrument or cash settlement but are settled through liquidation,
i.e., by entering into an offsetting transaction. Futures contracts have been
designed by boards of trade which have been designated 'contracts markets' by
the Commodity Futures Trading Commission ('CFTC').
The purchase or sale of a futures contract differs from the purchase or
sale of a security in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to the broker and the relevant contract
market, which varies, but is generally about 5% of the contract amount, must be
deposited with the broker. This amount is known as 'initial margin' and
represents a 'good faith' deposit assuring the performance of both the purchaser
and seller under the futures contract. Subsequent payments to and from the
broker, called 'variation margin', are required to be made on a daily basis as
the price of the futures contracts fluctuates making the long and short
positions in the futures contracts more or less valuable, a process known as
'mark to the market'. At any time prior to the settlement date of the futures
contract, the position may be closed out by taking an opposite position which
will operate to terminate the position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid to or released by the broker and the purchaser realizes a loss or gain.
In addition, a nominal commission is paid on each completed sale transaction.
The Company has received an order from the Securities and Exchange
Commission exempting it from the provisions of Section 17(f) and Section 18(f)
of the Investment Company Act of 1940, as amended (the 'Investment Company
Act'), in connection with its strategy of investing in futures contracts.
Section 17(f) relates to the custody of securities and other assets of an
investment company and may be deemed to prohibit certain arrangements between
the Company and commodities brokers with respect to initial and variation
margin. Section 18(f) of the Investment Company Act prohibits an open-end
investment company such as the Company from issuing a 'senior security' other
than a borrowing from a bank. The staff of the Securities and Exchange
Commission has in the past indicated that a futures contract may be a 'senior
security' under the Investment Company Act.
Risk Factors in Options and Futures Transactions. Utilization of options
and futures transactions involves the risk of imperfect correlation in movements
in the prices of options and futures contracts and movements in the prices of
the securities and currencies which are the subject of the hedge. If the price
of the options and futures contract moves more or less than the prices of the
hedged securities or currencies, the Company will experience a gain or loss
which will not be completely offset by movements in the prices of the securities
and currencies which are the subject of the hedge.
Prior to exercise or expiration, an exchange-traded option position can
only be terminated by entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange for call or put options of the same
series. The Company will enter into an option or futures transaction on an
exchange only if there appears to be a liquid secondary market for such options
or futures. However, there can be no assurance that a liquid secondary market
will exist for any particular call or put option or futures contract at any
specific time. Thus, it may not be possible to close an option or futures
position. The Company will acquire only over-the-counter options for which
management believes the Company can receive on each business day at least two
independent bids or offers (one of which will be from an entity other than a
party to the option). In the case of a
4
<PAGE>
futures position or an option on a futures position written by the Company, in
the event of adverse price movements, the Company would continue to be required
to make daily cash payments of variation margin. In such situations, if the
Company has insufficient cash, it may have to sell portfolio securities to meet
daily variation margin requirements at a time when it may be disadvantageous to
do so. In addition, the Company may be required to take or make delivery of the
security or currency underlying the futures contracts it holds. The inability to
close options and futures positions also could have an adverse impact on the
Company's ability to effectively hedge its portfolio. There is also the risk of
loss by the Company of margin deposits in the event of bankruptcy of a broker
with whom the Company has an open position in a futures contract or related
option. The risk of loss from investing in futures transactions is theoretically
unlimited.
The exchanges on which the Company intends to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying currency (whether or not covered) which may
be written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). 'Trading limits' are imposed on the maximum number of contracts which
any person may trade on a particular trading day. An exchange may order the
liquidation of positions found to be in violation of these limits, and it may
impose other sanctions or restrictions. The Investment Adviser does not believe
that these trading and position limits will have any adverse impact on the
portfolio strategies for hedging the Company's portfolio.
Hedging Foreign Currency Risks. Generally, the foreign exchange
transactions of the Company will be conducted on a spot, i.e., cash, basis at
the spot rate then prevailing for purchasing or selling currency in the foreign
exchange market. This rate under normal market conditions differs from the
prevailing exchange rate in an amount generally less than 1/10 of 1% due to the
costs of converting from one currency to another. However, the Company has
authority to deal in forward foreign exchange between currencies of Far Eastern
and Western Pacific countries and the dollar as a hedge against possible
variations in the foreign exchange rates between these currencies. This is
accomplished through contractual agreements to purchase or to sell a specified
currency at a specified future date and price set at the time of the contract.
The Company's dealings in forward foreign exchange will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward foreign currency with respect to
specific receivables or payables of the Company accruing in connection with the
purchase and sale of its portfolio securities, the sale and redemption of shares
of the Company or the payment of dividends and distributions by the Company.
Position hedging is the sale of forward currency with respect to portfolio
security positions denominated or quoted in such foreign currency. The Company
will not speculate in forward foreign exchange. All dealings in forward exchange
will be limited to contracts involving currencies of Far Eastern and Western
Pacific countries and the dollar. The Company may not position hedge with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency. If
the Company enters into a position hedging transaction, its custodian bank will
place cash or liquid securities in a separate account of the Company in an
amount equal to the value of the Company's total assets committed to the
consummation of such forward contract. If the value of the securities placed in
the separate account declines, additional cash or securities will be placed in
the account so that the value of the account will equal the amount of the
Company's commitment with respect to such contracts. The Company will not
attempt to hedge all of its portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the Investment
Adviser of the Company. The Company will not enter into a position hedging
commitment if, as a result thereof, the Company would have more than 15% of the
value of its
5
<PAGE>
assets committed to such contracts. The Company will not enter into a forward
contract with a term of more than one year.
As discussed in the Prospectus, the Company may also purchase or sell
listed or OTC foreign currency options, foreign currency futures and related
options on foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the price of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Company to hedge against a devaluation that is so
generally anticipated that the Company is not able to contract to sell the
currency at a price above the devaluation level it anticipates. It is possible
that, under certain circumstances, the Company may have to limit its currency
transactions to qualify as a regulated investment company under the Internal
Revenue Code; in this regard, the Company presently intends to limit its gross
income from currency hedging transactions to less than 10% of its gross income
in any taxable year until such time as the Company determines that income from
the transaction is not subject to this restriction. The cost to the Company of
engaging in foreign currency transactions varies with such factors as the
currencies involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis, no fees or commissions are involved.
The U.S. government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Company. If such restrictions should be reinstituted, it might become
necessary for the Company to invest all or substantially all of its assets in
U.S. securities. In such event, the Company would review its investment
objective and investment policies to determine whether changes are appropriate.
The Company's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the convertibility
and repatriation of assets. Because the shares of the Company are redeemable on
a daily basis in U.S. dollars, the Company 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 any significant effect on
its portfolio strategy.
High Yield Bonds. The Company is authorized to invest in fixed income
securities rated below investment grade by a nationally recognized statistical
rating agency or in unrated bonds which, in the Investment Adviser's judgment,
possess similar credit characteristics ('high yield bonds'). Issuers of high
yield bonds may be highly leveraged and may not have available to them more
traditional methods of financing. Therefore, the risks associated with acquiring
the securities of such issuers generally are greater than is the case with
higher rated securities. For example, during an economic downturn or a sustained
period of rising interest rates, issuers of high yield bonds may be more likely
to experience financial stress, especially if such issuers are highly leveraged.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific issuer developments or
the issuer's inability to meet specific projected business forecasts or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holder of high yield bonds because such
securities may be unsecured and may be subordinated to other creditors of the
issuer.
High yield bonds frequently have call or redemption features which would
permit issuers to repurchase such securities from the Company. If a call were
exercised by an issuer during a period of declining interest rates, the
6
<PAGE>
Company likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Company and dividends
to shareholders.
The Company may have difficulty disposing of certain high yield bonds
because there may be a thin trading market for such securities. The secondary
trading market for high yield bonds is generally not as liquid as the secondary
market for higher rated securities. Reduced secondary market liquidity may have
an adverse impact on market price and the Company's ability to dispose of
particular issues when necessary to meet the Company's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high yield
bonds, particularly in a thinly traded market. Factors adversely affecting the
market value of high yield bonds are likely to affect adversely the Company's
net asset value. In addition the Company may incur additional expenses to the
extent it is required to seek recovery upon a default on a portfolio holding or
participate in the restructuring of the obligation.
CURRENT INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the Prospectus, the
Company has adopted the following restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of a majority of the
Company'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). The Company may not:
1. Make investments for the purpose of exercising control or
management.
2. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved and only if immediately
thereafter not more than 10% of the Company's total assets, taken at market
value, would be invested in such securities.
3. Purchase or sell real estate; provided that the Company may invest
in securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
4. Purchase or sell commodities or commodity contracts, except that
the Company may deal in forward foreign exchange between currencies of the
different countries in which it may invest and the Company may purchase or
sell stock index and currency options, stock index futures, financial
futures and currency futures contracts and related options on such futures.
5. Purchase any securities on margin, except that the Company may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, or make short sales of
securities or maintain a short position. The payment by the Company of
initial or variation margin in connection with futures or related options
transactions, if applicable, shall not be considered the purchase of a
security on margin. Also, engaging in futures transactions and related
options will not be deemed a short sale or maintenance of a short position
in securities.
6. Make loans to other persons (except as provided in (7) below);
provided that for purposes of this restriction the acquisition of bonds,
debentures, or other corporate debt securities and investment in
7
<PAGE>
Government obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances and repurchase agreements shall not be deemed
to be the making of a loan.
7. Lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value; provided that such loans shall be made in
accordance with the guidelines set forth below.
8. Borrow amounts in excess of 20% of its total assets, taken at
market value, and then only from banks as a temporary measure for
extraordinary or emergency purposes such as the redemption of Company
shares. Utilization of borrowings may exaggerate increases or decreases in
an investment company's net asset value. However, the Company will not
purchase securities while borrowings are outstanding except to exercise
prior commitments and to exercise subscription rights. (See restriction (9)
below regarding the exclusion from this restriction of arrangements with
respect to options, futures contracts and options on futures contracts.)
9. Mortgage, pledge, hypothecate or in any manner transfer (except as
provided in (7) above), as security for indebtedness, any securities owned
or held by the Company except as may be necessary in connection with
borrowings mentioned in (8) above, and then such mortgaging, pledging or
hypothecating may not exceed 10% of the Company's total assets, taken at
market value. [In order to comply with certain state statutes, the Company
will not, as a matter of operating policy, mortgage, pledge or hypothecate
its portfolio securities to the extent that at any time the percentage of
the value of pledged securities plus the maximum sales charge will exceed
10% of the value of the Company's shares at the maximum offering price.]
(For the purpose of this restriction and restriction (8) above, collateral
arrangements with respect to the writing of options, futures contracts,
options on futures contracts, and collateral arrangements with respect to
initial and variation margin are not deemed to be a pledge of assets, and
neither such arrangements nor the purchase and sale of options, futures or
related options are deemed to be the issuance of a senior security.)
10. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which are not otherwise readily
marketable if, regarding all such securities, more than 5% of its total
assets, taken at market value, would be invested in such securities.
11. Underwrite securities of other issuers except insofar as the
Company may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities.
12. Purchase or sell interests in oil, gas or other mineral
exploration or development programs.
13. Invest in securities of issuers having a record, together with
predecessors, of less than three years of continuous operation if more than
5% of its total assets, taken at market value, would be invested in such
securities.
Subject to investment restriction (7) above, the Company may from time to
time lend securities from its portfolio to brokers, dealers and financial
institutions such as banks and trust companies and receive collateral in cash or
securities issued or guaranteed by the U.S. government which will be maintained
in an amount equal to at least 100% of the current market value of the loaned
securities. Such cash will be invested in short-term securities, which will
increase the current income of the Company. Such loans will not be for more than
30 days and will be terminable at any time. The Company 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. The Company may pay reasonable fees to persons unaffiliated with
the Company for services in arranging 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.
8
<PAGE>
The Board of Directors has established the policy that the Company will not
purchase or retain the securities of any issuer if those individual officers and
directors of the Company, the officers and general partner of the Investment
Adviser, the directors of such general partner or the officers and directors of
the Distributor each owning beneficially more than one-half of 1% of the
securities of such issuer own in the aggregate more than 5% of the securities of
such issuer. Portfolio securities of the Company may not be purchased from, sold
or loaned to the Investment Adviser or its affiliates or any of its directors,
general partners, officers or employees, acting as principal. In addition, until
April 1, 1994, portfolio securities of the Company may not be purchased from,
sold or loaned to Nomura Capital Management, Inc. ('NCM') and Lombard Odier
International Portfolio Management Limited ('LOIPM') or their affiliates or any
of their directors, officers or employees, acting as principal.
The Company has adopted a policy pursuant to which it will not invest in
warrants if, at the time of acquisition, its investment in warrants, valued at
the lower of cost or market value, would exceed 5% of the Company's net assets;
included within such limitation, but not to exceed 2% of the Company's net
assets, are warrants which are not listed on the New York or American Stock
Exchanges. For purposes of this policy, warrants acquired by the Company in
units or attached to securities may be deemed to be without value. The Company
also has adopted a policy pursuant to which it will not invest in real estate
limited partnerships or in oil, gas or mineral leases. The policies set forth in
this paragraph may be amended without the approval of the Company's
shareholders.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Company has adopted an investment policy
pursuant to which it will not purchase or sell OTC options if, as a result of
such transaction, the sum of the market value of OTC options currently
outstanding which are held by the Company, the market value of the underlying
securities covered by OTC call options currently outstanding which were sold by
the Company and margin deposits on the Company's existing OTC options on futures
contracts exceeds 10% of the net assets of the Company, taken at market value,
together with all other assets of the Company which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Company
to a primary U.S. government securities dealer recognized by the Federal Reserve
Bank of New York and if the Company has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Company will treat as illiquid such amount of the underlying securities as is
equal to the repurchase price less the amount by which the option is
'in-the-money' (i.e., current market value of the underlying securities minus
the option's strike price). The repurchase price with the primary dealers is
typically a formula price which is generally based on a multiple of the premium
received for the option, plus the amount by which the option is 'in-the-money'.
This policy as to OTC options is not a fundamental policy of the Company and may
be amended by the Board of Directors of the Company without the approval of the
Company's shareholders. However, the Company will not change or modify this
policy prior to the change or modification by the Securities and Exchange
Commission staff of its position.
Because of the affiliation of the Investment Adviser with the Company, the
Company is prohibited from engaging in certain transactions involving such firms
or their 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
Company would be prohibited from engaging in portfolio transactions with the
Investment Adviser or its affiliates acting as principal and from purchasing
securities in public offerings which are not registered under the Securities Act
of 1933, as amended, in which such firm or any
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of its affiliates participate as an underwriter or dealer. Similar restrictions
apply to transactions involving NCM and LOIPM until April 1, 1994.
The investment restrictions set forth in the Prospectus contain an
exception that permits the Company to purchase securities pursuant to the
exercise of subscription rights, subject to the condition that such purchase
will not result in the Company ceasing to be a diversified investment company.
Japanese and European corporations frequently issue additional capital stock by
means of subscription rights offerings to existing shareholders at a price
substantially below the market price of the shares. The failure to exercise such
rights would result in the Company's interest in the issuing company being
diluted. The market for such rights is not well developed, and accordingly, the
Company may not always realize full value on the sale of rights. Therefore, the
exception applies in cases where the limits set forth in the investment
restrictions in the Prospectus would otherwise be exceeded by exercising rights
or have already been exceeded as a result of fluctuations in the market value of
the Company's portfolio securities with the result that the Company would
otherwise be forced either to sell securities at a time when it might not
otherwise have done so or to forego exercising the rights.
Proposed Uniform Investment Restrictions. As discussed in the Prospectus
under 'Investment Objective and Policies--Investment Restrictions', the Board of
Directors of the Company has approved the replacement of the Company's existing
investment restrictions with the fundamental and non-fundamental investment
restrictions set forth below. These uniform investment restrictions have been
proposed for adoption by all of the non-money market mutual funds advised by
Fund Asset Management, L.P. ('FAM') or its affiliate, Merrill Lynch Asset
Management, L.P. ('MLAM' or the 'Investment Adviser'). The investment objective
and policies of the Company will be unaffected by the adoption of the propsed
investment restrictions.
Shareholders of the Company are currently considering whether to approve
the proposed revised investment restrictions. If such shareholder approval is
obtained, the Company's current investment restrictions will be replaced by the
prospsed restrictions, and the Company's Prospectus and Statement of Additional
Information will be supplemented to reflect such change.
Under the proposed fundamental investment restrictions, the Company may
not:
1. Make any investment inconsistent with the Company's classification
as a diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).
3. Make 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 Company may invest in securities directly or
indirectly secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that the Company 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 Company'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.
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7. Borrow money, except that (i) the Company 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 Company may borrow
up to an additional 5% of its total assets for temporary purposes, (iii)
the Company may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the
Company may purchase securities on margin to the extent permitted by
applicable law. The Company may not pledge its assets other than to secure
such borrowings or, to the extent permitted by the Company'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.
8. Underwrite securities of other issuers except insofar as the
Company 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 Company may do so in accordance with applicable law and
the Company's Prospectus and Statement of Additional Information, as they
may be amended from time to time, and without registering as a commodity
pool operator under the Commodity Exchange Act.
Under the proposed non-fundamental investment restrictions, the Company may
not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except
to the extent permitted by applicable law. The Company currently does not
intend to engage in short sales, except short sales 'against the box'.
c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed or put to the issuer or a third party, if at the time of
acquisition more than 15% of its total assets would be invested in such
securities. This restriction shall not apply to securities which mature
within seven days or securities which the Board of Directors of the Company
has otherwise determined to be liquid pursuant to applicable law.
Notwithstanding the 15% limitation herein, to the extent the laws of any
state in which the Company's shares are registered or qualified for sale
require a lower limitation, the Company will observe such limitation. As of
the date hereof, therefore, the Company will not invest more than 10% of
its total assets in securities which are subject to this investment
restriction (c). Securities purchased in accordance with Rule 144A under
the Securities Act (a 'Rule 144A security') and determined to be liquid by
the Fund's Board of Directors are not subject to the limitations set forth
in this investment restriction (c). Notwithstanding the fact that the Board
may determine that a Rule 144A security is liquid and not subject to
limitations set forth in this investment restriction (c), the State of Ohio
does not recognize Rule 144A securities as securities that are free of
restrictions as to resale. To the extent required by Ohio law, the Fund
will not invest more than 5% of its total assets in securities of issuers
that are restricted as to disposition, including Rule 144A securities.
d. Invest in warrants if, at the time of acquisition, its investments
in warrants, valued at the lower of cost or market value, would exceed 5%
of the Company's net assets; included within such limitation, but not to
exceed 2% of the Company's net assets, are warrants which are not listed on
the New York Stock Exchange or American Stock Exchange or a major foreign
exchange. For purposes of this restriction, warrants acquired by the
Company in units or attached to securities may be deemed to be without
value.
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e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Company's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities,
asset-backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Company, the officers and general
partner of the Investment Adviser, the director of such general partner or
the officers and directors of any subsidiary thereof each owning
beneficially more than one-half of one percent of the securities of such
issuer own in the aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs,
except that the Company may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Company's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restrictions (7) above,
borrow amounts in excess of 20% of its total assets, taken at market value,
and then only from banks as a temporary measure for extraordinary or
emergency purposes such as the redemption of Company shares. The Company
will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights.
------------------------
Because of the affiliation of Merrill Lynch with the Company, the Company
is prohibited from engaging in certain transactions involving Merrill Lynch
except pursuant to a permissive order or otherwise in compliance with the
provisions of the Investment Company Act and the rules and regulations
thereunder. Included among such restricted transactions are purchases from or
sales to Merrill Lynch of securities in transactions in which it acts as
principal and purchases of securities form underwriting syndicates of which
Merrill Lynch is a member.
MANAGEMENT OF THE COMPANY
DIRECTORS AND OFFICERS
The Directors and executive officers of the Company 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.
ARTHUR ZEIKEL--President and Director (1)(2)--President and Chief
Investment Officer of the Investment Adviser (which term as used herein includes
its corporate predecessors) since 1977; President of FAM (which term as used
herein includes its corporate predecessors) since 1977 and Chief Investment
Officer since 1976; President and Director of Princeton Services, Inc.
('Princeton Services') since 1993; Executive Vice President of Merrill Lynch,
Pierce, Fenner & Smith Inc. ('Merrill Lynch') since 1990 and a Senior Vice
President thereof from 1985 to 1990; Executive Vice President of Merrill Lynch &
Co., Inc. ('ML & Co.') since 1990; Director of the Distributor.
DONALD CECIL--Director (2)--1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.
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EDWARD H. MEYER--Director (2)--777 Third Avenue, New York, New York 10017.
President of Grey Advertising Inc. since 1968, Chief Executive Officer since
1970 and Chairman of the Board of Directors since 1972; Director of The May
Department Stores Company, Bowne & Co., Inc. (financial printers), Ethan Allen
Interiors Inc. and Harman International Industries, Inc.
CHARLES C. REILLY--Director (2)--9 Hampton Harbor Road, Hampton Bays, N.Y.
11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; former Senior Vice
President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business since 1990; Adjunct
Professor, Wharton School, University of Pennsylvania, 1990; Director, Harvard
Business School Alumni Association.
RICHARD R. WEST--Director (2)--482 Tepi Drive, Southbury, Connecticut
06488. Professor of Finance since 1984, and Dean from 1984 to 1993, of New York
University Leonard N. Stern School of Business Administration; Director of Re
Capital Corp. (reinsurance holding company), Bowne & Co., Inc. (financial
printers), Vornado, Inc. (real estate holding company), Smith-Corona Corporation
(manufacturer of typewriters and word processors) and Alexander's, Inc. (real
estate company).
TERRY K. GLENN--Executive Vice President (1)(2)--Executive Vice President
of the Investment Adviser and FAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President and Director of the
Distributor since 1986.
NORMAN R. HARVEY--Senior Vice President (1)(2)--Senior Vice President of
the Investment Adviser and FAM since 1982; Senior Vice President of Princeton
Services since 1993.
PHILIP L. KIRSTEIN--Senior Vice President (1)(2)--Senior Vice President and
General Counsel of the Investment Adviser and FAM since 1984; Senior Vice
President, General Counsel, Director and Secretary of Princeton Services;
Secretary of the Investment Adviser since 1984; Secretary of FAM since 1982;
Director of the Distributor.
DONALD C. BURKE--Vice President (1)(2)--Vice President and Director of
Taxation of the Investment Adviser since 1990; employee of Deloitte & Touche LLP
from 1982 to 1990.
GERALD M. RICHARD--Treasurer (1)(2)--Senior Vice President and Treasurer of
the Investment Adviser and FAM since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.
ROBERT HARRIS--Secretary (1)(2)--Vice President of the Investment Adviser
since 1984 and attorney associated with the Investment Adviser since 1980;
Secretary of the Distributor since 1982.
- ------------------
(1) Interested person, as defined in the Investment Company Act, of the Company.
(2) Such Director or officer is a director, trustee or officer of one or more
additional investment companies for which the Investment Adviser or an
affiliate, FAM, acts as investment adviser or manager.
At September 30, 1994, the officers and Directors of the Company as a group
(11 persons) owned an aggregate of less than 1% of the outstanding shares of the
Company. At such date, Mr. Zeikel, a Director of the Company, and the other
officers of the Company, owned less than 1% of the outstanding shares of common
stock of ML & Co.
The Company pays each Director not affiliated with the Investment Adviser a
fee of $3,500 per year plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses relating to attendance at meetings. The
Company also compensates members of its Audit and Nominating Committee (the
'Committee'), which consists of all of the non-affiliated Directors at a rate of
$500 per meeting attended. The Chairman of the
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Committee receives an additional fee of $250 per meeting attended. Fees and
expenses paid to the unaffiliated Directors aggregated $31,432 for the fiscal
year ended November 30, 1993.
ADVISORY AND MANAGEMENT ARRANGEMENTS
Reference is made to 'Management of the Company--Advisory and Management
Arrangements' in the Prospectus for certain information concerning the
management and advisory arrangements of the Company.
Securities held by the Company may also be held by, or be appropriate
investments for, other funds or other investment advisory clients for which the
Investment Adviser or its affiliates act as an adviser. Because of different
objectives or other factors, a particular security may be bought for one or more
clients when one or more clients are selling the same security. If purchases or
sales of securities by the Investment Adviser for the Company or other funds for
which it acts as investment adviser or for its other advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of the Investment Adviser or its affiliates during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
The Company has entered into an investment advisory agreement with the
Investment Adviser (the 'Investment Advisory Agreement'). As discussed in the
Prospectus, the Investment Advisory Agreement provides that the Investment
Adviser is entitled to receive for its services to the Company monthly
compensation at the annual rate of 1.0% of the Company's average daily net
assets. Until April 1, 1994, the Investment Adviser compensated NCM and LOIPM
for investment research, pursuant to separate investment research agreements
between the Investment Adviser and NCM and LOIPM (the 'Investment Research
Agreements'), at the annual rates of 0.20% and 0.15%, respectively, of the
Company's average daily net assets. The Investment Research Agreement between
the Investment Adviser and NCM recognized that NCM could enter into a separate
investment research agreement with Nomura Investment Management Co., Ltd.
('NIMCO') under which NCM could compensate NIMCO for investment research in an
amount determined by NCM and NIMCO but not in excess of the amount of
compensation NCM received from the Investment Adviser. The Investment Research
Agreements and related Sub-Research Agreement terminated on April 1, 1994. The
Investment Adviser continues to provide services to the Company pursuant to the
Investment Advisory Agreement.
For the fiscal year ended November 30, 1991, the Investment Adviser, NCM
and LOIPM earned fees of $2,040,619, $408,124 and $306,093, respectively. NCM
paid NIMCO $204,062 from the amount earned by NCM. For the fiscal year ended
November 30, 1992, the Investment Adviser, NCM and LOIPM earned fees of
$1,957,647, $391,529 and $293,647, respectively. NCM paid NIMCO $195,765 from
the amount earned by NCM. For the fiscal year ended November 30, 1993, the
Investment Adviser, NCM and LOIPM earned fees of $1,514,112, $465,880 and
$349,410, respectively. NCM paid NIMCO $232,948 from the amount earned by NCM.
California imposes limitations on the expenses of the Company. These
expense limitations require that the Investment Adviser reimburse the Company in
an amount necessary to prevent the ordinary operating expenses of the Company
(excluding interest, taxes, distribution fees, brokerage fees and commissions
and extraordinary charges such as litigation costs) from exceeding 2.5% of the
Company's first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of the remaining average daily net
assets. The Investment Adviser's obligation to reimburse the Company is limited
to the amount of the investment advisory fee. No fee payment will be made to the
Investment Adviser during any fiscal year which will cause
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<PAGE>
such expenses to exceed the most restrictive expense limitation applicable at
the time of such payment. For the fiscal years ended November 30, 1991, 1992 and
1993, no such reimbursement was required.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and furnish
office space for officers and employees of the Company connected with investment
and economic research, trading and investment management of the Company, as well
as the fees of all Directors of the Company who are affiliated persons of the
Investment Adviser. The Company pays all other expenses incurred in its
operation, including, among other things, taxes; expenses for legal and auditing
services; costs of printing proxies, stock certificates, shareholder reports and
prospectuses and statements of additional information (except to the extent paid
by the Distributor); charges of the custodian, any sub-custodian and transfer
agent; expenses of redemption of shares; Securities and Exchange Commission
fees; expenses of registering the shares under Federal, state or foreign laws;
fees and expenses of unaffiliated Directors; 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 Company. Accounting services are
provided to the Company by the Investment Adviser, and the Company reimburses
the Investment Adviser for its costs in connection with such services on a
semi-annual basis. For the fiscal year ended November 30, 1993, the amount of
such reimbursement was $111,045. As required by the Company's distribution
agreements, the Distributor will pay certain of the promotional expenses of the
Company incurred in connection with the offering of its shares. Certain expenses
in connection with the distribution of Class B shares will be financed by the
Company pursuant to a distribution plan in compliance with Rule 12b-1 under the
Investment Company Act. See 'Purchase of Shares--Distribution Plans'.
ML & Co., Merrill Lynch Investment Management, Inc. and Princeton Services
are 'controlling persons' of the Investment Adviser as defined under the
Investment Company Act because of their ownership of its voting securities or
their power to exercise a controlling influence over its management or policies.
Duration and Termination. Unless earlier terminated as described herein,
the Investment Advisory Agreement will remain in effect from year to year if
approved annually (a) by the Board of Directors of the Company or by a majority
of the outstanding shares of the Company and (b) by a majority of the Directors
who are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such 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 a majority of the shareholders of the
Company.
PURCHASE OF SHARES
Reference is made to 'Purchase of Shares' in the Prospectus for certain
information as to the purchase of Company shares.
The Company issues four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) 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 Company
represents indentical interests in the investment portfolio of the Company and
has the same rights, except that Class B, Class C and Class D shares bear the
expenses of the ongoing account maintenance fees, and Class B and Class C shares
bear the expenses of the ongoing distribution fees and the additional
incremental transfer agency costs resulting from the deferred sales charge
arrangements. Class B, Class C and Class D shares each have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted
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<PAGE>
with respect to such class pursuant to which account maintenance
and/or distribution fees are paid. Each class has different exchange privileges.
See 'Shareholder Services--Exchange Privilege'.
The Merrill Lynch Select Pricing(Service Mark) System is used by more than
50 mutual funds advised by MLAM or its affiliate, the Investment Adviser. Funds
advised by MLAM or the Investment Adviser are referred to herein as
'MLAM-advised mutual funds'.
The Company has entered into separate distribution agreements with Merrill
Lynch Funds Distributor, Inc. (the 'Distributor') in connection with the
continuous offering of each class of shares of the Company (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
Company. After the prospectuses, statements of additional information and
periodic reports have been prepared, set in type and mailed to shareholders, the
Distributor pays for the printing and distribution of copies thereof used in
connection with the offering to dealers and investors. The Distributor also pays
for other supplementary sales literature and advertising costs. The Distribution
Agreements are subject to the same renewal requirements and termination
provisions as the Investment Advisory Agreement described under 'Management of
the Company--Advisory and Management Arrangements'.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
For the fiscal years ended November 30, 1991, 1992 and 1993, the Company
sold its Class A shares through the Distributor and Merrill Lynch, as dealers.
During the fiscal year ended November 30, 1991, the Company sold 1,538,040 Class
A shares for aggregate net proceeds to the Company of $16,925,856. The gross
sales charges for the sale of Class A shares of the Company for that year were
$89,523, of which $85,750 was received by Merrill Lynch, and $3,773 was received
by the Distributor. During the fiscal year ended November 30, 1992, the Company
sold 2,220,109 Class A shares for aggregate net proceeds to the Company of
$27,778,220. The gross sales charges for the sale of Class A shares of the
Company for that year were $108,884, of which $106,091 was received by Merrill
Lynch, and $2,793 was received by the Distributor. During the fiscal year ended
November 30, 1993, the Company sold 9,166,536 Class A shares for aggregate net
proceeds to the Company of $112,504,555. The gross sales charges for the sale of
Class A shares of the Company for that year were $126,144, of which $118,953 was
received by Merrill Lynch, and $7,191 was received by the Distributor.
The term 'purchase' as used in the Prospectus and this Statement of
Additional Information 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 shares for his or their own account and single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section 401 of
the Code) 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 shares of the Company 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 term 'purchase' also includes purchases by employee
benefit plans not qualified under Section 401 of the Code, including purchases
by employees or by employers on behalf of employees, by means of a payroll
deduction plan or otherwise, of shares of the Company. Purchases by such a
company or non-qualified employee
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<PAGE>
benefit plan will qualify for the quantity discounts discussed above only if the
Company and the Distributor are able to realize economies of scale in sales
effort and sales related expense by means of the company, employer or plan
making the Company's Prospectus available to individual investors or employees
and forwarding investments by such persons to the Company and by any such
employer or plan bearing the expense of any payroll deduction plan.
Closed-End Fund Investment Option. Class A shares of the Company and
other MLAM-advised mutual funds ('Eligible Class A Shares') are offered at net
asset value to shareholders of certain closed-end funds advised by the
Investment Adviser or FAM who purchased such closed-end fund shares prior to
October 21, 1994, and wish to reinvest the net proceeds from a sale of their
closed-end fund shares of common stock in Eligible Class A Shares, if the
conditions set forth below are satisfied. Alternatively, closed-end fund
shareholders who purchased such shares on or after October 21, 1994, and wish to
reinvest the net proceeds from a sale of their closed-end fund shares are
offered Class A shares (if eligible to purchase Class A shares) or Class D
shares of the Company and other MLAM-advised mutual 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 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.
Class A shares of the Company are offered at net asset value to shareholders of
Merrill Lynch Senior Floating Rate Fund, Inc. ('Senior Floating Rate Fund') who
wish to reinvest the net proceeds from a sale of certain of their shares of
common stock of Senior Floating Rate Fund in shares of the Company. In order to
exercise this investment option, Senior Floating Rate Fund shareholders must
sell their Senior Floating Rate Fund shares to the Senior Floating Rate Fund in
connection with a tender offer conducted by the Senior Floating Rate Fund and
reinvest the proceeds immediately in the Company. This investment option is
available only with respect to the proceeds of Senior Floating Rate Fund shares
as to which no Early Withdrawal Charge (as defined in the Senior Floating Rate
Fund prospectus) is applicable. Purchase orders from Senior Floating Rate Fund
shareholders wishing to exercise this investment option will be accepted only on
the day that the related Senior Floating Rate Fund tender offer terminates and
will be effected at the net asset value of the Company at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. Reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Company 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 Company and of other 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 the purchaser's securities dealer,
with sufficient information to permit confirmation of qualification, and
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 Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Company or any
other MLAM-advised mutual funds made within a 13-month
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period starting with the first purchase pursuant to a Letter of Intention in the
form provided in the Prospectus. The Letter of Intention is available only to
investors whose accounts are maintained at the Company's transfer agent. The
Letter of Intention is not available to employee benefit plans for which Merrill
Lynch provides plan-participant record-keeping services. The Letter of Intention
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 Intention may be included under a subsequent Letter of
Intention 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 Company and of other MLAM-advised mutual funds
presently held, at cost or maximum offering price (whichever is higher), on the
date of the first purchase under the Letter of Intention, may be included as a
credit toward 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
Intention (minimum of $25,000), the investor will be notified and must pay,
within 20 days of the expiration of such Letter, the difference between the
sales charge on the Class A or Class D shares purchased at the reduced rate and
the sales charge applicable to the shares actually purchased through the Letter.
Class A or Class D shares equal to five percent of the intended amount will be
held in escrow during the 13-month period (while registered in the name of the
purchaser) for this purpose. The first purchase under the Letter of Intention
must be at least five percent of the dollar amount of such Letter. If a purchase
during the term of such Letter would otherwise be subject to a further reduced
sales charge based on the right of accumulation, the purchaser will be entitled
on that purchase and subsequent purchases to the reduced percentage sales charge
which would be applicable to a single purchase equal to the total dollar value
of the Class A or Class D shares then being purchased under such Letter, but
there will be no retroactive reduction of the sales charges on any previous
purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be deducted
from the total purchases made under such Letter. An exchange from a MLAM-advised
money market fund into the Company that creates a sales charge will count toward
completing a new or existing Letter of Intention from the Company.
Merrill Lynch Blueprint(Service Mark) Program. Class D shares of the
Company are offered to participants in the Merrill Lynch Blueprint(Service Mark)
Program ('Blueprint'). In addition, participants in Blueprint who own Class A
shares of the Fund may purchase additional Class A shares of the Fund through
Blueprint. Blueprint is directed to small investors, group IRAs and participants
in certain affinity groups such as credit unions, trade associations and benefit
plans. Investors placing orders to purchase Class D shares of the Company
through Blueprint will acquire the Class D shares at net asset value plus a
sales charge calculated in accordance with the Blueprint sales charge schedule
(i.e., up to $300 at 4.25%, $300.01 to $5,000 at 3.25% plus $3.00 and $5,000.01
or more at the standard sales charge rates disclosed in the Prospectus). Class D
shares of the Company are offered at net asset value plus a sales charge of 1/2
of 1% for corporate or group IRA programs placing orders to purchase their Class
D shares through Blueprint. Services, including the exchange privilege,
available to Class A and Class D shareholders through Blueprint, however, may
differ from those available to other investors in Class D shares.
Class A and Class D shares are offered at net asset value, to Blueprint
participants through the Merrill Lynch Directed IRA Rollover Program ('IRA
Rollover Program') available from Merrill Lynch Business Financial Services, a
business unit of Merrill Lynch. The IRA Rollover Program is available to
custodian rollover assets
18
<PAGE>
from Employer Sponsored Retirement and Savings Plans (as defined below) whose
Trustee and/or Plan Sponsor offers the Merrill Lynch Directed IRA Rollover
Program.
Orders for purchases and redemptions of Class A or Class D shares of the
Company may be grouped for execution purposes which, in some circumstances, may
involve the execution of such orders two business days following the day such
orders are placed. The minimum initial purchase price is $100, with a $50
minimum for subsequent purchases through Blueprint. There are no minimum initial
or subsequent purchase requirements for participants who are part of an
automatic investment plan. Additional information concerning purchases through
Blueprint, including any annual fees and transaction charges, is available from
Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Blueprint(Service
Mark) Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0041.
TMA(Service Mark) Managed Trusts. Class A shares are offered to
TMA(Service Mark) Managed Trusts to which Merrill Lynch Trust Company provides
discretionary trustee services at net asset value.
Employer Sponsored Retirement and Savings Plans. Class A and Class D
shares are offered at net asset value to employer sponsored retirement or
savings plans, such as tax qualified retirement plans within the meaning of
Section 401(a) of the Code, deferred compensation plans within the meaning of
Sections 403(b) and 457 of the Code, other deferred compensation arrangements,
Voluntary Employee Benefits Association ('VEBA') plans, and non-qualified After
Tax Savings and Investment programs, maintained on the Merrill Lynch Group
Employee Services system, herein referred to as 'Employer Sponsored Retirement
or Savings Plans', provided the plan has accumulated $20 million or more in
MLAM-advised mutual funds (in the case of Class A shares) or $5 million or more
in MLAM-advised mutual funds (in the case of Class D shares). Class D shares may
be offered at net asset value to new Employer Sponsored Retirement or Savings
Plans, provided the plan has $3 million or more initially invested in
MLAM-advised mutual funds. Assets of Employer Sponsored Retirement or Savings
Plans sponsored by the same sponsor or an affiliated sponsor may be aggregated.
Class A shares and Class D shares also are offered at net asset value to
Employer Sponsored Retirement or Savings Plans that have at least 1,000
employees eligible to participate in the plan (in the case of Class A shares) or
between 500 and 999 employees eligible to participate in the plan (in the case
of Class D shares). Employees eligible to participate in Employer Sponsored
Retirement or Savings Plans of the same sponsoring employer or its affiliates
may be aggregated. Tax qualified retirement plans within the meaning of Section
401(a) of the Code meeting any of the foregoing requirements and which are
provided specialized services (e.g., plans whose participants may direct on a
daily basis their plan allocations among a wide range of investments including
individual corporate equities in addition to mutual fund shares) by Blueprint,
are offered Class A shares at a price equal to net asset value per share plus a
reduced sales charge of 0.50%. Any Employer Sponsored Retirement or Savings Plan
which does not meet the above described qualifications to purchase Class A
shares at net asset value has the option of (i) purchasing Class A shares at the
initial sales charge schedule and possible CDSC schedule disclosed in the
Prospectus if it is otherwise eligible to purchase Class A shares, (ii)
purchasing Class D shares at the initial sales charge and possible CDSC schedule
disclosed in the Prospectus, (iii) if the Employer Sponsored Retirement or
Savings Plan meets the specified requirements, purchasing Class B shares with a
waiver of the CDSC upon redemption, or if the Employer Sponsored Retirement or
Savings Plan does not qualify to purchase Class B shares with a waiver of the
CDSC upon redemption, purchasing Class C shares at the CDSC schedule disclosed
in the Prospectus. The minimum initial and subsequent purchase requirements are
waived in connection with all the above referenced Employer Sponsored Retirement
or Savings Plans.
19
<PAGE>
Purchase Privilege of Certain Persons. Directors of the Company, members
of the Boards of other MLAM-advised investment companies, directors and
employees of ML & Co. and its subsidiaries (the term 'subsidiaries', when used
herein with respect to Merrill Lynch & Co., Inc., includes MLAM, FAM and certain
other entities directly or indirectly wholly-owned and controlled by Merrill
Lynch & Co., Inc.), and any trust, pension, profit-sharing or other benefit plan
for such persons may purchase Class A shares of the Company at net asset value.
Class D shares of the Company will be offered at net asset value, without
sales charge, to an investor who has a business relationship with a financial
consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchse 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 Company with proceeds from a redemption 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. Second, the investor also must establish that such redemption had been
made within 60 days prior to the investment in the Company, and the proceeds
from the redemption had been maintained in the interim in cash or a money market
fund.
Class D shares of the Company are also offered at net asset value, without
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who 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 Company with
proceeds from a redemption of shares of such other mutual fund and such fund was
subject to a sales charge either at the time of purchase or on a deferred basis.
Second, such purchase of Class D shares must be made within 90 days after such
notice.
Class D shares of the Company will be offered at net asset value, without a
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who 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 Company with proceeds from the redemption of such
shares of other mutual funds and that such shares have been outstanding for a
period of no less than six months. 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.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or consolidation with
a public or private investment company. The value of the assets or company
acquired in a tax-free transaction may be adjusted in appropriate cases to
reduce possible adverse tax consequences to the Company which might result from
an acquisition of assets having net unrealized appreciation which is
disproportionately higher at the time of acquisition than the realized or
unrealized appreciation of the Company. The issuance of Class D shares for
consideration other than cash is limited to bona fide reorganizations, statutory
mergers or other acquisitions of portfolio securities which (i) meet the
investment objectives and policies of the Company, (ii) are acquired for
investment and not for resale (subject to the understanding that the disposition
of the Company's portfolio securities shall at all times remain within its
control); and (iii) are liquid securities, the value of which is readily
ascertainable, which are not restricted as to transfer either by law or
liquidity of market (except that the Company may acquire through such
transactions restricted or illiquid securities to the extent the
20
<PAGE>
Company does not exceed the applicable limits on acquisition of such securities
set forth under 'Investment Objective and Policies' herein).
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.
DISTRIBUTION PLANS
Reference is made to 'Purchase of Shares--Distribution Plans' in the
Prospectus for certain information with respect to the separate distribution
plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the
Investment Company Act (each a 'Distribution Plan') with respect to the account
maintenance and/or distribution fees paid by the Company to the Distributor with
respect to such classes.
Payments of the account maintenance fees and/or distribution fees are
subject to the provisions of Rule 12b-1 under the Investment Company Act. 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 fees and/or distribution fees paid to the Distributor. 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 Company and its related class of shareholders. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
'interested persons' of the Company, as defined in the Investment Company Act
(the 'Independent Directors'), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that such Distribution Plan will benefit the Company 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 Independent
Directors or by the vote of the holders of a majority of the outstanding related
class of voting securities of the Company. A Distribution Plan cannot be amended
to increase materially the amount to be spent by the Company without the
approval of the related class of shareholder, and all material amendments are
required to be approved by the vote of the Directors, including a majority of
the Independent Directors who have no direct or indirect financial interest in
such Distribution Plan, cast in person at a meeting for that purpose. Rule 12b-1
further requires that the Company preserve copies of each Distribution Plan and
any report made pursuant to such plan for a period of not less than six years
from the date of such Distribution Plan or such report, the first two years in
an easily accessible place.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ('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
Company, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Company 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
21
<PAGE>
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
waivering the interest charges at any time. To the extent payments would exceed
the voluntary maximum, the Company will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Company rather than to the Distributor; however, the Company will continue
to make payments of the account maintenance fee. In certain circumstances the
amount payable pursuant to the voluntary maximum may exceed the amount payable
under the NASD formula. In such circumstances payment in excess of the amount
payable under the NASD formula will not be made.
The following table sets forth comparative information as of May 31, 1994
with respect to the Class B shares of the Company indicating the maximum
allowable payments that can be made under the NASD maximum sales charge rule and
the Distributor's voluntary maximum for the period October 21, 1988
(commencement of the public issuance of Class B shares) to May 31, 1994. Since
Class C shares of the Fund had not been publicly issued prior to the date of
this Statement of Additional Information, information concerning Class C shares
is not yet provided below.
<TABLE>
<CAPTION>
DATA CALCULATED AS OF MAY 31, 1994
--------------------------------------------------------------------------------
(IN THOUSANDS)
ALLOWABLE AMOUNTS
AGGREGATE INTEREST ON MAXIMUM PREVIOUSLY PAID AGGREGATE
ELIGIBLE GROSS SALES UNPAID AMOUNT TO UNPAID
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE
-------------- --------- ----------- ------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Under NASD Rule
as Adopted.......................... $ 54,219 $ 3,389 $ 539 $3,928 $ 1,135 $ 2,793
Under Distributor's
Voluntary Waiver.................... $ 54,219 $ 3,389 $ 271 $3,660 $ 1,135 $ 2,524
<CAPTION>
ANNUAL
DISTRIBUTION
FEE AT
CURRENT NET
ASSET
LEVEL(4)
------------
<S> <C>
Under NASD Rule
as Adopted.......................... $385
Under Distributor's
Voluntary Waiver.................... $385
</TABLE>
- ------------------
(1) Purchase price of all eligible Class B shares sold since October 24, 1988
(commencement of Class B operations) other than shares acquired through
dividend reinvestment and the exchange privilege.
(2) Interest is computed on a monthly basis based upon the prime rate, as
reported in The Wall Street Journal, plus 1.0% as permitted under the NASD
Rule.
(3) Consists of CDSC payments, distribution fee payments and accruals. Of the
distribution fee payments made prior to July 7, 1993 under a prior plan at
the 1.0% rate, 0.75% of average daily net assets has been treated as a
distribution fee and 0.25% of average daily net assets has been deemed to
have been a service fee and not subject to the NASD maximum sales charge
rule. See 'Purchase of Shares-- Distribution Plans' in the Prospectus.
(4) Provided to illustrate the extent to which the current level of distribution
fee payments (not including any CDSC payments) is amortizing the unpaid
balance. No assurance can be given that payments of the distribution fee
will reach either the voluntary maximum or the NASD maximum.
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<PAGE>
REDEMPTION OF SHARES
Reference is made to 'Redemption of Shares' in the Prospectus for certain
information as to the redemption and repurchase of Company shares.
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 periods during
which trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists, as defined by the Securities and Exchange Commission, as a
result of which disposal of portfolio securities or determination of the net
asset value of the Company is not reasonably practicable, and for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of shareholders of the Company.
The value of shares at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Company at such time.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under 'Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares', while Class B shares redeemed
within four years of purchase are subject to a CDSC under most circumstances,
the charge is waived on redemptions of Class B shares in connection with certain
post-retirement withdrawals from an Individual Retirement Account ('IRA') or
other retirement plan or following the death or disability of a Class B
shareholder. Redemptions for which the waiver applies are: (a) any partial or
complete redemption in connection with a tax-free distribution following
retirement under a tax-deferred retirement plan or attaining age 59 1/2 in the
case of an IRA or other retirement plan, or part of a series of equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) or any redemption resulting from the tax-free return of an excess
contribution to an IRA; or (b) any partial or complete redemption following the
death or disability (as defined in the Code) of a Class B shareholder (including
one who owns the Class B shares as joint tenant with his or her spouse),
provided the redemption is requested within one year of the death or initial
determination of disability. For the fiscal years ended November 30, 1991, 1992
and 1993, the Distributor received CDSCs of $77,059, $80,948 and $33,249,
respectively, all of which was paid to Merrill Lynch.
Merrill Lynch Blueprint(Service Mark) Program. Class B shares are offered
to certain participants in Blueprint. Blueprint is directed to small investors,
group IRAs and participants in certain affinity groups such as trade
associations and credit unions. Class B shares of the Company are offered
through Blueprint only to members of certain affinity groups. The CDSC is waived
in connection with purchase orders placed through Blueprint. Services, including
the exchange privilege, available to Class B investors through Blueprint,
however, may differ from those available to other investors in Class B shares.
Orders for purchases and redemptions of Class B shares of the Company will be
grouped for execution purposes which, in some circumstances, may involve the
execution of such orders two business days following the day such orders are
placed. The minimum initial purchase order is $100, with a $50 minimum for
subsequent purchases through Blueprint. There is no minimum initial or
subsequent purchase requirement for investors who are part of the Blueprint
automatic investment plan. Additional information concerning these Blueprint
programs, including any annual fees or transaction charges, is available from
Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Blueprint(Service Mark)
Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
23
<PAGE>
Retirement Plans. Any Retirement Plan which does not meet the
qualifications to purchase Class A or Class D shares at net asset value has the
option of purchasing Class A or Class D shares at the sales charge schedule
disclosed in the Prospectus, or if the Retirement Plan meets the following
requirements, then it may purchase Class B shares with a waiver of the CDSC upon
redemption. The CDSC is waived for any Eligible 401(k) Plan redeeming Class B
shares. 'Eligible 401(k) Plan' is defined as a retirement plan qualified under
Section 401(k) of the Code with a salary reduction feature offering a menu of
investments to plan participants. The CDSC is also waived for redemptions from a
401(a) plan qualified under the Code, provided, however, that each such plan has
the same or an affiliated sponsoring employer as an Eligible 401(k) Plan
purchasing Class B shares of MLAM-advised mutual funds ('Eligible 401(a) Plan').
Other tax qualified retirement plans within the meaning of Section 401(a) and
403(b) of the Code which are provided specialized services (e.g., plans whose
participants may direct on a daily basis their plan allocations among a menu of
investments) by independent administration firms contracted through Merrill
Lynch also may purchase Class B shares with a waiver of the CDSC. The CDSC is
also waived for any Class B shares which are purchased by an Eligible 401(k)
Plan or Eligible 401(a) Plan and are rolled over into a Merrill Lynch or Merrill
Lynch Trust Company custodied IRA and held in such account at the time of
redemption. The Class B CDSC also is waived for any Class B shares which 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 minimum initial and subsequent
purchase requirements are waived in connection with all the above referenced
Retirement Plans.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Company,
the Investment Adviser is primarily responsible for the execution of the
Company's portfolio transactions and the allocation of brokerage. In executing
such transactions, the Investment Adviser seeks to obtain the best net results
for the Company, 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 involved and the firm's risk in
positioning a block of securities. While the Investment Adviser generally seeks
reasonably competitive commission rates, the Company does not necessarily pay
the lowest commission or spread available. The Company has no obligation to deal
with any broker or group of brokers in execution of transactions in portfolio
securities. Subject to obtaining the best price and execution, brokers who
provide supplemental investment research to the Investment Adviser may receive
orders for transactions by the Company. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Investment Adviser under the Investment Advisory Agreement, and the expenses of
the Investment Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information. It is possible that certain of the
supplementary investment research so received will primarily benefit one or more
other investment companies or other accounts for which investment discretion is
exercised. Conversely, the Company may be the primary beneficiary of the
research or services received as a result of portfolio transactions effected for
such other accounts or investment companies. In addition, consistent with the
Rules of Fair Practice of the NASD and policies established by the Board of
Directors of the Company, the Investment Adviser may consider sales of shares of
the Company as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Company.
The Company anticipates that its brokerage transactions involving
securities of companies domiciled in countries other than the United States will
be conducted primarily on the principal stock exchanges of such countries.
Brokerage commissions and other transaction costs on foreign stock exchange
transactions are
24
<PAGE>
generally higher than in the United States, although the Company will endeavor
to achieve the best net results in effecting its portfolio transactions. There
is generally less government supervision and regulation of foreign stock
exchanges and brokers than in the United States.
Foreign equity securities may be held by the Company in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (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 U.S. or Europe, as the case may be. ADRs, like
other securities traded in the U.S., as well as GDRs traded in the U.S., will be
subject to negotiated commission rates.
The Company may invest in securities traded in the over-the-counter markets
and intends to deal directly with the dealers who make markets in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Under the Investment Company Act, persons affiliated with
the Company and persons who are affiliated with such affiliated persons are
prohibited from dealing with the Company as principal in the purchase and sale
of securities unless a permissive order allowing such transactions is obtained
from the Securities and Exchange Commission. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own account, the Company will not deal with affiliated
persons, including Merrill Lynch and its affiliates, in connection with such
transactions. However, affiliated persons of the Company may serve as its broker
in over-the-counter 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. See 'Investment Objective
and Policies--Current Investment Restrictions'.
For the fiscal year ended November 30, 1991, the Company paid brokerage
commissions of $727,716. Merrill Lynch and its affiliates received $39,227, or
5.39%, of such amount for effecting transactions involving 5.10% of the
aggregate dollar amount of transactions in which the Company paid brokerage
commissions.
For the fiscal year ended November 30, 1992, the Company paid brokerage
commissions of $688,167. Merrill Lynch and its affiliates received $32,076, or
4.7%, of such amount for effecting transactions involving 4.0% of the aggregate
dollar amount of transactions in which the Company paid brokerage commissions.
For the fiscal year ended November 30, 1993, the Company paid brokerage
commissions of $138,617. Merrill Lynch and its affiliates received $4,128, or
3.0%, of such amount for effecting transactions involving 3.4% of the aggregate
dollar amount of transactions in which the Company paid brokerage commissions.
The Board of Directors has considered the possibilities of seeking to
recapture for the benefit of the Company 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 Company.
After considering all factors deemed relevant, the Board of Directors made a
determination not to seek such recapture. The Board will reconsider this matter
from time to time.
Section 11(a) of the Securities Exchange Act of 1934, as amended, generally
prohibits members of the U.S. national securities exchanges from executing
exchange transactions for their affiliates and institutional accounts which 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 disclosing the aggregate compensation received by the
member in effecting such transactions, and (iii) complies with any rules the
25
<PAGE>
Securities and Exchange 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 Company 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 Company and annual statements
as to aggregate compensation will be provided to the Company.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Company is determined once daily
Monday through Friday at 4:15 p.m., New York time, on each day during which the
New York Stock Exchange is open for trading. The New York Stock Exchange is not
open on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. 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 Company also will determine its net asset
value on any day in which there is sufficient trading in its portfolio
securities that the net asset value might be affected materially, but only if on
any such day the Company is required to sell or redeem shares. Net asset value
is computed by dividing the value of the securities held by the Company plus any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total number
of shares outstanding at such time. Expenses, including the fee payable to the
Investment Adviser and any account maintenance and/or distribution fees, are
accrued daily. The per share net asset value of the Class B, Class C and Class D
shares generally will be lower than the per share net asset value of the Class A
shares reflecting the daily expense accruals of the account maintenance,
distribution and higher transfer agency fees applicable with respect to the
Class B and Class C shares and the daily expense accruals of the account
maintenance fees applicable with respect to the Class D shares; moreover the per
share net asset value of the Class B and Class C shares generally will be lower
than the per share net asset value of its Class D shares reflecting the daily
expense accruals of the distribution fees and higher transfer agency fees
applicable with respect to the Class B and Class C shares of the Company. It is
expected, however, that the per share net asset value of the four classes will
tend to converge immediately after the payment of dividends or distributions,
which will differ by approximately the amount of the expense accrued
differential between the classes.
Portfolio securities which 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. 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 Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the time
of valuation. When the Company writes a call option, the amount of the premium
received is recorded on the books of the Company as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last asked price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the
Company are valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last bid price.
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 Directors of the Company.
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Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Company's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
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
the New York Stock Exchange which will not be reflected in the computation of
the Company's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by the Directors.
SHAREHOLDER SERVICES
The Company offers a number of shareholder services described below which
are designed to facilitate investment in its shares. Certain of such services
are not available to investors who place orders for the Company's shares through
the Merrill Lynch Blueprint(Service Mark) Program. Full details as to each of
such services and copies of the various plans described below can be obtained
from the Company, 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 ordinary income dividends
and long-term capital gain distributions. The statements will also show any
other activity in the account since the preceding statement. Shareholders will
receive separate transaction confirmations for each purchase or sale transaction
other than automatic investment purchases and the reinvestment of ordinary
income dividends and long-term capital gain distributions.
Share certificates are issued only for full shares and only upon the
specific request of the shareholder. 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.
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 as
described in the Prospectus) or Class B, Class C or Class D shares at the
applicable public offering price 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 Automatic Investment Plan whereby the Company is authorized through
pre-authorized checks or automated clearing house debits of $50 or more to
charge the regular bank account of the shareholder on a regular basis to provide
systematic additions to the Investment Account of such shareholder. An investor
whose shares of the Company are held within a CMA(Registered) account may
arrange to have periodic investments made in the Company in amounts of $100 or
more ($1 for retirement accounts) through the CMA(Registered) Automated
Investment Program.
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AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions to the contrary are given as to the method of
payment of dividends and capital gains distributions, dividends and
distributions will be reinvested automatically in additional shares of the
Company. Such reinvestment will be at the net asset value of shares of the
Company as of the close of business on the ex-dividend date of the dividend or
distribution. Shareholders may elect in writing to receive either their
dividends or capital gains distributions, or both, in cash, in which event
payment will be mailed or direct deposited on or about the payment date.
Shareholders may, at any time, notify the transfer agent in writing or by
telephone (1-800-MER-FUND) that they no longer wish to have their dividends
and/or distributions reinvested in shares of the Company or vice versa, and
commencing ten days after receipt by the transfer agent of such notice, those
instructions will be effected.
SYSTEMATIC WITHDRAWAL PLANS--CLASS A AND CLASS D SHARES
A Class A or Class D shareholder may elect to make systematic withdrawals
from an Investment Account on either a monthly or quarterly basis as provided
below. Quarterly withdrawals are available for shareholders who have acquired
Class A or Class D shares of the Company having a value, based upon cost or the
current offering price, of $5,000 or more, and monthly withdrawals are available
for shareholders with Class A or Class D shares with such a value of $10,000 or
more.
At the time of each withdrawal payment, sufficient Class A or Class D
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 either a dollar amount or a percentage of the value of his Class A or
Class D shares. Redemptions will be made at net asset value as determined at the
close of business of the New York Stock Exchange (currently 4:00 p.m., New York
time) on the 24th day of each month or the 24th day of the last month of each
quarter, whichever is applicable. If the Exchange is not open for business on
such date, the Class A or Class D shares will be redeemed at the close of
business on the preceding business day. The check for the withdrawal payment
will be mailed, or the direct deposit of the withdrawal payment will be made, on
the next business day following redemption. When a shareholder is making
systematic withdrawals, dividends and distributions on all Class A or Class D
shares in the Investment Account are automatically reinvested in Class A or
Class D shares of the Company, respectively. A shareholder's Systematic
Withdrawal Plan may be terminated at any time, without charge or penalty, by the
shareholder, the Company, the Company's transfer agent or the Distributor.
Withdrawal payments should not be considered as dividends, yield or income.
Each withdrawal is a taxable event. If periodic withdrawals continuously exceed
reinvested dividends, the shareholder's original investment may be
correspondingly reduced. Purchases of additional Class A or Class D shares
concurrent with withdrawals are ordinarily disadvantageous to the shareholder
because of sales charges and tax liabilities. The Company will not knowingly
accept purchase orders for Class A or Class D shares of the Company 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 investments may not be made into an Investment Account in
which the shareholder has elected to make systematic withdrawals.
A Class A or Class D shareholder whose shares are held with a
CMA(Registered), CBA(Registered)or Retirement Account may elect to have shares
redeemed on a monthly, bimonthly, quarterly, semiannual or annual basis
through the
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Systematic Redemption Program. The minimum fixed dollar amount
redeemable is $25. The proceeds of systematic redemptions will be posted to the
shareholder's account five business days after the date the shares are redeemed.
Monthly systematic redemptions will be made at net asset value on the first
Monday of each month; bimonthly systematic redemptions will be made at net asset
value on the first Monday of every other month; and quarterly, semiannual or
annual redemptions are made at net asset value on the first Monday of months
selected at the shareholder's option. If the first Monday of the month is a
holiday, the redemption will be processed at net asset value on the next
business day. The Systematic Redemption Program is not available if Company
shares are being purchased within the account pursuant to the Automatic
Investment Program. For more information on the Systematic Redemption Program,
eligible shareholders should contact their Financial Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Company have an exchange
privilege with certain other MLAM-advised mutual funds listed below. Under the
Merrill Lynch Select Pricing(Service Mark) System, Class A shareholders may
exchange Class A shares of the Company for Class A shares of a second
MLAM-advised mutual fund if the shareholder holds any Class A shares of the
second fund in his 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 MLAM-advised mutual fund, but does not hold Class A shares of the second
fund in his account at the time of the exchange and is not otherwise eligible to
acquire Class A shares of the second fund, the shareholder will receive Class D
shares of the second fund as a result of the exchange. Class D shares also may
be exchanged for Class A shares of a second MLAM-advised mutual 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 B, Class C and
Class D shares will be exchangeable with shares of the same class of other
MLAM-advised mutual funds. For purposes of computing the CDSC that may be
payable upon disposition of the shares acquired in the exchange, the holding
period for the previously owned shares of the Company is 'tacked' to the holding
period of the newly acquired shares of the other fund as more fully described
below. Class A, Class B, Class C and Class D shares also will be exchangeable
for shares of certain MLAM-advised money market funds specifically designated
below as available for exchange by holders of Class A, Class B, Class C, or
Class D shares. Shares with a net asset value of at least $100 are required to
qualify for the exchange privilege, and any shares utilized in an exchange must
have been held by the shareholder for 15 days. It is contemplated that the
exchange privilege may be applicable to other new mutual funds whose shares may
be distributed by the Distributor.
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 MLAM-advised mutual
fund ('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 charge 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
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which the dividend was paid. Based on this formula, Class A and Class D shares
of the Company generally may be exchanged into the Class A or Class D shares of
the other funds or into shares of the Class A and Class D money market funds
with a reduced or without a sales charge.
In addition, each of the funds with Class B and Class C shares outstanding
('outstanding Class B or Class C shares') offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, ('new Class B or
Class C shares') of another MLAM-advised mutual fund 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 Company exercising the exchange privilege will continue to
be subject to the Company'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 Company acquired through
use of the exchange privilege will be subject to the Company's CDSC schedule if
such schedule is higher than the CDSC schedule relating to the Class B shares of
the fund from which the exchange has been made. For purposes of computing the
sales charge that may be payable on a disposition of the new Class B or Class C
shares, the holding period for the outstanding Class B or Class C shares is
'tacked' to the holding period of the new Class B or Class C shares. For
example, an investor may exchange Class B shares of the Company for those of
Merrill Lynch Special Value Fund, Inc. ('Special Value Fund') after having held
the Company Class B shares for two and a half years. The 2% sales charge that
generally would apply to a redemption would not apply to the exchange. Three
years later the investor may decide to redeem the Class B shares of Special
Value Fund and receive cash. There will be no CDSC due on this redemption, since
by 'tacking' the two and a half year holding period of Company Class B shares to
the three year holding period for the Special Value Fund Class B shares, the
investor will be deemed to have held the new Class B shares for more than five
years.
Shareholders also may exchange shares of the Company into shares of a money
market fund advised by the Investment Adviser or its affiliates, but the period
of time that Class B or Class C shares are held in a money market fund will not
count towards satisfaction of the holding period requirement for purposes of
reducing the CDSC or with respect to Class B shares, towards satisfaction of the
conversion period. However, shares of a money market fund which were acquired as
a result of an exchange for Class B or Class C shares of the Company may, in
turn, be exchanged back into Class B or Class C shares, respectively, of any
fund offering such shares, in which event the holding period for Class B or
Class C shares of the fund will be aggregated with previous holding periods for
purposes of reducing the CDSC. Thus, for example, an investor may exchange Class
B shares of the Company for shares of Merrill Lynch Institutional Fund
('Institutional Fund') after having held the Company Class B shares for two and
a half years and three years later decide to redeem the shares of Institutional
Fund for cash. At the time of this redemption the 2% CDSC that would have been
due had the Class B shares of the Company been redeemed for cash rather than
exchanged for shares of Institutional Fund will be payable. If instead of such
redemption the shareholder exchanged such shares for Class B shares of a fund
which the shareholder continued to hold for an additional two and a half years,
any subsequent redemption will not incur a CDSC.
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Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:
Funds issuing Class A, Class B, Class C and Class D Shares:
<TABLE>
<S> <C>
MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC.................................. High current income consistent with a policy of limiting
the degree of fluctuation in net asset value of Fund
shares, results from movements in interest rates, by
investing primarily in a portfolio of adjustable rate
securities, consisting principally of mortgage-backed
and asset-backed securities.
MERRILL LYNCH AMERICAS INCOME FUND, INC................. A high level of current income, consistent with prudent
investment risk, by investing primarily in debt
securities denominated in a currency of a country
located in the Western Hemisphere (i.e., North and
South America and the surrounding waters).
MERRILL LYNCH ARIZONA LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and Arizona income taxes as is
consistent with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade Arizona Municipal
Bonds.
MERRILL LYNCH ARIZONA MUNICIPAL BOND FUND............... A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Arizona income taxes as is consistent with prudent
investment management.
MERRILL LYNCH ARKANSAS MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Arkansas income taxes as is consistent with
prudent investment management.
MERRIL LYNCH ASSET GROWTH FUND, INC..................... High total investment return, consistent with prudent
risk, from investment in United States and foreign
equity, debt and money market securities the
combination of which will be varied both with respect
to types of securities and markets in response to
changing market and economic trends.
</TABLE>
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<TABLE>
<S> <C>
MERRILL LYNCH ASSET INCOME FUND, INC.................... A high level of current income through investment
primarily in United States fixed income securities.
MERRILL LYNCH BALANCED FUND FOR INVESTMENT
AND RETIREMENT........................................ As high a level of total investment return as is
consistent with reasonable risk by investing in common
stocks and other types of securities, including fixed
income securities and convertible securities.
MERRILL LYNCH BASIC VALUE FUND, INC..................... Capital appreciation and, secondarily, income through
investment in securities, primarily equities, that are
undervalued and therefore represent basic investment
value.
MERRILL LYNCH CALIFORNIA INSURED MUNICIPAL
BOND FUND............................................. A portfolio of Merrill Lynch California Municipal Series
Trust, a series fund, whose objective is to provide
shareholders with as high a level of income exempt
from Federal and California income taxes as is
consistent with prudent investment management through
investment in a portfolio consisting primarily of
insured California Municipal Bonds.
MERRILL LYNCH CALIFORNIA LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and California income taxes as is
consistent with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade California
Municipal Bonds.
MERRILL LYNCH CALIFORNIA MUNICIPAL BOND FUND............ A portfolio of Merrill Lynch California Municipal Series
Trust, a series fund, whose objective is to provide as
high a level of income exempt from Federal and
California income taxes as is consistent with prudent
investment management.
MERRILL LYNCH CAPITAL FUND, INC......................... The highest total investment return consistent with
prudent risk through a fully managed investment policy
utilizing equity, debt and convertible securities.
MERRILL LYNCH COLORADO MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from
</TABLE>
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<TABLE>
<S> <C>
Federal and Colorado income taxes as is consistent
with prudent investment management.
MERRILL LYNCH CONNECTICUT MUNICIPAL BOND FUND........... A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Connecticut income taxes as is consistent with
prudent investment management.
MERRILL LYNCH CORPORATE BOND FUND, INC.................. Current income from three separate diversified
portfolios of fixed income securities.
MERRILL LYNCH DEVELOPING CAPITAL MARKETS
FUND, INC............................................. Long-term appreciation through investment in securities,
principally equities, of issuers in countries having
smaller capital markets.
MERRILL LYNCH DRAGON FUND, INC.......................... Capital appreciation primarily through investment in
equity and debt securities of issuers domiciled in
developing countries located in Asia and the Pacific
Basin, other than Japan, Australia and New Zealand.
MERRILL LYNCH EUROFUND.................................. Capital appreciation primarily through investment in
equity securities of corporations domiciled in Europe.
MERRILL LYNCH FEDERAL SECURITIES TRUST.................. High current return through investments in U.S.
Government and Government agency securities, including
GNMA mortgage-backed certificates and other
mortgage-backed Government securities.
MERRILL LYNCH FLORIDA LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal income taxes as is consistent with
prudent investment management while serving to offer
shareholders the opportunity to own securities exempt
from Florida intangible personal property taxes
through investment in a portfolio primarily of
intermediate-term investment grade Florida Municipal
Bonds.
MERRILL LYNCH FLORIDA MUNICIPAL BOND FUND............... A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
income taxes as is consistent with prudent investment
management while seeking to offer shareholders the
opportunity to own securities
</TABLE>
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<TABLE>
<S> <C>
exempt from Florida intangible personal property
taxes.
MERRILL LYNCH FUND FOR TOMORROW, INC.................... Long-term growth through investment in a portfolio of
good quality securities, primarily common stock,
potentially positioned to benefit from demographic and
cultural changes as they affect consumer markets.
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.............. Long-term growth of capital through investment in a
diversified portfolio of equity securities placing
particular emphasis on companies that have exhibited
an above-average growth rate in earnings.
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC............... High total return consistent with prudent risk, through
a fully managed investment policy utilizing U.S. and
foreign equity, debt and money market securities, the
combination of which will be varied from time to time
both with respect to the types of securities and
markets in response to changing market and economic
trends.
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND
RETIREMENT............................................ High total investment return from investment in a global
portfolio of debt instruments denominated in various
currencies and multinational currency units.
MERRILL LYNCH GLOBAL CONVERTIBLE FUND, INC.............. High total return from investment primarily in an
internationally diversified portfolio of convertible
debt securities, convertible preferred stock and
'synthetic' convertible securities consisting of a
combination of debt securities or preferred stock and
warrants or options.
MERRILL LYNCH GLOBAL RESOURCES TRUST.................... Long-term growth and protection of capital from
investment in securities of domestic and foreign
companies that possess substantial natural resource
assets.
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC................. Long-term growth of capital by investing primarily in
equity securities of companies with relatively small
market capitalizations located in various foreign
countries and in the United States.
MERRILL LYNCH GLOBAL UTILITY FUND, INC.................. Capital appreciation and current income through
investment of at least 65% of its total assets in
equity and debt securities issued by domestic and
foreign companies which are primarily engaged in the
ownership or operation of facilities used to
</TABLE>
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<TABLE>
<S> <C>
generate, transmit or distribute electricity,
telecommunications, gas or water.
MERRILL LYNCH GROWTH FUND FOR INVESTMENT
AND RETIREMENT........................................ Growth of capital and, secondarily, income from
investment in a diversified portfolio of equity
securities placing principal emphasis on those
securities which management of the fund believes to be
undervalued.
MERRILL LYNCH HEALTHCARE FUND, INC.
(residents of Wisconsin must meet investor suitability
standards)............................................ Capital appreciation through worldwide investment in
equity securities of companies that derive or are
expected to derive a substantial portion of their
sales from products and services in healthcare.
MERRILL LYNCH INTERNATIONAL EQUITY FUND................. Capital appreciation and, secondarily, income by
investing in a diversified portfolio of equity
securities of issuers located in countries other than
the United States.
MERRILL LYNCH LATIN AMERICA FUND, INC................... Capital appreciation by investing primarily in Latin
American equity and debt securities.
MERRILL LYNCH MARYLAND MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Maryland income taxes as is consistent with
prudent investment management.
MERRILL LYNCH MASSACHUSETTS LIMITED MATURITY MUNICIPAL
BOND FUND............................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and Massachusetts income taxes as
is consistent with prudent investment management
through investment in a portfolio primarily of
intermediate-term investment grade Massachusetts
Municipal Bonds.
MERRILL LYNCH MASSACHUSETTS MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Massachusetts income taxes as is consistent with
prudent investment management.
</TABLE>
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<TABLE>
<S> <C>
MERRILL LYNCH MICHIGAN LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and Michigan income taxes as is
consistent with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade Michigan Municipal
Bonds.
MERRILL LYNCH MICHIGAN MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Michigan income taxes as is consistent with
prudent investment management.
MERRILL LYNCH MINNESOTA MUNICIPAL BOND FUND............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Minnesota income taxes as is consistent with
prudent investment management.
MERRILL LYNCH MUNICIPAL BOND FUND, INC.................. Tax-exempt income from three separate diversified
portfolios of municipal bonds.
MERRILL LYNCH MUNICIPAL INTERMEDIATE TERM FUND.......... Currently the only portfolio of Merrill Lynch Municipal
Series Trust, a series fund, whose objective is to
provide as high a level as possible of income exempt
from Federal income taxes by investing in investment
grade obligations with a dollar weighted average
maturity of five to twelve years.
MERRILL LYNCH NEW JERSEY LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and New Jersey income taxes as is
consistent with prudent investment management through
a portfolio primarily of intermediate-term investment
grade New Jersey Municipal Bonds.
MERRILL LYNCH NEW JERSEY MUNICIPAL BOND FUND............ A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and New Jersey income taxes as is consistent with
prudent investment management.
</TABLE>
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<TABLE>
<S> <C>
MERRILL LYNCH NEW MEXICO MUNICIPAL BOND FUND............ A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and New Mexico income taxes as is consistent with
prudent investment management.
MERRILL LYNCH NEW YORK LIMITED MATURITY MUNICIPAL BOND
FUND.................................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal, New York State and New York City
income taxes as is consistent with prudent investment
management through investment in a portfolio primarily
of intermediate-term investment grade New York
Municipal Bonds.
MERRILL LYNCH NEW YORK MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal,
New York State and New York City income taxes as is
consistent with prudent investment management.
MERRILL LYNCH NORTH CAROLINA MUNICIPAL BOND FUND........ A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and North Carolina income taxes as is consistent with
prudent investment management.
MERRILL LYNCH OHIO MUNICIPAL BOND FUND.................. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Ohio income taxes as is consistent with prudent
investment management.
MERRILL LYNCH OREGON MUNICIPAL BOND FUND................ A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Oregon income taxes as is consistent with prudent
investment management.
MERRILL LYNCH PACIFIC FUND, INC......................... Capital appreciation by investing in equity securities
of corporations domiciled in Far Eastern and Western
Pacific countries, including Japan, Australia, Hong
Kong and Singapore.
</TABLE>
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<TABLE>
<S> <C>
MERRILL LYNCH PENNSYLVANIA LIMITED MATURITY MUNICIPAL
BOND FUND............................................. A portfolio of Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, a series fund, whose
objective is to provide as high a level of income
exempt from Federal and Pennsylvania income taxes as
is consistent with prudent investment management
through investment in a portfolio of intermediate-term
investment grade Pennsylvania Municipal Bonds.
MERRILL LYNCH PENNSYLVANIA MUNICIPAL BOND FUND.......... A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
and Pennsylvania income taxes as is consistent with
prudent investment management.
MERRILL LYNCH PHOENIX FUND, INC......................... Long-term growth of capital by investing in equity and
fixed income securities, including tax-exempt
securities, of issuers in weak financial condition or
experiencing poor operating results believed to be
undervalued relative to the current or prospective
condition of such issuer.
MERRILL LYNCH SHORT-TERM GLOBAL INCOME FUND, INC........ As high a level of current income as is consistent with
prudent investment management from a global portfolio
of high quality debt securities denominated in various
currencies and multinational currency units and having
remaining maturities not exceeding three years.
MERRILL LYNCH SPECIAL VALUE FUND, INC................... Long-term growth of capital from investments in
securities, primarily common stocks, of relatively
small companies believed to have special investment
value and emerging growth companies regardless of
size.
MERRILL LYNCH STRATEGIC DIVIDEND FUND................... Long-term total return from investment in dividend
paying common stocks which yield more than Standard &
Poor's 500 Composite Stock Price Index.
MERRILL LYNCH TECHNOLOGY FUND, INC...................... Capital appreciation through worldwide investment in
equity securities of companies that derive or are
expected to derive a substantial portion of their
sales from products and services in technology.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
MERRILL LYNCH TEXAS MUNICIPAL BOND FUND................. A portfolio of Merrill Lynch Multi-State Municipal
Series Trust, a series fund, whose objective is to
provide as high a level of income exempt from Federal
income taxes as is consistent with prudent investment
management by investing primarily in a portfolio of
long-term, investment grade obligations issued by the
State of Texas, its political subdivisions, agencies
and instrumentalities.
MERRILL LYNCH UTILITY INCOME FUND, INC.................. High current income through investment in equity and
debt securities issued by companies which are
primarily engaged in the ownership or operation of
facilities used to generate, transmit or distribute
electricity, telecommunications, gas or water.
MERRILL LYNCH WORLD INCOME FUND, INC.................... High current income by investing in a global portfolio
of fixed income securities denominated in various
currencies, including multinational currencies.
</TABLE>
Class A Share Money Market Funds:
<TABLE>
<S> <C>
MERRILL LYNCH READY ASSETS TRUST........................ Preservation of capital, liquidity and the highest
possible current income consistent with the foregoing
objectives from the short-term money market securities
in which the Trust invests.
MERRILL LYNCH RETIREMENT RESERVES MONEY FUND (available
only for exchanges within certain retirement plans)... Currently the only portfolio of Merrill Lynch Retirement
Series Trust, a series fund, whose objectives are
current income, preservation of capital and liquidity
available from investing in a diversified portfolio of
short-term money market securities.
MERRILL LYNCH U.S.A. GOVERNMENT RESERVES................ Preservation of capital, current income and liquidity
available from investing in direct obligations of the
U.S. Government and repurchase agreements relating to
such securities.
MERRILL LYNCH U.S. TREASURY MONEY FUND.................. Preservation of capital, liquidity and current income
through investment exclusively in a diversified
portfolio of short-term marketable securities which
are direct obligations of the U.S. Treasury.
</TABLE>
39
<PAGE>
Class B, Class C and Class D Share Money
Market Funds:
<TABLE>
<S> <C>
MERRILL LYNCH GOVERNMENT FUND........................... A portfolio of Merrill Lynch Funds for Institutions
Series, a series fund whose objective is to provide
current income consistent with liquidity and security
of principal from investment in securities issued or
guaranteed by the U.S. Government, its agencies and
instrumentalities and in repurchase agreements secured
by such obligations.
MERRILL LYNCH INSTITUTIONAL FUND........................ A portfolio of Merrill Lynch Funds for Institutions
Series, a series fund, whose objective is to provide
maximum current income consistent with liquidity and
the maintenance of a high quality portfolio of money
market securities.
MERRILL LYNCH INSTITUTIONAL TAX-EXEMPT FUND............. A portfolio of Merrill Lynch Funds for Institutions
Series, a series fund, whose objective is to provide
current income exempt from Federal income taxes,
preservation of capital and liquidity available from
investing in a diversified portfolio of short term,
high quality municipal bonds.
MERRILL LYNCH TREASURY FUND............................. A portfolio of Merrill Lynch Funds for Institutions
Series, a series fund, whose objective is to provide
current income consistent with liquidity and security
of principal from investment in direct obligations of
the U.S. Treasury and up to 10% of its total assets in
repurchase agreements secured by such obligations.
</TABLE>
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their
Merrill Lynch financial consultant who will advise the Company of the exchange.
Shareholders of the Company, and shareholders of the other funds described above
with shares for which certificates have not been issued, may exercise the
exchange privilege by wire through their securities dealers. The Company
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 Securities and Exchange 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 at any time and thereafter
may 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.
40
<PAGE>
TAXES
The Company intends to continue to qualify for the special tax treatment
afforded regulated investment companies ('RICs') under the Internal Revenue Code
of 1986, as amended (the 'Code'). If it so qualifies, the Company (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 which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the 'shareholders'). The
Company intends to distribute substantially all of such income.
Dividends paid by the Company from its ordinary income and distributions of
the Company's net realized short-term capital gains (together referred to
hereafter as 'ordinary income dividends') are taxable to shareholders as
ordinary income. Distributions made from the Company's net realized long-term
capital gains (including long-term gains from certain transactions in 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
Company shares. Distributions in excess of the Company'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). Any loss upon the sale
or exchange of Company 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.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Company. Not later than 60 days after the close of its
taxable year, the Company will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. A portion of the Company'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 Company 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 Securities and Exchange Commission's exemptive order
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 Company 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 Company and received by its shareholders on December 31 of
the year in which such dividend was declared.
Ordinary income dividends paid by the Company to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the U.S.
withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Company or who, to the Company's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
41
<PAGE>
Dividends and interest received by the Company 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. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Company. If more than 50% in value of the Company's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Company will be eligible, and intends, to file an election
with the Internal Revenue Service pursuant to which shareholders of the Company
will be required to include their proportionate shares of such withholding taxes
in their U.S. income tax returns as gross income, treat such proportionate
shares as taxes paid by them and deduct such proportionate shares in computing
their taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation may
be subject to U.S. withholding tax on the income resulting from the Company's
election described in this paragraph but may not be able to claim a credit or
deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. The Company will report annually to its shareholders
the amount per share of such withholding taxes. For this purpose, the Company
will allocate foreign taxes and foreign source income among the Class A, Class
B, Class C and Class D shareholders according to a method similar to that
described above for the allocation of dividends eligible for the dividends
received deduction.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares for Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales charge
paid to the Company on the exchanged shares reduces any sales charge the
shareholder would have owed upon 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 Company will be
disallowed if other Company shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Code requires the RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Company intends to
distribute its income and capital gains in the manner necessary to avoid
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Company's taxable income and capital gains will be distributed to
avoid entirely the imposition of the tax. In such event, the Company will be
liable for the tax only on the amount by which it does not meet the foregoing
distribution requirements.
42
<PAGE>
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Company may write, purchase or sell options, futures or 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 options 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 non-equity option or a regulated futures contract for
a non-U.S. currency and the Company elects to have gain or loss in connection
with the contract 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. The mark-to-market rules outlined
above, however, will not apply to certain transactions entered into by the
Company solely to reduce the risk of changes in price or interest or currency
exchange rates with respect to its investments.
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. The
Company 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 Company's transactions in options, futures and forward foreign
exchange contracts. Under Section 1092, the Company may be required to postpone
recognition for tax purposes of losses incurred in certain closing transactions
in options, futures and forward foreign exchange contracts.
One of the requirements for qualification as a RIC is that less than 30% of
the Company's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Company may be restricted in effecting closing transactions within three months
after entering into an options or futures contract.
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 stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the Company 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, foreign currency
futures and forward foreign exchange contracts will be valued for purposes of
the RIC diversification requirements applicable to the Company.
Under Code Section 988, special rules are provided for certain transactions
in a 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 Company 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 Company. In general, however, Code Section 988
gains or losses will increase or decrease the amount of the Company's investment
company taxable income available to be distributed to shareholders as ordinary
income. Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Company would not be able to make any
ordinary income dividend distributions, and any distributions made before the
losses were realized but in the same
43
<PAGE>
taxable year would be recharacterized as a return of capital to shareholders,
thereby reducing the basis of each shareholder's Company shares, and resulting
in a capital gain for any shareholder who received a distribution greater than
such shareholder's basis in Company shares (assuming the shares were held as a
capital asset). These rules and the mark-to-market rules described above,
however, will not apply to certain transactions entered into by the Company
solely to reduce the risk of currency fluctuations with respect to its
investments.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative 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
which are derived from interest on U.S. Government obligations. State law varies
as to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Company.
PERFORMANCE DATA
From time to time the Company may include its average annual total return
and other total return data in advertisements or information furnished to
present or prospective shareholders. Total return figures are based on the
Company's historical performance and are not intended to indicate future
performance. Average annual total return is determined separately for Class A,
Class B, Class C and Class D shares in accordance with a formula specified by
the Securities and Exchange 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.
The Company also may quote annual, average annual and annualized total
return and aggregate total return performance data, both as a percentage and as
a dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that (1) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted,
and (2) the maximum applicable sales charges will not be included with respect
to annual or annualized rates of return calculations. Aside from the impact on
the performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the average
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over longer periods of time.
44
<PAGE>
Set forth below is annual total return information for the Class A and
Class B shares of the Company for the periods indicated. Since Class C and Class
D shares have not been issued prior to the date of this Statement of Additional
Information, performance information concerning Class C and Class D shares is
not yet provided.
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------
REDEEMABLE VALUE CLASS B SHARES*
OF A ------------------------------------
HYPOTHETICAL REDEEMABLE VALUE
EXPRESSED AS A $1,000 EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED INVESTMENT AT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL THE END OF ON A HYPOTHETICAL AT THE END OF THE
PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT PERIOD
- --------------------------------------- ----------------- ---------------- ----------------- -----------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
One Year Ended May 31, 1994............ 8.12% $ 1,081.20 8.88% $ 1,088.80
Five Years Ended May 31, 1994.......... 8.84% $ 1,527.50 8.90% $ 1,531.90
Inception (July 2, 1984) to May 31,
1994................................. 13.43% $ 3,490.10
October 21, 1988 to May 31, 1994....... 9.39% $ 1,654.20
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Six Months Ended May 31, 1994.......... 7.65% $ 1,076.50 7.12% $ 1,071.20
Year Ended November 30:
1993................................... 19.16% $ 1,191.60 17.87% $ 1,178.70
1992................................... 10.67% $ 1,106.70 9.58% $ 1,095.80
1991................................... 6.77% $ 1,067.70 5.67% $ 1,056.70
1990................................... (4.90)% $ 951.00 (5.88)% $ 941.20
1989................................... 19.36% $ 1,193.60 18.22% $ 1,182.20
1988................................... 17.59% $ 1,175.90
1987................................... 0.67% $ 1,006.70
1986................................... 33.34% $ 1,333.40
1985................................... 31.69% $ 1,316.90
July 2, 1984 to November 30, 1984...... 3.01% $ 1,030.10
October 21, 1988 to November 30,
1988................................. 1.68% $ 1,016.80
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (July 2, 1984) to May 31,
1994................................. 249.01% $ 3,490.10
October 21, 1988 to May 31, 1994....... 65.42% $ 1,654.20
</TABLE>
- ------------------
* Information as to Class B shares is presented only for the period October 21,
1988 to May 31, 1994. Prior to October 21, 1988, no Class B shares were
publicly issued.
45
<PAGE>
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
Company in advertisements directed to such investors may take into account a
reduced, and not the maximum, sales charge or may not take into account the CDSC
and therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses may be
deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Company was incorporated under Maryland law on March 7, 1984. It has an
authorized capital of 400,000,000 shares of Common Stock, par value of $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. Class A, Class B,
Class C and Class D Common Stock represent an interest in the same assets of the
Company and are identical in all respects except that the Class B, Class C and
Class D shares bear certain expenses related to the account maintenance and/or
distribution of such shares and that they have exclusive voting rights with
respect to matters relating to such account maintenance and/or distribution
expenditures. The Company has received an order from the Securities and Exchange
Commission permitting the issuance and sale of multiple classes of Common Stock.
The Board of Directors of the Company may classify and reclassify the shares of
the Company into additional classes of Common Stock at a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter submitted to a shareholder vote. The Company does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
does not require shareholders to act upon any of the following matters: (i)
election of Directors; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of selection of
independent auditors. Generally, under Maryland law, a meeting of shareholders
may be called for any purpose on the written request of the holders of at least
25% of the outstanding shares of the Company. Voting rights for Directors are
not cumulative. Shares issued are fully paid and non-assessable and have no
preemptive rights. Redemption and conversion rights are discussed elsewhere
herein and in the Prospectus. Each share is entitled to participate equally in
dividends and distributions declared by the Company and in the net assets of the
Company upon liquidation or dissolution after satisfaction of outstanding
liabilities. Stock certificates are issued by the transfer agent only on
specific request. Certificates for fractional shares are not issued in any case.
Shareholders may, in accordance with Maryland law, cause a meeting of
shareholders to be held for the purpose of voting on the removal of Directors at
the request of 25% of the outstanding shares of the Company. A Director may be
removed at a special meeting of shareholders by a vote of a majority of the
votes entitled to be cast for the election of Directors.
The Company was incorporated under the name 'Merrill Lynch International
Holdings, Inc.' On November 1, 1993, the Company commenced doing business under
the name 'Merrill Lynch Global Holdings' and on October 21, 1994, changed its
name to Merrill Lynch Global Holdings, Inc. As investing in overseas markets has
become more common, the term 'International Fund' has widely come to mean one
which invests exclusively outside the United States, whereas a 'global fund' is
one which may invest within the United States as well as in other markets.
Management of the Company believes that the name 'Merrill Lynch Global
46
<PAGE>
Holdings, Inc.' better portrays the Company's worldwide investment capabilities,
which include the ability to invest both within the United States and abroad.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class A and
Class B shares of the Company based on the value of the Company's net assets on
May 31, 1994, and its shares outstanding on that date is as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------- -------------
<S> <C> <C>
Net Assets............................................................ $ 333,995,295 $ 51,375,500
-------------- -------------
-------------- -------------
Number of Shares Outstanding.......................................... 25,272,218 3,965,457
-------------- -------------
-------------- -------------
Net Asset Value Per Share (net assets divided by number of shares
outstanding)........................................................ $ 13.22 $ 12.96
Sales Charge (for Class A shares: 5.25% of offering price (5.54% of
net amount invested*)).............................................. 0.73 **
-------------- -------------
Offering Price........................................................ $ 13.95 $ 12.96
-------------- -------------
-------------- -------------
</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 of shares. See 'Purchase of
Shares--Deferred Sales Charge Alternatives--Class B and Class C Shares' in
the Prospectus and 'Redemption of Shares--Deferred Sales Charges--Class B
Shares' herein.
As of May 31, 1994, no Class C or Class D shares of the Company had been
publicly offered.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Company. The selection of
independent auditors is subject to ratification by the shareholders of the
Company. The independent auditors are responsible for auditing the annual
financial statements of the Company.
CUSTODIAN
The Chase Manhattan Bank, N.A., Global Securities Services, 4 Chase
MetroTech Center, 18th Floor, Brooklyn, New York 11245 (the 'Custodian'), acts
as the custodian of the Company's assets. Under its contract with the Company,
the Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by the Company to be held in its offices
outside the U.S. and with certain foreign banks and securities depositories. The
Custodian is responsible for safeguarding and controlling the Company's cash and
securities, handling the receipt and delivery of securities and collecting
interest and dividends on the Company's investments.
TRANSFER AGENT
Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Company's
transfer agent (the 'Transfer Agent'). The Transfer Agent is responsible for the
issuance, transfer and redemption of shares and the opening, maintenance and
47
<PAGE>
servicing of shareholder accounts. See 'Management of the Company--Transfer
Agency Services' in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Company.
REPORTS TO SHAREHOLDERS
The fiscal year of the Company ends on November 30 of each year. The
Company sends to its shareholders at least semi-annually reports showing the
Company's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to shareholders
each year. After the end of each year shareholders will receive Federal income
tax information regarding dividends and capital gains distributions.
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 Company has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933, as amended, and
the Investment Company Act, to which reference is hereby made.
Categories in the Schedule of Investments contained in the Financial
Statements herein have been adopted by the Investment Adviser and are deemed
appropriate with respect to a specialized fund such as the Company.
To the knowledge of the Company, no person or entity owned beneficially 5%
or more of the Company's shares on September 30, 1994.
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MERRILL LYNCH GLOBAL HOLDINGS:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Global Holdings as of November 30,
1993, the related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for the periods presented. These financial statements and
the financial highlights are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1993 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Global
Holdings as of November 30, 1993, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 31, 1993
49
<PAGE>
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
LATIN AMERICA
Argentina
Beverages & Tobacco 27,000 Buenos Aires Embotelladora S.A. (BAESA) (ADR)* $ 737,640 $ 945,000 0.3%
Electronics 30,000 Central Puerto (ADR)* 795,000 840,000 0.3
Energy 50,000 Yacimientos Petroliferos Fiscales S.A.--Sponsored
(ADR)* 950,000 1,237,500 0.4
Telecommunications 40,000 ++++Telecom Argentina Stet--France Telecom S.A.
(ADR)* (1) 1,400,296 1,870,000 0.7
Total Investments in Argentina 3,882,936 4,892,500 1.7
Brazil
Telecommunications 20,000,000 Telecommunicacoes Brasileiras S.A.--Telebras PN
(Preferred) 621,462 700,089 0.2
Total Investments in Brazil 621,462 700,089 0.2
Chile
Chemicals 45,000 Sociedad Quimica y Minera de Chile S.A. (B Shares)
(ADR)* 1,158,750 1,068,750 0.4
Metals 35,000 Madeco S.A. (ADR)* 525,000 748,125 0.2
Utilities 40,000 Enersis S.A. (ADR)* 779,762 785,000 0.3
Total Investments in Chile 2,463,512 2,601,875 0.9
Mexico
Banking
40,000 ++++Grupo Financiero Bancomer, S.A. de C.V. (ADR)* 1,100,000 1,410,000 0.5
Beverages & Tobacco 20,000 Coca-Cola Femsa S.A. (ADR)* 454,319 570,000 0.2
20,000 PanAmerican Beverages Inc. (Shares A) (ADR)* 525,114 727,500 0.2
------------ ------------ -----
979,433 1,297,500 0.4
Broadcasting &
Publishing 25,000 ++++Grupo Televisa, S.A. de C.V. (ADR)* 625,000 1,481,250 0.5
Industrial Components 40,000 Consorcio Grupo Dina, S.A. de C.V. (ADR)* 627,987 880,000 0.3
Merchandising 500,000 Cifra, S.A. de C.V. (Class 'C') 462,703 1,386,873 0.5
Multi-Industry 120,000 Grupo Carso, S.A. de C.V. 776,634 1,060,474 0.4
Steel 70,000 Grupo Simec, S.A. de C.V. (ADR)* 983,276 1,513,750 0.5
Telecommunications 20,000 Telefonos de Mexico, S.A. de C.V. (ADR)* 545,000 1,115,000 0.4
Total Investments in Mexico 6,100,033 10,144,847 3.5
Venezuela
Steel 100,000 ++++Siderurgica Venezolana SIVENSA, S.A.I.C.A.--
S.A.C.A. (Warrants) (ADR)* (a) 220,000 3,000 0.0
52,000 ++++Venezolana de Prerreducidos Caroni 'Venprecar'
C.A. (GDS)** 379,600 286,000 0.1
------------ ------------ -----
599,600 289,000 0.1
Total Investments in Venezuela 599,600 289,000 0.1
Total Investments in Latin America 13,667,543 18,628,311 6.4
</TABLE>
50
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Held/ Value Percent of
Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
NORTH AMERICA
Canada
Appliances 160,000 International Semi-Tech Microelectronics, Inc.
(Installment Receipts) $ 984,765 $ 957,797 0.4%
Beverages & Tobacco 25,000 Cott Corp. 890,625 725,000 0.2
Electrical Equipment 150,000 CMAC Investment Corp. 996,330 954,056 0.3
Energy 40,000 Anderson Exploration, Ltd. 780,233 871,745 0.3
85,000 Enerflex Systems, Ltd. 809,153 898,402 0.3
700,000 Luscar Oil & Gas Ltd. 1,027,500 733,313 0.3
------------ ------------ -----
2,616,886 2,503,460 0.9
Food & Household
Products 160,000 CCL Industries 1,099,257 1,212,212 0.4
Forest Products 40,000 Slocan Forest Products, Ltd. 724,081 826,848 0.3
Oil-Field Equipment 60,000 Canadian Fracmaster, Ltd. 673,200 645,391 0.2
Total Investments in Canada 7,985,144 7,824,764 2.7
United States
Automobiles 30,000 Ford Motor Co. (8.40% Conv. Pfd.) 1,500,000 3,075,000 1.1
39,400 General Motors Corp. 1,477,263 2,083,275 0.7
------------ ------------ -----
2,977,263 5,158,275 1.8
Banking 35,000 Baybanks, Inc. 1,301,250 1,566,250 0.5
30,000 Chemical New York 817,500 1,155,000 0.4
25,000 Mercantile Bancorporation, Inc. 949,375 1,100,000 0.4
60,000 Midlantic National Bank 1,335,312 1,425,000 0.5
80,000 UJB Financial Corp. 1,602,623 1,930,000 0.7
------------ ------------ -----
6,006,060 7,176,250 2.5
Broadcasting & Publishing 50,000 Broadcasting Partners Inc. (Class A) 725,000 775,000 0.3
30,000 Clear Channel Communications Inc. 1,061,250 1,181,250 0.4
78,750 Infinity Broadcasting Co. (Class A) 671,250 1,988,437 0.7
100,000 Time Warner Inc. 2,832,157 4,412,500 1.5
------------ ------------ -----
5,289,657 8,357,187 2.9
Business Services 100,000 ++Beverly Enterprises 1,206,000 1,225,000 0.4
18,000 Microsoft Corp. 1,503,000 1,440,000 0.4
70,000 Molten Metal Technology, Inc. 1,208,113 1,697,500 0.6
60,000 Oracle Systems Corp. 956,438 1,890,000 0.7
60,000 ++PacifiCare Health Systems (Class 'B') 1,862,500 2,265,000 0.8
11,500 Purus Inc. 161,000 161,000 0.1
80,000 ++Sierra Health Services Inc. 1,341,201 1,280,000 0.4
22,400 United HealthCare Corp. 737,136 1,621,200 0.6
------------ ------------ -----
8,975,388 11,579,700 4.0
Computer Technology 40,000 Novell Inc. 1,253,000 930,000 0.4
Electrical Equipment 50,000 First Pacific Co. Ltd. 871,250 450,000 0.2
70,000 Ultratech Stepper Inc. 1,191,425 1,120,000 0.3
------------ ------------ -----
2,062,675 1,570,000 0.5
Electronics 25,000 Intel Corp. 590,937 1,531,250 0.5
85,000 LSI Logic Corp. 1,350,177 1,264,375 0.4
118,300 Logic Devices Inc. 660,046 561,925 0.2
</TABLE>
51
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
20,000 Micron Technologies Inc. 1,010,926 925,000 0.3
10,000 Motorola, Inc. 866,290 937,500 0.3
20,000 Texas Instruments, Inc. 1,297,950 1,285,000 0.5
------------ ------------ -----
5,776,326 6,505,050 2.2
Energy 20,000 Anadarko Petroleum, Inc. 724,326 797,500 0.3
15,000 Chevron Corp. 1,323,615 1,303,125 0.4
30,000 Enron Oil & Gas Co. 924,528 1,158,750 0.4
------------ ------------ -----
2,972,469 3,259,375 1.1
Food & Household
Products 65,000 Performance Food Group Co. 1,010,421 1,283,750 0.4
Health & Personal Care 35,000 Marsam Pharmaceuticals Inc. 773,749 665,000 0.3
50,000 Maybelline Inc. 1,206,802 1,250,000 0.4
58,300 Nutramax Products, Inc. 786,433 655,875 0.2
31,800 Watson Pharmaceutical Inc. 922,200 914,250 0.3
------------ ------------ -----
3,689,184 3,485,125 1.2
Industrial--Other 50,000 Johnson Controls, Inc. 1,950,091 2,662,500 0.9
50,000 Varity Corp. 1,408,040 1,981,250 0.7
------------ ------------ -----
3,358,131 4,643,750 1.6
Insurance 100,000 AFLAC, Inc. 2,261,425 2,700,000 0.9
Leisure 40,000 McDonald's Corp. 1,807,400 2,345,000 0.8
175,000 Mirage Resorts, Inc. 2,647,000 3,850,000 1.3
25,000 Savoy Pictures Entertainment, Inc. 471,375 493,750 0.2
40,000 Walt Disney Co. 1,223,800 1,590,000 0.6
------------ ------------ -----
6,149,575 8,278,750 2.9
Merchandising 30,000 The Home Depot, Inc. 456,275 1,241,250 0.4
30,000 ++Toys 'R' Us, Inc. 750,858 1,222,500 0.4
40,000 Wal-Mart Stores, Inc. 658,900 1,145,000 0.4
------------ ------------ -----
1,866,033 3,608,750 1.2
Multi-Industry 67,900 Addington Resources, Inc. 1,003,379 1,171,275 0.4
30,000 Paramount Communications, Inc. 1,753,342 2,362,500 0.8
------------ ------------ -----
2,756,721 3,533,775 1.2
Oil Field Equipment 30,000 Schlumberger Ltd. 1,752,332 1,725,000 0.6
Railroads 30,000 CSX Corp. 1,993,665 2,490,000 0.9
20,000 Consolidated Rail Corp. 931,200 1,247,500 0.4
------------ ------------ -----
2,924,865 3,737,500 1.3
Recreation 129,000 Autotote Corp. (Class A) 1,161,000 2,580,000 0.9
25,000 Eastman Kodak Co. 1,346,412 1,521,875 0.5
35,000 Lodgenet Entertainment Corp. 555,143 507,500 0.2
50,000 Mikohn Gaming Corp. 738,125 737,500 0.3
$1,500,000 United Gaming Inc., 7.50% due 9/15/2003 1,500,000 1,545,000 0.5
37,000 WMS Industries, Inc. 1,033,358 1,193,250 0.4
------------ ------------ -----
6,334,038 8,085,125 2.8
Telecommunications 55,000 Newbridge Networks Corp. 855,730 2,695,000 0.9
20,200 Pacific Telesis Group 1,057,876 1,146,350 0.4
------------ ------------ -----
1,913,606 3,841,350 1.3
Textiles 25,000 Fruit of the Loom, Inc. 1,014,975 825,000 0.3
Total Investments in the United States 70,344,144 90,283,712 31.1
Total Investments in North America 78,329,288 98,108,476 33.8
</TABLE>
52
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
PACIFIC BASIN
Australia
Banking 120,000 Advance Bank Australia Ltd. $ 792,422 $ 772,406 0.3%
102,637 National Australia Bank, Ltd. 626,209 812,269 0.3
200,000 St. George Bank, Ltd. 873,812 965,508 0.3
------------ ------------ -----
2,292,443 2,550,183 0.9
Broadcasting &
Publishing 150,000 News Corp. Ltd. (Ord) 1,090,627 974,411 0.3
Industrial--Other 300,000 Orbital Engine Corp., Ltd. 628,403 441,206 0.2
Total Investments in Australia 4,011,473 3,965,800 1.4
Hong Kong
Broadcasting &
Publishing 1,500,000 Oriental Press Group 719,704 1,135,996 0.4
Construction
& Housing 2,000,000 Paul Y--ITC Construction Hldg. 734,890 653,764 0.2
Multi-Industry 500,000 Swire Pacific 'A' Ltd. 2,287,425 3,463,007 1.2
Real Estate 550,000 Sun Hung Kai Properties, Ltd. 2,426,166 3,417,697 1.2
Telecommunications 500,000 Hong Kong Telecommunications Ltd. 1,046,047 951,518 0.3
Utilities 960,000 China Light & Power Co., Ltd. 3,896,550 5,654,735 1.9
Total Investments in Hong Kong 11,110,782 15,276,717 5.2
Indonesia
Cement 200,000 P.T. Indocement Tunggal Prakar 1,423,188 1,569,112 0.5
Textiles 300,000 Indorama Synthetics (Foreign) 841,750 1,027,055 0.4
Total Investments in Indonesia 2,264,938 2,596,167 0.9
Japan
Appliances 80,000 Matsushita Electric Industrial Co. 1,006,889 999,632 0.4
80,000 Rinnai Corp. 1,452,936 2,102,168 0.7
------------ ------------ -----
2,459,825 3,101,800 1.1
Automobiles 30,000 Mabuchi Motor Co. 1,695,519 1,697,905 0.5
300,000 Toyota Motor Corp. 4,148,625 4,520,397 1.6
------------ ------------ -----
5,844,144 6,218,302 2.1
Banking 170,000 The Asahi Bank, Ltd. 1,779,958 1,686,880 0.6
100,000 The Bank of Tokyo, Ltd. 1,301,028 1,304,667 0.5
150,000 The Mitsubishi Bank, Ltd. 3,821,028 3,583,241 1.2
------------ ------------ -----
6,902,014 6,574,788 2.3
Broadcasting &
Publishing 300,000 Tokyo Broadcasting System 3,736,661 3,169,791 1.2
Business Services 140,000 Kamigumi Co., Ltd. 1,684,693 1,363,469 0.5
Construction &
Housing 80,000 Kandenko Co., Ltd. 2,143,145 1,661,154 0.5
120,000 National House Industries 1,925,973 2,205,072 0.8
160,000 Sekisui House Ltd. 1,954,055 1,837,560 0.6
104,000 Taisei Prefab Construction Co. 1,677,874 1,375,965 0.5
------------ ------------ -----
7,701,047 7,079,751 2.4
Electronics 20,000 Keyence Corp. 1,309,685 1,690,555 0.6
40,000 Murata Manufacturing Co., Ltd. 1,057,943 1,286,292 0.4
------------ ------------ -----
2,367,628 2,976,847 1.0
Financial Services 300,000 Daiwa Securities Co., Ltd. 3,725,815 3,142,227 1.1
100,000 Mitsubishi Trust & Banking Corp. 1,132,517 1,010,658 0.3
------------ ------------ -----
4,858,332 4,152,885 1.4
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Industrial--Other 100,000 Futaba Industrial 1,670,788 1,497,611 0.5
Machinery 150,000 Makino Milling Machine 1,086,861 689,085 0.2
Machinery & Equipment 55,000 Aichi Corp. 671,369 439,636 0.2
Merchandising 80,000 Besi Denki Co., Ltd. 844,756 999,632 0.3
60,000 Ito--Yokado Co., Ltd. 2,604,246 2,905,182 1.0
60,000 Keiyo Co., Ltd. 1,087,771 1,091,510 0.4
------------ ------------ -----
4,536,773 4,996,324 1.7
Real Estate 14,000 Cesar Co. 186,822 135,060 0.0
Recreation 50,000 Sony Music Entertainment (Japan) Inc. 2,277,144 2,081,036 0.7
Transportation--Freight 35,000 Aoyama Trading Co. 2,287,334 2,382,856 0.8
200,000 Mitsui & Co. 1,346,038 1,221,977 0.4
------------ ------------ -----
3,633,372 3,604,833 1.2
Utilities 150,000 Sumitomo Electric Industries, Ltd. 1,388,464 1,571,114 0.5
60,000 Tohoku Electric Power 1,442,569 1,631,753 0.6
50,000 Tokyo Electric Power Company, Inc. 1,346,483 1,346,013 0.5
------------ ------------ -----
4,177,516 4,548,880 1.6
Total Investments in Japan 53,794,989 52,630,098 18.1
Malaysia
Automobiles 146,000 Edaran Otomobil Nasional BHD 510,210 816,408 0.3
Banking 400,000 Commerce Asset-Holding BHD 755,787 1,266,961 0.4
Construction
& Housing 150,000 Ekran BHD 573,279 791,851 0.3
Electrical Equipment 250,000 Technology Resources Industries BHD 763,507 1,026,473 0.4
Miscellaneous 133,333 Commerce Asset Holdings (Rights) (b) -- -- --
Telecommunications 350,000 Telekom Malaysia BHD 1,489,928 2,627,771 0.9
Utilities 150,000 Tenaga Nasional BHD 571,393 961,952 0.3
Total Investments in Malaysia 4,664,104 7,491,416 2.6
Singapore
Air Transport 100,000 Singapore Airlines, Ltd. 383,769 693,837 0.2
Banking 149,500 The Development Bank of Singapore Ltd. 822,928 1,373,703 0.5
Machinery & Equipment 70,000 Jurong Shipyard, Ltd. 212,543 603,825 0.2
Shipping 200,000 Straits Steamship Land 449,139 437,555 0.2
Telecommunications 400,000 Singapore Telecommunications Ltd. 907,320 975,122 0.3
Total Investments in Singapore 2,775,699 4,084,042 1.4
South Korea
Aerospace 20,000 Samsung Aerospace Industries 821,485 841,688 0.3
Banking 75,640 Hanil Bank 1,123,122 954,980 0.3
Construction
& Housing 25,750 Hyundai Engineering and Construction Co. 539,284 742,635 0.3
Utilities 40,000 Korea Electric Power Co. 1,097,115 965,466 0.3
Total Investments in South Korea 3,581,006 3,504,769 1.2
Thailand
Banking 100,000 The Siam Commercial Bank Ltd. 297,564 727,201 0.3
Building Materials 30,000 Siam Cement Group 815,552 952,830 0.3
Total Investments in Thailand 1,113,116 1,680,031 0.6
Total Investments in the Pacific Basin 83,316,107 91,229,040 31.4
</TABLE>
54
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Value Percent of
Industries Held Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
WESTERN EUROPE
Belgium
Utilities 5,250 Electrabel NPV $ 912,538 $ 911,157 0.3%
Total Investments in Belgium 912,538 911,157 0.3
Denmark
Telecommunications 4,000 GN Store Nord Holding (GREAT NORDIC) 335,774 344,040 0.1
Total Investments in Denmark 335,774 344,040 0.1
Finland
Food & Household
Products 40,000 Huhtamaki Corp. 904,752 1,247,922 0.4
Total Investments in Finland 904,752 1,247,922 0.4
France
Broadcasting &
Publishing 5,000 Canal Plus 1,040,635 1,060,925 0.4
Business & Public
Services 4,000 Compagnie Generale des Eaux 1,466,359 1,756,805 0.6
4,000 Compagnie Generale des Eaux (Rights) (c) -- 139,412 0.0
------------ ------------ -----
1,466,359 1,896,217 0.6
Chemicals 37,000 Rhone-Poulenc S.A. 1,044,573 926,013 0.3
Total Investments in France 3,551,567 3,883,155 1.3
Germany
Banking 5,000 Commerzbank AG 781,228 1,045,068 0.4
2,000 Deutsche Bank AG 651,283 987,640 0.3
------------ ------------ -----
1,432,511 2,032,708 0.7
Health &
Personal Care 3,000 Wella AG (Preferred) 1,257,500 1,484,958 0.5
Merchandising 3,500 Hornbach AG (Preferred) 1,880,506 3,346,549 1.2
1,311 Hornbach Baumarkt AG 691,841 802,559 0.3
------------ ------------ -----
2,572,347 4,149,108 1.5
Steel 4,000 Friedrich Grohe (Preferred) 874,709 851,213 0.3
Total Investments in Germany 6,137,067 8,517,987 3.0
Italy
Merchandising 125,000 La Rinascente RISP 285,348 320,550 0.1
Telecommunications 300,000 SIP Italia (Ordinary) 280,800 540,984 0.2
300,000 SIP Italia (Savings) 490,473 461,944 0.2
------------ ------------ -----
771,273 1,002,928 0.4
Textiles 30,000 Fila Holdings S.p.A. (ADR)* 540,000 450,000 0.1
Total Investments in Italy 1,596,621 1,773,478 0.6
Netherlands
Banking 26,000 ABN Amro Bank N.V. 770,721 944,028 0.3
Beverages & Tobacco 15,000 Heineken N.V. 1,523,893 1,558,989 0.5
Broadcasting &
Publishing 20,000 Wolters Kluwer CVA 739,262 1,098,627 0.4
Construction
& Housing 30,000 IHC Calland N.V. 626,864 617,978 0.2
Food & Household
Products 35,000 Kon Bols Wessanen 798,182 737,360 0.3
Total Investments in the Netherlands 4,458,922 4,956,982 1.7
Norway
Miscellaneous 20,000 Orkla A S-Frie A-Aksjer 571,454 708,050 0.2
Total Investments in Norway 571,454 708,050 0.2
Spain
Banking 9,700 Argentaria Corp. Bancaria de Espana 312,293 413,835 0.1
</TABLE>
55
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Business Services 88,000 Acesa Auto Pistas Cesa 1,013,923 858,948 0.3
84,000 Aumar-Autopistas Del Mare Nostrum S.A. 1,031,558 945,127 0.3
------------ ------------ -----
2,045,481 1,804,075 0.6
Utilities 57,000 Empresa Nacional de Electricidad S.A. 1,997,214 2,589,622 0.9
300,000 Iberdola I S.A. 1,977,383 1,944,346 0.7
------------ ------------ -----
3,974,597 4,533,968 1.6
Total Investments in Spain 6,332,371 6,751,878 2.3
Sweden
Health &
Personal Care 170,000 Astra 'B' Fria 2,861,783 3,295,002 1.1
Merchandising 15,000 Hennes & Mauritz 409,324 429,012 0.2
Total Investments in Sweden 3,271,107 3,724,014 1.3
Switzerland
Banking 4,000 Swiss Bank Corp. (Bearer) 849,733 1,280,000 0.4
Food & Household
Products 1,100 Nestle AG 439,670 849,933 0.3
Health &
Personal Care 361 Roche Holding AG 262,397 1,447,610 0.5
Insurance 2,000 Swiss Reinsurance Co. (PC) 725,688 972,000 0.3
750 Zurich Insurance Co. 707,642 714,000 0.3
------------ ------------ -----
1,433,330 1,686,000 0.6
Recreation 1,500 Societe de Microelectronique et Horlogerie (S.M.H.)
AG (Bearer) 247,411 1,040,000 0.4
7,500 Societe de Microelectronique et Horlogerie (S.M.H.)
AG (Registered) 255,866 1,150,000 0.4
------------ ------------ -----
503,277 2,190,000 0.8
Total Investments in Switzerland 3,488,407 7,453,543 2.6
United Kingdom
Banking 330,000 Bank of Scotland 953,045 948,136 0.3
300,000 National Westminster Bank PLC 1,836,513 2,474,751 0.9
------------ ------------ -----
2,789,558 3,422,887 1.2
Building Materials
& Components 500,000 Spring Ram Corp. PLC 1,450,088 362,845 0.1
Business & Public
Services 125,000 Carlton Communications PLC (Ordinary) 1,292,970 1,538,389 0.5
Energy Sources 450,000 British Petroleum Co. PLC 2,236,817 2,222,611 0.8
150,000 Lasmo PLC (Ordinary) 356,108 246,587 0.1
------------ ------------ -----
2,592,925 2,469,198 0.9
Food & Household
Products 200,000 Cadbury Schweppes PLC 1,741,253 1,378,811 0.5
Industrial--Other 350,000 Tomkins PLC 1,275,666 1,207,756 0.4
Merchandising 100,102 Boots Co. PLC 721,992 798,332 0.3
125,714 Kingfisher PLC 1,115,090 1,284,659 0.4
160,000 Lloyds Chemists PLC 679,285 748,794 0.2
275,000 Next PLC 783,755 806,404 0.3
125,000 Sainsbury (J.) PLC 1,027,202 749,756 0.3
------------ ------------ -----
4,327,324 4,387,945 1.5
Multi-Industry 150,000 Siebe PLC 1,033,849 1,271,809 0.4
Telecommunications 480,000 British Telecommunications PLC (Ordinary) 2,920,756 3,348,245 1.2
Total Investments in the United Kingdom 19,424,389 19,387,885 6.7
Total Investments in Western Europe 50,984,969 59,660,091 20.5
</TABLE>
56
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Face Value Percent of
Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
NORTH AMERICA
United States
Commercial Paper*** $ 6,863,000 Associates Corp. of North America, 3.25%
due 12/01/1993 $ 6,863,000 $ 6,863,000 2.4%
10,000,000 Matterhorn Capital Corp., 3.07% due 12/09/1993 9,993,178 9,993,178 3.4
------------ ------------ -----
16,856,178 16,856,178 5.8
US Government &
Agency Obligations 6,000,000 Federal Home Loan Bank, 3.17% due 1/12/1994 5,977,810 5,977,810 2.1
Total Investments in Short-Term Securities 22,833,988 22,833,988 7.9
Total Investments $249,131,895 290,459,906 100.0
============
Liabilities in Excess of Other Assets (16,411) (0.0)
------------ -----
Net Assets $290,443,495 100.0%
============ =====
<FN>
(a) Warrants entitle the Company to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to adjustment
under certain conditions until the expiration date.
(b) The rights may be exercised until October 7, 1993.
(c) The rights may be exercised until December 20, 1993.
* American Depositary Receipts (ADR).
** Global Depositary Shares (GDS).
*** Commercial Paper is traded on a discount basis; the interest rates shown
are the discount rates paid at the time of purchase by the fund.
++ Non-income producing security.
++++ Restricted securities as to resale. The value of the Company's investment
in restricted securities was approximately $5,050,000, representing 1.7% of net assets.
<CAPTION>
Value
Issue Acquisition Date Cost (Note 1a)
<S> <C> <C> <C>
Grupo Financiero Bancomer, S.A. de C.V. (ADR) 3/16/92 $1,100,000 $1,410,000
Grupo Televisa, S.A. de C.V. (ADR) 12/01/91 625,000 1,481,250
Siderurgica Venezolana SIVENSA, S.A.I.C.A.--S.A.C.A. (Warrants) (ADR) 2/13/92 220,000 3,000
Telecom Argentina Stet--France Telecom S.A. (ADR) 3/23/92-11/12/92 1,400,296 1,870,000
Venezolana de Prerreducidos Caroni 'Venprecar' C.A. (GDS) 2/13/92 379,600 286,000
Total $3,724,896 $5,050,250
========== ==========
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of November 30, 1993
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$249,131,895) (Note 1a) $290,459,906
Receivables:
Capital shares sold $1,136,657
Dividends 583,193
Securities sold 495,763
Interest 22,060 2,237,673
----------
Prepaid registration fees and other assets (Note 1f) 19,130
------------
Total assets 292,716,709
------------
Liabilities: Payables:
Securities purchased 1,068,125
Capital shares redeemed 642,520
Investment adviser (Note 2) 257,806
Distributor (Note 2) 30,290 1,998,741
----------
Accrued expenses and other liabilities 274,473
------------
Total liabilities 2,273,214
------------
Net Assets: Net assets $290,443,495
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 1,959,915
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 268,673
Paid-in capital in excess of par 230,529,893
Undistributed investment income--net 475,574
Undistributed realized capital gains on investments and foreign currency
transactions--net 15,899,412
Unrealized appreciation on investments and foreign currency transactions--net 41,310,028
------------
Net assets $290,443,495
============
Net Asset Class A Shares--Based on net assets of $256,202,562 and 19,599,150 shares outstanding $ 13.07
Value: ============
Class B Shares--Based on net assets of $34,240,933 and 2,686,727 shares outstanding $ 12.74
============
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended November 30, 1993
<S> <C> <C> <C>
Investment Dividends (net of $322,029 foreign withholding tax) $ 3,631,130
Income Interest and discount earned 446,714
(Notes 1d & 1e): ------------
Total income 4,077,844
------------
Expenses: Investment advisory fees (Note 2) 2,329,402
Transfer agent fees--Class A (Note 2) 335,413
Distribution fees--Class B (Note 2) 256,934
Custodian fees 170,652
Printing and shareholder reports 163,899
Accounting services 111,045
Professional fees 69,564
Registration fees (Note 1f) 56,001
Transfer agent fees--Class B (Note 2) 48,018
Directors' fees and expenses 31,432
Pricing fees 14,029
Amortization of organization expenses (Note 1f) 9,794
Other 6,087
------------
Total expenses 3,602,270
------------
Investment income--net 475,574
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 20,344,160
(Loss) on Foreign currency transactions (1,238,452) 19,105,708
Investments and ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 18,292,715
(Notes 1b, 1e & 3): Foreign currency transactions (4,823) 18,287,892
------------ ------------
Net realized and unrealized gain on investments and foreign currency
transactions 37,393,600
------------
Net Increase in Net Assets Resulting from Operations $ 37,869,174
============
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
STATEMENTS OF CHANGES OF NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended November 30,
Increase (Decrease) in Net Assets: 1993 1992
<S> <C> <C> <C>
Operations: Investment income--net $ 475,574 $ 1,329,944
Realized gain on investments and foreign currency transactions--net 19,105,708 8,677,477
Change in unrealized appreciation on investments and foreign currency
transactions--net 18,287,892 9,675,317
------------ ------------
Net increase in net assets resulting from operations 37,869,174 19,682,738
------------ ------------
Dividends & Investment income--net:
Distributions to Class A -- (1,459,188)
Shareholders Class B -- (2,875)
(Note 1g): Realized gain on investments--net:
Class A (11,512,553) (3,337,192)
Class B (1,598,607) (509,713)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (13,111,160) (5,308,968)
------------ ------------
Capital Share Net increase (decrease) in net assets derived from capital share
Transactions transactions 75,813,575 (15,149,240)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 100,571,589 (775,470)
Beginning of year 189,871,906 190,647,376
------------ ------------
End of year* $290,443,495 $189,871,906
============ ============
<FN>
*Undistributed investment income--net (Note 1h) $ 475,574 $ (1,566,434)
============ ============
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------------
For the For the
The following per share data and ratios have been derived For the Year Ended Seven-Month Year Ended
from information provided in the financial statements. November 30, Period Ended April 30,
------------------------------ Nov. 30, -------------------
Increase (Decrease) in Net Asset Value: 1993++++ 1992++++ 1991 1990 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.78 $ 10.95 $ 10.48 $ 10.91 $ 11.79 $ 12.23
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net (1) .04 .10 .16 .17 .20 .29
Realized and unrealized gain (loss) on
investments and foreign currency trans-
actions--net (1) 2.07 1.05 .53 (.30) .62 .88
-------- -------- -------- -------- -------- --------
Total from investment operations 2.11 1.15 .69 (.13) .82 1.17
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.10) (.21) (.13) (.21) (.34)
Realized gain on investments--net (.82) (.22) (.01) (.17) (1.49) (1.27)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.82) (.32) (.22) (.30) (1.70) (1.61)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 13.07 $ 11.78 $ 10.95 $ 10.48 $ 10.91 $ 11.79
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 19.16% 10.67% 6.77% (1.45%)+++ 6.93% 10.99%
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.43% 1.49% 1.48% 1.59%* 1.49% 1.47%
Net Assets: ======== ======== ======== ======== ======== ========
Investment income (loss)--net .32% (.19%) 1.31% 2.63%* 1.65% 2.04%
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $256,203 $166,947 $165,687 $176,898 $187,843 $195,932
Data: ======== ======== ======== ======== ======== ========
Portfolio turnover 56.98% 65.93% 63.94% 34.44% 84.21% 102.77%
======== ======== ======== ======== ======== ========
<CAPTION>
Class B
--------------------------------------------------------------------
For the For the For the
The following per share data and ratios have been derived For the Year Ended Seven-Month Year Period
from information provided in the financial statements. November 30, Period Ended Ended Oct.21,1988++
------------------------------ Nov. 30, April 30, to April 30,
Increase (Decrease) in Net Asset Value: 1993++++ 1992++++ 1991 1990 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.62 $ 10.82 $ 10.36 $ 10.82 $ 11.74 $ 11.29
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (1) (.08) (.03) .04 .10 .16 .06
Realized and unrealized gain (loss) on
investments and foreign currency trans-
actions--net (1) 2.02 1.05 .54 (.30) .55 .93
-------- -------- -------- -------- -------- --------
Total from investment operations 1.94 1.02 .58 (.20) .71 .99
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- --+++++ (.11) (.09) (.14) (.15)
Realized gain on investments--net (.82) (.22) (.01) (.17) (1.49) (.39)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.82) (.22) (.12) (.26) (1.63) (.54)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.74 $ 11.62 $ 10.82 $ 10.36 $ 10.82 $ 11.74
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 17.87% 9.58% 5.67% (2.08%)+++ 5.91% 9.10%+++
Return:** ======== ======== ======== ======== ======== ========
</TABLE>
61
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios to Average Expenses, excluding distribution fees 1.46% 1.52% 1.51% 1.63%* 1.53% 1.50%*
Net Assets: ======== ======== ======== ======== ======== ========
Expenses 2.46% 2.52% 2.51% 2.63%* 2.53% 2.50%*
======== ======== ======== ======== ======== ========
Investment income (loss)--net (.72%) (1.19%) .25% 1.54%* .65% .10%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 34,241 $ 22,925 $ 24,960 $ 22,623 $ 16,342 $ 1,476
Data: ======== ======== ======== ======== ======== ========
Portfolio turnover 56.98% 65.93% 63.94% 34.44% 84.21% 102.77%
======== ======== ======== ======== ======== ========
<FN>
* Annualized.
** Total investment returns excludes the effects of sales loads.
(1) Foreign currency transaction amounts have been reclassified to conform to 1993 presentation.
++ Commencement of Operations.
++++ Based on average shares outstanding during the period.
+++ Aggregate total investment return.
+++++ Amount less than $.01 per share.
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch International Holdings, Inc. is now doing business
under the name Merrill Lynch Global Holdings. Merrill Lynch
Global Holdings (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end
investment management company. The Company offers both Class A
and Class B Shares. Class A Shares are sold with a front-end sales
charge. Class B Shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with
respect to matters relating to such distribution expenditures. The
following is a summary of significant accounting policies followed
by the Company.
(a) Valuation of securities--Portfolio securities which are
traded on stock exchanges are valued at the last sale price 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. 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
Directors as the primary market. Securities traded in the over-the-
counter market are valued at the last available bid price in the
over-the-counter market prior to the time of valuation. Options
written by the Company are valued at the last asked price in the case
of exchange-traded options or in the case of options traded in the
over-the-counter market, the average of the last asked price as
obtained from one or more dealers. Options purchased by the
Company are valued at the last bid price in the case of exchange-
traded options or, in the case of options traded in the over-the-
counter market, the average of the last bid price as obtained
from two or more dealers unless there is only one dealer, in
which case that dealer's price is used. Securities with sixty
days or less to maturity are valued at amortized cost, which
approximates market. 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 Directors of the Company.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the
period. Foreign currency transactions are the result of settling
(realized) or valuing (unrealized) such transactions expressed in
foreign currencies into US dollars. Realized and unrealized gains
or losses from investments include the effects of foreign
exchange rates on investments.
The Company is authorized to enter into forward foreign exchange contracts as a
hedge against either specific transactions or portfolio positions. Such
contracts are not entered on the Company's records. However, the effect on
opera- tions is recorded from the date the Company enters into such contracts.
Premium or discount is amortized over the life of the contracts.
(c) Options--The Company can write covered call options and
purchase put options. When the Company writes an option, an
amount equal to the premium received by the Company is reflected
as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current
value of the option written.
62
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
NOTES TO FINANCIAL STATEMENTS (continued)
When a security is sold through an exercise of an option, the
related premium received (or paid) is deducted from (or added
to) the basis of the security sold. When an option expires
(or the Company enters into a closing transaction), the
Company realizes a gain or loss on the option to the extent
of the premiums received or paid (or gain or loss to the extent
the cost of the closing transactions exceeds the premium
paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required. Under the applicable foreign tax law,
a withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Dividend income is recorded on
the ex-dividend date, except that if the ex-dividend date has
passed, certain dividends from foreign securities are recorded as
soon as the Company is informed of the ex-dividend date. Interest
income is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Deferred organization expenses and prepaid registration
fees--Costs related to the organization of the second class of
shares are charged to expense over a five-year period. Prepaid
registration fees are charged to expense as the related shares
are issued.
(g) Dividends and distributions--Dividends and distributions paid
by the Company are recorded on the ex-dividend dates.
(h) Reclassifications--Certain 1992 amounts have been
reclassified to conform to the 1993 presentation. Accumulated
Investment loss-net, in the amount of $1,566,434, has been
reclassified to paid-in capital and undistributed realized gains,
as appropriate.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement
with Merrill Lynch Asset Management ("MLAM"). MLAM is the name
under which Merrill Lynch Investment Management, Inc. ("MLIM")
does business. MLIM is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. Pursuant to the Agreement, MLAM will be
responsible for the Company's portfolio and will provide, or
arrange for affiliates to provide, the administrative services
necessary for the operation of the Company.
Effective January 1, 1994, the investment advisory business of
MLAM was reorganized from a corporation to a limited partnership.
The general partner of MLAM is Princeton Services, Inc., an
indirect wholly-owned subsidiary of Merrill Lynch & Co.
As compensation for its services to the Company, the Investment
Adviser receives monthly compensation at the annual rate of 1.0%
of the average daily net assets of the Company. MLAM has entered
into Investment Research Agreements with Lombard Odier Global Port-
folio Management Limited ("LOIPM") and Nomura Capital Manage-
ment, Inc. ("NCM") pursuant to which LOIPM and NCM furnish MLAM
with economic research, securities analysis and investment
recommendations and review and render investment research with
respect to the portfolio of the Company. Pursuant to their
respective Investment Research Agreements, the Investment Adviser
pays LOIPM and NCM fees at the annual rates of 0.15% and 0.20%,
respectively, of the average daily net assets of the Company.
Certain states in which shares of the Company are qualified for
sale impose limitations on the expenses of the Company. The most
restrictive annual expense limitation requires that the
Investment Adviser reimburse the Company to the extent that
expenses (excluding interest, taxes, distribution fees, brokerage
fees and commissions, and extraordinary items) exceed 2.5% of the
Company's first $30 million of average daily net assets, 2.0% of
the Company's next $70 million of average daily net assets, and
1.5% of the daily net assets in excess thereof. In the event
reimbursement is required pursuant to such limitations, MLAM will
be responsible for the amounts required to be reimbursed, but the
fees paid to LOIPM and NCM will be reduced pro rata. No fee
payment will be made to the Investment Adviser during any fiscal
year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment. For
the year ended November 30, 1993, investment advisory fees were
$2,329,402, of which $1,514,112 was paid to MLAM, $349,410 was
paid to LOIPM and $465,880 was paid to NCM under the terms of
their respective research agreements.
The Company has adopted a Plan of Distribution (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940
pursuant to which Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of MLIM, receives a fee from
the Company for the sale of Class B Shares at the end of each month
at the annual rate of 1.0% of the average daily net assets
attributable to Class B Shares of the Company to compensate the
Distributor for services provided and the expenses borne by it under
the Plan. As
63
<PAGE>
authorized by the Plan, the Distributor has entered into an
agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"),
an affiliate of MLIM, which provides for the compensation of MLPF&S
for providing distribution-related services to the Company. For
the year ended November 30, 1993, MLFD earned $256,934 under the
Plan, all of which was paid to MLPF&S pursuant to the agreement.
For the year ended November 30, 1993, MLFD earned underwriting
discounts of $7,191, and MLPF&S earned dealer concessions of
$118,953 on the sale of the Company's Class A Shares. MLPF&S also
received contingent deferred sales charges of $33,249 relating to
transactions in Class B Shares and $32,094 in commissions on the
execution of portfolio security transactions for the Company
during the year.
Financial Data Services, Inc. ("FDS"), a wholly owned subsidiary
of Merrill Lynch & Co., Inc., acts as the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or
directors of MLIM, NCM, LOIPM (including their affiliated companies),
MLPF&S, FDS, MLFD, and/or Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the year ended November 30, 1993 were
$187,497,303 and $127,140,501, respectively.
Net realized and unrealized gains (losses) as of November 30,
1993 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $20,344,160 $41,328,011
Put options purchased (935,607) --
Foreign currency transactions (302,845) (17,983)
----------- -----------
Total $19,105,708 $41,310,028
=========== ===========
As of November 30, 1993, net unrealized appreciation for Federal
income tax purposes aggregated $41,328,011, of which $51,388,872
related to appreciated securities and $10,060,861 related to
depreciated securities. The aggregate cost of investments at
November 30, 1993 for Federal income tax purposes was
$249,131,895.
Transactions in put options purchased for the year ended November
30, 1993 were as follows:
Premiums
Par Value Paid
Outstanding put options purchased at
beginning of year -- --
Options purchased $78,263,602 $ 2,074,513
Options expired (49,187,998) (1,302,352)
Options closed (29,075,604) (772,161)
----------- -----------
Outstanding put options purchased at end
of year -- --
=========== ===========
4. Capital Stock Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $75,813,575 and $15,149,240 for the year ended
November 30, 1993 and November 30, 1992, respectively.
Transactions in capital shares for Class A and Class B Shares
were as follows:
Class A Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 9,166,536 112,504,555
Shares issued to shareholders in reinvest-
ment of distributions 900,399 9,949,408
----------- -----------
Total issued 10,066,935 122,453,963
Shares redeemed (4,639,892) (55,755,689)
----------- -----------
Net increase 5,427,043 $66,698,274
=========== ===========
Class A Shares for the Year Ended Dollar
November 30, 1992 Shares Amount
Shares sold 2,220,109 27,778,220
Shares issued to shareholders in reinvest-
ment of dividends and distributions 363,981 4,062,931
----------- -----------
Total issued 2,584,090 31,841,151
Shares redeemed (3,549,718) (43,173,181)
----------- -----------
Net decrease (965,628) $(11,332,030)
=========== ===========
Class B Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 1,235,408 $15,456,464
Shares issued to shareholders in reinvest-
ment of distributions 126,908 1,380,757
----------- -----------
Total issued 1,362,316 16,837,221
Shares redeemed (649,303) (7,721,920)
----------- -----------
Net increase 713,013 $ 9,115,301
=========== ===========
64
<PAGE>
Merrill Lynch Global Holdings, November 30, 1993
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Year Ended Dollar
November 30, 1992 Shares Amount
Shares sold 526,670 $ 6,357,123
Shares issued to shareholders in reinvest-
ment of dividends and distributions 40,389 442,762
----------- -----------
Total issued 567,059 6,799,885
Shares redeemed (901,191) (10,617,095)
----------- -----------
Net decrease (334,132) $(3,817,210)
=========== ===========
5. Subsequent Event:
On December 15, 1993, the Board of Directors declared an ordinary
income dividend in the amount of $0.371217 per Class A Share and
$0.219221 per Class B Share, and a capital gains distribution of
$0.442875 per Class A Share and Class B Share, payable on
December 22, 1993 to shareholders of record as of December 14,
1993.
65
<PAGE>
THE FOLLOWING SEMI-ANNUAL FINANCIAL STATEMENTS FOR THE COMPANY FOR THE PERIOD
ENDED MAY 31, 1994, ARE UNAUDITED. THESE UNAUDITED INTERIM FINANCIAL STATEMENTS
REFLECT ALL ADJUSTMENTS WHICH ARE, IN THE OPINION OF MANAGEMENT, NECESSARY TO A
FAIR STATEMENT OF THE RESULTS FOR THE INTERIM PERIOD PRESENTED. ALL SUCH
ADJUSTMENTS ARE OF A NORMAL RECURRING NATURE.
66
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
LATIN Shares Held/ Value Percent of
AMERICA Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Argentina Beverages & Tobacco 47,000 Buenos Aires Embotelladora S.A. (BAESA)
(ADR)* $ 1,427,640 $ 1,633,250 0.4%
Energy 50,000 Yacimientos Petroliferos Fiscales S.A.
-Sponsored (ADR)* 950,000 1,318,750 0.3
Multi-Industry 187,500 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 1,047,194 1,018,185 0.3
Telecommunications 40,000 ++Telecom Argentina Stet-France Telecom
S.A. (ADR)* 1,400,296 2,600,000 0.7
Utilities 30,000 Central Puerto (ADR)* 795,000 1,207,500 0.3
Total Investments in Argentina 5,620,130 7,777,685 2.0
Brazil Telecommunications 20,000,000 Telecomunicacoes Brasileiras S.A.--
Telebras PN (Preferred) 621,462 767,910 0.2
490,668 Telecomunicacoes Brasileiras S.A.
--Telebras PN (Rights) (a) 0 0 0.0
------------ ------------ ------
621,462 767,910 0.2
Total Investments in Brazil 621,462 767,910 0.2
Chile Chemicals 45,000 Sociedad Quimica y Minera de Chile S.A.
(B Shares) (ADR)* 1,158,750 1,271,250 0.3
Metals 35,000 Madeco S.A. (ADR)* 525,000 1,041,250 0.3
Multi-Industry 40,000 GT Chilean Growth Fund 1,365,000 1,160,000 0.3
Utilities 40,000 Enersis S.A. (ADR)* 779,762 920,000 0.2
Total Investments in Chile 3,828,512 4,392,500 1.1
Mexico Beverages & Tobacco 20,000 Coca-Cola Femsa S.A. (ADR)* 454,319 622,500 0.2
30,000 Empresa La Moderna, S.A. de C.V. (ADR)* 992,735 847,500 0.2
20,000 Panamerican Beverages, Inc. (Class A)
(ADR)* 525,114 597,500 0.1
------------ ------------ ------
1,972,168 2,067,500 0.5
Broadcasting & 20,000 ++Grupo Televisa, S.A. de C.V. (ADR)* 500,000 1,155,000 0.3
Publishing
Engineering &
Construction 36,000 Grupo Mexicano de Desarrollo S.A.
(Class B) 612,000 580,500 0.2
36,000 Grupo Mexicano de Desarrollo S.A.
(Class L) (ADR)* 612,000 621,000 0.2
------------ ------------ ------
1,224,000 1,201,500 0.4
Multi-Industry 150,000 Grupo Carso, S.A. de C.V. 1,320,769 1,494,582 0.4
Steel 67,400 Grupo Simec, S.A. de C.V. (ADR)* 946,876 1,685,000 0.4
Telecommunications 20,000 Telefonos de Mexico, S.A. de C.V. (ADR)* 545,000 1,242,500 0.3
Total Investments in Mexico 6,508,813 8,846,082 2.3
Venezuela Steel 52,000 ++Venezolana de Prerreducidos Caroni
'Venprecar' C.A. (GDS)** 379,600 380,250 0.1
Total Investments in Venezuela 379,600 380,250 0.1
Total Investments in Latin America 16,958,517 22,164,427 5.7
</TABLE>
67
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NORTH
AMERICA
Canada Oil-Field Equipment 17,200 Enerflex Systems, Ltd. 170,527 217,328 0.0
Telecommunications 55,000 Newbridge Networks Corp. 855,730 2,536,875 0.7
50,000 Northern Telecom 1,474,875 1,556,250 0.4
------------ ------------ ------
2,330,605 4,093,125 1.1
Total Investments in Canada 2,501,132 4,310,453 1.1
United Appliances & Household 70,000 Corning Inc. 2,278,075 2,301,250 0.6
States 50,000 River Oaks Furniture Inc. 941,875 825,000 0.2
------------ ------------ ------
3,219,950 3,126,250 0.8
Automobiles 30,000 Ford Motor Corp. (8.40% Conv. Pfd.) 1,500,000 2,857,500 0.7
50,000 General Motors Corp. 2,112,574 2,687,500 0.7
------------ ------------ ------
3,612,574 5,545,000 1.4
Banking 25,000 Baybanks, Inc. 941,250 1,575,000 0.4
37,500 Mercantile Bancorp., Inc. 949,375 1,364,063 0.4
80,000 Midlantic National Bank 1,912,812 2,480,000 0.6
80,000 UJB Financial Corp. 1,602,623 2,280,000 0.6
------------ ------------ ------
5,406,060 7,699,063 2.0
Broadcasting & 50,000 Broadcasting Partners Inc. (Class A) 725,000 531,250 0.1
Publishing 25,000 Clear Channel Communications Inc. 707,500 915,625 0.2
100,000 Time Warner Inc. 2,832,157 3,875,000 1.0
50,000 Viacom Inc. 1,468,965 1,518,750 0.4
------------ ------------ ------
5,733,622 6,840,625 1.7
Building Materials 30,000 Owens-Corning Fiberglass Corp. 1,266,112 952,500 0.2
Business & Public 36,000 Microsoft Corp. 1,503,000 1,930,500 0.5
Services 70,000 Molten Metal Technology, Inc. 1,208,113 1,382,500 0.3
60,000 Oracle Systems Corp. 956,438 2,047,500 0.5
60,000 PacifiCare Health Systems (Class 'B') 1,862,500 3,405,000 0.9
80,000 Sierra Health Services Inc. 1,341,201 2,080,000 0.5
44,800 United HealthCare Corp. 737,136 2,156,000 0.6
25,000 US HealthCare Inc. 987,500 993,750 0.3
------------ ------------ ------
8,595,888 13,995,250 3.6
Computer Technology 40,000 Novell Inc. 1,253,000 710,000 0.2
Electrical Equipment 60,000 Ultratech Stepper Inc. 1,159,400 1,185,000 0.3
Electronics/ 25,000 Intel Corp. 590,937 1,562,500 0.4
Components 20,000 Motorola, Inc. 866,290 935,000 0.2
20,000 Texas Instruments Inc. 1,297,950 1,605,000 0.4
------------ ------------ ------
2,755,177 4,102,500 1.0
</TABLE>
68
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
NORTH
AMERICA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
United Energy Sources 20,000 Anadarko Petroleum, Inc. $ 724,326 $ 1,075,000 0.3%
States 15,000 Chevron Corp. 1,323,615 1,305,000 0.3
(concluded) 30,000 Enron Oil & Gas Co. 924,528 1,320,000 0.3
------------ ------------ ------
2,972,469 3,700,000 0.9
Food & Household 65,000 Performance Food Group Co. 1,010,421 1,332,500 0.4
Products
Forest Products & 25,000 Georgia-Pacific Corp. 1,820,250 1,612,500 0.4
Paper
Industrial--Other 60,000 Johnson Controls, Inc. 2,430,691 2,940,000 0.8
50,000 Varity Corp. 1,408,040 1,831,250 0.5
------------ ------------ ------
3,838,731 4,771,250 1.3
Insurance 170,000 AFLAC, Inc. 4,370,715 5,695,000 1.5
Leisure & Tourism 50,000 McDonald's Corp. 2,385,500 3,100,000 0.8
125,000 Mirage Resorts, Inc. 1,927,525 2,453,125 0.6
50,000 Walt Disney Co. 1,653,250 2,162,500 0.6
------------ ------------ ------
5,966,275 7,715,625 2.0
Merchandising 50,000 The Home Depot, Inc. 1,259,675 2,256,250 0.6
75,000 Home Shopping Network, Inc. 1,046,474 796,875 0.2
25,000 Sports & Recreation Inc. 972,500 975,000 0.3
30,000 Toys 'R' Us, Inc. 750,858 1,065,000 0.3
40,000 Wal-Mart Stores, Inc. 658,900 940,000 0.2
------------ ------------ ------
4,688,407 6,033,125 1.6
Metals--Non-Ferrous 40,000 Phelps Dodge Corp. 2,297,400 2,220,000 0.6
Multi-Industry 20,000 Tenneco Inc. 1,091,238 957,500 0.3
Oil-Field Equipment 30,000 Schlumberger Ltd. 1,752,332 1,717,500 0.5
Railroads 30,000 CSX Corp. 1,993,665 2,295,000 0.6
20,000 Consolidated Rail Corp. 931,200 1,097,500 0.3
------------ ------------ ------
2,924,865 3,392,500 0.9
Recreation 18,300 Mikohn Gaming Corp. 263,062 242,475 0.1
US$ 1,500,000 United Gaming, Inc., 7.50% due 9/15/2003 1,500,000 1,215,000 0.3
------------ ------------ ------
1,763,062 1,457,475 0.4
Telecommunications 100,392 Airtouch Communications, Inc. 2,288,552 2,447,055 0.6
349 Pacific Telesis Group 11,111 10,601 0.0
------------ ------------ ------
2,299,663 2,457,656 0.6
Total Investments in the United States 69,797,611 87,218,819 22.6
Total Investments in North America 72,298,743 91,529,272 23.7
PACIFIC BASIN
Australia Banking 200,000 ANZ Banking Group 746,255 636,328 0.2
105,076 National Australia Bank, Ltd. 647,467 916,843 0.2
200,000 St. George Bank, Ltd. 873,812 930,132 0.2
------------ ------------ ------
2,267,534 2,483,303 0.6
</TABLE>
69
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Broadcasting & 150,000 News Corp., Ltd. (Ordinary) 1,090,627 1,000,999 0.3
Publishing
Industrial Components 220,000 Orbital Engine Corp., Ltd. 458,461 263,095 0.1
Metals 1,000,000 MIM Holdings, Ltd. 1,985,497 2,317,948 0.6
Real Estate 100,000 Lend Lease Corp. 1,265,923 1,218,030 0.3
Total Investments in Australia 7,068,042 7,283,375 1.9
Hong Kong Broadcasting & 1,000,000 Oriental Press Group 495,988 770,177 0.2
Publishing 380,000 Television Broadcast, Ltd. 1,477,469 1,537,117 0.4
------------ ------------ ------
1,973,457 2,307,294 0.6
Multi-Industry 520,000 Swire Pacific 'A' Ltd. 2,420,349 4,038,573 1.1
Real Estate 1,000,000 China Strategic Investment Ltd. 840,658 521,649 0.1
620,000 Sun Hung Kai Properties, Ltd. 2,945,354 4,173,193 1.1
------------ ------------ ------
3,786,012 4,694,842 1.2
Telecommunications 600,000 Hong Kong Telecommunications Ltd. 1,236,727 1,188,273 0.3
Utilities 1,000,000 China Light & Power Co., Ltd. 4,133,650 5,565,983 1.5
Total Investments in Hong Kong 13,550,195 17,794,965 4.7
Indonesia Automobile 100,000 Astra International Inc. 793,975 882,625 0.2
Cement 200,000 P.T. Indocement Tunggal Prakar 1,423,188 1,675,139 0.4
Textiles 330,000 Indorama Synthetics (Foreign) 975,477 1,319,085 0.3
Total Investments in Indonesia 3,192,640 3,876,849 0.9
Japan Appliances 200,000 Matsushita Electric Industrial Co. 2,837,637 3,499,044 0.9
80,000 Rinnai Corp. 1,452,936 2,302,103 0.6
44,500 Sony Corp. 2,433,123 2,646,176 0.7
------------ ------------ ------
6,723,696 8,447,323 2.2
Automobiles 40,000 Mabuchi Motor Co. 2,349,535 2,894,838 0.8
200,000 Toyota Motor Corp. 2,884,634 4,034,417 1.1
------------ ------------ ------
5,234,169 6,929,255 1.9
Banking 170,000 The Asahi Bank, Ltd. 1,779,958 1,885,277 0.5
100,000 The Bank of Tokyo, Ltd. 1,301,028 1,596,558 0.4
150,000 The Mitsubishi Bank, Ltd. 3,821,028 4,015,296 1.0
------------ ------------ ------
6,902,014 7,497,131 1.9
Broadcasting & 300,000 Tokyo Broadcasting System 3,736,661 4,990,440 1.3
Publishing
Business Services 150,000 Kamigumi Co., Ltd. 1,805,921 1,806,883 0.5
Chemicals 250,000 Asahi Chemical Industry 1,760,321 1,909,656 0.5
</TABLE>
70
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
PACIFIC BASIN Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Japan Construction & Housing 50,000 Kandenko Co., Ltd. $ 1,194,554 $ 1,008,604 0.3%
(concluded) 120,000 National House Industries 1,925,972 2,099,426 0.6
160,000 Sekisui House Ltd. 1,954,055 2,003,824 0.5
130,000 Shimizu Corp. 1,188,683 1,175,717 0.3
150,000 Taisei Prefab Construction Co. 2,333,723 1,864,245 0.5
------------ ------------ ------
8,596,987 8,151,816 2.2
Electrical & Electronics 200,000 Hitachi Ltd. 2,079,745 2,065,009 0.5
Electronics 150,000 Casio Computer Co. 1,853,397 1,892,925 0.5
29,500 Keyence Corp. 2,063,993 2,820,268 0.7
70,000 Murata Manufacturing Co., Ltd. 2,121,289 3,131,931 0.8
200,000 Sharp Corp. 3,027,869 3,441,683 0.9
70,000 Uniden Corp. 2,226,522 2,208,413 0.6
50,000 Victor Co. of Japan, Ltd. 682,703 702,677 0.2
------------ ------------ ------
11,975,773 14,197,897 3.7
Financial Services 300,000 Daiwa Securities Co., Ltd. 3,725,815 5,162,524 1.3
150,000 Mitsubishi Trust & Banking Corp. 1,920,692 2,423,518 0.6
------------ ------------ ------
5,646,507 7,586,042 1.9
Industrial Components 100,000 Futaba Industrial Co. 1,670,788 1,873,805 0.5
Insurance 200,000 Tokio Marine & Fire Insurance Co., Ltd. 2,573,815 2,619,503 0.7
Machinery & Engineering 100,000 Aichi Corp. 1,167,209 1,137,667 0.3
200,000 Makino Milling Machine 1,422,848 1,481,836 0.4
300,000 Mitsubishi Heavy Industries 2,198,026 2,199,809 0.6
------------ ------------ ------
4,788,083 4,819,312 1.3
Merchandising 60,000 Ito-Yokado Co., Ltd. 2,604,246 3,086,042 0.8
Metals 800,000 NKK Corp. 2,195,708 2,195,029 0.4
Real Estate 200,000 Mitsui Fudosan 2,482,763 2,390,057 0.6
Recreation 63,000 Sony Music Entertainment (Japan) Inc. 2,865,499 3,559,560 0.9
Telecommunications 94,000 Daimei Telecom Engineering 1,314,138 1,285,086 0.3
Utilities 270,000 Sumitomo Electric Industries, Ltd. 2,968,251 4,104,206 1.1
60,000 Tohoku Electric Power Co. 1,442,569 1,531,549 0.4
------------ ------------ ------
4,410,820 5,635,755 1.5
Wholesale & Inter- 35,000 Aoyama Trading Co. 2,287,334 1,435,469 0.4
national Trade 200,000 Mitsui & Co. 1,346,038 1,577,438 0.4
------------ ------------ ------
3,633,372 3,012,907 0.8
Total Investments in Japan 83,001,026 94,058,508 24.4
Malaysia Automobiles 100,000 Edaran Otomobil Nasional BHD 464,057 647,463 0.2
Banking 583,333 Commerce Asset-Holding BHD 1,276,855 1,967,587 0.5
Construction & Housing 150,000 Ekran BHD 573,279 1,221,262 0.3
Telecommunications 400,000 Telekom Malaysia BHD 1,837,601 2,946,536 0.8
Utilities 200,000 Tenaga Nasional BHD 879,094 1,054,550 0.3
Total Investments in Malaysia 5,030,886 7,837,398 2.1
</TABLE>
71
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
New Zealand Telecommunications 400,000 Telecom Corp. of New Zealand Ltd.
(Class C) (ADR)* 1,278,315 1,176,714 0.3
Total Investments in New Zealand 1,278,315 1,176,714 0.3
Singapore Air Transport 100,000 Singapore Airlines, Ltd. 383,769 867,580 0.2
Banking 149,500 The Development Bank of Singapore Ltd. 822,928 1,579,843 0.4
Multi-Industry 300,000 Amcol Holdings Ltd. 838,802 602,740 0.2
Shipping 350,000 Straits Steamship Land 788,684 940,639 0.3
Telecommunications 400,000 Singapore Telecommunications Ltd. 907,320 913,242 0.2
Transportation 120,000 Keppel Corp. Ltd. 851,434 845,401 0.2
Total Investments in Singapore 4,592,937 5,749,445 1.5
South Korea Aerospace 20,000 Samsung Aerospace Industries 821,485 868,702 0.2
2,983 Samsung Aerospace Industries (New) 77,985 78,110 0.0
------------ ------------ ------
899,470 946,812 0.2
Banking 75,640 Hanil Bank 1,123,122 857,967 0.2
Construction & Housing 26,265 Hyundai Engineering and Construction Co. 539,284 1,342,911 0.4
Ship Building 14,500 Samsung Heavy Industry 737,089 827,389 0.2
Utilities 40,000 Korea Electric Power Co. 1,097,115 1,528,915 0.4
Total Investments in South Korea 4,396,080 5,503,994 1.4
Thailand Building Materials 35,000 Siam Cement Group 1,001,562 1,672,886 0.4
Building Products 48,500 Jasmine Ltd. 670,900 670,901 0.2
Electrical Equipment 30,000 United Communication Industry 519,292 714,569 0.2
Electrical Services 20,000 Advanced Information Service 626,971 793,966 0.2
Total Investments in Thailand 2,818,725 3,852,322 1.0
Total Investments in the Pacific Basin 124,928,846 147,133,570 38.2
<CAPTION>
SOUTHEAST
ASIA Face Amount
<S> <C> <C> <C> <C> <C> <C>
India Electrical & Electronics $ 75,000 Sterlite Industry, 3.50% due 6/30/1999 75,000 74,250 0.0
Textiles & Apparel 40,000 Indian Rayon & Industries 844,207 830,000 0.2
Total Investments in India 919,207 904,250 0.2
Total Investments in Southeast Asia 919,207 904,250 0.2
</TABLE>
72
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
WESTERN Shares Held/ Value Percent of
EUROPE Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Belgium Utilities 5,250 Electrabel NPV $ 912,538 $ 887,674 0.2%
Total Investments in Belgium 912,538 887,674 0.2
Denmark Telecommunications 4,000 GN Store Nord Holding (GREAT NORDIC) 335,774 319,529 0.1
15,000 Tele Danmark A/S "B" 710,499 758,492 0.2
------------ ------------ ------
1,046,273 1,078,021 0.3
Total Investments in Denmark 1,046,273 1,078,021 0.3
Finland Food & Household 40,000 Huhtamaki Corp. 904,752 1,545,055 0.4
Products
Multi--Industry 5,000 OY Nokia AB 255,224 370,629 0.1
Total Investments in Finland 1,159,976 1,915,684 0.5
France Broadcasting & 5,000 Canal Plus 1,040,635 804,904 0.2
Publishing
Building Materials 8,500 Lapeyre S.A. 496,706 475,746 0.1
Business & Public 4,285 Compagnie Generale des Eaux 1,574,432 1,902,668 0.5
Services
Chemicals 5,000 Imetal Co. 502,687 501,954 0.1
Energy Services 6,000 Elf Aquitane 444,920 437,313 0.1
Engineering & 2,325 Colas Co. 411,884 418,897 0.1
Construction
Total Investments in France 4,471,264 4,541,482 1.1
Germany Automobiles 43,000 Daimler-Benz AG (ADR)* 2,010,250 2,112,375 0.6
Banking 2,000 Deutsche Bank AG 651,283 896,594 0.2
Health & Personal Care 3,000 Wella AG (Preferred) 1,257,499 1,682,482 0.4
Merchandising 3,000 Hornbach AG (Preferred) 1,612,790 3,156,934 0.8
1,312 Hornbach Baumarkt AG 691,841 798,053 0.2
------------ ------------ ------
2,304,631 3,954,987 1.0
Steel 4,000 Friedrich Grohe (Preferred) 874,709 1,090,024 0.3
Total Investments in Germany 7,098,372 9,736,462 2.5
Italy Banking 96,000 IMI (Ordinary) 619,722 739,158 0.2
Merchandising 125,000 La Rinascente RISP 285,348 492,615 0.1
Telecommunications 300,000 SIP Italia (Ordinary) 280,800 810,811 0.2
300,000 SIP Italia (Savings) 490,473 677,876 0.2
------------ ------------ ------
771,273 1,488,687 0.4
Total Investments in Italy 1,676,343 2,720,460 0.7
Netherlands Banking 26,000 ABN Amro Bank N.V. 770,721 851,396 0.2
Beverages & Tobacco 15,000 Heineken N.V. 1,523,893 1,833,830 0.5
Construction & Housing 50,000 IHC Caland N.V. 1,035,401 1,024,668 0.3
Food & Household 35,000 Kon Bols Wessanen 798,182 760,911 0.2
Products
Shipping 30,000 Ommeren (Kon. Van) 911,131 878,287 0.2
Total Investments in the Netherlands 5,039,328 5,349,092 1.4
</TABLE>
73
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Norway Broadcasting & 100,000 Schibsted Gruppen A/S 1,039,688 1,149,731 0.3
Publishing
Multi-Industry 40,000 Unitor Ships Service 796,035 757,140 0.2
Total Investments in Norway 1,835,723 1,906,871 0.5
Spain Energy & Petroleum 50,000 Repsol S.A. 1,662,606 1,578,753 0.4
Telecommunications 150,000 Telefonica de Espana Co. 2,015,867 2,036,149 0.5
Utilities 58,060 Empresa Nacional de Electricidad S.A. 2,056,698 2,805,555 0.7
Total Investments in Spain 5,735,171 6,420,457 1.6
Sweden Automobiles 14,500 Volvo AB 1,448,465 1,342,868 0.4
Health & Personal Care 113,400 Astra 'B' Fria 2,120,584 2,356,439 0.6
Merchandising 15,000 Hennes & Mauritz 409,324 781,170 0.2
Total Investments in Sweden 3,978,373 4,480,477 1.2
Switzerland Banking 4,000 Swiss Bank Corp. (Bearer) 849,733 1,152,639 0.3
Electrical Equipment 2,000 BBC Brown Boveri & Co. 1,542,228 1,797,432 0.5
Food & Household 1,100 Nestle AG 439,670 899,929 0.2
Products
Health & Personal Care 1,731 Roche Holding AG 6,874,061 8,284,600 2.2
Insurance 2,000 Swiss Reinsurance Co. (PC) 725,688 833,096 0.2
1,180 Zurich Insurance Co. 1,169,946 1,136,234 0.3
------------ ------------ ------
1,895,634 1,969,330 0.5
Recreation 7,500 Societe de Microelectronique et Horlogerie
(S.M.H.) AG (Registered) 255,866 941,512 0.3
Total Investments in Switzerland 11,857,192 15,045,442 4.0
United Banking 400,000 Bank of Scotland 1,207,550 1,070,284 0.3
Kingdom 300,000 National Westminster Bank PLC 1,836,513 1,931,953 0.5
------------ ------------ ------
3,044,063 3,002,237 0.8
Building Materials 500,000 Spring Ram Corp. PLC 1,450,088 436,503 0.1
& Components
Business & Public 125,000 Carlton Communications PLC (Ordinary) 1,292,970 1,647,753 0.4
Services
Energy Sources 450,000 British Petroleum Co. PLC 2,236,817 2,613,068 0.7
Food & Household 200,000 Cadbury Schweppes PLC 1,741,253 1,388,874 0.4
Products
Health & Personal Care 200,000 Goldsborough Healthcare PLC 506,868 453,510 0.1
Merchandising 100,102 Boots Co. PLC 721,992 773,267 0.2
125,714 Kingfisher PLC 1,115,090 1,026,463 0.3
160,000 Lloyds Chemists PLC 679,285 749,803 0.2
275,000 Next PLC 783,755 991,486 0.3
------------ ------------ ------
3,300,122 3,541,019 1.0
Multi-Industry 250,000 BTR PLC 1,464,905 1,409,660 0.4
150,000 Siebe PLC 1,033,849 1,253,955 0.3
------------ ------------ ------
2,498,754 2,663,615 0.7
Telecommunications 240,000 British Telecommunications PLC
(Ordinary) 1,460,378 1,316,086 0.3
Total Investments in the United Kingdom 17,531,313 17,062,665 4.5
Total Investments in Western Europe 62,341,866 71,144,787 18.5
</TABLE>
74
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Issue Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
United Commercial Paper*** $16,890,000 Associates Corp. of North America, 4.22%
States due 6/01/1994 $ 16,890,000 $ 16,890,000 4.4%
US Government & Federal Home Loan Mortgage Association:
Agency Obligations*** 8,000,000 3.82% due 6/01/1994 8,000,000 8,000,000 2.1
6,000,000 4.15% due 6/22/1994 5,985,475 5,985,475 1.5
Federal National Mortgage Association:
10,000,000 4.17% due 6/13/1994 9,986,100 9,986,100 2.6
15,000,000 4.16% due 6/27/1994 14,954,933 14,954,933 3.9
------------ ------------ ------
38,926,508 38,926,508 10.1
Total Investments in Short-Term
Securities 55,816,508 55,816,508 14.5
<CAPTION>
OPTIONS
Premiums Paid
<S> <C> <C> <C> <C> <C>
Currency Put Options Japanese Yen:
Purchased 139,108 Expiring December 1994 at Yen 107.80 625,985 189,743 0.1
136,030 Expiring January 1995 at Yen 110.27 627,097 126,508 0.0
Total Options Purchased 1,253,082 316,251 0.1
Total Investments $334,516,769 389,009,065 100.9
============
Liabilities in Excess of Other Assets (3,638,270) (0.9)
------------ ------
Net Assets $385,370,795 100.0%
============ ======
<FN>
(a) The rights may be exercised until June 27, 1994.
++ Restricted securities pursuant to Rule 144A amounted to $4,135,250, representing
1.1% of net assets.
* American Depositary Receipts (ADR).
** Global Depositary Shares (GDS).
*** Commercial Paper and certain US Government & Agency Obligations are traded on a
discount basis; the interest rates shown are the discount rates paid at the time of
purchase by the Company.
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 1994
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$333,263,687) (Note 1a) $388,692,814
Put options purchased, at value (cost--$1,253,082) (Notes 1a & 1c) 316,251
Receivables:
Capital shares sold $ 6,894,229
Securities sold 1,819,420
Dividends 1,021,871
Interest 25,007 9,760,527
------------
Prepaid registration fees and other assets (Note 1f) 19,130
------------
Total assets 398,788,722
------------
Liabilities: Payables:
Securities purchased 11,069,186
Capital shares redeemed 905,079
Investment adviser (Note 2) 332,516
Distributor (Note 2) 43,815 12,350,596
------------
Accrued expenses and other liabilities 1,067,331
------------
Total liabilities 13,417,927
------------
Net Assets: Net assets $385,370,795
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 2,527,222
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 396,546
Paid-in capital in excess of par 322,313,284
Undistributed investment income--net 718,979
Undistributed realized capital gains on investments and foreign
currency transactions--net 4,954,560
Unrealized appreciation on investments and foreign currency transactions--net 54,460,204
------------
Net assets $385,370,795
============
Net Asset Class A Shares--Based on net assets of $333,995,295 and
Value: 25,272,218 shares outstanding $ 13.22
============
Class B Shares--Based on net assets of $51,375,500 and
3,965,457 shares outstanding $ 12.96
============
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 1994
<S> <C> <C> <C>
Investment Dividends (net of $264,419 foreign withholding tax) $ 2,427,671
Income Interest and discount earned 709,454
(Notes 1d & 1e): ------------
Total income 3,137,125
------------
Expenses: Investment advisory fees (Note 2) 1,795,559
Distribution fees--Class B (Note 2) 220,132
Transfer agent fees--Class A (Note 2) 203,747
Custodian fees 111,547
Printing and shareholder reports 85,094
Accounting services 59,929
Registration fees (Note 1f) 36,052
Transfer agent fees--Class B (Note 2) 33,158
Professional fees 32,422
Directors' fees and expenses 14,280
Pricing fees 5,735
Other 3,278
------------
Total expenses 2,600,933
------------
Investment income--net 536,192
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 6,927,146
(Loss) on Foreign currency transactions--net (76,661) 6,850,485
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 14,101,116
(Notes 1b, 1e &3): Foreign currency transactions--net (950,940) 13,150,176
------------ ------------
Net realized and unrealized gain on investments
and foreign currency transactions 20,000,661
------------
Net Increase in Net Assets Resulting from Operations $ 20,536,853
============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: May 31, 1994 Nov. 30, 1993
<S> <C> <C> <C>
Operations: Investment income--net $ 536,192 $ 475,574
Realized gain on investments and foreign currency transactions--net 6,850,485 19,105,708
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 13,150,176 18,287,892
------------ ------------
Net increase in net assets resulting from operations 20,536,853 37,869,174
------------ ------------
Dividends & Distri- Investment income--net:
butions to Share- Class A (292,787) --
holders (Note 1g): Realized gain on investments--net:
</TABLE>
77
<PAGE>
<TABLE>
<S> <C> <C> <C>
Class A (15,976,086) (11,512,553)
Class B (1,819,251) (1,598,607)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (18,088,124) (13,111,160)
------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 92,478,571 75,813,575
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 94,927,300 100,571,589
Beginning of period 290,443,495 189,871,906
------------ ------------
End of period* $385,370,795 $290,443,495
============ ============
<FN>
* Undistributed investment income--net $ 718,979 $ 475,574
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
The following per share data and For the For the
ratios have been derived from information Six Months Seven-Month
provided in the financial statements. Ended For the Year Ended Period Ended
May 31, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994++ 1993++ 1992++ 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.07 $ 11.78 $ 10.95 $ 10.48 $ 10.91
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .03 .04 .10 .16 .17
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .93 2.07 1.05 .53 (.30)
-------- -------- -------- -------- --------
Total from investment operations .96 2.11 1.15 .69 (.13)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.01) -- (.10) (.21) (.13)
Realized gain on investments--net (.80) (.82) (.22) (.01) (.17)
-------- -------- -------- -------- --------
Total dividends and distributions (.81) (.82) (.32) (.22) (.30)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.22 $ 13.07 $ 11.78 $ 10.95 $ 10.48
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.65%+++ 19.16% 10.67% 6.77% (1.45%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.32%* 1.43% 1.49% 1.48% 1.59%*
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .42%* .32% (.19%) 1.31% 2.63%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $333,995 $256,203 $166,947 $165,687 $176,898
Data: ======== ======== ======== ======== ========
Portfolio turnover 22.44% 56.98% 65.93% 63.94% 34.44%
======== ======== ======== ======== ========
<FN>
* Annualized.
** Total investment returns exclude the effects of sales loads.
++ Based on average shares outstanding during the period.
+++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class B
The following per share data and For the For the
ratios have been derived from information Six Months Seven-Month
provided in the financial statements. Ended For the Year Ended Period Ended
May 31, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994++ 1993++ 1992++ 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.74 $ 11.62 $ 10.82 $ 10.36 $ 10.82
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.04) (.08) (.03) .04 .10
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net .92 2.02 1.05 .54 (.30)
-------- -------- -------- -------- --------
Total from investment operations .88 1.94 1.02 .58 (.20)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- -- (.11) (.09)
Realized gain on investments--net (.66) (.82) (.22) (.01) (.17)
-------- -------- -------- -------- --------
Total dividends and distributions (.66) (.82) (.22) (.12) (.26)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.96 $ 12.74 $ 11.62 $ 10.82 $ 10.36
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 7.12%+++ 17.87% 9.58% 5.67% (2.08%)+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding distribution fees 1.34%* 1.46% 1.52% 1.51% 1.63%*
Net Assets: ======== ======== ======== ======== ========
Expenses 2.34%* 2.46% 2.52% 2.51% 2.63%*
======== ======== ======== ======== ========
Investment income (loss)--net (.57%)* (.72%) (1.19%) .25% 1.54%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 51,376 $ 34,241 $ 22,925 $ 24,960 $ 22,623
Data: ======== ======== ======== ======== ========
Portfolio turnover 22.44% 56.98% 65.93% 63.94% 34.44%
======== ======== ======== ======== ========
<FN>
* Annualized.
** Total investment returns exclude the effects of sales loads.
++ Based on average shares outstanding during the period.
+++ Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Holdings (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Company offers both Class A and Class B Shares.
Class A Shares are sold with a front-end sales charge. Class B Shares
may be subject to a contingent deferred sales charge. Both classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B Shares bear
certain expenses related to the distribution of such shares and have
exclusive voting rights with respect to matters relating to such
distribution expenditures. The following is a summary of significant
accounting policies followed by the Company.
(a) Valuation of securities--Portfolio securities which are traded on
stock exchanges are valued at the last sale price 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. 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 Directors as the primary market. Securities
traded in the over-the-counter market are valued at the last available
bid price in the over-the-counter market prior to the time of valuation.
Options written by the Company are valued at the last asked price in the
case of exchange-traded options or in the case of options traded in the
over-the-counter market, the average of the last asked price as obtained
from one or more dealers. Options purchased by the Company are valued at
the last bid price in the case of exchange-traded options or, in the case
of options traded in the over-the-counter market, the average of the last
bid price as obtained from two or more dealers unless there is only one
dealer, in which case that dealer's price is used. Securities with sixty
days or less to maturity are valued at amortized cost, which approximates
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 Directors of
the Company.
(b) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are
the result of settling (realized) or valuing (unrealized) such transactions
expressed in foreign currencies into US dollars. Realized and unrealized gains
or losses from investments include the effects of foreign exchange rates on
investments.
The Company is authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures.
The Company is authorized to enter into forward foreign exchange contracts
as a hedge against either specific transactions or portfolio positions.
Such contracts are not entered on the Company's records. However, the effect
on operations is recorded from the date the Company enters into such contracts.
Premium or discount is amortized over the life of the contracts.
(c) Options--The Company can write covered call options and purchase put
options. When the Company writes an option, an amount equal to the premium
received by the Company is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect the
current value of the option written.
When a security is sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis of the
security sold. When an option expires (or the Company enters into a closing
transaction), the Company realizes a gain or loss on the option to the extent
of the premiums received or paid (or gain or loss to the extent the cost of
the closing transactions exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Company's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.
80
<PAGE>
Merrill Lynch Global Holdings, May 31, 1994
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend date, except that if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the Company is informed of the ex-dividend date. Interest
income is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the
Company are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). Effective January 1, 1994, the
investment advisory business of MLAM was reorganized from a corporation
to a limited partnership. Both prior to and after the reorganization,
ultimate control of MLAM was vested with Merrill Lynch & Co., Inc.
("ML & Co."). The general partner of MLAM is Princeton Services, Inc.,
an indirect wholly-owned subsidiary of ML & Co. The limited partners are
ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"), which is
also an indirect wholly-owned subsidiary of ML & Co. The Company has also
entered into a Distribution Agreement and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or Distributor"), a wholly-owned
subsidiary of MLIM.
As compensation for its services to the Company, the Investment Adviser
receives monthly compensation at the annual rate of 1.0% of the average
daily net assets of the Company. MLAM entered into Investment Research
Agreements with Lombard Odier Global Portfolio Management Limited ("LOIPM")
and Nomura Capital Management, Inc. ("NCM") pursuant to which LOIPM and NCM
furnished MLAM with economic research, securities analysis and investment
recommendations and reviewed and rendered investment research with respect
to the portfolio of the Company. The Investment Research Agreements with
LOIPM and NCM were terminated as of April 1, 1994. Pursuant to their
respective Investment Research Agreements, the Investment Adviser paid
LOIPM and NCM fees at the annual rates of 0.15% and 0.20%, respectively,
of the average daily net assets of the Company.
Certain states in which shares of the Company are qualified for sale
impose limitations on the expenses of the Company. The most restrictive
annual expense limitation requires that the Investment Adviser reimburse
the Company to the extent that expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Company's first $30 million of average daily net assets,
2.0% of the Company's next $70 million of average daily net assets, and
1.5% of the daily net assets in excess thereof. In the event reimbursement
is required pursuant to such limitations, MLAM will be responsible for the
amounts required to be reimbursed, but the fees paid to LOIPM and NCM will
be reduced pro rata. No fee payment will be made to the Investment Adviser
during any fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment. For the year
ended May 31, 1994, investment advisory fees were $1,795,559, of which
$1,167,113 was paid to MLAM, $269,334 was paid to LOIPM and $359,112 was
paid to NCM under the terms of their respective research agreements.
The Company has adopted a Plan of Distribution (the "Plan") in accordance
with Rule 12b-1 under the Investment Company Act of 1940 pursuant to which
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of MLIM, receives fees. The Company pays the
Distributor an ongoing account maintenance fee and a distribution fee,
which are accrued daily and paid monthly at the annual rates of 0.25% and
0.75%, respectively, of the average daily net assets of the Class B Shares of
the Company. Pursuant to a sub-agreement with the Distributor, Merrill Lynch
also provides account maintenance and distribution services to the Company.
The ongoing account maintenance fee compensates the Distributor and Merrill
Lynch for providing account maintenance services to Class B shareholders.
The ongoing distribution fee compensates the Distributor and Merrill Lynch
for providing shareholder and distribution services and bearing certain
distribution-related expenses of the Company, including payments to
financial consultants for selling Class B Shares. For the six months ended
May 31, 1994, MLFD earned $220,132 under the Plan, all of which was paid to
MLPF&S pursuant to the agreement.
For the six months ended May 31, 1994, MLFD earned underwriting discounts of
$5,796, and MLPF&S earned dealer concessions of $82,669 on the sale of the
Company's Class A Shares. MLPF&S also received contingent deferred sales
charges of $15,605 relating to
81
<PAGE>
transactions in Class B Shares and $19,039 in commissions on the execution
of portfolio security transactions for the Company during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co.,
acts as the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or directors
of MLIM, NCM, LOIPM (including their affiliated companies), MLPF&S, FDS, MLFD,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended May 31, 1994 were $115,420,462 and $71,140,819, respectively.
Net realized and unrealized gains (losses) as of May 31, 1994 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 6,927,327 $ 55,429,127
Short-term investments (181) --
Currency put options purchased -- (936,831)
Foreign currency transactions (76,661) (32,092)
------------ ------------
Total $ 6,850,485 $ 54,460,204
============ ============
As of May 31, 1994, net unrealized appreciation for Federal income tax
purposes aggregated $54,492,296, of which $63,668,103 related to appreciated
securities and $9,175,807 related to depreciated securities. The aggregate
cost of investments including call options at May 31, 1994 for Federal
income tax purposes was $333,263,687.
4. Capital Stock Transactions:
Net increase in net assets derived from capital share transactions
was $92,478,571 and $75,813,575 for the six months ended May
31, 1994 and the year ended November 30, 1993, respectively.
Transactions in capital shares for Class A and Class B Shares were
as follows:
Class A Shares for the Six Months Ended Dollar
May 31, 1994 Shares Amount
Shares sold 7,930,258 $106,531,072
Shares issued to shareholders in reinvest-
ment of dividends and distributions 1,160,533 14,703,953
----------- ------------
Total issued 9,090,791 121,235,025
Shares redeemed (3,417,724) (45,527,043)
----------- ------------
Net increase 5,673,067 $ 75,707,982
=========== ============
Class A Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 9,166,536 $112,504,555
Shares issued to shareholders in reinvest-
ment of distributions 900,399 9,949,408
----------- ------------
Total issued 10,066,935 122,453,963
Shares redeemed (4,639,892) (55,755,689)
----------- ------------
Net increase 5,427,043 $ 66,698,274
=========== ============
Class B Shares for the Six Months Ended Dollar
May 31, 1994 Shares Amount
Shares sold 1,593,113 $ 20,973,634
Shares issued to shareholders in reinvest-
ment of distributions 131,099 1,636,116
----------- ------------
Total issued 1,724,212 22,609,750
Shares redeemed (445,482) (5,839,161)
----------- ------------
Net increase 1,278,730 $ 16,770,589
=========== ============
Class B Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 1,235,408 $ 15,456,464
Shares issued to shareholders in reinvest-
ment of distributions 126,908 1,380,757
----------- ------------
Total issued 1,362,316 16,837,221
Shares redeemed (649,303) (7,721,920)
----------- ------------
Net increase 713,013 9,115,301
=========== ============
5. Commitments:
On May 31, 1994, the Company had entered into forward exchange contracts
under which it had agreed to sell various foreign currencies with an
approximate value of $6,904,000 and buy various foreign currencies with
an approximate value of $10,993,000.
82
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies................ 2
Hedging Techniques............................. 3
Current Investment Restrictions................ 7
Management of the Company........................ 12
Directors and Officers......................... 12
Advisory and Management Arrangements........... 14
Purchase of Shares............................... 15
Redemption of Shares............................. 23
Portfolio Transactions and Brokerage............. 24
Determination of Net Asset Value................. 26
Shareholder Services............................. 27
Taxes............................................ 41
Performance Data................................. 44
General Information.............................. 46
Description of Shares.......................... 46
Computation of Offering Price Per Share........ 47
Independent Auditors........................... 47
Custodian...................................... 47
Transfer Agent................................. 47
Legal Counsel.................................. 48
Reports to Shareholders........................ 48
Additional Information......................... 48
Independent Auditors' Report..................... 49
Financial Statements (audited)................... 50
Financial Statements (unaudited)................. 66
</TABLE>
Code #10245-1094
Statement of
Additional Information
[INSERT ART HERE]
- ------------------------------------------------------
MERRILL LYNCH
GLOBAL HOLDINGS, INC.
October 21, 1994
Distributor:
Merrill Lynch Funds
Distributor, Inc.
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair
and accurate narrative descriptions of graphic and image material omitted from
this EDGAR Submission File due to ASCII-incompatibility and cross-references
this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for the six months ended May 31, 1994
(unaudited) and fiscal years ended November 30, 1993, 1992, and
1991, the seven month period ended November 30, 1990, each of the
fiscal years in the five year period ended April 30, 1990 and the
period July 2, 1984 (commencement of operations) to April 30, 1985
(audited).
Contained in Part B:
Schedules of Investments, as of November 30, 1993 (audited) and May
31, 1994 (unaudited).
Statements of Assets and Liabilities, as of November 30, 1993
(audited) and May 31, 1994 (unaudited).
Statements of Operations for the fiscal year ended November 30,
1993 (audited) and May 31, 1994 (unaudited).
Statements of Changes in Net Assets for the six months ended May
31, 1994 (unaudited) and fiscal years ended November 30, 1993, and
1992 (audited).
Financial Highlights for the six months ended May 31, 1994
(unaudited) and fiscal years ended November 30, 1993, 1992, and
1991, the seven month period ended November 30, 1990, and each of
the fiscal years in the two year period ended April 30, 1990
(audited).
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------------------------
<S> <C>
1 (a) -- Articles of Incorporation of Registrant, as amended.(a)
(b) -- Articles of Amendment to Articles of Incorporation of Registrant.(c)
2 -- By-Laws of Registrant.(c)
3 -- None.
4 -- Copies of instruments defining the rights of shareholders, including the relevant portions of the
Articles of Incorporation, as amended, and By-Laws of Registrant.(f)
5 (a) -- Investment Advisory Agreement between Registrant and Merrill Lynch Asset Management, Inc.(e)
(b) -- Supplement to Investment Advisory Agreement between Registrant and Merrill Lynch Asset Management,
L.P., dated January 3, 1994.
6 (a) -- Class A Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc.(a)
(b) -- Class B Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc.(c)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds Distributor, Inc. with respect to the
Merrill Lynch Mutual Fund Advisor Program.(g)
(d) -- Form of new Class A Shares Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.
(e) -- Form of Class C Shares Distribution Agreement between Registrant and Merrill Lynch Funds Distributor,
Inc.
(f) -- Form of Class D Shares Distribution Agreement between Registrant and Merrill Lynch Funds Distributor,
Inc.
7 -- None.
8 -- Custody Agreement between Registrant and The Chase Manhattan Bank, N.A.(a)
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------------------------
<S> <C>
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between
Registrant and Merrill Lynch Financial Data Service, Inc. (now known as Financial Data Services,
Inc.)(b)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(a)
14 -- None.
15(a) -- Amended and Restated Class B Distribution Plan of the Registrant and Distribution Plan Sub-
Agreement.(g)
(b) -- Form of Class C Shares Distribution Plan and Class C Shares Distribution Plan Sub-Agreement of the
Registrant.
(c) -- Form of Class D Shares Distribution Plan and Class D Shares Distribution Plan Sub-Agreement of the
Registrant.
16(a) -- Schedule for computation of each performance quotation for Class A shares provided in the Registration
Statement in response to Item 22.(c)
(b) -- Schedule of computation of each performance quotation for Class B shares provided in the Registration
Statement in response to Item 22.(d)
17(a) -- Financial Data Schedule for the Six Months Ended May 31, 1994, relating to Class A Shares.
(b) -- Financial Data Schedule for the Year Ended November 30, 1993, relating to Class A Shares.
(c) -- Financial Data Schedule for the Six Months Ended May 31, 1994, relating to Class B Shares.
(d) -- Financial Data Schedule for the Year Ended November 30, 1993, relating to Class B Shares.
</TABLE>
- ------------------
(a) Filed on April 20, 1984 as an Exhibit to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement under the Securities Act of 1933.
(b) Filed on August 29, 1988 as an Exhibit to Post-Effective Amendment No. 5 to
Registrant's Registration Statement under the Securities Act of 1933.
(c) Filed on October 21, 1988 as an Exhibit to Post-Effective Amendment No. 6 to
Registrant's Registration Statement under the Securities Act of 1933.
(d) Filed on August 28, 1989 as an Exhibit to Post-Effective Amendment No. 7 to
Registrant's Registration Statement under the Securities Act of 1933.
(e) Filed on July 2, 1990 as an Exhibit to Post-Effective Amendment No. 8 to
Registrant's Registration Statement under the Securities Act of 1933.
(f) Reference is made to Article III (Sections 3 and 4), Article VI (Sections 2,
3 and 5), Article VII, Article VIII and Article X of the Registrant's
Articles of Incorporation, as amended, filed as Exhibit (1)(a) to the
Registrant's Registration Statement; amended and restated Article V
contained in the Articles of Amendment filed as Exhibit (1)(b) to the
Registrant's Registration Statement; and Article II, Article III (Sections
1, 2, 3, 5, 6 and 17), Article V (Section 7), Article VI, Article VII,
Article XII, Article XIII, and Article XIV of the Registrant's By-Laws
previously filed as Exhibit (2) to the Registrant's Registration Statement.
(g) Filed on March 30, 1994 as an Exhibit to Post-Effective Amendment No. 12 to
Registrant's Registration Statement under the Securities Act of 1933.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant is not controlled by or under common control with any other
person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS AT
TITLE OF CLASS SEPTEMBER 30, 1994
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Shares of Class A Common Stock, par value $0.10 per share..................................... 1,579
Shares of Class B Common Stock, par value $0.10 per share..................................... 126
Shares of Class C Common Stock, par value $0.10 per share..................................... 0
Shares of Class D Common Stock, par value $0.10 per share..................................... 0
</TABLE>
C-2
<PAGE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article VI of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the Distribution Agreement.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith or reckless disregard of the duties involved in
the conduct of his office. Absent a court determination that an officer or
director seeking indemnification was not liable on the merits or guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, the decision by the Registrant to
indemnify such person must be based upon the reasonable determination of
independent counsel or non-party independent directors, after review of the
facts, that such officer or director is not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
Each officer and director of the Registrant claiming indemnification within
the scope of Article VI of the By-Laws shall be entitled to advances from the
Registrant for payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the full extent
permitted under the General Laws of the State of Maryland; provided, however,
that the person seeking indemnification shall provide to the Registrant a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Registrant has been met and a written
undertaking to repay any such advance, if it should ultimately be determined
that the standard of conduct has not been met, and provided further that at
least one of the following additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Registrant for his undertaking; (b) the Registrant is insured against losses
arising by reason of the advance; or (c) a majority of a quorum of non-party
independent directors, or independent legal counsel in a written opinion, shall
determine, based on a review of facts readily available to the Registrant at the
time the advance is proposed to be made, that there is reason to believe that
the person seeking indemnification will ultimately be found to be entitled to
indemnification.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his activities as officer or
director of the Registrant. The Registrant, however, may not purchase insurance
on behalf of any officer or director of the Registrant that protects or purports
to protect such person from liability to the Registrant or to its stockholders
to which such officer or director would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office.
The Registrant may indemnify, make advances or purchase insurance to the
extent provided in Article VI of the By-Laws on behalf of an employee or agent
who is not an officer or director of the Registrant.
In Section 9 of the Class A and B 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 '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 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 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 Act and will be governed by the final adjudication of
such issue.
C-3
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management ('MLAM' or the 'Investment Adviser'), acts as investment adviser for
the following registered investment companies: Convertible Holdings, Inc.,
Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas
Income Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset
Income Fund, Inc., Merrill Lynch Balanced Fund for Investment and Retirement,
Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets Fund,
Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Fund For Tomorrow, Inc., Merrill
Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Convertible Fund, Inc., Merrill
Lynch Global Holdings Inc., Merrill Lynch Global Resources Trust, Merrill Lynch
Global Utility Fund, Inc., Merrill Lynch Global SmallCap, Inc., Merrill Lynch
Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund, Inc.,
Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Institutional
Intermediate Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin
America Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific
Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series
Trust, Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Series Fund,
Inc., Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., 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. Fund Asset
Management, L.P. ('FAM'), an affiliate of the Investment Adviser, acts as the
investment adviser for the following registered investment companies: Apex
Municipal Fund, Inc., 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., Corporate High Yield Fund,
Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund, Inc., Financial
Institutions Series Trust, Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., Merrill Lynch Basic Value Fund, Inc., Merrill
Lynch California Municipal Series Trust, Merrill Lynch Corporate Bond Fund,
Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch Funds for
Institutions Series, Merrill Lynch Multi-State Municipal Series Trust, Merrill
Lynch Multi-State Limited Maturity 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., MuniAssets
Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program,
Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc.,
MuniVest Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida
Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc.,
MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Insured Fund,
MuniYield Arizona Fund, Inc., MuniYield Arizona Fund II, 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
Insured Fund II, 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 New York Insured Fund III, Inc., MuniYield Pennsylvania Fund,
MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Senior Strategic
Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew York
Holdings, Inc. and Worldwide DollarVest Fund, Inc. The address of each of these
investment companies is Box 9011, Princeton, New Jersey 08543-9011, except that
the address of Merrill Lynch Funds for Institutions Series and Merrill Lynch
Institutional Intermediate Fund is One Financial Center, 15th Floor, Boston,
Massachusetts 02111-2646. The address of the Investment Adviser and FAM is also
P.O. Box 9011, Princeton, New Jersey 08543-9011. 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.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since December 1, 1991 for his or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr. Zeikel is President, Mr.
Richard is Treasurer and Mr. Glenn is Executive Vice President of substantially
all of the investment companies described in the preceding paragraph, and
Messrs. Durnin,
C-4
<PAGE>
Giordano, Harvey, Kirstein, Monagle and Ms. Griffin are directors, trustees or
officers of one or more of such companies.
<TABLE>
<CAPTION>
POSITION(S) WITH THE OTHER SUBSTANTIAL BUSINESS,
NAME INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
- ----------------------------------------- --------------------------- -----------------------------------------
<S> <C> <C>
ML & Co.................................. Limited Partner Financial Services Holding Company
Merrill Lynch Investment Management
Inc.................................... Limited Partner Investment Advisory Services; Limited
Partner of FAM
Princeton Services, Inc. ('Princeton
Services')............................. General Partner General Partner of FAM
Arthur Zeikel............................ President President of FAM; President and Director
of Princeton Services; Director of
Merrill Lynch Funds Distributor, Inc.
('MLFD')
Terry K. Glenn........................... Executive Vice President Executive Vice President of ML & Co.;
Executive Vice President of Merrill
Lynch Executive Vice President of FAM;
Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of Financial
Data Services, Inc. ('FDS'); President
of Princeton Administrators
Bernard J. Durnin........................ Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Vincent R. Giordano...................... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Elizabeth Griffin........................ Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Norman R. Harvey......................... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
N. John Hewitt........................... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Philip L. Kirstein....................... Senior Vice President, Senior Vice President, General Counsel
General Counsel and and Secretary of FAM; Senior Vice
Secretary President, General Counsel, Director
and Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss.......................... Senior Vice President and Senior Vice President and Controller of
Controller FAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller...................... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr.................... Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH THE OTHER SUBSTANTIAL BUSINESS,
NAME INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
- ----------------------------------------- --------------------------- -----------------------------------------
Gerald M. Richard........................ Senior Vice President and Senior Vice President and Treasurer of
Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD
<S> <C> <C>
Richard L. Rufener....................... Senior Vice President Senior Vice President of FAM; Vice
President of MLFD; Senior Vice
President of Princeton Services
Ronald L. Welburn........................ Senior Vice President Senior Vice President of FAM; Senior Vice
President of Princeton Services
Anthony Wiseman.......................... Senior Vice President Senior Vice President of Princeton
Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the investment companies referred to in the first paragraph of Item 28 except
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, 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 New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Strategic High Income Fund, Inc., Taurus
MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc. and Worldwide
DollarVest Fund, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook,
Aldrich, Breen, Graczyk, Fatseas and Wasel is One Financial Center, Boston,
Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
- ------------------------------------- ------------------------------------------ ------------------------------
<S> <C> <C>
Terry K. Glenn....................... President and Director Executive Vice President
Arthur Zeikel........................ Director President and Director
Philip L. Kirstein................... Director None
William E. Aldrich................... Senior Vice President None
Kevin P. Boman....................... Vice President None
Robert W. Crook...................... Senior Vice President None
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
- ------------------------------------- ------------------------------------------ ------------------------------
<S> <C> <C>
Michael J. Brady..................... Vice President None
William M. Breen..................... Vice President None
Sharon Creveling..................... Vice President and Assistant Treasurer None
Mark A. DeSario...................... Vice President None
James T. Fatseas..................... Vice President None
Stanley Graczyk...................... Vice President None
Michelle T. Lau...................... Vice President None
Debra W. Landsman-Yaros.............. Vice President None
Gerald M. Richard.................... Vice President and Treasurer Treasurer
Richard L. Rufener................... Vice President None
Salvatore Venezia.................... Vice President None
William Wasel........................ Vice President None
Robert Harris........................ Secretary Secretary
</TABLE>
(c) Not applicable.
ITEM 30. 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, and Financial Data Services, Inc., 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management of the
Company--Advisory and Management Arrangements' in the Prospectus constituting
Part A of the Registration Statement and under 'Management of the
Company--Advisory and Management Arrangements' in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is not
a party to any management related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Plainsboro, and the State of New Jersey, on the 14th day of October
1994.
MERRILL LYNCH INTERNATIONAL HOLDINGS,
INC.
(Registrant)
By /s/ ARTHUR ZEIKEL
-----------------------------------
(ARTHUR ZEIKEL, PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT TO REGISTRANT'S REGISTRATION STATEMENT HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE(S) INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- ---------------------------------- -------------------
<C> <S> <C>
/s/ ARTHUR ZEIKEL President and Director (Principal October 14, 1994
- ------------------------------------------------- Executive Officer)
(ARTHUR ZEIKEL)
/s/ GERALD M. RICHARD Treasurer (Principal Financial and October 14, 1994
- ------------------------------------------------- Accounting Officer)
(GERALD M. RICHARD)
DONALD CECIL* Director October 14, 1994
- -------------------------------------------------
(DONALD CECIL)
EDWARD H. MEYER* Director October 14, 1994
- -------------------------------------------------
(EDWARD H. MEYER)
CHARLES C. REILLY* Director October 14, 1994
- -------------------------------------------------
(CHARLES C. REILLY)
RICHARD R. WEST* Director October 14, 1994
- -------------------------------------------------
(RICHARD R. WEST)
*By /s/ARTHUR ZEIKEL October 14, 1994
- -------------------------------------------------
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT)
</TABLE>
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ------------------------------------------------------------------------------------------------ -------
<S> <C> <C>
1 (a) -- Articles of Incorporation of Registrant, as amended.(a)
(b) -- Articles of Amendment to Articles of Incorporation of Registrant.(c)
2 -- By-Laws of Registrant.(c)
3 -- None.
4 -- Copies of instruments defining the rights of shareholders, including the relevant portions of
the Articles of Incorporation, as amended, and By-Laws of Registrant.(f)
5 (a) -- Investment Advisory Agreement between Registrant and Merrill Lynch Asset Management, Inc.(e)
(b) -- Supplement to Investment Advisory Agreement between Registrant and Merrill Lynch Asset
Management, L.P., dated January 3, 1994.
6 (a) -- Class A Distribution Agreement between Registrant and Merrill Lynch Funds Distributor,
Inc.(a)
(b) -- Class B Distribution Agreement between Registrant and Merrill Lynch Funds Distributor,
Inc.(c)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds Distributor, Inc. with
respect to the Merrill Lynch Mutual Fund Advisor Program.(g)
(d) -- Form of new Class A Shares Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.
(e) -- Form of Class C Shares Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.
(f) -- Form of Class D Shares Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.
7 -- None.
8 -- Custody Agreement between Registrant and The Chase Manhattan Bank, N.A.(a)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement
between Registrant and Merrill Lynch Financial Data Service, Inc. (now known as Financial
Data Services, Inc.)(b)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(a)
14 -- None.
15 (a) -- Amended and Restated Class B Distribution Plan of the Registrant and Distribution Plan
Sub-Agreement.(g)
(b) -- Form of Class C Shares Distribution Plan and Class C Shares Distribution Plan Sub-Agreement
of the Registrant.
(c) -- Form of Class D Shares Distribution Plan and Class D Shares Distribution Plan Sub-Agreement
of the Registrant.
16 (a) -- Schedule for computation of each performance quotation for Class A shares provided in the
Registration Statement in response to Item 22.(c)
(b) -- Schedule of computation of each performance quotation for Class B shares provided in the
Registration Statement in response to Item 22.(d)
17 (a) -- Financial Data Schedule for the Six Months Ended May 31, 1994, relating to Class A Shares.
(b) -- Financial Data Schedule for the Year Ended November 30, 1993, relating to Class A Shares.
(c) -- Financial Data Schedule of the Six Months Ended May 31, 1994, relating to Class B Shares.
(d) -- Financial Data Schedule for the Year Ended November 30, 1993, relating to Class B Shares.
</TABLE>
(footnotes on following page)
<PAGE>
- ------------------
(a) Filed on April 20, 1984 as an Exhibit to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement under the Securities Act of 1933.
(b) Filed on August 29, 1988 as an Exhibit to Post-Effective Amendment No. 5 to
Registrant's Registration Statement under the Securities Act of 1933.
(c) Filed on October 21, 1988 as an Exhibit to Post-Effective Amendment No. 6 to
Registrant's Registration Statement under the Securities Act of 1933.
(d) Filed on August 28, 1989 as an Exhibit to Post-Effective Amendment No. 7 to
Registrant's Registration Statement under the Securities Act of 1933.
(e) Filed on July 2, 1990 as an Exhibit to Post-Effective Amendment No. 8 to
Registrant's Registration Statement under the Securities Act of 1933.
(f) Reference is made to Article III (Sections 3 and 4), Article VI (Sections 2,
3 and 5), Article VII, Article VIII and Article X of the Registrant's
Articles of Incorporation, as amended, filed as Exhibit (1)(a) to the
Registrant's Registration Statement; amended and restated Article V
contained in the Articles of Amendment filed as Exhibit (1)(b) to the
Registrant's Registration Statement; and Article II, Article III (Sections
1, 2, 3, 5, 6 and 17), Article V (Section 7), Article VI, Article VII,
Article XII, Article XIII, and Article XIV of the Registrant's By-Laws
previously filed as Exhibit (2) to the Registrant's Registration Statement.
(g) Filed on March 30, 1994 as an Exhibit to Post-Effective Amendment No. 12 to
Registrant's Registration Statement under the Securities Act of 1933.
EXHIBIT 99.5(b)
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
WITH
MERRILL LYNCH ASSET MANAGEMENT
As of January 1, 1994 Merrill Lynch Investment Management, Inc.
d/b/a Merrill Lynch Asset Management was reorganized as a limited
partnership, formally known as Merrill Lynch Asset Management,
L.P. and continuing to do business under the name Merrill Lynch
Asset Management ("MLAM"). The general partner of MLAM is
Princeton Services, Inc. and the limited partners are Merrill
Lynch Investment Management, Inc. and Merrill Lynch & Co., Inc.
Pursuant to Rule 202(a)(1)-1 under the Investment Advisers Act of
1940 and Rule 2a-6 under the Investment Company Act of 1940 such
reorganization did not constitute an assignment of this
investment advisory agreement since it did not involve a change
of control or management of the investment adviser. Pursuant to
the requirements of Section 205 of the Investment Advisers Act of
1940, however, Merrill Lynch Asset Management hereby supplements
this investment advisory agreement by undertaking to advise you
of any change in the membership of the partnership within a
reasonable time after any such change occurs.
By /s/ Arthur Zeikel
-------------------------
Dated: January 3, 1994
EXHIBIT 99.6(d)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between
MERRILL LYNCH GLOBAL HOLDINGS INC., a Maryland corporation (the
"Fund"), and MERRILL LYNCH 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 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 in 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 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 prin-
cipal underwriter and distributor, except that:
(a) The Fund may, upon written notice to the Distributor,
from time to time designate other principal underwriters and dis-
tributors 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 pur-
chase 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 sub-
stantially 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 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) 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(d) hereof, used in determining the
public offering price on which such orders were based.
(b) 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(c) hereof, or to securities dealers having
agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.
(c) 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(f).
(d) The net asset value of Class A shares shall be deter-
mined 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 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 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.
(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 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 VII 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(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 redemption or repurchase by the Fund
of any of the Class A shares purchased by or through the Distri-
butor 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 repur-
chase within seven business days after the date of the confirma-
tion 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.
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 Dis-
tributor may reasonably request for use in connection with the
distribution of Class A shares of the Fund, and this shall in-
clude, 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 addi-
tional 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 Securi-
ties 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.
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 in-
vestment 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 Distri-
butor 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.
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 continuous offering of the Class A shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class A shares only to such selected dealers as are mem-
bers 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 regis-
tration 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).
(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 con-
sultants. 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 qualifi-
cation of the Class A shares for sale pursuant to this Agreement
and, if necessary or advisable in connection therewith, of quali-
fying 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 Distri-
butor 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, or on any other statute or at com-
mon 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 per-
formance 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 does
not elect to assume the defense of any such suit, it will reim-
burse the Distributor or such controlling person or persons, de-
fendant 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. Merrill Lynch Mutual Fund Adviser Program. In
connection with the Merrill Lynch Mutual Fund Adviser Program,
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, are authorized to offer and sell shares of
the Fund, as agent for the Fund, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until August __, 1995 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 Dis-
tributor, 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 12. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is specifi-
cally 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 13. 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.
Section 14. This Agreement supersedes the prior
Distribution Agreement entered into by the parties hereto with
respect to the Class A shares of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MERRILL LYNCH GLOBAL HOLDINGS
By
---------------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
---------------------------------------------
Title:
EXHIBIT A
MERRILL LYNCH GLOBAL HOLDINGS, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor")
has an agreement with Merrill Lynch Global Holdings, 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, and its Class A shares are registered under the
Securities Act of 1933, as amended. You have received a copy of
the Class A 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 of 1933, as
amended. 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 the Merrill Lynch Mutual Fund
Adviser program and such other 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. 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. The minimum
initial and subsequent purchase requirements are as set forth in
the current Prospectus and Statement of Additional Information of
the Fund.
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:
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
- ------------------ -------------- -------------- -----------
Less than $10,000...... 5.25% 5.54% 5.00%
$10,000 but 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% 0.76% 0.65%
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will 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 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 of 1940, as amended, 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 pur-
chase Class A shares of the Fund 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 Class A,
Class B, Class C and Class D shares of the Fund and of any other
investment company with an initial sales charge for which the Distributor
acts as the distributor. 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
$10,000 or more of Class A shares or of Class D shares of any other
investment company with an initial sales charge for which the Distributor
acts as the distributor 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. You shall not place orders for any of the Class A shares 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. 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. 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 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. 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.
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, 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.
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. 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. Each
party hereto has the right to cancel this agreement upon notice to the
other party.
11. 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.
12. You represent that you are a member of the National Association
of Securities Dealers, Inc. and, with respect to any sales in the United
States, we both hereby agree to abide by the Rules of Fair Practice of
such Association.
13. 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.
14. 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.
15. Your first order placed pursuant to this Agreement for the
purchase of Class A shares of the Fund will represent your acceptance of
this Agreement.
16. This Agreement supersedes any prior Selected Dealers Agreement
entered into by the parties hereto with respect to the Class A shares of
the Fund.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
--------------------------------------------
By:
----------------------------------------------------
Address: [800 Scudders Mill Road]
-----------------------------------------------
[Plainsboro, New Jersey 08536]
-------------------------------------------------------
Date: , 1994
--------------------------------------------------
EXHIBIT 99.6(e)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994, between
Merrill Lynch Global Holdings, Inc., a Maryland corporation (the
"Fund"), and MERRILL LYNCH 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 in-
terest of the Fund to offer its shares for sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either direct-
ly 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 Fund's Class C shares in order to promote the growth of
the Fund and facilitate the distribution of its Class C shares.
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
the Fund (sometimes herein referred to as "Class C shares") to
the public and hereby agrees during the term of this Agreement to
sell 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 prin-
cipal underwriter and distributor of the Class C shares, 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 of the Fund issued in connection with the merger or conso-
lidation 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 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) It is contemplated that 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
eligible investors or securities dealers. Investors eligible 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(c) hereof.
(b) The Class C shares are to be resold by the Distributor
to investors at net asset value, as set forth in Section 3(c)
hereof, or to securities dealers having agreements with the Dis-
tributor upon the terms and conditions set forth in Section 7
hereof.
(c) The net asset value of Class C shares of the Fund 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 and guidelines established by the Board of
Directors.
(d) 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 imprac-
ticable or inadvisable to sell the Class C shares.
(e) 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. 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 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 VII 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. 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(c) 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 sus-
pended 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 C shares of the Fund, and this shall in-
clude, 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 its prospectus and statement of addi-
tional information as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to
any necessary approval of the shareholders, all necessary action
to fix the number of authorized 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 reasonably may 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 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 shares. The services of
the Distributor to the Fund hereunder are not to be deemed exclu-
sive and nothing herein contained shall prevent the Distributor
from entering into like arrangements with other investment com-
panies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distri-
butor 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 se-
lected 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 neces-
sary 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 Dealer Agreements.
(a) The Distributor shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") for the sale of Class C shares; provided,
that the Fund shall approve the forms of agreements with dealers.
Class C shares sold to selected dealers shall be for resale by
such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers
to be used during the continuous offering of the shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class C shares only to such selected dealers that 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 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 con-
sultants. 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
the public and any expenses of advertising incurred by the Dis-
tributor 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 here-
under may be paid from amounts recovered by it from the Fund
under such Plan.
(c) The Fund shall bear the cost and expenses of qualifi-
cation of the Class C shares for sale pursuant to this Agreement
and, if necessary or advisable in connection therewith, of quali-
fying 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 Distri-
butor 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 Class C 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, in-
formation 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, as
incurred, 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, as incurred, of any counsel retained by them.
The Fund shall promptly notify the Distributor of the commence-
ment 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, as incurred, described in the foregoing indem-
nity 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 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 Distri-
butor, 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. Merrill Lynch Mutual Fund Adviser Program. In
connection with the Merrill Lynch Mutual Fund Adviser Program,
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, are authorized to offer and sell shares of
the Fund, as agent for the Fund, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first
above written and shall remain in force until August __, 1995 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 12. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is specifi-
cally 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 13. Governing Law. The provisions of this Agree-
ment 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 GLOBAL HOLDINGS, INC.
By
----------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
----------------------------------------
Title:
EXHIBIT A
MERRILL LYNCH GLOBAL HOLDINGS, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor")
has an agreement with Merrill Lynch Global Holdings, 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 the "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, and its Class C shares being offered to the
public are registered under the Securities Act of 1933, as
amended. 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 "Prospec-
tus" and "Statement of Additional Information" as 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 of 1933, as amended. 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 the Merrill Lynch Mutual Fund Adviser program and
such other 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. 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 ini-
tial and subsequent purchase requirements are as set forth in the
current Prospectus and Statement of Additional Information of the
Fund.
3. You shall not place orders for any of the Class C shares
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 Addi-
tional 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 Addi-
tional 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 Sec-
tion 4 of the Distribution Agreement.
5. You shall not withhold placing orders received from your
customers so as to profit yourself as a result of such with-
holding: e.g., by a change in the "net asset value" from that
used in determining the offering price to your customers.
6. 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 Informa-
tion and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospec-
tus, 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.
7. 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 re-
quest.
8. 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.
9. 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.
10. You represent that you are a member of the National
Association of Securities Dealers, Inc. and, with respect to any
sales in the United States, we both hereby agree to abide by the
Rules of Fair Practice of such Association.
11. 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.
12. All communications to us should be sent to the address
below. Any notice to you shall be duly given if mailed or tele-
graphed to you at the address specified by you below.
13. 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.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-----------------------------------
(Authorized Signature)
Please return one signed copy
of this Agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
----------------------------------------------
By:
-----------------------------------------------------
Address: [800 Scudders Mill Road]
------------------------------------------------
[Plainsboro, New Jersey 08536]
------------------------------------------------
Date: , 1994
---------------------------------------------------
EXHIBIT 99.6(f)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between
Merrill Lynch Global Holdings, Inc., a Maryland corporation (the
"Fund"), and MERRILL LYNCH 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 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 in 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 distri-
butor of the Fund to sell Class D shares of common stock in the
Fund (sometimes herein referred to as "Class D shares") to the
public 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 prin-
cipal underwriter and distributor, except that:
(a) The Fund may, upon written notice to the Distributor,
from time to time designate other principal underwriters and dis-
tributors 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 pur-
chase 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 sub-
stantially 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 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) It is contemplated that 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
eligible 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(d) hereof, used in
determining the public offering price on which such orders were
based.
(b) The Class D shares are to be resold by the Distributor
to investors at the public offering price, as set forth in Sec-
tion 3(c) hereof, or to securities dealers having agreements
with the Distributor upon the terms and conditions set forth in
Section 7 hereof.
(c) 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 [Trustees or
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(f).
(d) The net asset value of Class D shares shall be deter-
mined 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 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 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.
(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 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 VII 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 D 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 redemption or repurchase by the Fund
of any of the Class D shares purchased by or through the Distri-
butor 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 shares are tendered for redemption or repur-
chase within seven business days after the date of the confirma-
tion 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 Dis-
tributor may reasonably request for use in connection with the
distribution of Class D shares of the Fund, and this shall in-
clude, 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 addi-
tional 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 Securi-
ties 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 in-
vestment 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 Distri-
butor 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 continuous offering of the Class D shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class D shares only to such selected dealers as are mem-
bers 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 regis-
tration 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 con-
sultants. 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
the public 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 D Shares Distribution
Plan pursuant to Rule 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 qualifi-
cation of the Class D shares for sale pursuant to this Agreement
and, if necessary or advisable in connection therewith, of quali-
fying 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 Distri-
butor 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 com-
mon 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 per-
formance 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 does
not elect to assume the defense of any such suit, it will reim-
burse the Distributor or such controlling person or persons, de-
fendant 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. Merrill Lynch Mutual Fund Adviser Program. In
connection with the Merrill Lynch Mutual Fund Adviser Program,
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, are authorized to offer and sell shares of
the Fund, as agent for the Fund, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until August __, 1995 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 Dis-
tributor, 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 12. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is specifi-
cally 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 13. 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 GLOBAL HOLDINGS, INC.
By
-----------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-------------------------------------
Title:
EXHIBIT A
MERRILL LYNCH GLOBAL HOLDINGS, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor")
has an agreement with Merrill Lynch Global Holdings, 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, and its Class D shares being offered to the
public are registered under the Securities Act of 1933, as
amended. You have received a copy of the Class D 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 of 1933, as
amended. We offer to sell to you, as a member of the Selected
Dealers Group, Class D shares of the Fund 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 the Merrill Lynch Mutual Fund Adviser program and
such other 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. 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. The minimum
initial and subsequent purchase requirements are as set forth in
the current Prospectus and Statement of Additional Information of
the Fund.
3. The sales charges for sales to the public, computed as
percentages of the public offering price and the amount invested,
and the related discount to Selected Dealers are as follows:
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
- ------------------ -------------- -------------- ------------
Less than $10,000.... 5.25% 5.54% 5.00%
$10,000 but 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**.. 0.75% 0.76% 0.65%
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will 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 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 of 1940, as amended, 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 eligible investors are permitted to purchase
Class D shares of the Fund 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 Class A,
Class B, Class C and Class D shares of the Fund and of any other
investment company with an initial sales charge for which the
Distributor acts as the distributor. 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
$10,000 or more of Class A shares or of Class D shares of any other
investment company with an initial sales charge for which the
Distributor acts as the distributor 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. You shall not place orders for any of the Class D shares
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. 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. 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 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. 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.
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, 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.
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. 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. Each
party hereto has the right to cancel this agreement upon notice to the
other party.
11. 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.
12. You represent that you are a member of the National
Association of Securities Dealers, Inc. and, with respect to any sales
in the United States, we both hereby agree to abide by the Rules of Fair
Practice of such Association.
13. 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.
14. 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.
15. Your first order placed pursuant to this Agreement for the
purchase of Class D shares of the Fund will represent your acceptance of
this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
------------------------------------------------
By:
--------------------------------------------------
Address: [800 Scudders Mill Road]
----------------------------------------------
[Plainsboro, New Jersey 08536]
-------------------------------------------------------
Date: , 1994
---------------------------------------------------
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Global Holdings:
We consent to the use in Post-Effective Amendment No. 13 to Registration
Statement No. 2-89834 of our report dated December 31, 1993 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
Deloitte & Touche LLP
Princeton, New Jersey
October 12, 1994
EXHIBIT 99.15(b)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH GLOBAL HOLDINGS, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994,
by and between Merrill Lynch Global Holdings, Inc., a Maryland
corporation (the "Fund"), and Merrill Lynch Funds Distributor,
Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end
investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, MLFD 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 MLFD, pursuant to which MLFD 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 Distribution
Plan (the "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 MLFD 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 the Plan will
benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby
agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay MLFD 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 MLFD and securities firms with which MLFD enters
into related agreements 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 MLFD a distribution fee under the
Plan at the end of each month at the annual rate of .75% of
average daily net assets of the Fund relating to Class C shares
to compensate MLFD and securities firms with which MLFD 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 MLFD 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. MLFD 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 MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting require-
ments set forth in Paragraph 4 hereof.
4. MLFD 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 securi-
ties 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 the Plan and such related agreements.
7. The Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in Paragraph 6.
8. The 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. The 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 the Plan is in effect, the selection and nomina-
tion 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 the 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
the Plan, or the agreements or such report, as the case may be,
the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this
Distribution Plan as of the date first above written.
MERRILL LYNCH GLOBAL HOLDINGS, INC.
By
-----------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
------------------------------------
Title:
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and
between Merrill Lynch Funds Distributor, Inc., a Delaware corpo-
ration ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation ("Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill
Lynch Global Holdings, 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, MLFD 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, as amended (the "Act"),
pursuant to which MLFD 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
activities related to Class C shares of the Fund and a
distribution fee from the Fund at the annual rate of .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, MLFD 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 activities and
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 and services with respect to the Class C shares of the
Fund and incur expenditures in connection with such activities
and services 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.
3. As compensation for its activities and services
performed under this Agreement, MLFD 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.
4. The Securities Firm shall provide MLFD, at least
quarterly, such information as reasonably requested by MLFD to
enable MLFD 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 the Plan, this
Agreement or any agreements related to the Plan or this Agreement
(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 WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-----------------------------------
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
------------------------------------
Title:
EXHIBIT 99.15(c)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH GLOBAL HOLDINGS, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994,
by and between Merrill Lynch Global Holdings, Inc., a Maryland
corporation (the "Fund"), and Merrill Lynch Funds Distributor,
Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end
investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, MLFD 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 MLFD, pursuant to which MLFD 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 Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act, pursuant to which the Fund will pay an account main-
tenance fee to MLFD 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 the Plan will
benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby
agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay MLFD 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 MLFD and securities firms with which MLFD enters
into related agreements ("Sub-Agreements") pursuant to Paragraph
2 hereof 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 hereby authorizes MLFD 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 of the type referred to in Paragraph 1. MLFD may
reallocate all or a portion of its account maintenance fee to
such Securities Firms as compensation for the above-mentioned
activities. Such Sub-Agreement shall provide that the Securities
Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting
requirements set forth in Paragraph 3 hereof.
3. MLFD 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 during
such period.
4. 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 securi-
ties of the Fund.
5. 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 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 the Plan and such related agreements.
6. The Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in Paragraph 5.
7. The 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.
8. The Plan may not be amended to increase materially the
rate of payments provided for in Paragraph 1 hereof 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 5 hereof, and no material
amendment to the Plan shall be made unless approved in the
manner provided for approval and annual renewal in Paragraph 5
hereof.
9. While the Plan is in effect, the selection and nomina-
tion 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.
10. The Fund shall preserve copies of the Plan and any
related agreements and all reports made pursuant to Paragraph 3
hereof, for a period of not less than six years from the date of
the Plan, or the agreements or such report, as the case may be,
the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this
Distribution Plan as of the date first above written.
MERRILL LYNCH GLOBAL HOLDINGS, INC.
By
-----------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-------------------------------------
Title:
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and
between Merrill Lynch Funds Distributor, Inc. a Delaware corpo-
ration ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation ("Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill
Lynch Global Holdings, Inc., a Maryland corporation (the "Fund"),
pursuant to which it acts as the exclusive distributor for the
sale of Class D shares of [beneficial interest or common stock,
par value $0.10 per share (the "Class D shares"), of the Fund;
and
WHEREAS, MLFD 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, as amended (the "Act"),
pursuant to which MLFD 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 providing account
maintenance activities and services with respect to Class D
shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain
account maintenance activities and services, including assistance
in connection with inquiries related to shareholder accounts, 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 and services with respect to the Class D shares of the
Fund and incur expenditures in connection with such activities
and services, of the types referred to in Paragraph 1 of the
Plan.
2. As compensation for its services performed under this
Agreement, MLFD shall pay the Securities Firm a fee at the end of
each calendar month in an amount agreed upon by the parties
hereto.
3. The Securities Firm shall provide MLFD, at least
quarterly, such information as reasonably requested by MLFD to
enable MLFD to comply with the reporting requirements of Rule
12b-1 regarding the disbursement of the fee during such period
referred to in Paragraph 3 of the Plan.
4. 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 the Plan, this
Agreement or any agreements related to the Plan or this Agreement
(the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.
5. 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 5.
6. 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 WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
--------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
----------------------------------------
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