<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1995
SECURITIES ACT FILE NO. 33-4026
INVESTMENT COMPANY ACT FILE NO. 811-4612
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 11 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 13 /X/
(Check appropriate box or boxes)
---------------------
MERRILL LYNCH EUROFUND
(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 EUROFUND
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>
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET 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.
JOHN A. MACKINNON, ESQ.
</TABLE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / 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
beneficial interest 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 December 27, 1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MERRILL LYNCH EUROFUND
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; Management of the Fund;
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(SM) System; Purchase of
Shares; Shareholder Services;
Additional Information; Inside Back
Cover Page
Item 8. Redemption or Repurchase.............. Fee Table; Merrill Lynch Select
Pricing(SM) 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....... Not Applicable
Item 13. Investment Objectives and Policies.... Investment Objective and Policies
Item 14. Management of the Fund................ Management of the Fund
Item 15. Control Persons and Principal Holders
of Securities....................... Management of the Fund
Item 16. Investment Advisory and Other
Services............................ Management of the Fund; 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............................ Taxes
Item 21. Underwriters.......................... Purchase of Shares
Item 22. Calculation of Performance Data....... Performance Data
Item 23. Financial Statements.................. Financial Statements
</TABLE>
PART C
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> 3
PROSPECTUS
FEBRUARY 27, 1995
MERRILL LYNCH EUROFUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
------------------------
Merrill Lynch EuroFund (the "Fund") is a diversified, open-end management
investment company seeking to provide shareholders with capital appreciation
primarily through investment in equities of corporations domiciled in European
countries. Current income from dividends and interest will not be an important
consideration in selecting portfolio securities. The Fund expects that under
normal market conditions at least 80% of the Fund's net assets will be invested
in European corporate securities, primarily common stocks and debt and preferred
securities convertible into common stocks. There can be no assurance that the
investment objective of the Fund will be realized.
------------------------
Pursuant to the Merrill Lynch Select Pricing(SM) System, the Fund offers
four classes of shares, each with a different combination of sales charges,
ongoing fees and other features. The Merrill Lynch Select Pricing(SM) System
permits an investor to choose the method of purchasing shares that the investor
believes is most beneficial given the amount of the purchase, the length of
time the investor expects to hold the shares and other relevant circumstances.
See "Merrill Lynch Select Pricing(SM) 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 Fund'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 Fund that
is relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated February 27, 1995 (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 Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
------------------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
<PAGE> 4
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Fund follows:
<TABLE>
<CAPTION>
CLASS CLASS
A(A) CLASS B(B) CLASS C D
----- --------------------------------- -------- -----
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price).............. 5.25%(c) None None 5.25%(c)
Sales Charge Imposed on
Dividend Reinvestments....... None None None None
Deferred Sales Charge (as a
percentage of original 4.0% during the first year,
purchase price or redemption decreasing 1.0% annually
proceeds, whichever is thereafter to 0.0% after the 1% for
lower)....................... None(d) fourth year one year None(d)
Exchange Fee................... None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS)(E):
Investment Advisory Fees(f).... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(g):
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............... 0.10% 0.10% 0.10% 0.10%
Shareholder Servicing
Costs(h)................... 0.11% 0.14% 0.14% 0.11%
Other........................ 0.07% 0.07% 0.07% 0.07%
--- --- --- ---
Total Other Expenses.... 0.28% 0.31% 0.31% 0.28%
--- --- --- ---
TOTAL FUND OPERATING
EXPENSES..................... 1.03% 2.06% 2.06% 1.28%
--- --- --- ---
--- --- --- ---
</TABLE>
- ---------------
(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and certain investment
programs. See "Purchase of Shares -- Initial Sales Charge
Alternatives -- Class A and Class D Shares" -- page 25.
(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 27.
(c) 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 25.
(d) 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.
(e) Information for Class A and Class B shares is stated for the fiscal year
ended October 31, 1994. Information under "Other Expenses" for Class C and
Class D shares is estimated for the fiscal year ending October 31, 1995.
(f) See "Management of the Fund -- Management and Advisory Arrangements" -- page
21.
(g) See "Purchase of Shares -- Distribution Plans" -- page 31.
(h) See "Management of the Fund -- Transfer Agency Services" -- page 23.
2
<PAGE> 5
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 Fund 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............................................. $ 62 $84 $ 106 $172
Class B............................................. $ 61 $85 $ 111 $220*
Class C............................................. $ 31 $65 $ 111 $239
Class D............................................. $ 65 $91 $ 119 $199
An investor would pay the following expenses on the same
$1,000 investment assuming no redemption at the end of
the period:
Class A............................................. $ 62 $84 $ 106 $172
Class B............................................. $ 21 $65 $ 111 $220*
Class C............................................. $ 21 $65 $ 111 $239
Class D............................................. $ 65 $91 $ 119 $199
</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 Fund 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 Fund's transfer agent are not
subject to the processing fee. See "Purchase of Shares" and "Redemption of
Shares".
MERRILL LYNCH SELECT PRICING(SM) SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
Pricing(SM) 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(SM) System is used by more than
50 mutual funds advised by Merrill Lynch Asset Management, L.P. ("MLAM" or the
"Manager") 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".
3
<PAGE> 6
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees, 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
the Class D shares, will be imposed directly against those classes and not
against all assets of the Fund, and accordingly, such charges do not affect the
net asset value of any other class or have any impact on investors choosing
another sales charge option. Dividends paid by the Fund for each class of shares
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 Fund. The
distribution-related revenues paid with respect to a class will not be used to
finance the distribution expenditures of another class. Sales personnel may
receive different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select PricingSM 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 PricingSM System that the investor
believes is 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 CONVERSION
CLASS SALES CHARGE(1) FEE FEE FEATURE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial sales No No No
charge(2)(3)
- -------------------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to
years, at a rate of 4.0% D shares automatically
during the first year, after approximately
decreasing 1.0% annually to eight years(4)
0.0%
- -------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- -------------------------------------------------------------------------------------------------
D Maximum 5.25% initial sales 0.25% No No
charge(3)
- -------------------------------------------------------------------------------------------------
</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".
(footnotes continued on next page)
4
<PAGE> 7
(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 Fund 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.
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 1% CDSC 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%,
and an ongoing distribution fee of 0.75% of the Fund'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 Fund, 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 Fund 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 Fund's average net
assets attributable to 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
5
<PAGE> 8
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
Fund's Board of Trustees 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
Fund'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".
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(SM) 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 there is an account maintenance fee
imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative particularly
attractive because similar sales charge reductions are not available with
respect to the deferred sales charges imposed in connection with purchases of
Class B or Class C shares. Investors not qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
also may elect to purchase Class A or Class D shares, because over time the
accumulated ongoing account maintenance and distribution fees on Class B or
Class C shares may exceed the initial sales 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 Fund after a
conversion period of approximately eight years, and thereafter investors will be
subject to lower ongoing fees.
6
<PAGE> 9
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
Charges".
7
<PAGE> 10
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the annual audits of the financial statements of the Fund by Deloitte &
Touche LLP, independent auditors. Financial statements for the fiscal year ended
October 31, 1994, and the independent auditors' report thereon are included in
the Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's most recent annual report to
shareholders which may be obtained, without charge, by calling or by writing the
Fund 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 YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1994* 1993 1992* 1991 1990 1989 1988+
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) In Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period....... $ 13.87 $ 10.53 $ 11.62 $ 10.70 $ 9.84 $ 9.00 $ 8.83
-------- -------- ------- ------- ------- ------- -------
Investment income -- net................. .18 .26 .24 .25 .18 .09 .01
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net.................... 1.91 3.08 (1.02) .96 .85 .77 .16
-------- -------- ------- ------- ------- ------- -------
Total from investment operations........... 2.09 3.34 (.78) 1.21 1.03 .86 .17
-------- -------- ------- ------- ------- ------- -------
Less dividends and distributions:
Investment income -- net................. -- -- (.31) (.29) (.17) -- --
Realized gain on investments -- net...... -- -- -- -- -- (.02) --
-------- -------- ------- ------- ------- ------- -------
Total dividends and distributions.......... -- -- (.31) (.29) (.17) (.02) --
-------- -------- ------- ------- ------- ------- -------
Net asset value, end of period............. $ 15.96 $ 13.87 $ 10.53 $ 11.62 $ 10.70 $ 9.84 $ 9.00
========= ========= ======== ======== ======== ======== ========
Total Investment Return:**
Based on net asset value per share....... 15.07% 31.72% (6.90)% 11.54% 10.39% 9.62% 1.93%#
========= ========= ======== ======== ======== ======== ========
Ratios To Average Net Assets:
Expenses, net of reimbursement, excluding
account maintenance and/or distribution
fees..................................... 1.03% 1.04% 1.09% 1.14% 1.17% 1.34% 1.38%***
========= ========= ======== ======== ======== ======== ========
Expenses................................... 1.03% 1.04% 1.09% 1.14% 1.17% 1.34% 1.38%***
========= ========= ======== ======== ======== ======== ========
Investment income (loss) -- net............ 1.17% 1.50% (2.69)% 2.94% 2.62% 2.25% 10.08%***
========= ========= ======== ======== ======== ======== ========
Supplemental Data:
Net assets, end of period (in thousands)... $236,288 $182,612 $87,865 $83,229 $85,798 $11,381 $ 21
========= ========= ======== ======== ======== ======== ========
Portfolio turnover......................... 82.47% 115.10% 109.95% 124.64% 122.67% 106.29% 161.28%
========= ========= ======== ======== ======== ======== ========
</TABLE>
- ---------------
* Based on average shares outstanding during the period.
** Total investment returns exclude the effects of sales loads.
*** Annualized.
+ Class A Shares commenced operations on October 26, 1988.
# Aggregate total investment returns.
8
<PAGE> 11
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------------
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------------
1994* 1993 1992* 1991 1990 1989 1988 1987+++
---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (Decrease) In
Net Asset Value:
Per Share Operating
Performance:
Net asset value, beginning
of period.................... $ 13.43 $ 10.30 $ 11.41 $ 10.51 $ 9.72 $ 9.00 $ 9.29 $ 10.00
---------- -------- -------- -------- -------- -------- -------- --------
Investment income -- net..... .02 .16 .12 .13 .12 .08 .22 .05
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net........ 1.83 2.97 (.98) .94 .78 .66 .41 (.76)
---------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations................... 1.85 3.13 (.86) 1.07 .90 .74 .63 (.71)
---------- -------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment income -- net..... -- -- (.25) (.17) (.11) -- (.18) --
Realized gain on
investments -- net......... -- -- -- -- -- (.02) (.74) --
---------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions................ -- -- (.25) (.17) (.11) (.02) (.92) --
---------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period....................... $ 15.28 $ 13.43 $ 10.30 $ 11.41 $ 10.51 $ 9.72 $ 9.00 $ 9.29
========== ========= ========= ========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value
per share.................. 13.78% 30.39% (7.73)% 10.35% 9.19% 8.28% 7.35% (7.10)%#
========== ========= ========= ========= ========= ========= ========= =========
Ratios To Average Net Assets:
Expenses, net of reimbursement,
excluding account maintenance
and/or distribution fees..... 1.06% 1.08% 1.12% 1.17% 1.20% 1.37% 1.08% 1.04%***
========== ========= ========= ========= ========= ========= ========= =========
Expenses....................... 2.06% 2.08% 2.12% 2.17% 2.20% 2.37% 2.30% 2.13%***
========== ========= ========= ========= ========= ========= ========= =========
Investment income
(loss) -- net................ 0.14% .51% (3.37)% 1.94% 1.32% .83% 1.36% .68%***
========== ========= ========= ========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands)............... $1,086,480 $765,279 $447,104 $484,031 $498,600 $201,484 $261,178 $436,503
========== ========= ========= ========= ========= ========= ========= =========
Portfolio turnover............. 82.47% 115.10% 109.95% 124.64% 122.67% 106.29% 161.28% 157.47%
========== ========= ========= ========= ========= ========= ========= =========
</TABLE>
- ---------------
* Based on average shares outstanding during the period.
** Total investment returns exclude the effects of sales loads.
*** Annualized.
+++ Class B Shares commenced operations on January 30, 1987.
# Aggregate total investment returns.
9
<PAGE> 12
FINANCIAL HIGHLIGHTS (CONCLUDED)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 21, 1994++
TO OCTOBER 31, 1994*
---------------------
CLASS CLASS
C D
------ ------
<S> <C> <C>
Increase (Decrease) In Net Asset Value:
Per Share Operating Performance:
Net asset value, beginning of period.................................................... $15.08 $15.75
------ ------
Investment income -- net.............................................................. (.01) --
Realized and unrealized gain (loss) on investments and foreign currency
transactions -- net................................................................. .21 .21
------ ------
Total from investment operations........................................................ .20 .21
------ ------
Less dividends and distributions:
Investment income -- net.............................................................. -- --
Realized gain on investments -- net................................................... -- --
------ ------
Total dividends and distributions....................................................... -- --
------ ------
Net asset value, end of period.......................................................... $15.28 $15.96
====== ======
Total Investment Return:**
Based on net asset value per share.................................................... 1.33%# 1.33%#
====== ======
Ratios To Average Net Assets:
Expenses, net of reimbursement, excluding account maintenance and/or distribution
fees.................................................................................. 1.86%*** 1.86%***
====== ======
Expenses................................................................................ 2.86%*** 2.11%***
====== ======
Investment income (loss) -- net......................................................... (2.47)%*** (1.70)%***
====== ======
Supplemental Data:
Net assets, end of period (in thousands)................................................ $ 462 $ 340
====== ======
Portfolio turnover...................................................................... 82.47% 82.47%
====== ======
</TABLE>
- ---------------
* Based on average shares outstanding during the period.
** Total investment returns exclude the effects of sales loads.
*** Annualized.
++ Commencement of operations.
# Aggregate total investment returns.
10
<PAGE> 13
SPECIAL AND RISK CONSIDERATIONS
GENERAL
Investments on an international basis involve certain risks not 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. Since the Fund 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 insofar as U.S. investors are concerned. In addition, 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.
Most of the securities held by the Fund will not be registered with the
Securities and Exchange Commission, nor will the issuers thereof be subject to
the reporting requirements of such agency. Accordingly, 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 to which U.S.
companies are subject.
Foreign companies are not generally subject to uniform accounting, auditing
and financial reporting standards or to practices and requirements comparable to
those applicable to domestic companies. Foreign securities markets, while
generally growing in volume, have, for the most part, 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.
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. The foreign markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. Delays in settlement could
result in temporary periods when assets of the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to the Fund due to subsequent declines in
value of such portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States. There is generally
less government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in U.S. securities since the
expenses of the Fund, such as custodial costs, are higher. Because of its
emphasis on the economies of European countries, the Fund should be considered
as a vehicle for diversification and not as a balanced investment program.
11
<PAGE> 14
INVESTMENT IN EASTERN EUROPEAN MARKETS
It is anticipated that a majority of the Fund's investments will be in
securities of issuers domiciled in Western European countries. However, the Fund
has the ability to invest in the securities of issuers domiciled in Eastern
European countries. Investment in the securities of issuers in Eastern European
markets involves certain additional risks not involved in investment in
securities of issuers in more developed capital markets, such as (i) low or
non-existent trading volume, resulting in a lack of liquidity and increased
volatility in prices for such securities, as compared to securities of
comparable issuers in more developed capital markets, (ii) uncertain national
policies and social, political and economic instability, increasing the
potential for expropriation of assets, confiscatory taxation, high rates of
inflation or unfavorable diplomatic developments, (iii) possible fluctuations in
exchange rates, differing legal systems and the existence or possible imposition
of exchange controls, custodial restrictions or other foreign or U.S.
governmental laws or restrictions applicable to such investments, (iv) national
policies which may limit the Fund's investment opportunities such as
restrictions on investment in issuers or industries deemed sensitive to national
interests, and (v) the lack of developed legal structures governing private and
foreign investments and private property.
Eastern European capital markets are emerging in a dynamic political and
economic environment brought about by the recent events there that have reshaped
political boundaries and traditional ideologies. In such a dynamic environment,
there can be no assurance that the Eastern European capital markets will
continue to present viable investment opportunities for the Fund. In the past,
Eastern European governments have expropriated substantial amounts of private
property, and most claims of the property owners have never been finally
settled. There is no assurance that such expropriations will not reoccur. In
such an event, it is possible that the Fund could lose the entire value of its
investments in the affected Eastern European markets.
Also, there may be less publicly available information about issuers in
Eastern Europe than would be available about issuers in more developed capital
markets, and such issuers may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to which U.S.
companies are subject. In certain Eastern European countries, no reporting
standards currently exist. As a result, traditional investment measurements used
in the U.S., such as price/earnings ratios, may not be applicable in certain
Eastern European markets. In addition, the currencies of Eastern European
countries are not, at present, freely convertible into other currencies and are
not internationally traded. Also, certain Eastern European authorities presently
require that securities of certain Eastern European issuers be held by
custodians in Eastern Europe. At this time, it is possible that certain Eastern
European countries may not have available institutions qualified under the
Investment Company Act to hold Fund assets. Therefore, the Fund may need to seek
an exemptive order from the Securities and Exchange Commission prior to
investing in certain Eastern European countries. There is no assurance that the
Securities and Exchange Commission would issue such an order.
Reforms currently underway and anticipated throughout Eastern Europe are
directed at political and economic liberalization, with efforts to develop
increasingly market-oriented economies and to decentralize the economic and
political decision-making processes currently in the forefront. There can be no
assurance that these reforms will continue or, if continued, will achieve their
goals; in addition, there is the possibility that reforms may be reversed in the
future.
12
<PAGE> 15
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation primarily
through investment in equities of corporations domiciled in European countries.
Current income from dividends and interest will not be an important
consideration in selecting portfolio securities. The Fund anticipates that under
normal market conditions at least 80% of its net assets will consist of European
corporate securities, primarily common stocks and securities convertible into
common stock. The investment objective of the Fund described in this paragraph
is a fundamental policy of the Fund and may not be changed without the approval
of the holders of a majority of the Fund's outstanding voting securities.
While there will be no prescribed limits on geographic asset distribution
within the European community, it is currently anticipated that a majority of
the Fund's assets will be invested in equity securities of issuers domiciled in
Western European countries such as the United Kingdom, Germany, the Netherlands,
Switzerland, Sweden, France, Italy, Belgium, Norway, Denmark, Finland, Portugal,
Austria and Spain. If political and economic conditions warrant, it is also
anticipated that the Fund will invest in issuers domiciled in Eastern European
countries such as Bulgaria, the Czech Republic, Hungary, Poland, Romania,
Slovakia, and the states which formerly comprised Yugoslavia and the Soviet
Union. Additional countries on the European continent may be added to this group
as circumstances dictate. In making the allocation of assets among the
securities markets, Merrill Lynch Asset Management, L.P., doing business as
Merrill Lynch Asset Management (the "Manager"), will consider such factors as
the condition and growth potential of the various economies and securities
markets and the issuers domiciled therein, currency and taxation investment
considerations and other pertinent financial, social, national and political
factors which may have an effect upon the climate for investing within such
securities markets.
Although the changes taking place in Eastern Europe are in their early
stages and foreign investors do not yet have direct access to many of these
markets, the Manager intends to take advantage of the business opportunities
that may emerge from the changing political, economic and legal environment in
Eastern Europe. At present, no Eastern European country has a developed stock
market, although certain countries (e.g., Hungary and Poland) have small
securities markets that are operational. Certain Eastern European countries are
currently fostering political and economic liberalization through a variety of
reform measures, including attempts to develop increasingly market-oriented
economies, to encourage foreign investment and to create a political atmosphere
conducive to multi-party political systems. Recently, laws have been enacted in
certain Eastern European countries allowing private individuals to own and
operate businesses and protecting the property rights of investors, including
foreign interests.
The Fund reserves the right as a temporary defensive measure to hold other
types of securities, including non-convertible debt and preferred securities,
government and money market securities of U.S. and non-U.S. issuers, or cash
(foreign currencies or U.S. dollars), in such proportions as, in the opinion of
the Manager, prevailing market, economic or political conditions warrant.
Investments made for defensive purposes will be maintained only during periods
in which the Manager determines that economic or financial conditions are
adverse for holding or being fully invested in equity securities of European
corporate issuers. A portion of the portfolio normally will be held in U.S.
dollars or short-term interest bearing U.S. dollar-denominated securities to
provide for possible redemptions.
The Fund has established no rating criteria for the debt securities in
which it may invest, and such securities may not be rated at all for
creditworthiness. Securities rated in the medium to lower rating
13
<PAGE> 16
categories of nationally recognized statistical rating organizations and unrated
securities of comparable quality are predominantly speculative with respect to
the capacity to pay interest and repay principal in accordance with the terms of
such securities and generally involve a greater volatility of price than
securities in higher rating categories. See "Investment Objective and Policies"
in the Statement of Additional Information for additional information regarding
ratings of debt securities. In purchasing such securities, the Fund will rely on
the Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. The Manager will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The Fund does not
intend to purchase debt securities that are in default or which the Manager
believes will be in default.
In addition to purchasing corporate securities of European issuers in
foreign markets, the Fund may invest in American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or other
securities convertible into securities of corporations domiciled in European
countries. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. 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.
CERTAIN OTHER INVESTMENT PRACTICES
Hedging Techniques. The Fund may engage in various portfolio strategies to
hedge its portfolio against investment and currency risks. These strategies
include the use of options on portfolio securities, currency options and
futures, options on such futures and forward foreign currency transactions. The
Fund may enter into such transactions only in connection with its hedging
strategies. While the Fund's use of hedging strategies is intended to reduce the
volatility of net asset value of its shares, the net asset value of the Fund's
shares will fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund 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 or currency exchange
rates occur. Reference is made to the Statement of Additional Information for
further information concerning these strategies.
Although there are certain risks involved in options and futures
transactions (as discussed below in "Risk Factors in Options, Futures and
Currency Transactions"), the Manager believes that, because the Fund will engage
in options and futures transactions only for hedging purposes, the options and
futures portfolio strategies of the Fund will not subject the Fund to the risks
frequently associated with the speculative use of options and futures
transactions. Tax requirements may limit the Fund's ability to engage in the
hedging transactions and strategies described below. See "Additional
Information -- Taxes".
The following is a description of the hedging instruments the Fund may
utilize with respect to investment and currency risks.
Writing Covered Options. The Fund 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 Fund in return for a premium gives another
party a right to buy specified securities owned by the Fund at or by a specified
future date and price set at the time of the
14
<PAGE> 17
contract. The principal reason for writing call options is to attempt to
realize, through the receipt of premiums, a greater return than would be
realized on the securities alone. By writing covered call options, the Fund
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 Fund's ability to sell the underlying security will be limited
while the option is in effect unless the Fund effects a closing purchase
transaction. A closing purchase transaction cancels out the Fund'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. The Fund may not write covered call options on underlying securities
in an amount exceeding 15% of the market value of its assets.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options which means that so long
as the Fund is obligated as the writer of the option, it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By writing a
put, the Fund will be obligated to purchase the underlying security at a price
that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. The Fund may engage in
closing transactions in order to terminate put options that it has written.
Purchasing Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option the Fund has a right to sell the underlying security at the stated
exercise price, thus limiting the Fund'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 Fund'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. In
certain circumstances, the Fund may purchase call options on securities held in
its portfolio on which it has written call options or on securities which it
intends to purchase. The Fund will not purchase options on securities if as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets. The Fund will engage in options transactions on exchanges and 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 terms negotiated by the buyer and seller. See
"Restrictions on OTC Options" below for information as to restrictions on the
use of OTC options.
Hedging Foreign Currency Risks. The Fund is authorized to deal in forward
foreign exchange among currencies of the different countries in which it will
invest and multinational currency units as a hedge against possible variations
in the foreign exchange rates among these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. The Fund's
dealings in forward foreign exchange will be limited to hedging involving
15
<PAGE> 18
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 Fund accruing in connection with the purchase and
sale of its portfolio securities, the sale and redemption of shares of the Fund,
or the payment of dividends and distributions by the Fund. Position hedging is
the sale of forward foreign currency with respect to portfolio security
positions denominated or quoted in such foreign currency. The Fund will not
speculate in forward foreign exchange. Hedging against a decline in the value of
a currency does not eliminate fluctuations in the prices 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 Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates.
The Fund is also authorized to purchase or sell listed or over-the-counter
("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. Such transactions may be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased by the
Fund. As an illustration, the Fund may use such techniques to hedge the stated
value in U.S. dollars of an investment in a pound sterling denominated security.
In such circumstances, for example, the Fund may purchase a foreign currency put
option enabling it to sell a specified amount of pounds for dollars at a
specified price by a future date. To the extent the hedge is successful, a loss
in the value of the pound 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 Fund may also sell a call option which,
if exercised, requires it to sell a specified amount of pounds 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 Fund gives up the opportunity to
profit without limit from increases in the relative value of the pound to the
dollar.
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. Listed options are
third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) which are issued by a
clearing corporation, traded on an exchange and have standardized strike prices
and expiration dates. OTC options are two-party contracts and have negotiated
strike prices and expiration dates. The Fund will engage in OTC options 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. 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 Fund
will not speculate in foreign currency options, futures or related options.
Accordingly, the Fund will not hedge a currency substantially in excess of the
market value of the 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 Fund but not yet delivered, the proceeds thereof in its
denominated currency. Further, the Fund will segregate at its custodian cash or
liquid debt securities having a market value substantially representing any
subsequent decrease in the market value of such hedged security, less any
initial or variation margin held in the account of its broker. The Fund may not
incur potential net liabilities of more than 33 1/3% of its total assets from
foreign currency options, futures or related options.
16
<PAGE> 19
Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission ("CFTC") applicable to the Fund provide
that the futures trading activities described herein will not result in the Fund
being deemed a "commodity pool", as under such regulations if the Fund adheres
to certain restrictions. In particular, the Fund 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 Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any such contracts and options. These
restrictions are in addition to other restrictions on the Fund's hedging
activities mentioned herein.
When the Fund 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 Fund'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 is unleveraged.
An order has been obtained from the Securities and Exchange Commission
which exempts the Fund from certain provisions of the Investment Company Act in
connection with transactions involving futures contracts and options thereon.
Restrictions on OTC Options. The Fund will engage in OTC options,
including 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 Fund has adopted an investment policy
pursuant to which it will not purchase or sell OTC options (including OTC
options on foreign currency futures contracts) if, as a result of such
transaction, the sum of the market value of OTC options currently outstanding
which are held by the Fund, the market value of the underlying securities
covered by OTC call options currently outstanding which were sold by the Fund
and margin deposits on the Fund's existing OTC options on futures contracts
exceeds 15% (10% to the extent required by certain state laws) of the total
assets of the Fund, taken at market value, together with all other assets of the
Fund which are illiquid or are not otherwise readily marketable. However, if the
OTC option is sold by the Fund to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and if the Fund has the
unconditional contractual right to repurchase such OTC option from the dealer at
a predetermined price, then the Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., the current market value of the
underlying security minus the option's strike price). The repurchase price with
the primary dealers is typically a formula price which is generally based on a
multiple of the premium received for the option, plus the amount by which the
option is "in-the-money". This policy as to OTC options is not a fundamental
policy of the Fund and may be amended by the Trustees of the Fund without the
approval of the Fund's shareholders. However, the Fund will not change or modify
this policy prior to the change or modification by the Securities and Exchange
Commission staff of its position.
17
<PAGE> 20
Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions 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 the hedged securities or
currencies, the Fund will experience a gain or loss which will not be completely
offset by movements in the price of the securities or currencies which are the
subject of the hedge. Transactions in options on futures contracts involve
similar risks.
The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures, or in the case of OTC transactions, the
Manager believes the Fund 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), unless there is only one dealer, in which case such
dealer's price will be used. 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 Fund's ability to
hedge effectively its portfolio. There is also the risk of loss by the Fund of
margin deposits or collateral in the event of bankruptcy of a broker with whom
the Fund has an open position in an option, a futures contract or related
option.
The exchanges on which the Fund intends to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not covered)
that 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. The Manager
does not believe that these trading and position limits will have any adverse
impact on the portfolio strategies for hedging the Fund's portfolio.
Portfolio Transactions. In executing portfolio transactions, the Manager
seeks to obtain the best net results for the Fund, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution and operational facilities of
the firm involved and the firm's risk in positioning a block of securities.
While the Manager generally seeks reasonably competitive commission rates, the
Fund does not necessarily pay the lowest commission or spread available. The
Fund contemplates that, consistent with its policy of obtaining the best net
results, it will place orders for transactions with a number of brokers and
dealers, including Merrill Lynch, an affiliate of the Manager. Subject to
obtaining the best price and execution, brokers who provide supplemental
investment research to the Fund may receive orders for transactions by the Fund.
Information so received will be in addition to, and not in lieu of, the services
required to be performed by the Manager, and the expenses of the Manager will
not necessarily be reduced as a result of the receipt of such supplemental
information. See "Management of the Fund -- Management and Advisory
Arrangements". In addition, consistent with the Rules of Fair Practice of the
NASD, the Manager may consider sales of shares of the Fund as a factor in the
selection of brokers or dealers to execute portfolio transactions for the Fund.
It is expected that the majority of the shares of the Fund will be sold by
Merrill Lynch.
Portfolio Turnover. The Manager will effect portfolio transactions without
regard to holding period if, in its judgment, such transactions are advisable in
light of a change in circumstance of a particular company or
18
<PAGE> 21
within a particular industry or due to general market, economic or financial
conditions. As a result of its investment policies, the Fund may engage in a
substantial number of portfolio transactions. Accordingly, while the Fund
anticipates that its annual portfolio turnover rate should not exceed 150% under
normal conditions, it is impossible to predict portfolio turnover rates. The
portfolio turnover rate is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales of U.S. Government securities and of all other 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. High portfolio turnover
involves correspondingly greater transaction costs in the form of dealer spreads
and brokerage commissions, which are borne directly by the Fund. The Fund is
subject to the Federal income tax requirement that less than 30% of the Fund's
gross income must be derived from gains from the sale or other disposition of
securities held for less than three months.
Repurchase Agreements. The Fund may invest in money market securities
pursuant to repurchase agreements. Repurchase agreements may be entered into
only with a member bank of the Federal Reserve System or a primary dealer in
U.S. Government securities or an affiliate thereof. Under such agreements, the
bank or primary dealer or an affiliate thereof agrees, upon entering into the
contract, to repurchase the security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period.
The Fund may not invest more than 15% (10% to the extent required by certain
state laws) of its total assets in repurchase agreements maturing in more than
seven days, together with all other illiquid securities.
Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. During the period of such a loan,
the Fund receives the income on the loaned securities and either receives the
income on the collateral or other compensation, i.e., negotiated loan premium or
fee, for entering into the loan 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 Fund could experience delays and costs
in gaining access to the collateral and could suffer a loss to the extent that
the value of the collateral fell below the market value of the borrowed
securities.
Warrants. The Fund may invest up to 10% of its total assets in warrants. A
warrant gives the holder thereof the right to subscribe by a specified date to a
stated number of shares of stock of the issuer at a fixed price. Warrants tend
to be more volatile than the underlying stock, and if at a warrant's expiration
date the stock is trading at a price below the price set in the warrant, the
warrant will expire worthless. Conversely, if at the expiration date the
underlying stock is trading at a price higher than the price set in the warrant,
the Fund can acquire the stock at a price below its market value.
INVESTMENT RESTRICTIONS
The Fund 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
19
<PAGE> 22
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act. Among the more significant restrictions, the Fund may
not:
- Make any investment inconsistent with the Fund's classification as a
diversified company under the Investment Company Act.
- Make investments for the purpose of exercising control or management.
- 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).
Nothing in the foregoing investment restrictions shall be deemed to
prohibit the Fund from purchasing the securities of any issuer pursuant to the
exercise of subscription rights distributed to the Fund by the issuer, except
that no such purchase may be made if as a result the Fund 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.
In addition, the Fund has adopted non-fundamental restrictions which may be
changed by the Board of Trustees. Among its non-fundamental policies, the Fund
may not:
- - 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 Trustees of the Fund 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 Fund's shares are registered or
qualified for sale require a lower limitation, the Fund will observe such
limitation. As of the date hereof, therefore, the Fund will not invest more
than 10% of its total assets in securities which are subject to this
investment restriction. 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 Trustees are not subject to the limitations set forth
in this investment restriction. 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, 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 laws, the Fund will not invest more than 50% of
its total assets in securities of issuers that are restricted as to
disposition, including Rule 144A securities.
As noted above, the Fund may purchase Rule 144A securities. Rule 144A
securities are not registered under the Securities Act of 1933, as amended (the
"Securities Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the Securities Act. Although the Fund is subject
to the above noted restrictions on the percentage of its assets invested in
illiquid investments, which may include 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, the Fund's Board of Trustees may continuously determine,
based on the trading markets for a specific restricted security, that it is
liquid. The Board of Trustees may adopt guidelines and delegate to the Manager
the daily function of determining and monitoring liquidity of restricted
securities. The Board of Trustees, however, will retain sufficient oversight and
be ultimately responsible for the determinations.
20
<PAGE> 23
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 Trustees will monitor carefully the Fund'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 Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.
The full text of the investment restrictions is set forth under "Investment
Objective and Policies -- Investment Restrictions" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND
TRUSTEES
The Board of Trustees of the Fund consists of six individuals, five of whom
are not "interested persons" of the Fund as defined in the Investment Company
Act. The Board of Trustees is responsible for the overall supervision of the
operations of the Fund and performs the various duties imposed on the directors
or trustees of investment companies by the Investment Company Act.
The Trustees are:
ARTHUR ZEIKEL* -- President and Chief Investment Officer of the Manager;
President and Director of Princeton Services, Inc.; Executive Vice President of
Merrill Lynch & Co., Inc.; 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.
EDWARD D. ZINBARG -- Former Executive Vice President of The Prudential
Insurance Company of America.
- ---------------
* Interested person, as defined in the Investment Company Act, of the Fund.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Manager, Merrill Lynch Asset Management, L.P., which does business as
Merrill Lynch Asset Management, is owned and controlled by Merrill Lynch & Co.,
Inc., a financial services holding company and the parent of Merrill Lynch. The
Manager provides the Fund with management and investment advisory services. The
Manager or an affiliate, Fund Asset Management, L.P. ("FAM"), acts as the
investment adviser to more than 130 other registered investment companies. The
Manager also offers portfolio management and
21
<PAGE> 24
portfolio analysis services to individual and institutional accounts. As of
January 31, 1995, the Manager and FAM had a total of approximately $166.5
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of the Manager.
The management agreement with the Manager (the "Management Agreement")
provides that, subject to the direction of the Trustees, the Manager is
responsible for the actual management of the Fund's portfolio and constantly
reviews the Fund's holdings in light of its own research analysis and that from
other relevant sources. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Manager. Subject to the general
oversight of the Trustees, the Manager provides the administrative services
necessary for the operation of the Fund and provides all the office space,
facilities, equipment and necessary personnel for management of the Fund.
The Manager receives compensation at the annual rate of 0.75% of the
average daily net assets of the Fund. This fee is higher than that of most
mutual funds, but the Fund believes this fee, which is typical for an
international fund, is justified by the special international nature of the
Fund. For the fiscal year ended October 31, 1994, the Manager received a fee of
$10,148,764 (based on average net assets of approximately $1.3 billion). At
January 31, 1995, the net assets of the Fund aggregated approximately $1.1
billion. At this asset level, the annual management fee would aggregate
approximately $8.4 million.
The Manager has also entered into a sub-advisory agreement with Merrill
Lynch Asset Management U.K. Limited ("MLAM U.K."), a wholly-owned, indirect
subsidiary of Merrill Lynch & Co., Inc. and an affiliate of the Manager,
pursuant to which the Manager pays MLAM U.K. a fee computed at the rate of 0.15%
of the average daily net assets of the Fund for providing investment advisory
services to the Manager with respect to the Fund. For the fiscal year ended
October 31, 1994, the fee paid by the Manager to MLAM U.K. pursuant to such
arrangement aggregated $2,006,345. At the Fund's January 31, 1995 asset level,
the annual fee paid by the Manager to MLAM U.K. would aggregate approximately
$1.7 million. MLAM U.K. has offices at Ropemaker Place, 25 Ropemaker Street, 1st
Floor, London EC24 9LY, England.
Adrian Holmes, Vice President of the Fund, is the Fund's Portfolio Manager.
Mr. Holmes has been a Portfolio Manager of the Manager since November 1993 and a
Vice President of the Manager since 1990. Mr. Holmes has been primarily
responsible for selecting investments for the Fund since 1993.
The Management Agreement obligates the Fund to pay certain expenses
incurred in its operations, including among other things, the management fee,
legal and audit fees, unaffiliated Trustees' fees and expenses, registration
fees, custodian and transfer agency fees, accounting and pricing costs, the cost
of printing proxies, and certain of the costs of printing shareholder reports,
prospectuses and statements of additional information distributed to
shareholders. Accounting services are provided to the Fund by the Manager, and
the Fund reimburses the Manager for its costs in connection with such services.
For the fiscal year ended October 31, 1994, the amount of such reimbursement was
$97,681. For the fiscal year or period ended October 31, 1994, the ratio of
total expenses to average net assets for each class of shares was as follows:
Class A, 1.03% (for the fiscal year); Class B, 2.06% (for the fiscal year);
Class C, 2.86% (annualized) (for the period October 21, 1994 (commencement of
public offering) to October 31, 1994); and Class D, 2.11% (annualized) (for the
period October 21, 1994 (commencement of public offering) to October 31, 1994).
22
<PAGE> 25
CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act which incorporates the Code of Ethics of the
Manager (together, the "Codes"). The Codes significantly restrict the personal
investing activities of all employees of the Manager and, as described below,
impose additional, more onerous, restrictions on fund investment personnel.
The Codes require that all employees of the Manager preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to all employees of the Manager include
a ban on acquiring any securities in a "hot" initial public offering and a
prohibition from profiting on short-term trading in securities. In addition, no
employee may purchase or sell any security which at the time is being purchased
or sold (as the case may be), or to the knowledge of the employee is being
considered for purchase or sale, by any fund advised by the Manager.
Furthermore, the Codes provide for trading "blackout periods" which prohibit
trading by investment personnel of the Fund within periods of trading by the
Fund in the same (or equivalent) security (15 or 30 days depending upon the
transaction).
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc., acts as the Fund's
transfer agent pursuant to a transfer agency, dividend disbursing agency and
shareholder servicing agency agreement (the "Transfer Agency Agreement").
Pursuant to the Transfer Agency Agreement, the Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening and maintenance
of shareholder accounts. Pursuant to the Transfer Agency Agreement, the Transfer
Agent receives 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 year ended October 31, 1994, $1,784,073 was paid to the Transfer
Agent pursuant to the Transfer Agency Agreement. At January 31, 1995, the Fund
had 21,267 Class A shareholder accounts, 109,361 Class B shareholder accounts,
258 Class C shareholder accounts and 3,326 Class D shareholder accounts. At this
level of accounts, the annual fee payable to the Transfer Agent would aggregate
approximately $1.8 million, plus miscellaneous and out-of-pocket expenses.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor Inc. (the "Distributor"), an affiliate of
both the Manager and Merrill Lynch, acts as the distributor of the shares of the
Fund. Shares of the Fund are offered continuously for sale by the Distributor
and other eligible securities dealers (including Merrill Lynch). Shares of the
Fund 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 Fund 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(SM) System,
23
<PAGE> 26
as described below. As to purchase orders received by securities dealers prior
to the close of business on the New York Stock Exchange (generally, 4:00 p.m.,
New York time), which includes orders received after the close of business on
the previous day, the applicable offering price will be based on the net asset
value determined as of 15 minutes after the close of business on the New York
Stock Exchange on the day the orders are placed with the Distributor, provided
the orders are received by the Distributor prior to 30 minutes after the close
of business on the New York Stock Exchange on that day. The applicable offering
price for purchase orders is based upon the net asset value of the Fund next
determined after receipt of the purchase orders by the Distributor. If the
purchase orders are not received by the Distributor prior to 30 minutes after
the close of business on the New York Stock Exchange, such orders shall be
deemed received on the next business day. The Fund or the Distributor may
suspend the continuous offering of the Fund's shares of any class at any time in
response to conditions in the securities markets or otherwise and may thereafter
resume such offering from time to time. Any order may be rejected by the
Distributor or the Fund. 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.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing(SM) 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 Fund with the investment
thereafter being subject to a contingent deferred sales charge and ongoing
distribution fees. A discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing(SM) System is set forth under "Merrill Lynch Select Pricing(SM) System"
on page 3.
Each Class A, Class B, Class C and Class D share of the Fund represents
identical interests in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees, 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 Fund, 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 Fund 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".
24
<PAGE> 27
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 Fund. The distribution-related revenues paid
with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares. 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 arrangements
for each class of shares under the Merrill Lynch Select Pricing(SM) System,
followed by a more detailed description of each class.
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE(1) FEE FEE FEATURE
- -------------------------------------------------------------------------------------------------
A Maximum 5.25% initial No No No
sales charge(2)(3)
- -------------------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to
years, D shares automatically
at a rate of 4.0% during after approximately
the first year, decreasing eight years(4)
1.0%
annually to 0.0%
- -------------------------------------------------------------------------------------------------
C 1.0% CDSC for 0.25% 0.75% No
one year
- -------------------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(3)
- -------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(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 Fund 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.
25
<PAGE> 28
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternative is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS DISCOUNT TO
PERCENTAGE OF PERCENTAGE* SELECTED DEALERS
OFFERING OF THE NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF PURCHASE PRICE 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 million or more of Class A or Class D shares by
certain Employer Sponsored Retirement or Savings 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 Fund 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 October 31, 1994, the Fund sold 12,530,353 of
its Class A shares for aggregate net proceeds to the Fund of $190,014,197. The
gross sales charges for the sale of its Class A shares for the period were
$3,058,065, of which $93,139 and $2,964,926 were received by the Distributor and
Merrill Lynch, respectively. During such period, the Distributor received no
CDSCs with respect to redemptions within one year after purchase of the Class A
shares purchased subject to front-end sales charge waivers.
During the fiscal period October 21, 1994 (commencement of public offering)
through October 31, 1994, the Fund sold 24,171 of its Class D shares for
aggregate net proceeds to the Fund of $381,029. The gross sales charges for the
sale of its Class D shares for the period were $10,279, of which $679 and $9,600
were received by the Distributor and Merrill Lynch, respectively. During such
period, the Distributor received no CDSCs with respect to redemptions within one
year after the purchase of the Class D 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 that currently own Class A shares in a
shareholder account, including participants in the Merrill Lynch Blueprint(SM)
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
26
<PAGE> 29
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(SM) 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 are offered at net asset value to Merrill Lynch & Co.,
Inc. and its subsidiaries and their directors and employees and to members of
the Boards of MLAM-advised investment companies, including the Fund. 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 Fund also may purchase Class A shares of the Fund
if certain conditions set forth in the Statement of Additional Information
are met. For example, Class A shares of the Fund 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 Class 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(SM) 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.
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 Fund 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
27
<PAGE> 30
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 Fund 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 Fund in connection with the sale of the Class B and Class C
shares, such as the payment of compensation to financial consultants for selling
Class B and Class C shares, from its own funds. Payments by the Fund to the
Distributor of the distribution fee under the Distribution Plan relating to
Class B shares may be used in whole or in part by the Distributor to this
purpose. The combination of the CDSC and the ongoing distribution fee
facilitates the ability of the Fund to sell the Class B and Class C shares
without a sales charge being deducted at the time of purchase. Approximately
eight years after issuance, Class B shares will convert automatically into Class
D shares of the Fund, 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 Fund 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 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 Fund exercising the
exchange privilege described under "Shareholder Services -- Exchange Privilege"
will continue to be subject to the Fund's CDSC schedule if such schedule is
higher than the CDSC schedule relating to the Class B shares acquired as a
result of the exchange.
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 proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no CDSC will
be imposed on increases in net asset value above the initial purchase price. In
addition, no CDSC will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
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<PAGE> 31
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
CLASS B CDSC
YEAR SINCE AS A PERCENTAGE
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 October 31, 1994, the Distributor received CDSCs of
$1,866,124 with respect to redemptions of Class B shares, all of which were paid
to Merrill Lynch. For the fiscal period October 21, 1994 (commencement of public
offering) to October 31, 1994, the Distributor received no CDSCs with respect to
the redemption of Class C shares.
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 purchases 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 a 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 for shares purchased after
October 21, 1994).
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(SM) 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.
29
<PAGE> 32
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 Fund. 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 Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the Fund
held in the account on the Conversion Date will be converted to Class D shares
of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
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
30
<PAGE> 33
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 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 Fund 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 Fund 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 Fund pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual rate
of 0.25% of the average daily net assets of the Fund attributable to shares of
the relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) in connection with account maintenance activities.
The Distribution Plans for Class B and Class C shares each provide that the
Fund also pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the shares of the
relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for providing shareholder and distribution
services, and bearing certain distribution-related expenses of the Fund,
including payments to financial consultants for selling Class B and Class C
shares of the Fund. The Distribution Plans relating to Class B and Class C
shares are designated to permit an investor to purchase Class B and Class C
shares through dealers without the assessment of an initial sales charge and at
the same time permit the dealer to compensate its financial consultants in
connection with the sale of the Class B and Class C shares. In this regard, the
purpose and function of the ongoing distribution fees and the CDSC are the same
as those of the initial sales charge with respect to the Class A and Class D
shares of the Fund in that the deferred sales charges provide for the financing
of the distribution of the Fund's Class B and Class C shares.
For the fiscal year ended October 31, 1994, the Fund paid the Distributor
$10,998,651 pursuant to the Class B Distribution Plan (based on average net
assets subject to the Class B Distribution Plan of $1.1 billion), all of which
was paid to Merrill Lynch for providing account maintenance and distribution-
related activities and services in connection with Class B shares. For the
fiscal period October 21, 1994 (commencement of public offering) to October 31,
1994, the Fund paid the Distributor $86 pursuant to the Class C Distribution
Plan (based on average net assets subject to the Class C Distribution Plan of
approximately $312,983), all of which was paid to Merrill Lynch for providing
account maintenance and distribution-related activities and services in
connection with Class C shares. For the fiscal period October 21, 1994
(commencement of public offering) to October 31, 1994, the Fund paid the
Distributor $13 pursuant to the Class D Distribution Plan (based on average net
assets subject to the Class D Distribution Plan of approximately $184,576), all
of which was paid to Merrill Lynch for providing account maintenance services in
connection with Class D shares. At January 31, 1995, the net assets of the Fund
subject to the Class B Distribution Plan aggregated approximately $909.2
million. At this asset level, the annual fee payable pursuant to the Class B
Distribution Plan would aggregate approximately $9.1 million. At January 31,
1995,
31
<PAGE> 34
the net assets of the Fund subject to the Class C Distribution Plan aggregated
approximately $1.6 million. At this asset level, the annual fee payable pursuant
to the Class C Distribution Plan would aggregate approximately $16,199. At
January 31, 1995, the net assets of the Fund subject to the Class D Distribution
Plan aggregated approximately $18.6 million. At this asset level, the annual fee
payable pursuant to the Class D Distribution Plan would aggregate approximately
$46,450.
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 Trustees 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, the distribution fees and
CDSCs, and the expenses consist of financial consultant compensation.
As of December 31, 1993, the fully allocated accrual expenses incurred by
the Distributor and Merrill Lynch with respect to Class B shares for the period
since January 30, 1987 (commencement of operations) exceeded fully allocated
revenues by approximately $6,347,000 (0.71% of Class B net assets at that date).
As of December 31, 1994, direct cash revenues for the period since the
commencement of operations exceeded direct cash expenses by $27,957,750 (2.58%
of Class B net assets at that date). Similar fully allocated accrual data is not
yet available with respect to Class C shares which the Fund commenced offering
to the public on October 21, 1994. As of December 31, 1994, for Class C shares,
direct cash expenses for the period since October 21, 1994 (commencement of
public offering) exceeded direct cash revenues by $590 (0.13% of Class C net
assets at that date).
The Fund 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 Fund 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 Fund, the maximum sales charge rule limits
the aggregate of distribution fee
32
<PAGE> 35
payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of
Class B shares and Class C shares, computed separately (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges) plus (2)
interest on the unpaid balance for the respective class, computed separately, at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the payment of the distribution fee and the CDSC).
In connection with the Class B shares, the Distributor has voluntarily agreed to
waive interest charges on the unpaid balance in excess of 0.50% of eligible
gross sales. Consequently, the maximum amount payable to the Distributor
(referred to as the "voluntary maximum") in connection with the Class B shares
is 6.75% of eligible gross sales. The Distributor retains the right to stop
waiving the interest charges at any time. To the extent payments would exceed
the voluntary maximum, the Fund will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Fund rather than to the Distributor; however, the Fund will continue to make
payments of the account maintenance fee. In certain circumstances the amount
payable pursuant to the voluntary maximum may exceed the amount payable under
the NASD formula. In such circumstances payment in excess of the amount payable
under the NASD formula will not be made.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all full and fractional shares of
the Fund upon receipt of a written request in proper form. The redemption price
is the net asset value per share next determined after the initial receipt of
proper notice of redemption. Except for any CDSC which may be applicable to
Class B shares, 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 Fund at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so by tendering the shares
directly to the Transfer Agent, Financial Data Services, Inc., Transfer Agency
Mutual Fund Operations Department, P.O. Box 45289, Jacksonville, Florida
32232-5289. Proper notice of redemption in the case of shares deposited with the
Transfer Agent may be accomplished by a written letter requesting redemption.
Proper notice of redemption in the case of shares for which certificates have
been issued may be accomplished by a written letter as noted above accompanied
by certificates for the shares to be redeemed. Redemption requests delivered
other than by mail should be delivered to Financial Data Services, Inc.,
Transfer Agency Mutual Fund Operations Department, 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484. Redemption requests should not be sent to the
Fund. A redemption request requires the signature(s) of all persons in whose
name(s) the shares are registered, signed exactly as the name(s) appear(s) 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, payments will be mailed within seven
days of receipt of a proper notice of redemption.
33
<PAGE> 36
At various times the Fund may be requested to redeem shares for which it
has not yet received good payment. The Fund may delay or cause to be delayed the
mailing of a redemption check until such time as good payment (i.e., cash or
certified check drawn on a U.S. bank) has been collected for the purchase of
such shares. Normally, this delay will not exceed 10 days.
REPURCHASE
The Fund will also repurchase shares through a shareholder's listed
securities dealer. The Fund will normally 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
Fund from such dealer not later than 30 minutes after the close of business on
the New York Stock Exchange (generally, 4:00 p.m., New York time) on the same
day. Dealers have the responsibility of submitting such repurchase requests to
the Fund not later than 30 minutes after the close of business on the New York
Stock Exchange in order to obtain that day's closing price.
The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than any applicable
CDSC). Securities dealers may impose a charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch charges its
customers a processing fee (presently $4.85) to confirm a repurchase of shares.
Purchases directly through the Transfer Agent are not subject to the processing
fee. The Fund reserves the right to reject any order for repurchase, which right
of rejection might adversely affect shareholders seeking redemption through the
repurchase procedure. A shareholder whose order for repurchase is rejected by
the Fund, however, may redeem shares as set forth above.
REINSTATEMENT PRIVILEGE -- CLASS A AND CLASS D SHARES
Shareholders 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 Fund at net asset value without a sales
charge up to the dollar amount redeemed. The reinstatement privilege may be
exercised by sending a notice of exercise along with a check for the amount to
be reinstated to the Transfer Agent within 30 days after the date the request
for redemption was accepted by the Transfer Agent or the Distributor. 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 Fund offers a number of shareholder services and investment plans
designed to facilitate investment in shares of the Fund. 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 Fund by calling the telephone
number on the cover page hereof or from the Distributor or Merrill Lynch.
Certain of these services are available only to U.S. investors.
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<PAGE> 37
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. 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
at the Transfer Agent. 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 Fund, a shareholder must either redeem the shares (paying any
applicable CDSC) so that the cash proceeds can be transferred to the account at
the new firm, or such shareholder must continue to maintain a retirement account
at Merrill Lynch for those shares.
Exchange Privilege. Shareholders of each class of shares of the Fund 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 Securities and Exchange Commission (the
"Commission").
Under the Merrill Lynch Select PricingSM System, Class A shareholders may
exchange Class A shares of the Fund 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
35
<PAGE> 38
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 are exchangeable with shares of the
same class of other MLAM-advised mutual funds.
Shares of the Fund which are subject to a CDSC are 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 Fund. 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 Fund 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 are 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 Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the new Class B shares. In addition, Class B
shares of the Fund acquired through use of the exchange privilege will be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares of the MLAM-advised mutual fund from
which the exchange has been made.
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 Fund'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 Fund will be
made solely on the basis of the relative net asset values of the shares being
exchanged. Therefore, there will not be a charge for any difference between the
sales charge previously paid on the shares of the other MLAM-advised mutual fund
and the sales charge payable on the shares of the Fund being acquired in the
exchange under the MFA program.
Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions are reinvested automatically in full
and fractional shares of the Fund at the net asset value per share next
determined 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 telephone call (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 capital gains distributions, or both, 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 upon redemption of shares issued as a
result of the automatic reinvestment of dividends or capital gains
distributions.
36
<PAGE> 39
Systematic Withdrawal 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(R), CBA(R) or Retirement Account may elect to
have shares redeemed on a monthly, bimonthly, quarterly, semiannual or annual
basis through the CMA(R)/CBA(R) Systematic Redemption Program, subject to
certain conditions.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C
and 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(R) or CBA(R) accounts may arrange to have periodic investments made
in the Fund in their CMA(R) or CBA(R) accounts or in certain related accounts in
amounts of $100 or more through the CMA(R)/CBA(R) Automated Investment Program.
PERFORMANCE DATA
From time to time the Fund 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
formulas specified by the 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 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 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 Fund with respect to
all shares, to the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in the same amount, except
that account maintenance and distribution fees and any incremental transfer
agency costs relating to each class of shares will be borne exclusively by that
class. The Fund will include performance data for all classes of shares of the
Fund in any advertisement or information including performance data of the Fund.
The Fund also may quote 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 distributed to investors whose
37
<PAGE> 40
purchases are subject to reduced sales loads in the case of Class A and Class D
shares or waiver of the CDSC in the case of Class B shares (such as investors in
certain retirement plans), the performance data may take into account the
reduced, and not the maximum, sales charge or may not take into account the CDSC
and therefore may reflect greater total return since, due to the reduced sales
charges or waiver of the CDSC, a lower amount of expenses is deducted. See
"Purchase of Shares". The Fund's total return may be expressed either as a
percentage or as a dollar amount in order to illustrate such total return on a
hypothetical $1,000 investment in the Fund at the beginning of each specified
period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate, and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to the Financial
Times -- Actuaries Europe Index, the Morgan Stanley Capital International Europe
Index, 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 Fund may include the Fund'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
indicative of the Fund's relative performance for any future period.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute all its net investment income, if
any. Dividends from such net investment income are paid at least annually. All
net realized long- or short-term capital gains, if any, are distributed to the
Fund's shareholders annually after the close of the Fund's fiscal year. From
time to time, the Fund may declare a special distribution at or about the end of
the calendar year in order to comply with a Federal income tax requirement that
certain percentages of its ordinary income and capital gains be distributed
during the calendar year. Dividends and distributions may be reinvested
automatically in shares of the Fund at net asset value without a sales load.
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
Fund or received in cash.
The per share dividends and distributions on each class of shares will be
reduced as a result of any account maintenance, distribution and higher transfer
agency fees applicable with respect to that class. See "Additional
Information -- Determination of Net Asset Value".
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the "shareholders"). The
Fund intends to distribute substantially all of such income.
38
<PAGE> 41
Dividends paid by the Fund from its ordinary income and distributions of
the Fund'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 Fund's net realized long-term capital gains
(including long-term gains from certain transactions in warrants, futures and
options) ("capital gain dividends") are taxable to shareholders as long-term
capital gains, regardless of the length of time the shareholder has owned Fund
shares. Distributions in excess of the Fund's earnings and profits will first
reduce the adjusted tax basis of a holder's shares and, after such adjusted tax
basis is reduced to zero, will constitute capital gains to such holder (assuming
the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income or capital gain dividends.
Distributions by the Fund, whether from ordinary income or capital gains,
generally will not be eligible for the dividends received deduction allowed to
corporations under the Code. If the Fund 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 Fund and received by its shareholders on
December 31 of the year in which such dividend was declared.
Ordinary income dividends paid by the Fund 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 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 Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. 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 Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their 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 Fund'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 Fund 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 Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
39
<PAGE> 42
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, 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. In certain circumstances the Fund may elect
capital gain or loss treatment for such transactions. Such Code Section 988
gains or losses will generally increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to shareholders as
ordinary income. Additionally, if Code Section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary income dividend distributions, and 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 Fund shares and resulting in a capital gain for any
shareholder who received a distribution greater than the shareholder's tax basis
in Fund 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 into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring such shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales charge
paid to the Fund on the exchanged shares reduces any sales charge the
shareholder would have owed upon purchase of new shares in the absence of the
exchange privilege. Instead, such charge will be treated as an amount paid for
the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
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
Fund.
DETERMINATION OF NET ASSET VALUE
Net asset value of the shares of all classes of the Fund is determined once
daily as of 15 minutes after the close of business on the New York Stock
Exchange (generally, 4:00 p.m., New York time), following the close of trading
on the New York Stock Exchange on each day during which such Exchange is open
for trading. Any assets or liabilities expressed in terms of foreign 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
40
<PAGE> 43
is computed by dividing the value of the securities held by the Fund plus any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total number
of shares outstanding at such time. Expenses, including the fees payable to the
Manager and any account maintenance and/or distribution fees payable to the
Distributor, are accrued daily.
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 Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last bid price.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund.
Since foreign securities exchanges may be open on certain U.S. holidays on
which the Fund will not determine its net asset value and accept share orders,
portfolio securities will trade and the net asset value of the Fund's shares may
be significantly affected on days when an investor has no access to the Fund.
The per share net asset value of the Class A shares will generally be
higher than the per share net asset value 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 (although not necessarily meet)
immediately after the payment of dividends or distributions which will differ by
approximately the amount of the expense accrual differentials between the
classes.
ORGANIZATION OF THE FUND
The Fund was organized on March 11, 1986, under the laws of the
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts business trust". The Fund is authorized to issue an unlimited
number of shares of beneficial interest of $.10 par value of different classes.
At the date of this Prospectus, the shares of the Fund are divided into Class A,
Class B, Class C and Class D shares. Class A, Class B, Class C and Class D
shares represent interests in the assets of the Fund and have identical voting,
dividend, liquidation and other rights and the same terms and conditions 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 and that each
class has exclusive voting rights with respect to matters relating to account
maintenance and distribution expenditures, as applicable. See "Purchase of
Shares". The Fund has received an order from the Securities and Exchange
Commission (the "Commission") permitting the issuance and sale of multiple
classes of shares. Shares issued are fully paid and non-assessable and have no
preemptive rights. Shares have the
41
<PAGE> 44
conversion rights described in this Prospectus. The Trustees of the Fund may
classify and reclassify the shares of the Fund into additional classes at a
future date.
The Declaration of Trust of the Fund, as amended (the "Declaration"), does
not require that the Fund hold an annual meeting of shareholders. However, the
Fund will be required to call special meetings of shareholders in accordance
with the requirements of the Investment Company Act to seek approval of new
management and advisory arrangements, a material increase in distribution fees
or a change in the fundamental policies, objective or restrictions of the Fund.
The Fund also would be required to hold a special shareholders' meeting to elect
new Trustees at such time as less than a majority of the Trustees holding office
have been elected by shareholders. The Declaration provides that a shareholders'
meeting may be called for any reason at the request of 10% of the outstanding
shares of the Fund or by a majority of the Trustees.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified 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, Pierce, Fenner & Smith Incorporated
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 Fund at the address or
telephone number set forth on the cover page of this Prospectus.
------------------------
The Declaration, dated March 11, 1986, and subsequently amended, a copy of
which is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "Merrill Lynch EuroFund" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
Fund shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim of said Fund,
but the "Trust Property" only shall be liable.
42
<PAGE> 45
MERRILL LYNCH EUROFUND -- AUTHORIZATION FORM (PART 1)
- --------------------------------------------------------------------------------
NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH
BLUEPRINT(SM) PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINT(SM)
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 EuroFund 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.)
<TABLE>
<S> <C>
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)
</TABLE>
<TABLE>
<S> <C>
Occupation ......................................... Name and Address of Employer..............................................
Signature of Owner
.........................................................................
.........................................................................
................................................... .........................................................................
Signature of Owner Signature of Co-Owner (if any)
</TABLE>
(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
<TABLE>
<S> <C> <C>
Ordinary Income Dividends Long-term Capital Gains
--------------------------------- ---------------------------------
SELECT / / Reinvest SELECT / / Reinvest
ONE: / / Cash ONE: / / Cash
--------------------------------- ---------------------------------
</TABLE>
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 EuroFund 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.
43
<PAGE> 46
MERRILL LYNCH EUROFUND -- AUTHORIZATION FORM (PART 1) -- (CONTINUED)
- --------------------------------------------------------------------------------
3. SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION 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.
<TABLE>
<S> <C>
............................................................. ............................................................
Signature of Owner Signature of Co-Owner (if any)
</TABLE>
- --------------------------------------------------------------------------------
4. LETTER OF INTENTION -- CLASS A AND D SHARES ONLY (See terms and conditions in
the Statement of Additional Information)
<TABLE>
<S> <C>
......................,19........
Dear Sir/Madam: Date of initial purchase
</TABLE>
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch EuroFund 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:
<TABLE>
<S> <C> <C> <C> <C>
/ / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000
</TABLE>
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Merrill Lynch EuroFund 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 EuroFund held as security.
<TABLE>
<S> <C>
By:.............................................................. ...............................................................
Signature of Owner Signature of Co-Owner
(If registered in joint parties, both must sign)
</TABLE>
In making purchases under this letter, the following are the related accounts
on which reduced offering prices are to apply:
<TABLE>
<S> <C>
(1) Name ................................................... (2) Name....................................................
Account Number ............................................. Account Number..............................................
</TABLE>
- --------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp
This form when completed should be mailed to:
Merrill Lynch EuroFund
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
<TABLE>
<S> <C> <C>
- --------- ------------
..............................
- --------- ------------
Branch-Code F/C No. F/C Last Name
- --------- ---------------
- --------- ---------------
Dealer's Customer Account No.
</TABLE>
44
<PAGE> 47
MERRILL LYNCH EUROFUND -- AUTHORIZATION FORM (PART 2)
- --------------------------------------------------------------------------------
NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE SYSTEMATIC WITHDRAWAL OR AUTOMATIC
INVESTMENT PLANS ONLY.
- --------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
<TABLE>
<S> <C>
(PLEASE PRINT) ------------------------------------
Name of Owner.......................................................................
------------------------------------
First Name Initial Last Name Social Security No.
or Taxpayer Identification No.
Address.............................................................................
.................................................................................... Account Number...........................
(Zip Code) (if existing account)
Name of Co-Owner (if any)...........................................................
Address.............................................................................
....................................................................................
</TABLE>
- --------------------------------------------------------------------------------
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 EuroFund 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 _________________ or as soon as possible thereafter.
(month)
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.........................................................................
........................................................................
<TABLE>
<S> <C>
Signature of Owner........................................ Date.................
Signature of Co-Owner (if any)..................................................
</TABLE>
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO 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
<TABLE>
<S> <C>
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)
</TABLE>
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID" OR
A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHALL ACCOMPANY THIS APPLICATION.
45
<PAGE> 48
MERRILL LYNCH EUROFUND -- AUTHORIZATION FORM (PART 2) -- (CONTINUED)
- --------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C> <C>
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
</TABLE>
of Merrill Lynch EuroFund, 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 EuroFund as indicated below:
Amount of each check or ACH debit $..........................................
Account No...................................................................
Please date and invest ACH debits on the 20th of each month
beginning ___________ or as soon as 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 Signature of Depositor
Number (If joint account, both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED
"VOID" SHOULD ACCOMPANY THIS APPLICATION.
46
<PAGE> 49
MANAGER
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
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE> 50
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 FUND, THE MANAGER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table........................................... 2
Merrill Lynch Select Pricing(SM) System............. 3
Financial Highlights................................ 8
Special and Risk Considerations..................... 11
General............................................ 11
Investment in Eastern European Markets............. 12
Investment Objective and Policies................... 13
Certain Other Investment Practices................. 14
Investment Restrictions............................ 19
Management of the Fund.............................. 21
Trustees........................................... 21
Management and Advisory Arrangements............... 21
Code of Ethics..................................... 23
Transfer Agency Services........................... 23
Purchase of Shares.................................. 23
Initial Sales Charge Alternatives -- Class A and
Class D Shares................................... 25
Deferred Sales Charge Alternatives -- Class B and
Class C Shares................................... 27
Distribution Plans................................. 31
Limitations on the Payment of Deferred Sales
Charges.......................................... 32
Redemption of Shares................................ 33
Redemption......................................... 33
Repurchase......................................... 34
Reinstatement Privilege -- Class A and Class D
Shares........................................... 34
Shareholder Services................................ 34
Performance Data.................................... 37
Additional Information.............................. 38
Dividends and Distributions........................ 38
Taxes.............................................. 38
Determination of Net Asset Value................... 40
Organization of the Fund........................... 41
Shareholder Reports................................ 42
Shareholder Inquiries.............................. 42
Authorization Form.................................. 43
Code # 10475-0295
</TABLE>
[LOGO]
MERRILL LYNCH
EUROFUND
ART WORK
PROSPECTUS
February 27, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This Prospectus should be
retained for future reference.
<PAGE> 51
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH EUROFUND
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
-------------------------
Merrill Lynch EuroFund (the "Fund") is a mutual fund seeking to provide
shareholders with capital appreciation primarily through investment in equities
of corporations domiciled in European countries. Current income from dividends
and interest will not be an important consideration in selecting portfolio
securities. The Fund expects that under normal market conditions at least 80% of
the Fund's net assets will be invested in European corporate securities,
primarily common stocks and debt and preferred securities convertible into
common stocks. There can be no assurance that the investment objective of the
Fund will be realized.
Pursuant to the Merrill Lynch Select Pricing(SM) System, the Fund offers
four classes of shares each with a different combination of sales charges,
ongoing fees and other features. The Merrill Lynch Select Pricing(SM) System
permits an investor to choose the method of purchasing shares that the investor
believes is most beneficial given the amount of the purchase, the length of
time the investor expects to hold the shares and other relevant circumstances.
-------------------------
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the prospectus of the Fund, dated
February 27, 1995 (the "Prospectus"), which has been filed with the Securities
and Exchange Commission and can be obtained, without charge, by calling or by
writing the Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
-------------------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
-------------------------
The date of this Statement of Additional Information is February 27, 1995.
<PAGE> 52
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation
primarily through investment in equities of corporations domiciled in European
countries. Reference is made to "Investment Objective and Policies" in the
Prospectus for a discussion of the investment objective and policies of the
Fund.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, Merrill Lynch Asset Management, L.P., doing business as
Merrill Lynch Asset Management (the "Manager"), will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a particular
company or within a particular industry or due to general market, economic or
financial conditions. Accordingly, while the Fund anticipates that its annual
portfolio turnover rate should not exceed 150% under normal conditions, it is
impossible to predict portfolio turnover rates. The portfolio turnover rate is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of U.S. Government
securities and of all other 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 October
31, 1993, and 1994, the Fund's portfolio turnover rates were 115.10% and 82.47%,
respectively. The Fund is subject to the Federal income tax requirement that
less than 30% of the Fund's gross income be derived from gains from the sale or
other disposition of securities held for less than three months.
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 Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate. Any changes in
the investment objective or fundamental policies set forth under "Investment
Restrictions" below would require the approval of the holders of a majority of
the Fund's outstanding voting securities.
The Fund'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 Fund are redeemable on a daily
basis on each day the Fund determines its net asset value in U.S. dollars, the
Fund 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. See "Redemption of Shares". Under present conditions, the Manager
does not believe that these considerations will have any significant effect on
its portfolio strategy, although there can be no assurance in this regard.
OTHER INVESTMENT POLICIES AND PRACTICES
Hedging Techniques. Reference is made to the discussion concerning hedging
techniques under the caption "Investment Objective and Policies -- Certain Other
Investment Practices -- Hedging Techniques" in the Prospectus.
The Fund may engage in various portfolio strategies to hedge its portfolio
against investment and currency risks. These strategies include the use of
options on portfolio securities, currency options and futures, and options on
such futures and forward foreign currency transactions. While the Fund'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 Fund's shares will fluctuate.
2
<PAGE> 53
Although certain risks are involved in options and futures transactions (as
discussed below), the Manager believes that, because the Fund will only engage
in these transactions for hedging purposes, the options and futures portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of options and futures transactions.
The following information relates to the hedging instruments the Fund may
utilize with respect to currency risks.
Writing Covered Options. The Fund 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 Fund, in return for a premium, gives another
party a right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund 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 Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects a
closing purchase transaction. A closing purchase transaction cancels out the
Fund'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 a decline in the price of
the underlying security.
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 would realize 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 would realize a gain or loss from the sale of the
underlying security.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options which means that so long
as the Fund is obligated as the writer of the option, it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies, with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By writing a
put, the Fund will be obligated to purchase the underlying security at a price
that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. The Fund may engage in
closing transactions in order to terminate put options that it has written.
Purchasing Options. The Fund may purchase put options to hedge against a
decline in the market value of its equity holdings. By buying a put, the Fund
has a right to sell the underlying security at the exercise price, thus limiting
the Fund'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; 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 Fund's position as the purchaser of an option by
means of an offsetting sale of
3
<PAGE> 54
an identical option prior to the expiration of the option it has purchased. In
certain circumstances, the Fund may purchase call options on securities held in
its portfolio on which it has written call options or on securities which it
intends to purchase. The Fund will not purchase options on securities if as a
result of such purchase, the aggregate cost of all outstanding options on
securities held by the Fund would exceed 5% of the market value of the Fund's
total assets.
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 price 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 Fund 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 Fund will enter into an option or futures transaction on an exchange
only if there appears to be a liquid secondary market for such option 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
Fund will acquire only over-the-counter options for which management believes
the Fund 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),
unless there is only one dealer, in which case such dealer's price will be used.
In the case of a futures position or an option on a futures position written by
the Fund, in the event of adverse price movements, the Fund would continue to be
required to make daily cash payments of variation margin. In such situations, if
the Fund 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 Fund 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
Fund's ability to effectively hedge its portfolio. There is also the risk of
loss by the Fund of margin deposits in the event of bankruptcy of a broker with
whom the Fund has an open position in the futures contract or related option.
The risk of loss from investing in futures transactions is theoretically
unlimited.
The exchanges on which the Fund intends to conduct options transactions
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 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 Manager does not believe
that these trading and position limits will have any adverse impact on the
portfolio strategies for hedging the Fund's portfolio.
Forward Foreign Exchange Transactions. Generally, the foreign exchange
transactions of the Fund will be conducted on a spot, i.e., cash basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. This rate under normal market conditions differs from the prevailing
exchange rate in an amount generally less than one-tenth of one percent due to
the costs of converting from one currency to
4
<PAGE> 55
another. However, the Fund has authority to deal in forward foreign exchange
between currencies of the different countries in whose securities it will invest
as a hedge against possible variations in the foreign exchange rates between
these currencies. This is accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. The Fund'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 Fund accruing
in connection with the purchase and sale of its portfolio securities, the sale
and redemption of shares of the Fund or the payment of dividends and
distributions by the Fund. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. The Fund will not speculate in forward foreign exchange.
The Fund 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 Fund enters into a position hedging
transaction, its custodian will place cash or liquid securities in a separate
account of the Fund in an amount equal to the value of the Fund'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 Fund's commitment with respect to such contracts. The
Fund will not enter into a position hedging commitment if, as a result thereof,
the Fund would have more than 15% of the value of its assets committed to such
contracts. The Fund will not enter into a forward contract with a term of more
than one year.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices 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 Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currency involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange are usually
conducted on a principal basis, no fees or commissions are involved.
Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or a primary dealer in U.S. Government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, upon entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Repurchase
agreements usually cover short periods, such as under one week. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred to the purchaser. As a purchaser,
the Fund will require the seller to provide additional collateral if the market
value of the securities falls below the repurchase price at any time during the
term of the repurchase agreement. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but constitute only collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs or possible losses in connection with the
disposition of the collateral. In the event of a default under such a repurchase
agreement, instead of the contractual fixed rate of return, the rate of return
to the Fund shall be dependent upon intervening
5
<PAGE> 56
fluctuations of the market value of such securities and the accrued interest on
the securities. In such event, the Fund would have rights against the seller for
breach of contract with respect to any losses arising from market fluctuations
following the failure of the seller to perform.
Lending of Portfolio Securities. Subject to the investment restrictions
stated below, the Fund may lend securities from its portfolio to approved
borrowers and receive collateral in cash or securities issued or guaranteed by
the U.S. Government which are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The purpose of
such loans is to permit the borrowers to use such securities for delivery to
purchasers when such borrowers have sold short. If cash collateral is received
by the Fund, it is invested in short-term money market securities, and a portion
of the yield received in respect of such investment is retained by the Fund.
Alternatively, if securities are delivered to the Fund as collateral, the Fund
and the borrower negotiate a rate for the loan premium to be received by the
Fund for lending its portfolio securities. In either event, the total yield on
the Fund's portfolio is increased by loans of its portfolio securities. The Fund
will have the right to regain record ownership of loaned securities to exercise
beneficial rights such as voting rights, subscription rights and rights to
dividends, interest or other distributions. Such loans are terminable at any
time. The Fund may pay reasonable finder's, administrative and custodial fees in
connection with such loans. With respect to the lending of portfolio securities,
there is the risk of failure by the borrower to return the securities involved
in such transactions.
Debt Securities. The Fund may hold convertible debt securities and, from
time to time as a temporary defensive measure, may also hold non-convertible
debt securities and preferred securities. The Fund has established no rating
criteria for the debt securities in which it may invest. Therefore, the Fund may
invest in debt securities either (a) rated in one of the top four rating
categories by a nationally recognized rating organization or which, in the
Manager's judgment, possess similar credit characteristics ("investment grade
securities") or (b) rated below the top four rating categories or which, in the
Manager's judgment, possess similar credit characteristics ("high yield
securities"). The Manager considers ratings as one of several factors in its
independent credit analysis of issuers.
Issuers of high yield securities 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
securities may be more likely to experience financial stress, especially if such
issuers are highly leveraged. In addition, the market for high yield securities
is relatively new and has not weathered a major economic recession, and it is
unknown what effect such a recession might have on such securities. 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 securities because such
securities may be unsecured and may be subordinated to other creditors of the
issuer.
High yield securities frequently have call or redemption features which
would permit issuers to repurchase such securities from the Fund. If a call were
exercised by an issuer during a period of declining interest rates, the Fund
likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund and dividends to
shareholders.
6
<PAGE> 57
The Fund may have difficulty disposing of certain high yield securities
because there may be a thin trading market for such securities. Because not all
dealers maintain markets in all high yield securities, there is no established
retail secondary market for many of these securities, and the Fund anticipates
that such securities could be sold only to a limited number of dealers or
institutional investors. To the extent that a secondary trading market for high
yield securities does exist, it 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 Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
securities also may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing the Fund's portfolio. Market
quotations are generally available on many high yield securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of fundamental and non-fundamental
restrictions and policies relating to the investment of its assets and its
activities. The fundamental policies set forth below may not be changed without
the approval of the holders of a majority of the Fund's outstanding voting
securities (which for this purpose and under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), means the lesser of (i) 67% of the
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).
Under the fundamental investment restrictions, the Fund may not:
1. Make any investment inconsistent with the Fund's classification as
a diversified company under the Investment Company Act.
2. Invest more than 25% of its 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 Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
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 Fund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
6. Issue senior securities to the extent such issuance would violate
applicable law.
7. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund
7
<PAGE> 58
may borrow up to an additional 5% of its total assets for temporary
purposes, (iii) the Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities
and (iv) the Fund may purchase securities on margin to the extent permitted
by applicable law. The Fund may not pledge its assets other than to secure
such borrowings or, to the extent permitted by the Fund's investment
policies as set forth in its Prospectus and Statement of Additional
Information, as they may be amended from time to time, in connection with
hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies.
8. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act"), in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to
the extent that the Fund may do so in accordance with applicable law and
the Fund's Prospectus and 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.
In addition, the Fund has adopted non-fundamental restrictions which
may be changed by the Board of Trustees. Under the non-fundamental
investment restrictions, the Fund may not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except
to the extent permitted by applicable law. The Fund currently does not
intend to engage in short sales, except short sales "against the box".
c. Invest in securities 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 Trustees of the Fund 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 Fund's shares are registered or qualified for sale
require a lower limitation, the Fund will observe such limitation. As of
the date hereof, therefore, the Fund 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 Trustees 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 50% 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 10%
of the Fund's total assets.
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 Fund's total assets would be invested in such
8
<PAGE> 59
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 Trustees of the Fund, the officers and general
partner of the Manager, the directors 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 Fund 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 Fund's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restriction (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 Fund shares. In addition, the
Fund will not purchase securities while borrowings are outstanding except
to exercise prior commitments and to exercise subscription rights.
The staff of the Securities and Exchange Commission (the "Commission") has
taken the position that purchased over-the-counter options ("OTC options") and
the assets used as cover for written OTC options are illiquid securities.
Therefore, the Fund has adopted an investment policy pursuant to which it will
not purchase or sell OTC options if, as a result of such transaction, the sum of
the market value of OTC options currently outstanding which are held by the
Fund, the market value of the underlying securities covered by OTC call options
currently outstanding which were sold by the Fund and margin deposits on the
Fund's existing OTC options on futures contracts exceeds 15% (10% to the extent
required by certain state laws) of the total assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Fund to
a primary U.S. Government securities dealer recognized by the Federal Reserve
Bank of New York and if the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is equal
to the repurchase price less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying security minus the option's strike
price). The repurchase price with the primary dealers is typically a formula
price which is generally based on a multiple of the premium received for the
option, plus the amount by which the option is "in-the-money". This policy as to
OTC options is not a fundamental policy of the Fund and may be amended by the
Trustees of the Fund without the approval of the Fund's shareholders. However,
the Fund will not change or modify this policy prior to the change or
modification by the Commission staff of its position.
Portfolio securities of the Fund generally may not be purchased from, sold
or loaned to the Manager or its affiliates or any of their directors, general
partners, officers or employees, acting as principal, unless pursuant to a rule
or exemptive order under the Investment Company Act. Because of the affiliation
of the Manager with the Fund, the Fund is prohibited from engaging in certain
transactions involving the Manager's affiliate, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") or its affiliates except for brokerage
transactions permitted under the Investment Company Act involving only usual and
customary commissions
9
<PAGE> 60
or transactions pursuant to an exemptive order under the Investment Company Act.
See "Portfolio Transactions and Brokerage". Without such an exemptive order, the
Fund would be prohibited from engaging in portfolio transactions with Merrill
Lynch 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 of its affiliates participate as an
underwriter or dealer.
The investment restrictions contain an exception that permits the Fund to
purchase securities pursuant to the exercise of subscription rights, subject to
the condition that such purchase will not result in the Fund ceasing to be a
diversified investment company. 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 Fund's interest in the
issuing company being diluted and may cause the Fund to forego a favorable
investment opportunity. The market for such rights is not well developed, and
accordingly, the Fund 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 would otherwise be exceeded by exercising rights or have
already been exceeded as a result of fluctuations in the market value of the
Fund's portfolio securities with the result that the Fund 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.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund, their ages and their
principal occupations for at least the last five years are set forth below.
Unless otherwise noted, the address of each executive officer and Trustee is
P.O. Box 9011, Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (62) -- President and Trustee(1)(2) -- President of the
Manager (which term as used herein includes its corporate predecessors) since
1977 and Chief Investment Officer since 1976; President of Fund Asset
Management, L.P. ("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 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 (68) -- Trustee(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.
EDWARD H. MEYER (68) -- Trustee(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 (63) -- Trustee(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.
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<PAGE> 61
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 (57) -- Trustee(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).
EDWARD D. ZINBARG (60) -- Director(2) -- 5 Hardwell Road, Short Hills, New
Jersey 07078-2117. Former Executive Vice President of The Prudential Insurance
Company of America from 1988 to 1994; former Director of Prudential Reinsurance
Company and former Trustee of the Prudential Foundation.
TERRY K. GLENN (54) -- Executive Vice President(1)(2) -- Executive Vice
President of the Manager 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 (61) -- Senior Vice President(1)(2) -- Senior Vice
President of the Manager and FAM since 1982; Senior Vice President of Princeton
Services since 1993.
ALAN J. ALBERT (47) -- Vice President(1) -- Senior Managing Director of
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") since 1993; Vice
President of the Manager since 1986.
ADRIAN HOLMES (33) -- Vice President(1) -- Managing Director of MLAM U.K.
since 1993; Vice President of the Manager since 1990 and associated therewith
since 1987.
DONALD C. BURKE (34) -- Vice President(1)(2) -- Vice President and Director
of Taxation of the Manager since 1990; employee of Deloitte & Touche LLP from
1982 to 1990.
GERALD M. RICHARD (45) -- Treasurer(1)(2) -- Senior Vice President and
Treasurer of the Manager 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 (43) -- Secretary(1)(2) -- Vice President of the Manager
since 1984 and attorney associated with the Manager since 1980; Secretary of the
Distributor since 1982.
- ---------------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Trustee or officer is a director, trustee or officer of one or more
additional investment companies for which the Manager, or its affiliate,
FAM, acts as investment adviser or manager.
At January 31, 1995, the officers and Trustees of the Fund as a group (13
persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund. At such date, Mr. Zeikel, a Trustee of the Fund, and the other officers of
the Fund, owned less than 1% of the outstanding shares of common stock of
Merrill Lynch & Co., Inc.
COMPENSATION OF TRUSTEES
The Fund pays each Trustee not affiliated with the Manager a fee of $3,500
per year plus $500 per meeting attended, together with such Trustees' actual
out-of-pocket expenses relating to attendance at
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<PAGE> 62
meetings. The Fund also compensates members of its Audit and Nominating
Committee (the "Committee"), which consists of all of the non-affiliated
Trustees, at a rate of $500 per meeting attended. The Chairman of the Committee
receives an additional fee of $250 per meeting attended. Fees and expenses paid
to the unaffiliated Trustees aggregated $35,345 for the fiscal year ended
October 31, 1994.+
The following table sets forth for the fiscal year ended October 31, 1994,
compensation paid by the Fund to the non-interested Trustees and for the
calendar year ending December 31, 1994, the aggregate compensation paid by all
investment companies advised by the Manager and its affiliate, FAM ("MLAM/FAM
Advised Funds") to the non-interested Trustees.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS MLAM/FAM ADVISED
COMPENSATION ACCRUED AS PART FUNDS PAID
NAME OF TRUSTEE FROM FUND OF FUND EXPENSES TO TRUSTEES(1)
- -------------------------------------------- ---------------- ------------------- ----------------
<S> <C> <C> <C>
Donald Cecil................................ $9,750 None $276,350
Edward H. Meyer............................. $8,500 None $251,600
Charles C. Reilly........................... $8,500 None $276,900
Richard R. West............................. $8,500 None $300,900
Edward D. Zinbarg*.......................... $8,500 None $121,500
</TABLE>
- ---------------
* Projected annual compensation for the Fund's current fiscal year. Mr.
Zinbarg was elected to the Fund's Board of Trustees effective October 25,
1994.
(1) The Trustees served on the boards of other MLAM/FAM Advised Funds as
follows: Mr. Cecil (34 boards); Mr. Meyer (34 boards); Mr. Reilly (40
boards); Mr. West (40 boards); and Mr. Zinbarg (16 boards).
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Fund -- Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which the
Manager 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 Manager for the Fund 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
Manager or its affiliates during the same period may increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price.
The Fund has entered into a management agreement (the "Management
Agreement") with the Manager. As discussed in the Prospectus, the Manager
receives for its services to the Fund monthly
- ---------------
+ During most of the fiscal year ended October 31, 1994, the Board consisted of
five Trustees, four of whom were non-interested.
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<PAGE> 63
compensation at the annual rate of 0.75% of the average daily net assets of the
Fund. For the fiscal years ended October 31, 1992, 1993 and 1994, the total
management fees paid by the Fund to the Manager aggregated $4,363,875,
$4,484,339 and $10,148,764, respectively.
The Manager has also entered into a sub-advisory agreement with MLAM U.K.,
a wholly-owned, indirect subsidiary of ML & Co. and an affiliate of the Manager,
pursuant to which MLAM pays MLAM U.K. a fee computed at the annual rate of 0.15%
of the average daily net assets of the Fund for providing investment advisory
services to MLAM with respect to the Fund. For the fiscal years ended October
31, 1992, 1993 and 1994, the fees paid by MLAM to MLAM U.K. pursuant to such
arrangement aggregated $872,775, $896,864 and $2,006,345, respectively.
California imposes limitations on the expenses of the Fund. These expense
limitations require that the Manager reimburse the Fund in an amount necessary
to prevent the aggregate ordinary operating expenses of the Fund (excluding
taxes, distribution fees, brokerage fees and commissions and extraordinary
charges such as litigation costs) from exceeding 2.5% of the Fund'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
Manager's obligation to reimburse the Fund is limited to the amount of the
management fee. No fee payment will be made to the Manager during any fiscal
year which will cause such expenses to exceed the most restrictive expense
limitation at the time of such payment.
The Fund has received an order from the State of California partially
waiving the expense limitations described above. Pursuant to the terms of such
order, the expense limitations that would otherwise apply are waived to the
extent the Fund's expense for custodial services, management and auditing fees
exceeds the average of such fees of a group of funds managed by the Manager or
its subsidiary which primarily invest domestically. Since the commencement of
operations of the Fund, no reimbursement of expenses has been required pursuant
to the applicable expense limitation provisions discussed above.
The Management Agreement obligates the Manager to provide investment
advisory services and to pay all compensation of and furnish office space for
officers and employees of the Fund connected with investment and economic
research, trading and investment management of the Fund, as well as the fees of
all Trustees of the Fund who are affiliated persons of the Manager or any of its
affiliates. The Fund 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; Commission fees; expenses of
registering the shares under Federal, state or foreign laws; fees and expenses
of unaffiliated Trustees; accounting and pricing costs (including the daily
calculation of net asset value); insurance; interest; brokerage costs;
litigation and other extraordinary or non-recurring expenses; and other expenses
properly payable by the Fund. Accounting services are provided to the Fund by
the Manager, and the Fund reimburses the Manager for its costs in connection
with such services on a semi-annual basis. For the fiscal years ended October
31, 1992, 1993 and 1994, the amounts of such reimbursement were $99,991, $60,042
and $97,681, respectively. As required by the Fund's distribution agreements,
its underwriters will pay certain promotional expenses of the Fund incurred in
connection with the offering of its shares. Certain expenses in connection with
the account maintenance and/or distribution of Class B, Class C and Class D
shares will be financed by the Fund pursuant to distribution plans in compliance
with Rule 12b-1 under the Investment Company Act. See "Purchase of
Shares -- Distribution Plans".
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<PAGE> 64
ML & Co. and Princeton Services, Inc. are "controlling persons" of the
Manager as defined under the Investment Company Act because of their ownership
of its voting securities or their power to exercise a controlling influence over
its management or policies.
Duration and Termination. Unless earlier terminated as described herein,
the Management Agreement and the sub-advisory agreement will remain in effect
from year to year if approved annually (a) by the Board of Trustees or by a
majority of the outstanding shares of the Fund and (b) by a majority of the
Trustees who are not parties to such contract or interested persons (as defined
in the Investment Company Act) of any such party. Such contracts are not
assignable and may be terminated without penalty on 60 days' written notice at
the option of either party thereto or by the vote of the shareholders of the
Fund.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing(SM) System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives, and shares of Class B and Class C are
sold to investors choosing the deferred sales charge alternatives. Each Class A,
Class B, Class C and Class D share of the Fund represents identical interests in
the investment portfolio of the Fund and has the same rights, except that Class
B, Class C and Class D shares bear the expenses of the ongoing account
maintenance fees, 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 arrangement. 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. Each class has different exchange
privileges. See "Shareholder Services -- Exchange Privilege".
The Merrill Lynch Select Pricing(SM) System is used by more than 50 mutual
funds advised by the Manager or its affiliate, FAM. Funds advised by the Manager
or FAM are referred to herein as "MLAM-advised mutual funds".
The Fund has entered into separate distribution agreements with the
Distributor in connection with the continuous offering of each class of shares
of the Fund (the "Distribution Agreements"). The Distribution Agreements
obligate the Distributor to pay certain expenses in connection with the offering
of each class of shares of the Fund. After the prospectuses, statements of
additional information and periodic reports have been prepared, set in type and
mailed to shareholders, the Distributor pays for the printing and distribution
of copies thereof used in connection with the offering to dealers and investors.
The Distributor also pays for other supplementary sales literature and
advertising costs. The Distribution Agreements are subject to the same renewal
requirements and termination provisions as the Management Agreement and the
sub-advisory agreement described above.
INITIAL SALES CHARGE ALTERNATIVES -- CLASS A AND CLASS D SHARES
The gross sales charges for the sale of Class A shares for the fiscal year
ended October 31, 1992, were $726,101, of which the Distributor received $32,587
and Merrill Lynch received $693,514. The gross sales
14
<PAGE> 65
charges for the sale of Class A shares for the fiscal year ended October 31,
1993, were $1,566,988, of which the Distributor received $101,049 and Merrill
Lynch received $1,465,939. The gross sales charges for the sale of Class A
shares for the fiscal year ended October 31, 1994, were $3,058,065 of which the
Distributor received $93,139 and Merrill Lynch received $2,964,926. The gross
sales charges for the sale of Class D shares for the fiscal period October 21,
1994 (commencement of public offering) to October 31, 1994, were $10,279, of
which the Distributor received $679 and Merrill Lynch received $9,600. During
such periods, the Distributor received no contingent deferred sales charges with
respect to redemptions within one year after purchase of Class A or Class D
shares purchased subject to front-end sales charge waivers.
The term "purchase", as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Fund, refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and to single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (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 Fund or shares of other registered investment
companies at a discount; provided, however, that it shall not include purchases
by any group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of an
insurance company, customers of either a bank or broker-dealer or clients of an
investment adviser. The 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 Fund. Purchases by such a company
or non-qualified employee benefit plan will qualify for quantity discounts only
if the Fund 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 Fund's Prospectus available to individual investors or employees and
forwarding investments by such persons to the Fund 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 Fund 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 Manager or FAM
who purchased such closed-end fund shares prior to October 21, 1994 (the date
the Merrill Lynch Select Pricing(SM) System commenced operations) and wish to
reinvest the net proceeds from a sale of their closed-end fund shares of common
stock in Eligible Class A Shares, if the conditions set forth below are
satisfied. Alternatively, closed-end fund shareholders who purchased such shares
on or after October 21, 1994, and wish to reinvest the net proceeds from a sale
of their closed-end fund shares are offered Class A shares (if eligible to buy
Class A shares) or Class D shares of the Fund and other MLAM-advised mutual
funds ("Eligible Class D Shares"), if the following conditions are met. First,
the sale of the 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
15
<PAGE> 66
investment option. Class D shares of the Fund 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 Fund.
In order to exercise this investment option, Senior Floating Rate Fund
shareholders must sell their Senior Floating Rate Fund shares to Senior Floating
Rate Fund in connection with a tender offer conducted by Senior Floating Rate
Fund and reinvest the proceeds immediately in the Fund. 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 Fund at such day.
REDUCED INITIAL SALES CHARGES -- CLASS A AND CLASS D SHARES
Right of Accumulation. Reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of the purchaser's combined holdings of all classes
of shares of the Fund and of 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. 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 Fund or any
other MLAM-advised mutual funds made within a 13-month 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 Fund's transfer agent. The Letter of Intention is
not available to employee benefit plans for which Merrill Lynch provides plan
participant recordkeeping 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 Fund 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 purchased 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 remaining registered in the
name of the purchaser) for this
16
<PAGE> 67
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 that further reduced percentage sales charge, but
there will be no retroactive reduction of the sales charges on any previous
purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be deducted
from the total purchases made under such Letter. An exchange from a MLAM-advised
money market fund into the Fund that creates a sales charge will count toward
completing a new or existing Letter of Intention from the Fund.
Merrill Lynch Blueprint(SM) Program. Class D shares of the Fund are
offered to participants in the Merrill Lynch Blueprint(SM) 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.
The Blueprint program 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 A or
Class D shares of the Fund through Blueprint will acquire the Class A or
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%, from
$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). In addition, Class A or Class
D shares of the Fund are being 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 A or Class D shares through Blueprint. Services, including the
exchange privilege, available to Class A and Class D investors through
Blueprint, however, may differ from those available to other investors in Class
A or 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 from Employer Sponsored Retirement and Savings Plans
(as defined below) whose Trustee and/or Plan Sponsor has entered into a Merrill
Lynch Directed IRA Rollover Program Service Agreement.
Orders for purchases and redemptions of Class A or Class D shares of the
Fund may be grouped for execution purposes which, in some circumstances, may
involve the execution of such orders two business days following the day such
orders are placed. The minimum initial purchase price is $100, with a $50
minimum for subsequent purchases through Blueprint. There are no minimum initial
or subsequent purchase requirements for participants who are part of an
automatic investment plan. Additional information concerning purchases through
Blueprint, including any annual fees and transaction charges, is available from
Merrill Lynch, Pierce, Fenner & Smith Incorporated, The Blueprint(SM) Program,
P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
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 Internal Revenue Code of 1986, as amended (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
17
<PAGE> 68
$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) and 403(b) 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 and other
securities in addition to mutual fund shares) by the Merrill Lynch BlueprintSM
Program, 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 or Class D shares at net asset value has the option of (1) purchasing
Class D shares at the initial sales charge schedule disclosed in the Prospectus
for purchases of up to $1,000,000 and at 0.75% for purchases of $1,000,000 or
more, (ii) 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 (iii) if the Employer Sponsored Retirement or Savings Plan does
not qualify to purchase Class B shares with a waiver upon redemption, purchasing
Class B or Class C shares at their respective CDSC schedule disclosed in the
prospectus.
Certain Employer Sponsored Retirement or Savings Plans, which were
permitted prior to October 21, 1994, to purchase Class A shares at the initial
sales charge schedule in the then current prospectus for purchases up to
$1,000,000 and at 0.75% for purchases of $1,000,000 or more, may purchase Class
A shares at the initial sales charge schedule disclosed in the Prospectus for
purchases of up to $1,000,000 and at 0.75% for purchases of $1,000,000 or more.
The minimum initial and subsequent purchase requirements are waived in
connection with all the above referenced Employer Sponsored Retirement or
Savings Plans.
Purchase Privilege of Certain Persons. Trustees of the Fund, 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 ML & Co. includes MLAM, FAM and certain other entities directly or
indirectly wholly owned and controlled by ML & Co.) and any trust, pension,
profit-sharing or other benefit plan for such persons may purchase Class A
shares of the Fund at net asset value.
Class D shares of the Fund are offered at net asset value, without a 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 purchase by such investor if the following
conditions are satisfied. First, the investor must advise Merrill Lynch that it
will purchase Class D shares of the Fund with proceeds from a redemption of 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 Fund, and the proceeds from
the redemption had been maintained in the interim in cash or a money market
fund.
18
<PAGE> 69
Class D shares of the Fund 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, if the following conditions are satisfied:
first, the investor must purchase Class D shares of the Fund with proceeds from
a redemption of shares of such other mutual fund and the shares of such other
fund were subject to a sales charge either at the time of purchase or on a
deferred basis and; second, such purchase of Class D shares must be made within
90 days after such notice of termination.
Class D shares of the Fund are 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 Fund 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 that 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 Fund 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 Fund. 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 Fund; (ii) are acquired for investment
and not for resale (subject to the understanding that the disposition of the
Fund'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 Fund may acquire through such transactions restricted or illiquid
securities to the extent the Fund does not exceed the applicable limits on
acquisition of such securities set forth under "Investment Objective and
Policies" herein).
TMA(SM) Managed Trusts. Class A shares are also offered to TMA(SM)
Managed Trusts to which Merrill Lynch Trust Company provides discretionary
trustee services at net asset value.
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 Fund 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 Trustees shall review quarterly reports of the disbursement of the
account
19
<PAGE> 70
maintenance fees and/or distribution fees paid to the Distributor. In their
consideration of each Distribution Plan, the Trustees must consider all factors
they deem relevant, including information as to the benefits of the Distribution
Plan to the Fund 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 Trustees who are not "interested persons" of the
Fund, as defined in the Investment Company Act (the "Independent Trustees"),
shall be committed to the discretion of the Independent Trustees then in office.
In approving each Distribution Plan in accordance with Rule 12b-1, the
Independent Trustees concluded that there is reasonable likelihood that such
Distribution Plan will benefit the Fund and its related class of shareholders.
Each Distribution Plan can be terminated at any time, without penalty, by the
vote of a majority of the Independent Trustees or by the vote of the holders of
a majority of the outstanding related class of voting securities of the Fund. A
Distribution Plan cannot be amended to increase materially the amount to be
spent by the Fund without the approval of the related class of shareholders, and
all material amendments are required to be approved by the vote of the Trustees,
including a majority of the Independent Trustees who have no direct or indirect
financial interest in such Distribution Plan, cast in person at a meeting called
for that purpose. Rule 12b-1 further requires that the Fund 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
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of
Class B shares and Class C shares, computed separately (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges), plus (2)
interest on the unpaid balance for the respective class, computed separately, at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the payment of the distribution fee and the CDSC).
In connection with the Class B shares, the Distributor has voluntarily agreed to
waive interest charges on the unpaid balance in excess of 0.50% of eligible
gross sales. Consequently, the maximum amount payable to the Distributor
(referred to as the "voluntary maximum") in connection with the Class B shares
is 6.75% of eligible gross sales. The Distributor retains the right to stop
waiving the interest charges at any time. To the extent payments would exceed
the voluntary maximum, the Fund will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Fund rather than to the Distributor; however, the Fund will continue to make
payments of the account maintenance fee. In certain circumstances the amount
payable pursuant to the voluntary maximum may exceed the amount payable under
the NASD formula. In such circumstances payment in excess of the amount payable
under the NASD formula will not be made.
The following table sets forth comparative information as of October 31,
1994, with respect to the Class B shares and as of November 30, 1994, with
respect to the Class C shares of the Fund indicating the maximum allowable
payments that can be made under the NASD maximum sales charge rule and, with
respect to Class B shares, the Distributor's voluntary maximum.
20
<PAGE> 71
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTION
ALLOWABLE ALLOWABLE AMOUNTS FEE AT
ELIGIBLE AGGREGATE INTEREST MAXIMUM PREVIOUSLY AGGREGATE CURRENT
GROSS SALES ON UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE LEVEL(4)
---------- --------- --------- -------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR CLASS B SHARES -- DATA
CALCULATED AS OF OCTOBER 31,
1994 (IN THOUSANDS):
Class B Shares (for the fiscal
period October 26, 1988
(commencement of public
offering) to October 31, 1994):
Under NASD Rule as Adopted........ $1,780,799 $111,300 $33,007 $144,307 $ 46,331 $97,976 $8,139
Under Distributor's Voluntary
Waiver.......................... $1,780,799 $111,300 $ 8,904 $120,204 $ 46,331 $73,873 $8,139
FOR CLASS C SHARES -- DATA
CALCULATED AS OF NOVEMBER 30,
1994 (NOT ROUNDED):
Class C Shares (for the fiscal
period October 21, 1994
(commencement of public
offering) to November 30, 1994):
Under NASD Rule as Adopted........ $ 877,273 $ 54,830 $ 251 $54,579 $ 948 $53,631 $7,826
</TABLE>
- ---------------
(1) Purchase price of all eligible Class B or Class C shares sold during the
period indicated 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 with respect to Class B shares prior to July
7, 1993, under the distribution plan in effect at that time, 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.
(4) Provided to illustrate the extent to which the current level of distribution
fee payments (not including any contingent deferred sales charge payments)
is amortizing the unpaid balance. No assurance can be given that payments of
the distribution fee will reach either the NASD maximum or, with respect to
Class B shares, the voluntary maximum.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Fund 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
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
Commission, as a result of which disposal of portfolio securities or
determination of the net asset value of the Fund is not reasonably practicable,
and for such other periods as the Commission may by order permit for the
protection of shareholders of the Fund.
The value of shares at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Fund at such time.
21
<PAGE> 72
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 on redemptions of Class B
shares 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 October 31, 1992, 1993 and 1994, the
Distributor received CDSCs of $1,181,463, $927,070 and $1,866,124, respectively,
with regard to redemptions of Class B shares all of which was paid to Merrill
Lynch. For the fiscal period October 21, 1994 (commencement of public offering)
to October 31, 1994, there were no redemptions of Class C shares resulting in
payments of CDSCs.
Merrill Lynch Blueprint(SM) 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 Fund 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 Fund 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(SM) Program, P.O. Box 30441, New Brunswick, New
Jersey 08989-0441.
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 also
is waived for any Class B shares which
22
<PAGE> 73
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 Trustees of the Fund, the Manager is
primarily responsible for the execution of the Fund's portfolio transactions and
the allocation of the brokerage. In executing such transactions, the Manager
seeks to obtain the best net results for the Fund, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution and operational facilities of
the firm involved and the firm's risk in positioning a block of securities.
While the Manager generally seeks reasonably competitive commission rates, the
Fund does not necessarily pay the lowest commission or spread available. The
Fund has no obligation to deal with any broker or group of brokers in the
execution of transactions in portfolio securities. The Fund contemplates that,
consistent with the above policy of obtaining the best net results, a portion of
its brokerage transactions with respect to equities may be conducted through
Merrill Lynch and its affiliates. For the fiscal year ended October 31, 1992,
the Fund paid total brokerage commissions of $1,651,139, of which $139,435, or
8.44%, was paid to Merrill Lynch for effecting 5.12% of the aggregate dollar
amount of transactions in which the Fund paid brokerage commissions. For the
fiscal year ended October 31, 1993, the Fund paid total brokerage commissions of
$2,301,225, of which $164,219 or 7.14% was paid to Merrill Lynch for effecting
6.82% of the aggregate dollar amount of transactions in which the Fund paid
brokerage commissions. For the fiscal year ended October 31, 1994, the Fund paid
total brokerage commissions of $2,510,229, of which $272,400 or 10.9% was paid
to Merrill Lynch for effecting 10.2% of the aggregate dollar amount of
transactions in which the Fund paid brokerage commissions. Subject to obtaining
the best price and execution, brokers who provide supplemental investment
research to the Manager may receive orders for transactions by the Fund.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Manager under the Management Agreement, and the
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information. In addition, consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and
policies established by the Trustees of the Fund, the Manager may consider sales
of shares of the Fund as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Fund. 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 Fund 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.
The Fund 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 generally higher than in the United States, although the Fund
will endeavor to achieve the best net results in effecting its portfolio
transactions. There is generally less governmental supervision and regulation of
foreign stock exchanges and brokers than in the United States.
23
<PAGE> 74
Foreign equity securities may be held by the Fund 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 United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, as well as GDRs traded
in the United States, will be subject to negotiated commission rates. The Fund
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 Fund
and persons who are affiliated with such affiliated persons are prohibited from
dealing with the Fund as principal in the purchase and sale of securities unless
a permissive order allowing such transactions is obtained from the Commission.
Since transactions in the over-the-counter market usually involve transactions
with dealers acting as principal for their own account, the Fund will not deal
with affiliated persons, including Merrill Lynch and any of its affiliates, in
connection with such transactions. See "Investment Objective and
Policies -- Investment Restrictions".
The Trustees have considered the possibilities of seeking to recapture for
the benefit of the Fund brokerage commissions and other expenses of possible
portfolio transactions by conducting portfolio transactions through affiliated
entities. For example, brokerage commissions received by affiliated brokers
could be offset against the advisory fee paid by the Fund. After considering all
factors deemed relevant, the Trustees made a determination not to seek such
recapture. The Trustees 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 United States 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
Commission has prescribed with respect to the requirements of clauses (i) and
(ii). To the extent Section 11(a) would apply to Merrill Lynch acting as a
broker for the Fund in any of its portfolio transactions executed on any such
securities exchange of which it is a member, appropriate consents have been
obtained from the Fund and annual statements as to aggregate compensation will
be provided to the Fund.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information -- Determination of Net Asset
Value" in the Prospectus concerning the determination of net asset value. The
net asset value of the shares of the Fund is determined once daily Monday
through Friday as of 15 minutes after the close of business on the New York
Stock Exchange (generally, 4:00 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. The Fund 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 Fund is required to sell or redeem
shares. Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates quoted by one or
more banks or dealers on the day of valuation. Net asset value is computed by
dividing the value of the securities held by the Fund plus any cash or other
assets (including
24
<PAGE> 75
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 fees payable to the Manager 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 Class B and Class C
shares generally will be lower than the per share net asset value of Class D
shares reflecting the daily expense accruals of the distribution fees and higher
transfer agency fees applicable with respect to Class B and Class C shares of
the Fund. It is expected, however, that the per share net asset value of the
four classes will tend to converge (although not necessarily meet) immediately
after the payment of dividends or distributions, which will differ by
approximately the amount of the expense accrual differentials 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 Trustees 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 Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options or, in
the case of options traded in the 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 Trustees of the Fund. Such valuations and procedures will be
reviewed periodically by the Trustees.
Since foreign securities exchanges may be open on certain U.S. holidays on
which the Fund will not determine its net asset value and accept share orders,
portfolio securities will trade and the net asset value of the Fund's shares may
be significantly affected on days when an investor has no access to the Fund.
SHAREHOLDER SERVICES
The Fund 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 Fund's shares through the
Merrill Lynch Blueprint(SM) Program. Full details as to each such service and
copies of the various plans described below can be obtained from the Fund, the
Distributor or Merrill Lynch. Certain of these services are available only to
U.S. investors.
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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 reinvestments 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 who has an Investment Account. Issuance of
certificates representing all or only part of the full shares in an Investment
Account may be requested by a shareholder directly from the transfer agent.
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 Fund's Automatic Investment Plan whereby the Fund 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. For
investors who buy shares of the Fund through Blueprint, no minimum charge to the
investor's bank account is required. An investor whose shares of the Fund are
held within a CMA(R) or CBA(R) account may arrange to have periodic investments
made in the Fund in amounts of $100 or more ($1 for retirement accounts) through
the CMA(R)/CBA(R) Automated Investment Program.
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 Fund.
Such reinvestment will be at the net asset value of the shares of the Fund, 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 capital gains distributions reinvested in shares of the Fund or vice
versa, and commencing ten days after receipt by the transfer agent of such
notice, those instructions will be effected.
SYSTEMATIC WITHDRAWAL PLAN -- CLASS A AND CLASS D SHARES
A Class A or Class D shareholder may elect to make 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 Fund having a value, based on cost or the current
offering price, of
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<PAGE> 77
$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 determined as of 15
minutes after the close of business of the New York Stock Exchange (generally,
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 following 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 reinvested automatically in Class A
or Class D shares of the Fund, respectively. A shareholder's Systematic
Withdrawal Plan may be terminated at any time, without charge or penalty, by the
shareholder, the Fund, the Fund'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 reduced
correspondingly. 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 Fund will not knowingly accept purchase
orders for Class A or Class D shares of the Fund from investors who maintain a
Systematic Withdrawal Plan unless such purchase is equal to at least one year's
scheduled withdrawals or $1,200, whichever is greater. Periodic investments may
not be made into an Investment Account in which the shareholder has elected to
make systematic withdrawals.
Alternatively, a Class A or Class D shareholder whose shares are held
within a CMA(R), CBA(R) or Retirement Account may elect to have shares redeemed
on a monthly, bimonthly, quarterly, semiannual or annual basis through the
CMA(R)/CBA(R) 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 Fund shares
are being purchased within the account pursuant to the Automatic Investment
Program. For more information on the CMA(R)/CBA(R) Systematic Redemption
Program, eligible shareholders should contact their Financial Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Fund have an exchange privilege
with certain other MLAM-advised mutual funds listed below. Under the Merrill
Lynch Select Pricing(SM) System, Class A shareholders may exchange Class A
shares of the Fund 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
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<PAGE> 78
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
are exchangeable with shares of the same class of other MLAM-advised mutual
funds. 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 Fund 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 are also 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 at
least 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 or Class D shares acquired through dividend reinvestment shall be deemed
to have been sold with a sales charge equal to the sales charge previously paid
on the Class A or Class D shares on which the dividend was paid. Based on this
formula, Class A or Class D shares of the Fund generally may be exchanged into
the Class A or Class D shares of the other funds or into shares of the Class A
or 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 Fund exercising the exchange privilege will continue to be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the new Class B shares acquired through use of the exchange
privilege. In addition, Class B shares of the Fund acquired through use of the
exchange privilege will be subject to the Fund's CDSC schedule if such schedule
is higher than the CDSC schedule relating to the Class B shares of the fund from
which the exchange has been made. For purposes of computing the 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 Fund for those of Merrill Lynch Special Value
Fund, Inc. ("Special Value Fund") after
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<PAGE> 79
having held the Fund Class B shares for two and a half years. The 2% CDSC that
generally would apply to a redemption would not apply to the exchange. Three
years later the investor may decide to redeem the Class B shares of Special
Value Fund and receive cash. There will be no CDSC due on this redemption, since
by "tacking" the two and a half year holding period of Fund Class B shares to
the three year holding period for the Special Value Fund Class B shares, the
investor will be deemed to have held the new Class B shares for more than five
years.
Shareholders also may exchange shares of the Fund into shares of a money
market fund advised by the Manager 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 Fund 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 Fund for shares of Merrill Lynch Institutional Fund ("Institutional
Fund") after having held the Fund 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 Fund 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.
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:
MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC. ........ High current income, consistent with a policy
of limiting the degree of fluctuation in
net asset value 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 invest-
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ment 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.
MERRILL 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.
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, INC. ............. 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 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.
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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 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 capital 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.
MERRILL LYNCH FEDERAL SECURITIES
TRUST......................... High current return through investments in
U.S. Government and Government agency
securities, including GNMA mort-
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gage-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 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 FUNDAMENTAL VALUE
PORTFOLIO (available only for
exchanges by certain
individual retirement accounts
for which Merrill Lynch acts
as custodian)................. A portfolio of Merrill Lynch Retirement Asset
Builder Program, Inc., a series fund, whose
objective is to provide capital
appreciation and income by investing in
securities, with at least 65% of the
portfolio's assets being invested in
equities.
MERRILL LYNCH GLOBAL ALLOCATION
FUND, INC. ................... High total return, consistent with prudent
risk, through a fully managed investment
policy utilizing United States and for-
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<PAGE> 83
eign 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 HOLDINGS,
INC. (residents of Arizona
must meet investor suitability
standards).................... The highest total investment return
consistent with prudent risk through
worldwide investment in an internationally
diversified portfolio of securities.
MERRILL LYNCH GLOBAL OPPORTUNITY
PORTFOLIO (available only for
exchanges by certain
individual retirement accounts
for which Merrill Lynch acts
as custodian)................. A portfolio of Merrill Lynch Retirement Asset
Builder Program, Inc., a series fund, whose
objective is to provide a high total
investment return through an investment
policy utilizing United States and foreign
equity, debt and money market securities,
the combination of which will vary
depending upon changing market and economic
trends.
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.
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<PAGE> 84
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
primarily engaged in the ownership or
operation of facilities used to 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.
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<PAGE> 85
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.
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.
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<PAGE> 86
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.
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.
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<PAGE> 87
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.
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 QUALITY BOND
PORTFOLIO (available only for
exchanges by certain
individual retirement accounts
for which Merrill Lynch acts
as custodian)................. A portfolio of Merrill Lynch Retirement Asset
Builder Program, Inc., a series fund, whose
objective is to provide a high level of
current income through investment in a
diversified portfolio of debt obligations,
such as corporate bonds and notes,
convertible securities, preferred stocks
and governmental obligations.
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.
37
<PAGE> 88
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.
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 U.S. GOVERNMENT
SECURITIES PORTFOLIO
(available only for exchanges
by certain individual
retirement accounts for which
Merrill Lynch acts as
custodian).................... A portfolio of Merrill Lynch Retirement Asset
Builder Program, Inc., a series fund, whose
objective is to provide a 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 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.
38
<PAGE> 89
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.
Class A Share Money Market Funds:
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.
Class B, Class C and Class D Share Money Market Funds:
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
Institutional 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.
39
<PAGE> 90
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.
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 Fund of the exchange.
Shareholders of the Fund, and shareholders of the other funds described above
with shares for which certificates have not been issued, may exercise the
exchange privilege by wire through their securities dealers. The Fund reserves
the right to require a properly completed Exchange Application. This exchange
privilege may be modified or terminated in accordance with the rules of the
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.
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue Code
of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the "shareholders"). The
Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of
the Fund'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 Fund's net realized long-term capital gains
(including long-term gains from certain transactions in warrants, futures and
options) ("capital gain dividends") are taxable to shareholders as long-term
capital gains, regardless of the length of time the shareholder has owned Fund
shares. Any loss upon the sale or exchange of Fund shares held for six months or
less, however, will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder. Distributions in excess of
the Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming the shares are held as a
capital asset).
40
<PAGE> 91
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income or capital gain dividends.
Distributions by the Fund, whether from ordinary income or capital gains,
generally will not be eligible for the dividends received deduction allowed to
corporations under the Code. If the Fund 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 Fund and received by its shareholders on
December 31 of the year in which such dividend was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S. withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the U.S.
withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the 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 Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their 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 Fund'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 Fund will report annually to its shareholders the amount per share of such
withholding taxes. For this purpose, the Fund will allocate foreign taxes and
foreign source income among the Class A, Class B, Class C and Class D
shareholders according to a method (which it believes is consistent with the
Securities and Exchange Commission 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.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's
41
<PAGE> 92
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 such shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales charge
paid to the Fund on the exchanged shares reduces any sales charge the
shareholder would have owed upon purchase of the new shares in the absence of
the exchange privilege. Instead, such sales charge will be treated as an amount
paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income and
capital gains in the manner necessary to avoid imposition of the 4% excise tax,
there can be no assurance that sufficient amounts of the Fund's taxable income
and capital gains will be distributed to avoid entirely the imposition of the
tax. In such event, the Fund will be liable for the tax only on the amount by
which it does not meet the foregoing distribution requirements.
The Fund may invest in securities rated in the medium to lower rating
categories of nationally recognized rating organizations, and in unrated
securities ("high yield securities"), as previously described. Some of these
high yield securities may be purchased at a discount and may therefore cause the
Fund to accrue income before amounts due under the obligations are paid. In
addition, a portion of the interest payments on such high yield securities may
be treated as dividends for Federal income tax purposes and may be eligible for
the dividends received deduction allowed to domestic corporations under the
Code.
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures and forward foreign
exchange contracts. Options and futures contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the end
of each taxable year, i.e., each such option or futures contract will be treated
as sold for its fair market value on the last day of the taxable year. Unless
such contract is a forward foreign exchange contract, or is a non-equity option
or a regulated futures contract for a non-U.S. currency for which the Fund
elects to have gain or loss treated as ordinary gain or loss under Code Section
988 (as described below), gain or loss from Section 1256 contracts will be 60%
long-term and 40% short-term capital gain or loss. The mark-to-market rules
outlined above, however, will not apply to certain transactions entered into by
the Fund solely to reduce the risk of changes in price or interest or currency
exchange rates with respect to its investments.
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. The Fund
may, nonetheless, elect to treat the gain or loss from certain forward foreign
exchange contracts as capital. In this case, gain or loss realized in connection
with a forward foreign exchange
42
<PAGE> 93
contract that is a Section 1256 contract will be characterized as 60% long-term
and 40% short-term capital gain or loss.
Code Section 1092, which applies to certain "straddles", may affect the
taxation of the Fund's transactions in options, futures and forward foreign
exchange contracts. Under Section 1092, the Fund may be required to postpone
recognition for tax purposes of losses incurred in certain 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 Fund's gross income be derived from gains from the sale or other disposition
of securities held for less than three months. Accordingly, the Fund may be
restricted in effecting closing transactions within three months after entering
into an option 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 Fund qualifies as a
RIC. It is currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, foreign currency
futures and forward foreign exchange contracts will be valued for purposes of
the RIC diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S dollar). In
general, foreign currency gains or losses from certain debt instruments, from
certain forward contracts, from futures contracts that are not "regulated
futures contracts" and from unlisted options will be treated as ordinary income
or loss under Code Section 988. In certain circumstances, the Fund may elect
capital gain or loss treatment for such transactions. Regulated futures
contracts, as described above, will be taxed under Code Section 1256 unless
application of Section 988 is elected by the Fund. In general, however, Code
Section 988 gains or losses will increase or decrease the amount of the Fund's
investment company taxable income available to be distributed to shareholders as
ordinary income. Additionally, if Code Section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary income dividend distributions, and 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 Fund shares and resulting in a capital gain for any
shareholder who received a distribution greater than the shareholder's tax basis
in Fund shares (assuming the shares were held as a capital asset). The
mark-to-market rules outlined above, however, will not apply to certain
transactions entered into by the Fund solely to reduce the risk of 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.
43
<PAGE> 94
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
Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data, in advertisements or information furnished to present
or prospective shareholders. Total return data are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return is determined separately for Class A, Class B, Class
C and Class D shares in accordance with formulas specified by the Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charge in the case of Class A and Class D
shares and the CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of Class B and Class C
shares.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that, (1) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted,
and (2) the maximum applicable sales charges will not be included with respect
to annual or annualized rates of return calculations. Aside from the impact on
the performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the average
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over longer periods of time.
44
<PAGE> 95
Set forth in the tables below is total return information for the Class A,
Class B, Class C and Class D shares of the Fund for the periods indicated.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------- -------------------------------- --------------------------------
REDEEMABLE REDEEMABLE REDEEMABLE
VALUE OF A VALUE OF A VALUE OF A
HYPOTHETICAL HYPOTHETICAL HYPOTHETICAL
EXPRESSED AS A $1,000 EXPRESSED AS A $1,000 EXPRESSED AS A $1,000
PERCENTAGE BASED INVESTMENT AT PERCENTAGE BASED INVESTMENT AT PERCENTAGE BASED INVESTMENT AT
ON A HYPOTHETICAL THE END OF ON A HYPOTHETICAL THE END OF ON A HYPOTHETICAL THE END OF
PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
- ------------------------- ----------------- ------------- ----------------- ------------- ----------------- -------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... 12.63% 1,003.30
One Year Ended October
31, 1994............... 9.03% $1,090.30 9.78% $1,097.80
Five Years Ended October
31, 1994............... 10.49% $1,646.30 10.53% $1,649.50
Inception (October 26,
1988) to October 31,
1994................... 10.69% $1,839.40
Inception (January 30,
1987) to October 31,
1994................... 7.73% $1,781.30
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... 1.33% $1,013.30
Year Ended October 31,
1994................... 15.07% $1,150.70 13.78% $1,137.80
1993................... 31.72% $1,317.20 30.39% $1,303.90
1992................... (6.90)% $ 931.00 (7.73)% $ 922.70
1991................... 11.54% $1,115.40 10.35% $1,103.50
1990................... 10.39% $1,103.90 9.19% $1,091.90
1989................... 9.62% $1,096.20 8.28% $1,082.80
1988................... 7.35% $1,073.50
Inception (January 30,
1987) to October 31,
1987................... (7.10)% $ 929.00
Inception (October 26,
1988) to October 31,
1988................... 1.93% $1,019.30
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... 0.33% 1,003.30
Inception (October 26,
1988) to October 31,
1994................... 83.94% $1,839.40
Inception (January 30,
1987) to October 31,
1994................... 78.13% $1,781.30
</TABLE>
<TABLE>
<CAPTION>
CLASS D
--------------------------------
REDEEMABLE
VALUE OF A
HYPOTHETICAL
EXPRESSED AS A $1,000
PERCENTAGE BASED INVESTMENT AT
ON A HYPOTHETICAL THE END OF
PERIOD $1,000 INVESTMENT THE PERIOD
- ------------------------- ----------------- -------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE
SALES CHARGES)
<S> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... (77.35)% $ 960.10
One Year Ended October
31, 1994...............
Five Years Ended October
31, 1994...............
Inception (October 26,
1988) to October 31,
1994...................
Inception (January 30,
1987) to October 31,
1994...................
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE
SALES CHARGES)
<S> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... 1.33% $1,013.30
Year Ended October 31,
1994...................
1993...................
1992...................
1991...................
1990...................
1989...................
1988...................
Inception (January 30,
1987) to October 31,
1987...................
Inception (October 26,
1988) to October 31,
1988...................
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE
SALES CHARGES)
<S> <C> <C>
Inception (October 21,
1994) to October 31,
1994................... (3.99)% $ 960.10
Inception (October 26,
1988) to October 31,
1994...................
Inception (January 30,
1987) to October 31,
1994...................
</TABLE>
45
<PAGE> 96
In order to reflect the reduced sales charges, in the case of Class A or
Class D shares, or the waiver of the CDSC, in the case of Class B or Class C
shares, applicable to certain investors, as described under "Purchase of Shares"
and "Redemption of Shares", respectively, the total return data quoted by the
Fund in advertisements directed to such investors may take into account the
reduced, and not the maximum, sales charge or may take into account the CDSC and
therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses is deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Declaration of Trust of the Fund permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, par value
$0.10 per share, of different classes and to divide or combine the shares of
each class into a greater or lesser number of shares without thereby changing
the proportionate beneficial interest in the Fund. At the date of this Statement
of Additional Information, the shares of the Fund are divided into four classes
of shares, designated Class A, Class B, Class C and Class D. Under the
Declaration of Trust, the Trustees have the authority to issue separate classes
of shares which would represent interests in the assets of the Fund and have
identical voting, dividend, liquidation and other rights and the same terms and
conditions except that (i) expenses related to the distribution of the shares of
a class may be borne solely by such class, (ii) a class may have exclusive
voting rights with respect to matters relating to the expenses being borne only
by such class and (iii) classes may have different conversion rights. The Fund
has received an order from the Commission permitting the issuance and sale of
multiple classes of shares. Upon liquidation of the Fund, shareholders of each
class are entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders, except for any expenses which may be attributable
only to one class. Shares have no preemptive rights. The rights of redemption,
exchange and conversion are described elsewhere herein and in the Prospectus.
Shares are fully paid and non-assessable by the Fund.
Shareholders are entitled to one vote for each full share held and
fractional votes for fractional shares held in the election of Trustees (to the
extent hereafter provided) and on other matters submitted to a vote of
shareholders, except that shareholders of a class bearing account maintenance
and/or distribution expenses as provided above shall have exclusive voting
rights with respect to matters relating to such account maintenance and/or
distribution expenditures. Voting rights are not cumulative, so that the holders
of more than 50% of the shares voting in the election of Trustees can, if they
choose to do so, elect all the Trustees of the Fund, in which event the holders
of the remaining shares are unable to elect any person as a Trustee. No
amendment may be made to the Declaration of Trust without the affirmative vote
of a majority of the outstanding shares of the Fund.
46
<PAGE> 97
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class A, Class
B, Class C and Class D shares of the Fund based on the value of the Fund's net
assets on October 31, 1994, and its shares outstanding on that date is as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ -------------- -------- --------
<S> <C> <C> <C> <C>
Net Assets........................... $236,288,410 $1,086,480,093 $462,160 $339,994
=========== ============= ======== ========
Number of Shares Outstanding......... 14,805,226 71,087,909 30,248 21,303
=========== ============= ======== ========
Net Asset Value Per Share (net assets
divided by number of shares
outstanding)....................... $ 15.96 $ 15.28 $ 15.28 $ 15.96
Sales Charge (for Class A and Class D
shares: 5.25% of offering price
(5.54%
of net amount invested*)).......... .88 ** ** .88
------------ -------------- -------- --------
Offering Price....................... $ 16.84 $ 15.28 $ 15.28 $ 16.84
=========== ============= ======== ========
</TABLE>
- ---------------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B and Class C shares are not subject to an initial sales charge but may
be subject to a CDSC on redemption. See "Purchase of Shares -- Deferred Sales
Charge Alternatives -- Class B and Class C Shares" in the Prospectus.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, have
been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the shareholders of the Fund.
The independent auditors are responsible for auditing the annual financial
statements of the Fund.
CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109
(the "Custodian") acts as the custodian of the Fund's assets. Under its contract
with the Fund, the Custodian is authorized to establish separate accounts in
foreign currencies and to cause foreign securities owned by the Fund 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
Fund's cash and securities, handling the receipt and delivery of securities and
collecting interest and dividends on the Fund'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 Fund's
transfer agent (the "Transfer Agent"). The Transfer Agent is responsible for the
issuance, transfer and redemption of shares and the opening, maintenance and
servicing of shareholder accounts. See "Management of the Fund -- Transfer
Agency Services" in the Prospectus.
47
<PAGE> 98
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on October 31 of each year. The Fund sends
to its shareholders at least semi-annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements audited
by independent auditors is sent to shareholders each year. After the end of each
year, shareholders will receive Federal income tax information regarding
dividends 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 Fund has filed with the Commission, Washington,
D.C., under the Securities Act of 1933 and the Investment Company Act, to which
reference is hereby made.
Under a separate agreement, Merrill Lynch has granted the Fund the right to
use the "Merrill Lynch" name and has reserved the right to withdraw its consent
to the use of such name by the Fund at any time or to grant the use of such name
to any other company, and the Fund has granted Merrill Lynch, under certain
conditions, the use of any other name it might assume in the future, with
respect to any corporation organized by Merrill Lynch.
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on January 31, 1995.
------------------------
The Declaration of Trust establishing the Fund, dated March 11, 1986, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Merrill Lynch EuroFund" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of the Trust shall be held
to any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim of said Fund but the "Trust
Property" only shall be liable.
48
<PAGE> 99
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
MERRILL LYNCH EUROFUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch EuroFund as of October 31, 1994,
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 each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund'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 October
31, 1994 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
EuroFund as of October 31, 1994, 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 7, 1994
49
<PAGE> 100
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Warrants Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Austria
Utilities 183,950 Verbund Oesterreichische Elekrizitats AG $ 10,223,316 $ 11,532,644 0.9%
Total Investments in Austria 10,223,316 11,532,644 0.9
Belgium
Banking 66,750 Generale de Banque S.A. 16,340,010 16,202,085 1.2
Building 8,400 Glaverbel S.A. (New Shares) 1,111,200 1,246,154 0.1
Materials 8,000 Glaverbel S.A. (Ordinary) 1,069,413 1,186,813 0.1
-------------- -------------- -----
2,180,613 2,432,967 0.2
Total Investments in Belgium 18,520,623 18,635,052 1.4
Finland
Banking 6,055,480 ++Kansallis-Osake-Pankki 15,610,007 11,268,755 0.8
4,316,800 ++Unitas Bank Ltd. 13,057,655 13,092,548 1.0
-------------- -------------- -----
28,667,662 24,361,303 1.8
Metals & Mining 687,700 ++Outokumpu OY 9,764,165 14,525,726 1.1
Paper & Forest 1,123,700 Enso-Gutzeit OY 'R' (Ordinary) (Registered) 7,143,284 9,956,527 0.8
Products 362,400 Metsa Serla OY 13,741,677 16,801,040 1.3
404,425 ++++Repola OY S 5,417,944 8,454,725 0.6
-------------- -------------- -----
26,302,905 35,212,292 2.7
Total Investments in Finland 64,734,732 74,099,321 5.6
France
Automobiles &
Equipment 154,050 Peugeot S.A. 18,500,382 23,049,204 1.7
Banking 93,480 Societe Generale 9,795,323 10,539,856 0.8
Banking & 225,850 Compagnie de Suez 12,255,610 10,795,043 0.8
Financial 212,605 Compagnie Financiere de Paribas 15,453,636 14,131,033 1.1
-------------- -------------- -----
27,709,246 24,926,076 1.9
Beverages 9,881 LVMH 1,424,091 1,591,545 0.1
Chemicals 545,700 Rhone Poulenc S.A. 13,688,070 13,449,234 1.0
Diversified
Companies 177,431 Compagnie de Fives--Lille 9,488,305 16,940,821 1.3
Financial
Services 33,108 EuraFrance S.A. 10,200,148 11,449,341 0.9
Insurance 138,950 GAN S.A. 11,816,541 7,698,472 0.6
Packaging 248,200 Pechiney International S.A. 6,917,208 7,677,679 0.6
Utilities 131,332 Compagnie Generale des Eaux 14,824,484 12,016,891 0.9
Total Investments in France 124,363,798 129,339,119 9.8
</TABLE>
50
<PAGE> 101
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Warrants Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Germany
Automobiles & 31,550 Continental AG $ 4,743,761 $ 4,635,576 0.3%
Equipment 55,000 ++Continental AG (Warrants) (a) 3,126,602 2,411,159 0.2
11,900 Volkswagen AG 3,204,881 3,489,771 0.3
202,495 ++Volkswagen AG (Preferred) (Warrants) (a) 20,029,386 20,511,782 1.5
-------------- -------------- -----
31,104,630 31,048,288 2.3
Capital Goods 321,783 ++Kloeckner Werke AG 14,985,368 29,068,408 2.2
68,554 Mannesmann AG 18,651,219 18,305,352 1.4
53,230 ++Thyssen AG 8,158,756 10,158,073 0.8
118,808 ++Thyssen AG (Warrants) (a) 3,460,062 7,497,018 0.5
-------------- -------------- -----
45,255,405 65,028,851 4.9
Chemicals 130,660 BASF AG 21,735,516 27,624,761 2.1
118,150 ++Bayer AG (Warrants) (a) 9,222,721 14,440,120 1.1
-------------- -------------- -----
30,958,237 42,064,881 3.2
Diversified
Companies 170,000 ++Veba AG (Warrants) (a) 7,318,746 6,842,909 0.5
Insurance 7,900 Munich Reinsurance Co. 14,115,776 14,535,370 1.1
Total Investments in Germany 128,752,794 159,520,299 12.0
Ireland
Banking 610,200 Bank of Ireland 2,641,538 2,803,968 0.2
Building 617,000 CRH PLC 2,050,542 3,469,669 0.3
Materials 42,000 CRH PLC (New Shares) 156,604 236,185 0.0
-------------- -------------- -----
2,207,146 3,705,854 0.3
Total Investments in Ireland 4,848,684 6,509,822 0.5
Italy
Banking & 6,058,000 Credito Italiano S.p.A. 10,111,783 6,430,939 0.5
Financial 12,116,000 Credito Italiano S.p.A. (Rights) (b) 0 469,029 0.0
-------------- -------------- -----
10,111,783 6,899,968 0.5
Building &
Construction 2,571,700 Filippo Fochi S.p.A. 8,169,638 6,854,300 0.5
Diversified 11,979,435 Compagnie Industriali Riunite S.p.A. (CIR) 11,194,219 13,791,575 1.0
Companies
Utilities 9,559,051 Societa Finanziaria Telefonica S.p.A. (STET) 20,855,534 23,644,406 1.8
Total Investments in Italy 50,331,174 51,190,249 3.8
Netherlands
Automobiles &
Equipment 352,000 Vredestein Groep N.V. 3,504,552 2,858,566 0.2
Banking 673,150 ABN Amro Holding N.V. 21,509,836 23,901,414 1.8
Capital Goods 91,800 Ahrend Groep N.V. 6,522,706 8,586,864 0.6
Chemicals 225,000 Akzo N.V. 22,293,969 28,395,080 2.1
</TABLE>
51
<PAGE> 102
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Warrants Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Electrical
Equipment 1,527,200 Philips Electronics N.V. $ 37,474,112 $ 50,514,381 3.8%
Insurance 384,550 Aegon N.V. 16,109,652 23,729,493 1.8
448,700 Amev N.V. 15,296,669 18,644,855 1.4
528,228 Internationale Nederlanden Groep N.V. 18,732,904 24,704,914 1.9
-------------- -------------- -----
50,139,225 67,079,262 5.1
Papers 434,530 KNP BT (Koninklijke) 8,525,449 12,827,264 1.0
177,393 KNP BT (Koninklijke) (Preferred) 721,071 797,059 0.1
-------------- -------------- -----
9,246,520 13,624,323 1.1
Telecommunications 157,900 Royal Ptt Nederland N.V. 5,007,549 5,026,218 0.4
Transportation 653,516 KLM Royal Dutch Airlines N.V. 12,912,312 18,168,287 1.4
Total Investments in the Netherlands 168,610,781 218,154,395 16.5
Norway
Oil & Gas 228,200 Saga Petroleum A.S. (Class A) 2,697,693 2,720,611 0.2
Producers 1,102,400 Saga Petroleum A.S. (Class B) 12,575,675 12,553,122 0.9
-------------- -------------- -----
15,273,368 15,273,733 1.1
Total Investments in Norway 15,273,368 15,273,733 1.1
Spain
Banking 128,753 Banco Popular Espanol S.A. 14,089,977 16,146,800 1.2
215,800 Banco Santander S.A. 9,375,237 8,768,436 0.7
-------------- -------------- -----
23,465,214 24,915,236 1.9
Petroleum 766,268 Repsol S.A. 21,422,573 24,498,310 1.8
Utilities 2,251,170 Telefonica Nacional de Espana S.A. 28,066,764 30,460,072 2.3
Total Investments in Spain 72,954,551 79,873,618 6.0
Sweden
Appliances 293,700 Electrolux AB 14,484,076 15,251,787 1.2
Automobiles & 729,900 Volvo AB 13,808,866 14,410,461 1.1
Equipment
Banking 865,500 ++Svenska Handelsbanken AB (Class A) 13,098,934 11,672,529 0.9
Engineering 598,600 SKF AB (Class A) 11,046,752 10,736,249 0.8
277,800 SKF AB (Class B) 5,353,782 5,059,758 0.4
314,000 ++++Svedala Industry AB 5,614,776 7,290,751 0.5
-------------- -------------- -----
22,015,310 23,086,758 1.7
Insurance 228,600 Skandia Group Forsakrings AB 3,438,056 4,163,645 0.3
Metals & Mining 814,500 ++Avesta-Sheffield AB 7,119,558 8,096,984 0.6
1,078,975 Trelleborg AB (Class B) 7,282,961 16,651,775 1.3
-------------- -------------- -----
14,402,519 24,748,759 1.9
Total Investments in Sweden 81,247,761 93,333,939 7.1
</TABLE>
52
<PAGE> 103
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Warrants Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Switzerland
Banking 69,935 Schweizerischer Bankverein $ 19,869,184 $ 20,156,425 1.5%
Electrical
Equipment 32,110 BBC Brown Boveri & Cie (Bearer) 22,290,150 27,559,379 2.1
Insurance 1,245 Baloise 2,366,092 2,344,287 0.2
5,890 ++Baloise (Warrants) (a) 532,558 656,529 0.0
-------------- -------------- -----
2,898,650 3,000,816 0.2
Pharmaceuticals 40,155 Ciba-Geigy AG 21,790,891 23,402,436 1.8
Total Investments in Switzerland 66,848,875 74,119,056 5.6
Turkey
Automobiles & 960,600 ++++Turk Otomobil Fabrikasi A.S. 7,682,550 3,784,764 0.3
Equipment
Total Investments in Turkey 7,682,550 3,784,764 0.3
United Kingdom
Aerospace 5,137,950 Rolls Royce PLC 11,518,786 14,593,710 1.1
Building 940,000 CRH PLC 4,855,526 5,217,150 0.4
Materials 221,400 CRH PLC (New Shares) 823,556 1,228,805 0.1
5,395,400 Tarmac PLC (Ordinary) 11,851,140 10,745,090 0.8
-------------- -------------- -----
17,530,222 17,191,045 1.3
Chemicals 1,819,700 Imperial Chemical Industries PLC (Ordinary) 21,930,631 23,852,941 1.8
Consumer Goods 1,696,600 Vendome Luxury Group (Units) (c) 9,802,681 14,373,860 1.1
Electrical
Equipment 2,645,100 General Electric Co. PLC 13,322,146 11,917,297 0.9
Food & Beverage 3,833,500 Grand Metropolitan PLC 25,087,094 25,969,892 2.0
2,526,000 Tate & Lyle PLC 15,384,478 17,565,865 1.3
1,006,000 Unilever PLC 15,150,990 18,721,016 1.4
-------------- -------------- -----
55,622,562 62,256,773 4.7
Industrials 759,800 Thorn EMI PLC (Ordinary) 11,313,107 12,055,692 0.9
4,774,700 Tomkins PLC 16,966,477 16,523,747 1.2
-------------- ----------- -----
28,279,584 28,579,439 2.1
Insurance 2,143,500 Commercial Union Assurance Co. PLC 19,387,178 19,174,791 1.4
Leisure 5,886,300 Forte PLC 21,482,171 22,196,319 1.7
2,978,450 Rank Organisation PLC 18,667,845 19,691,188 1.5
-------------- -------------- -----
40,150,016 41,887,507 3.2
Oil & Related 2,061,000 The British Petroleum Co. PLC 10,252,059 14,651,859 1.1
1,380,000 The Shell Transport & Trading Co. PLC 14,671,668 16,557,433 1.3
-------------- -------------- -----
24,923,727 31,209,292 2.4
</TABLE>
53
<PAGE> 104
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Warrants Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
United Kingdom
(concluded)
Pharmaceuticals 4,850,700 SmithKline Beecham Corp. PLC (Class A) $ 30,096,940 $ 32,306,593 2.4%
Retail Trade 6,450,000 Asda Group PLC 5,741,489 6,317,388 0.5
8,812,200 Sears PLC 16,033,301 15,463,913 1.2
-------------- -------------- -----
21,774,790 21,781,301 1.7
Telecommunications 3,936,900 British Telecommunications PLC 23,478,968 25,352,920 1.9
Utilities-- 507,800 Cable & Wireless PLC 3,475,048 3,481,517 0.3
Communications
Total Investments in the United Kingdom 321,293,279 347,958,986 26.3
Total Stocks & Convertible Warrants 1,135,686,286 1,283,324,997 96.9
<CAPTION>
Face Amount Short-Term Securities
<S> <C> <C> <C> <C> <C>
Repurchase $22,241,000 HSBC Holdings PLC, purchased on 10/31/1994 to
Agreements* yield 4.77% to 11/01/1994 22,241,000 22,241,000 1.7
Total Investments in Short-Term Securities 22,241,000 22,241,000 1.7
<CAPTION>
Premiums
Par Value Issue Paid
<S> <C> <C> <C> <C> <C>
Currency 60,000,000 Deutschemark, expiring November 1994 at
DM 1.711 2,088,000 0 0.0
Put Options 145,000,000 French Franc, expiring November 1994 at
Frf 5.85 4,872,000 0 0.0
Purchased 95,000,000 Netherlands Guilder, expiring November 1994
at Nlg 1.92 3,239,500 0 0.0
70,000,000 Spanish Peseta, expiring November 1994 at
Pta 139.30 2,884,000 0 0.0
Total Currency Put Options Purchased 13,083,500 0 0.0
Total Investments $1,171,010,786 1,305,565,997 98.6
==============
Other Assets 18,004,660 1.4
Less Liabilities -------------- -----
Net Assets $1,323,570,657 100.0%
============== =====
<FN>
(a)Warrants entitle the Fund 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 11/08/94.
(c)Each unit consists of one ordinary 5p Vendome PLC and one ordinary NPC Vendome SA.
**Repurchase Agreements are fully collateralized by US Government & Agency Obligations.
++Non-income producing securities.
++++Restricted security as to resale. The value of the Fund's investment in restricted
securities was approximately $19,530,000, representing 1.5% of net assets.
</TABLE>
<TABLE>
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Repola OY S 5/18/1993 $ 5,417,944 $ 8,454,725
Svedala Industry AB 6/17/1993 5,614,776 7,290,751
Turk Otomobil Fabrikasi A.S. 3/03/1994 7,682,550 3,784,764
Total $18,715,270 $19,530,240
=========== ===========
See Notes to Financial Statements.
</TABLE>
54
<PAGE> 105
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of October 31, 1994
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$1,157,927,286) (Note 1a) $1,305,565,997
Options purchased (cost--$13,083,500) (Notes 1a & 1c) 0
Cash 94,883
Foreign cash 835,883
Receivables:
Securities sold $ 26,330,374
Dividends 6,481,675
Beneficial interest sold 3,089,562
Interest 2,947 35,904,558
--------------
Prepaid registration fees and other assets (Note 1f) 112,085
--------------
Total assets 1,342,513,406
--------------
Liabilities: Payables:
Capital shares redeemed 8,543,708
Securities purchased 7,584,546
Distributor (Note 2) 924,268
Investment adviser (Note 2) 848,619 17,901,141
--------------
Accrued expenses and other liabilities 1,041,608
--------------
Total liabilities 18,942,749
--------------
Net Assets: Net assets $1,323,570,657
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number
Consist of: of shares authorized $ 1,480,523
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 7,108,791
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 3,025
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 2,130
Paid-in capital in excess of par 1,067,523,228
Undistributed realized capital gains on investments and foreign currency
transactions--net 112,731,529
Unrealized appreciation on investments and foreign currency transactions--net 134,721,431
--------------
Net assets $1,323,570,657
==============
Net Asset Value: Class A--Based on net assets of $236,288,410 and 14,805,226 shares of
beneficial interest outstanding $ 15.96
==============
Class B--Based on net assets of $1,086,480,093 and 71,087,909 shares
of beneficial interest outstanding $ 15.28
==============
Class C--Based on net assets of $462,160 and 30,248 shares of
beneficial interest outstanding $ 15.28
==============
Class D--Based on net assets of $339,994 and 21,303 shares of
beneficial interest outstanding $ 15.96
==============
See Notes to Financial Statements.
</TABLE>
55
<PAGE> 106
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Year Ended October 31, 1994
<S> <C> <C> <C>
Investment Income Dividends (net of $3,973,659 foreign withholding tax) $ 27,234,127
(Notes 1d & 1e): Interest 2,269,733
--------------
Total income 29,503,860
--------------
Expenses: Distribution fees--Class B (Note 2) $ 10,998,651
Investment advisory fees (Note 2) 10,148,764
Transfer agent fees--Class B (Note 2) 1,497,966
Custodian fees 1,333,446
Printing and shareholder reports 295,860
Transfer agent fees--Class A (Note 2) 286,107
Registration fees (Note 1f) 231,966
Accounting services (Note 2) 97,681
Professional fees 78,134
Trustees' fees and expenses 35,345
Pricing fees 5,470
Other 18,201
--------------
Total expenses 25,027,591
--------------
Investment income--net 4,476,269
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 155,293,375
(Loss) on Foreign currency transactions (9,494,117) 145,799,258
Investment & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 17,541,613
(Notes 1b, 1e & 3): Foreign currency transactions (12,418,865) 5,122,748
-------------- --------------
Net realized and unrealized gain on investments and foreign
currency transactions 150,922,006
--------------
Net Increase in Net Assets Resulting from Operations $ 155,398,275
==============
See Notes to Financial Statements.
</TABLE>
56
<PAGE> 107
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <C> <C> <C>
Operations: Investment income--net $ 4,476,269 $ 4,063,172
Realized gain (loss) on investments and foreign currency transactions--net 145,799,258 (14,444,105)
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net 5,122,748 172,655,666
-------------- --------------
Net increase in net assets resulting from operations 155,398,275 162,274,733
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 220,281,320 250,646,762
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 375,679,595 412,921,495
Beginning of year 947,891,062 534,969,567
-------------- --------------
End of year $1,323,570,657 $ 947,891,062
-------------- --------------
See Notes to Financial Statements.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended October 31,
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 year $ 13.87 $ 10.53 $ 11.62 $ 10.70 $ 9.84
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .18 .26 .24 .25 .18
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 1.91 3.08 (1.02) .96 .85
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.09 3.34 (.78) 1.21 1.03
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- -- (.31) (.29) (.17)
Realized gain on investments--net -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- -- (.31) (.29) (.17)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.96 $ 13.87 $ 10.53 $ 11.62 $ 10.70
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 15.07% 31.72% (6.90%) 11.54% 10.39%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses 1.03% 1.04% 1.09% 1.14% 1.17%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net 1.17% 1.50% (2.69%) 2.94% 2.62%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $ 236,288 $ 182,612 $ 87,865 $ 83,229 $ 85,798
Data: ========== ========== ========== ========== ==========
Portfolio turnover 82.47% 115.10% 109.95% 124.64% 122.67%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the year.
See Notes to Financial Statements.
</TABLE>
57
<PAGE> 108
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended October 31,
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 year $ 13.43 $ 10.30 $ 11.41 $ 10.51 $ 9.72
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .02 .16 .12 .13 .12
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net 1.83 2.97 (.98) .94 .78
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.85 3.13 (.86) 1.07 .90
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- -- (.25) (.17) (.11)
Realized gain on investments--net -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- -- (.25) (.17) (.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.28 $ 13.43 $ 10.30 $ 11.41 $ 10.51
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.78% 30.39% (7.73%) 10.35% 9.19%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses, excluding account maintenance and
Average distribution fees 1.06% 1.08% 1.12% 1.17% 1.20%
Net Assets: ========== ========== ========== ========== ==========
Expenses 2.06% 2.08% 2.12% 2.17% 2.20%
========== ========== ========== ========== ==========
Investment income--net 0.14% 0.51% (3.37%) 1.94% 1.32%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $1,086,480 $ 765,279 $ 447,104 $ 484,031 $ 498,600
Data: ========== ========== ========== ========== ==========
Portfolio turnover 82.47% 115.10% 109.95% 124.64% 122.67%
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++
to October 31, 1994++++
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.08 $ 15.75
Operating -------------- --------------
Performance: Investment income--net (.01) --
Realized and unrealized gain on investments and
foreign currency transactions--net .21 .21
-------------- --------------
Total from investment operations .20 .21
-------------- --------------
Net asset value, end of period $ 15.28 $ 15.96
============== ==============
Total Investment Based on net asset value per share 1.33%+++ 1.33%+++
Return:** ============== ==============
Ratios to Expenses, excluding account maintenance and distribution fees 1.86%* 1.86%*
Average ============== ==============
Net Assets: Expenses 2.86%* 2.11%*
============== ==============
Investment income--net (2.47%)* (1.70%)*
============== ==============
Supplemental Net assets, end of period (in thousands) $ 462 $ 340
Data: ============== ==============
Portfolio turnover 82.47% 82.47%
============== ==============
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
++Commencement of operations.
++++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
58
<PAGE> 109
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch EuroFund (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing SM System.
Shares of Class A and Class D are sold with a front-end sales charge. Shares of
Class B and Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with
respect to matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Portfolio securities, which are traded on
European stock exchanges, are valued at the last sales price on the exchanges
on the day the securities are being valued or, if closing prices are
unavailable, at the last traded bid price available prior to the time of
valuation. Securities traded in the over-the-counter market are valued at the
quoted bid price in the over-the-counter market prior to the time of valuation.
Portfolio securities which are traded both in the over-the- counter market and
on the stock exchange are valued on the exchange designated by or under the
authority of the Trustees as the primary market. Short-term securities are
valued at amortized cost, which approximates market value. Options which are
traded on exchanges are valued at their last sale price as of the close of such
exchanges or, lacking any sales, at the last available bid price. Securities
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 Fund's Board of
Trustees.
(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) receivables or payables 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 Fund 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 Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such contracts.
Premium or discount is amortized over the life of the contracts.
The Fund may also 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 may be effected with respect to hedges on
non-US dollar-denominated securities owned by the Fund, sold by the Fund but
not yet delivered, or committed or anticipated to be purchased by the Fund.
(c) Options--The Fund can write covered call options and purchase put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market 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 Fund enters into a closing transaction),
the Fund 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
transaction is less than or exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund'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 dates, except that if the
ex-dividend date has passed, certain dividends from foreign securities are
recorded as soon as the funds are informed of the ex-dividend
59
<PAGE> 110
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 Fund
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund 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. ("PSI"), 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 Fund 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.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operation of the Fund. For such services, the Fund pays a monthly fee of
0.75%, on an annual basis, of the average daily value of the Fund's net assets.
MLAM has entered into a Sub-Advisory Agreement with Merrill Lynch Asset
Management U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant to which
MLAM pays MLAM U.K. a fee computed at the rate of 0.15% of the average daily net
assets of the Fund for providing investment advisory services to MLAM with
respect to the Fund. Certain of the states in which the shares of the Fund are
qualified for sale impose limitations on the expenses of the Fund. The most
restrictive annual expense limitation requires that the Investment Adviser
reimburse the Fund to the extent that Fund's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and extraordinary
items) exceed 2.5% of the Fund'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
average daily net assets in excess thereof. MLAM's obligation to reimburse the
Fund is limited to the amount of the management fee. No fee payment will be made
to MLAM during any fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment.
Pursuant to the distribution plans (the "Distribution Plans") adopted by the
Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates based upon
the average daily net assets of the shares as follows:
<TABLE>
<CAPTION>
Account Maintenance Fee Distribution Fee
<S> <C> <C>
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
</TABLE>
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended October 31, 1994, MLFD earned underwriting discounts and
MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
shares as follows:
<TABLE>
<CAPTION>
MLFD MLPF&S
<S> <C> <C>
Class A $93,139 $2,964,926
Class D 679 9,600
</TABLE>
MLPF&S received contingent deferred sales charges of $1,866,124 relating to
transactions in Class B Shares, and $272,400 in commissions on the execution of
portfolio security transactions for the Fund for the year ended October 31,
1994.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co.,
is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
60
<PAGE> 111
Certain officers and/or trustees of the Fund are officers and/or directors of
MLAM, MLIM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1994 were $1,238,121,662 and $1,035,945,983,
respectively.
Net realized and unrealized gains (losses) as of October 31, 1994 were as
follows:
<TABLE>
<CAPTION>
Realized Unrealized
Gains (Losses) Gains (Losses)
<S> <C> <C>
Investments:
Long-term $154,331,814 $147,638,711
Call options written 1,110,009 --
Put options purchased (148,448) --
------------ ------------
Total investments 155,293,375 147,638,711
Currency transactions:
Put options purchased (2,241,520) (13,083,500)
Call options purchased (21,809,000) --
Call options written 12,654,901 --
Put options written 2,911,945 --
Foreign currency
transactions (1,010,443) 166,220
------------ ------------
Total currency
transactions (9,494,117) (12,917,280)
------------ ------------
Total $145,799,258 $134,721,431
============ ============
</TABLE>
Transactions in call options written for the year ended October 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Premiums
Par Value Received
<S> <C> <C>
Outstanding call options
written at beginning
of year -- --
Options written $ 735,521,831 $ 16,779,939
Options exercised (735,521,831) (16,779,939)
Options closed -- --
------------- ------------
Outstanding call options
written at end of year $ -- $ --
============= ============
</TABLE>
Transactions in put options written for the year ended October 31, 1994 were as
follows:
<TABLE>
<CAPTION>
Premiums
Par Value Paid
<S> <C> <C>
Outstanding put options
written at beginning
of year -- --
Options written $ 455,400,000 $ 3,510,630
Options exercised (455,400,000) (3,510,630)
Options closed -- --
------------- ------------
Outstanding put options
written at end of year $ -- $ --
============= ============
</TABLE>
As of October 31, 1994, net unrealized appreciation for Federal income tax
purposes aggregated $147,638,711, of which $179,668,339 related to appreciated
securities and $32,029,628 related to depreciated securities. The aggregate
cost of investments at October 31, 1994 for Federal income tax purposes was
$1,157,927,286.
4. Shares of Beneficial Interest:
Net increase in net assets derived from beneficial interest transactions was
$220,281,320 and $250,646,762 for the years ended October 31, 1994 and October
31, 1993, respectively.
Transactions in shares of beneficial interest for each class were as follows:
<TABLE>
<CAPTION>
Class A Shares for the Year
Ended October 31, 1994 Shares Dollar Amount
<S> <C> <C>
Shares sold 12,530,353 $ 190,014,197
----------- -------------
Total issued 12,530,353 190,014,197
Shares redeemed (10,887,820) (167,629,564)
----------- -------------
Net increase 1,642,533 $ 22,384,633
=========== =============
Class A Shares for the Year
Ended October 31, 1993 Shares Dollar Amount
Shares sold 8,144,065 $ 105,277,574
----------- -------------
Total issued 8,144,065 105,277,574
Shares redeemed (3,323,921) (39,652,091)
----------- -------------
Net increase 4,820,144 $ 65,625,483
=========== =============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares for the Year
Ended October 31, 1994 Shares Dollar Amount
<S> <C> <C>
Shares sold 41,040,817 $ 596,780,681
----------- -------------
Total issued 41,040,817 596,780,681
Shares redeemed (26,955,193) (399,676,122)
----------- -------------
Net increase 14,085,624 $ 197,104,559
=========== =============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares for the Year
Ended October 31, 1993 Shares Dollar Amount
<S> <C> <C>
Shares sold 26,455,622 $ 332,604,731
----------- -------------
Total issued 26,455,622 332,604,731
Shares redeemed (12,880,889) (147,583,452)
----------- -------------
Net increase 13,574,733 $ 185,021,279
=========== =============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares for the
Period October 21, 1994++
to October 31, 1994 Shares Dollar Amount
<S> <C> <C>
Shares sold 30,249 $ 456,068
----------- ------------
Total issued 30,249 456,068
Shares redeemed (1) (15)
----------- ------------
Net increase 30,248 $ 456,053
============ ============
<FN>
++Commencement of Operations.
</TABLE>
61
<PAGE> 112
<TABLE>
<CAPTION>
Class D Shares for the
Period October 21, 1994++
to October 31, 1994 Shares Dollar Amount
<S> <C> <C>
Shares sold 24,171 $ 381,029
----------- ------------
Total issued 24,171 381,029
Shares redeemed (2,868) (44,954)
----------- ------------
Net increase 21,303 $ 336,075
=========== ============
</TABLE>
[FN]
++Commencement of Operations.
5. Commitments:
At October 31, 1994, the Fund had outstanding forward exchange contracts under
which it had agreed to purchase and sell foreign currency aggregating
approximately $2,468,000 and $21,503,000, respectively.
6. Subsequent Event:
On December 14, 1994, the Fund's Board of Trustees declared an ordinary income
dividend in the amount of $0.889 and a capital gains distribution in the amount
of $0.737 to Class A, Class B, Class C and Class D shareholders payable on
December 21, 1994 to shareholders of record as of December 13, 1994.
62
<PAGE> 113
[This page is intentionally left blank.]
<PAGE> 114
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies..... 2
Other Investment Policies and
Practices........................ 2
Investment Restrictions............. 7
Management of the Fund................ 10
Trustees and Officers............... 10
Compensation of Trustees............ 11
Management and Advisory
Arrangements..................... 12
Purchase of Shares.................... 14
Redemption of Shares.................. 21
Portfolio Transactions and
Brokerage........................... 23
Determination of Net Asset Value...... 24
Shareholder Services.................. 25
Taxes................................. 40
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.................. 50
</TABLE>
Code # 10476-0295
MERRILL LYNCH
EUROFUND
ART WORK
STATEMENT OF ADDITIONAL INFORMATION
February 27, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE> 115
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 308 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 plats, circular graph Back cover of Prospectus and
paper and Merrill Lynch Logo back cover of Statement of
including stylized market bull. Additional Information.
<PAGE> 116
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for each of the years in the eight-year period
ended October 31, 1994.
Contained in Part B:
Financial Statements:
Schedule of Investments as of October 31, 1994.
Statement of Assets and Liabilities as of October 31, 1994.
Statement of Operations for the fiscal year ended October 31, 1994.
Statements of Changes in Net Assets for each of the years in the
two-year period ended October 31, 1994.
Financial Highlights for each of the years in the five-year period
ended October 31, 1994.
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<S> <C>
1(a)-- Declaration of Trust of Registrant.
(b)-- Amendment of Declaration of Trust of the Registrant.
(c)-- Amendment of Declaration of Trust of the Registrant.
(d)-- Instrument establishing Class A shares and Class B shares of the Registrant.
(e)-- Certification of Amendment to Declaration of Trust and Establishment and Designation
of Classes.
2 -- By-Laws of the Registrant.
3 -- None.
4 -- Copies of instruments defining the rights of shareholders, including the relevant
portions of the Declaration of Trust, as amended, By-Laws and Specimen Share
Certificates of Registrant.(f)
5(a)-- Management Agreement between Registrant and Merrill Lynch Asset Management, Inc.(b)
(b)-- Sub-Advisory Agreement between Merrill Lynch Asset Management, Inc. and Merrill Lynch
Asset Management U.K. Limited.(e)
6(a)-- Class B Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(b)
(b)-- Class A Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(c)-- Class C Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(d)-- Class D Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(e)-- Letter Agreement between the Registrant and Merrill Lynch Funds Distributor, Inc.
with respect to the Merrill Lynch Mutual Fund Adviser Program.(g)
7 -- None.
</TABLE>
C-1
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -------------------------------------------------------------------------------------
<S> <C>
8 -- Custody Agreement between Registrant and Brown Brothers Harriman & Co.(b)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement between Registrant and Merrill Lynch Financial Data Services, Inc. (now
known as Financial Data Services, Inc.).(c)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(b)
14 -- None.
15(a)-- Class B shares Distribution Plan and Class B shares Distribution Plan Sub-Agreement
of the Registrant.(g)
(b)-- Class C shares Distribution Plan and Class C shares Distribution Plan Sub-Agreement
of the Registrant.(h)
(c)-- Class D shares Distribution Plan and Class D shares Distribution Plan Sub-Agreement
of the Registrant.(h)
16(a)-- Schedule of computation of each performance quotation for Class A shares provided in
the Registration Statement in response to Item 22.(d)
(b)-- Schedule of computation of each performance quotation for Class B shares provided in
the Registration Statement in response to Item 22.(c)
(c)-- Schedule of computation of each performance quotation for Class C shares provided in
the Registration Statement in response to Item 22.
(d)-- Schedule of computation of each performance quotation for Class D shares provided in
the Registration Statement in response to Item 22.
17(a)-- Financial Data Schedule for the year ended October 31, 1994 relating to Class A
Shares.
(b)-- Financial Data Schedule for the year ended October 31, 1994 relating to Class B
Shares.
(c)-- Financial Data Schedule for the year ended October 31, 1994 relating to Class C
Shares.
(d)-- Financial Data Schedule for the year ended October 31, 1994 relating to Class D
Shares.
18 -- Power of Attorney for Edward D. Zinbarg.
</TABLE>
- ---------------
(a) Filed as an Exhibit to Registrant's Registration Statement on Form N-1A
under the Securities Act of 1933.
(b) Filed as an Exhibit to Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(c) Filed as an Exhibit to Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(d) Filed as an Exhibit to Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(e) Filed as an Exhibit to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
C-2
<PAGE> 118
(f) Reference is made to Article I, Article II (Sections 2.2, 2.3, 2.4 and
2.7), Article III (Sections 3.1 and 3.4), Article IV (Sections 4.1, 4.3
and 4.4), Article V (Sections 5.1, 5.2, 5.3 and 5.5), Article VI (Sections
6.2, 6.3, 6.4, 6.5, 6.7 and 6.8), Article VII (Section 7.1), Article VIII
(Sections 8.2 and 8.3), Article X (Sections 10.3, 10.4, 10.5, 10.6, 10.7
and 10.8), Article XI (Sections 11.3, 11.4 and 11.5) and Article XII
(Section 12.6) of the Registrant's Declaration of Trust previously filed
as Exhibit 1(a) to the Registration Statement; the Amendment to
Declaration of Trust of Registrant dated May 19, 1986, previously filed as
Exhibit 1(b) to the Registration Statement; the Amendment to Declaration
of Trust of Registrant dated December 16, 1986, previously filed as
Exhibit 1(c) to the Registration Statement; the Instrument of
Establishment previously filed as Exhibit 1(d) to the Registration
Statement; the Certification of Amendment to Declaration of Trust and
Establishment and Designation of Classes filed as Exhibit 1(e) to the
Registration Statement; and Article I, Article V and Article VI of the
Registrant's By-Laws previously filed as Exhibit 2 to the Registration
Statement.
(g) Filed as an Exhibit to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(h) Filed as an Exhibit to Post-Effective Amendment No. 10 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
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 JANUARY 31, 1995
- -------------------------------------------------------------------------- ---------------------
<S> <C>
Class A shares of beneficial interest, par value $0.10 per share.......... 392
Class B shares of beneficial interest, par value $0.10 per share.......... 2,410
Class C shares of beneficial interest, par value $0.10 per share.......... 4
Class D shares of beneficial interest, par value $0.10 per share.......... 58
</TABLE>
ITEM 27. INDEMNIFICATION.
Section 5.3 of the Registrant's Declaration of Trust provides as follows:
"The Trust shall indemnify each of its Trustees, officers, employees,
and agents (including persons who serve at its request as directors,
officers or trustees of another organization in which it has any interest
as a shareholder, creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which he
may be involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been such a trustee, officer,
employee or agent, except with respect to any matter as to which he shall
have been adjudicated to have acted in bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties; provided, however,
that as to any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no
C-3
<PAGE> 119
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from
independent legal counsel approved by the Trustees to the effect that if
either the matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of good faith and reasonable belief as to
the best interests of the Trust, had been adjudicated, it would have been
adjudicated in favor of such person. The rights accruing to any Person
under these provisions shall not exclude any other right to which he may be
lawfully entitled; provided that no Person may satisfy any right of
indemnity or reimbursement granted herein or in Section 5.1 or to which he
may be otherwise entitled except out of the property of the Trust, and no
Shareholder shall be personally liable to any Person with respect to any
claim for indemnity or reimbursement or otherwise. The Trustees may make
advance payments in connection with indemnification under this Section 5.3,
provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he
is not entitled to such indemnification".
Insofar as the conditional advancing of indemnification moneys for actions
based upon the Investment Company Act of 1940 may be concerned, such payments
will be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a defense
to the action, including costs connected with the preparation of a settlement;
(ii) advances may be made only upon receipt of a written promise by, or on
behalf of, the recipient to repay that amount of the advance which exceeds the
amount to which it is ultimately determined that he is entitled to receive from
the Registrant by reason of indemnification; and (iii) (a) such promise must be
secured by a surety bond, other suitable insurance or an equivalent form of
security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 9 of the 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, 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 Securities Act
of 1933 may be permitted to Trustees, 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 Trustee, 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
Trustee, 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-4
<PAGE> 120
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF MANAGER.
(a) Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch
Asset Management ("MLAM" or the "Manager"), 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 Small Cap Fund, 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 Middle East/Africa Fund, Inc., Merrill Lynch
Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready
Assets Trust, Merrill Lynch Retirement Asset Builder Program, Inc., 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
Manager, 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
C-5
<PAGE> 121
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except
that the address of Merrill Lynch Funds for Institutions Series and Merrill
Lynch Institutional Intermediate Fund is One Financial Center, 15th Floor,
Boston, Massachusetts, 02111-2646. The address of the Manager and FAM is also
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
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
November 1, 1992 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, Giordano, Harvey, Hewitt, Kirstein, Monagle and Ms. Griffin are
directors, trustees or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITIONS WITH PROFESSION, VOCATION
NAME THE MANAGER OR EMPLOYMENT
- --------------------------------- ------------------------- -----------------------------------
<S> <C> <C>
ML & Co.......................... Limited Partner Financial Services Holding Company
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");
Executive Vice President of ML &
Co.; Executive Vice President of
Merrill Lynch
Terry K. Glenn................... Executive Vice President 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, L.P.
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
</TABLE>
C-6
<PAGE> 122
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITIONS WITH PROFESSION, VOCATION
NAME THE MANAGER OR EMPLOYMENT
- --------------------------------- ------------------------- -----------------------------------
<S> <C> <C>
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
General Counsel and Counsel, and Secretary of FAM;
Secretary Secretary, Senior Vice President,
General Counsel, Director and
Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss.................. Senior Vice President and Senior Vice President and
Controller Controller of 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
Gerald M. Richard................ Senior Vice President and Senior Vice President and Treasurer
Treasurer of FAM; Senior Vice President and
Treasurer of Princeton Services;
Vice President and Treasurer of
MLFD
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>
(b) Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") acts as
sub-adviser for the following registered investment companies: Merrill Lynch
EuroFund, Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global
SmallCap Fund, Inc., Merrill Lynch International Equity Fund and Merrill Lynch
Short-Term Global Income Fund, Inc. The address of each of these investment
companies is P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of
MLAM U.K. is Ropemaker Place, 25 Ropemaker Street, 1st Floor, London EC24 9LY,
England.
Set forth below is a list of each executive officer and director of MLAM
U.K. indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since November 1,
1992, for his own account or in the capacity of director, officer, partner or
trustee. In addition,
C-7
<PAGE> 123
Messrs. Zeikel, Albert, Glenn, Harvey, Richard and Yardley are officers of one
or more of the registered investment companies listed in the preceding
paragraph:
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION
NAME MLAM U.K. OR EMPLOYMENT
- --------------------------------- ---------------------------- --------------------------------
<S> <C> <C>
Arthur Zeikel.................... Chairman President of the Manager and
FAM; President and Director of
Princeton Services; Director
of MLFD; Executive Vice
President of ML & Co.;
Executive Vice President of
Merrill Lynch
Alan J. Albert................... Managing Director Vice President of the Manager
Terry K. Glenn................... Managing Director Executive Vice President of the
Manager and FAM; Executive
Vice President and Director of
Princeton Services; President
and Director of MLFD; Director
of FDS; President of Princeton
Administrators, L.P.
Paul J. Sarosy................... Managing Director None
Andrew John Bascand.............. Director Director of Merrill Lynch Global
Asset Management Limited
Norman R. Harvey................. Senior Vice President Senior Vice President of the
Manager and FAM; Senior Vice
President of Princeton
Services
Gerald M. Richard................ Senior Vice President Senior Vice President and
Treasurer of the Manager and
FAM; Senior Vice President and
Treasurer of Princeton
Services; Vice President and
Treasurer of MLFD
Adrian Holmes.................... Vice President None
Steven J. Yardley................ Vice President None
Carol Ann Langham................ Company Secretary None
Debra Anne Searle................ Assistant Company Secretary None
</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(a)
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
C-8
<PAGE> 124
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., Senior Strategic 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 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)
POSITION(S) AND
(1) 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 Trustee
Philip L. Kirstein........................... Director None
William E. Aldrich........................... Senior Vice President None
Robert W. Crook.............................. Senior Vice President None
Kevin P. Boman............................... Vice President None
Michael J. Brady............................. Vice President None
William M. Breen............................. Vice President None
Sharon Creveling............................. Vice President and None
Assistant Treasurer
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
Salvatore Venezia............................ Vice President None
William Wasel................................ Vice President None
Robert Harris................................ Secretary None
</TABLE>
C-9
<PAGE> 125
(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
Trust -- Management and Advisory Arrangements" in the Prospectus constituting
Part A of the Registration Statement and under "Management of the
Fund -- Management and Advisory Arrangements" in the Statement of Additional
Information constituting Part B of the Registration Statement, Registrant is not
a party to any management related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-10
<PAGE> 126
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 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 24TH DAY OF FEBRUARY 1995.
MERRILL LYNCH EUROFUND
(Registrant)
By: /s/ ARTHUR ZEIKEL
------------------------------------
(ARTHUR ZEIKEL, PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS 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(S)
- ----------------------------------- ----------------------------------- ------------------
<C> <S> <C>
/s/ ARTHUR ZEIKEL President and Trustee (Principal February 24, 1995
- ----------------------------------- Executive Officer)
(ARTHUR ZEIKEL)
/s/ GERALD M. RICHARD Treasurer (Principal Financial and February 24, 1995
- ----------------------------------- Accounting Officer)
(GERALD M. RICHARD)
DONALD CECIL* Trustee February 24, 1995
- -----------------------------------
(DONALD CECIL)
EDWARD H. MEYER* Trustee February 24, 1995
- -----------------------------------
(EDWARD H. MEYER)
CHARLES C. REILLY* Trustee February 24, 1995
- -----------------------------------
(CHARLES C. REILLY)
RICHARD R. WEST* Trustee February 24, 1995
- -----------------------------------
(RICHARD R. WEST)
EDWARD D. ZINBARG* Trustee February 24, 1995
- -----------------------------------
(EDWARD D. ZINBARG)
*By: /s/ ARTHUR ZEIKEL February 24, 1995
- -----------------------------------
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT)
</TABLE>
C-11
<PAGE> 127
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
------ ----
<C> <S> <C>
1(a)-- Declaration of Trust of Registrant.
(b)-- Amendment of Declaration of Trust of the Registrant dated 1986.
(c)-- Amendment of Declaration of Trust of the Registrant dated 1986.
(d)-- Instrument establishing Class A shares and Class B shares of the
Registrant.
(e)-- Certification of Amendment to Declaration of Trust and Establishment and
Designation of Classes.
2 -- By-Laws of the Registrant.
3 -- None.
4 -- Copies of instruments defining the rights of shareholders, including the
relevant portions of the Declaration of Trust, as amended, By-Laws and
Specimen Share Certificates of Registrant.(f)
5(a)-- Management Agreement between Registrant and Merrill Lynch Asset Management,
Inc.(b)
(b)-- Sub-Advisory Agreement between Merrill Lynch Asset Management, Inc. and
Merrill Lynch Asset Management U.K. Limited.(e)
6(a)-- Class B Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(b)
(b)-- Class A Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(c)-- Class C Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(d)-- Class D Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(h)
(e)-- Letter Agreement between the Registrant and Merrill Lynch Funds
Distributor, Inc. with respect to the Merrill Lynch Mutual Fund Adviser
Program.(g)
7 -- None.
8 -- Custody Agreement between Registrant and Brown Brothers Harriman & Co.(b)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Merrill Lynch Financial Data
Services, Inc. (now known as Financial Data Services, Inc.).(c)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(b)
14 -- None.
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
------ ----
<C> <S> <C>
15(a)-- Class B shares Distribution Plan and Class B shares Distribution Plan
Sub-Agreement of the Registrant.(g)
(b)-- Class C shares Distribution Plan and Class C shares Distribution Plan
Sub-Agreement of the Registrant.(h)
(c)-- Class D shares Distribution Plan and Class D shares Distribution Plan
Sub-Agreement of the Registrant.(h)
16(a)-- Schedule of computation of each performance quotation for Class A shares
provided in the Registration Statement in response to Item 22.(d)
(b)-- Schedule of computation of each performance quotation for Class B shares
provided in the Registration Statement in response to Item 22.(c)
(c)-- Schedule of computation of each performance quotation for Class C shares
provided in the Registration Statement in response to Item 22.
(d)-- Schedule of computation of each performance quotation for Class D shares
provided in the Registration Statement in response to Item 22.
17(a)-- Financial Data Schedule for the year ended October 31, 1994 relating to
Class A Shares.
(b)-- Financial Data Schedule for the year ended October 31, 1994 relating to
Class B Shares.
(c)-- Financial Data Schedule for the year ended October 31, 1994 relating to
Class C Shares.
(d)-- Financial Data Schedule for the year ended October 31, 1994 relating to
Class D Shares.
18 -- Power of Attorney for Edward D. Zinbarg.
</TABLE>
- ---------------
(a) Filed as an Exhibit to Registrant's Registration Statement on Form N-1A
under the Securities Act of 1933.
(b) Filed as an Exhibit to Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(c) Filed as an Exhibit to Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(d) Filed as an Exhibit to Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(e) Filed as an Exhibit to Post-Effective Amendment No. 6 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(f) Reference is made to Article I, Article II (Sections 2.2, 2.3, 2.4 and 2.7),
Article III (Sections 3.1 and 3.4), Article IV (Sections 4.1, 4.3 and 4.4),
Article V (Sections 5.1, 5.2, 5.3 and 5.5), Article VI (Sections 6.2, 6.3,
6.4, 6.5, 6.7 and 6.8), Article VII (Section 7.1), Article VIII (Sections
8.2 and 8.3), Article X (Sections 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8),
Article XI (Sections 11.3, 11.4 and 11.5) and Article XII (Section 12.6) of
the Registrant's Declaration of Trust previously filed as Exhibit 1(a) to
the Registration Statement; the Amendment to Declaration of Trust of
Registrant dated May 19, 1986, previously filed as Exhibit 1(b) to the
Registration Statement; the Amendment to Declaration of Trust of Registrant
dated December 16, 1986, previously filed as Exhibit 1(c) to the
Registration Statement; the Instrument of Establishment previously filed as
Exhibit 1(d) to the Registration Statement; the
<PAGE> 129
Certification of Amendment to Declaration of Trust and Establishment and
Designation of Classes filed as Exhibit 1(e) to the Registration Statement;
and Article I, Article V and Article VI of the Registrant's By-Laws
previously filed as Exhibit 2 to the Registration Statement.
(g) Filed as an Exhibit to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
(h) Filed as an Exhibit to Post-Effective Amendment No. 10 to the Registrant's
Registration Statement on Form N-1A under the Securities Act of 1933.
<PAGE> 1
EXHIBIT 99.1(a)
DECLARATION OF TRUST
OF
MERRILL LYNCH EUROPE TRUST
THE DECLARATION OF TRUST of Merrill Lynch Europe Trust is
made the 11th day of March, 1986, by the parties signatory hereto,
as trustees (such persons, so long as they shall continue in
office in accordance with the terms of this Declaration of Trust,
and all other persons who at the time in question have been duly
elected or appointed as trustees in accordance with the provisions
of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H :
WHEREAS, the Trustees desire to form a trust fund under the
law of Massachusetts for the investment and reinvestment of funds
contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the
trust assets be divided into transferable shares of beneficial
interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will
hold in trust all money and property contributed to the trust fund
to manage and dispose of the same for the benefit of the holders
from time to time of the shares of beneficial interest issued
hereunder and subject to the provisions hereof, to wit:
<PAGE> 2
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the
"Trust") shall be "Merrill Lynch Europe Trust", and so far as may
be practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which
name (and the word "Trust" wherever hereinafter used) shall refer
to the Trustees as Trustees, and not individually, and shall not
refer to the officers, agents, employees or Shareholders of the
Trust. However, should the Trustees determine that the use of
such name is not advisable, they may select such other name for
the Trust as they deem proper and the Trust may hold its property
and conduct its activities under such other name. Any name
change shall become effective upon the execution by a majority of
the then Trustees of an instrument setting forth the new name.
Any such instrument shall have the status of an amendment to this
Declaration.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Majority Shareholder Vote" (the 67% or more
than 50% requirement of the third sentence of Section 2(a)(42) of
the 1940 Act, whichever may be applicable) and "Principal
Underwriter" shall have the meanings given them in the 1940 Act.
"Declaration" shall mean this Declaration as amended from
time to time. References in this Declaration to "Declaration",
"hereof", "herein" and "hereunder" shall be deemed to refer to the
Declaration rather than the article or section in which such words
appear.
"Fundamental Policies" shall mean the investment restrictions
set forth in the Prospectus and designated as fundamental policies
therein.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of
the Trust under the Securities Act of 1933, as amended, including
the Statement of Additional Information incorporated by reference
therein.
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"Shareholders" shall mean as of any particular time all
holders of record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time and includes fractions of
Shares as well as whole Shares.
"Trustees" shall mean the signatories to this Declaration, so
long as they shall continue in office in accordance with the terms
hereof, and all other persons who at the time in question have
been duly elected or appointed and have qualified as trustees in
accordance with the provisions hereof and are then in office, are
herein referred to as the "Trustees", and reference in this
Declaration to a Trustee or Trustees shall refer to such person or
persons in their capacity as trustees hereunder.
"Trust Property" shall mean as of any particular time any and
all property, real or personal, tangible or intangible, which at
such time is owned or held by or for the account of the Trust or
the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940,
as amended from time to time.
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ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall
be fixed from time to time by written instrument signed by a
majority of the Trustees then in office, provided, however, that
the number of Trustees shall in no event be less than three or
more than fifteen (except prior to the first public offering of
Shares). Any vacancy created by an increase in Trustees may, to
the extent permitted by the 1940 Act, be filled by the appointment
of an individual having the qualifications described in this
Article made by a written instrument signed by a majority of the
Trustees then in office. Any such appointment shall not become
effective, however, until the individual named in the written
instrument of appointment shall have accepted in writing such
appointment and agreed in writing to be bound by the terms of this
Declaration. No reduction in the number of Trustees shall have
the effect of removing any Trustee from office prior to the
expiration of his term. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in
Section 2.4 hereof, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by this
Declaration. A Trustee shall be an individual at least 21 years
of age who is not under legal disability. Trustees need not own
Shares.
2.2. Term of Office. Each Trustee shall (except in the
event of resignations or removals or vacancies pursuant to
Sections 2.3 or 2.4 hereof) hold office until his successor has
been elected and is qualified to serve as Trustee.
2.3. Resignation and Removal. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an
instrument in writing signed by him and delivered or mailed to the
Chairman, if any, the President or the Secretary and such
resignation shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any of the
Trustees may be removed (provided the aggregate number of Trustees
after such removal shall not be less than the number required by
Section 2.1 hereof) with cause, by the action of two-thirds of the
remaining Trustees. Any Trustee may be removed at any special
meeting of the Shareholders by a vote of two-thirds of the
outstanding Shares. Upon the resignation or removal of a Trustee,
or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for
the purpose of conveying to the Trust or the remaining Trustees
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any Trust Property held in the name of the resigning or removed
Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in
the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, bankruptcy, adjudicated incompetence or other
incapacity to perform the duties of the office, or removal, of a
Trustee. No such vacancy shall operate to annul this Declaration
or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, the Shareholders,
acting at any meeting of Shareholders held in accordance with
Section 10.2 hereof, or, to the extent permitted by the 1940 Act,
a majority of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee
so elected by the Trustees shall hold office as provided in this
Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President,
the Secretary or any two Trustees. Regular meetings of the
Trustees may be held without call or notice at a time and place
fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be mailed or otherwise given not less than
48 hours before the meeting but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any business on the
ground that the meeting has not been lawfully called or convened.
The Trustees may act with or without a meeting. A quorum for all
meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the
Trustees may be taken at a meeting by vote of a majority of the
Trustees present (a quorum being present) or without a meeting by
written consents of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum
for all meetings of any such committee shall be a majority of the
members thereof. Unless provided otherwise in this Declaration,
any action of any such committee may be taken at a meeting by vote
of a majority of the members present (a quorum being present) or
without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of
the Trustees, Trustees who are Interested Persons of the Trust
within the meaning of Section 1.2 hereof or otherwise interested
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in any action to be taken may be counted for quorum purposes under
this Section and shall be entitled to vote to the extent permitted
by the 1940 Act.
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference
telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and
participation in a meeting pursuant to such communications systems
shall constitute presence in person at such meeting.
2.6. Officers. The Trustees shall annually elect a
President, a Secretary and a Treasurer and may elect a Chairman.
The Trustees may elect or appoint or authorize the Chairman, if
any, or President to appoint such other officers or agents with
such powers as the Trustees may deem to be advisable. The
Chairman and President shall be and the Secretary and Treasurer
may, but need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and from time to time
amend or repeal the By-Laws for the conduct of the business of the
Trust.
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ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of
the Trust to the same extent as if the Trustees were the sole
owners of the Trust Property and business in their own right, but
with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole
discretion are proper for conducting the business of the Trust.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the
Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to
the Fundamental Policies, to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, ex-
change, distribute or otherwise deal in or dispose of nego-
tiable or non-negotiable instruments, obligations, evidences
of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, reverse repurchase
agreements, options, futures contracts, options on futures
contracts and other investments, including, without limita-
tion, those issued, guaranteed or sponsored by any state,
territory or possession of the United States and the District
of Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government or its
agencies or instrumentalities, or international instrumental-
ities, or by any bank, savings institution, corporation or
other business entity organized under the laws of the United
States and, to the extent provided in the Prospectus and not
prohibited by the Fundamental Policies, organized under
foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all
such investments of every kind and description, including,
without limitation, the right to consent and otherwise act
with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any
of said rights, powers and privileges in respect of any of
said instruments; and the Trustees shall be deemed to have
the foregoing powers with respect to any additional securi-
ties in which the Trust may invest should the investment
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policies set forth in the Prospectus or the Fundamental
Policies be amended.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal Title to all the Trust Property
shall be vested in the Trustees as joint tenants except that the
Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the
Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately
protected.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter
become a Trustee upon his due election and qualification. Upon
the resignation, removal or death of a Trustee he shall automat-
ically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee
in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and
delivered.
3.4. Issuance and Repurchase of Securities. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in, Shares, including shares in fractional
denominations, and, subject to the more detailed provisions set
forth in Articles VIII and IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the
laws of the Commonwealth of Massachusetts governing business
corporations.
3.5. Borrow Money. Subject to the Fundamental Policies, the
Trustees shall have power to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or
undertake the performance of any obligation, contract or
engagement of any other person, firm, association or corporation.
3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the
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management of the Trust and the Trust Property, to delegate from
time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to
the same extent as such delegation is permitted to directors of a
Massachusetts business corporation and is permitted by the 1940
Act.
3.7. Collection and Payment. The Trustees shall have power
to collect all property due to the Trust; to pay all claims
including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claim relating to the Trust Property; to
foreclose any security interest securing any obligations, by
virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and
pay any expenses which in the opinion of the Trustees are
necessary or incidental to carry out any of the purposes of this
Declaration, and to pay reasonable compensation from the funds of
the Trust to themselves as Trustees. The Trustees shall fix the
compensation of all officers, employees and Trustees. The
Trustees may pay themselves such compensation for special
services, including legal, underwriting, syndicating and brokerage
services, as they in good faith may deem reasonable and
reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
3.9. Miscellaneous Powers. The Trustees shall have the
power to: (a) employ or contract with such Persons as the
Trustees may deem desirable for the transaction of the business of
the Trust; (b) enter into joint ventures, partnerships and any
other combinations or associations; (c) purchase, and pay for out
of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the
Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such
Person in such capacity, whether or not constituting negligence,
or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-
sharing, share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of
the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify
any Person with whom the Trust has dealings, including any
advisor, administrator, manager, distributor and selected dealers,
to such extent as the Trustees shall determine; (g) guarantee
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indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust and the method in which
its accounts shall be kept; and (i) adopt a seal for the Trust,
but the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
3.10. Further Powers. The Trustees shall have power to
conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and
without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other
things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees will not be
required to obtain any court order to deal with the Trust
Property.
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ARTICLE IV
Management and Distribution Arrangements
4.1. Management Arrangements. Subject to a Majority
Shareholder Vote, as required by the 1940 Act, the Trustees may in
their discretion from time to time enter into advisory or
management contracts whereby the other party to such contract
shall undertake to furnish the Trustees such advisory and
management services as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine. Notwithstanding any
provisions of this Declaration, the Trustees may authorize any
adviser or manager (subject to such general or specific
instructions as the Trustees may from time to time adopt) to
effect purchases, sales, loans or exchanges of portfolio
securities of the Trust on behalf of the Trustees or may authorize
any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of any such adviser
or manager (and all without further action by the Trustees). Any
such purchases, sales, loans and exchanges shall be deemed to have
been authorized by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their
discretion from time to time enter into a contract, providing for
the sale of the Shares of the Trust to net the Trust not less than
the par value per share, whereby the Trust may either agree to
sell the Shares to the other party to the contract or appoint such
other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may
in their discretion determine not inconsistent with the provisions
of this Article IV or the By-Laws; and such contract may also
provide for the repurchase or sale of Shares by such other party
as principal or as agent of the Trust and may provide that such
other party may enter into selected dealer agreements with
registered securities dealers to further the purpose of the
distribution or repurchase of the Shares.
4.3. Parties to Contract. Any contract of the character
described in Section 4.1 and 4.2 of this Article IV or in Article
VII hereof may be entered into with any corporation, firm, trust
or association, although one or more of the Trustees or officers
of the Trust may be an officer, director, Trustee, shareholder, or
member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding
such relationship be liable merely by reason of such relationship
for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or
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indirectly therefrom, provided that the contract when entered into
was reasonable and fair and not inconsistent with the provisions
of this Article IV or the By-Laws. The same person (including a
firm, corporation, trust, or association) may be the other party
to contracts entered into pursuant to Sections 4.1 and 4.2 above
or Article VII, and any individual may be financially interested
or otherwise affiliated with persons who are parties to any or all
of the contracts mentioned in this Section 4.3.
4.4. Provisions and Amendments. Any contract entered into
pursuant to Section 4.1 and 4.2 of this Article IV shall be
consistent with and subject to the requirements of Section 15 of
the 1940 Act with respect to its continuance in effect, its
termination, and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract,
entered into pursuant to Section 4.1 shall be effective unless
assented to by a Majority Shareholder Vote.
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ARTICLE V
Limitations of Liability of Shareholders,
Trustees and Others
5.1. No Personal Liability of Shareholders, Trustees, etc.
No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. No Trustee, officer,
employee or agent of the Trust shall be subject to any personal
liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from his bad faith, willful
misfeasance, gross negligence or reckless disregard of his duty to
such Person; and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such
liability, he shall not on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities,
to which such Shareholder may become subject by reason of his
being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. The rights
accruing to a Shareholder under this Section 5.1 shall not exclude
any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right
of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided
herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee,
or agent thereof for any action or failure to act (including
without limitation the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.
5.3. Mandatory Indemnification. The Trust shall indemnify
each of its Trustees, officers, employees, and agents (including
persons who serve at its request as directors, officers or
trustees of another organization in which it has any interest, as
a shareholder, creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees)
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reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil
or criminal, in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being
or having been such a Trustee, officer, employee or agent, except
with respect to any matter as to which he shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties; provided, however,
that as to any matter disposed of by a compromise payment by such
person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to
the effect that if either the matter of willful misfeasance, gross
negligence or reckless disregard of duty, or the matter of good
faith and reasonable belief as to the best interests of the Trust,
had been adjudicated, it would have been adjudicated in favor of
such person. The rights accruing to any Person under these
provisions shall not exclude any other right to which he may be
lawfully entitled; provided that no Person may satisfy any right
of indemnity or reimbursement granted herein or in Section 5.1 or
to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any
Person with respect to any claim for indemnity or reimbursement or
otherwise. The Trustees may make advance payments in connection
with indemnification under this Section 5.3, provided that the
indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined
that he is not entitled to such indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or surety or other security
for the performance of any of his duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, transfer agent or other person dealing
with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of
money or property paid, loaned, or delivered to or on the order of
the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors
thereof only in their capacity as Trustees under this Declaration
or in their capacity as officers, employees or agents of the
Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking
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made or issued by the Trustees or by any officers, employees or
agents of the Trust, in their capacity as such, shall contain an
appropriate recital to the effect that the Shareholders, Trustees,
officers, employees and agents of the Trust shall not personally
be bound by or liable thereunder, nor shall resort be had to their
private property for the satisfaction of any obligation or claim
thereunder, and appropriate references shall be made therein to
the Declaration, and may contain any further recital which they
may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees,
Shareholders, officers, employees or agents of the Trust. The
Trustees may maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers, employees and
agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees
in their sole judgment shall deem advisable.
5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be
fully and completely justified and protected with regard to any
act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust, upon an
opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by any investment adviser,
distributor, selected dealers, accountants, appraisers or other
experts or consultants elected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of
whether such counsel or expert may also be a Trustee.
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ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial
interest, all of one class, with par value $0.10 per share. The
number of such shares of beneficial interest authorized hereunder
is unlimited. All Shares issued hereunder including, without
limitation, Shares issued in connection with a dividend in Shares
or a split of Shares, shall be fully paid and nonassessable.
6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any
business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest conferred by their Shares, and
they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can
they be called upon to share or assume any losses of the Trust or
suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the
rights in this Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights (except for rights of appraisal
specified in Section 11.4).
6.3. Trust Only. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between
the Trustees and each Shareholder from time to time. It is not
the intention of the Trustees to create a general Partnership,
limited partnership, joint stock association, corporation,
bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners
or members of a joint stock association.
6.4. Issuance of Shares. The Trustees, in their discretion,
may from time to time without a vote of the Shareholders issue
Shares, in addition to the then issued and outstanding Shares and
Shares held in the treasury, to such party or parties and for such
amount not less than par value and type of consideration, includ-
ing cash or property, at such time or times, and on such terms as
the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in
connection with the assumption of, liabilities) and businesses.
In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby
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changing the proportionate beneficial interests in the Trust.
Contributions to the Trust may be accepted for, and Shares shall
be redeemed as, whole Shares and/or 1/1,000ths of a Share or
multiples thereof.
6.5. Register of Shares. A register shall be kept at the
Trust or a transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and
addresses of the Shareholders and the number of Shares held by
them respectively and a record of all transfers thereof. Such
register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him
as herein provided, until he has given his address to a transfer
agent or such other officer or agent of the Trustees as shall keep
the said register for entry thereon. It is not contemplated that
certificates will be issued for the Shares; however, the Trustees,
in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as
to their use.
6.6. Transfer Agent and Registrar. The Trustee shall have
power to employ a transfer agent or transfer agents, and a
registrar or registrars. The transfer agent or transfer agents
may keep the said register and record therein the original issues
and transfers, if any, of the said Shares. Any such transfer
agent and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a
corporation, except as modified by the Trustees.
6.7. Transfer of Shares. Shares shall be transferable on
the records of the Trust only by the record holder thereof or by
his agent thereto duly authorized in writing, upon delivery to the
Trustees or a transfer agent of the Trust of a duly executed
instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other
matters as may reasonably be required. Upon such delivery the
transfer shall be recorded on the register of the Trust. Until
such record is made, the Shareholder of record shall be deemed to
be the holder of such Shares for all purposes hereof and neither
the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of
the proposed transfer.
Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or
otherwise by operation of law, shall be recorded on the register
of Shares as the holder of such Shares upon production of the
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proper evidence thereof to the Trustees or a transfer agent of the
Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes
hereof and neither the Trustees nor any transfer agent or
registrar nor any officer or agent of the Trust shall be affected
by any notice of such death, bankruptcy or incompetence, or other
operation of law.
6.8. Notices. Any and all notices to which any Shareholder
hereunder may be entitled and any and all communications shall be
deemed duly served or given if mailed, postage prepaid, addressed
to any Shareholder of record at his last known address as recorded
on the register of the Trust.
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<PAGE> 19
ARTICLE VII
Custodian
7.1. Appointment and Duties. The Trustees shall at all
times employ one or more custodians, meeting the qualifications
for custodians for portfolio securities of investment companies
contained in the 1940 Act, as custodian with authority as its
agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the
Trust and the 1940 Act:
(1) to hold the securities owned by the Trust and
deliver the same upon written order;
(2) to receive and receipt for any moneys due to the
Trust and deposit the same in its own banking department or
elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books
and accounts of the Trust and furnish clerical and accounting
services; and
(5) if authorized to do so by the Trustees, to compute
the net income of the Trust;
all upon such basis of compensation as may be agreed upon
between the Trustees and the custodian. If so directed by a
Majority Shareholder Vote, the custodian shall deliver and pay
over all property of the Trust held by it as specified in such
vote.
The Trustees may also authorize the custodian to employ one
or more sub-custodians from time to time to perform such of the
acts and services of the custodian and upon such terms and
conditions, as may be agreed upon between the custodian and such
sub-custodian and approved by the Trustees, provided that in every
case such sub-custodian shall meet the qualifications for
custodians contained in the 1940 Act.
7.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees
may direct the custodian to deposit all or any part of the
securities owned by the Trust in a system for the central handling
of securities established by a national securities exchange or a
national securities association registered with the Commission
under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance
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<PAGE> 20
with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged
by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal
only upon the order of the Trust.
20
<PAGE> 21
ARTICLE VIII
Redemption
8.1. Redemptions. All outstanding Shares may be redeemed at
the option of the holders thereof, upon and subject to the terms
and conditions provided in this Article VIII. The Trust shall,
upon application of any Shareholder or pursuant to authorization
from any Shareholder, redeem or repurchase from such Shareholder
outstanding Shares for an amount per share determined by the
application of a formula adopted for such purpose by resolution of
the Trustees (which formula shall be consistent with the 1940 Act,
and the rules and regulations promulgated thereunder); provided
that (a) such amount per share shall not exceed the cash
equivalent of the proportionate interest of each share in the
assets of the Trust at the time of the purchase or redemption and
(b) if so authorized by the Trustees, the Trust may, at any time
and from time to time, charge fees for effecting such redemption,
at such rates as the Trustees may establish, as and to the extent
permitted under the 1940 Act, and the rules and regulations
promulgated thereunder, and may, at any time and from time to
time, pursuant to such Act and such rules and regulations, suspend
such right of redemption. The procedures for effecting redemption
shall be as set forth in the Prospectus from time to time.
8.2. Redemption of Shares; Disclosure of Holding. If the
Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares or other securities of
the Trust has or may become concentrated in any person to an
extent which would disqualify the Trust as a regulated investment
company under the Internal Revenue Code, then the Trustees shall
have the power by lot or other means deemed equitable by them (i)
to call for redemption a number, or principal amount, of Shares or
other securities of the Trust sufficient, in the opinion of the
Trustees, to maintain or bring the direct or indirect ownership of
Shares or other securities of the Trust into conformity with the
requirements for such qualification and (ii) to refuse to transfer
or issue Shares or other securities of the Trust to any Person
whose acquisition of the Shares or other securities of the Trust
in question would in the opinion of the Trustees result in such
disqualification. The redemption shall be effected at a
redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other
securities of the Trust as the Trustees deem necessary to comply
with the provisions of the Internal Revenue Code, or to comply
with the requirements of any other taxing authority.
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<PAGE> 22
8.3. Redemptions of Accounts of Less than $1,000. Due to
the relatively high cost of maintaining investment accounts of
less than $1,000, the Trustees shall have the power to redeem
shares at a redemption price determined in accordance with Section
8.1 if at any time the total investment in such account does not
have a value of at least $1,000; provided, however, that the
Trustees may not exercise such power if the Prospectus does not
describe such power. In the event the Trustees determine to
exercise their power to redeem Shares provided in this Section
8.3, Shareholders shall be notified that the value of their
account is less than $1,000 and allowed 60 days to make an
additional investment before redemption is processed.
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<PAGE> 23
ARTICLE IX
Determination of Net Asset Value,
Net Income and Distributions
9.1. Net Asset Value. The net asset value of each
outstanding Share of the Trust shall be determined at such time or
times on such days as the Trustees may determine, in accordance
with the 1940 Act. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in
the Prospectus. The power and duty to make the daily calculations
may be delegated by the Trustees to the adviser, administrator,
manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the
1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from
time to time distribute ratably among the Shareholders such
proportion of the net profits, surplus (including paid-in
surplus), capital, or assets held by the Trustees as they may deem
proper. Such distribution may be made in cash or property
(including without limitation any type of obligations of the Trust
or any assets thereof), and the Trustees may distribute ratably
among the Shareholders additional Shares issuable hereunder in
such manner, at such times, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of
record at the time of declaring a distribution or among the
Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits
such amount as they may deem necessary to pay the debts or
expenses of the Trust or to meet obligations of the Trust, or as
they may deem desirable to use in the conduct of its affairs or to
retain for future requirements or extensions of the business. The
Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate. Inasmuch as the computation
of net income and gains for Federal income tax purposes may vary
from the computation thereof on the books, the above provisions
shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends
and as capital gains distributions, respectively, additional amounts
sufficient to enable the Trust to avoid or reduce liability for taxes.
9.3. Power to Modify Foregoing Procedures. Notwithstanding
any of the foregoing provisions of this Article IX, the Trustees
may prescribe, in their absolute discretion, such other bases and
23
<PAGE> 24
times for determining the per share net asset value of the Trust's
Shares or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable or to
enable the Trust to comply with any provision of the 1940 Act, or
any rule or regulation thereunder, including any rule or
regulation adopted pursuant to Section 22 of the 1940 Act by the
Commission or any securities association registered under the
Securities Exchange Act of 1934, or any order of exemption issued
by said Commission, all as in effect now or hereafter amended or
modified.
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<PAGE> 25
ARTICLE X
Shareholders
10.1. Voting Powers. The Shareholders shall have power to
vote (i) for the removal of Trustees as provided in Section 2.3,
(ii) with respect to any advisory or management contract as
provided in Section 4.1, (iii) with respect to the amendment of
this Declaration as provided in Section 11.3, (iv) with respect to
such additional matters relating to the Trust as may be required
or authorized by the 1940 Act, the laws of the Commonwealth of
Massachusetts or other applicable law or by this Declaration or
the By-Laws of the Trust, and (v) with respect to such additional
matters relating to the Trust as may be properly submitted for
Shareholder approval.
10.2. Meetings of Shareholders. Special meetings of the
Shareholders may be called at any time by a majority of the
Trustees and shall be called by any Trustee upon written request
of Shareholders holding in the aggregate not less than 10% of the
outstanding Shares having voting rights, such request specifying
the purpose or purposes for which such meeting is to be called.
Any such meeting shall be held within or without the Commonwealth
of Massachusetts on such day and at such time as the Trustees
shall designate. The holders of one-third of the outstanding
Shares present in person or by proxy shall constitute a quorum for
the transaction of any business, except as may otherwise be
required by the 1940 Act, the laws of the Commonwealth of
Massachusetts or other applicable law or by this Declaration or
the By-Laws of the Trust. If a quorum is present at a meeting,
the affirmative vote of a majority of the Shares represented at
the meeting constitutes the action of the Shareholders, unless the
1940 Act, the laws of the Commonwealth of Massachusetts or other
applicable law, the Declaration or the By-Laws of the Trust
requires a greater number of affirmative votes.
10.3. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting,
shall be given by the Trustees by mail to each Shareholder at his
registered address, mailed at least 10 days and not more than 60
days before the meeting. Only the business stated in the notice
of the meeting shall be considered at such meeting. Any adjourned
meeting may be held as adjourned without further notice.
10.4. Record Date for Meetings. For the purpose of
determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for
the purposes of any other action, the Trustees may from time to
time close the transfer books for such period, not exceeding 30
25
<PAGE> 26
days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 60 days
prior to the date of any meeting of Shareholders or daily
dividends or other action as a record date for the determination
of the Persons to be treated as Shareholders of record for such
purposes, except for dividend payments which shall be governed by
Section 9.2 hereof.
10.5. Proxies, etc. At any meeting of Shareholders, any
holder of Shares entitled.to vote thereat may vote by proxy,
provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with the Secretary, or with such
other officer or agent of the Trust as the Secretary may direct,
for verification prior to the time at which such vote shall be
taken. Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or
one or more of the officers of the Trust. Only Shareholders of
record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a
vote of such fraction. When any Share is held jointly by several
persons, any one of them may vote at any meeting in person or by
proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the
legal control of any other person as regards the charge or
management of such Share, he may vote by his guardian or such
other person appointed or having such control, and such vote may
be given in person or by proxy.
10.6. Reports. The Trustees shall cause to be prepared at
least annually a report of operations containing a balance sheet
and statement of income and undistributed income of the Trust
prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on
such financial statements. Copies of such reports shall be mailed
to all Shareholders of record within the time required by the 1940
Act. The Trustees shall, in addition, furnish to the Shareholders
at least semi-annually interim reports containing an unaudited
balance sheet of the Trust as of the end of such period and an
unaudited statement of income and surplus for the period from the
beginning-of the current fiscal year to the end of such period.
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<PAGE> 27
10.7. Inspection of Records. The records of the Trust shall
be open to inspection by Shareholders to the same extent as is
permitted shareholders of a Massachusetts business corporation.
10.8. Shareholder Action by Written Consent. Any action
which may be taken by Shareholders may be taken without a meeting
if a majority of Shareholders entitled to vote on the matter (or
such larger proportion thereof as shall be required by any express
provision of this Declaration) consent to the action in writing
and the written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
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<PAGE> 28
ARTICLE XI
Duration; Termination of Trust;
Amendment; Mergers, Etc.
11.1. Duration. Subject to possible termination in
accordance with the provisions of Section 11.2 hereof, the Trust
created hereby shall continue until the expiration of 20 years
after the death of the last survivor of the initial Trustees named
herein and the following named persons:
<TABLE>
<CAPTION>
Name Address Date of Birth
<S> <C> <C>
Lindsay Rider MacKinnon Mountain Farm Road January 27, 1981
Tuxedo Park, N.Y. 10987
Eric Alfred Pietrzak 95 Corona Avenue January 29, 1981
Pelham, N.Y. 10803
Angus Washburn Smith 12 Masterton Road October 15, 1982
Bronxville, N.Y. 10708
Ashley Chapin Smith 12 Masterton Road May 20, 1972
Bronxville, N.Y. 10708
Elisabeth Lyon Smith 12 Masterton Road October 15, 1982
Bronxville, N.Y. 10708
Thomas Ervin Smith 12 Masterton Road November 14, 1973
Bronxville, N.Y. 10708
</TABLE>
11.2. Termination of Trust.
(a) The Trust may be terminated by the affirmative vote
of the holders of not less than two-thirds of the Shares at any
meeting of Shareholders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by
the holders of not less than two-thirds of such Shares. Upon the
termination of the Trust,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs
of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust
shall have been wound up, including the power to fulfill or
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<PAGE> 29
discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, transfer or otherwise dispose
of all or any part of the remaining Trust Property to one or
more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities,
and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchanges,
transfer or other disposition of all or substantially all the
Trust Property shall require approval of the principal terms
of the transaction and the nature and amount of the
consideration by vote or consent of the holders of a majority
of the Shares entitled to vote.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements, as they deem
necessary for their protection, the Trustees may distribute
the remaining Trust Property, in cash or in kind or partly
each, among the Shareholders according to their respective
rights.
(b) After termination of the Trust and distribution to
the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust an
instrument in writing setting forth the fact of such termination,
and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
11.3. Amendment Procedure.
(a) This Declaration may be amended by the affirmative
vote of the holders of not less than a majority of the Shares at
any meeting of Shareholders or by an instrument in, writing, with-
out a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of such Shares. The
Trustees may also amend this Declaration without the vote or con-
sent of Shareholders if they deem it necessary to conform this
Declaration to the requirements of applicable Federal laws or reg-
ulations or the requirements of the regulated investment company
provisions of the internal Revenue Code, but the Trustees shall
not be liable for failing so to do.
(b) No amendment may be made, under Section 11.3 (a)
above, which would change any rights with respect to any Shares of
the Trust by reducing the amount payable thereon upon liquidation
of the Trust or by diminishing or eliminating any voting, rights
pertaining thereto, except with the vote or consent of the holders
of two-thirds of the Shares. Nothing contained in this
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<PAGE> 30
Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(c) A certification in recordable form signed by a
majority of the Trustees setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable
form, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the
records of the Trust. Notwithstanding any other provision hereof,
until such time as a Registration Statement under the Securities
Act of 1933, as amended, covering the first public offering of
Shares of the Trust shall have become effective, this Declaration
may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by
a majority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets. the Trust
may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property, including its good will,
upon such terms and conditions and for such consideration when and
as authorized at any meeting of shareholders called for the pur-
pose by the affirmative vote of the holders of not less than two-
thirds of the Shares, or by an instrument or instruments in writ-
ing without meeting, consented to by the holders of not less than
two-thirds of such Shares, and any such merger, consolidation,
sales lease or exchange shall be deemed for all purposes to have
been accomplished under and pursuant to the statutes of the Com-
monwealth of Massachusetts. In respect of any such merger, con-
solidation, sale or exchange of assets, any Shareholder shall be
entitled to rights of appraisal of his Shares to the same extent
as a shareholder of a Massachusetts business corporation in
respect of a merger, consolidation, sale or exchange of assets of
a Massachusetts business corporation, and such rights shall be his
exclusive remedy in respect of his dissent from any such action.
11.5. Incorporation. With the approval of the holders of a
majority of the Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws
of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or indi-
rectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or
organization in exchange for the Shares or securities thereof or
30
<PAGE> 31
otherwise, and to lend money to, subscribe for the Shares or
securities of, and enter into any contracts with any such corpo-
ration, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in
which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause merger or consolidation
between the Trust or any successor thereto and any such corpora-
tion, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in
effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associ-
ations or other organizations and selling, conveying or transfer-
ring a portion of the Trust Property to such organizations or
entities.
31
<PAGE> 32
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto
shall be filed in the office of the Secretary of the Commonwealth
of Massachusetts and in such other places as may be required under
the laws of Massachusetts and may also be filed or recorded in
such other places as the Trustees deem appropriate. Each amend-
ment so filed shall be accompanied by a certificate signed and
acknowleged by a Trustee stating that such action was duly taken
in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of
such amendment, such amendment shall be effective upon its filing.
A restated Declaration, containing the original Declaration and
all amendments theretofore made, may be executed from time to time
by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various
amendments thereto.
12.2. Resident Agent. The Trust shall maintain a resident
agent in the Commonwealth of Massachusetts, which agent shall
initially be CT Corporation System, 12 Oliver Street, Boston,
Massachusetts 02109. The Trustees may designate a successor
resident agent, provided, however, that such appointment shall not
become effective until written notice thereof is delivered to the
office of the Secretary of the Commonwealth.
12.3. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and
with reference to the laws thereof, and the rights of all parties
and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State
and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the
construction of matters not specifically covered herein or as to
which an ambiguity exists.
12.4. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to
be an original, and such counterparts, together, shall constitute
one and the same instrument, which shall be sufficiently evidenced
by any such original counterpart.
12.5. Reliance by Third Parties. Any certificate executed
by an individual who, according to the records of the Trust, or of
any recording office in which this Declaration may be recorded,
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<PAGE> 33
appears to be a Trustee hereunder, certifying to: (a) the number
or identity of Trustees or Shareholders, (b) the due authorization
of the execution of any instrument or writing, (c) the form of
any vote passed at a meeting of Trustees or Shareholders, (d) the
fact that the number of Trustees or Shareholders present at any
meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any
manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any person
dealing with the Trustees and their successors.
12.6. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable,
and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Internal Revenue
Code, the laws of the Commonwealth of Massachusetts or with other
applicable laws and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Declaration;
provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in
any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
33
<PAGE> 34
IN WITNESS WHEREOF, the undersigned, constituting all of the
Trustees of the Trust, have caused these presents to be executed
as of the day and year first above written.
-------------------------
Philip L. Kirstein
------------------------
Mark B. Goldfus
------------------------
Robert Harris
------------------------
William E. Aldrich
<PAGE> 1
EXHIBIT 99.1(b)
MERRILL LYNCH EUROFUND
The undersigned, constituting a majority of the Trustees of Merrill
Lynch EuroFund (the "Trust"), a Massachusetts business trust, hereby certify
that the Trustees of the Trust have duly adopted the following amendment, as
approved by the sole share-holder of the Trust, to the Declaration of Trust of
the Trust dated the llth day of March, 1986 (the "Declaration of Trust").
VOTED: That Section 1.2 of Article I of the Declaration of Trust be and it
hereby is amended in its entirety to read as follows:
1.2 Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Share-holder Vote" (the 67% or more than 50% requirement of
the third sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them in
the 1940 Act.
"Declaration" shall mean this Declaration as amended from time to time.
References in this Declaration to "Declaration", "hereof", "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set forth
in the Prospectus and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
<PAGE> 2
"Prospectus" shall mean the currently effective Prospectus of the Trust
under the Securities Act of 1933, as amended, including the Statement of
Additional Information incorporated by reference therein.
"Shareholders" shall mean as of any particular time all holders of
record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be divided from
time to time and includes fractions of Shares as well as whole Shares. As
provided in Article VI hereof, the Trust may issue separate classes of Shares;
all references to Shares shall be deemed to be Shares of a single class or all
classes as the context may require.
"Trustees" shall mean the signatories to this Declaration, so long as
they shall continue in office in accordance with the terms hereof, and all
other persons who at the time in question have been duly elected or appointed
and have qualified as trustees in accordance with the provisions hereof and are
then in office, are herein referred to as the "Trustees", and reference in this
Declaration to a Trustee or Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time, and shall include the rules and regulations and any relevant
order of exemption promulgated thereunder by the Commission.
VOTED: That Section 6.1 of Article VI of the Declaration of Trust be and it
hereby is amended in its entirety to read as follows:
6.1. Beneficial Interest. The interest of the beneficiaries hereunder
shall be divided into transferable shares of beneficial interest, par value
$0.10 per share. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees, in their discretion without a vote of
the Shareholders, may divide the shares of beneficial interest into classes.
In such event, each class
2
<PAGE> 3
shall represent interests in the Trust property and have identical
voting, dividend, liquidation and other rights and the same terms and
conditions except that expenses related directly or indirectly to the
distribution of the shares of a class may be borne solely by such class (as
shall be determined by the Trustees) and, as provided in Section 10.1, a class
may have exclusive voting rights with respect to matters relating to the
expenses being borne solely by such class. The bearing of such expenses solely
by a class of Shares shall be appropriately reflected (in the manner determined
by the Trustees) in the net asset value, dividend and liquidation rights of the
Shares of such class. The division of the Shares into classes and the terms
and conditions pursuant to which the Shares of the classes will be issued must
be made in compliance with the 1940 Act. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and nonassessable.
VOTED: That Section 8.1 of Article VIII of the Declaration of Trust be and it
hereby is amended in its entirety to read as follows:
8.1. Redemptions. All outstanding Shares may be redeemed at the option
of the holders hereof, upon and subject to the terms and conditions provided in
this Article VIII. The Trust shall, upon application of any Shareholder or
pursuant to authorization from any Shareholder, redeem or repurchase from such
Share-holder outstanding Shares for an amount per share determined by the
application of a formula adopted for such purpose by resolution of the Trustees
(which formula shall be consistent with the 1940 Act); provided that (a) such
amount per share shall not exceed the cash equivalent of the proportionate
interest of each share in the assets of the Trust at the time of the purchase
or redemption and (b) if so authorized by the Trustees, the Trust may, at any
time and from time to time, charge fees for effecting such redemption, at such
rates as the Trustees may establish, as and to the extent permitted under the
1940 Act, and may, at any time and from time to time, pursuant to such Act,
suspend such right of redemption. The procedures for effecting redemption
shall be as set forth in the Prospectus from time to time.
VOTED: That Sections 9.1, 9.2 and 9.3 of Article IX of the
Declaration of Trust be and they hereby are amended in their
entirety to read as follows:
3
<PAGE> 4
9.1. Net Asset Value. The net asset value of each outstanding Share of
the Trust shall be determined at such time or times on such days as the
Trustees may determine, in accordance with the 1940 Act. The method of
determination of net asset value of Shares of each class shall be determined by
the Trustees and shall be as set forth in the Prospectus with any expenses
being borne solely by a class of Shares being reflected in the net asset value
of such Shares. The power and duty to make the daily calculations may be
delegated by the Trustees to the adviser, administrator, manager, custodian,
transfer agent or such other person as the Trustees may determine. The Trustee
may suspend the daily determination of net asset value to the extent permitted
by the 1940 Act.
9.2. Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in-surplus), capital, or assets held by the
Trustees as they deem proper with any expenses being borne solely by a class of
Shares being reflected in the net profits or other assets being distributed to
such class. Such distribution may be made in cash or property (including
without limitation any type of obligations of the Trust or any assets thereof),
and the Trustees may distribute ratably among the Shareholders additional
Shares issuable hereunder in such manner, at such times, and on such terms as
the Trustees may deem proper. Such distributions may be among the Shareholders
of record at the time of declaring a distribution or among the Shareholders of
record at such later date as the Trustees shall determine. The Trustees may
always retain from the net profits such amount as they may deem necessary to
pay the debts or expenses of the Trust or to meet obligations of the Trust, or
as they deem desirable to use in the conduct of its affairs or to retain for
future requirements or extensions of the business. The Trustees may adopt and
offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and
as capital
4
<PAGE> 5
gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.3. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's Shares or net income, or the declaration and
payment of dividends and distributions as they deem necessary or desirable or
to enable the Trust to comply with any provision of the 1940 Act, including any
rule or regulation adopted pursuant to Section 22 of the 1940 Act by the
Commission or any securities association registered under the Securities
Exchange Act of 1934, all as in effect now or hereafter amended or modified.
VOTED: That Section 10.1 and 10.2 of Article X of the Declaration of Trust be
and they hereby are amended in their entirety to read as follows:
10.1. Voting Powers. The Shareholders shall have power to vote (i) for
the removal of Trustees as provided in Section 2.3, (ii) with respect to any
advisory or management contract as provided in Section 4.1, (iii) with respect
to the amendment of this Declaration as may be provided in Section 11.3, (iv)
with respect to such additional matters relating to the Trust as may be
required or authorized by the 1940 Act, the laws of the Commonwealth of
Massachusetts or other applicable law or by this Declaration or the By-Laws of
the Trust, and (v) with respect to such additional matters relating to the
Trust as may be properly submitted for Shareholder approval. If the Shares
shall be divided into classes as provided in Article VI hereof, the Shares of
each class shall have identical voting rights except that the Trustees, in
their discretion, may provide a class with exclusive voting rights with respect
to matters related to expenses being borne solely by such class.
10.2. Meetings of Shareholders. Special meetings of the Shareholders
may be called at any time by a majority of the Trustees and shall be called by
any Trustee upon written request of Shareholders holding in the aggregate not
less than 10% of the outstanding Shares having voting rights, such request
specifying the purpose or purposes for which such meeting is to be called. Any
such meeting shall be held within or
5
<PAGE> 6
without the Commonwealth of Massachusetts on such day and at such time as the
Trustees shall designate. The holders of one-third of the outstanding Shares
present in person or by proxy shall constitute a quorum for the transaction of
any business, except as may otherwise be required by the 1940 Act, the laws of
the Commonwealth of Massachusetts or other applicable law or by this
Declaration or the By-Laws of the Trust. If a quorum is present at a meeting,
the affirmative vote of a majority of the Shares represented at the meeting
constitutes the action of the Shareholders, unless the 1940 Act, the laws of
the Commonwealth of Massachusetts or other applicable law, the Declaration or
by the By-Laws of the Trust requires a greater number of affirmative votes. If
the Shares shall be divided into classes with a class having exclusive voting
rights with respect to certain matters, the aforesaid quorum and voting
requirements with respect to action to be taken by the Shareholders of the
class on such matters shall be applicable only to the Shares of such class.
VOTED: That Section 11.2 of Article XI of the Declaration of Trust be and
it hereby is amended in its entirety to read as follows:
11.2. Termination of Trust.
(a) The Trust may be terminated by the affirmative vote of the holders
of not less than two-thirds of the Shares at any meeting of Shareholders or by
an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than two-thirds of such
Shares. Upon the termination of the Trust,
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been
wound up, including the power to fulfill or discharge the
contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property to one or more persons at public or
private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge
or pay its liabilities, and do all other acts appropriate to
liquidate its business;
6
<PAGE> 7
provided that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall require
approval of the principal terms of the transaction and the nature and amount of
the consideration by vote or consent of the holders of a majority of the Shares
entitled to vote.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders of each class, according to their respective rights
taking into account the proper allocation of expenses being borne solely by
any class of Shares.
(b) After termination of the Trust and distribution to the Shareholders
as herein provided, a majority of the Trustees shall execute and lodge among
the records of the Trust an instrument in writing setting forth the fact of
such termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interest of all
Shareholders shall thereupon cease.
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned, constituting a majority of the
Trustees, have signed this certificate in duplicate original counterparts and
have caused a duplicate original to be lodged among the records of the Trust as
required by Article XI, Section 11.3(c) of the Declaration of Trust as of the
15th day of
December, 1986.
/s/Arthur Zeikel
- ---------------------------
Arthur Zeikel
279 Watchung Road
Westfield, New Jersey 07090
/s/Donald Cecil
- ---------------------------
Donald Cecil
3 Stratford Road
Harrison, New York 10528
/s/Howard R. Hawkins
- ---------------------------
Howard R. Hawkins
33 Meadow Croft Lane
Greenwich, Connecticut 06830
/s/Richard T. O'Reilly
- ---------------------------
Richard T. O'Reilly
Rockwood Lane Spur
Greenwich, Connecticut 06830
/s/John W. Oswald
- ---------------------------
John W. Oswald
9500 Marstan Road
Philadelphia, Pennsylvania 19118
/s/Richard R. West
- ---------------------------
Richard R. West
Berrill Farms
RFD Greensboro Road
Lebanon, New Hampshire 03766
<PAGE> 1
EXHIBIT 99.1(c)
MAY 19 1986
MERRILL LYNCH EUROPE TRUST
The undersigned, Arthur Zeikel, Donald Cecil, Richard T. O'Reilly and
Richard R. West, constituting a majority of the Trustees of Merrill Lynch
Europe Trust (the "Trust"), a Massachusetts business trust having no
shareholders as of the date hereof, hereby certify that the Trustees of the
Trust have duly adopted the following amendment to the Declaration of Trust of
the Trust dated the llth day of March, 1986.
VOTED: That the Declaration of Trust dated March 11, 1986 be
and it hereby is amended to change the name of the Trust from "Merrill
Lynch Europe Trust" to "Merrill Lynch EuroFund" in the following
manner:
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Merrill Lynch EuroFund,", and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever hereinafter used) shall
refer to the Trustees as Trustees, and not individually, and shall not refer to
the officers, agents, employees or Shareholders of the Trust. However, should
the Trustees determine that the use of such name is not advisable, they may
select such other name for the Trust as they deem proper and the Trust may hold
its property and conduct its activities under such other name. Any name change
shall become effective upon the execution by a majority of the then Trustees of
an instrument setting forth the new name. Any such instrument shall have the
status of an amendment to this Declaration.
IN WITNESS WHEREOF, the said, Arthur Zeikel, Donald Cecil, Richard T.
O'Reilly and Richard R. West, constituting a majority of the Trustees have
signed this Certificate in duplicate original counterparts and have
<PAGE> 2
caused a duplicate original to be lodged among the records of the Trust as
required by Article XI, Section 11.3(c) of the Declaration of Trust, as of
the 19th day of May, 1986.
-------------------------
(Arthur Zeikel)
279 Watchung Fork
Westfield, N.J. 07090
-------------------------
(Donald Cecil)
3 Stratford Road
Harrison, N.Y. 10528
-------------------------
(Richard T. O'Reilly)
Rockwood Lane Spur
Greenwich, CT 06830
-------------------------
(Richard R. West)
Berrill Farms RFD.
Greensboro Road
Lebanon, N.Y. 03766
2
<PAGE> 1
EXHIBIT 99.1(d)
MERRILL LYNCH EUROFUND
Establishment and Designation
of
Class A Shares and Class B Shares of
Beneficial Interest of the Trust
The undersigned, being a majority of the Trustees of Merrill Lynch EuroFund,
a Massachusetts business trust (the "Trust"), acting pursuant to Section 6.1 of
the Declaration of Trust, as amended, dated May 28, 1986 (the "Declaration") of
the Trust, do hereby divide the shares of beneficial interest of the Trust, par
value $.10 per share ("Shares"), to create two classes of Shares, within the
meaning of said Section 6.1, as follows:
1. The two classes of Shares are designated "Class A Shares" and
"Class B Shares", respectively.
2. Class A Shares and Class B Shares shall be entitled to all of
the rights and preferences accorded to Shares under the
Declaration.
3. The purchase price of Class A Shares and Class B Shares, the
method of determination of net asset value of Class A Shares
and Class B Shares, the price, terms and manner of redemption of
Class A Shares and Class B Shares, and the relative dividend
rights of holders of Class A Shares and Class B Shares shall be
established by the Trustees of the Trust in accordance with the
provisions of the Declaration and shall be set forth in the
currently effective prospectus and statement of additional
information of the Trust, as amended from time to time, under the
Securities Act of 1933, as amended.
4. All Shares issued prior to the filing of this instrument with the
Commonwealth of Massachusetts shall be deemed Class B Shares.
IN WITNESS WHEREOF, the undersigned, have signed this instrument in
duplicate original counterparts and have caused a
<PAGE> 2
duplicate original to be lodged among the records of the Trust this 3rd
day of October, 1988.
- -------------------------- ----------------------------
Arthur Zeikel Richard R. West
279 Watchung Fork 29 Washington Square West, Apt. 4A
Westfield, New Jersey 07090 New York, New York 10011
- -------------------------- ----------------------------
Howard R. Hawkins Donald Cecil
33 Meadow Croft Lane 3 Stratford Road
Greenwich, Connecticut 06830 Harrison, New York 10528
- ---------------------------
Dr. John Oswald
9500 Marstan Road
Philadelphia, Pennsylvania 19118
The Declaration of Trust establishing Merrill Lynch EuroFund, dated March 11,
1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth
of Massachusetts, provides that the name "Merrill Lynch EuroFund" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of
Merrill Lynch EuroFund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise in connection with the affairs of said Trust but the
Trust Property only shall be liable.
2
<PAGE> 1
EXHIBIT 99.1(e)
MERRILL LYNCH EUROFUND
Certification Of Amendment
To Declaration Of Trust
and
Establishment and Designation of Classes
The undersigned, constituting a majority of the Trustees of Merrill Lynch
EuroFund (the "Trust"), a Massachusetts business trust, hereby certify that the
Trustees of the Trust have duly adopted the following amendments, as approved
by a majority of the shareholders of the Trust, to the Trust's Declaration of
Trust.
VOTED: That Sections 6.1 and 6.2 of Article VI of the Declaration of Trust
be, and they hereby are, amended in their entirety to read as follows:
6.1 Beneficial Interest. The interest of the beneficiaries hereunder shall
be divided into transferable shares of beneficial interest, par value $0.10 per
share. The number of such shares of beneficial interest authorized hereunder
is unlimited. The Trustees, in their discretion, without a vote of the
Shareholders, may divide the shares of beneficial interest into classes. In
such event, each class shall represent interests in the Trust property and have
identical voting, dividend, liquidation and other rights and the same terms and
conditions except that expenses related directly or indirectly to the
distribution of the shares of a class may be borne solely by such class (as
shall be determined by the Trustees) and, as provided in Section 10.1, a class
may have exclusive voting rights with respect to matters relating to the
expenses being borne solely by such class. The bearing of such expenses solely
by a class of Shares shall be appropriately reflected (in the manner determined
by the Trustees) in the net asset value, dividend and liquidation rights of the
Shares of such class. The Trustees may provide that shares of a class will be
exchanged for shares of another class without any act or deed on the part of
the holder of shares of the class being exchanged, whether or not shares of
such class are issued and outstanding, all on terms and conditions as the
Trustees may specify. The Trustees may redesignate a class or series of shares
of beneficial interest or a portion of a class or series of shares of
beneficial interest whether or not shares of such class or series are issued
and outstanding, provided that such redesignation does not substantially
adversely affect the preference, conversion or
<PAGE> 2
other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such issued and
outstanding shares of beneficial interest. The division of the Shares into
classes and the terms and conditions pursuant to which the Shares of the
classes will be issued must be made in compliance with the 1940 Act. All
Shares issued hereunder including, without limitation, Shares issued in
connection with a dividend in Shares or a split of Shares, shall be fully paid
and nonassessable.
6.2. Rights of Shareholders. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described are
vested exclusively in the Trustees, and the Shareholders shall have no interest
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving
only the rights in this Declaration specifically set forth. The Shares shall
not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights (except for rights of appraisal specified in Section 11.4 and
except as may be specified by the Trustees in connection with the division of
shares into classes or the redesignation of classes or portions of classes in
accordance with Section 6.1).
VOTED: That Section 10.1 of Article X of the Declaration of Trust be, and it
hereby is, amended in its entirety to read as follows:
10.1. Voting Powers. The Shareholders shall have power to vote (i) for the
removal of Trustees as provided in Section 2.3; (ii) with respect to any
advisory or management contract as provided in Section 4.1; (iii) with respect
to the amendment of this Declaration as provided in Section 11.3; (iv) with
respect to such additional matters relating to the Trust as may be required or
authorized by the 1940 Act, the laws of the Commonwealth of Massachusetts or
other applicable law or by this Declaration or the By-Laws of the Trust; and
(v) with respect to such additional matters relating to the Trust as may be
properly submitted for Shareholder approval. If the Shares of a Series shall
be divided into classes as provided in Article VI hereof, the Shares of each
class shall have identical voting rights except that the Trustees, in their
discretion, may provide a class with exclusive voting rights with respect to
matters related to expenses being borne solely by such class whether or not
shares of such class are issued and outstanding.
2
<PAGE> 3
The undersigned, being a majority of the Trustees of the Trust, acting
pursuant to Section 6.1 of the Declaration of Trust, do hereby divide the
shares of beneficial interest of each series of the Trust to create four
classes of shares, within the meaning of said Section 6.1, as follows:
1. The four classes of shares are designated "Class A Shares,"
"Class B Shares," "Class C Shares," and "Class D Shares."
2. Class A Shares, Class B Shares, Class C Shares and Class D Shares
shall be entitled to all of the rights and preferences accorded
to Shares under the Declaration of Trust.
3. The purchase price, the method of determination of net asset
value, the price, terms and manner of redemption, and the
relative dividend rights of holders of Class A Shares, Class B
Shares, Class C Shares and Class D Shares shall be established by
the Trustees of the Trust in accordance with the provisions of the
Declaration of Trust and shall be set forth in the currently
effective prospectus and statement of additional information of
the Trust relating to each series of the Trust, as amended from
time to time, contained in the Trust's registration statement
under the Securities Act of 1933, as amended.
4. Class A Shares, Class B Shares, Class C Shares and Class D Shares
shall vote together as a single class except that shares of a
class may vote separately on matters affecting only that class
and shares of a class not affected by a matter will not vote on
that matter.
5. A class of shares of any series of the Trust may be terminated by
the Trustees by written notice to the Shareholders of the class.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, constituting a majority of the
Trustees, have signed this certificate in duplicate original counterparts and
have caused a duplicate original to be lodged among the records of the Trust as
required by Article XI, Section 11.3(c) of the Declaration of Trust as of
day of October, 1994.
- ---------------------------- -------------------------
Donald Cecil Edward H. Meyer
3 Stratford Road 580 Park Avenue
Harrison, NY 10528 New York, NY 10021
- ---------------------------- -------------------------
Charles C. Reilly Richard R. West
9 Hampton Harbor Road 482 Tepi Drive
Hampton Bays, NY 11946 Southbury, CT 06488
- ----------------------------
Arthur Zeikel
300 Woodland Avenue
Westfield, NJ 07090
The Declaration of Trust establishing Merrill Lynch EuroFund, dated
March 11, 1986, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth
of Massachusetts, provides that the name of the Trust, "Merrill Lynch
EuroFund," refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Merrill Lynch EuroFund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Trust but the "Trust Property" only shall be liable.
4
<PAGE> 1
EXHIBIT 99.2
=================================================================
BY-LAWS
OF
MERRILL LYNCH EUROFUND
=================================================================
<PAGE> 2
MERRILL LYNCH EUROFUND
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing MERRILL LYNCH EUROFUND, dated March 11, 1986,
as from time to time amended (hereinafter called the "Declaration"). All words
and terms capitalized in these By-Laws shall have the meaning or meanings set
forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1. Chairman. The Chairman, if any, shall act as
chairman at all meetings of the Shareholders; in his absence, the President
shall act as chairman; and in the absence of the Chairman and President, the
Trustee or Trustees present at each meeting may elect a temporary chairman for
the meeting, who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in
person or by duly executed proxy and each full share represented at the meeting
shall have one vote, all as provided in Article X of the Declaration. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
a longer period is expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing Record Dates.
For the purpose of determining the Shareholders who are
<PAGE> 3
entitled to notice of or to vote or act at any meeting, including any
adjournment thereof, or who are entitled to participate in any dividends, or
for any other proper purpose, the Trustees may from time to time close the
transfer books or fix a record date in the manner provided in Section 10.4 of
the Declaration. If the Trustees do not prior to any meeting of Shareholders
so fix a record date or close the transfer books, then the date of mailing
notice of the meeting or the date upon which the dividend resolution is
adopted, as the case may be, shall be the record date.
Section 1.4. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. The number of Inspectors shall be either one or three. If
appointed at the meeting on the request of one or more Shareholders or proxies,
a majority of Shares present shall determine whether one or three Inspectors
are to be appointed, but failure to allow such determination by the
Shareholders shall not affect the validity of the appointment of Inspectors of
Election. In case any person appointed as Inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of
3
<PAGE> 4
the convening of the meeting or at the meeting by the person acting as
chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all
votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Shareholders. If
there are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. On request of the Chairman, if any, of the meeting, or of any Shareholder
or his proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
Section 1.5. Records at Shareholder Meetings. At each meeting of
the Shareholders there shall be open for inspection the minutes of the last
previous Shareholder Meeting of the Trust and a list of the Shareholders of the
Trust, certified to be true and correct by the Secretary or other proper agent
of the Trust, as of the record date of the meeting or the date of closing of
transfer books, as the case may be. Such list of Shareholders shall contain
the name of each Shareholder in alphabetical order
4
<PAGE> 5
and the address of and number of Shares owned by such Shareholder.
Shareholders shall have such other rights and procedures of inspection of the
books and records of the Trust as are granted to shareholders of a
Massachusetts business corporation.
ARTICLE II
Trustees
Section 2.1. Annual and Regular Meetings. The Trustees shall hold
an annual meeting for the election of officers and the transaction of other
business which may come before such meeting, on such date as shall be fixed by
the Trustees from time to time. Regular meetings of the Trustees may be held
without call or notice at such place or places and times as the Trustees may by
resolution provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees
shall be held upon the call of the Chairman, if any, the President, the
Secretary or any two Trustees, at such time, on such day, and at such place as
shall be designated in the notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by mail
or by telegram (which term shall include a cablegram) or delivered personally.
If notice is given by mail, it shall be mailed not later than 48 hours
preceding the meeting and if given by telegram or personally, such telegram
shall be sent or
5
<PAGE> 6
delivery made not later than 48 hours preceding the meeting. Notice by
telephone shall constitute personal delivery for these purposes. Notice of a
meeting of Trustees may be waived before or after any meeting by signed written
waiver. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting has not been lawfully called or
convened.
Section 2.4. Chairman; Records. The Chairman, if any, shall act
as chairman at all meetings of the Trustees; in his absence the President shall
act as chairman; and, in the absence of the Chairman and the President, the
Trustees present shall elect one of their number to act as temporary chairman.
The results of all actions taken at a meeting of the Trustees, or by unanimous
written consent of the Trustees, shall be recorded by the Secretary.
6
<PAGE> 7
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The officers of the Trust
shall consist of a Chairman, if any, a President, a Secretary, a Treasurer and
such other officers or assistant officers, including Vice-Presidents, as may be
elected by the Trustees, or in the case of assistant officers, as may be
appointed by the President. Any two or more of the offices may be held by the
same person, except that the same person may not be both President and
Secretary. The Trustees may designate a Vice-President as an Executive
Vice-President and may designate the order in which the other Vice-Presidents
may act. The Chairman and the President shall be Trustees, but no other
officer of the Trust need be a Trustee.
Section 3.2. Election and Tenure. At the initial organizational
meeting and thereafter at each annual meeting of the Trustees, the Trustees
shall elect the Chairman, if any, President, Secretary, Treasurer and such
other officers as the Trustees shall deem necessary or appropriate in order to
carry out the business of the Trust. Such officers shall hold office until the
next annual meeting of the Trustees and until their successors have been duly
elected and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
7
<PAGE> 8
Section 3.3. Removal of Officers. Any officer may be removed at
any time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of
action which any officer may have as a result of removal in breach of a
contract of employment. Any officer may resign at any time by notice in
writing signed by such officer and delivered or mailed to the Chairman, if any,
President, or Secretary, and such resignation shall take effect immediately
upon receipt by the Chairman, if any, President, or Secretary, or at a later
date according to the terms of such notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.5. Chairman, President, and Vice-Presidents. The
Chairman, if any, shall, if present, preside at all meetings of the
Shareholders and of the Trustees and shall exercise and perform such other
powers and duties as may from time to time be assigned to him by the Trustees.
Subject to such supervisory powers, if any, as may be given by the Trustees to
the Chairman, if any, the President shall be the chief executive officer of the
Trust and, subject to the control of the Trustees, shall have general
supervision, direction and control of the business of the
8
<PAGE> 9
Trust and of its employees and shall exercise such general powers of management
as are usually vested in the office of president of a corporation. In the
absence of the Chairman, if any, the President shall preside at all meetings of
the Shareholders and of the Trustees. The President shall be, ex-officio, a
member of all standing committees, except as otherwise provided in the
resolutions or instruments creating any such committees. Subject to direction
of the Trustees, the Chairman, if any, and the President shall each have power
in the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages, and other instruments in writing, and
to employ and discharge employees and agents of the Trust. Unless otherwise
directed by the Trustees, the Chairman, if any, and the President shall each
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust at any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The Chairman, if any, and the President shall have such further authorities and
duties as the Trustees shall from time to time determine. In the absence or
disability of the President, the Vice-Presidents in order of their rank as
fixed by the Trustees or, if more than one and not ranked, the Vice President
designated by the Trustees, shall perform all of the duties of the President,
and when so acting shall have all the
9
<PAGE> 10
powers of and be subject to all of the restrictions upon the President.
Subject to the direction of the Trustees, and of the President, each
Vice-President shall have the power in the name and on behalf of the Trust to
execute any and all loan documents, contracts, agreements, deeds, mortgages and
other instruments in writing, and, in addition, shall have such other duties
and powers as shall be designated from time to time by the Trustees or by the
President.
Section 3.6. Secretary. The Secretary shall keep the minutes of
all meetings of, and record all votes of, Shareholders, Trustees and the
Executive Committee, if any. He shall be custodian of the seal of the Trust,
if any, and he (and any other person so authorized by the Trustees) shall affix
the seal or, if permitted, a facsimile thereof, to any instrument executed by
the Trust which would be sealed by a Massachusetts corporation executing the
same or a similar instrument and shall attest the seal and the signature or
signatures of the officer or officers executing such instrument on behalf of
the Trust. The Secretary shall also perform any other duties commonly incident
to such office in a Massachusetts business corporation, and shall have such
other authorities and duties as the Trustees shall from time to time determine.
Section 3.7. Treasurer. Except as otherwise directed by the
Trustees, the Treasurer shall have the general supervision of the monies,
funds, securities, notes receivable and other
10
<PAGE> 11
valuable papers and documents of the Trust, and shall have and exercise under
the supervision of the Trustees and of the President all powers and duties
normally incident to his office. He may endorse for deposit or collection all
notes, checks and other instruments payable to the Trust or to its order. He
shall deposit all funds of the Trust in such depositories as the Trustees shall
designate. He shall be responsible for such disbursement of the funds of the
Trust as may be ordered by the Trustees or the President. He shall keep
accurate account of the books of the Trust's transactions which shall be the
property of the Trust, and which together with all other property of the Trust
in his possession, shall be subject at all times to the inspection and control
of the Trustees. Unless the Trustees shall otherwise determine, the Treasurer
shall be the principal accounting officer of the Trust and shall also be the
principal financial officer of the Trust. He shall have such other duties and
authorities as the Trustees shall from time to time determine. Notwithstanding
anything to the contrary herein contained, the Trustees may authorize any
adviser, administrator, manager or transfer agent to maintain bank accounts and
deposit and disburse funds of the Trust.
Section 3.8. Other Officers and Duties. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of the
Trust. In addition, the President
11
<PAGE> 12
may appoint such assistant officers as he shall from time to time determine to
be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each
officer, employee and agent of the Trust shall have such other duties and
authority as may be conferred upon him by the Trustees or delegated to him by
the President.
ARTICLE IV
Miscellaneous
Section 4.1. Custodians. In accordance with Section 7.l of the
Declaration, the funds of the Trust shall be deposited with such custodian or
custodians as the Trustees shall designate and shall be drawn out on checks,
drafts or other orders signed by such officer, officers, agent or agents
(including any adviser, administrator or manager), as the Trustees may from
time to time authorize.
Section 4.2. Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such officer, officers, agent or
agents, as provided in these By-Laws or as the Trustees may from time to time
by resolution provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed
to any document, and the seal and its attestation may be lithographed, engraved
or otherwise printed on any document with
12
<PAGE> 13
the same force and effect as if it had been imprinted and attested manually in
the same manner and with the same effect as if done by a Massachusetts business
corporation.
ARTICLE V
Share Certificates and Share Transfers
Section 5.1. Share Certificates. Each holder of Shares of the
Trust shall be entitled upon request to have a certificate or certificates, in
such form as shall be approved by the Trustees, representing the number of
Shares owned by him, provided, however, that certificates for fractional Shares
shall not be delivered in any case. The certificates representing Shares shall
be signed by or in the name of the Trust by the President or a Vice-President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Trust. Any or all of the signatures
or the seal on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate shall be issued, it may be issued by
the Trust with the same effect as if such officer, transfer agent or registrar
were still in office at the date of issue.
Section 5.2. Transfer Agents, Registrars and the Like. As
provided in Section 6.6 of the Declaration, the Trustees shall
13
<PAGE> 14
have authority to employ and compensate such transfer agents and registrars
with respect to the Shares of the Trust as the Trustees shall deem necessary or
desirable and may require all certificates for Shares to bear the signature or
signatures of any of them. In addition, the Trustees shall have power to
employ and compensate such dividend disbursing agents, warrant agents and
agents for the reinvestment of dividends as they shall deem necessary or
desirable. Any of such agents shall have such power and authority as is
delegated to any of them by the Trustees.
Section 5.3. Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 6.7
of the Declaration, and on surrender of the certificate or certificates, if
issued, for such Shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. The Trust, or its
transfer agents, shall be authorized to refuse any transfer unless and until
presentation of such evidence as may be reasonably required to show that the
requested transfer is proper.
Section 5.4. Registered Shareholders. The Trust may deem and
treat the holder of record of any Share as the absolute owner thereof for all
purposes and shall not be required to take any notice of any right or claim of
right of any other person.
14
<PAGE> 15
Section 5.5. Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may deem
expedient concerning the issue, transfer and registration of certificates for
Shares of the Trust.
Section 5.6. Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing Shares of the Trust shall immediately
notify the Trust of any loss, destruction or mutilation of such certificate,
and the Trust may issue a new certificate in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have been lost
or destroyed or which shall have been mutilated, and the Trustees may, in their
discretion, require such owner or his legal representatives to give the Trust a
bond in such sum, limited or unlimited, and in such form and with such surety
or sureties, as the Trustees in their absolute discretion shall determine, to
indemnify the Trust against any claim that may be made against it on account of
the alleged loss or destruction of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Trustees in
their absolute discretion, may refuse to issue any such new certificates,
except pursuant to legal proceedings under the laws of the Commonwealth of
Massachusetts.
15
<PAGE> 16
ARTICLE VI
Amendment of By-Laws
Section 6.1. Amendment and Repeal of By-Laws. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which
are in conflict with the Declaration, and any apparent inconsistency shall be
construed in favor of the related provisions in the Declaration.
The Declaration establishing Merrill Lynch EuroFund, a copy of which,
together with all amendments thereto, is on file in the office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Merrill Lynch
EuroFund" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of Merrill Lynch EuroFund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise in connection with the
affairs of said Merrill Lynch EuroFund but the "Trust Property" only shall be
liable.
(Rev. 10/94)
16
<PAGE> 1
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
MERRILL LYNCH EUROFUND:
We consent to the use in Post-Effective Amendment No. 11 to Registration
Statement No. 33-4026 of our report dated December 7, 1994 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
February 24, 1995
<PAGE> 1
EXHIBIT 99.16(c)
<TABLE>
<CAPTION>
EuroFund - Class - C Since Since
10/21/94 - 10/31/94 Inception Inception
Avg Annual Total
Return Return*
------ -------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 15.08 15.08
----- -----
Equals Shares Purchased 66.31 66.31
Plus Shares Acquired through
Dividend Reinvestment 0.00 0.00
---- ----
Equals Shares Held at 10/31/94 66.31 66.31
Multiplied by Net Asset
Value at 10/31/94 15.28 15.28
----- -----
Equals Ending Value before
deduction for contingent deferred
sales charge 1,013.26 1,013.26
Less deferred sales charge (10.00) 0.00
------- ----
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 12/31/94 $1,003.26 $1,013.26
--------- ---------
Divided by $1,000 (P) 1.0033 1.0133
Subtract 1 0.0033 0.0133
Expressed as a percentage equals the
Aggregate Total Return for the
Period (T) 0.33%
=====
Expressed as a percentage equals the
Aggregate Total Return for the
Period 1.33%
=====
ERV divided by P 1.0033
Raise to the power of 36.5000
Equals 1.1263
Subtract 1 0.1263
Expressed as a percentage equals the
Average Annualized Total Return 12.63%
======
</TABLE>
* Does not include sales charge for the period.
<PAGE> 1
EXHIBIT 99.16(d)
<TABLE>
<CAPTION>
EuroFund - Class D
10/21/94 - 10/31/94
Since Since
Inception Inception
Avg Annual Total
Return Return*
------ -------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum
Offering Price 16.62
-----
Divided by Net Asset Value 15.75
-----
Equals Shares Purchased 60.16 63.49
Plus shares Acquired through
Divided Reinvestment 0.00 0.00
---- ----
Equals Shares Held at 10/31/94 60.16 63.49
Multiplied by Net Asset Value at
10/31/94 15.96 15.96
----- -----
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 12/31/94 $960.13 $1,013.30
Divided by $1,000 (P) 0.9601 1.0133
Subtract 1 -0.0399 0.0133
Expressed as a percentage equals the
Aggregate Total Return for the
Period (T) -3.99%
======
Expressed as a percentage equals the
Aggregate Total Return for the Period 1.33%
=====
ERV divided by P 0.9601
Raise to the power of 36.5000
Equals 0.2265
Subtract 1 -0.7735
Expressed as a percentage equals the
Average Annualized Total Return -77.35%
=======
</TABLE>
* Does not include sales charge for the period.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>0000790525
<NAME>MERRILL LYNCH EUROFUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1157927286
<INVESTMENTS-AT-VALUE> 1305565997
<RECEIVABLES> 35904558
<ASSETS-OTHER> 1042851
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1342513406
<PAYABLE-FOR-SECURITIES> 7584546
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11358203
<TOTAL-LIABILITIES> 18942749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1076117697
<SHARES-COMMON-STOCK> 14805226
<SHARES-COMMON-PRIOR> 13162693
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 112731529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 134721431
<NET-ASSETS> 236288410
<DIVIDEND-INCOME> 27234127
<INTEREST-INCOME> 2269733
<OTHER-INCOME> 0
<EXPENSES-NET> 25027591
<NET-INVESTMENT-INCOME> 4476269
<REALIZED-GAINS-CURRENT> 145799258
<APPREC-INCREASE-CURRENT> 5122748
<NET-CHANGE-FROM-OPS> 155398275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12530353
<NUMBER-OF-SHARES-REDEEMED> 10887820
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 375679595
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 37543998
<GROSS-ADVISORY-FEES> 10148764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25027591
<AVERAGE-NET-ASSETS> 249296497
<PER-SHARE-NAV-BEGIN> 13.87
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 1.91
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.96
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>0000790525
<NAME>MERRILL LYNCH EUROFUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1157927286
<INVESTMENTS-AT-VALUE> 1305565997
<RECEIVABLES> 35904558
<ASSETS-OTHER> 1042851
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1342513406
<PAYABLE-FOR-SECURITIES> 7584546
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11358203
<TOTAL-LIABILITIES> 18942749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1076117697
<SHARES-COMMON-STOCK> 71087909
<SHARES-COMMON-PRIOR> 57002285
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 112731529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 134721431
<NET-ASSETS> 1086480093
<DIVIDEND-INCOME> 27234127
<INTEREST-INCOME> 2269733
<OTHER-INCOME> 0
<EXPENSES-NET> 25027591
<NET-INVESTMENT-INCOME> 4476269
<REALIZED-GAINS-CURRENT> 145799258
<APPREC-INCREASE-CURRENT> 5122748
<NET-CHANGE-FROM-OPS> 155398275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41040817
<NUMBER-OF-SHARES-REDEEMED> 26955193
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 375679595
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 37543998
<GROSS-ADVISORY-FEES> 10148764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25027591
<AVERAGE-NET-ASSETS> 1082074298
<PER-SHARE-NAV-BEGIN> 13.43
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.83
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.28
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>0000790525
<NAME>MERRILL LYNCH EUROFUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1157927286
<INVESTMENTS-AT-VALUE> 1305565997
<RECEIVABLES> 35904558
<ASSETS-OTHER> 1042851
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1342513406
<PAYABLE-FOR-SECURITIES> 7584546
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11358203
<TOTAL-LIABILITIES> 18942749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1076117697
<SHARES-COMMON-STOCK> 30248
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 112731529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 134721431
<NET-ASSETS> 462160
<DIVIDEND-INCOME> 27234127
<INTEREST-INCOME> 2269733
<OTHER-INCOME> 0
<EXPENSES-NET> 25027591
<NET-INVESTMENT-INCOME> 4476269
<REALIZED-GAINS-CURRENT> 145799258
<APPREC-INCREASE-CURRENT> 5122748
<NET-CHANGE-FROM-OPS> 155398275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30249
<NUMBER-OF-SHARES-REDEEMED> 1
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 375679595
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10148764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25027591
<AVERAGE-NET-ASSETS> 312983
<PER-SHARE-NAV-BEGIN> 15.08
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .21
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.28
<EXPENSE-RATIO> 2.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK>0000790525
<NAME>MERRILL LYNCH EUROFUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 1157927286
<INVESTMENTS-AT-VALUE> 1305565997
<RECEIVABLES> 35904558
<ASSETS-OTHER> 1042851
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1342513406
<PAYABLE-FOR-SECURITIES> 7584546
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11358203
<TOTAL-LIABILITIES> 18942749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1076117697
<SHARES-COMMON-STOCK> 21303
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 112731529
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 134721431
<NET-ASSETS> 339994
<DIVIDEND-INCOME> 27234127
<INTEREST-INCOME> 2269733
<OTHER-INCOME> 0
<EXPENSES-NET> 25027591
<NET-INVESTMENT-INCOME> 4476269
<REALIZED-GAINS-CURRENT> 145799258
<APPREC-INCREASE-CURRENT> 5122748
<NET-CHANGE-FROM-OPS> 155398275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24171
<NUMBER-OF-SHARES-REDEEMED> 2868
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 375679595
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10148764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25027591
<AVERAGE-NET-ASSETS> 184576
<PER-SHARE-NAV-BEGIN> 15.75
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> .21
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.96
<EXPENSE-RATIO> 2.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.18
POWER OF ATTORNEY
I, Edward D. Zinbarg, hereby authorize Arthur Zeikel, Terry K.
Glenn, Gerald M. Richard, Mark B. Goldfus, Robert Harris or Michael J.
Hennewinkel, or any of them, as attorney-in-fact, to sign on my behalf any
amendments to the Registration Statement for each of the following registered
investment companies and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission: Emerging Tigers Fund, Inc.; Merrill Lynch
Americas Income Fund, Inc.; Merrill Lynch Developing Capital Markets Fund,
Inc.; Merrill Lynch Dragon Fund, Inc.; Merrill Lynch EuroFund; Merrill Lynch
Global Allocation Fund, Inc.; Merrill Lynch Global Bond Fund for Investment and
Retirement; Merrill Lynch Global Holdings, Inc.; Merrill Lynch Global SmallCap
Fund, Inc.; Merrill Lynch Healthcare Fund, Inc.; Merrill Lynch International
Equity Fund; Merrill Lynch Latin America Fund, Inc.; Merrill Lynch Middle
East/Africa Fund, Inc.; Merrill Lynch Pacific Fund, Inc.; Merrill Lynch
Short-Term Global Income Fund, Inc.; Merrill Lynch Technology Fund, Inc.; and
Worldwide DollarVest Fund, Inc.
Dated: February 21, 1995 /s/ Edward D. Zinbarg
----------------------------------
Edward D. Zinbarg
(Director of each above referenced
Maryland corporation and Trustee
of each above referenced
Massachusetts business trust)
