<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1995
SECURITIES ACT FILE NO. 33-6091
INVESTMENT COMPANY ACT FILE NO. 811-4684
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 13 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 14 /X/
(CHECK APPROPRIATE BOX OR BOXES)
---------------------
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
(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 GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT
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)
/ / 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 February 28, 1995.
---------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BEING REGISTERED PER SHARE OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest
(par value $.10 per share)... 14,392,331 $9.74 $289,998.76* $100
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
*(1) The calculation of the maximum aggregate price is made pursuant to Rule
24e-2 under the Investment Company Act of 1940.
(2) The total amount of securities redeemed or repurchased during the
Registrant's previous fiscal year was 37,082,370 shares of Beneficial
Interest.
(3) 22,719,813 of the shares described in (2) above have been used for
reduction pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment
Company Act of 1940 in previous filings during Registrant's current fiscal
year.
(4) 14,362,557 of the shares redeemed during Registrant's previous fiscal year
are being used for the reduction of the registration fee in this amendment
to the Registration Statement.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------- ------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page.......................... Cover Page
Item 2. Synopsis............................ Fee Table
Item 3. Condensed Financial Information..... Financial Highlights; Performance
Data
Item 4. General Description of Registrant... Investment Objective and Policies;
Additional Information
Item 5. Management of the Fund.............. Fee Table; Investment Objective and
Policies; Management of the Fund;
Portfolio Transactions; 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.......................... Dividends, Distributions and
Taxes -- Taxes
Item 21. Underwriters........................ Purchase of Shares
Item 22. Calculation of Performance Data..... Performance Data
Item 23. Financial Statements................ Financial Statements
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
PROSPECTUS
APRIL 28, 1995
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
------------------------
The investment objective of Merrill Lynch Global Bond Fund for Investment
and Retirement (the "Fund") is to seek a high total investment return by
investing in a global portfolio of debt instruments denominated in various
currencies and multinational currency units. Total investment return is the
aggregate of capital value changes and income. Accordingly, investments may be
shifted among obligations denominated in particular currencies or currency units
depending upon management's analysis of total investment return available from
obligations in terms of both potential for capital appreciation in U.S. dollars
and the rate of income paid on such obligations. Under normal conditions, the
Fund's investments will be denominated in at least three currencies or
multinational currency units. The Fund generally will invest without regard to
tax considerations applicable to distributions to shareholders and therefore may
particularly appeal to investors for whom current tax liability is not a major
consideration, such as employee benefit plans and individual retirement accounts
("IRAs"). The Fund presently contemplates that it will invest primarily in
obligations denominated in the currencies of the U.S., Japan, Canada, Western
European nations, New Zealand and Australia as well as in European Currency
Units. The Fund may seek to hedge against interest rate and currency risks
through the use of options, futures and foreign currency transactions.
Investments on an international basis involve special considerations. See
"Special Considerations". For more information on the Fund's investment
objective and policies, please see "Investment Objective and Policies" on page
12.
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 April 28, 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 -- INVESTMENT ADVISER
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 A(A) CLASS B(B) CLASS C CLASS D
-------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)...................... 4.00%(c) None None 4.00%(c)
Sales Charge Imposed on Dividend
Reinvestments........................ None None None None
Deferred Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)............................... None(d) 4.0% during the first year, 1.0% for None(d)
decreasing 1.0% annually one
thereafter to 0.0% after the year
fourth year
Exchange Fee........................... None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS)(E):
Investment Advisory Fees(f)............ 0.60% 0.60% 0.60% 0.60%
12b-1 Fees(g):
Account Maintenance Fees............. None 0.25% 0.25% 0.25%
Distribution Fees.................... None 0.50% 0.55% None
(Class B shares convert to
Class D shares automatically
after approximately ten years
and cease being subject to
distribution fees)
Other Expenses:
Custodial Fees....................... 0.06% 0.06% 0.06% 0.06%
Shareholder Servicing Costs(h)....... 0.10% 0.12% 0.12% 0.10%
Other................................ 0.08% 0.08% 0.08% 0.08%
Total Other Expenses............. 0.24% 0.26% 0.26% 0.24%
TOTAL FUND OPERATING EXPENSES............ 0.84% 1.61% 1.66% 1.09%
</TABLE>
- ---------------
(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and investment programs. See
"Purchase of Shares -- Initial Sales Charge Alternatives -- Class A and
Class D Shares" -- page 26.
(b) Class B shares convert to Class D shares automatically approximately ten
years after initial purchase. See "Purchase of Shares -- Deferred Sales
Charge Alternatives -- Class B and Class C Shares" -- page 28.
(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 26.
(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 December 31, 1994. Information under "Other Expenses" for Class C and
Class D shares is estimated for the fiscal year ending December 31, 1995.
(f) See "Management of the Fund -- Management and Advisory Arrangements" -- page
22.
(g) See "Purchase of Shares -- Distribution Plans" -- page 31.
(h) See "Management of the Fund -- Transfer Agency Services" -- page 24.
2
<PAGE> 5
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR
THE PERIOD OF:
----------------------------
1 3 5 10
YEAR YEARS YEARS YEARS
--- --- --- ----
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a
$1,000 investment including the maximum $40 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......................................... $48 $66 $85 $140
Class B......................................... $56 $71 $88 $191
Class C......................................... $27 $52 $90 $197
Class D......................................... $51 $73 $98 $168
An investor would pay the following expenses on the
same $1,000 investment assuming no redemption at
the end of the period:
Class A......................................... $48 $66 $85 $140
Class B......................................... $16 $51 $88 $191
Class C......................................... $17 $52 $90 $197
Class D......................................... $51 $73 $98 $168
</TABLE>
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 (the "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 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".
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 "Investment Adviser") or an affiliate of MLAM, Fund Asset
Management, L.P. ("FAM"). Funds advised by MLAM or FAM are referred to herein
as "MLAM-advised mutual funds".
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, are imposed directly against those classes and not against
all assets of the Fund and, accordingly, such charges do not affect the net
asset value of any other class or have any impact on investors choosing another
sales charge option.
Dividends paid by the Fund for each class of shares are calculated in the
same manner at the same time and 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 Pricing(SM) System,
followed by a more detailed description of each class and a discussion of the
factors that investors should consider in determining the method of purchasing
shares under the Merrill Lynch Select Pricing(SM) System that the investor
believes is the most beneficial under his particular circumstances. More
detailed information as to each class of shares is set forth under "Purchase of
Shares".
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE(1) FEE FEE FEATURE
- --------------------------------------------------------------------------------------------------
A Maximum 4.00% initial No No No
sales charge(2)(3)
- --------------------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to
years, at a rate of 4.0% D shares automatically
during the first year, after approximately
decreasing 1.0% annually ten years(4)
to 0.0%
- --------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- --------------------------------------------------------------------------------------------------
D Maximum 4.00% 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. 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.
(footnotes continued on next page)
4
<PAGE> 7
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial Sales
Charge Alternatives -- Class A and Class D Shares -- Eligible Class A
Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead may 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 an eight
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 of the Fund 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 of the Fund in a
shareholder account are entitled to purchase additional Class A shares
of the Fund 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 Merrill Lynch & Co., Inc.
("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 their directors and employees and to members of the Boards of
MLAM-advised mutual funds. The maximum initial sales charge is 4.00%,
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 also are 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
ongoing distribution fee of 0.50% 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 ten 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 eight 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 --
5
<PAGE> 8
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 0.55% of the Fund's average net assets
attributable to the Class C shares. Class C shares are also subject to
a CDSC if they are redeemed within one year of purchase. Although Class
C shares are subject to a 1.0% CDSC for only one year (as compared to
four years for Class B), Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject
to distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Fund's Board of
Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
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 purchase 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.
6
<PAGE> 9
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 ten years, and thereafter investors will be
subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend to
hold their shares for an extended period of time. Investors in Class B shares
should take into account whether they intend to redeem their shares within the
CDSC period and, if not, whether they intend to remain invested until the end of
the conversion period and thereby take advantage of the reduction in ongoing
fees resulting from the conversion into Class D shares. Other investors,
however, may elect to purchase Class C shares if they determine that it is
advantageous to have all their assets invested initially and they are uncertain
as to the length of time they intend to hold their assets in MLAM-advised mutual
funds. Although Class C shareholders are subject to a shorter CDSC period at a
lower rate, they forgo 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 National
Association of Securities Dealers, Inc., the Class B distribution fees are
further limited under a voluntary waiver of asset-based sales charges. See
"Purchase of Shares -- Limitations on the Payment of Deferred Sales Charges".
7
<PAGE> 10
FINANCIAL HIGHLIGHTS
The financial information in the tables 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 year
ended December 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 DECEMBER 31,
-----------------------------------------------------
1994 1993 1992 1991
---------------- -------- ------- -------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................... $ 10.03 $ 9.79 $ 10.38 $ 9.93
------- -------- ------- -------
Investment income -- net............................................. .55 .70 .77 .95
Realized and unrealized gain (loss) on investments and foreign
currency transactions -- net....................................... (1.07) .56 .01 .55
------- -------- ------- -------
Total from investment operations........................................ (.52) 1.26 .78 1.50
------- -------- ------- -------
Less dividends and distributions:
Investment income -- net............................................. (.24) (.67) (1.14) (1.05)
Realized gain on investments -- net.................................. -- (.30) (.23) --
In excess of realized gain on investments -- net..................... (.03) (.05) -- --
Return of capital.................................................... (.28) -- -- --
------- -------- ------- -------
Total dividends and distributions....................................... (.55) (1.02) (1.37) (1.05)
------- -------- ------- -------
Net asset value, end of period.......................................... $ 8.96 $ 10.03 $ 9.79 $ 10.38
================ ========= ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share................................... (5.29)% 13.21% 7.83% 16.00%
================ ========= ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees................................ .84% .82% .84% .99%
================ ========= ======== ========
Expenses............................................................. .84% .82% .84% .99%
================ ========= ======== ========
Investment income -- net............................................. 5.84% 6.44% 12.24% 8.02%
================ ========= ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................. $ 90,823 $108,241 $61,131 $21,211
================ ========= ======== ========
Portfolio turnover................................................... 405.00% 419.99% 235.11% 67.76%
================ ========= ======== ========
<CAPTION>
FOR THE PERIOD
OCTOBER 25,
1988++ TO
DECEMBER 31,
1990 1989 1988
------- ------ ----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................... $ 9.77 $10.24 $10.22
------- ------ -----
Investment income -- net............................................. 1.01 .83 .35
Realized and unrealized gain (loss) on investments and foreign
currency transactions -- net....................................... .42 (.17) (.08)
------- ------ -----
Total from investment operations........................................ 1.43 .66 .27
------- ------ -----
Less dividends and distributions:
Investment income -- net............................................. (1.27) (.71) (.25)
Realized gain on investments -- net.................................. -- -- --
In excess of realized gain on investments -- net..................... -- -- --
Return of capital.................................................... -- (.42) --
------- ------ -----
Total dividends and distributions....................................... (1.27) (1.13) (.25)
------- ------ -----
Net asset value, end of period.......................................... $ 9.93 $ 9.77 $10.24
======== ======= ===============
TOTAL INVESTMENT RETURN:**
Based on net asset value per share................................... 15.64% 7.27% 2.66%#
======== ======= ===============
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees................................ 1.06% 1.05% 1.01%*
======== ======= ===============
Expenses............................................................. 1.06% 1.05% 1.01%*
======== ======= ===============
Investment income -- net............................................. 12.71% 7.33% 22.63%*
======== ======= ===============
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................. $10,601 $9,156 $1,684
======== ======= ===============
Portfolio turnover................................................... 159.79% 188.22% 198.60%
======== ======= ===============
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Annualized.
+ In 1987, the Fund changed its fiscal year end from July 31 to December 31.
++ Commencement of Operations.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
</TABLE>
8
<PAGE> 11
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 10.03 $ 9.79 $ 10.39 $ 9.93 $ 9.77 $ 10.24
------- -------- -------- -------- -------- --------
Investment income -- net................... .47 .60 .70 .85 .93 .77
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net...................... (1.07) .58 (.01) .58 .42 (.18)
------- -------- -------- -------- -------- --------
Total from investment operations.............. (.60) 1.18 .69 1.43 1.35 .59
------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income -- net................... (.20) (.59) (1.06) (.97) (1.19) (.67)
Realized gain on investments -- net........ -- (.30) (.23) -- -- --
In excess of realized gain on
investments -- net....................... (.03) (.05) -- -- -- --
Return of capital.......................... (.24) -- -- -- -- (.39)
------- -------- -------- -------- -------- --------
Total dividends and distributions............. (.47) (.94) (1.29) (.97) (1.19) (1.06)
------- -------- -------- -------- -------- --------
Net asset value, end of period................ $ 8.96 $ 10.03 $ 9.79 $ 10.39 $ 9.93 $ 9.77
================ ========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share............ (6.01)% 12.36% 6.91% 15.23% 14.76% 6.45%
================ ========= ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees...... .86% .83% .86% 1.02% 1.09% 1.07%
================ ========= ========= ========= ========= =========
Expenses................................... 1.61% 1.58% 1.61% 1.77% 1.84% 1.82%
================ ========= ========= ========= ========= =========
Investment income -- net................... 5.06% 5.72% 11.67% 7.76% 11.97% 4.73%
================ ========= ========= ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $700,995 $897,150 $637,834 $380,749 $274,124 $262,641
================ ========= ========= ========= ========= =========
Portfolio turnover......................... 405.00% 419.99% 235.11% 67.76% 159.79% 188.22%
================ ========= ========= ========= ========= =========
<CAPTION>
FOR THE PERIOD
AUG. 29,
1986++ TO
1988 1987+ JULY 31, 1987
-------- -------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 10.68 $ 10.31 $ 10.00
-------- -------- -------
Investment income -- net................... .77 .30 .63
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net...................... (.39) 1.29 .33
-------- -------- -------
Total from investment operations.............. .38 1.59 .96
-------- -------- -------
Less dividends and distributions:
Investment income -- net................... (.82) (.30) (.65)
Realized gain on investments -- net........ -- (.92) --
In excess of realized gain on
investments -- net....................... -- -- --
Return of capital.......................... -- -- --
-------- -------- -------
Total dividends and distributions............. (.82) (1.22) (.65)
-------- -------- -------
Net asset value, end of period................ $ 10.24 $ 10.68 $ 10.31
========= ========= =============
TOTAL INVESTMENT RETURN:**
Based on net asset value per share............ 3.81% 16.26%# 9.79%#
========= ========= =============
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees...... .99% 1.03%* 1.00%*
========= ========= =============
Expenses................................... 1.74% 1.78%* 1.75%*
========= ========= =============
Investment income -- net................... 10.16% 6.98%* 6.79%*
========= ========= =============
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)... $304,607 $314,529 $ 353,222
========= ========= =============
Portfolio turnover......................... 198.60% 111.97% 123.87%
========= ========= =============
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Annualized.
+ In 1987, the Fund changed its fiscal year end from July 31 to December 31.
++ Commencement of Operations.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
</TABLE>
9
<PAGE> 12
FINANCIAL HIGHLIGHTS -- (CONCLUDED)
<TABLE>
<CAPTION>
FOR THE PERIOD OCT. 21,
1994++
TO DEC. 31, 1994
--------------------------
CLASS C CLASS D
---------- -------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................................... $ 9.21 $ 9.21
---------- -------
Investment income -- net............................................................. .09 .10
Realized and unrealized loss on investments and foreign currency
transactions -- net................................................................ (.25) (.25)
---------- -------
Total from investment operations........................................................ (.16) (.15)
---------- -------
Less dividends and distributions:
Investment income -- net............................................................. (.03) (.04)
Realized gain on investments -- net.................................................. -- --
In excess of realized gain on investments -- net..................................... (.01) (.01)
Return of capital -- net............................................................. (.05) (.05)
---------- -------
Total dividends and distributions....................................................... (.09) (.10)
---------- -------
Net asset value, end of period.......................................................... $ 8.96 $ 8.96
=========== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share................................................... (1.73)%# (1.62)%#
=========== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees................................................ .89%* .87%*
=========== ========
Expenses............................................................................. 1.69%* 1.12%*
=========== ========
Investment income -- net............................................................. 5.20%* 5.81%*
=========== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............................................. $ 3,614 $ 1,755
=========== ========
Portfolio turnover................................................................... 405.00% 405.00%
=========== ========
</TABLE>
- ---------------
* Annualized.
++ Commencement of Operations.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
10
<PAGE> 13
SPECIAL CONSIDERATIONS
Although the Fund provides a vehicle for investors to participate in the
international debt markets, the Fund should not be considered a balanced
investment program. As a non-diversified investment company, the Fund may invest
a larger percentage of its assets in individual issuers than a diversified
investment company. In this regard, the Fund is not subject to the general
limitation that it not invest more than five percent of its total assets in the
securities of any one issuer. To the extent the Fund makes investments in excess
of five percent of its assets in a particular issuer, its exposure to credit and
market risks associated with that issuer is increased.
As a global fund, the Fund may invest in U.S. and foreign securities.
Investments in securities of foreign entities and securities denominated in
foreign currencies involve risks not typically related to domestic investment,
including, but not limited to, fluctuations in foreign exchange rates, future
foreign political and economic developments and the possible imposition of
exchange controls or other foreign or U.S. governmental laws or restrictions
applicable to such investments. Since the Fund may invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates may affect the value of investments in the
portfolio and the unrealized appreciation or depreciation of investments insofar
as U.S. investors are concerned. Changes in foreign currency exchange rates
relative to the U.S. dollar will affect the U.S. dollar value of the Fund's
assets denominated in those currencies and the Fund's yield on such assets.
Foreign currency exchange rates are determined by forces of supply and demand on
the foreign exchange markets. These forces are, in turn, affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation, and other factors. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments position.
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 investment in those countries.
There may be less publicly available information about a foreign financial
instrument than about a U.S. instrument, and foreign entities may not be subject
to accounting, auditing and financial reporting standards and requirements
comparable to those to which U.S. entities are subject. In addition, certain
foreign investments may be subject to foreign withholding taxes. Investors will
be able to deduct such taxes in computing their taxable income or to use such
amounts as credits against their U.S. income taxes if more than 50% of the
Fund's total assets at the close of any taxable year consists of stocks or
securities in foreign corporations. See "Additional Information -- Taxes".
Foreign financial markets, while generally growing in volume, typically have
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. Foreign markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays or other
problems 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 the value of such portfolio security or, if the
Fund has entered into a
11
<PAGE> 14
contract to sell the security, could result in possible liability to the
purchaser. Costs associated with transactions in foreign securities generally
are higher than with transactions in U.S. securities. There generally is less
government supervision and regulation of exchanges, financial institutions 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 because
the expenses of the Fund, such as custodial costs, are higher. The portfolio
turnover of the Fund may be higher than that of many investment companies. See
"Investment Objective and Policies -- Other Investment Policies and
Practices -- Portfolio Turnover".
The Fund may engage in various portfolio strategies to seek to increase its
return through the use of options on portfolio securities and to hedge its
portfolio against movements in the securities markets and exchange rates between
currencies by the use of options, futures and options thereon. Utilization of
options and futures transactions involves the risk of imperfect correlation in
movements in the prices of options and futures and movements in the prices of
the securities or currencies which are the subject of the hedge. There can be no
assurance that a liquid secondary market for options and futures contracts will
exist at any specific time. See "Investment Objective and Policies -- Hedging
Techniques".
The net asset value of the Fund's shares, to the extent that the Fund
invests in fixed income securities, will be affected by changes in the general
level of interest rates. When interest rates decline, the value of a portfolio
of fixed income securities can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio of fixed income securities can be expected
to decline.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective is to seek a high total investment return by investing
in a global portfolio of debt instruments denominated in various currencies and
multinational currency units. Total investment return is the aggregate of
capital value changes and income. This investment objective is a fundamental
policy of the Fund which may not be changed without a vote of a majority of its
outstanding shares as defined below. There can be no assurance that this
investment objective will be realized. The Fund will seek to achieve its
objective through a fully managed investment approach described below. The Fund
is a non-diversified open-end management investment company. The Fund may seek
to hedge against interest rate and currency risks through the use of options,
futures and foreign currency transactions.
As an investment company making investments in debt instruments on a global
basis, the Fund may purchase debt obligations issued or guaranteed by U.S. or
foreign governments (including foreign states, provinces and municipalities) or
their agencies and instrumentalities ("governmental entities"), or issued or
guaranteed by international organizations designated or supported by multiple
governmental entities to promote economic reconstruction or development
("supranational entities") such as the International Bank for Reconstruction and
Development (the "World Bank") and the European Coal and Steel Community, or
issued by either U.S. or foreign corporations or financial institutions.
With respect to the creditworthiness of the Fund's portfolio securities,
under normal conditions all of the securities owned by the Fund will be (i)
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or (ii) obligations which have a credit rating of A or better
by Standard & Poor's
12
<PAGE> 15
Ratings Group ("S&P") or by Moody's Investors Service, Inc. ("Moody's") or
commercial paper rated A-1 by S&P or Prime-1 by Moody's or obligations that the
Fund's investment adviser has determined to be of similar creditworthiness. The
Fund's investment adviser may determine that a non-dollar denominated obligation
of a foreign government is of similar creditworthiness notwithstanding S&P's or
Moody's less favorable rating of a dollar denominated obligation of the same
issuer, provided that the investment adviser believes that such dollar
denominated obligation is assigned a lower rating because it is denominated in a
currency other than the foreign government's own currency.
In evaluating obligations, the Investment Adviser will utilize its internal
credit analysis resources as well as financial and economic information obtained
from other sources. With respect to foreign corporate issuers, the Investment
Adviser will consider the financial condition of the issuer and market and
economic conditions relevant to its operations. In terms of foreign governmental
obligations, the Investment Adviser will review the financial position of the
issuer and political and economic conditions in the country. Investment in
securities of supranational entities is subject to the additional risk to be
considered by the Investment Adviser that member governments will fail to make
required capital contributions and that a supranational entity will thus be
unable to meet its obligations.
The Fund's fully managed approach enables it to seek high total investment
return by investing in debt instruments denominated in various currencies and
currency units on the basis of the potential capital appreciation of such
instruments in U.S. dollars and the rates of income paid on such instruments. As
a general matter, in evaluating investments, the Fund will consider, among other
factors, the relative levels of interest rates prevailing in various countries,
the potential appreciation of such investments in their denominated currencies
and, for debt instruments not denominated in U.S. dollars, the potential
movement in the value of such currencies compared to the U.S. dollar. In seeking
capital appreciation, the Fund may invest in relatively low-yielding instruments
in expectation of favorable currency fluctuations or interest rate movements,
thereby potentially reducing the Fund's current yield. In seeking income, the
Fund may invest in short-term instruments with relatively high yields (as
compared to other debt securities) meeting the Fund's investment criteria,
notwithstanding that the Fund may not anticipate that such instruments will
experience substantial capital appreciation.
The average maturity of the Fund's portfolio securities will vary based
upon the Investment Adviser's assessment of economic and market conditions. As
with all debt securities, changes in market yields will affect the Fund's asset
value as the prices of portfolio securities generally increase when interest
rates decline and decrease when interest rates rise. Prices of longer term
securities generally fluctuate more in response to interest rate changes than do
shorter term securities. The Fund does not expect the average maturity of its
portfolio to exceed ten years.
The Fund may invest in debt instruments denominated in any currency or
multinational currency unit. An illustration of a multinational currency unit is
the European Currency Unit ("ECU") which is a "basket" consisting of specified
amounts of the currencies of certain of the member states of the European
Community, a Western European economic cooperative association including France,
Germany, The Netherlands and the United Kingdom. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Investment Adviser does not believe that such adjustments will
adversely affect holders of ECU-denominated obligations or the marketability of
such securities. European supranationals, in particular, issue ECU-denominated
obligations. The Fund may invest in debt instruments denominated in the currency
of one nation
13
<PAGE> 16
although issued by a governmental entity, corporation or financial institution
of another nation. For example, the Fund may invest in a Japanese
yen-denominated obligation issued by a U.S. corporation. Such investments
involve credit risks associated with the issuer and currency risks associated
with the currency in which the obligation is denominated. It is anticipated that
the Fund will invest primarily in marketable instruments denominated in the
currencies of the U.S., Japan, Canada, Western European nations, New Zealand and
Australia as well as in ECUs. Further, it is anticipated that such instruments
will be issued primarily by entities located in such countries and by
supranational entities. Under certain adverse conditions, the Fund may restrict
the financial markets or currencies in which its assets will be invested and may
invest its assets solely in the U.S. financial markets or U.S.
dollar-denominated obligations.
The Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended, but can be offered
and sold to "qualified institutional buyers" under Rule 144A under that Act.
However, the Fund will not invest more than 15% (10% to the extent required by
certain state laws) of its total assets in illiquid investments, which includes
securities for which there is no readily available market, securities subject to
contractual restrictions on resale, certain investments in asset-backed and
receivable-backed securities and restricted securities, unless the Fund's
Trustees continuously determine, based on the trading markets for the specific
restricted security, that it is liquid. The Trustees may adopt guidelines and
delegate to the Investment Adviser the daily function of determining and
monitoring liquidity of restricted securities. The Trustees, however, will
retain sufficient oversight and be ultimately responsible for the
determinations.
Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Trustees will carefully monitor 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.
HEDGING TECHNIQUES
The Fund may engage in various portfolio strategies to hedge its portfolio
against interest rate and currency risks. These strategies include the use of
options on portfolio securities, currency options, financial and currency
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 the net asset value of its shares, the net asset values 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, interest rates or
currency exchange rates occur. When the Fund engages in transactions denominated
in foreign currencies, it will be subject to the risks of adverse changes in the
exchange rates between such foreign currencies and the U.S. dollar, the currency
used to value the Fund's assets. Reference is made to the Statement of
Additional Information for further information concerning these strategies.
Although certain risks are involved in options and futures transactions (as
discussed below in "Risk Factors in Options, Futures and Currency
Transactions"), the Investment Adviser believes that, because the 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
14
<PAGE> 17
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 that the Fund may
utilize with respect to interest rate and currency risks.
Hedging Interest Rate Risks. The Fund may purchase and write (i.e., sell)
call options on its portfolio securities, purchase put options on securities and
engage in transactions in financial futures and related options, as described
below.
The Fund may write call options with respect to securities it owns which
provide the holder of the option the right to buy the underlying security
covered by the option at the stated exercise price until the option expires. The
Fund writes only covered call options, which means that so long as the Fund is
obligated as the writer of a call option, it will own the underlying securities
subject to the option. The Fund may also purchase put options, which will
provide it with the right to sell the underlying securities at the stated
exercise price, thus limiting the Fund's risk of loss through a decline in the
market value of the securities until the put expires. The Fund may write call
options on securities with respect to which it has purchased a put option. By
purchasing a put option on a security, the Fund limits its risk of loss on that
security. By writing a call option on the security, the Fund will offset, in
whole or in part, the cost of purchasing such put option, but limits its
opportunity to profit from an increase in the value of the security above the
exercise price. There is no percentage limitation with respect to portfolio
securities on which the Fund may write call options.
The Fund may also purchase and sell financial futures contracts ("futures
contracts") as a hedge against adverse changes in interest rates, as described
below. A futures contract is an agreement between two parties which obligates
the purchaser of the futures contract to buy and the seller of a futures
contract to sell a particular commodity, in this case securities, for a set
price on a future date. The Fund may effect transactions in futures contracts in
U.S. and foreign agency and government securities and corporate debt securities.
Transactions by the Fund in financial futures are subject to limitations as
described below under "Restrictions on the Use of Futures Transactions".
The Fund may sell financial futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market values of fixed-income securities which may be held by the Fund
will fall, thus reducing the net asset value of the Fund. However, as interest
rates rise, the value of the Fund's short position in the futures contract will
also tend to increase, thus offsetting all or a portion of the depreciation in
the market value of the Fund's investments which are being hedged. While the
Fund will incur commission expenses in selling and closing out futures
positions, these commissions are generally less than the transaction expenses
which the Fund would have incurred had the Fund sold portfolio securities in
order to reduce its exposure to increases in interest rates. The Fund also may
purchase financial futures contracts in anticipation of a decline in interest
rates when it is not fully invested in a particular market in which it intends
to make investments to gain market exposure that may in part or entirely offset
an increase in the cost of securities it intends to purchase. It is anticipated
that, in a substantial majority of these transactions, the Fund will purchase
securities upon termination of the futures contract.
The Fund may purchase futures contracts in anticipation of a decline in
interest rates when it is not fully invested in a particular market in which it
intends to make investments to gain market exposure that may in part or entirely
offset an increase in the cost of securities it intends to purchase. The Fund
does not consider
15
<PAGE> 18
purchases of futures contracts to be a speculative practice under these
circumstances. In a substantial majority of these transactions, the Fund will
purchase securities upon termination of the futures contract.
The Fund may also purchase and write call and put options on futures
contracts in connection with its hedging activities. Generally, these strategies
are utilized under the same market and market sector conditions (i.e.,
conditions relating to specific types of investments) in which the Fund enters
into futures transactions. The Fund may purchase put options or write call
options on futures contracts rather than selling the underlying futures contract
in anticipation of an increase in interest rates. Similarly, the Fund may
purchase call options, or write put options on futures contracts, as a
substitute for the purchase of such futures to hedge against the increased cost
resulting from a decline in interest rates of securities which the Fund intends
to purchase. Limitations on transactions in options on futures contracts are
described below.
The Fund may engage in options and futures transactions on exchanges and in
the over-the-counter markets. 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. Over-the-counter ("OTC") transactions are two-party
contracts with prices and terms negotiated by the buyer and seller. 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.
To trade futures contracts, the Fund is not required to deposit funds equal
to the value of the futures contract. The Fund need only make a deposit, called
an "initial margin deposit", equal to a percentage (typically 15% or less) of
the value of the futures contract. As a result, a relatively small adverse move
in the price of a futures contract may result in immediate and substantial
losses to the Fund. For example, if at the time of purchase 10% of the price of
a futures contract is deposited as margin, a 10% decrease in the price of that
contract would, if the contract were then closed out, result in total loss of
the initial margin deposit before any deduction for brokerage commissions and
other transaction costs. A decrease of more than 10% would result in a loss of
more than the total initial margin deposit. Options on futures contracts are
similarly or even more highly leveraged. However, 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 effect of
leverage from such futures contract is minimized.
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 futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
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
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<PAGE> 19
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 Securities and Exchange Commission staff of its position.
Hedging Foreign Currency Risks. The Fund is authorized to deal in forward
foreign exchange between 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 between these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date (up to one year) and price 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 purchase or sale of one forward foreign currency for another
currency with respect to portfolio security positions denominated or quoted in
such foreign currency to offset the effect of an anticipated substantial
appreciation or depreciation, respectively, in the value of such currency
relative to the U.S. dollar. In this situation, the Fund also may, for example,
enter into a forward contract to sell or purchase a different foreign currency
for a fixed U.S. dollar amount where it is believed that the U.S. dollar value
of the currency to be sold or bought pursuant to the forward contract will fall
or rise, as the case may be, whenever there is a decline or increase,
respectively, in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated (this practice being referred to as a
"cross-hedge"). 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.
In connection with its trading in forward foreign currency contracts, the
Fund will contract with a foreign or domestic bank or foreign or domestic
securities dealer, to make or take future delivery of a specified amount of a
particular currency. There are no limitations on daily price moves in such
forward contracts, and banks and dealers are not required to continue to make
markets in such contracts. There have been periods during which certain banks or
dealers have refused to quote prices for such forward contracts or have quoted
prices with an unusually wide spread between the price at which the bank or
dealer is prepared to buy and that at which it is prepared to sell. Governmental
imposition of credit controls might limit any such forward contract trading.
With respect to its trading of forward contracts, if any, the Fund will be
subject to the risk of bank or dealer failure and the inability of, or refusal
by, a bank or dealer to perform with respect to such contracts. Any such default
would deprive the Fund of any profit potential or force the Fund to cover its
commitments for resale, if any, at the then-market price and could result in a
loss to the Fund.
17
<PAGE> 20
The Fund is also authorized to purchase or sell listed or OTC foreign
currency options, foreign currency futures and related options on foreign
currency futures as a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to hedges on
non-U.S. dollar denominated securities (including securities denominated in the
ECU) 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
Japanese yen-denominated security. In such circumstances, for example, the Fund
may purchase a foreign currency put option enabling it to sell a specified
amount of yen for dollars at a specified price by a future date. To the extent
the hedge is successful, a loss in the value of the dollar relative to the yen
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 yen for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such a call option in this illustration, the Fund gives
up the opportunity to profit without limit from increases in the relative value
of the yen to the dollar.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or to 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 or 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 Fund will acquire only those OTC
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). 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 denominated in such currency which it owns, the
expected acquisition price of securities which it has committed or anticipates
to purchase which are denominated in such currency and, in the case of
securities which have been sold by the Fund but not yet delivered, the proceeds
thereof in its denominated currency. Further, the Fund will segregate at its
custodian U.S. Government or other high quality securities having a market value
substantially representing any subsequent net decrease in the market value of
such hedged positions, including net positions with respect to cross-currency
hedges. The Fund may not incur potential net liabilities with respect to
currency and securities positions, including net liabilities with respect to
cross-currency hedges, of more than 33 1/3% of its total assets from foreign
currency options, futures, related options and forward currency transactions.
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 defined 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
18
<PAGE> 21
liquidation value of the Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any such contracts and options.
An order has been obtained from the Securities and Exchange Commission
which exempts the Fund from certain provisions of the Investment Company Act of
1940, as amended (the "Investment Company Act"), in connection with transactions
involving futures contracts and options thereon.
Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures and
movements in the price of the securities and 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. The successful use
of options and futures also depends on the Investment Adviser's ability to
predict correctly price movements in the market involved in a particular options
or futures transaction. To compensate for imperfect correlations, the Fund may
purchase or sell futures contracts in a greater dollar amount than the hedged
securities or currencies if the volatility of the hedged securities or
currencies is historically greater than the volatility of the options or futures
contracts. Conversely, the Fund may purchase or sell fewer futures contracts if
the volatility of the price of the hedged securities or currencies is
historically less than that of the options or futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
futures contract approaches.
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,
management believes the Fund can receive on each business day at least two
independent bids or offers. However, there can be no assurance that a liquid
secondary market will exist at any specific time. Thus, it may not be possible
to close an options or futures transaction. 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 options on portfolio securities and currency are
traded have generally established limitations governing the maximum number of
call or put options on the same underlying security and 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. The Investment
Adviser does not believe that these trading and position limits will have any
adverse impact on the portfolio strategies for hedging the Fund's portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES
Portfolio Transactions. The securities in which the Fund invests are
traded primarily in the OTC market. Since portfolio transactions generally will
not be effected on foreign securities exchanges, the Fund generally does not
expect to incur potential settlement delays which may occur on certain of such
exchanges. Where possible, the Fund will deal directly with the dealers who make
a market in the securities involved
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<PAGE> 22
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Such
portfolio securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. Securities firms may
receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options. The Fund has no obligation to
deal with any broker in the execution of transactions in portfolio securities.
Under the Investment Company Act, persons affiliated with the Fund, including
Merrill Lynch, are prohibited from dealing with the Fund as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the Securities and Exchange Commission. Affiliated
persons of the Fund may serve as its broker in transactions conducted on an
exchange and in OTC transactions conducted on an agency basis. In addition,
consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., the Fund 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. Costs associated with transactions in foreign securities
are generally higher than costs associated with transactions in U.S. securities,
although the Fund will endeavor to achieve the best net results in effecting
such transactions.
Repurchase Agreements; Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Under a repurchase agreement, the seller agrees, upon entering into the contract
with the Fund, to repurchase a security (typically a security issued or
guaranteed by the U.S. government) at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed yield for the Fund insulated from fluctuations in the market value of
the underlying security during such period, although, to the extent the
repurchase agreement is not denominated in U.S. dollars, the Fund's return may
be affected by currency fluctuations. Repurchase agreements may be entered into
only with a member bank of the Federal Reserve System, a primary dealer in U.S.
government securities or an affiliate thereof. A purchase and sale contract is
similar to a repurchase agreement, but purchase and sale contracts, unlike
repurchase agreements, allocate interest on the underlying security to the
purchaser during the term of the agreement. In all instances, the Fund takes
possession of the underlying securities when investing in repurchase agreements
or purchase and sale contracts. Nevertheless, if the seller were to default on
its obligation to repurchase a security under a repurchase agreement or purchase
and sale contract and the market value of the underlying security at such time
was less than the Fund had paid to the seller, the Fund would realize a loss.
The Fund may not invest more than 15% (10% to the extent required by certain
state laws) of its total assets in repurchase agreements or purchase and sale
contracts maturing in more than seven days, together with all other illiquid
securities.
Lending of Portfolio Securities. The Fund is authorized to lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions if it receives
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 a loan fee 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.
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<PAGE> 23
Investment Restrictions. The Fund's investment activities are subject to
further restrictions that are described in the Statement of Additional
Information. Investment restrictions and policies which are fundamental policies
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities (which for this purpose and under the
Investment Company Act means the lesser of (i) 67% of the shares represented at
a meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares). Among its fundamental policies,
the Fund may not invest more than 25% of its total assets, taken at market value
at the time of each investment in the securities of corporate issuers in any
particular industry. 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. As explained further
in the Statement of Additional Information, under state law the Fund is
presently limited with respect to investment in certain illiquid
securities to 10% of its total assets.
-- Notwithstanding the less restrictive fundamental investment restriction
recited in the Statement of Additional Information, borrow amounts in
excess of 10% of its total assets, taken at market value, and then only
from banks as a temporary measure for extraordinary or emergency
purposes or to meet redemptions.
Although the Fund has registered as a "non-diversified" investment company
under the Investment Company Act, to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund will
be subject to certain diversification requirements of the Code. See "Additional
Information -- Taxes".
Portfolio Turnover. The Investment Adviser will effect portfolio
transactions without regard to holding period, if, in its judgment, such
transactions are advisable in light of a change in circumstance in general
market, economic or financial conditions. As a result of its investment
policies, the Fund may engage in a substantial number of portfolio transactions.
Accordingly, while the Fund anticipates that its annual portfolio turnover rate
should not exceed 500% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. High portfolio turnover involves
correspondingly greater transaction costs in the form of dealer spreads and
brokerage commissions, which are borne directly by the Fund, and may increase
the percentage of the Fund's distributions which are taxable to shareholders as
ordinary income. See "Additional Information -- Taxes".
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<PAGE> 24
MANAGEMENT OF THE FUND
BOARD OF 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 of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies by the Investment Company Act.
The Trustees of the Fund are:
ARTHUR ZEIKEL* -- President of the Investment Adviser; President and
Director of Princeton Services, Inc.; Executive Vice President of Merrill Lynch
& Co., Inc. ("ML & Co."); Executive Vice President of Merrill Lynch; Director of
the Distributor.
DONALD CECIL -- Special Limited Partner of Cumberland Partners (an
investment partnership).
EDWARD H. MEYER -- Chairman of the Board, President and Chief Executive
Officer of Grey Advertising Inc.
CHARLES C. REILLY -- Self-employed financial consultant; former President
and Chief Investment Officer of Verus Capital, Inc.; former Senior Vice
President of Arnhold and S. Bleichroeder, Inc.; Adjunct Professor, Columbia
University Graduate School of Business.
RICHARD R. WEST -- Professor of Finance, and Dean from 1984 to 1993, New
York University Leonard N. Stern School of Business Administration.
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
Merrill Lynch Asset Management, L.P., which does business as Merrill Lynch
Asset Management (the "Investment Adviser"), is owned and controlled by ML &
Co., a financial services holding company and the parent of Merrill Lynch, and
provides the Fund with management and investment advisory services. The
Investment Adviser or an affiliate, Fund Asset Management, L.P. ("FAM"), acts as
the investment adviser for more than 130 other registered investment companies.
The Investment Adviser also provides investment advisory services to individuals
and institutions. As of March 31, 1995, the Investment Adviser and FAM had a
total of approximately $170.3 billion in investment company and other portfolio
assets under management, including accounts of certain affiliates of the
Investment Adviser.
The investment advisory agreement with the Investment Adviser (the
"Investment Advisory Agreement") provides that, subject to the direction of the
Board of Trustees of the Fund, the Investment Adviser is responsible for the
actual management of the Fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Investment
Adviser, subject to review by the Board of Trustees.
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<PAGE> 25
The Investment Adviser provides the portfolio manager for the Fund, who
considers analyses from various sources (including brokerage firms with which
the Fund does business), makes the necessary decisions, and places transactions
accordingly. The Investment Adviser is also obligated to perform certain
administrative and management services for the Fund and is obligated to provide
all of the office space, facilities, equipment and personnel necessary to
perform its duties under the Investment Advisory Agreement.
The Fund pays the Investment Adviser a monthly fee at the annual rate of
0.60% of the average daily net assets of the Fund. For the fiscal year ended
December 31, 1994, the Investment Adviser earned a fee of $5,439,841 (based upon
average net assets of approximately $908.7 million). At March 31, 1995, the net
assets of the Fund aggregated approximately $778.9 million. At this asset level,
the annual management fee would aggregate approximately $4.7 million.
Robert J. Parish, Vice President of the Fund, is the Fund's Portfolio
Manager. Mr. Parish has been a Vice President and Portfolio Manager of the
Manager and its predecessor since 1991 and Portfolio Manager for Templeton
Investment Counsel, Inc. from 1986 to 1991. Mr. Parish has been primarily
responsible for the management of the Fund's portfolio since March 1993.
The Investment Advisory Agreement obligates the Fund to pay certain
expenses incurred in its operations including, among other things, the
investment advisory fee; legal and audit fees; registration fees; unaffiliated
Trustees' fees and expenses; custodian and transfer agency fees; accounting
costs; the costs of issuing and redeeming shares; and certain of the costs of
printing proxies, shareholder reports, prospectuses and statements of additional
information. Accounting services are provided to the Fund by the Investment
Adviser, and the Fund reimburses the Investment Adviser for its costs in
connection with such services on a semi-annual basis. For the fiscal year ended
December 31, 1994, the amount of such reimbursement was $236,141. For the fiscal
year ended December 31, 1994, the ratio of total expenses to average net assets
for Class A shares was 0.84%, and the ratio of total expenses to average net
assets for Class B shares was 1.61%. For the fiscal period October 21, 1994
(commencement of operations for Class C and Class D shares) to December 31,
1994, the ratio of total expenses to average net assets for Class C shares was
1.69% (annualized), and the ratio of total expenses to average net assets for
Class D shares was 1.12% (annualized).
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
Investment Adviser (together, the "Codes"). The Codes significantly restrict the
personal investing activities of all employees of the Investment Adviser and, as
described below, impose additional, more onerous, restrictions on Fund
investment personnel.
The Codes require that all employees of the Investment Adviser 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
Investment Adviser include a ban on acquiring any securities in a "hot" initial
public offering and a prohibition from profiting on short-term trading in
securities. In addition, no employee may purchase or sell any security 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 Investment Adviser. Furthermore, the Codes provide for trading
23
<PAGE> 26
"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 ML & Co., acts as the Fund's transfer agent pursuant
to a transfer agency, dividend disbursing agency and shareholder servicing
agency agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer
Agency Agreement, the Transfer Agent is responsible for the issuance, transfer
and redemption of shares and the opening and maintenance of shareholder
accounts. Pursuant to the Transfer Agency Agreement, the Transfer Agent receives
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 December 31, 1994, the Fund paid $1,084,350 to the Transfer Agent pursuant
to the Transfer Agency Agreement. At March 31, 1995, the Fund had 6,427 Class A
shareholder accounts and 57,483 Class B shareholder accounts (including certain
subaccounts on which the standard annual transfer agency fees are assessed),
1,336 Class C shareholder accounts and 370 Class D shareholder accounts. At this
level of accounts, the annual fee payable to the Transfer Agent would aggregate
approximately $898,233, plus miscellaneous and out-of-pocket expenses.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of
both the Investment Adviser and Merrill Lynch, acts as the distributor of the
shares of the 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, 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 that day, provided the Distributor
in turn receives the orders from the securities dealer prior to 30 minutes after
the close of business on the New York Stock Exchange, on that day. If the
purchase orders are not received 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.
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<PAGE> 27
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, are imposed directly against those classes and not against all
assets of the Fund and, accordingly, such charges do not affect the net asset
value of any other class or have any impact on investors choosing another sales
charge option. Dividends paid by the Fund for each class of shares are
calculated in the same manner at the same time and will differ only to the
extent that account maintenance and distribution fees and any incremental
transfer agency costs relating to a particular class are borne exclusively by
that class. Class B, Class C and Class D shares each have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted with respect to
such class pursuant to which account maintenance and/or distribution fees are
paid. See "Distribution Plans" below. Each class has different exchange
privileges. See "Shareholder Services -- Exchange Privilege".
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in that
the sales charges applicable to each class provide for the financing of the
distribution of the shares of the 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.
25
<PAGE> 28
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 4.00% initial sales No No No
charge(2)(3)
- -------------------------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% 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 ten years(4)
0.0%
- -------------------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- -------------------------------------------------------------------------------------------------------
D Maximum 4.00% 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 an eight
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.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
26
<PAGE> 29
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS DISCOUNT TO
PERCENTAGE PERCENTAGE* OF SELECTED DEALERS
OF OFFERING THE NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE PRICE INVESTED THE OFFERING PRICE
- --------------------------------------------------- -------------- -------------- ------------------
<S> <C> <C> <C>
Less than $25,000.................................. 4.00% 4.17% 3.75%
$25,000 but less than $50,000...................... 3.75 3.90 3.50
$50,000 but less than $100,000..................... 3.25 3.36 3.00
$100,000 but less than $250,000.................... 2.50 2.56 2.25
$250,000 but less than $1,000,000.................. 1.50 1.52 1.25
$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 annual rates: 0.75% on purchases of
$1,000,000 to $2,500,000; 0.40% on purchases of $2,500,001 to $3,500,000;
0.25% on purchases of $3,500,001 to $5,000,000; and 0.20% 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 December 31, 1994, the Fund sold 4,384,679 Class A shares
for aggregate net proceeds of $40,711,428. The gross sales charges for the sale
of Class A shares of the Fund for that year were $177,216, of which $18,126 and
$159,090 were received by the Distributor and Merrill Lynch, respectively. For
such fiscal year, the Distributor received $7,268 in CDSCs with respect to
redemption within one year after purchase of Class A shares purchased subject to
front-end sales charge waivers. During the fiscal period October 21, 1994
(commencement of operations for Class D shares) to December 31, 1994, the Fund
sold 200,576 Class D shares for aggregate net proceeds of $1,819,651. The gross
sales charges for the sale of Class D shares of the Company for that period were
$6,079, of which $601 and $5,478 were received by the Distributor and Merrill
Lynch, respectively. During such period, the Distributor did not receive CDSCs
with respect to redemption within one year after purchase of 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 who currently own Class A shares of the
Fund in a shareholder account, including participants in the Merrill Lynch
Blueprint(SM) Program, are entitled to purchase additional Class A shares of the
Fund in that account. Certain employer sponsored retirement or savings plans,
including eligible 401(k) plans, may purchase Class A shares at net asset value
provided such plans meet the required minimum number of eligible employees or
required amount of assets advised by MLAM or any of its affiliates. Class A
shares are available at net asset value to corporate warranty insurance reserve
fund programs provided that the program has $3 million or more initially
invested in MLAM-advised mutual funds. Also eligible to purchase Class A shares
at net asset value are participants in certain investment programs including
TMA(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 ML & Co. and its subsidiaries and their directors
and employees and to members of the Boards of MLAM-advised investment
27
<PAGE> 30
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
BlueprintSM 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 ten 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 shares are subject to
an account maintenance fee of 0.25% of net assets and a distribution fee, 0.50%
of Class B net assets and 0.55% of Class C 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.
28
<PAGE> 31
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. 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 ten 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 eight years. If Class B shares of the
Company are exchanged for Class B shares of another MLAM-advised mutual fund,
the conversion period applicable to the Class B shares acquired in the exchange
will apply, and the holding period for the shares exchanged will be tacked onto
the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C
shares is limited by the NASD asset-based sales charge rule. See "Limitations on
the Payment of Deferred Sales Charges" below. The proceeds from the ongoing
account maintenance fee are used to compensate Merrill Lynch for providing
continuing account maintenance activities. Class B shareholders of the 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 current
market value 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.
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 December 31, 1994, the Distributor received CDSCs of
$2,016,979 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
operations for Class C shares) to December 31, 1994, the Distributor received
$217 in 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
29
<PAGE> 32
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 on or
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.
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 ten
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
30
<PAGE> 33
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.
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual funds will convert approximately
ten years after initial purchase. If, during the Conversion Period, a
shareholder exchanges Class B shares with an eight-year Conversion Period for
Class B shares with a ten-year Conversion Period, or vice versa, the Conversion
Period applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
The Conversion Period is modified for shareholders who purchased Class B
shares through certain retirement plans which qualified for a waiver of the CDSC
normally imposed on purchases of Class B shares ("Class B Retirement Plans").
When the first share of any MLAM-advised mutual fund purchased by a Class B
Retirement Plan has been held for ten years (i.e., ten years from the date the
relationship between MLAM-advised mutual funds and the Class B Retirement Plan
was established), all Class B shares of all MLAM-advised mutual funds held in
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 rates of 0.50%,
with respect to Class B shares, and 0.55%, with respect to Class C shares, of
the average
31
<PAGE> 34
daily net assets of the Fund attributable to the shares of the relevant class in
order to compensate the Distributor and Merrill Lynch (pursuant to a
sub-agreement) for providing shareholder and distribution services, and bearing
certain distribution-related expenses of the Fund, including payments to
financial consultants for selling Class B and Class C shares of the Fund. The
Distribution Plans relating to Class B and Class C shares are designed to permit
an investor to purchase Class B and Class C shares through dealers without the
assessment of an initial sales charge and at the same time permit the dealer to
compensate its financial consultants in connection with the sale of the Class B
and Class C shares. In this regard, the purpose and function of the ongoing
distribution fees and the CDSC are the same as those of the initial sales charge
with respect to the Class A and Class D shares of the Fund in that the 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 December 31, 1994, the Fund paid the Distributor
$6,022,155 pursuant to the Class B Distribution Plan (based on average net
assets subject to the Class B Distribution Plan of approximately $803.0
million), all of which was paid to Merrill Lynch for providing account
maintenance and distribution-related activities and services in connection with
Class B shares. For the fiscal period October 21, 1994 (commencement of
operations for Class C shares) to December 31, 1994, the Fund paid the
Distributor $2,694 pursuant to the Class C Distribution Plan (based on average
net assets subject to the Class C Distribution Plan of approximately $1.7
million), 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
operations for Class D shares) to December 31, 1994, the Fund paid the
Distributor $400 pursuant to the Class D Distribution Plan (based on average net
assets subject to such Distribution Plan of approximately $823,442), all of
which was paid to Merrill Lynch for providing account maintenance services in
connection with Class D shares. At March 31, 1995, the net assets of the Fund
subject to the Class B Distribution Plan aggregated approximately $682.7
million. At this asset level, the annual fee payable pursuant to the Class B
Distribution Plan would aggregate approximately $5.1 million. At March 31, 1995,
the net assets of the Fund subject to the Class C Distribution Plan aggregated
approximately $7.3 million. At this asset level, the annual fee payable pursuant
to the Class C Distribution Plan would aggregate approximately $58,781. At March
31, 1995, the net assets of the Fund subject to the Class D Distribution Plan
aggregated approximately $3.2 million. At this asset level, the annual fee
payable pursuant to the Class D Distribution Plan would aggregate approximately
$7,933.
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, CDSCs and certain other related
revenues, and expenses consist of financial consultant compensation, branch
office and regional operation center selling and transaction processing
expenses, advertising, sales promotion and marketing expenses, corporate
overhead and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and CDSCs,
and the expenses consist of financial consultant compensation.
32
<PAGE> 35
As of December 31, 1994, for Class B shares, the fully allocated accrual
expenses incurred by the Distributor and Merrill Lynch since the Fund commenced
operations on August 29, 1986, exceeded fully allocated accrual revenues for
such period by approximately $8,302,000 (1.18% of Class B net assets at that
date). As of December 31, 1994, for Class B shares, direct cash revenues for the
period since the commencement of operations exceeded direct cash expenses by
$18,853,685 (2.69% 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 commencement of
the offering of Class C shares exceeded direct cash revenues by $11,585 (0.32%
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 Trustees 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 Trustees 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 payments and CDSCs payable by the Fund to (1)
6 1/4% of eligible gross sales of Class B shares and Class C shares, computed
separately (defined to exclude shares issued pursuant to dividend reinvestments
and exchanges), plus (2) interest on the unpaid balance for the respective
class, computed separately, at the prime rate plus 1% (the unpaid balance being
the maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). In connection with the Class B shares, the
Distributor has voluntarily agreed to waive interest charges on the unpaid
balance in excess of 0.50% of eligible gross sales. Consequently, the maximum
amount payable to the Distributor (referred to as the "voluntary maximum") in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving 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 fees. 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.
33
<PAGE> 36
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, 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 signatures of all persons in whose names
the shares are registered, signed exactly as their names appear on the Transfer
Agent's register or on the certificate, as the case may be. The signatures 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.
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 it has assured itself that good
payment (e.g., cash or certified check drawn on a U.S. bank) has been collected
for the purchase of such shares. In addition, the Fund reserves the right not to
honor redemption requests where the shares to be redeemed have been purchased by
check within 10 days prior to the date the redemption request is received unless
the Fund or its Transfer Agent has been advised, and has confirmed, that the
check used for investment has been cleared for payment by the shareholder's
bank.
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
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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); however, securities dealers may impose a charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its
customers a processing fee (presently $4.85) to confirm a repurchase of shares.
Redemptions 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
described below which are 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 BlueprintSM 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 plans and services, 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.
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. These
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
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<PAGE> 38
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 who are
interested in transferring their Class B or Class C shares from Merrill Lynch
and who do not wish to have an Investment Account maintained for such shares at
the Transfer Agent may request their new brokerage firm to maintain such shares
in an account registered in the name of the brokerage firm for the benefit of
the shareholder. If the new brokerage firm is willing to accommodate the
shareholder in this manner, the shareholder must request the issuance of
certificates for such shares and then must turn the certificates over to the new
firm for re-registration as described in the preceding sentence. Shareholders
considering transferring a tax-deferred retirement account such as an IRA 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 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 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
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<PAGE> 39
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 automatically reinvested in full
and fractional shares of the Fund, without sales charge, at the net asset value
per share next determined on the payable date of such dividend or distribution.
A shareholder may at any time, by written notification to Merrill Lynch if the
shareholder's account is maintained with Merrill Lynch or by written
notification or by telephone (1-800-MER-FUND) to the Transfer Agent if the
shareholder's account is maintained with the Transfer Agent, elect to have
subsequent dividends or 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. The Automatic Investment Program is not available to shareholders
whose shares are held in a brokerage account with Merrill Lynch other than a
CMA(R) account.
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.
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<PAGE> 40
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 a
formula 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, 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 purchases are subject to waiver
of the CDSC in the case of Class B and Class C shares (such as investors in
certain retirement plans) or to reduced sales charges in the case of Class A and
Class D shares, 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.
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<PAGE> 41
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 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 its
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
The net investment income of the Fund is declared as dividends daily prior
to the determination of the net asset value which is calculated 15 minutes after
the close of business on the New York Stock Exchange (generally, 4:00 p.m, New
York time) on that day. The net investment income of the Fund for dividend
purposes consists of interest earned on portfolio securities, less expenses, in
each case computed since the most recent determination of the net asset value.
Expenses of the Fund, including the advisory fee and any account maintenance
and/or distribution fees, are accrued daily. Dividends of net investment income
are declared daily and reinvested monthly in the form of additional full and
fractional shares of the Fund at net asset value unless the shareholder elects
to receive such dividends in cash. Shares will accrue dividends as long as they
are issued and outstanding. 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.
Certain gains or losses attributable to foreign currency gains or losses
from certain forward contracts may increase or decrease the amount of the Fund's
income available for distribution to shareholders. If such losses exceed other
income during a taxable year, (a) the Fund would not be able to make any
ordinary dividend distributions, and (b) distributions made before the losses
were realized would be recharacterized as a return of capital to shareholders,
rather than as an ordinary dividend, reducing each shareholder's tax basis in
his Fund shares for Federal income tax purposes. For a detailed discussion of
the Federal tax considerations relevant to foreign currency transactions, see
"Additional Information -- Taxes". If in any fiscal year the Fund has net income
from certain foreign currency transactions, such income will be distributed
annually. Shares are issued and outstanding as of the settlement date of a
purchase order to the settlement date of a redemption order.
All net realized long- or short-term capital gains, if any, are declared
and distributed to the Fund's shareholders at least annually. Capital gains
distributions will be automatically reinvested in shares unless the shareholder
elects to receive such distributions in cash.
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For information as to how to elect either dividend reinvestment or cash
payments, see "Shareholder Services -- Automatic Reinvestment of Dividends and
Capital Gains Distributions". Dividends and distributions are taxable to
shareholders as described below whether they are reinvested in shares of any
portfolio or received in cash.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes 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), on each day during which the New York
Stock Exchange is open for trading. The Fund will also 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 materially affected, but only if on
any such day the Fund is required to sell or redeem shares. Any assets or
liabilities initially expressed in terms of non-U.S. dollar currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the day of valuation. The net asset value is computed
by dividing the market value of the securities held by the Fund plus any cash or
other assets (including interest 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 Investment
Adviser and any account maintenance and/or distribution fees payable to the
Distributor, are accrued daily.
The per share net asset value of the Class A shares will generally be
higher than the per share net asset value of shares of the other classes,
reflecting the daily expense accruals of the account maintenance and transfer
agency fees applicable with respect to the Class B, Class C and Class D shares;
moreover, 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. Since the distribution fees borne by the
Class C shares are higher than the distribution fees borne by the Class B
shares, the per share net asset value of the Class B shares generally will be
higher than the per share net asset value of the 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 differential between the classes.
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.
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. Other
investments, including futures contracts and related options, are stated at
market value or otherwise at the fair value at which it is expected they may be
resold, as determined in good faith by or under the direction of the Board of
Trustees. Any assets or liabilities initially expressed in terms of
40
<PAGE> 43
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers on the day of valuation.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Trustees.
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 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 dividends 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.
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
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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 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.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are not
"regulated futures contracts" and from unlisted options will generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the 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 such shareholder's 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 the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid to the Fund 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 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.
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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.
ORGANIZATION OF THE FUND
The Fund was organized on May 30, 1986, under the laws of the Commonwealth
of Massachusetts as "Merrill Lynch Retirement Global Bond Fund" and is a
business entity commonly known as a "Massachusetts business trust". Following
the commencement of operations, the Trustees of the Fund approved a change in
the Fund's fiscal year end from July 31 to December 31. On April 25, 1991, the
Fund changed its name to "Merrill Lynch Global Bond Fund for Investment and
Retirement". 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 four classes designated
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 expenses related to the account maintenance and/or distribution of a
class of shares are borne solely by such class. Each class has exclusive voting
rights with respect to matters relating to account maintenance and/or
distribution expenditures, as applicable. See "Purchase of Shares". The Fund has
received an order from the Commission permitting the issuance and sale of
multiple classes of shares. The Trustees of the Fund may classify and reclassify
the shares of the Fund into additional classes at a future date. Shares issued
are fully paid, non-assessable and have no preemptive rights. Shares have the
conversion rights described in this Prospectus.
Shareholders are entitled to one vote for each full share held and to
fractional votes for fractional shares held in the election of Trustees (to the
extent hereafter provided) and on other matters submitted to the vote of
shareholders. There will normally be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Shareholders may, in accordance with the Declaration of Trust, cause a
meeting of shareholders to be held for the purpose of voting on the removal of
Trustees. Except as set forth above, the Trustees shall continue to hold office
and appoint successor 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
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receive separate copies of each report and communication for each of the
shareholder's related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this, please call your Merrill Lynch
financial consultant or Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
------------------
The Declaration of Trust establishing the Fund, dated as of May 28, 1986, 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 Global Bond Fund for Investment and Retirement" refers to the
Trustees under the Declaration of Trust 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.
44
<PAGE> 47
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND
RETIREMENT -- 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)
<TABLE>
<S> <C> <C> <C>
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
</TABLE>
of Merrill Lynch Global Bond Fund for Investment and Retirement 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. ..........................................................
</TABLE>
Name............................................................................
First Name Initial Last Name
Name of Co-Owner (if any).......................................................
First Name Initial Last Name
Address.........................................................................
....................................................... Date..................
(Zip Code)
<TABLE>
<S> <C>
Occupation ......................................... Name and Address of Employer.................................................
.............................................................................
.............................................................................
................................................... .............................................................................
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>
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 Global Bond Fund for Investment and Retirement
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.
45
<PAGE> 48
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND
RETIREMENT -- 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 UNDER-REPORTING 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 Global Bond Fund for Investment and Retirement or any other investment
company with an initial sales charge or deferred sales charge for which Merrill
Lynch Funds Distributor, Inc. acts as distributor over the next 13 month period
which will equal or exceed:
/ / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Merrill Lynch Global Bond Fund for
Investment and Retirement Prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc., my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Global Bond Fund for Investment and Retirement held
as security.
<TABLE>
<S> <C>
By:.............................................................. ...............................................................
Signature of Owner Signature of Co-Owner
(If registered in joint names, 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 Global Bond Fund for Investment and Retirement
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>
46
<PAGE> 49
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND
RETIREMENT -- 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>
------------------------------------
Name of Owner....................................................................... ------------------------------------
First Name Initial Last Name Social Security Number
or Taxpayer Identification No.
Name of Co-Owner (if any)...........................................................
First Name Initial Last Name
Address.............................................................................
.................................................................................... Account Number...........................
(Zip Code) (if existing account)
</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 Global Bond
Fund for Investment and Retirement 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.........................................................................
......................................................................
Signature of Owner................................... Date......................
Signature of Co-Owner (if any)..................................................
(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
Name on your Account............................................................
Bank Name.......................................................................
Bank Number ................................ Account Number.....................
Bank Address....................................................................
..............................................................
Signature of Depositor..................................... Date................
Signature of Depositor..........................................................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID" OR
A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHALL ACCOMPANY THIS APPLICATION.
47
<PAGE> 50
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND
RETIREMENT -- 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)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Global Bond Fund for Investment and Retirement, subject to the
terms set forth below. In the event that I am not eligible to purchase Class A
shares, I understand that Class D shares will be purchased.
FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw an ACH debit each month on my bank account for
investment in Merrill Lynch Global Bond Fund for Investment and Retirement 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 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.
48
<PAGE> 51
[This page is intentionally left blank.]
<PAGE> 52
[This page is intentionally left blank.]
<PAGE> 53
INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
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
State Street Bank and Trust Company
P.O. Box 351
225 Franklin Street
Boston, Massachusetts 02101
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> 54
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 INVESTMENT ADVISER 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 Considerations.................. 11
Investment Objective and Policies....... 12
Management of the Fund.................. 22
Board of Trustees..................... 22
Management and Advisory
Arrangements....................... 22
Code of Ethics........................ 23
Transfer Agency Services.............. 24
Purchase of Shares...................... 24
Initial Sales Charge Alternatives --
Class A and Class D Shares......... 26
Deferred Sales Charge Alternatives --
Class B and Class C Shares......... 28
Distribution Plans.................... 31
Limitations on the Payment of Deferred
Sales Charges...................... 33
Redemption of Shares.................... 34
Redemption............................ 34
Repurchase............................ 34
Reinstatement Privilege -- Class A and
Class D Shares..................... 35
Shareholder Services.................... 35
Performance Data........................ 38
Additional Information.................. 39
Dividends and Distributions........... 39
Determination of Net Asset Value...... 40
Taxes................................. 41
Organization of the Fund.............. 43
Shareholder Reports................... 43
Shareholder Inquiries................. 44
Authorization Form...................... 45
Code # 10417-0495
</TABLE>
[LOGO]
MERRILL LYNCH
GLOBAL BOND FUND FOR
INVESTMENT AND RETIREMENT
ART WORK
PROSPECTUS
April 28, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
<PAGE> 55
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE (609) 282-2800
-------------------------
The investment objective of Merrill Lynch Global Bond Fund for Investment
and Retirement (the "Fund") is to seek a high total investment return by
investing in a global portfolio of debt instruments denominated in various
currencies and multinational currency units. Total investment return is the
aggregate of capital value changes and income. Accordingly, investments may be
shifted among obligations denominated in particular currencies or currency units
depending upon management's expectation of the potential for capital
appreciation in U.S. dollars or relatively high rates of income. The Fund
generally will invest without regard to tax considerations applicable to
distributions to shareholders and therefore may particularly appeal to investors
for whom current tax liability is not a major consideration, such as employee
benefit plans and individual retirement accounts ("IRAs"). The Fund presently
contemplates that it will invest primarily in obligations denominated in the
currencies of the U.S., Japan, Canada, Western European nations, New Zealand and
Australia as well as in European Currency Units. The Fund may seek to hedge
against interest rate and currency risks through the use of options, futures and
foreign currency transactions.
-------------------------
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 Select Pricing 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 April
28, 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 -- INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
-------------------------
The date of this Statement of Additional Information is April 28, 1995.
<PAGE> 56
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek a high total investment
return by investing in a global portfolio of debt instruments denominated in
various currencies and multinational currency units. 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 "Investment Adviser"), will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a particular
company or within a particular industry or due to general market, economic or
financial conditions. For the fiscal years ended December 31, 1994 and 1993, the
Fund's portfolio turnover rates were 405.00% and 419.99%, respectively. The
portfolio turnover rate is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities (exclusive of purchases or
sales of securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of the securities in the portfolio during the
year. 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 Fund does
not believe that these considerations will have any significant effect on its
portfolio strategy, although there can be no assurance in this regard.
HEDGING TECHNIQUES
Reference is made to the discussion concerning hedging techniques under the
caption "Hedging Techniques" in the Prospectus.
The Fund may engage in various portfolio strategies to hedge its portfolio
against interest rate and currency risks. These strategies include the use of
options on its portfolio securities, financial and currency 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> 57
Although certain risks are involved in options and futures transactions (as
discussed below in "Risk Factors in Options and Futures Transactions"), the
Investment Adviser 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 interest rate and currency risks.
The Fund may write (i.e., sell) covered call options on its portfolio
securities, purchase put options on securities and engage in transactions in
financial futures as described below.
Writing Covered Options. The Fund may write call options with respect to
securities which it owns which provide the holder of the option the right to buy
the underlying security covered by the option from the Fund at the stated
exercise price. The Fund writes only covered options, which means that so long
as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the options.
The Fund will receive a premium from writing a call option, which increases
the Fund's return on the underlying security in the event the option expires
unexercised or is closed out at a profit. The amount of the premium will
reflect, among other factors, the current market price of the underlying
security, the relationship of the exercise price to the market price, the time
period until the expiration of the option and interest rates. By writing a call,
the Fund limits its opportunity to profit from an increase in the market value
of the underlying security above the exercise price of the option for as long as
the Fund's obligation as a writer continues. Thus, in some periods the Fund will
receive less total return and in other periods greater total return from its
hedged positions than it would have received from its underlying securities
unhedged. To facilitate closing transactions, as described below, the Fund will
ordinarily write only options for which a secondary market exists.
The Fund may engage in closing transactions in order to terminate
outstanding exchange-traded options that it has written. To effect a closing
transaction, the Fund purchases, prior to the exercise of an outstanding option
that it has written, an option of the same series as that on which it desires to
terminate its obligation. Profit or loss from a closing purchase transaction
will depend on whether the cost of such transaction is more or less than the
premium received on the sale of the option plus the related transaction costs.
The Fund may also enter into over-the-counter put and call option
transactions, which are two-party contracts with prices and terms negotiated
between the buyer and seller.
Purchase of Put Options. The Fund may purchase put options in connection
with its hedging activities. By buying a put, the Fund has the right to sell the
underlying securities 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
expires.
Futures Contracts. The Fund may purchase and sell financial futures
contracts ("futures contracts") as a hedge against adverse changes in interest
rates. A futures contract is an agreement between two parties to buy and sell a
security for a set price on a future date. The Fund may effect transactions in
futures contracts in U.S. and foreign agency and government securities and
corporate debt securities traded on U.S. and foreign exchanges, as well as
over-the-counter.
3
<PAGE> 58
The Fund may sell futures contracts in anticipation of an increase in the
general level of interest rates. Generally, as interest rates rise, the market
value of the securities held by the Fund will fall, thus reducing the net asset
value of the Fund. This interest rate risk can be reduced without employing
futures as a hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs in the form of
dealer spreads and brokerage commissions and would typically reduce the Fund's
average yield as a result of the shortening of maturities.
The sale of futures contracts provides an alternative means of hedging
against rising interest rates. As rates increase the value of the Fund's short
position in the futures contracts will also tend to increase, thus offsetting
all or a portion of the depreciation in the market value of the Fund's
investments which are being hedged. While the Fund will incur commission
expenses in selling and closing out futures positions (which is done by taking
an opposite position which operates to terminate the position in the futures
contract), commissions on futures transactions are lower than transaction costs
incurred in the purchase and sale of portfolio securities.
The Fund may purchase futures contracts in anticipation of a decline in
interest rates when it is not fully invested in order to gain rapid market
exposure that may in part or entirely offset an increase in the cost of
long-term securities it intends to purchase. As such purchases are made, an
equivalent amount of futures contracts will be closed out. In a substantial
majority of these transactions, the Fund will purchase securities upon
termination of the futures contracts. However, due to changing market conditions
and interest rate forecasts, a futures position may be terminated without a
corresponding purchase of securities.
Options on Financial Futures. The Fund may purchase and write call and put
options on futures contracts in connection with its hedging activities.
Generally, these strategies would be employed under the same market and market
sector conditions as those in which the Fund would enter into futures contracts.
The Fund may purchase put options or write call options on futures contracts
rather than selling the underlying futures contracts in anticipation of an
increase in interest rates. Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the purchase of such
futures to hedge against the increased cost resulting from a decline in interest
rates of securities which the Fund intends to purchase.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS
Utilization of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are the subject of the hedge. If the price of the
futures contract moves more or less than the price of the securities, the Fund
will experience a gain or loss which will not be completely offset by movements
in the price of the debt securities which are the subject of the hedge. There is
also a risk of imperfect correlations where the securities underlying futures
contracts have different maturities than the portfolio securities being hedged.
Transactions in currency futures and options on interest rate and currency
futures contracts involve similar risks.
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. Similarly, positions in interest rate and currency futures may be closed
out only on an exchange which provides a secondary market for such futures. 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.
4
<PAGE> 59
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). 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
instruments or currency underlying 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 a 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 (whether or not covered) which may
be written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). "Trading Limits" are imposed on the maximum number of contracts which
any person may trade on a particular trading day. An exchange may order the
liquidation of positions found to be in violation of these limits, and it may
impose other sanctions or restrictions. The Investment Adviser does not believe
that these trading and position limits will have any adverse impact on the
portfolio strategies for hedging the 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 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 bank 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
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<PAGE> 60
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 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.
OTHER INVESTMENT POLICIES AND PRACTICES
Repurchase Agreements and Purchase and Sale Contracts. The Fund may invest
in securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements may be entered into only with a member bank of the Federal
Reserve System or primary dealer in U.S. Government securities or an affiliate
thereof. Purchase and sale contracts may be entered into only with financial
institutions which have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million. Under such
agreements, the other party agrees, upon entering into the contract with the
Fund, to repurchase the security at a mutually agreed upon time and price in a
specified currency, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period although it may be affected by currency
fluctuations. In the case of repurchase agreements, the prices at which the
trades are conducted do not reflect the accrued interest on the underlying
obligations; whereas, in the case of purchase and sale contracts, the prices
take into account accrued interest. Such agreements usually cover short periods,
often less than one week. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the case of a repurchase agreement, as a
purchaser, the Fund will require the seller to provide additional collateral if
the market value of the securities falls below the repurchase price at any time
during the term of the repurchase agreement; the Fund does not have the right to
seek additional collateral in the case of purchase and sale contracts. In the
event of default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Fund but
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. A purchase and sale
contract differs from a repurchase agreement in that the contract arrangements
stipulate that the securities are owned by the Fund. In the event of a default
under such a repurchase agreement or under a purchase and sale contract, instead
of the contractual fixed rate of return, the rate of return to the Fund would
depend upon intervening fluctuations of the market values 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.
The Fund may not invest more than 15% (10% to the extent required by certain
state laws) of its total assets in repurchase agreements or purchase and sale
contracts maturing in more than seven days, together with all other illiquid
investments. While the substance of purchase and sale contracts is similar to
the substance of repurchase agreements, because of the different treatment with
respect to accrued interest and additional collateral, management
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<PAGE> 61
believes that purchase and sale contracts are not repurchase agreements as such
term is understood in the banking and brokerage community.
Lending of Portfolio Securities. Subject to the investment restriction
stated below, the Fund may lend securities from its portfolio with a value not
exceeding 33 1/3% of its total assets to approved borrowers and receive therefor
collateral in cash or securities issued or guaranteed by the U.S. Government
which is maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The purpose of such loans is to
permit the borrower to use such securities for delivery to purchasers when such
borrower has sold short. If cash collateral is received by the Fund, it is
invested in short-term money market securities, and a portion of the yield
received in respect of such investment is retained by the Fund. Alternatively,
if securities are delivered to the Fund as collateral, the Fund and the borrower
negotiate a rate for the 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.
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. Invest more than 25% of its total assets, taken at market value at
the time of each investment, in the securities of corporate issuers in any
particular industry.
2. Make investments for the purpose of exercising control or
management.
3. 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.
4. 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.
5. Issue senior securities to the extent such issuance would violate
applicable law.
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<PAGE> 62
6. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the Fund
may purchase securities on margin to the extent permitted by applicable
law. The Fund may not pledge its assets other than to secure such
borrowings or, to the extent permitted by the Fund's investment policies as
set forth in its Prospectus and Statement of Additional Information, as
they may be amended from time to time, in connection with hedging
transactions, short sales, when-issued and forward commitment transactions
and similar investment strategies.
7. 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.
8. 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 Directors. 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, or
in securities having a record, together with predecessors, of less than
three years of continuous operation.
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d. Invest in warrants if, at the time of acquisition, its investments
in warrants, valued at the lower of cost or market value, would exceed 5%
of the Fund's net assets; included within such limitation, but not to
exceed 2% of the Fund's net assets, are warrants which are not listed on
the New York Stock Exchange or American Stock Exchange or a major foreign
exchange. For purposes of this restriction, warrants acquired by the Fund
in units or attached to securities may be deemed to be without value.
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 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 Investment Adviser, 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 (6) above,
borrow amounts in excess of 10% of its total assets, taken at market value,
and then only from banks as a temporary measure for extraordinary or
emergency purposes or to meet redemptions.
The Fund has registered as a "non-diversified" investment company under the
Investment Company Act. However, the Fund intends to limit its investments to
the extent required by the diversification requirements of the Internal Revenue
Code. See "Additional Information -- Taxes" in the Prospectus.
The staff of the Securities and Exchange 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 transactions, 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 an 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 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
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<PAGE> 64
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.
Because of the affiliation of the Investment Adviser with the Fund, the
Fund is prohibited from engaging in certain transactions involving such firm or
its affiliates except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order under the Investment Company Act. See "Portfolio
Transactions and Brokerage". Without such an exemptive order, the Fund would be
prohibited from engaging in portfolio transactions with the Investment Adviser
or its affiliates acting as principal and from purchasing securities in public
offerings which are not registered under the Securities Act in which such firm
or any of its affiliates participate as an underwriter or dealer.
Because of the affiliation of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") with the Fund, the Fund is prohibited from
engaging in certain transactions involving Merrill Lynch except pursuant to a
permissive order or otherwise in compliance with the provisions of the
Investment Company Act and the rules and regulations thereunder. Included among
such restricted transactions are purchases from or sales to Merrill Lynch of
securities in transactions in which it acts as principal and purchases of
securities from underwriting syndicates of which Merrill Lynch is a member.
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
Investment Adviser (which term as used herein includes its corporate
predecessors) since 1977; President of Fund Asset Management, L.P. ("FAM")
(which term as used herein includes its corporate predecessors) since 1977;
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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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,
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) -- Trustee(2) -- 5 Hardwell Road, Short Hills, New
Jersey 07078-2117. 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 Investment Adviser and FAM since 1983; Executive Vice President
and Director of Princeton Services since 1993; President and Director of the
Distributor since 1986.
N. JOHN HEWITT (60) -- Senior Vice President(1)(2) -- Senior Vice President
of the Investment Adviser since 1976; Manager of the Investment Adviser's Fixed
Income Mutual Funds and Insurance Portfolio Groups.
DONALD C. BURKE (34) -- Vice President(1)(2) -- Vice President and Director
of Taxation of the Investment Adviser since 1990; employee of Deloitte & Touche
LLP from 1982 to 1990.
ROBERT J. PARISH (40) -- Vice President(1) -- Vice President of the
Investment Adviser since 1991; Portfolio Manager for Templeton Investment
Counsel, Inc. from 1986 to 1991.
GERALD M. RICHARD (45) -- Treasurer(1)(2) -- Senior Vice President and
Treasurer of the Investment Adviser and FAM since 1984; Senior Vice President
and Treasurer of Princeton Services since 1993; Vice President of the
Distributor since 1981 and Treasurer since 1984.
MARK B. GOLDFUS (48) -- Secretary(1)(2) -- Vice President of the Investment
Adviser and FAM since 1985.
- ---------------
(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 certain other
investment companies for which the Investment Adviser, or its affiliate FAM,
acts as investment adviser or manager.
At March 31, 1995, the officers and Trustees of the Fund as a group (12
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 ML &
Co.
COMPENSATION OF TRUSTEES
The Fund pays each Trustee not affiliated with the Investment Adviser a fee
of $3,500 per year plus $500 per meeting attended, together with such Trustee's
actual out-of-pocket expenses relating to attendance at 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
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<PAGE> 66
the Committee receives an additional fee of $250 per meeting attended. For the
fiscal year ended December 31, 1994, fees and expenses paid to unaffiliated
Trustees aggregated $35,940+.
The following table sets forth for the fiscal year ended December 31, 1994,
compensation paid by the Fund to the non-interested Trustees and for the year
ended December 31, 1994, the aggregate compensation paid by all investment
companies advised by the Investment Adviser and its affiliate, FAM ("MLAM/FAM
Advised Funds") to the non-interested Trustees.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM FUND AND
AGGREGATE BENEFITS ACCRUED OTHER MLAM/FAM
COMPENSATION AS PART OF FUND ADVISED FUNDS PAID TO
NAME OF TRUSTEE FROM FUND EXPENSES 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 $ 125,500
</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) In addition to the Fund, the Trustees serve 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 other investment advisory clients for which the
Investment Adviser or its affiliates act as an adviser. Because of different
objectives or other factors, a particular security may be bought for one or more
clients when one or more clients are selling the same security. If purchases or
sales of securities by the Investment Adviser for the 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 Investment Adviser or its affiliates during the same period
may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price.
The Fund has entered into an investment advisory agreement (the "Investment
Advisory Agreement") with the Investment Adviser. As discussed in the
Prospectus, the Investment Adviser receives for its services to the Fund monthly
compensation at the annual rate of 0.60% of the average daily net assets of the
Fund. For the fiscal years ended December 31, 1994, 1993 and 1992, the total
advisory fees paid by the Fund to the Investment Adviser aggregated $5,439,841,
$5,111,447 and $3,312,075, respectively.
- ---------------
+During most of the fiscal year ended December 31, 1994, the Board consisted of
five Trustees, four of whom were non-interested.
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<PAGE> 67
The State of California imposes limitations on the expenses of the Fund.
These expense limitations require that the Investment Adviser reimburse the Fund
in an amount necessary to prevent the aggregate ordinary operating expenses
(excluding interest, taxes, brokerage fees and commissions, distribution fees
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 Fund's next
$70 million of average daily net assets and 1.5% of the Fund's remaining average
daily net assets. The Investment Adviser's obligation to reimburse the Fund is
limited to the amount of the investment advisory fee. No fee payment will be
made to the Investment Adviser during any fiscal year which will cause such
expenses to exceed the most restrictive expense limitation at the time of such
payment. For the fiscal years ended December 31, 1994, 1993 and 1992, the
Investment Adviser made no reimbursement to the Fund with respect to the expense
limitation provisions discussed above.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and to
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 Investment Adviser or any of their 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; Securities and Exchange 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 Investment
Adviser, and the Fund reimburses the Investment Adviser for its costs in
connection with such services on a semiannual basis. For the fiscal years ended
December 31, 1994, 1993 and 1992, the amount of such reimbursement was $236,141,
$167,189 and $83,403, respectively. As required by the Fund's distribution
agreements, the Distributor will pay certain of the promotional expenses of the
Fund incurred in connection with the offering of its shares. Certain expenses in
connection with the distribution of its 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".
ML & Co. and Princeton Services are "controlling persons" of the Investment
Adviser as defined under the Investment Company Act because of their ownership
of its voting securities or their power to exercise a controlling influence over
its management or policies.
Duration and Termination. Unless earlier terminated as described herein,
the Investment Advisory Agreement will remain in effect from year to year if
approved annually (a) by the Board of 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 contract is not assignable and may be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the vote of the shareholders of the Fund.
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<PAGE> 68
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
PricingSM System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives, and shares of Class B and Class C are
sold to investors choosing the deferred sales charge alternatives. Each Class A,
Class B, Class C and Class D share of the Fund represents 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. 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 PricingSM System is used by more than 50 mutual
funds advised by the Investment Adviser, or an affiliate of the Investment
Adviser, FAM. Funds advised by the Investment Adviser 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 Investment Advisory Agreement
described under "Management of the Fund -- Advisory and Management
Arrangements".
INITIAL SALES CHARGE ALTERNATIVES -- CLASS A AND CLASS D SHARES
For the fiscal years ended December 31, 1994, 1993 and 1992 the Fund sold
its Class A shares through the Distributor and Merrill Lynch, as dealers. The
gross sales charges attributable to payments of initial sales charges in
connection with purchases of Class A shares for the fiscal year ended December
31, 1994, were $177,216, of which the Distributor received $18,126 and Merrill
Lynch received $159,090. The gross sales charges for the sale of its Class D
shares for the fiscal period October 21, 1994 (commencement of operations) to
December 31, 1994, were $6,079, of which $601 was received by the Distributor,
and $5,478 was received by Merrill Lynch. During such periods, the Distributor
received no contingent deferred sales charges with respect to redemptions within
one year after purchase of Class D shares purchased subject to front-end sales
charge waivers and $7,268 with respect to redemptions within one year after
purchase of Class A shares purchased subject to front-end sales charge waivers.
The gross sales charges attributable to payments of initial sales charges in
connection with purchases of Class A shares for the fiscal year ended December
31, 1993, were $733,485, of which the Distributor received $69,986 and Merrill
Lynch received $663,499. The gross sales charges attributable to payments of
initial sales charges in connection with purchases of Class A shares for the
14
<PAGE> 69
fiscal year ended December 31, 1992, were $727,584, of which the Distributor
received $25,059 and Merrill Lynch received $702,525.
The term "purchase" as used in the Prospectus and this Statement of
Additional Information refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and 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
investments 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 the quantity discounts
discussed above 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 MLAM or the
Investment Adviser who purchased such closed-end fund shares prior to October
21, 1994, and wish to reinvest the net proceeds from a sale of their closed-end
fund shares of common stock in Eligible Class A Shares, if the conditions set
forth below are satisfied. Alternatively, closed-end fund shareholders who
purchased such shares on or after October 21, 1994 (the date the Merrill Lynch
Select PricingSM System commenced operations), and wish to reinvest the net
proceeds from a sale of their closed-end fund shares are offered Class A shares
(if 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 investment option. Class A
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
15
<PAGE> 70
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
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 record-keeping services. The Letter of Intention is not a
binding obligation to purchase any amount of Class A or Class D shares; however,
its execution will result in the purchaser paying a lower sales charge at the
appropriate quantity purchase level. A purchase not originally made pursuant to
a Letter of Intention may be included under a subsequent Letter of Intention
executed within 90 days of such purchase if the Distributor is informed in
writing of this intent within such 90-day period. The value of Class A and Class
D shares of the 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 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 purpose. The first purchase under the Letter of Intention
must be at least five percent of the dollar amount of such Letter. If a
purchaser during the term of such Letter would otherwise be subject to a further
reduced sales charge based on the right of accumulation, the purchaser will be
entitled on that purchase and subsequent purchases to the reduced percentage
sales charge which would be applicable to a single purchase equal to the total
dollar value of the Class A or Class D shares then being purchased under such
Letter, but there will be no retroactive reduction of the sales charges on any
previous purchase.
16
<PAGE> 71
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. Blueprint is
directed to small investors, group IRAs and participants in certain
affinity groups such as credit unions, trade associations and benefit plans.
Investors placing orders to purchase Class 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 $5,000 at 3.5%, 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 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 shareholders 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 Section 403(b) and 457 of the
Code, other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system, herein
referred to as "Employer Sponsored Retirement or Savings Plans", provided the
plan has accumulated $20 million or more in MLAM-advised mutual funds (in the
case of Class A shares) or $5 million or more in MLAM-advised mutual funds (in
the case of Class D shares). Class D shares may be offered at net asset value to
new Employer Sponsored Retirement or Savings Plans, provided the plan has $3
million or more initially invested in MLAM-advised mutual funds. Assets of
Employer Sponsored Retirement or Savings Plans sponsored by the same sponsor or
an affiliated sponsor may be aggregated. Class A shares and Class D shares also
are offered at net asset value to Employer Sponsored Retirement or Savings Plans
that have at
17
<PAGE> 72
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 an
Employer Sponsored Retirement or Savings Plan of the same sponsoring employer or
its affiliates may be aggregated. Tax qualified retirement plans within the
meaning of Section 401(a) of the Code meeting any of the foregoing requirements
and which are provided specialized services (e.g., plans whose participants may
direct on a daily basis their plan allocations among a wide range of investments
including individual corporate equities and other securities in addition to
mutual fund shares) by Blueprint, are offered Class A shares at a price equal to
net asset value per share plus a reduced sales charge of 0.50%.
Any Employer Sponsored Retirement or Savings Plan which does not meet the
above described qualifications to purchase Class A or Class D shares at net
asset value has the option of (i) 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 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.
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
18
<PAGE> 73
charge either at the time of purchase or on a deferred basis; second, such
purchase of Class D shares must be made with 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 than six months. Second, such purchase of Class D shares must be made
within 60 days after the redemption, and the proceeds from the redemption must
be maintained in the interim in cash or a money market fund.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or consolidation with
a public or private investment company. The value of the assets or company
acquired in a tax-free transaction may be adjusted in appropriate cases to
reduce possible adverse tax consequences to the 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 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 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
19
<PAGE> 74
"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 a 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 shareholder, 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 December 31,
1994, with respect to the Class B and 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> 75
<TABLE>
<CAPTION>
DATA CALCULATED AS OF DECEMBER 31, 1994
------------------------------------------------------------------------------------------
(IN THOUSANDS)
ANNUAL
ALLOWABLE DISTRIBUTION
ALLOWABLE INTEREST AMOUNTS FEE AT
ELIGIBLE AGGREGATE ON MAXIMUM PREVIOUSLY AGGREGATE CURRENT
GROSS SALES 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>
Class B Shares (for the fiscal
period August 29, 1986
(commencement of public
offering) to December 31,
1994):
Under NASD Rule As Adopted...... $1,269,920 $ 79,370 $ 28,486 $107,856 $ 30,611 $ 77,245 $ 3,505
--------- ---------- ---------- -------- ------- --------- ------------
Under Distributor's Voluntary
Waiver........................ $1,269,920 $ 79,370 $ 6,350 $85,720 $ 30,611 $ 55,109 $ 3,505
--------- ---------- ---------- -------- ------- --------- ------------
Class C Shares (for the fiscal
period October 21, 1994
(commencement of public
offering) to December 31,
1994): (NOT IN THOUSANDS)
Under NASD Rule As Adopted...... $3,050,770 $190,673 $ 1,679 $192,352 $ 2,078 $190,274 $ 19,878
--------- ---------- ---------- -------- ------- --------- ------------
</TABLE>
- ---------------
(1) Purchase price of all eligible Class B or Class C shares sold during 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%, 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 CDSC 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
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists, as defined by the 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 Securities and
Exchange 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> 76
DEFERRED SALES CHARGES -- CLASS B AND CLASS C 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 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 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
December 31, 1992, 1993 and 1994, the Distributor received CDSCs of $921,835,
$1,134,081 and $2,016,979, 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 operations) to December 31, 1994, the Distributor received
CDSCs of $217 with regard to redemptions of Class C shares, all of which was
paid to Merrill Lynch.
Merrill Lynch BlueprintSM 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 price 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 BlueprintSM 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 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
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<PAGE> 77
a waiver of the CDSC. The CDSC is also waived for any Class B shares which are
purchased by an Eligible 401(k) Plan or Eligible 401(a) Plan and are rolled over
into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such account at the time of redemption. The Class B CDSC also is waived for any
Class B shares which are purchased by a Merrill Lynch rollover IRA that was
funded by a rollover from a terminated 401(k) plan managed by the MLAM Private
Portfolio Group and held in such account at the time of redemption. The minimum
initial and subsequent purchase requirements are waived in connection with all
the above referenced Retirement Plans.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Reference is made to "Investment Objective and Policies -- Other Investment
Policies and Practices" in the Prospectus.
Subject to policies established by the Trustees of the Fund, the Investment
Adviser is primarily responsible for the execution of the Fund's portfolio
transactions. In executing such transactions, the Investment Adviser 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. Subject to obtaining
the best price and execution, brokers who provide supplemental investment
research to the Investment Adviser may receive orders for transactions by the
Fund. Information so received will be in addition to and not in lieu of the
services required to be performed by the Investment Adviser under the Investment
Advisory Agreement, and the expenses of the Investment Adviser will not
necessarily be reduced as a result of the receipt of such supplemental
information. It is possible that certain of the supplementary investment
research so received will primarily benefit one or more other investment
companies or other accounts for which investment discretion is exercised.
Conversely, the 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. In addition, consistent with the Rules of Fair Practice
of the NASD and policies established by the Trustees of the Fund, the Investment
Adviser may consider sales of shares of the Fund as a factor in the selection of
brokers or dealers to execute portfolio transactions of the Fund.
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 U.S. national securities exchanges from executing
exchange transactions for their affiliates and institutional accounts which they
manage unless the member (i) has obtained prior express authorization from the
account to effect such transactions, (ii) at least annually furnishes the
account with a statement disclosing the aggregate compensation received by the
member in effecting such transactions, and (iii) complies with any rules the
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. For the fiscal
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<PAGE> 78
years ended December 31, 1994, 1993 and 1992, Merrill Lynch effected no
portfolio transactions for the Fund generating brokering commissions.
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. Net asset value is computed by dividing the value of the securities held
by the Fund plus any cash or other assets (including interest accrued but not
yet received) minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time. Expenses, including the investment
advisory fees 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 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 its 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. The per share net asset value of the
Class B shares generally will be higher than the per share net asset value of
the Class C shares as a result of the higher distribution fees applicable with
respect to the Class C shares. 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 among
the classes.
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.
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. Other
investments, including futures contracts and related options, are stated at
market value or otherwise at the fair value at which it is expected they may be
resold, as determined in good faith by or under the direction of the Board of
Trustees. Any assets or liabilities initially expressed in terms of
24
<PAGE> 79
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
market rates as quoted by one or more banks or dealers on the day of valuation.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees.
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 BlueprintSM Program. Full details as to each of such services and
copies of the various plans described below can be obtained from the Fund, the
Distributor or Merrill Lynch.
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.
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.
Shareholders considering transferring their Class A 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. If
the new brokerage firm is willing to accommodate the shareholder in this manner,
the shareholder must request that he be issued certificates for his shares, and
then must turn the certificates over to the new firm for re-registration as
described in the preceding sentence. Shareholders considering transferring a
tax-deferred retirement account such as an individual retirement account from
Merrill Lynch to another brokerage firm or financial institution should be aware
that, if the firm to which the retirement account is to be transferred will not
take delivery of shares of the 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.
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<PAGE> 80
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 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 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 the receipt by the transfer agent of such
notice, those instructions will be effected.
SYSTEMATIC WITHDRAWAL PLANS -- CLASS A AND CLASS D SHARES
A Class A or Class D shareholder may elect to make 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 $5,000 or more, and monthly withdrawals are available for
shareholders with Class A or Class D shares with such a value of $10,000 or
more.
At the time of each withdrawal payment, sufficient Class A or Class D
shares are redeemed from those on deposit in the shareholder's account to
provide the withdrawal payment specified by the shareholder. The shareholder may
specify either a dollar amount or a percentage of the value of his Class A or
Class D shares. Redemptions will be made at net asset value as determined as of
15 minutes after the close of business on 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 New York
Stock 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
26
<PAGE> 81
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 with
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 CMA(R)/CBA(R) 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 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 also are exchangeable for
shares of certain MLAM-advised money market funds specifically designated below
as available for exchange by holders of
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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 and Class D shares acquired through dividend reinvestment shall be
deemed to have been sold with a sales charge equal to the sales charge
previously paid on the Class A or Class D shares on which the dividend was paid.
Based on this formula, Class A and Class D shares of the Fund generally may be
exchanged into the Class A or Class D shares of the other funds or into shares
of the Class A and Class D money market funds with a reduced or without a sales
charge.
In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, of another
MLAM-advised mutual fund ("new Class B or Class C shares") on the basis of
relative net asset value per Class B or Class C share, without the payment of
any CDSC that might otherwise be due on redemption of the outstanding shares.
Class B shareholders of the Fund exercising the exchange privilege will continue
to be subject to the Fund's CDSC schedule if such schedule is higher than the
CDSC schedule relating to the new Class B shares acquired through use of the
exchange privilege. In addition, Class B shares of the Fund acquired through use
of the exchange privilege will be subject to the Fund's CDSC schedule if such
schedule is higher than the CDSC schedule relating to the Class B shares of the
fund from which the exchange 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 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 Investment Adviser or its affiliates, but the period
of time that Class B or Class C shares are held in a money market fund will not
count towards satisfaction of the holding period requirement for purposes of
reducing the CDSC or with respect to Class B shares, towards satisfaction of the
conversion period. However, shares of a money market fund which were acquired as
a result of an exchange for Class B or Class C shares of the Fund
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<PAGE> 83
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 investment management through
investment in a portfolio primarily of
intermediate-term investment grade Arizona
Municipal Bonds.
MERRILL LYNCH ARIZONA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arizona income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH ARKANSAS
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income
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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.
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
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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
investments 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 EUROFUND........ Capital appreciation primarily through
investment in equity securities of corporations
domiciled in Europe.
MERRILL LYNCH FEDERAL
SECURITIES TRUST............ High current return through investments in U.S.
Government and Government agency securities,
including GNMA mortgage-backed certificates and
other mortgage-backed Government securities.
MERRILL LYNCH FLORIDA
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal
income taxes as is consistent with prudent
investment management while serving to
31
<PAGE> 86
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 GLOBAL
ALLOCATION FUND, INC. ...... High total return consistent with prudent risk,
through a fully managed investment policy
utilizing U.S. and foreign equity, debt and
money market securities, the combination of
which will be varied from time to time both
with respect to the types of securities and
markets in response to changing market and
economic trends.
MERRILL LYNCH 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
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.
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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.
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.
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<PAGE> 88
MERRILL LYNCH HEALTHCARE FUND,
INC. (residents of Wisconsin
must meet investor
suitability standards)...... Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
MERRILL LYNCH INTERNATIONAL
EQUITY FUND................. Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.
MERRILL LYNCH LATIN AMERICA
FUND, INC. ................. Capital appreciation by investing primarily in
Latin American equity and debt securities.
MERRILL LYNCH MARYLAND
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Maryland income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH MASSACHUSETTS
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal and
Massachusetts income taxes as is consistent
with prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade
Massachusetts Municipal Bonds.
MERRILL LYNCH MASSACHUSETTS
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Massachusetts
income taxes as is consistent with prudent
investment management.
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.
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<PAGE> 89
MERRILL LYNCH MICHIGAN
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Michigan income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH MINNESOTA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Minnesota income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH MUNICIPAL BOND
FUND, INC. ................. Tax-exempt income from three separate
diversified portfolios of municipal bonds.
MERRILL LYNCH MUNICIPAL
INTERMEDIATE TERM FUND...... Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide as high a level as
possible of income exempt from Federal income
taxes by investing in investment grade
obligations with a dollar weighted average
maturity of five to twelve years.
MERRILL LYNCH NEW JERSEY
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal and
New Jersey income taxes as is consistent with
prudent investment management through a
portfolio primarily of intermediate-term
investment grade New Jersey Municipal Bonds.
MERRILL LYNCH NEW JERSEY
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Jersey
income taxes as is consistent with prudent
investment management.
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.
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<PAGE> 90
MERRILL LYNCH NEW YORK
LIMITED MATURITY MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide as
high a level of income exempt from Federal, New
York State and New York City income taxes as is
consistent with prudent investment management
through investment in a portfolio primarily of
intermediate-term investment grade New York
Municipal Bonds.
MERRILL LYNCH NEW YORK
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal, New York State and
New York City income taxes as is consistent
with prudent investment management.
MERRILL LYNCH NORTH CAROLINA
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and North Carolina
income taxes as is consistent with prudent
investment management.
MERRILL LYNCH OHIO MUNICIPAL
BOND FUND................... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Ohio income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH OREGON
MUNICIPAL BOND FUND......... A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Oregon income
taxes as is consistent with prudent investment
management.
MERRILL LYNCH PACIFIC
FUND, INC. ................. Capital appreciation by investing in equity
securities of corporations domiciled in Far
Eastern and Western Pacific countries,
including Japan, Australia, Hong Kong and
Singapore.
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.
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<PAGE> 91
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.
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.
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<PAGE> 92
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.
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.
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<PAGE> 93
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
Institutions Series, a series fund, whose
objective is to provide maximum current income
consistent with liquidity and the maintenance
of a high quality portfolio of money market
securities.
MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND............. A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income exempt
from Federal income taxes, preservation of
capital and liquidity available from investing
in a diversified portfolio of short-term, high
quality municipal bonds.
MERRILL LYNCH TREASURY FUND... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in direct obligations
of the U.S. Treasury and up to 10% of its total
assets in repurchase agreements secured by such
obligations.
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
39
<PAGE> 94
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute all of its net investment income and net
realized long- or short-term capital gains, if any, to the Fund's shareholders
at least annually. From time to time, the Fund may declare a special
distribution at or about the end of the calendar year in order to comply with a
Federal income tax requirement that certain percentages of its ordinary income
and capital gains be distributed during the calendar year. If in any fiscal year
the Fund has net income from certain foreign currency transactions, such income
will be distributed annually. See "Shareholder Services -- Automatic
Reinvestment of Dividends and Capital Gains Distributions" for information
concerning the manner in which dividends and distributions may be reinvested
automatically in shares of the Fund. Shareholders may elect in writing to
receive any such dividends or distributions, or both, in cash. Dividends and
distributions are taxable to investors whether received in cash or reinvested in
additional shares of the Fund. The per share dividends and distributions on
Class B and Class C shares will be lower than the per share dividends and
distributions on Class A and Class D shares as a result of the account
maintenance, distribution and higher transfer agency fees applicable with
respect to the Class B and Class C shares; similarly, the per share dividends
and distributions on Class D shares will be lower than the per share dividends
and distributions on Class A shares as a result of the account maintenance fees
applicable with respect to the Class D shares. The per share dividends and
distributions on Class B shares will be higher than the per share dividends and
distributions on Class C shares as a result of the higher distribution fees
applicable with respect to the Class C shares. See "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.
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 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). Any loss upon the sale or exchange of Fund
shares held for
40
<PAGE> 95
six months or less will be treated as long-term capital loss to the extent of
any capital gain dividends received by the shareholder.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the 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 dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, 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 RIC 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
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 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
Commission's exemptive order permitting the issuance and sale of multiple
classes of stock) that is based on the gross income allocable to Class A, Class
B, Class C and Class D shareholders during the taxable year, or such other
method as the Internal Revenue Service may prescribe.
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<PAGE> 96
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid to the Fund reduces any sales charge the shareholder would have owed upon
the purchase of the new shares in the absence of the exchange privilege.
Instead, such sales charge will be treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if 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.
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures or forward foreign
exchange contracts. Options and futures contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the end
of each taxable year, i.e., each such 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 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.
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<PAGE> 97
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 options or futures contract.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS
In general, gains from "foreign currencies" and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the 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 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 basis in Fund shares assuming the
shares were held as a capital asset. These rules and the mark-to-market rules
described above, however, will not apply to certain transactions entered into by
the Fund solely to reduce the risk of currency fluctuation 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 dividends and capital gain dividends may also be subject to
state and local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law varies
as to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state, or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment in
the Fund.
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<PAGE> 98
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data, as well as yield, in advertisements or information
furnished to present or prospective shareholders. Total return and yield figures
are based on the Fund's historical performance and are not intended to indicate
future performance. Average annual total return and yield are determined
separately for Class A, Class B, Class C and Class D shares in accordance with
formulas specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charges 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 or
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> 99
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 SHARES CLASS B SHARES
----------------------- ----------------------
REDEEMABLE REDEEMABLE
VALUE OF VALUE OF
EXPRESSED A EXPRESSED A
AS A HYPOTHETICAL AS A HYPOTHETICAL
PERCENTAGE $1,000 PERCENTAGE $1,000
BASED ON INVESTMENT BASED INVESTMENT
A AT THE ON A AT THE
HYPOTHETICAL END OF HYPOTHETICAL END OF
$1,000 THE $1,000 THE
PERIOD INVESTMENT PERIOD INVESTMENT PERIOD
- ---------------------------- ---------- ------ ---------- ------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
One Year Ended December 31,
1994...................... (9.07)% $ 909.30 (9.57)% $ 904.30
Five Years Ended December
31, 1994.................. 8.29% $1,489.00 8.35% $1,493.00
Inception (August 29, 1986)
to December 31, 1994...... 9.33% $2,105.90
Inception (October 25, 1988)
to December 31, 1994...... 8.32% $1,639.70
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Year Ended December 31,
1994........................ (5.29)% $ 947.10 (6.01)% $ 939.90
1993........................ 13.21% $1,132.10 12.36% $1,123.60
1992........................ 7.83% $1,078.30 6.91% $1,069.10
1991........................ 16.00% $1,160.00 15.23% $1,152.30
1990........................ 15.64% $1,156.40 14.76% $1,147.60
1989........................ 7.27% $1,072.70 6.45% $1,064.50
1988........................ 3.81% $1,038.10
1987........................ 22.82% $1,228.20
Inception (August 29, 1986)
to December 31, 1986...... 3.93% $1,039.30
Inception (October 25, 1988)
to December 31, 1988...... 2.66% $1,026.60
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (August 29, 1986)
to December 31, 1994...... 110.59% $2,105.90
Inception (October 25, 1988)
to December 31, 1994...... 63.97% $1,639.70
</TABLE>
45
<PAGE> 100
<TABLE>
<CAPTION>
CLASS C SHARES CLASS D SHARES
------------------------------------- -------------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
OF A OF A
HYPOTHETICAL HYPOTHETICAL
$1,000 $1,000
EXPRESSED AS A INVESTMENT EXPRESSED AS A INVESTMENT
PERCENTAGE BASED AT THE END OF PERCENTAGE BASED AT THE END OF
ON A HYPOTHETICAL THE ON A HYPOTHETICAL THE
PERIOD $1,000 INVESTMENT PERIOD $1,000 INVESTMENT PERIOD
- ------------------------------ ----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (October 21, 1994)
to December 31, 1994........ (13.14)% $ 973.00 (25.46)% $ 944.50
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (October 21, 1994)
to December 31, 1994........ (1.73)% $ 982.70 (1.62)% $ 983.80
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Inception (October 21, 1994)
to December 31, 1994........ (2.70)% $ 973.00 (5.55)% $ 944.50
</TABLE>
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 not take into account the CDSC
and therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses may be
deducted.
46
<PAGE> 101
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 Class A,
Class B, Class C and Class D shares. 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 expenses related to the account maintenance and/or distribution of the
shares of a class may be borne solely by such class and a class may have
exclusive voting rights with respect to matters relating to the expenses being
borne only by such class. The Fund has received an order from the Securities and
Exchange Commission permitting the issuance and sale of multiple classes of
shares. The Board of Trustees of the Fund may classify and reclassify the shares
of the Fund into additional classes of shares at a future date. 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
pre-emptive rights. The rights of redemption, conversion and exchange 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 the 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.
47
<PAGE> 102
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 December 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......................... $90,823,366 $700,994,799 $3,614,209 $1,755,046
========== =========== ========= =========
Number of Shares Outstanding....... 10,138,497 78,233,237 403,414 195,870
========== =========== ========= =========
Net Asset Value Per Share (net
assets divided by number of
shares outstanding).............. $ 8.96 $ 8.96 $ 8.96 $ 8.96
Sales Charge (for Class A and Class
D shares 4.00% of offering price
(4.17% of net amount
invested*))...................... 0.37 ** ** 0.37
----------- ------------ ---------- ----------
Offering Price..................... $ 9.33 $ 8.96 $ 8.96 $ 9.33
========== =========== ========= =========
</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 and "Redemption of Shares -- Deferred
Sales Charges -- Class B and Class C Shares" herein.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
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
State Street Bank and Trust Company, P.O. Box 351, 225 Franklin Street,
Boston, Massachusetts 02101 (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
48
<PAGE> 103
servicing of shareholder accounts. See "Management of the Fund -- Transfer
Agency Services" in the Prospectus.
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 December 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 Securities and Exchange
Commission, Washington, D.C., under the Securities Act 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on March 31, 1994.
------------------------------
The Declaration of Trust establishing the Fund, dated as of May 28, 1986, 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 Global Bond Fund for Investment and Retirement" refers to the
Trustees under the Declaration of Trust 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.
49
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT :
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Global Bond Fund for Investment
and Retirement as of December 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 December
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 Global
Bond Fund for Investment and Retirement as of December 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
February 3, 1995
50
<PAGE> 105
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE PERCENT OF
AMOUNT ISSUE RATE DATE (NOTE 1a) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AUSTRALIA
LONG-TERM A$ 9,000,000 Australian Government Bond (2) 12.50% 9/15/1997 $ 7,362,338 0.92%
OBLIGATIONS 54,000,000 Queensland Treasury Corp., Domestic (3) 8.00 7/14/1999 38,498,122 4.83
6,300,000 Queensland Treasury Corp., Global Notes (3) 8.00 5/14/2003 4,258,932 0.53
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN AUSTRALIA
(COST--$50,624,780) 50,119,392 6.28
- -----------------------------------------------------------------------------------------------------------------------------------
BELGIUM
LONG-TERM Bf 430,000,000 Belgium Government Bond (2) 7.75 12/22/2000 13,320,667 1.67
OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN BELGIUM
(COST--$13,137,039) 13,320,667 1.67
- -----------------------------------------------------------------------------------------------------------------------------------
CANADA
LONG-TERM C$ 6,000,000 Canadian Government Bond (2) 7.75 9/01/1999 4,078,854 0.51
OBLIGATIONS 5,500,000 Canadian Government Bond (2) 9.00 12/01/2004 3,893,448 0.49
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN CANADA (COST--$8,152,868) 7,972,302 1.00
- -----------------------------------------------------------------------------------------------------------------------------------
DENMARK
LONG-TERM Dkr364,000,000 Denmark Government Bond (2) 6.00 12/10/1999 53,480,092 6.71
OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN DENMARK (COST--$53,130,101) 53,480,092 6.71
- -----------------------------------------------------------------------------------------------------------------------------------
FRANCE
LONG-TERM ECU 16,500,000 French Government "B-TAN" (2) 5.00 3/16/1999 17,865,444 2.24
OBLIGATIONS Frf130,500,000 French Government "B-TAN" (2) 7.00 11/12/1999 23,437,134 2.94
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN FRANCE (COST--$42,646,389) 41,302,578 5.18
- -----------------------------------------------------------------------------------------------------------------------------------
GERMANY
LONG-TERM DM 34,000,000 Deutschland Republic (2) 8.00 7/22/2002 22,337,209 2.80
OBLIGATIONS 20,000,000 Deutschland Republic (2) 6.25 1/04/2024 10,432,817 1.31
63,000,000 Treuhandanstalt (2) 5.75 4/29/1999 38,381,977 4.82
21,000,000 Treuhandanstalt (2) 7.50 9/09/2004 13,447,868 1.69
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN GERMANY
(COST--$84,827,802) 84,599,871 10.62
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 106
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE PERCENT OF
AMOUNT ISSUE RATE DATE (NOTE 1a) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IRELAND
LONG-TERM Iep 14,500,000 Irish Gilts (2) 6.25% 4/01/1999 $20,261,140 2.54%
OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN IRELAND (COST--$20,437,693) 20,261,140 2.54
- -----------------------------------------------------------------------------------------------------------------------------------
ITALY
LONG-TERM Lit 26,000,000,000 Buoni Poliennali del Tesoro
OBLIGATIONS (Italian Government Bonds) (2) 12.00 9/18/1998 16,075,527 2.02
32,500,000,000 Buoni Poliennali del Tesoro
(Italian Government Bonds) (2) 8.50 4/01/1999 17,794,181 2.23
6,000,000,000 Buoni Poliennali del Tesoro
(Italian Government Bonds) (2) 12.50 3/01/2001 3,776,379 0.47
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN ITALY (COST--$41,290,628) 37,646,087 4.72
- -----------------------------------------------------------------------------------------------------------------------------------
NETHERLANDS
LONG-TERM NLG 79,000,000 Netherlands Government Bond (2) 7.50 6/15/1999 45,635,126 5.72
OBLIGATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE NETHERLANDS
(COST--$45,443,525) 45,635,126 5.72
- -----------------------------------------------------------------------------------------------------------------------------------
SPAIN
LONG-TERM Pta 7,595,000,000 Bonos del Estado (Spanish Government
OBLIGATIONS Bonds) (2) 8.30 12/15/1998 51,816,895 6.50
500,000,000 Bonos del Estado (Spanish Government
Bonds) (2) 12.25 3/25/2000 3,852,147 0.48
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SPAIN (COST--$58,820,921) 55,669,042 6.98
- -----------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM
LONG-TERM Pound 15,900,000 United Kingdom Gilt (2) 6.00 8/10/1999 22,370,555 2.81
OBLIGATIONS Sterling 9,600,000 United Kingdom Gilt (2) 9.00 3/03/2000 15,226,218 1.91
ECU 20,000,000 United Kingdom Gilt (2) 9.12 2/21/2001 25,118,720 3.15
Pound 3,500,000 United Kingdom Treasury Notes (2) 8.00 6/10/2003 5,225,794 0.66
Sterling
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED KINGDOM
(COST--$68,859,017) 67,941,287 8.53
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 107
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE PERCENT OF
AMOUNT ISSUE RATE DATE (NOTE 1A) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNITED STATES
LONG-TERM US$ 7,000,000 Federal National Mortgage Association (4) 8.625% 11/10/2004 $ 7,028,560 0.88%
OBLIGATIONS 7,500,000 Federal National Mortgage Association (4) 8.55 12/10/2004 7,430,625 0.93
4,000,000 Federal National Mortgage Association,
Floating Rate Notes (Indexed to Lit/Sfr)
(a) (4) 12.28++ 2/18/1999 2,830,000 0.36
4,000,000 Federal National Mortgage Association,
Floating Rate Notes (Indexed to Pta/Sfr)
(a) (4) 11.18++ 3/24/1999 2,810,000 0.35
37,000,000 Republic of Finland (2) 6.75 11/24/1997 35,705,000 4.48
11,000,000 Republic of Italy (2) 6.62 6/09/2003 9,658,000 1.21
11,000,000 Republic of Italy (2) 6.00 9/27/2003 9,286,200 1.17
10,000,000 United States Treasury Notes (4) 7.25 11/30/1996 9,922,300 1.25
10,000,000 United States Treasury Notes (4) 7.75 11/30/1999 9,958,800 1.25
8,000,000 United States Treasury Notes (4) 5.87 2/15/2004 6,980,000 0.88
67,000,000 United States Treasury Notes (4) 7.25 5/15/2004 64,372,327 8.08
15,000,000 United States Treasury STRIPS** (4) 7.25 8/15/2004 14,407,035 1.81
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN LONG-TERM OBLIGATIONS
(COST--$185,494,037) 180,388,847 22.65
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM US$ 40,000,000 CS First Boston, Commercial Paper* (1) 6.00 1/24/1995 39,860,000 5.00
OBLIGATIONS 40,000,000 Federal Farm Credit Banks, Commercial
Paper* (1) 5.56 1/09/1995 39,962,933 5.01
39,000,000 Federal National Mortgage Association (4) 5.88 1/13/1995 38,936,300 4.88
10,286,000 General Electric Capital Corp., Commercial
Paper* (1) 5.80 1/03/1995 10,286,000 1.29
500,000 United States Treasury Bills (4) 4.85 1/05/1995 499,865 0.06
100,000 United States Treasury Bills (4) 5.31 2/02/1995 99,558 0.01
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SHORT-TERM OBLIGATIONS
(COST--$129,644,656) 129,644,656 16.25
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN THE UNITED STATES
(COST--$315,138,693) 310,033,503 38.90
- -----------------------------------------------------------------------------------------------------------------------------------
PAR STRIKE EXPIRATION PREMIUMS
VALUE PRICE DATE PAID
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENCY PUT OPTIONS PURCHASED
A$ 7,625,000 Australian Dollar $ .762 1/30/1995 18,300 .00
DM 36,558,462 German Mark 1.586 1/30/1995 106,019 .01
48,582,996 German Mark 1.605 1/30/1995 58,300 .01
Pound Sterling 15,500,000 Great Britain Pound 1.545 1/31/1995 82,150 .01
Lit 19,500,000 Italian Lira 1,690.000 1/31/1995 27,300 .01
Nlg 22,500,000 Netherlands Guilder 1.770 1/31/1995 85,500 .01
Pta 28,000,000 Spanish Peseta 135.500 1/31/1995 106,400 .01
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENCY PUT OPTIONS PURCHASED
(COST--$907,846) 483,969 .06
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED (COST--$907,846) 483,969 .06
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$803,417,302) 788,465,056 98.91
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 108
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
PAR STRIKE EXPIRATION PREMIUMS PERCENT OF
VALUE ISSUE PRICE DATE PAID NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENCY CALL OPTIONS WRITTEN
A$ 7,850,000 Australian Dollar $ .785 1/30/1995 $ (28,260) (.01)%
DM 50,897,227 German Mark 1.532 1/30/1995 (341,011) (.04)
37,846,656 German Mark 1.532 1/30/1995 (253,573) (.03)
Pound Sterling 15,500,000 Great Britain Pound 1.582 1/31/1995 (69,750) (.01)
Lit 19,500,000 Italian Lira 1,590.000 1/31/1995 (48,750) (.01)
Nlg 22,500,000 Netherland Guilder 1.735 1/31/1995 (247,500) (.03)
Pta 28,000,000 Spanish Peseta 129.500 1/31/1995 (70,000) (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENCY CALL OPTIONS WRITTEN
(PREMIUMS RECEIVED--$697,119) (1,058,844) (.14)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED--$697,119) (1,058,844) (.14)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (COST--$802,720,183) 787,406,212 98.77
UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS++++ (5,385,318) (.67)
VARIATION MARGIN ON FUTURE CONTRACTS++++++ 16,250 .00
OTHER ASSETS LESS LIABILITIES 15,150,276 1.90
------------ -------
NET ASSETS $797,187,420 100.00%
============ =======
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Corresponding industry groups for foreign securities (percent
of net assets):
(1)Financial Services--11.30%
(2)Sovereign Government Obligations--61.45%
(3)Sovereign/Regional Government Agency Obligations--5.36%
(4)US Government & Agency Obligations--20.74%
*Commercial Paper is traded on a discount basis; the interest rate shown
is the discount rate paid at the time of purchase by the Fund.
**STRIPS--Separate Trading of Registered Interest and Principal of
Securities.
(a)Indexed instrument for which the principal amount due at maturity is
affected by the relative value of the foreign currencies indicated.
++Interest rates on Floating Rate Notes are adjusted periodically based on
appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1994.
++++Forward foreign exchange contracts as of December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION APPRECIATION
FOREIGN CURRENCY PURCHASED DATE (DEPRECIATION)
- ----------------------------------------------------------------------------------
<S> <C> <C>
C$ 42,400,000 January 1995 $ (358,678)
DM 6,226,352 January 1995 68,348
YEN 6,470,580,800 January 1995 335,817
- ----------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$99,352,208) $ 45,487
-----------
- ----------------------------------------------------------------------------------
FOREIGN CURRENCY SOLD
- ----------------------------------------------------------------------------------
A$ 32,000,000 January 1995 $ (203,611)
DM 325,531,524 January 1995 (3,790,667)
DM 61,191,780 February 1995 (556,379)
Dkr 181,740,278 January 1995 (425,357)
Pta 551,654,466 February 1995 (20,852)
Pound
Sterling 4,588,531 January 1995 (22,498)
Lit 49,181,350,000 January 1995 (411,441)
- ----------------------------------------------------------------------------------
TOTAL (US$ COMMITMENT--$340,924,866) $(5,430,805)
-----------
- ----------------------------------------------------------------------------------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS--NET $(5,385,318)
===========
- ----------------------------------------------------------------------------------
</TABLE>
++++++Financial futures contracts sold as of December 31, 1994 were as follows:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION VALUE
CONTRACTS ISSUE DATE (NOTE 1a)
- --------------------------------------------------------------------------
<S> <C> <C>
52 US Treasury Bonds March 1995 $(5,156,125)
- --------------------------------------------------------------------------
(TOTAL CONTRACT PRICE--$5,148,906) $(5,156,125)
===========
- --------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
54
<PAGE> 109
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS: Investments, at value (identified cost--$802,509,456) (Note 1a) $787,981,087
Put options purchased, at value (cost--$907,846) (Notes 1a & 1b) 483,969
Foreign cash 45,458
Receivables:
Securities sold $103,196,563
Interest 14,426,015
Beneficial interest sold 932,751
Variation margin (Note 1b) 16,250 118,571,579
------------
Prepaid registration fees and other assets (Note 1f) 42,903
------------
Total assets 907,124,996
------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES: Unrealized depreciation on forward foreign exchange contracts (Note 1b) 5,385,318
Call options written, at value (premiums received--$697,119) (Note 1b) 1,058,844
Payables:
Securities purchased 95,989,999
Beneficial interest redeemed 3,978,746
Dividends to shareholders (Note 1g) 2,034,910
Distributor (Note 2) 486,114
Investment adviser (Note 2) 439,155 102,928,924
------------
Accrued expenses and other liabilities 564,490
------------
Total liabilities 109,937,576
------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS: Net assets $797,187,420
============
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Class A Shares of beneficial interest, $0.10 par value, unlimited number
CONSIST OF: of shares authorized $ 1,013,850
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 7,823,324
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 40,341
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 19,587
Paid-in capital in excess of par 879,637,694
Accumulated realized capital losses on investments and foreign
currency transactions--net (70,658,935)
Unrealized depreciation on investments and foreign currency
transactions--net (20,688,441)
------------
Net assets $797,187,420
============
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET Class A--Based on net assets of $90,823,366 and 10,138,497 shares of
VALUE: beneficial interest outstanding $ 8.96
============
Class B--Based on net assets of $700,994,799 and 78,233,237 shares of
beneficial interest outstanding $ 8.96
============
Class C--Based on net assets of $3,614,209 and 403,414 shares of
beneficial interest outstanding $ 8.96
============
Class D--Based on net assets of $1,755,046 and 195,870 shares of
beneficial interest outstanding $ 8.96
============
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
55
<PAGE> 110
FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME Interest and discount earned (net of $667,795 foreign withholding tax) $ 60,466,023
(NOTES 1D & 1E): ------------
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES: Distribution fees--Class B (Note 2) $ 6,022,167
Investment advisory fees (Note 2) 5,439,841
Transfer agent fees--Class B (Note 2) 976,185
Custodian fees 506,746
Accounting services (Note 2) 236,141
Printing and shareholder reports 235,243
Registration fees (Note 1f) 115,151
Transfer agent fees--Class A (Note 2) 108,165
Professional fees 93,011
Trustees' fees and expenses 35,940
Distribution fees--Class C (Note 2) 2,694
Account maintenance fees--Class D (Note 2) 400
Other 15,118
------------
Total expenses 13,786,802
------------
Investment income--net 46,679,221
------------
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED & Realized loss from:
UNREALIZED Investments--net (66,141,438)
LOSS ON Foreign currency transactions--net (22,093,225) (88,234,663)
INVESTMENTS & ------------
FOREIGN CURRENCY Change in unrealized depreciation on:
TRANSACTIONS--NET Investments--net (10,441,284)
(NOTES 1C, 1E & 3): Foreign currency transactions--net (6,192,227) (16,633,511)
------------ ------------
Net realized and unrealized loss on investments and foreign
currency transactions (104,868,174)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(58,188,953)
============
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
56
<PAGE> 111
FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS: 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS: Investment income--net $ 46,679,221 $ 49,349,216
Realized gain (loss) on investments and foreign currency
transactions--net (88,234,663) 29,307,307
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net (16,633,511) 16,672,043
-------------- --------------
Net increase (decrease) in net assets resulting from operations (58,188,953) 95,328,566
-------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS & Investment income--net:
DISTRIBUTIONS TO Class A (2,646,477) (5,330,230)
SHAREHOLDERS Class B (17,852,973) (44,016,259)
(NOTE 1G): Class C (7,735) --
Class D (4,807) --
Realized gain on investments--net:
Class A -- (3,116,015)
Class B -- (26,191,292)
Return of capital--net:
Class A (3,059,329) --
Class B (20,638,053) --
Class C (8,942) --
Class D (4,725) --
In excess of realized gain on investments--net:
Class A (317,003) (462,706)
Class B (2,138,481) (3,889,220)
Class C (926) --
Class D (490) --
-------------- --------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (46,679,221) (83,005,722)
-------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets derived from beneficial interest transactions (103,334,766) 294,102,091
TRANSACTIONS -------------- --------------
(NOTE 4):
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS: Total increase (decrease) in net assets (208,202,940) 306,424,935
Beginning of year 1,005,390,360 698,965,425
-------------- --------------
End of year $ 797,187,420 $1,005,390,360
============== ==============
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
57
<PAGE> 112
FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. CLASS A
FOR THE YEAR ENDED DECEMBER 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 $ 10.03 $ 9.79 $ 10.38 $ 9.93 $ 9.77
OPERATING --------- --------- --------- --------- ---------
PERFORMANCE: Investment income--net .55 .70 .77 .95 1.01
Realized and unrealized gain (loss) on invest-
ments and foreign currency transactions--net (1.07) .56 .01 .55 .42
--------- --------- --------- --------- ---------
Total from investment operations (.52) 1.26 .78 1.50 1.43
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.24) (.67) (1.14) (1.05) (1.27)
Realized gain on investments--net -- (.30) (.23) -- --
Return of capital--net (.28) -- -- -- --
In excess of realized gain on investments--net (.03) (.05) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.55) (1.02) (1.37) (1.05) (1.27)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.96 $ 10.03 $ 9.79 $ 10.38 $ 9.93
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT Based on net asset value per share (5.29%) 13.21% 7.83% 16.00% 15.64%
RETURN:* ========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO Expenses .84% .82% .84% .99% 1.06%
AVERAGE ========= ========= ========= ========= =========
NET ASSETS: Investment income--net 5.84% 6.44% 12.24% 8.02% 12.71%
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Net assets, end of year (in thousands) $ 90,823 $ 108,241 $ 61,131 $ 21,211 $ 10,601
DATA: ========= ========= ========= ========= =========
Portfolio turnover 405.00% 419.99% 235.11% 67.76% 159.79%
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
58
<PAGE> 113
FINANCIAL INFORMATION (CONCLUDED)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (CONCLUDED)
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. CLASS B
FOR THE YEAR ENDED DECEMBER 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 $ 10.03 $ 9.79 $ 10.39 $ 9.93 $ 9.77
OPERATING --------- --------- --------- --------- ---------
PERFORMANCE: Investment income--net .47 .60 .70 .85 .93
Realized and unrealized gain (loss) on invest-
ments and foreign currency transactions--net (1.07) .58 (.01) .58 .42
--------- --------- --------- --------- ---------
Total from investment operations (.60) 1.18 .69 1.43 1.35
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.20) (.59) (1.06) (.97) (1.19)
Realized gain on investments--net -- (.30) (.23) -- --
Return of capital--net (.24) -- -- -- --
In excess of realized gain on investments--net (.03) (.05) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.47) (.94) (1.29) (.97) (1.19)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 8.96 $ 10.03 $ 9.79 $ 10.39 $ 9.93
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT Based on net asset value per share (6.01%) 12.36% 6.91% 15.23% 14.76%
RETURN:* ========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE Expenses, excluding distribution fees .86% .83% .86% 1.02% 1.09%
NET ASSETS: ========= ========= ========= ========= =========
Expenses 1.61% 1.58% 1.61% 1.77% 1.84%
========= ========= ========= ========= =========
Investment income--net 5.06% 5.72% 11.67% 7.76% 11.97%
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Net assets, end of period (in thousands) $ 700,995 $ 897,150 $ 637,834 $ 380,749 $ 274,124
DATA: ========= ========= ========= ========= =========
Portfolio turnover 405.00% 419.99% 235.11% 67.76% 159.79%
========= ========= ========= ========= =========
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED
FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. FOR THE PERIOD OCT. 21, 1994++
TO DEC. 31, 1994
---------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: CLASS C CLASS D
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE Net asset value, beginning of period $ 9.21 $ 9.21
OPERATING -------- --------
PERFORMANCE: Investment income--net .09 .10
Realized and unrealized loss on investments and foreign currency
transactions--net (.25) (.25
-------- --------
Total from investment operations (.16) (.15)
-------- --------
Less dividends:
Investment income--net (.03) (.04)
Return of capital--net (.05) (.05)
In excess of realized gain on investments--net (.01) (.01)
-------- --------
Total dividends and distributions (.09) (.10)
-------- --------
Net asset value, end of period $ 8.96 $ 8.96
======== ========
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT Based on net asset value per share (1.73%)+++ (1.62%)+++
RETURN:* ======== ========
- ------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE Expenses, excluding distribution fees .89%* * .87%**
NET ASSETS: ======== ========
Expenses 1.69%* * 1.12%**
======== ========
Investment income--net 5.20%* * 5.81%**
======== ========
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Net assets, end of period (in thousands) $ 3,614 $ 1,755
DATA: ======== ========
Portfolio turnover 405.00% 405.00%
======== ========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Total investment returns exclude the effects of sales loads.
**Annualized.
+++Aggregate total investment return.
++Commencement of Operations.
See Notes to Financial Statements.
59
<PAGE> 114
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Global Bond Fund for Investment and Retirement (the "Fund") is
registered under the Investment Company Act of 1940 as a non-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 securities--Securities traded in the over-the-counter
market are valued at the last available bid price or yield equivalents
obtained from one or more dealers in the over-the-counter market prior to the
time of valuation. Portfolio securities which are traded on stock exchanges
are valued at the last sale price on the principal market 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.
Options written are valued 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.
Other investments, including futures contracts and related options, are stated
at market value or otherwise at the fair value at which it is expected they
may be resold, as determined in good faith by or under the direction of the
Board of Trustees of the Fund. Any assets or liabilities initially expressed
in the terms of non-US dollar currencies are translated into US dollars at the
prevailing market rates as quoted by one or more banks or dealers on the day
of valuation.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees of the Fund.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterpart does
not perform under the contract.
* Forward foreign exchange contracts--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.
* Foreign currency options and futures--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.
* Financial futures contracts--The Fund may purchase or sell financial
futures contracts and options on such futures contracts as a hedge against
adverse changes in interest rates. A futures contract is an agreement between
two parties to buy or sell a security for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed.
* 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 purchased or
sold through an exercise of an option, the related premium paid (or
60
<PAGE> 115
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds 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 that the premium received
or paid (or gain or loss to the extent the cost of the closing transaction is
less than or exceeds the premiums paid or received).
Written and purchased options are non-income producing investments.
(c) 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) assets or liabilities
expressed in foreign currencies into US dollars. Realized and unrealized gains
or losses from investments include the effects of foreign exchange rates on
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 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).
Interest income (including amortization of discount) 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 from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded
on the ex-dividend dates.
(h) Reclassifications--Generally accepted accounting principles require that
certain differences between accumulated net realized capital losses for
financial reporting and tax purposes, if permanent, be reclassified to
accumulated net investment losses. Accordingly, current year's permanent
book/tax differences of $23,711,049 have been reclassified from accumulated
net realized losses to accumulated net investment losses. These
reclassifications have no effect on net assets or net asset values per share.
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"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch
& Co. ("ML & Co."), which is also the limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plans with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
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 0.60%, on an annual basis, of the average daily value of the
Fund's net assets. The most restrictive annual expense limitation requires
that the Investment Adviser reimburse the Fund to the extent the Fund's
expenses (excluding interest rates, 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 Fund's next $70 million of
average daily net assets, and 1.5% of the average daily net assets in excess
thereof. The Adviser's obligation to reimburse the Fund is limited to the
amount of the investment advisory fee. No fee payment will be made to the
Investment Adviser during any fiscal year which will cause 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
61
<PAGE> 116
daily and paid monthly at annual rates based upon the average daily net
assets of the shares as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------
ACCOUNT DISTRIBUTION
MAINTENANCE FEE FEE
- ---------------------------------------------------
<S> <C> <C>
Class B 0.25% 0.50%
Class C 0.25% 0.55%
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 December 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 $181,126 $159,090
Class D $ 601 $ 5,478
- -------------------------------------------------
</TABLE>
MLPF&S received contingent deferred sales charges of $2,016,979 relating to
transactions in Class B Shares of beneficial interest and $217 relating to
transactions in Class C Shares of beneficial interest for the Fund the year
ended December 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.
Certain officers and/or trustees of the Fund are officers and/or directors of
MLPF&S, MLFD, MLAM, PSI, FDS, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1994 were $3,093,282,684 and $3,271,292,982,
respectively.
Net realized and unrealized gains (losses) as of December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
REALIZED UNREALIZED
GAINS (LOSSES) GAINS (LOSSES)
- ----------------------------------------------------------
<S> <C> <C>
Investments:
Long-term $(66,054,394) $(14,528,369)
Short-term (267) --
Financial futures 270,402 (7,219)
Options purchased (531,812) --
Options written 174,633 --
------------ ------------
Total investments (66,141,438) (14,535,588)
------------ ------------
Currency transactions:
Options purchased (1,201,548) (423,877)
Options written (1,340,009) (361,725)
Foreign currency
transactions (4,514,737) 18,067
Forward foreign
exchange contracts (15,036,931) (5,385,318)
------------ ------------
Total currency
transactions (22,093,225) (6,152,853)
------------ ------------
Total $(88,234,663) $(20,688,441)
============ ============
- ----------------------------------------------------------
</TABLE>
Transactions in call options written for the year ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
NUMBER OF
CONTRACTS PREMIUMS
CALL OPTIONS WRITTEN WRITTEN RECEIVED
- --------------------------------------------------------
<S> <C> <C>
Outstanding call options
written, beginning
of year 1 $ 78,692
Options written 27 3,491,635
Options expired (8) (878,108)
Options exercised (13) (1,995,100)
---------- ----------
Outstanding call options
written at end of year 7 $ 697,119
========== ===========
- --------------------------------------------------------
</TABLE>
Transactions in put options written for the year ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------
NUMBER OF
CONTRACTS PREMIUMS
PUT OPTIONS WRITTEN WRITTEN RECEIVED
- -------------------------------------------------------
<S> <C> <C>
Outstanding put options
written, beginning
of year 1 $ 677,586
Options written 19 2,139,811
Options expired (5) (934,814)
Options exercised (15) (1,882,583)
---------- ----------
Outstanding put options
written at end of year -- $ --
========== ===========
- -------------------------------------------------------
</TABLE>
62
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
As of December 31, 1994, net unrealized depreciation for Federal income tax
purposes aggregated $17,542,267, of which $859,371 related to appreciated
securities and $18,401,638 related to depreciated securities. The aggregate
cost of investments, plus premiums paid for options purchased, less premiums
received for options written, at December 31, 1994 for Federal income tax
purposes was $805,523,354.
4. BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(103,334,766) and $294,102,091 for the years ended December
31, 1994 and December 31, 1993, respectively.
Transactions in shares of capital for each class were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS A SHARES FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1994 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 4,384,679 $ 40,711,428
Shares issued to share-
holders in reinvestment of
dividends 396,034 4,528,178
---------- ------------
Total issued 4,780,713 45,239,606
Shares redeemed (5,434,215) (50,793,461)
---------- ------------
Net decrease (653,502) $ (5,553,855)
========== ============
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS A SHARES FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1993 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 7,296,287 $ 74,556,820
Shares issued to share-
holders in reinvestment of
dividends & distributions 552,772 5,589,768
---------- ------------
Total issued 7,849,059 80,146,588
Shares redeemed (3,300,362) (33,764,584)
---------- ------------
Net increase 4,548,697 $ 46,382,004
========== ============
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS B SHARES FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1994 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 17,716,789 $ 166,930,180
Shares issued to share-
holders in reinvestment of
dividends 2,712,869 25,310,189
----------- -------------
Total issued 20,429,658 192,240,369
Shares redeemed (31,626,761) (295,457,890)
----------- -------------
Net decrease (11,197,103) $(103,217,521)
=========== =============
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS B SHARES FOR THE YEAR ENDED DOLLAR
DECEMBER 31, 1993 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 32,678,494 $333,514,433
Shares issued to share-
holders in reinvestment of
dividends & distributions 4,530,502 45,791,118
----------- ------------
Total issued 37,208,996 379,305,551
Shares redeemed (12,907,839) (131,585,464)
----------- ------------
Net increase 24,301,157 $247,720,087
=========== ============
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS C SHARES FOR THE PERIOD
OCTOBER 21, 1994++ TO DOLLAR
DECEMBER 31, 1994 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 417,769 $ 3,791,175
Shares issued to share-
holders in reinvestment of
dividends 1,634 14,657
--------- ------------
Total issued 419,403 3,805,832
Shares redeemed (15,989) (145,912)
--------- ------------
Net increase 403,414 $ 3,659,920
========= ============
- -----------------------------------------------------------------
</TABLE>
++Commencement of Operations.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
CLASS D SHARES FOR THE PERIOD
OCTOBER 21, 1994+ TO DOLLAR
DECEMBER 31, 1994 SHARES AMOUNT
- -----------------------------------------------------------------
<S> <C> <C>
Shares sold 200,576 $ 1,819,651
Shares issued to share-
holders in reinvestment of
dividends 699 6,275
---------- ------------
Total issued 201,275 1,825,926
Shares redeemed (5,405) (49,236)
---------- ------------
Net increase 195,870 $ 1,776,690
========== ============
- -----------------------------------------------------------------
</TABLE>
++Commencement of Operations.
5. COMMITMENTS:
At December 31, 1994, the Fund entered into foreign exchange contracts under
which it had agreed to buy and sell various foreign currencies with values of
approximately $18,161 and $1,157, respectively.
6. CAPITAL LOSS CARRYFORWARD:
At December 31, 1994, the Fund had a net capital loss carryforward of
approximately $56,717,000, all of which expires in 2002. This amount will be
available to offset like amounts of any future taxable gains.
63
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Investment Objective and Policies..... 2
Management of the Fund................ 10
Purchase of Shares.................... 14
Initial Sales Charge Alternatives --
Class A and Class D Shares....... 14
Reduced Initial Sales Charges....... 16
Distribution Plans.................. 19
Limitations on the Payment of
Deferred Sales Charges........... 20
Redemption of Shares.................. 21
Portfolio Transactions and
Brokerage........................... 23
Determination of Net Asset Value...... 24
Shareholder Services.................. 25
Dividends, Distributions and Taxes.... 40
Performance Data...................... 44
General Information................... 47
Description of Shares............... 47
Computation of Offering Price
Per Share........................ 48
Independent Auditors................ 48
Custodian........................... 48
Transfer Agent...................... 48
Legal Counsel....................... 49
Reports to Shareholders............. 49
Additional Information.............. 49
Security Ownership of Certain
Beneficial Owners................ 49
Independent Auditors' Report.......... 50
Financial Statements.................. 51
</TABLE>
Code # 10418-0495
[LOGO]
MERRILL LYNCH
GLOBAL BOND FUND
FOR INVESTMENT AND
RETIREMENT
ART WORK
STATEMENT OF
ADDITIONAL
INFORMATION
April 28,1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE> 119
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission File due to ASCII-incompatibility and cross-
references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graphic paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<PAGE> 120
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
Contained in Part A:
Financial Highlights for each of the periods in the nine-year period
ended December 31, 1994.
Contained in Part B:
Schedule of Investments, as of December 31, 1994.
Statement of Assets and Liabilities as of December 31, 1994.
Statement of Operations for the year ended December 31, 1994.
Statements of Changes in Net Assets for the years ended December 31,
1994 and 1993.
Financial Highlights for each of the periods in the five-year period
ended December 31, 1994.
(B) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C>
1 (a) -- Declaration of Trust of Registrant.(c)
(b) -- Amendment to Declaration of Trust of Registrant.(c)
(c) -- Amendment to Declaration of Trust of Registrant, dated October 3, 1988.(c)
(d) -- Instrument establishing Class A shares and Class B shares of Registrant.(c)
(e) -- Amendment to Declaration of Trust of Registrant, dated April 25, 1991.(c)
(f) -- Certification of Amendment to Declaration of Trust and Establishment and Designation
of Classes.
2 -- By-Laws of Registrant.
3 -- None.
4 -- Copies of Instruments defining the rights of shareholders, including the relevant
portions of the Declaration of Trust, as amended, and By-Laws of Registrant.(a)
5 (a) -- Investment Advisory Agreement between Registrant and Merrill Lynch Asset Management,
Inc.(c)
(b) -- Supplement to Investment Advisory Agreement between Registrant and Merrill Lynch
Asset Management, L.P. dated January 3, 1994.(b)
6 (a) -- Class A Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(b) -- Class B Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds Distributor, Inc.
with respect to the Merrill Lynch Mutual Fund Advisor Program.(b)
(d) -- Class C Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(e) -- Class D Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
7 -- None.
8 -- Custody Contract between Registrant and State Street Bank and Trust Company.(c)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement between Registrant and Merrill Lynch Financial Data Service, Inc. (now
known as Financial Data Services, Inc.).(c)
10 -- Opinion of Brown & Wood, Counsel for Registrant.
11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(c)
14 -- None.
15 (a) -- Amended and Restated Class B Distribution Plan of the Registrant and Distribution
Plan Sub-Agreement.(c)
</TABLE>
C-1
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------
<S> <C> <C>
(b) -- Class C Shares Distribution Plan and Class C Shares Distribution Plan Sub-Agreement
of the Registrant.(c)
(c) -- Class D Shares Distribution Plan and Class D Shares Distribution Plan Sub-Agreement
of the Registrant.(c)
16 (a) -- Schedule of computation of each performance quotation related to Class A shares
provided in the Registration Statement in response to Item 22.(c)
(b) -- Schedule of computation of each performance quotation related to Class B shares
provided in the Registration Statement in response to Item 22.(c)
(c) -- Schedule of computation of each performance quotation relating to Class C shares
provided in the Registration Statement in response to Item 22.
(d) -- Schedule of computation of each performance quotation relating to Class D shares
provided in the Registration Statement in response to Item 22.
17 (a) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to Class A
Shares.
(b) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to Class B
Shares.
(c) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to Class C
Shares.
(d) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to Class D
Shares.
18 -- Power of Attorney for Edward D. Zinbarg.
</TABLE>
- ---------------
(a) Reference is made to Article I (Sections 1.1 and 1.2), Article II (Sections
2.1, 2.3, 2.4 and 2.7), Article III (Sections 3.1, 3.4, 3.9 and 3.10),
Article IV, Article V (Sections 5.1, 5.2, 5.3 and 5.5), Article VI
(Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.7 and 6.8), Article VII, Article VIII,
Article IX, Article X, Article XI (Sections 11.2, 11.3, 11.4 and 11.5) and
Article XII (Sections 12.3 and 12.6) of the Registrant's Declaration of
Trust filed as Exhibit 1(a) to the Registrant's Registration Statement; the
Amendments and Instrument related to Registrant's Declaration of Trust
filed as Exhibits 1(b), 1(c), 1(d) and 1(e) to the Registrant's
Registration Statement; the Certification of Amendment to Declaration of
Trust and Establishment and Designation of Classes filed as Exhibit 1(f) to
Registrant's Registration Statement; and Article I, Article V and Article
VI of the Registrant's By-Laws previously filed as Exhibit 2 to the
Registrant's Registration Statement.
(b) Filed as an Exhibit to Post-Effective Amendment No. 11 to Registrant's
Registration Statement under the Securities Act of 1933 on Form N-1A.
(c) Refiled pursuant to the Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) phase-in requirements.
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
MARCH
31,
TITLE OF CLASS 1995
- --------------------------------------------------------------------------- -----
<S> <C>
Class A shares of beneficial interest, par value $0.10 per share........... 131
Class B shares of beneficial interest, par value $0.10 per share........... 1,245
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........... 3
</TABLE>
C-2
<PAGE> 122
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 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
C-3
<PAGE> 123
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management ("MLAM" or the "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 SmallCap 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 investment companies:
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, The Corporate Fund Accumulation Program, Inc., Corporate High
Yield Fund, Inc., Corporate High Yield Fund II, Inc., Emerging Tigers Fund,
Inc., Financial Institutions Series Trust, Income Opportunities Fund 1999, Inc.,
Income Opportunities Fund 2000, Inc., Merrill Lynch Basic Value Fund, Inc.,
Merrill Lynch California Municipal Series Trust, Merrill Lynch Corporate Bond
Fund, Inc., Merrill Lynch Federal Securities Trust, Merrill Lynch Funds for
Institutions Series, Merrill Lynch Multi-State Municipal Series Trust, Merrill
Lynch Multi-State Limited Maturity Municipal Series Trust, Merrill Lynch
Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch
Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc., MuniAssets
Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program,
Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc.,
MuniVest Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida
Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc.,
MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania Insured Fund,
MuniYield Arizona Fund, Inc., MuniYield Arizona Fund II, Inc., MuniYield
California Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield
California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida
Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield
Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured
Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund,
Inc., MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II,
Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund,
MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Senior Strategic
Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew York
Holdings, Inc. and Worldwide DollarVest Fund, Inc. The address of each of these
investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011. 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, FAM, Princeton Services,
Inc. ("Princeton Services"), Merrill Lynch Funds Distributor, Inc. ("MLFD") and
Princeton Administrators is also P.O. Box 9011, Princeton, New Jersey
08543-9011. The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Merrill Lynch & Co., Inc.
C-4
<PAGE> 124
("ML & Co.") is World Financial Center, North Tower, 250 Vesey Street, New York,
New York 10281. The address of Financial Data Services, Inc. ("FDS") is 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
December 31, 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 and Kirstein are directors, trustees or officers of one
or more of such companies.
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME THE MANAGER PROFESSION, VOCATION 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 MLFD; Executive Vice
President of ML & Co.; Executive
Vice President of Merrill Lynch
Terry K. Glenn................... Executive Vice Executive Vice President of FAM;
President Executive Vice President and
Director of Princeton Services;
President and Director of MLFD;
Director of 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
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 Senior Vice President, General
Counsel, Director and Secretary
of Princeton Services; Director
of MLFD
Ronald M. Kloss.................. Senior Vice President Senior Vice President and
and Controller Controller of FAM; Senior Vice
President and Controller of
Princeton Services
Stephen M.M. Miller.............. Senior Vice President Senior Vice President and
and Controller Controller of FAM; Senior Vice
President of Princeton Services
Joseph T. Monagle................ Senior Vice President Senior Vice President of FAM;
Senior Vice President of Princeton
Services
</TABLE>
C-5
<PAGE> 125
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS,
NAME THE MANAGER PROFESSION, VOCATION OR EMPLOYMENT
- --------------------------------- ----------------------- -----------------------------------
<S> <C> <C>
Gerald M. Richard................ Senior Vice President Senior Vice President and Treasurer
and 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>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the investment companies referred to in the first paragraph of Item 28 except
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured
Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc.,
MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High
Income Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus
MuniCalifornia Holdings, Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide
DollarVest Fund, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of
C-6
<PAGE> 126
Messrs. Crook, Aldrich, Breen, Graczyk, Fatseas and Wasel is One Financial
Center, Boston, Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
- ------------------------------------- --------------------------------------- --------------------------
<S> <C> <C>
Terry K. Glenn....................... President and Director Executive Vice President
Arthur Zeikel........................ Director President and 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 Assistant Treasurer None
Mark A. DeSario...................... Vice President None
James T. Fatseas..................... Vice President None
Stanley Graczyk...................... Vice President None
Michelle T. Lau...................... Vice President None
Gerald M. Richard.................... Vice President and Treasurer Treasurer
Salvatore Venezia.................... Vice President None
William Wasel........................ Vice President None
Robert Harris........................ Secretary None
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant, 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and its transfer agent, 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
Fund -- 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-7
<PAGE> 127
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 27th day of April 1995.
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
(Registrant)
By: /s/ ARTHUR ZEIKEL
------------------------------------
(Arthur Zeikel, President)
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to registrant's registration statement has been signed
below by the following persons in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------- ----------------------------------- ----------------
<S> <C> <C>
/s/ ARTHUR ZEIKEL President and Trustee (Principal April 27, 1995
- ----------------------------------- Executive Officer)
(Arthur Zeikel)
/s/ GERALD M. RICHARD Treasurer (Principal Financial and April 27, 1995
- ----------------------------------- Accounting Officer)
(Gerald M. Richard)
DONALD CECIL* Trustee April 27, 1995
- -----------------------------------
(Donald Cecil)
EDWARD H. MEYER* Trustee April 27, 1995
- -----------------------------------
(Edward H. Meyer)
CHARLES C. Trustee April 27, 1995
REILLY*
- -----------------------------------
(Charles C. Reilly)
RICHARD R. Trustee April 27, 1995
WEST*
- -----------------------------------
(Richard R. West)
EDWARD D. ZINBARG* Trustee April 27, 1995
- -----------------------------------
(Edward D. Zinbarg)
*By: /s/ ARTHUR ZEIKEL April 27, 1995
- -----------------------------------
(Arthur Zeikel, Attorney-in-Fact)
</TABLE>
C-8
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------- ----
<S> <C> <C> <C>
1 (a) -- Declaration of Trust of Registrant.(c)
(b) -- Amendment to Declaration of Trust of Registrant.(c)
(c) -- Amendment to Declaration of Trust of Registrant, dated October 3, 1988.(c)
(d) -- Instrument establishing Class A shares and Class B shares of Registrant.(c)
(e) -- Amendment to Declaration of Trust of Registrant, dated April 25, 1991.(c)
(f) -- Certification of Amendment to Declaration of Trust and Establishment and
Designation of Classes.
2 -- By-Laws of Registrant.
3 -- None.
4 -- Copies of Instruments defining the rights of shareholders, including the
relevant portions of the Declaration of Trust, as amended, and By-Laws of
Registrant.(a)
5 (a) -- Investment Advisory Agreement between Registrant and Merrill Lynch Asset
Management, Inc.(c)
(b) -- Supplement to Investment Advisory Agreement between Registrant and Merrill
Lynch Asset Management, L.P. dated January 3, 1994.(b)
6 (a) -- Class A Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(b) -- Class B Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds Distributor,
Inc. with respect to the Merrill Lynch Mutual Fund Advisor Program.(b)
(d) -- Class C Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
(e) -- Class D Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.(c)
7 -- None.
8 -- Custody Contract between Registrant and State Street Bank and Trust
Company.(c)
9 -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency
Agreement between Registrant and Merrill Lynch Financial Data Service, Inc.
(now known as Financial Data Services, Inc.).(c)
10 -- Opinion of Brown & Wood, Counsel for Registrant.
11 -- Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management, Inc.(c)
14 -- None.
15 (a) -- Amended and Restated Class B Distribution Plan of the Registrant and
Distribution Plan Sub-Agreement.(c)
(b) -- Class C Shares Distribution Plan and Class C Shares Distribution Plan
Sub-Agreement of the Registrant.(c)
(c) -- Class D Shares Distribution Plan and Class D Shares Distribution Plan
Sub-Agreement of the Registrant.(c)
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------- ----
<S> <C> <C> <C>
16 (a) -- Schedule of computation of each performance quotation related to Class A
shares provided in the Registration Statement in response to Item 22.(c)
(b) -- Schedule of computation of each performance quotation related to Class B
shares provided in the Registration Statement in response to Item 22.(c)
(c) -- Schedule of computation of each performance quotation relating to Class C
shares provided in the Registration Statement in response to Item 22.
(d) -- Schedule of computation of each performance quotation relating to Class D
shares provided in the Registration Statement in response to Item 22.
17 (a) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to
Class A Shares.
(b) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to
Class B Shares.
(c) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to
Class C Shares.
(d) -- Financial Data Schedule for the Year Ended December 31, 1994 relating to
Class D Shares.
18 -- Power of Attorney for Edward D. Zinbarg
</TABLE>
- ---------------
(a) Reference is made to Article I (Sections 1.1 and 1.2), Article II (Sections
2.1, 2.3, 2.4 and 2.7), Article III (Sections 3.1, 3.4, 3.9 and 3.10),
Article IV, Article V (Sections 5.1, 5.2, 5.3 and 5.5), Article VI
(Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.7 and 6.8), Article VII, Article VIII,
Article IX, Article X, Article XI (Sections 11.2, 11.3, 11.4 and 11.5) and
Article XII (Sections 12.3 and 12.6) of the Registrant's Declaration of
Trust filed as Exhibit 1(a) to the Registrant's Registration Statement; the
Amendments and Instrument related to Registrant's Declaration of Trust
filed as Exhibits 1(b), 1(c), 1(d) and 1(e) to the Registrant's
Registration Statement; the Certification of Amendment to Declaration of
Trust and Establishment and Designation of Classes filed as Exhibit 1(f) to
Registrant's Registration Statement; and Article I, Article V and Article
VI of the Registrant's By-Laws previously filed as Exhibit 2 to the
Registrant's Registration Statement.
(b) Filed as an Exhibit to Post-Effective Amendment No. 11 to Registrant's
Registration Statement under the Securities Act of 1933 on Form N-1A.
(c) Refiled pursuant to the Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) phase-in requirements.
<PAGE> 1
EXHIBIT 99.10
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
TELEPHONE: 212-839-5300
FACSIMILE: 212-839-5599
April 28, 1995
Merrill Lynch Global Bond Fund for Investment and Retirement
Box 9011
Princeton, NJ 08543-9011
Dear Sirs:
This opinion is furnished in connection with the registration by
Merrill Lynch Global Bond Fund for Investment and Retirement, a Massachusetts
business trust (the "Fund"), of 14,392,331 shares of beneficial interest, par
value $0.10 per share (the "Shares"), under the Securities Act of 1933 pursuant
to a registration statement on Form N-1A (File No. 33-6091), as amended (the
"Registration Statement").
As counsel for the Fund, we are familiar with the proceedings taken by
it in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Declaration of Trust of the
Fund, as amended, the By-Laws of the Fund, as amended, and such other documents
as we have deemed relevant to the matters referred to in this opinion.
<PAGE> 2
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of beneficial interest, except that shareholders
of the Fund may under certain circumstances be held personally liable for the
Fund's obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood
2
<PAGE> 1
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Global Bond Fund
for Investment and Retirement:
We consent to the use in Post-Effective Amendment No. 13 to Registration
Statement No. 33-6091 of our report dated February 3, 1995, 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
April 24, 1995
<PAGE> 1
EXHIBIT 99.16c
Global Bond for Investment & Retirement - Class C
10/21/94 - 12/31/94
<TABLE>
<CAPTION>
Since Since
Inception Inception
Avg Annual Total
Return Return*
---------- ----------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 8.96 8.96
---------- ----------
Equals Shares Purchased 111.61 111.61
Plus Shares Acquired through
Dividend Reinvestment -1.93 -1.93
---------- ----------
Equals Shares Held at 12/31/94 109.68 109.68
Multiplied by Net Asset Value at 12/31/94 8.96 8.96
---------- ----------
Equals Ending Value before deduction for
contingent deferred sales charge 982.70 982.70
Less deferred sales charge (9.73) 0.00
---------- ----------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 12/31/94 $972.97 $982.70
---------- ----------
Divided by $1,000 (P) 0.9730 0.9827
Subtract 1 -0.0270 -0.0173
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -2.70%
==========
Expressed as a percentage equals the
Aggregate Total Return for the Period -1.73%
==========
ERV divided by P 0.9730
Raise to the power of 5.1408
Equals 0.8686
Subtract 1 -0.1314
Expressed as a percentage equals the
Average Annualized Total Return -13.14%
==========
</TABLE>
<PAGE> 2
EXHIBIT 99.16c (Continued)
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 12-31-94
Global Bond for Investment & Retirement - Class C
<TABLE>
<S> <C>
Long term income generally based on yield to
maturity times market value of each security $15,108
Plus short term income accrued for the past
thirty days 2,127
-----------
Equals Total Income 17,235
Less expenses for the past thirty days -3,807
-----------
Equals net monthly income for yield calculation 13,429
-----------
Average shares outstanding for 30 days 298,493
Times the Net Asset Value 8.96
-----------
Equals total dollars $2,674,494
===========
Net monthly income divided by total dollars equals 0.005021025
Add 1 1.005021025
Raise to the power of 6 1.030506850
Subtract 1 0.030506850
Times 2 0.061013700
Expressed as a percentage equals the
standardized yield for the 30 day period 6.10%
===========
Tax Rate 28.00%
x = 1 minus Tax Rate 72.00%
Standardized Yield divided by x equals
Tax Equivalent Yield for 30 day period 8.47%
===========
</TABLE>
<PAGE> 1
EXHIBIT 99.16d
Global Bond for Investment & Retirement - Class D
10/21/94 - 12/31/94
<TABLE>
<CAPTION>
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 9.59
---------
Divided by Net Asset Value 9.21
---------
Equals Shares Purchased 104.23 108.58
Plus Shares Acquired through
Dividend Reinvestment 1.17 1.22
--------- ---------
Equals Shares Held at 12/31/94 105.41 109.80
Multiplied by Net Asset Value at 12/31/94 8.96 8.96
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 12/31/94 $ 944.46 $ 983.81
Divided by $1,000 (P) 0.9445 0.9838
Subtract 1 -0.0555 -0.0162
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -5.55%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period -1.62%
=========
ERV divided by P 0.9445
Raise to the power of 5.1408
Equals 0.7454
Subtract 1 -0.2546
Expressed as a percentage equals the
Average Annualized Total Return -25.46%
=========
</TABLE>
<PAGE> 2
EXHIBIT 99.16d (Continued)
30 DAYS STANDARDIZED YIELD
FOR THE PERIOD ENDING 12-31-94
Global Bond for Investment & Retirement - Class D
<TABLE>
<S> <C>
Long term income generally based on yield to
maturity times market value of each security $7,226
Plus short term income accrued for the past
thirty days 1,017
----------
Equals Total Income 8,243
Less expenses for the past thirty days -1,188
----------
Equals net monthly income for yield calculation 7,055
----------
Average shares outstanding for 30 days 142,814
Times the Maximum Offering Price 9.33
----------
Equals total dollars $1,332,454
==========
Net monthly income divided by total dollars equals 0.005294758
Add 1 1.005294758
Raise to the power of 6 1.032192044
Subtract 1 0.032192044
Times 2 0.064384088
Expressed as a percentage equals the standardized
yield for 30 day period 6.44%
======
Tax Rate 28.00%
X = 1 minus Tax Rate 72.00%
Standardized Yield divided by X equals
Tax Equivalent Yield for 30 day period 8.94%
======
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000794220
<NAME> ML GLOBAL BOND FUND FOR INVESTMENT & RETIREMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 802720183
<INVESTMENTS-AT-VALUE> 787406212
<RECEIVABLES> 118571579
<ASSETS-OTHER> 88361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 906066152
<PAYABLE-FOR-SECURITIES> 95989999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12888733
<TOTAL-LIABILITIES> 108878732
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 888534796
<SHARES-COMMON-STOCK> 10138497
<SHARES-COMMON-PRIOR> 10791999
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 70658935
<ACCUM-APPREC-OR-DEPREC> (20688441)
<NET-ASSETS> 90823366
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60466023
<OTHER-INCOME> 0
<EXPENSES-NET> 13786802
<NET-INVESTMENT-INCOME> 46679221
<REALIZED-GAINS-CURRENT> (88234663)
<APPREC-INCREASE-CURRENT> (16633511)
<NET-CHANGE-FROM-OPS> (58188953)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2646477
<DISTRIBUTIONS-OF-GAINS> 317003
<DISTRIBUTIONS-OTHER> 3059329
<NUMBER-OF-SHARES-SOLD> 4384679
<NUMBER-OF-SHARES-REDEEMED> 5434215
<SHARES-REINVESTED> 396034
<NET-CHANGE-IN-ASSETS> (208202940)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6135320
<GROSS-ADVISORY-FEES> 5439841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13786802
<AVERAGE-NET-ASSETS> 103188307
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> (1.07)
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> .28
<PER-SHARE-NAV-END> 8.96
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000794220
<NAME> ML GLOBAL BOND FUND FOR INVESTMENT & RETIREMENT
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 802720183
<INVESTMENTS-AT-VALUE> 787406212
<RECEIVABLES> 118570579
<ASSETS-OTHER> 88361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 906066152
<PAYABLE-FOR-SECURITIES> 95989999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12888733
<TOTAL-LIABILITIES> 108878732
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 888534796
<SHARES-COMMON-STOCK> 78233237
<SHARES-COMMON-PRIOR> 89430340
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 70658935
<ACCUM-APPREC-OR-DEPREC> (20688441)
<NET-ASSETS> 700994799
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60466023
<OTHER-INCOME> 0
<EXPENSES-NET> 13786802
<NET-INVESTMENT-INCOME> 46679221
<REALIZED-GAINS-CURRENT> (88234663)
<APPREC-INCREASE-CURRENT> (16633511)
<NET-CHANGE-FROM-OPS> (58188953)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17852973
<DISTRIBUTIONS-OF-GAINS> 2138481
<DISTRIBUTIONS-OTHER> 20638053
<NUMBER-OF-SHARES-SOLD> 17716789
<NUMBER-OF-SHARES-REDEEMED> 31626761
<SHARES-REINVESTED> 2712869
<NET-CHANGE-IN-ASSETS> (208202940)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6135320
<GROSS-ADVISORY-FEES> 5439841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13786802
<AVERAGE-NET-ASSETS> 802962681
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> (1.07)
<PER-SHARE-DIVIDEND> .20
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> .24
<PER-SHARE-NAV-END> 8.96
<EXPENSE-RATIO> 1.61
<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> 0000794220
<NAME> ML GLOBAL BOND FUND FOR INVESTMENT & RETIREMENT
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 802720183
<INVESTMENTS-AT-VALUE> 787406212
<RECEIVABLES> 118570579
<ASSETS-OTHER> 88361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 906066152
<PAYABLE-FOR-SECURITIES> 95989999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12888733
<TOTAL-LIABILITIES> 108878732
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 888534796
<SHARES-COMMON-STOCK> 403414
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 70658935
<ACCUM-APPREC-OR-DEPREC> (20688441)
<NET-ASSETS> 3614209
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60466023
<OTHER-INCOME> 0
<EXPENSES-NET> 13786802
<NET-INVESTMENT-INCOME> 46679221
<REALIZED-GAINS-CURRENT> (88234663)
<APPREC-INCREASE-CURRENT> (16633511)
<NET-CHANGE-FROM-OPS> (58188953)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7735
<DISTRIBUTIONS-OF-GAINS> 926
<DISTRIBUTIONS-OTHER> 8942
<NUMBER-OF-SHARES-SOLD> 417769
<NUMBER-OF-SHARES-REDEEMED> 15989
<SHARES-REINVESTED> 1634
<NET-CHANGE-IN-ASSETS> (208202940)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6135320
<GROSS-ADVISORY-FEES> 5439841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13786802
<AVERAGE-NET-ASSETS> 1739091
<PER-SHARE-NAV-BEGIN> 9.21
<PER-SHARE-NII> .09
<PER-SHARE-GAIN-APPREC> (.25)
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> .05
<PER-SHARE-NAV-END> 8.96
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000794220
<NAME> ML GLOBAL BOND FUND FOR INVESTMENT & RETIREMENT
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 802720183
<INVESTMENTS-AT-VALUE> 787406212
<RECEIVABLES> 118570579
<ASSETS-OTHER> 88361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 906066152
<PAYABLE-FOR-SECURITIES> 95989999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12888733
<TOTAL-LIABILITIES> 108878732
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 888534796
<SHARES-COMMON-STOCK> 195870
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 70658935
<ACCUM-APPREC-OR-DEPREC> (20688441)
<NET-ASSETS> 1755046
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 60466023
<OTHER-INCOME> 0
<EXPENSES-NET> 13786802
<NET-INVESTMENT-INCOME> 46679221
<REALIZED-GAINS-CURRENT> (88234663)
<APPREC-INCREASE-CURRENT> (16633511)
<NET-CHANGE-FROM-OPS> (58188953)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4087
<DISTRIBUTIONS-OF-GAINS> 490
<DISTRIBUTIONS-OTHER> 4725
<NUMBER-OF-SHARES-SOLD> 200576
<NUMBER-OF-SHARES-REDEEMED> 5405
<SHARES-REINVESTED> 699
<NET-CHANGE-IN-ASSETS> (208202940)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6135320
<GROSS-ADVISORY-FEES> 5439841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13786802
<AVERAGE-NET-ASSETS> 823442
<PER-SHARE-NAV-BEGIN> 9.21
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> (.25)
<PER-SHARE-DIVIDEND> .04
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> .05
<PER-SHARE-NAV-END> 8.96
<EXPENSE-RATIO> 1.12
<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)
<PAGE> 1
1(a)
DECLARATION OF TRUST
OF
MERRILL LYNCH HIGH QUALITY GLOBAL BOND-FUND
THE DECLARATION OF TRUST of Merrill Lynch High Quality Global Bond Fund is
made as of the 28th day of May, 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 High Quality Global Bond Fund", 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.
"Prospectusff 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.
2.
<PAGE> 3
"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.
3.
<PAGE> 4
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
4.
<PAGE> 5
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
5.
<PAGE> 6
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.
6.
<PAGE> 7
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, exchange, distribute or
otherwise deal in or dispose of negotiable 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 limitation, 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 instrumentalities, 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 mote
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 securities in which the Trust may invest should the
investment
7.
<PAGE> 8
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 automatically 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
8.
<PAGE> 9
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, profitsharing,-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
9.
<PAGE> 10
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.
10.
<PAGE> 11
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
tim 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
11.
<PAGE> 12
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.
12.
<PAGE> 13
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)
13.
<PAGE> 14
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 Reqired 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
14.
<PAGE> 15
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.
15.
<PAGE> 16
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,
including 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
16.
<PAGE> 17
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 Shakes 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
17.
<PAGE> 18
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.
18.
<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 *ay be permitted by the
Commission, or otherwise in accordance
19.
<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, a& 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.
21.
<PAGE> 22
8.3. Redemptions of Accounts of Less than $1,000. Due to the relati e@ly
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.
22.
<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.
24.
<PAGE> 25
ARTICLE X
Shareholders
10.1. Viting Powers. The Shareholders shall have pcwer to vote (i) foe 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.
26.
<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.
27.
<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:
Name Address Date of Birth
---- ------- -------------
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
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 Shareh6lders
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
28.
<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, 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 oil 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, without 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 consent
of Shareholders if they deem it necessary to conform this Declaration to the
requirements of applicable Federal laws or regulations 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
29.
<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 instent 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 purpose by the affirmative vote of the holders of not less than two-thirds
of the Shares, or by an instrument or instruments in writing without meeting,
consented to by the holders of not less than two-thirds of such Shares, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. In respect of any such merger, consolidation,
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
indirectly 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 corporation, 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 corporation, 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,
associations or other organizations and selling, conveying or transferring 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 n
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
amendment 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,
32.
<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
/s/ Mark B.Goldfus
Address:
/s/ Philip L Kirstein
/s/ Michael J. Hennewinkel
Address:
/s/ William M. Breen
Address
34.
<PAGE> 1
1(b)
MERRILL LYNCH HIGH QUALITY GLOBAL DIVISION
The undersigned, Philip L. Kirstein, Mark B. Goldfus and
Michael J. Hennewinkel, constituting a majority of the Trustees of Merrill Lynch
High Quality Global Bond Fund (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 7th day of July, 1986.
VOTED: That the Declaration of Trust dated May 28, 1986 be and it hereby is
amended to change the name of the Trust from "Merrill Lynch High
Quality Global Bond Fund" to "Merrill Lynch Retirement Global Bond
Fund" by striking Section 1.1 of Article I of said Declaration of
Trust and substituting therefor:
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Merrill Lynch Retirement Global Bond Fund", 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.
<PAGE> 2
IN WITNESS WHEREOF, the said Philip L. Kirstein, Mark B. Goldfus and
Michael J. Hennewinkel 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 7th day of July, 1986.
/s/ Philip L. Kirstein
79 West Shore Drive
Pennington, New Jersey 08534
/s/Mark B. Goldfus
509 Bergen Street
Lawrenceville, New Jersey 08648
/s/ Michael J. Hennewinkel
5 Bennington Way
Belle Mead, New Jersey 08502
-2-
<PAGE> 1
1(c)
1988 MERRILL LYNCH RETIREMENT GLOBAL BOND
The undersigned, constituting a majority of the Trustees of Merrill Lynch
Retirement Global Bond Fund (the "Trust"), a Massachusetts business trust,
hereby certify that the Trustees of the Trust have duly adopted the following
amendment, as approved by a majority of the shareholders of the Trust, to the
Declaration of Trust of the Trust dated the 28th day of May 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 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.
<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 trans- ferable shares of beneficial interest, par
value $0.10 per share. The number of such shares of bene- ficial 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. No
division of Shares into classes shall result in the creation of a class of
Shares having a preference as to dividends or distributions or a preference
in the event of any liquidation, termination or winding up of the Trust.
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 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); 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.
3.
<PAGE> 4
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:
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
4.
<PAGE> 5
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 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 Declara- tion 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 meet- ings 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
5.
<PAGE> 6
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 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
6.
<PAGE> 7
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, 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 3rd day of October, 1988.
/s/ Arthur Zeikel /s/ Richard R. West
279 Watchung Fork 29 Washington Square West, Apt. 4A
Westfield, New Jersey 07090 New York, New York 10011
/s/ Howard R. Hawkins /s/ Donald Cecil
33 Meadow Croft Lane 3 Stratford Road
Greenwich, Connecticut 06830 Harrison, New York 10528
/s/ Dr. John Oswald
9500 Marstan Road
Philadelphia, Pennsylvania 19118
8.
<PAGE> 1
1(d)
MERRILL LYNCH RETIREMENT GLOBAL BOND
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
Retirement Global Bond Fund, 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 $.lo 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.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned, have signed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust this 3rd day of October 1988.
/s/ Arthur 2eikel /s/Richard R. West
279 Watchung Fork 29 Washington Square West, Apt. 4A
Westfield, New Jersey 07090 New York, New York 10011
/s/ Howard R. Hawkins /s/ Donald Cecil
33 Meadow Croft Lane 3 Stratford Road
Greenwich, Connecticut 06830 Harrison, New York 10528
/s/ Dr. John Oswald
9500 Marstan Road
Philadelphia, Pennsylvania 19118
The Declaration of Trust establishing Merrill Lynch Retirement Global Bond
Fund, dated May 28, 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 Retirement
Global Bond Fund" 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 Retirement Global Bond 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 or otherwise in
connection with the affairs of said Trust but the Trust Property only shall be
liable.
2.
<PAGE> 1
1(e)
MERRILL LYNCH RETIREMENT GLOBAL BOND FUND
THE UNDERSIGNED, constituting a majority of the Trustees, of Merrill Lynch
Retirement Global Bond Fund, a Massachusetts business trust, acting pursuant to
Section 1.1 of the Declaration of Trust dated May 28, 1986, as amended, do
hereby consent to and adopt the following resolution.
RESOLVED, that the Declaration of Trust dated May 28, 1986, as amended, be
and it hereby is amended to change the name of the Trust from "Merrill Lynch
Retirement Global Bond Fund" to "Merrill Lynch Global Bond Fund for Investment
and Retirement" in the following manner:
1.1 Name. The name of the trust created hereby (the "Trust") shall be
"Merrill Lynch Global Bond Fund for Investment and Retirement," 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 be 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.
/s/ Richard West /s/ Donald Cecil
/s/ Edward H, Meyer /s/ Howard R. Hawkins
/s/ Dr. John Oswald /s/ Charles C. Reilly
/s/ Arthur Zeikel
The Declaration of Trust establishing the Fund, dated as of
<PAGE> 2
May 28, 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 Retirement Global Bond
Fund" 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.
<PAGE> 1
1(f)
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
Certification Of Amendment
To Declaration Of Trust
and
Establishment and Designation of Classes
The undersigned, constituting a majority of the Trustees of Merrill Lynch
Global Bond Fund for Investment and Retirement (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
<PAGE> 2
substantially adversely affect the preference, conversion or 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.
/s/ Donald Cecil /s/ Edward H. Meyer
- --------------------------- ------------------------------
Donald Cecil Edward H. Meyer
3 Stratford Road 580 Park Avenue
Harrison, NY 10528 New York, NY 10021
/s/ Charles C. Reilly /s/ Richard R. West
- --------------------------- ------------------------------
Charles C. Reilly Richard R. West
9 Hampton Harbor Road 482 Tepi Drive
Hampton Bays, NY 11946 Southbury, CT 06488
/s/ Arthur Zeikel
- ---------------------------
Arthur Zeikel
300 Woodland Avenue
Westfield, NJ 07090
The Declaration of Trust establishing Merrill Lynch Global Bond Fund for
Investment and Retirement, dated May 28, 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 Global Bond Fund for Investment and Retirement," 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 Global Bond Fund for Investment and Retirement 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
2
================================================================================
BY-LAWS
OF
MERRILL LYNCH GLOBAL BOND
FUND FOR INVESTMENT AND RETIREMENT
================================================================================
<PAGE> 2
MERRILL LYNCH GLOBAL BOND
FUND FOR INVESTMENT AND RETIREMENT
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT
AND RETIREMENT, dated May 28, 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.
<PAGE> 3
Section 1.3. Closing of Transfer Books and Fixing Record Dates. For the
purpose of determining the Shareholders who are 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
3
<PAGE> 4
Inspector fails to appear or fails or refuses to act, the vacancy may be filled
by appointment made by the Trustees in advance of 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
4
<PAGE> 5
transfer books, as the case may be. Such list of Shareholders shall contain the
name of each Shareholder in alphabetical order 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
5
<PAGE> 6
mailed not later than 48 hours preceding the meeting and if given by telegram or
personally, such telegram shall be sent or 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.
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<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.
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<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
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<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
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<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
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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
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<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
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<PAGE> 13
the same force and effect as if it had een imprinted and attested manually in
the same manner and with the same effect s 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
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<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.
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<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.
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<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 Global Bond Fund for Investment
and Retirement, 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 Global Bond Fund for Investment and
Retirement" 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 Global Bond Fund for Investment and
Retirement 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 Global Bond Fund
for Investment and Retirement but the "Trust Property" only shall be liable.
(Rev. 1/95)
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<PAGE> 1
5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 17th day of July, 1986, by and between MERRILL LYNCH
RETIREMENT GLOBAL BOND FUND, a Massachusetts business trust (hereinafter
referred to as the "Trust"),and INC., a Delaware corporation MERRILL LYNCH ASSET
MANAGEMENT, (.hereinafter referred to as the "lnvestment Adviser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Trust is engaged in business as a diversified open-end
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Adviser's Act of 1940; and
WHEREAS, the Trust's assets will be invested primarily in a portfolio of
debt instruments denominated in various currencies and multi-national currency
units; and
WHEREAS, the Trust desires to retain the Investment Adviser to provide
management and investment advisory services to the Trust in the manner and on
the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Trust on the terms and conditions
hereinafter set forth;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Investment Adviser hereby agree as
follows:
ARTICLE I
Duties of the Investment Adviser
The Trust hereby employs the Investment Adviser to act as a manager and
investment adviser of the Trust and to furnish, or arrange for affiliates to
furnish, the management and investment advisory services described below,
subject to the polices of, review by and overall control of the Board of
Trustees of the Trust, for the period and on the terms and conditions set forth
in this Agreement. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The Investment Adviser and its affiliates
shall for all purposes herein be deemed to be independent contractors and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Trust in any way or otherwise be deemed agents of the
Trust.
(a) Management Services. The Investment Adviser shall perform (or arrange
for the performance by affiliates of) the management and administrative services
necessary for the operation of the Trust including administering shareholder
accounts and handling shareholder relations. The Investment Adviser shall
provide the Trust with office space, facilities, equipment and
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<PAGE> 3
necessary personnel and such other services as the Investment Adviser, subject
to review by the Trustees, shall from time to time determine to be necessary or
useful to perform its obligations under this Agreement. The Investment Adviser
shall also, on behalf of the Trust, conduct relations with custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder
servicing agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such other
capacity deemed to be necessary or desirable. The Investment Adviser shall
generally monitor the Trust's compliance with investment policies and
restrictions as set forth in the currently effective prospectus and statement of
additional information relating to the shares of the Trust under the Securities
Act of 1933, as amended (the "prospectus" and 'Statement of Additional
Information', respectively). The Investment Adviser shall make reports to the
Trustees of its performance of obligations hereunder and furnish advice and
recommendations with respect to such other aspects of the business and affairs
of the Trust as it shall determine to be desirable.
(b) Investment Advisory Services. The Investment Adviser shall provide the
Trust with such investment research, advice and supervision as the latter may
from time to time consider necessary for the proper supervision of the assets
of the Trust, shall furnish continuously an investment program for the Trust and
shall determine from time to time which securities shall be
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<PAGE> 4
purchased, sold or exchanged and what portion of the assets of the Trust shall
be held in the various securities in which the Trust invests or cash, subject
always to the restrictions of the Declaration of Trust and By-Laws of the Trust,
as amended from time to time, the provisions of the Investment Company Act and
the statements relating to the Trust's investment objectives, investment
policies and investment restrictions as the same are set forth in the Prospectus
and Statement of Additional Information. The Investment Adviser shall make
decisions for the Trust as to foreign currency matters and make determinations
as to foreign exchange contracts. The Investment Manager shall make decisions
for the Trust as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Trust's portfolio
securities shall be exercised. Should the Trustees at any time, however, make
any definite determination as to investment policy and notify the Investment
Adviser thereof in writing, the Investment Adviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Adviser shall take, on behalf of the Trust, all actions which it deems necessary
to implement the investment policies determined as provided above, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Trust's account with brokers or dealers selected by it, and to that
end, the Investment Adviser is authorized as the agent of the Trust to give
instructions to the Custodian
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<PAGE> 5
of the Trust as to deliveries of securities and payments of cash for the account
of the Trust. In connection with the selection of such brokers or dealers and
the placing of such orders with respect to assets of the Trust, the Investment
Adviser is directed at all times to seek to obtain execution and prices within
the policy guidelines determined by the Trustees and set forth in the Prospectus
and Statement of Additional Information. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Investment Adviser may
select brokers or dealers with which it or the Trust is affiliated.
ARTICLE II
Allocation of Charges and Expenses
(a) The Investment Adviser. The Investment Adviser assumes and shall pay
for maintaining the staff and personnel necessary to perform its obligations
under this Agreement, 'and shall at its own expense, provide the office space,
facilities, equipment and necesary personnel which it is obligated to provide
under Article I hereof, and shall pay all compensation of officers of the Trust
and all trustees of the Trust who are affiliated persons of the Investment
Adviser.
(b) The Trust. The Trust assumes and shall pay or cause to be paid all
other expenses of the Trust (except for the expenses paid by the Distributor),
including, without limitation: taxes, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder reports, prospec-
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<PAGE> 6
tuses and statements of additional information, charges of the Custodian, any
Sub-Custodian and Transfer Agent, expenses of portfolio transactions expenses of
redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under Federal, state and foreign laws, fees and actual
out-of-pocket expenses of trustees who are not affiliated persons of the
Investment Adviser, accounting and pricing costs (including the daily
calculation of the net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and other expenses
Properly payable by the Trust. It is also understood that the Trust will
reimburse the Investment Adviser for its costs in providing accounting services
to the Trust. The Distributor will pay certain of the expenses of the Trust
incurred in connection with the continuous offering of beneficial shares of
interest in the Trust.
ARTICLE III
Compensation of the Investment Adviser
(a) Management and Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Investment Adviser, the Trust
shall pay to the Investment Adviser at the end of each calendar month a fee
based upon the average daily value of the net assets of the Trust, as determined
and computed in accordance with the description of the determination of net
asset value contained in the Prospectus and Statement of Additional
Information, at the annual rate of .60 of 1.0%
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<PAGE> 7
(0.60%) of the average daily net assets of the Trust, commencing the day
following effectiveness hereof. If this Agreement on becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fee as set
forth above. Subject to the provisions of subsection (b) hereof, payment of the
Investment Adviser's compensation for the preceding month shall be made as
promptly as possible after completion of the 'computations contemplated by
subsection (b) hereof. During any period when the determination of net asset
value is suspended by the Trustees, the net asset value of a share as of the
last business day prior to such suspension shall for this purpose be deemed to
be the net asset value at the close of each succeeding business day until it is
again determined.
(b) Expense Limitations. In the event the operating expenses of the Trust,
including amounts payable to the Investment Adviser pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Trust imposed by appli-
cable state securities laws or regulations thereunder, as such limitations may
be raised or lowered from time to time, the Investment Adviser shall reduce its
investment advisory fee by the extent of such excess and, if required pursuant
to any such laws or regulations, will reimburse the Trust in the amount of such
excess; provided, however, to the extent permitted by law,
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<PAGE> 8
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited to
legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Trust. Whenever the expenses of the
Trust exceed a pro rata portion of the applicable annual expense limitations,
the estimated amount of reimbursement under such limitations shall be applicable
as an offset against the monthly payment of the fee due to the Investment
Adviser. Should two or more such expenses limitations be applicable as at the
end of the last business day of the month, that expense limitation which results
in the largest reduction in the Investment Adviser's fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Trust contemplated hereby and
directors, officers and employees of the Investment Adviser and such affiliates.
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<PAGE> 9
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Trust are not to be deemed to
be exclusive, the Investment Adviser and any person controlled by or under
common control with the Investment Adviser (for purposes of the Article V
referred to as "affiliates") is free to render services to others. It is
understood that Trustees, officers, employees and shareholders of the Trust are
or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees, partners, and shareholders or otherwise and that
directors, officers, employees, partners, and shareholders of the Investment
Adviser and its affiliates are or may become similarly interested in the Trust,
and that the Investment Adviser and directors, officers, employees, partners,
and shareholders of its affiliates may become interested in the Trust as
shareholder or otherwise.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first above written
and shall remain in force until June 30, 1988 and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the
Trustees, or by the vote of a majority of the outstanding voting securities of
the Trust, and (ii) a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in
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<PAGE> 10
person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Trust, or by the Investment Adviser, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Trust, and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act of 1940 and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act.
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<PAGE> 11
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH RETIREMENT GLOBAL BOND
FUND
By
----------------------------------
MERRILL LYNCH MANAGEMENT, INC.
By
----------------------------------
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<PAGE> 1
6(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between MERRILL LYNCH
GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT, a Massachusetts business trust
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation
(the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class A shares of
beneficial interest in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund
hereby appoints the Distributor as the principal underwriter and
distributor of the Fund to sell Class A shares of beneficial
interest in the Fund (sometimes herein referred to as "Class A
shares") to eligible investors (as defined below) and hereby
<PAGE> 2
agrees during the term of this Agreement to sell Class A shares of the Fund to
the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to time
designate other principal underwriters and distributors of Class A shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
Class A shares in the areas so designated shall terminate, but this Agreement
shall remain otherwise in full effect until terminated in accordance with the
other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class A shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2
<PAGE> 3
(d) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class A shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class A shares from the Fund.
(a) The Distributor shall have the right to buy from the Fund the Class A
shares needed, but not more than the Class A shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class A shares of the
Fund placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class A shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of additional
information", respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such Class A shares ("eligible investors"). The
price which the Distributor shall pay for the Class A shares so purchased from
the Fund shall be the net asset value, determined as set forth in Section 3(d)
hereof, used in determining the public offering price on which such orders were
based.
(b) The Class A shares are to be resold by the Distributor to eligible
investors at the public offering price, as set forth in Section 3(c) hereof, or
to securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
3
<PAGE> 4
(c) The public offering price(s) of the Class A shares, i.e., the price per
share at which the Distributor or selected dealers may sell Class A shares to
eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class A shares, plus a sales charge not to exceed 4.0% of the
public offering price (4.17% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain Trustees, officers
and employees of the Fund, directors and employees of Merrill Lynch & Co., Inc.
and its subsidiaries, and to certain other persons described in the prospectus
and statement of additional information, without a sales charge or at a reduced
sales charge, upon terms and conditions set forth in the prospectus and
statement of additional information. If the public offering price does not equal
an even cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
(d) The net asset value of Class A shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Trustees.
4
<PAGE> 5
(e) The Fund shall have the right to suspend the sale of its Class A shares
at times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof. The Fund shall also have the right to suspend the sale of
its Class A shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by Federal or New
York authorities, or if there shall have been some other event, which, in the
judgment of the Fund, makes it impracticable or inadvisable to sell the Class A
shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares from eligible investors. The
Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
5
<PAGE> 6
Section 4. Repurchase or Redemption of Class A shares by the Fund.
(a) Any of the outstanding Class A shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its obligations as set forth in Article VIII of its
Declaration of Trust, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus and statement of additional
information. The price to be paid to redeem or repurchase the Class A shares
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class A shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class A
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class A shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of
6
<PAGE> 7
the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the Fund
as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii)
the balance shall be paid to or for the account of the shareholder, in each case
in accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
7
<PAGE> 8
such number of opies of the prospectus and statement of additional information
as the istributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class A shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for
sale such number of Class A shares as the Distributor may reasonably be expected
to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect sales
of Class A shares of the Fund but shall not be obligated to sell any specific
number of Class A shares. The
8
<PAGE> 9
services of the Distributor to the Fund hereunder are not to be deemed exclusive
and nothing herein contained shall prevent the Distributor from entering into
like arrangements with other investment companies so long as the performance
of its obligations hereunder is not impaired thereby.
(b) In selling the Class A shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to eligible investors and
selected dealers, the collection of amounts payable by eligible investors and
selected dealers on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the National Association
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice
9
<PAGE> 10
("selected dealers") for the sale of Class A shares and fix therein the portion
of the sales charge which may be allocated to the selected dealers; provided
that the Fund shall approve the forms of agreements with dealers and the dealer
compensation set forth therein. Class A shares sold to selected dealers shall be
for resale by such dealers only at the public offering price(s) set forth in the
prospectus and statement of additional information. The form of agreement with
selected dealers to be used during the continuous offering of the Class A shares
is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class A
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class A
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
10
<PAGE> 11
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to eligible investors and any
expenses of advertising incurred by the Distributor in connection with such
offering.
(c) The Fund shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Fund and the Distributor pursuant to Section 5(c) hereof and the
cost and expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification pursuant to
Section 5(c) hereof.
11
<PAGE> 12
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class A shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties
or by reason of the reckless disregard
12
<PAGE> 13
of their obligations and duties under this Agreement; or (ii) is the Fund to be
liable under its indemnity agreement contained in this paragraph with respect to
any claim made against the Distributor or any such controlling persons, unless
the Distributor or such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them, but in case the Fund does
not elect to assume the defense of any such suit, it will reim-
13
<PAGE> 14
burse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Trustees in connection with the issuance or sale of any of the Class A
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund against
any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class A shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
the Merrill Lynch Mutual Fund Adviser Program,
14
<PAGE> 15
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, are authorized to offer and sell shares of the Fund, as agent for
the Fund, to participants in such program. The terms of this Agreement shall
apply to such sales, including terms as to the offering price of shares, the
proceeds to be paid to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until October 21, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Trustees or by
the vote of a majority of the outstanding voting securities of the Fund and (ii)
by the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice
to the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested
15
<PAGE> 16
person", when used in this Agreement, shall have the respective meanings
specified in the Investment Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 14. This Agreement supersedes the prior Distribution Agreement
entered into by the parties hereto with respect to the Class A shares of the
Fund.
Section 15. Personal Liability. The Declaration of Trust establishing the
Fund, dated May 28, 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 Global Bond
Fund for Investment and Retirement" refers to the Trustees under
16
<PAGE> 17
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 or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH GLOBAL BOND FUND FOR
INVESTMENT AND RETIREMENT
By
---------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
---------------------------------------
Title:
17
<PAGE> 18
EXHIBIT A
MERRRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT
CLASS A SHARES OF BENEFICIAL INTEREST
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Global Bond Fund for Investment and Retirement, a
Massachusetts business trust (the "Fund"), pursuant to which it acts as the
distributor for the sale of Class A shares of beneficial interest, par value
$0.10 per share (herein referred to as "Class A shares"), of the Fund and as
such has the right to distribute Class A shares of the Fund for resale. The Fund
is an open-end investment company registered under the Investment Company Act of
1940, as amended, and its Class A shares are registered under the Securities Act
of 1933, as amended. You have received a copy of the Class A shares Distribution
Agreement (the "Distribution Agreement") between ourself and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms "Prospectus" and "Statement of Additional Information" used herein
refer to the prospectus and statement of additional information, respectively,
on file with the Securities and Exchange Commission which is part of the most
recent effective registration statement pursuant to the Securities Act of 1933,
as amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class A shares of the Fund for resale to investors identified in the Prospectus
and Statement of Additional Information as eligible to purchase Class A shares
("eligible investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional
<PAGE> 19
Information of the Fund. The procedure relating to the handling of orders shall
be subject to Section 5 hereof and instructions which we or the Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by the Distributor or the Fund in the sole discretion of either. The
minimum initial and subsequent purchase requirements are as set forth in the
current Prospectus and Statement of Additional Information of the Fund.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- -------------- -----------
<S> <C> <C> <C>
Less than $25,000 4.00% 4.17% 3.75%
$25,000 but less
than $50,000 3.75% 3.90% 3.50%
$50,000 but less
than $100,000 3.25% 3.36% 3.00%
$100,000 but less
than $250,000 2.50% 2.56% 2.25%
$250,000 but less
than $1,000,000 1.50% 1.52% 1.25%
$1,000,000 and over** 0.00% 0.00% 0.00%
</TABLE>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as
set forth in the current Prospectus and Statement of Additional Information
of the Fund. Such purchases may be subject to a contingent deferred sales
charge as set forth in the current Prospectus and Statement of Additional
Information.
2
<PAGE> 20
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Fund or Class A shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class A
shares of the Fund at the offering price applicable to the total of (a) the
public offering price of the shares then being purchased plus (b) an amount
equal to the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares of
the Fund and of any other investment company with an initial sales charge for
which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
3
<PAGE> 21
4. You shall not place orders for any of the Class A shares unless you have
already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class A shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or
4
<PAGE> 22
responsibility to you in these respects unless expressly assumed in connection
therewith.
9. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class A shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Fund will represent your acceptance of this Agreement.
5
<PAGE> 23
16. This Agreement supersedes any prior Selected Dealers Agreement entered
into by the parties hereto with respect to the Class A shares of the Fund.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
---------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
--------------------------------------------
By:
---------------------------------------------------
Address: 800 Scudders Mill Road
----------------------------------------------
Plainsboro, New Jersey 08536
-------------------------------------------------------
Date: October 21, 1994
-------------------------------------------------
6
<PAGE> 1
6(b)
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 17th day of July, 1986 between MERRILL LYNCH
RETIREMENT GLOBAL BOND FUND, a Massachusetts business trust (the "Trust"), and
MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended to date (the "lnvestment Company Act"), as an-open-end investment
company and it is affirmatively in the interest of the Trust to offer its shares
for sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Trust's shares in
order to promote the growth of the Trust and facilitate the distribution of its
shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Trust hereby appoints the
Distributor as the principal underwriter and distributor of the Trust to sell
shares of beneficial interest of
<PAGE> 2
the Trust (sometimes herein referred to as "shares") to the public and hereby
agrees during the term of this Agreement to sell shares of the Trust to the
Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Trust to act as principal underwriter and
distributor, except that:
(a) The Trust may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of its shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
shares in the areas so designated shall terminate, but this Agreement shall
remain otherwise in full effect until terminated in accordance with the other
provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase shares from
the Trust shall not apply to shares of the Trust issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Trust or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Trust.
2.
<PAGE> 3
(c) Such exclusive rights also shall not apply to shares issued by the
Trust pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive rights also shall not apply to shares issued by the
Trust pursuant to the reinstatement privilege afforded redeeming shareholders.
Section 3. Purchase of Shares from the Trust.
(a) Prior to the continuous offering of the shares, commencing on a date
agreed upon by the Trust and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for shares during a subscription period
which shall last for such period as may be agreed upon by the parties hereto.
The subscriptions will be payable within six business days after the termination
of the subscription period, at which time the Trust will commence operations.
(b) After the Trust commences operations, the Trust will commence an
offering of its shares and thereafter the Distributor shall have the right to
buy from the Trust the shares needed, but not more than the shares needed
(except for clerical errors in transmission) to fill unconditional orders for
shares of the Trust placed with the Distributor by investors or securities
dealers. The price which the Distributor shall -pay for the shares so purchased
from the Trust shall be the net asset value, determined as set forth in Section
3(e) hereof.
(c) The shares are to be resold by the Distributor to investors at net
asset value, as set forth in Section 3(e)
3.
<PAGE> 4
hereof, or to securities dealers having agreements with the Distributor upon
the terms and conditions set forth in Section 7 hereof.
(d) The net asset value of shares of the Trust shall be determined by the
Trust or any agent of the Trust in accordance with the method set forth in the
prospectus and statement of additional information of the Trust and guidelines
established by the Trustees.
(e) The Trust shall have the right to suspend the sale of its shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof. The Trust shall also have the right to suspend the sale of
its shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by Federal or New York
authorities, or if there shall have been some other event, which, in the
judgment of the Trust, makes it impracticable or inadvisable to sell the shares.
(f) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase orders for shares received by
the Distributor. Any order may be rejected by the Trust; provided, however, that
the Trust will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Trust (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and, upon receipt
by the Trust (or its agent) of payment therefor, will deliver deposit receipts
or
4
<PAGE> 5
certificates for such shares pursuant to the instructions of the Distributor.
Payment shall be made to the Trust in New York Clearing House funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Trust (or its agent).
Section 4. Repurchase or Redemption of Shares by the Trust.
(a) Any of the outstanding shares may be tendered for redemption at any
time, and the Trust agrees to repurchase or redeem the shares so tendered in
accordance with its obligations as set forth in Article VIII of its Declaration
of Trust, as amended from time to time, and in accordance with the applicable
provisions set forth in the prospectus and statement of additional information
of the Trust. The price to be paid to redeem or repurchase the shares shall be
equal to the net asset value calculated in accordance with the provisions of
Section 3(e) hereof, less the redemption fee or other charge, if any, set forth
in the prospectus and statement of additional information of the Trust. All
payments by the Trust hereunder shall be made in the manner set forth below.
The Trust shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Trust as follows: (i) any applicable contingent deferred sales
charge shall be paid to the Distributor and (ii) the balance
<PAGE> 6
shall be paid to or for the account of the shareholder, in each case in
accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of shares or payment may be suspended at times when the New
York Stock Exchange is closed, when trading on said Exchange is closed, when
trading on said Exchange is restricted, when an emergency exists as a result of
which disposal by the Trust of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Trust.
(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of the Trust, and
this shall include, upon request by the Distributor, one certified copy of all
financial statements prepared for the Trust by independent public accountants.
The Trust shall make available to the Distributor such number of copies of its
prospectus and statement of additional information as the Distributor shall
reasonably request.
(b) The Trust shall take, from time to time, but subject to the necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be
<PAGE> 7
necessary to register the same under the Securities Act of 1933, as amended (the
"Securities Act"), to the end that there will be available for sale such number
of shares as the Distributor reasonably may be expected to sell.
(c) The Trust shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its shares for sale under the
securities laws of such states as the Distributor and the Trust may approve. Any
such qualification may be withheld, terminated or withdrawn by the Trust at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Trust. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Trust in connection with such
qualification.
(d) The Trust will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports, of the Trust.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect sales
of shares of the Trust, but shall not be obligated to sell any specific number
of shares. The services of the Distributor to the Trust hereunder are not to be
deemed exclusive and nothing herein contained shall prevent the Distributor from
entering into like arrangements with other
7.
<PAGE> 8
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the shares of the Trust, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all Federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
registration statement or related prospectus and statement of additional
information and any sales literature specifically approved by the Trust.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of shares; provided, that the Trust shall approve the forms of agreements
with dealers. Shares sold to selected dealers shall be for resale by such
dealers only at net asset value determined as set forth in Section 3(d)
8.
<PAGE> 9
hereof. The form of agreement with selected dealers to be used during the
subscription period described in Section 3(a) is attached hereto as Exhibit A
and the initial form of agreement with selected dealers to be used in the
continuous offering of the shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell shares
only to such selected dealers as are members in good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Trust shall bear all costs and expenses of the Trust, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials)
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs
9.
<PAGE> 10
and expenses of printing and distributing any copies thereof which are to be
used in connection with the offering of shares to selected dealers or investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the shares for sale to the public and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that, so long as the Trust's Distribution Plan pursuant to
Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor hereunder may be paid from amounts recovered by it
from the Trust under such Plan.
(c) The Trust shall bear the cost and expenses of qualification of the
shares for sale pursuant to this Agreement, and, if necessary or advisable in
connection therewith, of qualifying the Trust as a broker or dealer, in such
states of the United States or other jurisdictions as shall be selected by the
Trust and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Trust decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Trust shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including
10.
<PAGE> 11
the reasonable cost of investigating or defending any alleged loss, liability,
claim, damage or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares, which may be
based upon the Securities Act, or on any other statute or at common law, on the
ground that the registration statement or related prospectus and statement of
additional information, as from time to time amended and supplemented, or an
annual or interim report to shareholders of the Trust, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Trust in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Trust in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor or any such controlling persons
thereof against any liability to the Trust or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Trust to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling persons, unless
11.
<PAGE> 12
the Distributor or such controlling persons, as the case may be, shall have
notified the Trust in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
I or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the Distributor of the commencement of any
12.
<PAGE> 13
litigation or proceedings against it or any of its officers or trustees in
connection with the issuance or sale of any of the shares.
(b) The Distributor shall indemnify and hold harmless the Trust and each of
its trustees and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to shareholders. In case any action shall be brought against
the Trust or any person so indemnified, in respect of which indemnity may be
sought against the Distributor, the Distributor shall have the rights and duties
given to the Trust, and the Trust and each person so indemnified shall have the
rights and duties given to the Distributor by the provisions of subsection (a)
of this Section 9.
Section 10. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until June 30 1988 and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Trustees, or by the vote of a
majority of the outstanding voting securities of the Trust, and
13.
<PAGE> 14
(ii) by the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Trust, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities',
'assignment', 'affiliated person' and 'interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees,
or by the vote of a majority of outstanding voting securities of the Trust, and
(ii) by the vote of a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
Section 12. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the
14.
<PAGE> 15
extent that the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 13. Personal Liability. The Declaration of Trust establishing
Merrill Lynch Retirement Global Bond Fund, dated May 28, 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 Retirement Global Bond Fund' 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 or otherwise in
connection with the affairs of the Trust, but the "Trust Property' only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT GLOBAL
BOND FUND
By /s/
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
15.
<PAGE> 16
EXHIBIT B
MERRILL LYNCH RETIREMENT GLOBAL BOND FUND
SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the 'Distributor') has an agreement
with Merrill Lynch Retirement Global Bond Fund, a Massachusetts business trust
(the 'Trust') , pursuant to which it acts as the distributor for the sale of
shares of beneficial interest, par value $0.10 per share, of the Trust, and as
such has the right to distribute shares of the Trust for resale. The Trust is
an open-end investment company registered under the Investment Company Act of
1940, as amended, and its shares being offered to the public are registered
under the Securities Act of 1933, as amended. You have received a copy of the
Distribution Agreement between ourself and the Trust and reference is made
herein to certain provisions of such Distribution Agreement. The terms
"Prospectus" and 'Statement of Additional Information" as to the prospectus and
statement of additional used herein refer information, respectively, on file
with the Securities and Exchange Commission which is part of the most recent
effective registration statement pursuant to the Securities Act of 1933, as
amended. As principal, we offer to sell to you, as a member of the Selected
Dealers Group, shares of the Trust upon the following terms and conditions:
1. in all sales of these shares to the public you shall act as dealer for
your own account, and in no transaction shall you have any authority to act as
agent for the Trust, for us or for any other member of the Selected Dealers
Group.
2. orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Trust. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Trust shall forward from time to time to you. All orders are
subject to acceptance or rejection-by the Distributor or the Trust in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Trust.
3. You shall not place orders for any of the shares unless you have already
received purchase orders for such shares at the applicable public offering
prices and subject to the. terms hereof and of the Distribution Agreement. You
agree that you.will not
<PAGE> 17
offer or sell any of the shares except under circumstances that will result in
compliance with the applicable Federal and state securities laws and that in
connection with sales and offers to sell shares you will furnish to each person
to whom any such sale or offer is made a copy of the Prospectus and, if
requested, the Statement of Additional Information (as then amended or
supplemented) and will not furnish to any person any information relating to the
shares of the Trust, which is inconsistent in any respect with the information
contained in the Prospectus and Statement of Additional information (as then
amended or supplemented) or cause any advertisement to be published in any
newspaper or posted in any public place without our consent and the consent of
the Trust.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Trust for shares of the Trust to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement, and (ii) to tender
shares directly to the Trust or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
'net asset value' from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning shares of
the Trust except those contained in the current Prospectus and Statement of
Additional information of the Trust and in such printed information subsequently
issued by us or the Trust as information supplemental to such Prospectus and
Statement of Additional Information. In purchasing shares through us you shall
rely solely on the representations contained in the Prospectus and Statement of
Additional Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Trust's Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material are our
sole responsibility and not the responsibility of the Trust, and you agree that
the Trust shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making Purchases from you a
copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and Proxy solicitation materials of the Trust. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information,
2.
<PAGE> 18
annual or interim reports and proxy solicitation materials of the Trust will be
supplied to you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of shares entirely. Each party hereto has the right to
cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. we
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states,, but we assume
no responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
3
<PAGE> 19
13. Your first order placed pursuant to this Agreement for the purchase of
shares of the Trust will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
(Authorized Signature)
Please return one signed copy of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:
By:
Address:
Date:
4
<PAGE> 1
6(d)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994, between Merrill Lynch
Global Bond Fund for Investment and Retirement, a Massachusetts business trust
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation
(the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for
sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class C shares
in order to promote the growth of the Fund and facilitate the distribution of
its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class C shares of beneficial interest in the Fund (sometimes herein referred to
as "Class C
<PAGE> 2
shares") to the public and hereby agrees during the term of this Agreement to
sell shares of the Fund to the Distributor upon the terms and conditions herein
set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class C shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class C
shares of any such company by the Fund.
2
<PAGE> 3
(c) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class C shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
(a) It is contemplated that the Fund will commence an offering of its
Class C shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class C shares needed, but not more than the Class C shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class C shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class C shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the Class C shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(c) hereof.
3
<PAGE> 4
(b) The Class C shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class C shares of the Fund shall be determined
by the Fund or any agent of the Fund in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Board of Trustees.
(d) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class C shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class C shares.
(e) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class C shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund
4
<PAGE> 5
(or its agent) will confirm orders upon their receipt, will make appropriate
book entries and, upon receipt by the Fund (or its agent) of payment therefor,
will deliver deposit receipts or certificates for such Class C shares pursuant
to the instructions of the Distributor. Payment shall be made to the Fund in
New York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund.
(a) Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class C shares so
tendered in accordance with its obligations as set forth in Article VIII of its
Declaration of Trust, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus and statement of additional
information of the Fund. The price to be paid to redeem or repurchase the Class
C shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(c) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below.
5
<PAGE> 6
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class C shares of the
Fund, and this shall in- clude, upon request by the Distributor, one certified
copy of all
6
<PAGE> 7
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
prospectus and statement of addi- tional information as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act to the end that there will be available for sale such number
of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
7
<PAGE> 8
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclu- sive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment com- panies so long as the performance of its obligations hereunder
is not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any se- lected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be neces-
sary to comply with the requirements of the National Association
8
<PAGE> 9
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealer Agreements.
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements,
9
<PAGE> 10
prospectuses, statements of additional information, annual or interim reports or
proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial con- sultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class C shares for sale to the public and any expenses of advertising
incurred by the Dis- tributor in connection with such offering. It is
understood and agreed that so long as the Fund's Class C Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor here- under may be paid from amounts
recovered by it from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali-
10
<PAGE> 11
fying the Fund as a broker or dealer in such states of the United States or
other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class C
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, in- formation
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i)
11
<PAGE> 12
is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be
12
<PAGE> 13
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the
event the Fund elects to assume the defense of any such suit and retain such
counsel, the Distributor or such controlling person or persons, defendant or
defendants in the suit shall bear the fees and expenses, as incurred, of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses, as incurred, of any counsel retained by them. The
Fund shall promptly notify the Distributor of the commence- ment of any
litigation or proceedings against it or any of its officers or Trustees in
connection with the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund against
any loss, liability, claim, damage or expense, as incurred, described in the
foregoing indem- nity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the
13
<PAGE> 14
annual or interim reports to shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distri- butor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above written
and shall remain in force until October 21, 1995 and thereafter, but only for so
long as such continuance is specifically approved at least annually by (i) the
Directors or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any
14
<PAGE> 15
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifi- cally approved by (i) the
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any
15
<PAGE> 16
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
Section 14. Personal Liability. The Declaration of Trust establishing
the Fund, dated May 28, 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 Global Bond
Fund for Investment and Retirement" 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 or otherwise in connection with the
affairs of the Fund, but the "Trust Property" only shall be liable.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
By
-----------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By -----------------------------------
Title:
16
<PAGE> 17
EXHIBIT A
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
CLASS C SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Global Bond Fund for Investment and Retirement, a
Massachusetts business trust (the "Fund"), pursuant to which it acts as the
distributor for the sale of Class C shares of beneficial interest, par value
$0.10 per share (herein referred to as the "Class C shares"), of the Fund and as
such has the right to distribute Class C shares of the Fund for resale. The
Fund is an open-end investment company registered under the Investment Company
Act of 1940, as amended, and its Class C shares being offered to the public are
registered under the Securities Act of 1933, as amended. You have received a
copy of the Class C Shares Distribution Agreement (the "Distribution Agreement")
between ourself and the Fund and reference is made herein to certain provisions
of such Distribution Agreement. The terms "Prospectus" and "Statement of
Additional Information" as used herein refer to the prospectus and statement of
additional information, respectively, on file with the Securities and Exchange
Commission which is part of the most recent effective registration statement
pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as
a member of the Selected Dealers Group, Class C shares of the Fund upon the
following terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All
1
<PAGE> 18
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum ini- tial and subsequent purchase
requirements are as set forth in the current Prospectus and Statement of
Additional Information of the Fund.
3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of Addi-
tional Information (as then amended or supplemented) and will not furnish to any
person any information relating to the Class C shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Addi- tional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Sec- tion 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such with- holding: e.g., by a change in
the "net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class C
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Informa- tion and supplemental
information above mentioned. Any printed information which we furnish you other
than the Fund's Prospec- tus, Statement of Additional Information, periodic
reports and proxy solicitation material is our sole responsibility and not
2
<PAGE> 19
the responsibility of the Fund, and you agree that the Fund shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon re- quest.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or tele- graphed to you at the
address specified by you below.
3
<PAGE> 20
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ______________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
--------------------------------------------------------
By:
---------------------------------------------------------------
Address: 800 Scudders Mill Road
----------------------------------------------------------
Plainsboro, New Jersey 08536
-------------------------------------------------------------------
Date: October 21, 1994
-------------------------------------------------------------
4
<PAGE> 1
6(e)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between MERRILL LYNCH
GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT, a Massachusetts business trust
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation
(the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either directly to purchasers
or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D shares of
beneficial interest in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distri- butor of the Fund to sell
Class D shares of beneficial interest in the Fund (sometimes herein referred to
as "Class D shares") to
<PAGE> 2
the public and hereby agrees during the term of this Agreement to sell Class D
shares of the Fund to the Distributor upon the terms and conditions herein set
forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as prin- cipal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and dis- tributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
sub- stantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2
<PAGE> 3
(d) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
(a) It is contemplated that the Fund will commence an offering of its
Class D shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class D shares needed, but not more than the Class D shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class D shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class D shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class D shares. The price which
the Distributor shall pay for the Class D shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors
at the public offering price, as set forth in Sec- tion 3(c) hereof, or to
securities dealers having agreements
3
<PAGE> 4
with the Distributor upon the terms and conditions set forth in Section 7
hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 4.0% of the public offering price
(4.17 % of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Trustees, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
(d) The net asset value of Class D shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional
4
<PAGE> 5
information of the Fund and guidelines established by the Trustees.
(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts or certificates for such Class D shares pursuant to the instructions of
the Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
5
<PAGE> 6
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article VIII of its
Declaration of Trust, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus and statement of additional
information. The price to be paid to redeem or repurchase the Class D shares
shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for redemption or repur- chase within seven business days
after the date of the confirma- tion of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class D shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of
6
<PAGE> 7
the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the Fund
as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii)
the balance shall be paid to or for the account of the shareholder, in each case
in accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class D shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Dis- tributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall in- clude, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
7
<PAGE> 8
such number of copies of the prospectus and statement of additional information
as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securi- ties Act, to the end that there will be available for
sale such number of Class D shares as the Distributor may reasonably be expected
to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The
8
<PAGE> 9
services of the Distributor to the Fund hereunder are not to be deemed exclusive
and nothing herein contained shall prevent the Distributor from entering into
like arrangements with other in- vestment companies so long as the performance
of its obligations hereunder is not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice
9
<PAGE> 10
("selected dealers") for the sale of Class D shares and fix therein the portion
of the sales charge which may be allocated to the selected dealers; provided
that the Fund shall approve the forms of agreements with dealers and the dealer
compensation set forth therein. Class D shares sold to selected dealers shall
be for resale by such dealers only at the public offering price(s) set forth in
the prospectus and statement of additional information. The form of agreement
with selected dealers to be used during the continuous offering of the Class D
shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class
D shares only to such selected dealers as are mem- bers in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required regis- tration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class D
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
10
<PAGE> 11
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments of
sales commissions to financial con- sultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the costs
and expenses of printing and distributing any copies thereof which are to be
used in connection with the offering of Class D shares to selected dealers or
investors pursuant to this Agreement. The Distributor shall bear the costs and
expenses of preparing, printing and distributing any other literature used by
the Distributor or furnished by it for use by selected dealers in connection
with the offering of the Class D shares for sale to the public and any expenses
of advertising incurred by the Distributor in connection with such offering. It
is understood and agreed that so long as the Fund's Class D Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor hereunder in connection with account
maintenance activities may be paid from amounts recovered by it from the Fund
under such plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali- fying the Fund as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Fund
11
<PAGE> 12
and the Distributor pursuant to Section 5(c) hereof and the cost and expenses
payable to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at com- mon law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the
12
<PAGE> 13
Fund or its security holders to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the per- formance of their duties or by reason of the
reckless disregard of their obligations and duties under this Agreement; or (ii)
is the Fund to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or such controlling persons, as the
case may be, shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Distributor or such controlling
persons (or after the Distributor or such controlling persons shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve it from any liability which it may
have to the person against whom such action is brought otherwise than on account
of its indemnity agreement contained in this paragraph. The Fund will be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, but if
the Fund elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or such controlling
person or persons, defendant or defendants in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
13
<PAGE> 14
Distributor or such controlling person or persons, defendant or defendants in
the suit shall bear the fees and expenses of any additional counsel retained by
them, but in case the Fund does not elect to assume the defense of any such
suit, it will reim- burse the Distributor or such controlling person or persons,
de- fendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the Class
D shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each
of its Trustees and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class D shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified
14
<PAGE> 15
shall have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection
with the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above written and
shall remain in force until October 21, 1995 and thereafter, but only for so
long as such continuance is specifically approved at least annually by (i) the
Trustees or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Dis- tributor, on sixty days' written notice
to the other party. This
15
<PAGE> 16
Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifi- cally approved by (i) the
Trustees or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Trustees of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 14. Personal Liability. The Declaration of Trust establishing
the Fund, dated May 28, 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 Global Bond
16
<PAGE> 17
Fund for Investment and Retirement" 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 or otherwise in connection with the
affairs of the Fund, but the "Trust Property" only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT
AND RETIREMENT
By
-------------------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-------------------------------------------------
Title:
17
<PAGE> 18
EXHIBIT A
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT
CLASS D SHARES OF BENEFICIAL INTEREST
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Global Bond Fund for Investment and Retirement, a
Massachusetts business trust (the "Fund"), pursuant to which it acts as the
distributor for the sale of Class D shares of beneficial interest, par value
$0.10 per share (herein referred to as "Class D shares"), of the Fund and as
such has the right to distribute Class D shares of the Fund for resale. The
Fund is an open-end investment company registered under the Investment Company
Act of 1940, as amended, and its Class D shares being offered to the public are
registered under the Securities Act of 1933, as amended. You have received a
copy of the Class D Shares Distribution Agreement (the "Distribution Agreement")
between ourself and the Fund and reference is made herein to certain provisions
of such Distribution Agreement. The terms "Prospectus" and "Statement of
Additional Information" used herein refer to the prospectus and statement of
additional information, respectively, on file with the Securities and Exchange
Commission which is part of the most recent effective registration statement
pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as
a member of the Selected Dealers Group, Class D shares of the Fund upon the
following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 5 hereof and
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor
1
<PAGE> 19
or the Fund in the sole discretion of either. The minimum initial and
subsequent purchase requirements are as set forth in the current Prospectus and
Statement of Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages
of the public offering price and the amount invested, and the related discount
to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- -------------- -----------
<S> <C> <C> <C>
Less than $25,000...... 4.00% 4.17% 3.75%
$25,000 but less
than $50,000.......... 3.75% 3.90% 3.50%
$50,000 but less
than $100,000......... 3.25% 3.36% 3.00%
$100,000 but less
than $250,000......... 2.50% 2.56% 2.25%
$250,000 but less
than $1,000,000....... 1.50% 1.52% 1.25%
$1,000,000 and over**.. 0.00% 0.00% 0.00%
</TABLE>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as
set forth in the current Prospectus and Statement of Additional Information
of the Fund. Such purchases may be subject to a contingent deferred sales
charge as set forth in the current Prospectus and Statement of Additional
Information.
2
<PAGE> 20
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class D shares of the Fund or Class D shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which eligible investors are permitted to purchase Class D shares of the
Fund at the offering price applicable to the total of (a) the public offering
price of the shares then being purchased plus (b) an amount equal to the then
current net asset value or cost, whichever is higher, of the purchaser's
combined holdings of Class A, Class B, Class C and Class D shares of the Fund
and of any other investment company with an initial sales charge for which the
Distributor acts as the distributor. For any such right of accumulation to be
made available, the Distributor must be provided at the time of purchase, by the
purchaser or you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any
sales made by you to the public qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the
3
<PAGE> 21
right of accumulation or a Letter of Intention is set forth in the Prospectus
and Statement of Additional Information.
4. You shall not place orders for any of the Class D shares unless you
have already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers
so as to profit yourself as a result of such withholding: e.g., by a change in
the "net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class
D shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's
4
<PAGE> 22
Prospectus, Statement of Additional Information, periodic reports and proxy
solicitation material is our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current Prospectus and, if requested, the Statement
of Additional Information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in
which we believe the Class D shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such states,
but we assume no responsibility or obligation as to your right to sell Class D
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
5
<PAGE> 23
15. Your first order placed pursuant to this Agreement for the
purchase of Class D shares of the Fund will represent your acceptance of this
Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
---------------------------------------------
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
-------------------------------------------
By:
---------------------------------------------------
Address: 800 Scudders Mill Road
----------------------------------------------
Plainsboro, New Jersey 08536
------------------------------------------------------
Date: October 21, 1994
-----------------------------------------------
6
<PAGE> 1
8
CUSTODIAN CONTRACT
This Contract between Merrill Lynch Retirement Global Bond Fund, a
business trust organized and existing under the laws of The Commonwealth of
Massachusetts, having its principal place of business at 800 Scudders Mill Road,
Plainsboro, New Jersey, 08543, hereinafter called the "Fund', and State Street
Bank and Trust Company, a Massachusetts corporation, having its principal place
of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of its Declaration of
Trust. The Fund agrees to deliver to the Custodian all securities and cash
owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest, $.10 par value, ("Shares") of the Fund
as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
<PAGE> 2
18. Personal Liability
The Declaration of Trust establishing Merrill Lynch Retirement Global
Bond Fund, dated May 28, 1986, a copy of which, together with all amendments
thereto (the "Declaration")$ is oil file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name "Merrill Lynch Retirement
Global Bond Fund" 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 or otherwise in connection with the affairs of the Trust,
but the "Trust Property" only shall be liable.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 29th day of August 1986.
ATTEST MERRILL LYNCH RETIREMENT GLOBAL
BOND FUND
/s/ Mark B. Goldfus By
- --------------------------- --------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ P.H. Larsen By /s/ E.D. Hawkins Jr.
- --------------------------- --------------------------------
Assistant Secretary Vice Presidentt
-35-
<PAGE> 3
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of Merrill Lynch
Retirement Global Bond Fund for use as sub-custodians for the Fund's securities
and other assets:
GLOBAL CUSTODY NETWORK
<TABLE>
<CAPTION>
COUNTRY BANK
<S> <C>
Australia ANZ Banking Group Ltd.
Canada Canada Trust Company
France Credit Commercial De
France
Germany Berliner Handels Und
Frankfurter Bank
Japan Sumitomo Trust & Banking
Company Limited
Netherlands Bank Mees & Hope, N.V.
Algemene Bank Nederland
Switzerland Union Bank of Switzerland
United Kingdom State Street London
Limited
State Street Boston Corp.
</TABLE>
<PAGE> 1
9
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 5th day of October, 1987 by and between
Merrill Lynch Retirement Global Bond Fund (the "Fund") and Merrill Lynch
Financial Data Service, Inc. ("MLFDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Fund wishes to appoint MLFDS to be the Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to,
the terms and provisions of this Agreement, and MLFDS is desirous of accepting
such appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this
Agreement, the Fund and MLFDS agree as follows:
1. Appointment of MLFDS as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent.
(a) The Fund hereby appoints MLFDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject
to, the terms and provisions of this Agreement.
(b) MLFDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to act
as such upon, and subject to, the terms and provisions of this Agreement.
2. Definitions.
(a) In this Agreement:
(I) The term "Act" means the Investment Company Act of 1940 as amended
from time to time and any rule or regulation thereunder;
(II) The term "Account" means any account of a Shareholder, or, if the
shares are held in an account in the name of MLPF&S for benefit of an identified
customer, such account, including a Plan Account, any account under a plan (by
whatever name referred to in the Prospectus) pursuant to the Self-Employed
Individuals Retirement Act of 1962 ("Keogh Act Plan") and any plan (by whatever
name referred to in the Prospectus) in conjunction with Section 401 of the
Internal Revenue Code ("Corporation Master Plan");
<PAGE> 2
(III) The term "application" means an application made by a
Shareholder or prospective Shareholder respecting the opening of the Account;
(IV) The term "MLFD" means Merrill Lynch Funds Distributor,
Inc., a Delaware corporation;
(V) The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation;
(VI) The term "Officer's Instruction" means an instruction in
writing given on behalf of the Fund to MLFDS, and signed on behalf of the Fund
by the President, and Vice President, the Secretary or the Treasurer of the
Fund;
(VII) The term "Prospectus" means the Prospectus and the
Statement of Additional Information of the Fund as from time to time in effect;
(VIII) The term "Shares" means shares of stock or beneficial
interest, as the case may be, of the Fund, irrespective of class or series;
(IX) The term "Shareholder" means the holder of record of
Shares:
(X) The term "Plan Account" means an account opened by a
Shareholder or prospective Shareholder in respect to an open account, monthly
payment or withdrawal plan (in each case by whatever name referred to in the
Prospectus), and may also include an account relating to any other Plan if and
when provision is made for such plan in the Prospectus.
3. Duties of MLFDS as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent.
(a) Subject to the succeeding provisions of the Agreement, MLFDS
hereby agrees to perform the following functions as Transfer Agent, Dividend
Disbursing Agent, and Shareholder Servicing Agent for the Fund;
(I) Issuing, transferring and redeeming Shares;
(II) opening, maintaining, servicing and closing Accounts;
-2-
<PAGE> 3
(III) Acting as agent for the Fund Shareholders and/or customers
of MLPF&S in connection with Plan Accounts, upon the terms and subject to the
conditions contained in the Prospectus and application relating to the specific
Plan Account;
(IV) Acting as agent of the Fund an/or MLPF&S, maintaining such
records as may permit the imposition of such contingent deferred sales charges
as may be described in the Prospectus, including such reports as may be
reasonably requested by the Fund with respect to such Shares as may be subject
to a contingent deferred sales charge;
(V) Upon the redemption of Shares subject to such a contingent
deferred sales charge, calculating and deducting from the redemption proceeds
thereof the amount of such charge in the manner set forth in the Prospectus.
MLFDS shall pay, on behalf of MLFD, to MLPF&S such deducted contingent deferred
sales charges imposed upon all Shares maintained in the name of MLPF&S, or
maintained in the name of an account identified as a customer account of MLPF&S.
Sales charges imposed upon any other Shares shall be paid by MLFDS to MLFD.
(VI) Exchanging the investment of an investor into, or from the
shares of other open-end investment companies or other series portfolios of the
Fund, if any, if and to the extent permitted by the Prospectus at the direction
of such investor.
(VII) Processing redemptions;
(VIII) Examining and approving legal transfers;
(IX) Replacing lost, stolen or destroyed certificates
representing Shares, in accordance with, and subject to, procedures and
conditions adopted by the Fund;
(X) Furnishing such confirmations of transactions relating to their
Shares as required by applicable law;
(XI) Acting as agent for the Fund and/or MLPF&S, furnishing such
appropriate periodic statements relating to Accounts, together with additional
enclosures, including appropriate income tax information and income tax forms
duly completed, as required by applicable law.
(XII) Acting as agent for the Fund and/or MLPF&S, mailing annual,
semi-annual and quarterly reports prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to Shareholders as required by
applicable law;
(XIII) Furnishing such periodic statements of transactions
effected by MLFDS, reconciliations, balances and summaries as the Fund may
reasonably request;
-3-
<PAGE> 4
(XIV) Maintaining such books and records relating to transactions
effected by MLFDS as are required by the Act, or by any other applicable
provision of law, rule or regulation, to be maintained by the Fund or its
transfer agent with respect to such transactions, and preserving, or causing to
be preserved any such books and records for such periods as may be required by
any such law, rule or regulation and as may be agreed upon from time to time
between MLFDS and the Fund. In addition, MLFDS agrees to maintain and preserve
master files and historical computer tapes on a daily basis in multiple separate
locations a sufficient distance apart to insure preservation of at least one
copy of such information;
(XV) Withholding taxes on non-resident alien Accounts, preparing and
filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(XVI) Reinvesting dividends for full and fractional shares and
disbursing cash dividends, as applicable.
(b) MLFDS agrees to act as proxy agent in connection with the holding
of annual, if any, and special meeting of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
communicating to the Fund the results of such tabulation accompanied by
appropriate certifications, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, in such form and containing such
information as may be required by the Fund.
(c) MLFDS agrees to deal with, and answer in a timely manner, all
correspondence and inquires relating to the functions of MLFDS under this
Agreement with respect to Accounts.
(d) MLFDS agrees to furnish to the Fund such information and at such
intervals as is necessary for the Fund to comply with the registration and/or
the reporting requirements (including applicable escheat laws) of the Securities
and Exchange Commission, Blue Sky authorities or other governmental authorities.
-4-
<PAGE> 5
(e) MLFDS agrees to provide to the Fund such information as may
reasonably be required to enable the Fund to reconcile the number of outstanding
Shares between MLFDS's records and the account books of the Fund.
(f) Notwithstanding anything in the foregoing provisions of this
paragraph, MLFDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular class
of cases) as may from time to time be contained in an officer's Instruction.
4. Compensation.
The charges for services described in this Agreement, including
"out-of-pocket" expenses, will be set forth in the Schedule of Fees Attached
hereto.
5. Right of Inspection.
MLFDS agrees that it will in a timely manner make available to, and
permit, any officer, accountant, attorney or authorized agent of the Fund to
examine and make transcripts and copies (including photocopies and computer or
other electronical information storage media and print-outs) of any and all of
its books and records which relate to any transaction or function performed by
MLFDS or pursuant to this Agreement.
6. Confidential Relationship.
MLFDS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Fund, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Fund by way of
an Officer's Instruction.
7. Indemnification.
The Fund shall indemnify and hold MLFDS harmless from any loss, costs,
damage and reasonable expenses, including reasonable attorney's fees (provided
that such attorney is appointed with the Fund's consent, which consent shall not
be unreasonably withheld), incurred by it resulting from any claim, demand,
action, or suit in connection with the performance of its duties hereunder,
<PAGE> 6
provided that this indemnification shall not apply to actions or omissions of
MLFDS in cases of willful misconduct, failure to act in good faith or negligence
by MLFDS, it's officers, employees or agents, and further provided, that prior
to confessing any claim against it which may be subject to this indemnification,
MLFDS shall give the Fund reasonable opportunity to defend against said claim in
its own name or in the name of MLFDS. An action taken by MLFDS upon any
Officer's Instruction reasonably believed by it to have been properly executed
shall not constitute willful misconduct, failure to act in good faith or
negligence under this Agreement.
8. Regarding MLFDS.
(a) MLFDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and capabilities
as may be reasonably determined by the Fund to be necessary for the satisfactory
performance of the duties and responsibilities of MLFDS. MLFDS warrants and
represents that its officers and supervisory personnel charged with carrying out
its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent for the Fund possess the special skill and technical knowledge
appropriate for that purpose. MLFDS shall at all time exercise due care and
diligence in the performance of its functions as Transfer Agent, Dividend
Disbursing Agent, and Shareholder Servicing Agent for the Fund. MLFDS agrees
that, in determining whether it has exercised due care and diligence, its
conduct shall be measured by the standard applicable to persons possessing such
special skill and technical knowledge.
(b) MLFDS warrants and represents that is duly authorized and permitted
to act as Transfer Agent, Dividend Disbursing Agent, and Shareholder Servicing
Agent under all applicable laws and that it will immediately notify the Fund of
any revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
9. Termination.
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or MLFDS (without penalty to the Fund or MLFDS) provided
that the terminating party gives the other party written notice of such
termination at least sixty (60) days in advance, except that the Fund may
terminate this Agreement immediately upon written notice to MLFDS if the
authority or permission of MLFDS to act as Transfer Agent, Dividend Disbursing
Agent, and Shareholder Servicing Agent has been revoked or if any proceeding or
other action which the Fund reasonably believes will lead to such revocation has
been commenced.
-6-
<PAGE> 7
(b) Upon termination of this Agreement, MLFDS shall deliver all
unissued and cancelled stock certificates representing Shares remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments and
other documents (including computerized or other electronically stored
information) made or accumulated in the performance of its duties as Transfer
Agent, Disbursing Agent, and Shareholder Servicing Agent for the Fund along with
a certified locator document clearly indicating the complete contents therein,
to such successor as may be specified in a notice of termination or Officer's
Instruction; and the Fund assumes all responsibility for failure thereafter to
produce any paper, record or documents so delivered and identified in the
locator document, if and when required to be produced.
10. Amendment.
Except to the extent that the performance by MLFDS or its functions
under this Agreement may from time to time be modified by an Officer's
Instruction, this Agreement may be amended or modified only by further written
Agreement between the parties.
11. Governing Law.
This agreement shall be governed by the laws of the State of New
Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers and their respective
corporate seals hereunto duly affixed and attested, as of the day and year above
written.
MERRILL LYNCH RETIREMENT GLOBAL BOND FUND
By: /s/ Gerald Richard /s/ Mark B. Goldfus (Attest)
----------------------------- ----------------------------
Title: Treasurer Secretary
--------------------------- ----------------------------
MERRILL LYNCH FINANCIAL DATA SERVICE, INC.
By:
--------------------------------------
Title: President
-----------------------------------
/s/ Judy E. Nelsen
-------------------------------
Title: Assistant Vice President
------------------------
-7-
<PAGE> 1
13
CERTIFICATE OF SOLE SHAREHOLDER
Merrill Lynch Asset Management, Inc., the holder of 10,000 shares of
beneficial interest, par value $0.10 per share, of Merrill Lynch Retirement
Global Bond Fund, a Massachusetts busi- ness trust (the "Trust"), does hereby
confirm to the Trust its representation that it purchased such shares for
investment purposes, with no present intention of redeeming or reselling any
portion thereof, and does further agree that if it redeems any portion of such
shares prior to the amortization of the Trust's organizational expenses, the
proceeds thereof will be reduced by the proportionate amount of the unamortized
organizational expen- ses which the number of shares being redeemed bears to the
number of shares initially purchased.
MERRILL LYNCH ASSET MANAGEMENT, INC.
By:
--------------------------------
Dated: July 17, 1986
<PAGE> 1
15(b)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between
Merrill Lynch Global Bond Fund for Investment and Retirement, a Massachusetts
business trust (the "Fund"), and Merrill Lynch Funds Distributor, Inc., a
Delaware corporation ("MLFD").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class C
shares of beneficial interest, par value $0.10 per share (the "Class C shares"),
of the Fund to the public; and
WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class C shares; and
WHEREAS, the Trustees of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of
<PAGE> 2
average daily net assets of the Fund relating to Class C shares to compensate
MLFD and securities firms with which MLFD enters into related agreements
pursuant to Paragraph 3 hereof ("Sub- Agreements") for providing account
maintenance activities with respect to Class C shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class C shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.55% of average daily net assets of the Fund
relating to Class C shares to compensate MLFD and securities firms with which
MLFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares of the Fund. Such expenditures
may consist of sales commissions to financial consultants for selling Class C
shares of the Fund, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Fund
and the costs of preparing and distributing promotional materials. The
distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub-Agreement shall provide that
the Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting require- ments set forth
in Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Trustees, and
the Trustees shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
2
<PAGE> 3
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securi- ties of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Trustees of
the Fund and (b) those Trustees of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding Class C voting
securities of the Fund.
9. The Plan may not be amended to increase materially the rate of payments
provided for herein unless such amendment is approved by at least a majority, as
defined in the Investment Company Act, of the outstanding Class C voting
securities of the Fund, and by the Trustees of the Fund in the manner provided
for in Paragraph 6 hereof, and no material amendment to the Plan shall be made
unless approved in the manner provided for approval and annual renewal in
Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomina- tion of
Trustees who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Trustees who are
not interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
12. The Declaration of Trust establishing the Fund, dated May 30, 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 Global Bond Fund for Investment and
Retirement" refers to the Trustees under the Declaration collectively as
trustees, but not as individuals or personally;
3
<PAGE> 4
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 or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH GLOBAL BOND FUND
FOR INVESTMENT AND RETIREMENT
By
------------------------------------
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
------------------------------------
Title:
4
<PAGE> 5
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc., a Delaware corpo- ration ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Global Bond
Fund For Investment and Retirement, a Massachusetts business trust (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of Class C
shares of beneficial interest, par value $0.10 per share (the "Class C shares"),
of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares for account maintenance activities
related to Class C shares of the Fund and a distribution fee from the Fund at
the annual rate of 0.55% of average daily net assets of the Fund relating to
Class C shares for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class C shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class C shares of the Fund and incur expenditures
in connection with such activities and services of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class C shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
<PAGE> 6
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by votes
of a majority of both (a) the Trustees of the Fund and (b) those Trustees of the
Fund who are not "interested persons" of the Fund, as defined in the Act, and
have no direct or indirect financial interest in the operation of the Plan, this
Agreement or any agreements related to the Plan or this Agreement (the "Rule
12b-1 Trustees"), cast in person at a meeting or called for the purpose of
voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
-------------------------------------
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------------
Title:
<PAGE> 1
15(c)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH GLOBAL BOND FUND FOR INVESTMENT AND RETIREMENT
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between
Merrill Lynch Global Bond Fund for Investment and Retirement, a Massachusetts
business trust (the "Fund"), and Merrill Lynch Funds Distributor, Inc., a
Delaware corporation ("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling shares
of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class D
shares of beneficial interest, par value $0.10 per share (the "Class D shares"),
of the Fund to the public; and
WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account main- tenance fee to MLFD with respect to the
Fund's Class D shares; and
WHEREAS, the Trustees of the Fund have determined that there is a reasonable
likelihood that adoption of the Plan will benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at the
end of each month at the annual rate of 0.25% of average daily net assets of the
Fund relating to Class D shares to compensate MLFD and securities firms with
which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph 2 hereof for providing account maintenance activities with respect to
Class D shareholders of the Fund. Expenditures under
<PAGE> 2
the Plan may consist of payments to financial consultants for maintaining
accounts in connection with Class D shares of the Fund and payment of expenses
incurred in connection with such account maintenance activities including the
costs of making services available to shareholders including assistance in
connection with inquiries related to shareholder accounts.
2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as is
reasonably necessary to permit MLFD to comply with the reporting requirements
set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of Trustees, and the
Trustees shall review, at least quarterly, a written report complying with the
requirements of Rule 12b-1 regarding the disbursement of the account maintenance
fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securi- ties of the Fund.
5. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Trustees of
the Fund and (b) those Trustees of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
6. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
7. The Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Trustees, or by vote of a majority of the outstanding Class D voting
securities of the Fund.
8. The Plan may not be amended to increase materially the rate of payments
provided for in Paragraph 1 hereof unless such
2
<PAGE> 3
amendment is approved by at least a majority, as defined in the Investment
Company Act, of the outstanding Class D voting securities of the Fund, and by
the Trustees of the Fund in the manner provided for in Paragraph 5 hereof, and
no material amendment to the Plan shall be made unless approved in the manner
provided for approval and annual renewal in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomina- tion of Trustees
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Trustees who are not interested
persons.
10. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
11. The Declaration of Trust establishing the Fund, dated May 30, 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 Global Bond Fund for Investment and
Retirement" 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 or otherwise in connection with the affairs of the Fund, but
the "Trust Property" only shall be liable.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH GLOBAL BOND FUND FOR
INVESTMENT AND RETIREMENT
By
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Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
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Title:
4
<PAGE> 5
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc., a Delaware corpo- ration ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Global Bond
Fund for Investment and Retirement, a Massachusetts business trust (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of Class D
shares of beneficial interest, par value $0.10 per share (the "Class D shares"),
of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares for providing account maintenance
activities and services with respect to Class D shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Fund's Class D shareholders
and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class D shares of the Fund and incur expenditures
in connection with such activities and services, of the types referred to in
Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD
shall pay the Securities Firm a fee at the end of each calendar month in an
amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the fee
during such period referred to in Paragraph 3 of the Plan.
<PAGE> 6
4. This Agreement shall not take effect until it has been approved by votes
of a majority of both (a) the Trustees of the Fund and (b) those Trustees of the
Fund who are not "interested persons" of the Fund, as defined in the Act, and
have no direct or indirect financial interest in the operation of the Plan, this
Agreement or any agreements related to the Plan or this Agreement (the "Rule
12b-1 Trustees"), cast in person at a meeting or meetings called for the purpose
of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
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Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
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Title:
2
