<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1996
FILE NO. 33-8708
FILE NO. 811-4839
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 9
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
(Exact name of registrant as specified in charter)
ONE FINANCIAL CENTER
FIFTEENTH FLOOR
BOSTON, MASSACHUSETTS 02111-2646
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (617) 357-1460
ROBERT W. CROOK
ONE FINANCIAL CENTER
FIFTEENTH FLOOR
BOSTON, MASSACHUSETTS 02111-2646
(Name and address of agent for service)
------------------------
Copies to:
Philip L. Kirstein, Esq. Leonard B. Mackey, Jr., Esq.
Merrill Lynch Asset Management Rogers & Wells
P.O. Box 9011 200 Park Avenue
Princeton, New Jersey 08543-9011 New York, New York 10166
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.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AMOUNT OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER SHARE PRICE FEE
<S> <C> <C> <C> <C>
Shares of Beneficial Interest, par
value $0.10 per share........... 4,342,322 $9.87 $289,990* $100
</TABLE>
* The calculation of the maximum aggregate offering price is made as of February
21, 1996 pursuant to Rule 24e-2 under the Investment Company Act of 1940. The
total amount of shares of beneficial interest redeemed or repurchased during
the Registrant's previous fiscal year was 4,312,941. None of these shares have
been used for reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the
Investment Company Act of 1940 in previous filings during the Registrant's
current fiscal year. 4,312,941 shares of beneficial interest redeemed during
the Registrant's previous fiscal year are being used for the reduction of the
registration fee in this post-effective amendment to the Registration
Statement.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE REGISTRANT'S MOST RECENT
FISCAL YEAR WAS FILED ON DECEMBER 21, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
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. Financial Highlights............................ Financial Highlights; Performance Data
Item 4. General Description of Registrant............... Investment Objective; Investment Policies;
Additional Information; Appendix
Item 5. Management of the Fund.......................... Investment Adviser; Management of the Fund;
Portfolio Transactions; Additional
Information
Item 5A. Management's Discussion of Fund Performance..... *
Item 6. Capital Stock and Other Securities.............. Cover Page; Dividends; Net Asset Value; Taxes;
Additional Information
Item 7. Purchase of Securities Being Offered............ Purchase of Shares; Exchange Privilege;
Distributor; Additional Information
Item 8. Redemption or Repurchase........................ Redemption of Shares
Item 9. Pending Legal Proceedings....................... *
PART B
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Table of Contents
Item 12. General Information and History................. Additional Information
Item 13. Investment Objectives and Policies.............. Investment Objective and Policies; Investment
Restrictions; Portfolio Transactions
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; Management and Advisory
Arrangements; Distributor
Item 17. Brokerage Allocation and Other Practices........ Portfolio Transactions
Item 18. Capital Stock and Other Securities.............. *
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................. Distributor; Redemption of Shares
Item 20. Tax Status...................................... Dividends, Distributions and Taxes
Item 21. Underwriters.................................... Distributor
Item 22. Calculation of Performance Data................. Performance Data
Item 23. Financial Statements............................ Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C
to this Registration Statement.
</TABLE>
- ---------------
* Item inapplicable or answer negative.
<PAGE>
PROSPECTUS
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
ONE FINANCIAL CENTER o BOSTON, MASSACHUSETTS 02111-2646
FOR GENERAL INFORMATION AND PURCHASES CALL 617-357-1460 OR TOLL FREE
800-225-1576
------------------------
Merrill Lynch Institutional Intermediate Fund (the 'Fund') is a
diversified, open-end management investment company which seeks current income.
The Fund intends to invest only in those assets (including assets subject to
repurchase agreements) which will permit shares of the Fund to qualify both as
'liquid assets' under the regulations of the Office of Thrift Supervision in the
Department of the Treasury ('OTS') and as an investment permitted by the
regulations of the National Credit Union Administration. See 'Investment
Policies' for a description of such investments.
The Investment Adviser of the Fund is Merrill Lynch Asset Management, L.P.
('MLAM'). The Distributor of the Fund is Merrill Lynch Funds Distributor, Inc.
('MLFD'), a subsidiary of MLAM.
The Fund is designed primarily as an economical and convenient means for
the investment of funds by federal savings and loan associations and federal
credit unions. The Fund may also be an appropriate vehicle for other entities
such as corporations, investment bankers and brokers, insurance companies,
investment counselors, pension funds, employee benefit plans, law firms, trusts,
estates, and educational, religious and charitable institutions. The net asset
value of the Fund's shares will fluctuate. Fund shares are sold and redeemed on
each business day at net asset value without any sales or redemption charge.
However, the Fund pays the Distributor a distribution fee for providing certain
services in connection with the distribution of the Fund's shares. All net
investment income is declared as dividends daily. Dividends are paid monthly and
automatically reinvested in additional shares or, at the option of the
shareholder, paid in cash. Purchase orders where payment is to be made by
Federal Funds wire must be submitted to MLFD, Boston, by telephone and payment
must be remitted by Federal Funds wire directly to State Street Bank and Trust
Company. While other forms of payment will also be accepted, purchase of shares
will not be effected until Federal Funds are available. The minimum initial
purchase is $25,000 per investor and the minimum subsequent purchase is $1,000.
See 'Purchase of Shares,' page 10.
------------------------
This Prospectus is a concise statement of information about the Fund that
is relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated February 26, 1996 (the 'Statement of Additional
Information'), 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 numbers or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
------------------------
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.
------------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
The date of this Prospectus is February 26, 1996.
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases....... None
Deferred Sales Charge........................... None
Sales Charge Imposed on Dividend
Reinvestments................................ None
Redemption Fees................................. None
Exchange Fee.................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Investment Advisory Fees........................ 0.40%
12b-1 Fees...................................... 0.15
Other Expenses
Custodian Fees............................... 0.02%
Shareholder Servicing Fees................... 0.05
Other Fees................................... 0.34
-----
Total Other Expenses....................... 0.41%
------
TOTAL FUND OPERATING EXPENSES..................... 0.96%
------
------
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE
PERIOD OF:
----------------------------------------
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment
assuming (1) an operating expense ratio of 0.96%, (2) a 5% annual return
throughout the period and (3) redemption at the end of the period:....... $ 10 $31 $53 $118
</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. For a more detailed description of such costs and expenses, see
'Investment Adviser,' 'Redemption of Shares' and 'Purchase of Shares.'
The Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a five percent annual rate of return as mandated by
Securities and Exchange Commission regulations. The Example should not be
considered a representation of past or future expenses, and actual expenses or
annual rates of return may be more or less than those assumed for purposes of
the Example.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in
conjunction with the annual audits of the financial statements of the Fund by
Deloitte & Touche LLP, Independent Auditors. Financial Statements for the year
ended October 31, 1995 and the Independent Auditors' report thereon are included
in the Statement of Additional Information.
The following per share data and ratios have been derived from information
provided in the financial statements:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987+
------- ------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 9.60 $ 10.31 $ 10.06 $ 9.76 $ 9.35 $ 9.42 $ 9.44 $ 9.57 $ 10.00
------- ------- -------- -------- -------- -------- -------- -------- ---------
Investment income--net..... .62 .55 .54 .62 .72 .77 .83 .80 .73
Realized and unrealized
gain (loss) on
investments--net......... .22 (.71) .25 .30 .41 (.07) (.02) (.13) (.43)
------- ------- -------- -------- -------- -------- -------- -------- ---------
Total from investment
operations............... .84 (.16) .79 .92 1.13 .70 .81 .67 .30
------- ------- -------- -------- -------- -------- -------- -------- ---------
Less dividends from
investment income--net... (.62) (.55) (.54) (.62) (.72) (.77) (.83) (.80) (.73)
------- ------- -------- -------- -------- -------- -------- -------- ---------
Net asset value, end of
period................... $ 9.82 $ 9.60 $ 10.31 $ 10.06 $ 9.76 $ 9.35 $ 9.42 $ 9.44 $ 9.57
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
TOTAL INVESTMENT RETURN:
Based on net asset value
per share................ 8.95% (1.54)% 8.07% 9.66% 12.62% 7.75% 9.12% 7.29% 3.18%#
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
distributions fees....... .81% .68% .65% .67% .66% .60% .55% .50% .44%*
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
Expenses................... .96% .83% .80% .82% .81% .75% .70% .65% .59%*
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
Investment income--net..... 6.38% 5.55% 5.34% 6.24% 7.66% 8.24% 8.96% 8.36% 7.66%*
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $65,139 $81,407 $122,283 $94,798 $125,888 $151,891 $211,528 $303,530 $426,712
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
Portfolio turnover......... 47.90% 172.51% 204.80% 156.12% 202.11% 68.74% 306.69% 262.56% 406.66%
------- ------- -------- -------- -------- -------- -------- -------- ---------
------- ------- -------- -------- -------- -------- -------- -------- ---------
</TABLE>
- ------------------
* Annualized
+ The Fund commenced operations on November 6, 1986.
# Aggregate total investment return.
Further information about the Fund's performance is contained in the Fund's
Annual Report, which can be obtained, without charge, upon request.
3
<PAGE>
INVESTMENT OBJECTIVE
The Fund's objective is to seek current income. The Fund intends to invest
only in assets (including assets subject to repurchase agreements) that qualify
both as 'liquid assets' under the regulations of OTS and as investments
permitted by the Federal Credit Union Act and the regulations of the National
Credit Union Administration ('Permitted Investments'), as such regulations may
be in effect from time to time. Accordingly, the Fund will invest in a security
which constitutes a 'liquid asset' only if it also constitutes a Permitted
Investment and will invest in a security which constitutes a Permitted
Investment only if it also constitutes a 'liquid asset.' Moreover, 'Eligible
Investments' for the Fund will consist of securities which constitute both
'liquid assets' and Permitted Investments and which, in accordance with such
regulations, also may be included in the portfolio of an open-end management
investment company the shares of which qualify as 'liquid assets' or as
Permitted Investments. The Appendix (page 20) hereto contains those provisions
of the statutes and regulations in effect on the date hereof describing assets
in which investment companies, the shares of which qualify as 'liquid assets' or
Permitted Investments, may invest. The Fund may invest in any assets which
become Eligible Investments, and will sell any assets which lose their status as
Eligible Investments within the time required by the regulation which rescinds
that status. The investment objective of the Fund described in this paragraph is
a fundamental policy of the Fund and may not be changed without the approval of
the holders of a majority of the Fund's outstanding shares. There can be no
assurance that the objective will be realized.
The Investment Adviser intends to actively manage the Fund's portfolio to
seek to take advantage of market opportunities and to reduce the adverse effect
of price volatility. This portfolio strategy is not a fundamental policy and may
be modified by the Board of Trustees of the Fund without the approval of the
Fund's shareholders.
The net asset value of the Fund's shares will fluctuate. An increase in
interest rates will generally reduce the value of the Fund's investments and a
decline in interest rates will generally increase their value. If there are
unusually heavy redemption requests because of changes in interest rates or for
any other reason, the Fund may have to sell a portion of its investment
portfolio at a time when it may be disadvantageous to do so. However, in these
circumstances the Fund is permitted to borrow from banks amounts up to 10% of
the value of its net assets and believes that such borrowings would help
mitigate any adverse effects and would make such a sale of its portfolio
securities unlikely. The Fund will not purchase portfolio securities while any
borrowings are outstanding. See 'Investment Restrictions' in the Statement of
Additional Information.
INVESTMENT POLICIES
Shares of open-end management investment companies registered with the
Securities and Exchange Commission under the Investment Company Act of 1940
('registered investment companies') whose entire portfolios are restricted by
their investment policy, changeable only by shareholder vote, to certain assets
that would qualify as liquid investments if owned directly by savings
associations, may be used by savings associations to meet their liquidity
requirements. The Fund has been informed by the Federal Home Loan Bank Board
(predecessor of the OTS), that savings associations, in reliance on an opinion
of counsel, could treat Fund shares as 'liquid assets' and could invest in Fund
shares without percentage of assets limitations. Section 401(h) of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, P. L. 101-73
('FIRREA'), provides that all orders, resolutions, determinations and
regulations which had been issued by the Federal Home Loan Bank Board and were
in effect on the date FIRREA took effect (August 9, 1989), shall continue in
effect
4
<PAGE>
until modified, terminated, set aside or superseded by the director of the OTS.
The determination of the Federal Home Loan Bank Board with respect to the
treatment of Fund shares as 'liquid assets' was in effect on August 9, 1989 and
has not been modified, terminated, set aside or superseded. Thus, investments in
shares of the Fund can be utilized to satisfy the liquidity requirements of the
OTS regulations. In addition, the National Credit Union Administration has taken
the position that federal credit unions may invest indirectly in investments in
which they may invest directly by purchasing shares of registered investment
companies which invest solely in Permitted Investments. The Fund has received an
opinion of counsel to the effect that shares of the Fund qualify as an
investment permitted by Sections 107(7) and (8) of the Federal Credit Union Act.
Under the regulations described above, the Fund presently may invest in
such assets as obligations issued or fully guaranteed as to interest and
principal by the U.S. government maturing in five years or less; obligations
maturing in five years or less issued or fully guaranteed as to interest and
principal by certain U.S. government agencies; bankers' acceptances maturing in
nine months or less issued by a bank the deposits of which are insured by the
Federal Deposit Insurance Corporation ('FDIC'); negotiable certificates of
deposit maturing in one year or less issued by a bank or savings association the
deposits of which are insured by the FDIC; and obligations of state and local
governments maturing in two years or less. Included among such obligations
maturing in five years or less will be obligations the Fund commits to purchase
on a when-issued basis, with the commitment being made in excess of five years
prior to the maturity date of the obligation.
Under normal circumstances, at least 65% of the value of the Fund's total
assets will be invested in securities that have a dollar weighted average
maturity of between three and five years. The balance of the Fund's assets will
be invested in Eligible Investments with shorter maturities. Under unusual
market or economic conditions, however, the Fund for temporary defensive
purposes may invest up to 100% of its assets in Eligible Investments with
shorter maturities, or the Fund may hold its assets in cash.
The following is a description of certain securities in which the Fund may
invest:
Government Securities: Certain government securities, including U.S.
Treasury bills, notes and bonds and securities of the Government National
Mortgage Association and the Federal Housing Administration, are issued or
guaranteed by the U.S. Government and supported by the full faith and
credit of the United States. Other U.S. Government securities are issued or
guaranteed by Federal agencies or government-sponsored enterprises and are
not direct obligations of the United States but involve sponsorship or
guarantees by Government agencies or enterprises. These obligations include
securities that are supported by the right of the issuer to borrow from the
Treasury, such as obligations of Federal Home Loan Banks, and securities
that are supported only by the credit of the instrumentality, such as
Federal National Mortgage Association bonds. Because the U.S. Government is
not obligated to provide support to its instrumentalities, the Fund will
invest in obligations issued by these instrumentalities where the
Investment Adviser is satisfied that the credit risk with respect to the
issuers is minimal.
Bank Obligations: The Fund may invest in certificates of deposit and
bankers' acceptances of the 50 largest commercial banks in the United
States (measured by total assets as shown by their most recent annual
financial statements) and, with respect to up to 5% of its net assets,
certificates of deposit issued by other commercial banks and by savings
associations if the deposits of that commercial bank or savings association
are insured by the FDIC; provided that the Fund may invest only in
certificates of deposit and bankers' acceptances issued by institutions
whose outstanding securities are rated in the top three categories by a
nationally recognized rating agency. The Fund may invest in certificates of
deposit issued by and other
5
<PAGE>
time deposits in foreign branches of FDIC insured banks. Investment in such
deposits involves somewhat different risks from those affecting deposits in
United States branches of such banks. These risks, which might adversely
affect the payment of principal and interest on such deposits, include
future political and economic developments, the possibility that a foreign
jurisdiction might impose withholding taxes on interest income payable on
such deposits, the possible seizure or nationalization of foreign deposits
or the possible adoption of foreign governmental restrictions, such as
exchange controls.
Obligations of State and Local Governments: The Fund may invest in
obligations of state and local governments rated in one of the four highest
rating categories by a nationally recognized rating agency. Obligations in
the lowest of those categories are considered to have some speculative
characteristics.
Repurchase Agreements; Purchase and Sale Contracts: The Fund may
invest in Eligible Investments subject to repurchase agreements, and in
Treasury obligations subject to purchase and sale contracts, with any
member bank of the Federal Reserve System or primary dealer in U.S.
Government securities. Under such instruments, the purchaser (i.e., the
Fund) acquires ownership of the obligation (debt security) and the seller
agrees, at the time of the sale, to repurchase the obligation at the
mutually agreed upon time and price, thereby determining the yield during
the purchaser's holding period. This results in a fixed rate of return
insulated from market fluctuations during such period. In the case of
repurchase agreements, the prices at which the trades are conducted do not
reflect accrued interest on the underlying obligations, whereas, in the
case of purchase and sale contracts, the prices take into account accrued
interest. Such agreements cover short periods, such as under one week.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the
purchaser. In the case of a repurchase agreement, 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
repurchase agreement; the Fund does not have the right to seek additional
collateral in the case of purchase and sale contracts. In the event of
default by the seller under a repurchase agreement construed to be a
collateralized loan, the underlying securities are not owned by the Fund
but only constitute collateral for the seller's obligation to pay the
repurchase price. Therefore, the Fund may suffer time delays and incur
costs or possible losses in connection with the disposition of the
collateral. A purchase and sale contract differs from a repurchase
agreement in that the contract arrangements stipulate that the securities
are owned by the Fund. In the event of a default under such a repurchase
agreement or under a purchase and sale contract, instead of the contractual
fixed rate of return, the rate of return to the Fund will be dependent on
intervening fluctuations of the market value of such security and the
accrued interest on the security. 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. There is no limit on the amount of the Fund's assets that may be
subject to repurchase agreements or purchase and sale contracts, except as
described below under 'Investment Restrictions.'
Reverse Repurchase Agreements: The Fund may enter into reverse
repurchase agreements, which involve the sale of Eligible Investments with
an agreement to repurchase the securities at an agreed upon price, date and
interest payment. The Fund will utilize reverse repurchase agreements to
provide liquidity to meet redemption requests when the sale of portfolio
securities is considered to be disadvantageous. A separate account of the
Fund will be established with its custodian bank consisting of cash or U.S.
Government securities having a market value at all times at least equal in
value to the proceeds received on any sale subject to repurchase plus
accrued interest. Entry into reverse repurchase agreements is considered
6
<PAGE>
to be a form of borrowing subject to the limitations described under
'Investment Restrictions' below. The Fund does not presently expect to
enter into reverse repurchase agreements.
Forward Commitments: To the extent permitted by the regulations, the
Fund may purchase or sell securities on a when-issued or forward commitment
basis at fixed purchase or sale terms with periods of up to 45 days between
commitment and settlement date. These transactions occur when securities
are purchased or sold by the Fund with payment and delivery taking place in
the future to secure what is considered an advantageous yield and price at
the time of entering into the transaction. The value of the security on the
delivery date may be more or less than its purchase price. The Fund will
maintain a separate account at its custodian bank consisting of cash or
U.S. Government securities (valued on a daily basis) equal at all times to
the amount of the forward commitment. As of the date of this Prospectus,
the Fund is not permitted under the OTS regulations to purchase or sell
securities on a forward commitment basis. The Fund may, however, purchase
securities issued by the U.S. Government, its agencies and
instrumentalities on a when-issued basis, provided that the period between
the date on which the when-issued transaction is entered into and the date
on which the securities being purchased are to be issued is less than 30
days.
Lending Portfolio Securities: The Fund may lend its portfolio
securities with a value not exceeding 33 1/3% of its total assets to banks,
brokers and other financial institutions and receive collateral in cash or
securities issued or guaranteed by the U.S. Government which qualify as
permitted portfolio securities as described above. The collateral will be
maintained at all times in an amount equal to at least 102% of the current
market value of the loaded securities. During the period of the loans, the
Fund receives the income on the loaned securities and either receives the
income on the collateral or other compensation, i.e., a negotiated loan
premium or fee, for entering into the loan, thereby increasing 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 falls below
the market value of the borrowed securities.
Investment Restrictions: The Fund has adopted a number of
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without
the approval of the holders of a majority of the Fund's outstanding voting
securities. Among the more significant restrictions, the Fund may not (1)
invest more than 25% of its total assets in the securities of issuers in
any particular industry (other than U.S. Government securities or
Government agency securities); (2) purchase the securities of any one
issuer, other than the U.S. Government or Government agencies, if
immediately after such purchase more than 5% of the value of its total
assets would be invested in such issuer; (3) purchase more than 10% of the
outstanding voting securities of an issuer; (4) enter into repurchase
agreements or purchase and sale contracts, or purchase non-negotiable time
deposits, with more than seven days to maturity, or purchase any security
with legal or contractual restrictions on resale or for which no readily
available market exists, if it would result in the investment of more than
10% of the value of the Fund's net assets in such instruments; or (5) issue
senior securities, borrow money or pledge its assets, except that the Fund
may borrow from a bank or enter into reverse repurchase agreements as a
temporary measure for extraordinary or emergency purposes or to meet
redemptions in amounts not exceeding 10% (taken at the market value) of its
total assets and pledge its assets to secure such borrowings (the Fund will
not purchase portfolio securities when any such borrowings are
outstanding).
7
<PAGE>
INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P. ('MLAM'), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc., is the investment adviser for the Fund.
The principal address of the Investment Adviser is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 (mailing address: P.O. Box 9011, Princeton, New
Jersey 08543-9011). The Investment Adviser or its affiliate, Fund Asset
Management, L.P. ('FAM'), acts as the investment adviser for over 130 other
registered investment companies. MLAM also offers portfolio management and
portfolio analysis services to individuals and institutions. In the aggregate,
as of January 31, 1996, MLAM and FAM had a total of approximately $202.8 billion
in investment company and other portfolio assets under management.
Subject to the general supervision of the Board of Trustees of the Fund,
the Investment Adviser renders investment advice and is responsible for the
overall management of the Fund's business affairs.
The Fund pays the Investment Adviser a monthly fee at the annual rate of
0.40% of the average daily net assets of the Fund. In addition, 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.
The Investment Adviser has agreed that, in the event the operating expenses
of the Fund (including the fees payable to the Investment Adviser but excluding
taxes, interest, brokerage and extraordinary expenses) for any fiscal year
exceed the expense limitations applicable to the Fund imposed by state
securities laws or any published regulations thereunder, it will reduce its fee
by the extent of such excess and, if required pursuant to any such laws or
regulations, will annually reimburse the Fund in the amount of such excess.
MLAM received $271,378, or 0.40% of the Fund's average net assets, in
investment advisory fees from the Fund during the Fund's fiscal year ended
October 31, 1995. For the same period, total expenses of the Fund were $649,653,
or 0.96% of average net assets.
Jay C. Harbeck has served as the Fund's Portfolio Manager since January 1,
1992, and is primarily responsible for the Fund's day-to-day management. He has
served as Vice President of MLAM since 1986.
DISTRIBUTOR
The principal underwriter and distributor of shares in the Fund is Merrill
Lynch Funds Distributor, Inc. (the 'Distributor'), a wholly-owned subsidiary of
the Investment Adviser. The address of the Distributor is One Financial Center,
Fifteenth Floor, Boston, MA 02111-2646. The Distributor makes a continuous
offering of the Fund's shares.
The Fund has adopted a Distribution and Shareholder Servicing Plan (the
'Plan') in compliance with Rule 12b-1 under the Investment Company Act of 1940,
pursuant to which the Fund pays the Distributor a monthly fee at the annual rate
of 0.15% of the Fund's average daily net assets in order to compensate the
Distributor for services it provides and expenses it bears. Under its
Distribution Agreement with the Fund, the Distributor bears certain
distribution-related expenses of the Fund, including payments to securities
dealers with whom the Distributor has entered into selected dealer agreements
('Selected Dealers'), including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch') and Broadcort Capital, Inc., an affiliate of
Merrill Lynch. Such payments are intended to compensate Selected Dealers for
their services in connection with the distribution of the Fund's shares, which
consist in part of providing compensation to financial consultants for selling
shares of the Fund. In addition, the Distributor pays the cost and expenses of
printing and distributing any
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copies of any prospectuses, statements of additional information and annual and
interim reports of the Fund (after such items have been prepared and set in
type) which are used in connection with the offering of shares to Selected
Dealers or investors, and the cost 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. The Plan is designed, in part, to permit the investor to purchase
shares through Selected Dealers without assessment of a front-end sales load and
at the same time to permit a Selected Dealer to pay its financial consultants a
commission on sale of the shares. During the year ended October 31, 1995, the
distribution fee paid by the Fund under the Plan totalled $101,765, all of which
was paid to Merrill Lynch for providing distribution-related services in
connection with Fund shares.
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 Distribution Plan. 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 distribution fees 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 distribution fees and the expenses
consist of financial consultant compensation. As of December 31, 1994, the last
date for which fully allocated accrual data is available, the fully allocated
accrual expenses incurred by the Distributor and Merrill Lynch since the Fund
commenced operations on November 6, 1986 exceeded revenues for such period by
$1,506,000 (2.21% of net assets at that date). As of December 31, 1995, direct
cash revenues for the period since the commencement of operations exceeded
direct expenses by $619,728 (0.97% of net assets at that date).
The Fund has no obligation with respect to unreimbursed distribution
expenses incurred by the Distributor and there is no assurance that the trustees
of the Fund will approve the continuance of the Plan from year to year. However,
the Distributor intends to seek annual continuance of the Plan.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Board of Trustees of the Fund consists of seven individuals, five of
whom are not interested persons of the Fund as defined in the Investment Company
Act of 1940. The trustees of the Fund are responsible for the overall
supervision of the operations of the Fund and perform the various duties imposed
on directors of investment companies by the Investment Company Act of 1940. The
Board of Trustees elects officers annually.
The trustees of the Fund are:
ROBERT W. CROOK,* Senior Vice President of the Investment Adviser and of
the Distributor.
DAVID ALMY, President of McCall & Almy, Inc.
A. BRUCE BRACKENRIDGE, Retired Group Executive of J.P. Morgan & Co., Inc.
and Morgan Guaranty Trust Company; Director of Parsons School of Design.
CHARLES C. CABOT, JR., Partner in the law firm of Sullivan & Worcester.
TERRY K. GLENN,* Executive Vice President of the Investment Adviser,
President and Director of the Distributor and Executive Vice President of FAM.
GEORGE W. HOLBROOK, JR., President of Bradley Resources Company.
9
<PAGE>
W. CARL KESTER, Professor of Business Administration, Harvard University
Graduate School of Business Administration.
- ------------------
* Interested person of the Fund, as defined in the Investment Company Act of
1940.
As described under the caption 'Investment Adviser,' the Investment Adviser
has assumed responsibility for the actual management of the business affairs of
the Fund, subject to the general supervision of the Fund's Board of Trustees.
The responsibility for making decisions to buy, sell or hold a particular
security rests with the Investment Adviser. The Investment Adviser performs
certain of the other administrative services and provides all the office space,
facilities, equipment and necessary personnel for portfolio management of the
Fund. Each trustee who is not an officer or employee of Merrill Lynch & Co.,
Inc. or its subsidiaries will be paid $6,000 annually in his capacity as trustee
and all trustees will be reimbursed for any expenses incurred in attending
meetings of the Fund's Board of Trustees or any committee thereof. No officer or
employee of Merrill Lynch & Co., Inc. or its subsidiaries will receive any
compensation from the Fund for acting as a trustee or officer of the Fund. The
Fund will require no employees other than its officers, all of whom will be
compensated by the Investment Adviser or the Distributor.
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 of 1940 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 '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).
PURCHASE OF SHARES
Shares will be offered continuously for sale by the Distributor. The price
per share is the net asset value per share, with no sales charge being imposed
at the time of purchase (for distribution charges, see 'Distributor'). The Fund
will effect orders to purchase its shares on each day that the New York Stock
Exchange and State Street Bank and Trust Company ('State Street Bank') are open
for business. The offering price of purchase orders received prior to the
regular close of the New York Stock Exchange (generally, 4:00 P.M., Boston time)
will be based on the net asset value determined as of the close of the New York
Stock Exchange on the day the order is placed with the Distributor. Purchase
orders received by the Distributor after such time will be effected at the close
of trading on the next business day. A purchase order does not become effective
until Federal Funds are received by State Street Bank or other forms of payment
are converted by State Street Bank (at no charge to the investor) into Federal
Funds. The minimum initial purchase is $25,000. No minimum balance need be
maintained
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and the subsequent purchases must be at least $1,000. The Fund or the
Distributor may at any time suspend the continuous offering of the Fund's shares
to the general public and may thereafter resume such offering from time to time.
THE FUND STRONGLY RECOMMENDS THE USE OF FEDERAL FUNDS TO PURCHASE SHARES
BECAUSE, WHILE THE OTHER FORMS OF PAYMENT DESCRIBED BELOW WILL ALSO BE ACCEPTED,
PURCHASE ORDERS DO NOT BECOME EFFECTIVE UNTIL FEDERAL FUNDS ARE AVAILABLE.
PURCHASES OF FUND SHARES MAY BE MADE IN ANY ONE OF THE FOLLOWING MANNERS:
PURCHASE BY FEDERAL FUNDS WIRE
Federal Funds are monies credited to a bank's account with a Federal
Reserve Bank. To purchase shares of the Fund by wiring Federal Funds, the
investor must first telephone the Distributor in Boston (toll free 800-225-1576)
to receive a wire order number. On the telephone the following information will
be requested by the Distributor: name of investor, address, tax identification
number, dividend distribution election, amount being wired and wiring bank.
Instructions should then be given by the investor to its bank to wire transfer
Federal Funds to State Street Bank and Trust Company--Boston, Attention: Merrill
Group, Credit Merrill Lynch Institutional Intermediate Fund, Wire Order Number:
(Assigned by Fund), and the investor's name and account number.
The Fund has a procedure designed to facilitate the purchase of shares by
Federal Funds wire. If a purchase order for shares is received prior to 12:00
Noon, Boston time, and payment in Federal Funds is received by State Street Bank
by the close of the Federal Funds wire on the day the purchase order is
received, the order will be effected that day as of 4:00 P.M., Boston time.
Dividends will accrue starting on the day the order is effected.
If a purchase order is received after 12:00 Noon, Boston time, and payment
in Federal Funds is received by State Street Bank by the close of the Federal
Funds wire on the day the purchase order is received, the order will be effected
that day as of 4:00 P.M., Boston time, but dividends will not accrue until the
following business day. Consequently, the Fund strongly recommends that you
place your order before 12:00 Noon, Boston time.
PURCHASE BY CHECK OR FEDERAL RESERVE DRAFT
Purchase orders for which remittance is to be made by check or Federal
Reserve Draft must be submitted directly by mail to State Street Bank and Trust
Company, P.O. Box 8500, Boston, Massachusetts 02266-8500, together with payment
for the purchase price of such shares and, in the case of a new account, a
completed Account Application (see page 29). Such orders will become effective
on the day the remittance is converted into Federal Funds, and shares will be
purchased at the net asset value next determined after such conversion. CHECKS
AND FEDERAL RESERVE DRAFTS SHOULD BE MADE PAYABLE TO MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND. Money transmitted by check normally will be converted into
Federal Funds within two business days following receipt. Certified checks are
not necessary, but checks are accepted subject to collection at full face value
in United States funds and must be drawn on a United States bank. In the event
that the purchase price for shares is paid by Federal Funds in the form of a
Federal Reserve Draft, Federal Funds will be available to the Fund on the next
business day and the investor's order will be effected on such day. During the
period of time prior to the conversion into Federal Funds, an investor's money
will not be invested and, therefore, will not be earning dividends.
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<PAGE>
GENERAL
All funds will be fully invested in full and fractional shares. To minimize
recordkeeping by banks and other institutions purchasing shares on behalf of
separate accounts, arrangements can be made through the Distributor to have
State Street Bank provide subaccounting services. Institutions wishing to open
multiple or subaccounts may obtain additional Account Application forms by
telephoning the Distributor in Boston.
The issuance of shares is recorded on the books of the Fund, and, to avoid
additional operating costs and for investors' convenience, certificates will not
be issued unless expressly requested in writing by a shareholder. Certificates
will not be issued for fractional shares. State Street Bank, the transfer agent,
will send to each shareholder of record a monthly statement and a statement of
shares of the Fund owned after each purchase or redemption relating to such
shareholder.
State Street Bank is closed on certain holidays on which the New York Stock
Exchange is open. These holidays are Martin Luther King Day (the third Monday in
January), Columbus Day (the second Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring Federal Funds on such
holidays because State Street Bank is not open to receive such funds on behalf
of the Fund. Investors whose checks are received one business day prior to a
holiday will have the proceeds of the check invested in shares of the Fund on
the next day on which State Street Bank is open for business. Also, investors
will not be able to have redemption proceeds wired to their banks on these days.
The Fund's offices will be open on these days, however, and all phones will be
operative. The Fund's staff will be available to process redemption orders and
take orders for next business day purchases.
THE FUND RESERVES THE RIGHT TO REJECT ANY PURCHASE ORDER FOR FUND SHARES.
REDEMPTION OF SHARES
Upon receipt by State Street Bank of a proper redemption request
(indicating the name and account number of the shareholder and the dollar amount
or number of shares to be redeemed), the Fund will redeem shares at their next
determined net asset value, without charge. The value of shares at the time of
redemption may be more or less than the shareholder's cost, depending on the
market values of the securities held by the Fund at that time. See 'Net Asset
Value.' Shareholders may use either the ordinary or, if they elect, the
expedited redemption procedure described below. If in utilizing either of the
redemption procedures the shareholder redeems all shares owned, dividends
accrued for the month to date will be simultaneously remitted by check.
EXPEDITED REDEMPTION PROCEDURE
Shareholders meeting the requirements stated below may initiate redemptions
by submitting their redemption requests to State Street Bank by telephone (toll
free 800-225-5150; in Massachusetts 800-972-5555) or by mail (P.O. Box 8500,
Boston, Massachusetts 02266-8500) (without signature guarantee (as described in
Rule 17Ad-15 of the Securities Exchange Act of 1934)) and have the proceeds sent
by a Federal Funds wire to a previously designated bank or trust company
account. The minimum amount to be wired is $1,000. A proper redemption request
which is received by State Street Bank prior to 4:00 P.M., Boston time, will be
effected immediately after 4:00 P.M., Boston time, on that day. The redemption
proceeds will be wired on the next business day following receipt of the
redemption request that State Street Bank and the New York Stock Exchange are
open for business.
In order to utilize the expedited redemption procedure, all shares must be
held in non-certificated form in the shareholder's account. In addition, an
Account Application (page 29) with the expedited payment authorization
12
<PAGE>
section properly completed must be on file with State Street Bank before an
expedited redemption request is submitted. This form requires a shareholder to
designate the bank or trust company account to which its redemption proceeds
should be sent. Any change in the bank or trust company account designated to
receive the proceeds must be submitted in proper form on a new Account
Application with signature guaranteed. In making a telephone redemption request,
a shareholder must provide the shareholder's name and account number, the dollar
amount of the redemption requested, and the name of the bank to which the
redemption proceeds should be sent. If the information provided by the
shareholder does not correspond to the information on the application, the
transaction will not be approved. Shares purchased other than by Federal Funds
wire may not be redeemed by the expedited procedure until 15 calendar days after
the purchase of such shares but may be redeemed pursuant to the ordinary
redemption procedure during such period.
ORDINARY REDEMPTION PROCEDURE
If this method of redemption is used, the shareholder may submit his
redemption request in writing to State Street Bank and Trust Company, P.O. Box
8500, Boston, Massachusetts 02266-8500. The Fund will make payment for shares
redeemed pursuant to the ordinary redemption procedure by check sent to the
shareholder at the address on such shareholder's Account Application. Such
checks will normally be sent out within one business day, but in no event more
than seven days after receipt of the redemption request in proper form. If
certificates have been issued representing the shares to be redeemed, prior to
effecting a redemption with respect to such shares, State Street Bank must have
received such certificates. A shareholder's signature must be guaranteed by an
'eligible guarantor institution' as such term is defined by Rule 17Ad-15 of the
Securities Exchange Act of 1934, the existence and validity of which may be
verified by State Street Bank through the use of industry publications. A notary
public is not an acceptable guarantor. In certain instances, State Street Bank
may request additional documentation which it believes necessary to insure
proper authorization such as, but not limited to, trust instruments, death
certificates, appointment of executor or administrator, or certificates of
corporate authority. Shareholders having questions regarding proper
documentation should contact State Street Bank.
DIVIDENDS
It is the Fund's intention to distribute all its net investment income.
Dividends from such net investment income are declared daily and paid monthly.
The Fund's net investment income for dividend purposes is determined immediately
prior to 4:00 P.M., Boston time. Immediately after each such determination, and
prior to 4:00 P.M., Boston time, the Fund will declare a dividend to qualified
shareholders of record of its net investment income payable to shareholders of
record as of 4:00 P.M., Boston time (see 'Purchase of Shares'). Therefore, a
qualified shareholder will receive the dividend declared on the day its purchase
order is effected and all shareholders will receive the dividend declared on the
day their redemption order is effected. All net realized long- or short-term
capital gains, if any, will be distributed to shareholders annually after the
close of the Fund's fiscal year. Dividends and distributions are automatically
reinvested in additional Fund shares at net asset value and credited to the
shareholder's account or, at the shareholder's option, paid in cash.
Shareholders may receive their dividends in cash monthly by completing the
appropriate section of the Account Application (page 29). Such cash dividends
will be paid by check within seven days after the end of each month. The
election to receive cash dividends may be made at the time of purchase of Fund
shares or at any time subsequent thereto by giving written notice to State
Street Bank. To be effective with respect to a particular monthly dividend, such
written notice must be received by State Street Bank at least seven days prior
to the end
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<PAGE>
of the month. Dividends and distributions are taxable to shareholders whether
distributed in cash or reinvested in additional shares. See 'Taxes' below.
NET ASSET VALUE
The net asset value per share of the Fund is determined at the regular
close of the New York Stock Exchange (generally, 4:00 P.M., Boston time) on days
on which the New York Stock Exchange is open for business. The New York Stock
Exchange is closed on national holidays (other than Martin Luther King Day,
Columbus Day and Veterans Day) and Good Friday. The net asset value per share is
determined by adding the value of all securities and other assets in the
portfolio, deducting its liabilities and dividing by the number of shares
outstanding. The value of the Fund's portfolio securities will be determined on
the basis of fair value as determined in good faith by or under the direction of
the Fund's Board of Trustees. In determining fair value, securities for which
market quotations are readily available are valued at market value. The value of
the Fund's portfolio securities traded in the over-the-counter markets will be
valued at the most recent bid price or yield equivalent as obtained from dealers
who make a market in the securities. Securities with remaining maturities of 60
days or less are valued by use of the amortized cost method of valuation. As
described under 'Purchase of Shares,' State Street Bank, the Fund's transfer
agent, is closed on certain days the New York Stock Exchange is open. On such
days purchase orders will not be processed.
TAXES
The Fund has qualified for the special tax treatment afforded regulated
investment companies ('RICs') under the Internal Revenue Code of 1986, as
amended (the 'Code'), and intends to continue to qualify for such treatment. If
it so qualifies, in any year in which it distributes at least 90% of its
investment company taxable income, the Fund (but not its shareholders) will be
relieved of Federal income tax on the amount it distributes to shareholders. The
Fund contemplates declaring as dividends 100% of its taxable net investment
income. See 'Dividends.' If in any taxable year the Fund does not qualify as a
RIC, all of its taxable income will be taxed to the Fund at corporate rates.
Dividends paid by the Fund from its investment income and distributions of the
Fund's net realized short-term capital gains are taxable to shareholders as
ordinary income. Distributions made from net realized long-term capital gains
are taxable to shareholders as long-term capital gains. Dividends and
distributions will be taxable to shareholders as ordinary income or capital
gains, whether received in cash or reinvested in additional shares of the Fund.
State Street Bank, the Fund's transfer agent, will send each shareholder a
monthly dividend statement which will include the amount of dividends paid and
identify whether such dividends represent ordinary income or capital gains.
The Fund may be subject to a 4% excise tax on a portion of its
undistributed income. To avoid the tax, the Fund must distribute annually at
least 98% of its adjusted taxable ordinary income for the calendar year and at
least 98% of its capital gain net income for the 12-month period ending, as a
general rule, on October 31 of the calendar year. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution, as
the case may be, in the previous year. The excise tax is imposed on the amount
by which the Fund does not meet the foregoing distribution requirements. Any
dividend declared by the Fund in October, November or December of any year and
payable to shareholders of record on a specified date in such a month will be
deemed to have been received by each
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<PAGE>
shareholder on December 31 of such year and to have been paid by the Fund not
later than December 31 of such year, provided that such dividend is actually
paid by the Fund during January of the following year.
Some shareholders may be subject to 31% withholding on reportable
dividends, capital gains distributions and redemption payments ('backup
withholding'). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Fund or who, to the Fund's knowledge, have furnished an incorrect number. An
investor, when establishing an account, must certify under penalty of perjury
that such number is correct and that he is not otherwise subject to backup
withholding.
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 these Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
The Statement of Additional Information describes in greater detail the
effects of these and other provisions of the Code on the Fund and its
shareholders.
Certain states exempt from state income taxation dividends paid by RICs
which are derived in whole or in part 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. The Fund intends to
provide shareholders annually with information relating to the Fund's income and
assets necessary to permit shareholders to determine whether and to what extent
their dividend income from the Fund is exempt from their state's income tax.
Shareholders are urged to consult their tax advisors as to whether any
portion of the dividends they receive from the Fund are exempt from state income
taxes and as to any other specific questions as to Federal, foreign, state or
local taxes. Foreign investors should also consider applicable foreign taxes in
their evaluation of an investment in the Fund.
PORTFOLIO TRANSACTIONS
The Fund has no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policy
established by the trustees of the Fund, the Investment Adviser is primarily
responsible for the Fund's portfolio decisions and placing of the Fund's
portfolio transactions. In placing orders, it is the policy of the Fund to
obtain the best net results taking into account such factors as price (including
the applicable dealer spread), the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities, the firm's
risk in positioning the securities involved and the provision of supplemental
investment research by the firm. Although the Investment Adviser generally seeks
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available.
The Eligible Investments which the Fund purchases are traded primarily in
the over-the-counter market. Where possible, the Fund will deal directly with
the dealers who make a market in the securities involved 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. Eligible Investments are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities
transactions of the Fund will primarily consist of dealer spreads and
underwriting commissions. Affiliated persons of the Fund may serve as its broker
in over-the-counter transactions conducted on an agency basis. The Fund may
purchase securities from any underwriting syndicate of which Merrill Lynch is a
member under certain conditions in accordance with the provisions of a rule
adopted
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<PAGE>
under the Investment Company Act of 1940. Of the securities in which the Fund
invests, generally only U.S. Government agency securities and securities issued
by any State, territory or possession or political subdivision are sold in
underwritings.
PORTFOLIO TURNOVER
The Investment Adviser effects portfolio transactions without regard to
holding period if, in its judgment, such transactions are advisable in light of
a change in circumstances in general market, economic or financial conditions.
As a result of its investment policies, the Fund may engage in a substantial
number of portfolio transactions. 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. In addition, if gains on certain securities
held by the Fund for less than three months exceed 30% of the Fund's annual
gross income for Federal income tax purposes, the Fund's status as a regulated
investment company under the Code may be jeopardized. See 'Taxes.' As a result
of volatility in interest rates during 1994, the Fund's portfolio turnover rate
for the fiscal year ended October 31, 1994 was 172.51%. The Fund's portfolio
turnover rate for the fiscal year ended October 31, 1995 was 47.90%.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange their shares for shares of any one of
four portfolios of Merrill Lynch Funds For Institutions Series--Merrill Lynch
Treasury Fund, Merrill Lynch Government Fund, Merrill Lynch Institutional Fund
or Merrill Lynch Institutional Tax-Exempt Fund (collectively referred to as the
'funds')--on the basis described below. In order to qualify for the Exchange
Privilege, a shareholder must exchange shares with a current value of at least
$1,000. Under the Exchange Privilege, each of the funds offers to exchange its
shares for shares of the Fund, on the basis of relative net asset value per
share. If in utilizing the Exchange Privilege the shareholder exchanges all his
shares of the Fund, all dividends accrued on such shares for the month to date
will be automatically reinvested in the new fund. Before effecting an exchange,
shareholders of the Fund should obtain the currently effective prospectus of the
fund for which shares are being exchanged. The investment objectives of Merrill
Lynch Treasury Fund are to seek current income consistent with liquidity and
security of principal from investment in direct obligations of the U.S.
Treasury. The investment objectives of Merrill Lynch Government Fund are to seek
current income consistent with liquidity and security of principal from
investment in securities issued by the U.S. Government, its agencies and
instrumentalities, and in repurchase agreements secured by such obligations. The
investment objectives of Merrill Lynch Institutional Fund are to seek maximum
current income consistent with liquidity and the maintenance of a portfolio of
high quality, short-term 'money market' instruments. The investment objectives
of Merrill Lynch Institutional Tax-Exempt Fund are to seek 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. An exchange between funds pursuant to the Exchange Privilege is treated
as a sale for Federal income tax purposes and, depending upon the circumstances,
a short- or long-term capital gain or loss may be realized. The Exchange
Privilege may be modified or terminated at any time.
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<PAGE>
To exercise the Exchange Privilege, shareholders should contact the
Distributor in Boston. A shareholder may make exchanges by telephone, provided
that (i) it has elected the telephone exchange option on the Account
Application, (ii) the registration of the account for the new fund will be the
same as for the Fund, and (iii) the shares to be registered are not in
certificate form. To make exchanges by telephone, a shareholder should call the
Distributor toll free at 800-225-1576. The shareholder should identify himself
by name and account number and give the name of the fund into which it wishes to
make the exchange and the number of shares it wishes to exchange. The
shareholder also may write to State Street Bank requesting that the exchange be
effected. Such letter must be signed exactly as the account is registered with
signature(s) guaranteed by a commercial bank which is a member of the FDIC or by
a trust company or a member firm of a domestic securities exchange. The Fund
reserves the right to require a properly completed Exchange Application.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
yield for various specified time periods in advertisements or information
furnished to present or prospective shareholders. Average annual total return
and yield are computed in accordance with formulas specified by the Securities
and Exchange Commission.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield to maturity of each security earned during the
period by (b) the average daily number of shares outstanding during the period
that were entitled to receive dividends multiplied by the net asset value per
share on the last day of the period. The standardized yield for the 30-day
period ended October 31, 1995 was 5.08%.
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 the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return. 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 a longer period of time. The
Fund's total return may be expressed either as a percentage or as a dollar
amount in order to illustrate such total return on a hypothetical $1,000
investment in the Fund at the beginning of each specified period.
Total return and yield figures are based on the Fund's historical
performance and are not intended to indicate future performance. The Fund's
total return and yield 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 Morningstar Publications, Inc., Lipper Analytical Services, Inc.,
Money Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes Magazine and Fortune Magazine. From time to time, the
Fund may include the Fund's Morningstar risk-adjusted performance ratings in
advertisements 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.
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ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
Under the Declaration of Trust, the trustees are authorized to issue an
unlimited number of full and fractional shares of a single class with a par
value of $.10 per share and to divide or combine such shares into a greater or
lesser number of shares. All shares have equal voting rights, and each issued
and outstanding share is entitled to one vote and to participate equally in
dividends and distributions declared by the Fund and in net assets of the Fund
upon liquidation or dissolution remaining after satisfaction of outstanding
liabilities. The shares of the Fund, when issued, will be fully paid and
non-assessable, have no preference, preemptive, conversion or similar rights,
and be freely transferable. 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. Meetings of the shareholders will be called upon
written request of shareholders holding in the aggregate not less than 10% of
the outstanding shares having voting rights. Except as set forth above, the
trustees will continue to hold office and appoint successor trustees. Shares do
not have cumulative voting rights and the holders of more than 50% of the shares
of the Fund voting for the election of trustees can elect all of the trustees of
the Fund if they choose to do so and in such event the holders of the remaining
shares would not be able to elect any trustees. Holders of shares of the Fund
are entitled to redeem their shares as set forth under 'Redemption of Shares.'
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Fund.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, is the Fund's custodian, transfer agent and dividend disbursing
agent.
COUNSEL AND INDEPENDENT AUDITORS
Rogers & Wells, counsel to the Fund, passes upon legal matters for the Fund
in connection with the shares offered by this Prospectus. Deloitte & Touche LLP
are the independent auditors of the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on October 31 of each year. The Fund
issues to its shareholders semi-annual reports containing unaudited financial
statements and annual reports containing financial statements which are audited
by the independent auditors.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Statement of
Additional Information, dated February 26, 1996, which forms a part of the
Registration Statement, is incorporated by reference into this Prospectus. The
Statement of Additional Information may be obtained without charge as provided
on the cover page of this Prospectus. The Registration Statement including the
exhibits filed therewith may be examined at the office of the Securities and
Exchange Commission in Washington, D.C.
---------------
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The Fund was organized as an unincorporated business trust under the laws
of Massachusetts on September 10, 1986. Its executive offices are located at One
Financial Center, Boston, Massachusetts 02111-2646 (telephone toll free
800-225-1576).
The Declaration of Trust establishing the Fund, dated September 10, 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 Institutional Intermediate 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 Fund may be held to any personal liability, nor may resort be had
to their private property for the satisfaction of any obligation or claim
otherwise in connection with the affairs of the Fund but the Fund's property
only shall be liable.
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APPENDIX
OFFICE OF THRIFT SUPERVISION REGULATIONS
The regulations adopted by the Office of Thrift Supervision, as currently
in effect, define 'liquid assets' to include shares in any open-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, while the portfolio of such company is
restricted by its investment policy, changeable only by vote of the
shareholders, to investments (including such investments held pursuant to
repurchase agreements) described below:
(1) Time deposits in a Federal Home Loan Bank, the Bank for Savings
and Loan Associations, Chicago, Illinois, or the Savings Banks Trust
Company, New York, New York;
(2) Except as the Office may otherwise direct in a specific case,
obligations of the United States maturing in 5 years or less;
(3) Obligations with 5 years or less remaining until maturity, issued,
or fully guaranteed as to principal and interest, by:
(i) A Federal Home Loan Bank(s);
(ii) The Federal National Mortgage Association;
(iii) The Government National Mortgage Association;
(iv) A Bank(s) for Cooperatives, including the National Bank for
Cooperatives or the United Bank for Cooperatives;
(v) A Farm Credit Bank(s);
(vi) The Tennessee Valley Authority;
(vii) The Export-Import Bank of the United States;
(viii) The Commodity Credit Corporation;
(ix) The Federal Financing Bank;
(x) The Student Loan Marketing Association;
(xi) The Federal Home Loan Mortgage Corporation; or
(xii) The National Credit Union Administration;
(4) Savings accounts of an insured financial institution, including
loans of unsecured day(s) funds to an insured financial institution (i.e.,
Federal funds or similar unsecured loans), if:
(i) Except for loans of unsecured day(s) funds, such accounts are
(A) negotiable and will mature in one year or less, (B) not negotiable
and will mature in 90 days or less, or (C) not withdrawable without
notice and the notice periods do not exceed 90 days;
(ii) Loans of unsecured day(s) funds will mature in 6 months or
less; and
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(iii) The priority of claims of a lender of unsecured day(s) funds
is not subordinate to claims of depositors in the borrower thereof;
(5) Bankers' acceptances of an insured financial institution if:
(i) The total of all such acceptances of the same financial
institution held by the same savings association does not exceed
one-fourth of 1 percent of total deposits of such financial institution
(as shown by its last published statement of condition preceding the
date of acceptance);
(ii) Such acceptances will mature in 9 months or less;
(6) Obligations of or obligations issued by (other than gold-related
obligations) any state, territory or possession of the United States or
political subdivision thereof, including any agency, corporation or
instrumentality of a state, territory, possession or political subdivision:
Provided, That:
(i) Such obligations continue to meet the requirements of Sec.
545.72(a) of this chapter; and
(ii) Such obligations will mature in 2 years or less;
(7) Promissory notes issued to and made to the order of an insured
financial institution by the Savings Association Insurance Fund or the Bank
Insurance Fund; and
(8) Corporate debt obligations and commercial paper denominated in
dollars, Provided, That:
(i) Such corporate debt obligations (A) continue to be rated in one
of the four highest categories by the most recently published rating of
such obligations by a nationally recognized investment rating service,
(B) are marketable as defined by Sec. 541.7 of this part, (C) will
mature in three years or less, and (D) are not convertible to common
stock;
(ii) Such commercial paper (A) continues to be rated in one of the
two highest categories by the most recently published rating of such
paper by two nationally recognized investment rating services, or, if
unrated, is guaranteed by a company having outstanding paper that is so
rated, (B) will mature in 270 days or less; and
Provided, That an amount not in excess of one percent of such
institution's assets invested in eligible corporate debt obligations or
commercial paper of a single issuer shall be counted as a liquid asset.
FEDERAL CREDIT UNIONS-PERMITTED INVESTMENTS
A Federal Credit Union may invest:
(1) in loans exclusively to members;
(2) in obligations of the United States of America, or securities
fully guaranteed as to principal and interest thereby;
(3) in accordance with rules and regulations prescribed by the Board,
in loans to other credit unions in the total amount not exceeding 25 per
centum of its paid in and unimpaired capital and surplus;
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(4) in shares or accounts of savings and loan associations or mutual
savings banks, the accounts of which are insured by the Federal Savings and
Loan Insurance Corporation or the Federal Deposit Insurance Corporation;
(5) in obligations issued by banks for cooperatives, Federal land
banks, Federal intermediate credit banks, Federal home loan banks, the
Federal Home Loan Bank Board, or any corporation designated in section
9101(3) of Title 31 as a wholly owned Government corporation; or in
obligations, participations, or other instruments of or issued by, or fully
guaranteed as to principal and interest by, the Federal National Mortgage
Association or the Government National Mortgage Association; or in
mortgages, obligations, or other securities which are or ever have been
sold by the Federal Home Loan Mortgage Corporation pursuant to section 1454
or section 1455 of this title; or in obligations or other instruments or
securities of the Student Loan Marketing Association; or in obligations,
participations, securities, or other instruments of, or issued by, or fully
guaranteed as to principal and interest by any other agency of the United
States and a Federal credit union may issue and sell securities which are
guaranteed pursuant to section 1721(g) of this title;
(6) in participation certificates evidencing beneficial interests in
obligations, or in the right to receive interest and principal collections
therefrom, which obligations have been subjected by one or more Government
agencies to a trust or trusts for which any executive department, agency,
or instrumentality of the United States (or the head thereof) has been
named to act as trustee;
(7) in shares or deposits of any central credit union in which such
investments are specifically authorized by the board of directors of the
Federal credit union making the investment;
(8) in shares, share certificates, or share deposits of federally
insured credit unions;
(9) in the shares, stocks, or obligations of any other organization,
providing services which are associated with the routine operations of
credit unions, up to 1 per centum of the total paid in and unimpaired
capital and surplus of the credit union with the approval of the Board:
Provided, however, That such authority does not include the power to
acquire control directly or indirectly, of another financial institution,
nor invest in shares, stocks or obligations of an insurance company, trade
association, liquidity facility or any other similar organization,
corporation, or association, except as otherwise expressly provided by this
chapter;
(10) in the capital stock of the National Credit Union Central
Liquidity Facility;
(11) investments in obligations of, or issued by, any State or
political subdivision thereof (including any agency, corporation, or
instrumentality of a State or political subdivision), except that no credit
union may invest more than 10 per centum of its unimpaired capital and
surplus in the obligations of any one issuer (exclusive of general
obligations of the issuer);
(12) in deposits in national banks and in State banks, trust
companies, and mutual savings banks operating in accordance with the laws
of the State in which the Federal credit union does business, or in banks
or institutions the accounts of which are insured by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance
Corporation, and for Federal credit unions or credit unions authorized by
the Department of Defense operating suboffices on American military
installations in foreign countries or trust territories of the United
States to maintain demand deposit accounts in banks located in those
countries
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or trust territories, subject to such regulations as may be issued by the
Board and provided such banks are correspondents of banks described in this
paragraph; and
(13) in securities that are offered and sold pursuant to section
77d(5) of Title 15; or that are mortgage related securities (as that term
is defined in section 78c(a)(41) of Title 15), subject to such regulations
as the Board may prescribe, including regulations prescribing minimum size
of the issue (at the time of initial distribution) or minimum aggregate
sales prices, or both.
The regulations reproduced below govern the investment powers of Federal
Credit Unions:
12 C.F.R. SECTION 703.2 DEFINITIONS
Adjusted trading means any method or transaction used to defer a loss
whereby a federal credit union sells a security to a vendor at a price above its
current market price and simultaneously purchases or commits to purchase from
the vendor another security at a price above its current market price.
Average life means the weighted average time to principal repayment with
the amount of the principal paydowns (both scheduled and unscheduled) as the
weights.
Bailment for hire contract means a contract whereby a third party, bank or
other financial institution, for a fee, agrees to exercise ordinary care in
protecting the securities held in safekeeping for its customers.
Bankers' Acceptance means a time draft that is drawn on and accepted by a
bank, and that represents an irrevocable obligation of the bank.
Cash forward agreement means an agreement to purchase or sell a security
with delivery and acceptance being mandatory and at a future date in excess of
thirty (30) days from the trade date.
Collateralized Mortgage Obligation (CMO) means a multi-class bond issue
collateralized by whole loan mortgages or mortgage-backed securities (MBS). CMOs
usually consist of four or more classes of bonds which are commonly referred to
as 'tranches'.
Corporate credit union means a credit union that conforms to the definition
of 'corporate credit union' as contained in part 704 of this chapter.
Eurodollar deposit means a deposit in a foreign branch of a United States
depository institution.
Facility means the home office of a federal credit union or any suboffice
thereof including, but not necessarily limited to, a wire service, telephonic
station, or mechanical teller station.
Federal funds transaction means a short-term or open-ended transfer of
funds to a section 107(8) institution.
Futures contract means a contract for the future delivery of commodities,
including certain government securities, sold on commodities exchanges.
Immediate family member means a spouse or other family members living in
the same household.
Market price means the last established price at which a security is sold.
Maturity date means the date on which a security matures, and shall not
mean the call date or the average life of the security.
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Real Estate Mortgage Investment Conduit (REMIC) means a nontaxable entity
formed for the sole purpose of holding a fixed pool of mortgages secured by an
interest in real property and issuing multiple classes of interests in the
underlying mortgages.
Repurchase transaction means a transaction in which a federal credit union
agrees to purchase a security from a vendor and to resell the same or any
identical security to that vendor at a later date. A repurchase transaction may
be of three types:
(1) Investment-type repurchase transaction means a repurchase
transaction where the federal credit union purchasing the security takes
physical possession of the security, or receives written confirmation of
the purchase and a custodial or safekeeping receipt from a third party
under a written bailment for hire contract, or is recorded as the owner of
the security through the Federal Reserve Book-Entry System;
(2) Financial institution-type repurchase transaction means a
repurchase transaction with a section 107(8) institution; and
(3) Loan-type repurchase transaction means any repurchase transaction
that does not qualify as an investment-type or financial institution-type
repurchase transaction.
Residual interest means the remainder cash flows from a CMO or REMIC
transaction after payments due bondholders and trust administrative expenses
have been satisfied.
Reverse repurchase transaction means a transaction whereby a federal credit
union agrees to sell a security to a purchaser and to repurchase the same or any
identical security from that purchaser at a future date and at a specified
price.
Section 107(8) institution means an institution in which a federal credit
union is authorized to make deposits pursuant to section 107(8) of the Federal
Credit Union Act (12 U.S.C. 1757(8)), i.e., an institution that is insured by
the Federal Deposit Insurance Corporation or is a state bank, trust company or
mutual savings bank operating in accordance with the laws of a state in which
the federal credit union maintains a facility.
Security means any security, obligation, account, deposit, or other item
authorized for investment by a federal credit union pursuant to section 107(7),
107(8), or 107(15)(B) of the Federal Credit Union Act
(12 U.S.C. 1757(7), 1757(8), 1757(15)(B)), other than loans to members.
Senior management employee means the credit union's chief executive officer
(typically this individual holds the title of President or Treasurer/Manager),
any assistant chief executive officers (e.g., Assistant President, Vice
President or Assistant Treasurer/Manager) and the chief financial officer
(Comptroller).
Settlement date means the date originally agreed to by a federal credit
union and a vendor for settlement of the purchase or sale of a security.
Short sale means the sale of a security not owned by the seller.
Standby commitment means a commitment to either buy or sell a security, on
or before a future date, at a predetermined price. The seller of the commitment
is the party receiving payment for assuming the risk associated with committing
either to purchase a security in the future at a predetermined price, or to sell
a security in the future at a predetermined price. The seller of the commitment
is required to either accept delivery
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of a security (in the case of a commitment to buy) or make delivery of a
security (in the case of a commitment to sell), in either case at the option of
the buyer of the commitment.
Stripped Mortgage-Backed Securities (SMBS) means securities that represent
unequal proportions of the cash flows of an underlying pool of mortgages. In
their purest form, SMBS represent mortgage-backed securities (MBS) that have
been converted into interest only (IO) securities, where holders receive 100
percent of the interest cash flows, and principal only (PO) securities, where
holders receive 100 percent of the principal cash flows.
Trade date means the date a federal credit union originally agrees, whether
orally or in writing, to enter into the purchase or sale of a security.
Yankee Dollar deposit means a deposit in a United States branch of a
foreign bank licensed to do business in the state in which it is located, or a
deposit in a state-chartered, foreign controlled bank.
Zero coupon bond means a debt obligation that makes no periodic interest
payments but instead is sold at a discount from its face value. The holder of a
zero coupon bond realizes the rate of return through the gradual appreciation of
the security, which is redeemed at face value on a specified maturity date.
12 C.F.R. SECTION 703.4 AUTHORIZED ACTIVITIES
(a) General authority. A federal credit union may contract for the purchase
or sale of a security provided that:
(1) The delivery of the security is to be made within thirty (30) days
from the trade date; and
(2) The price of the security at the time of purchase is the market
price.
(b) Cash forward agreements. A federal credit union may enter into a cash
forward agreement to purchase or sell a security, provided that:
(1) The period from the trade date to the settlement date does not
exceed one hundred and twenty (120) days;
(2) If the credit union is the purchaser, it has written cash flow
projections evidencing its ability to purchase the security;
(3) If the credit union is the seller, it owns the security on the
trade date; and
(4) The cash forward agreement is settled on a cash basis at the
settlement date.
(c) Loans, shares and deposits--other financial institutions. A federal
credit union may invest in the following accounts of other financial
institutions as specified in sections 107(7) and 107(8) of the Federal Credit
Union Act (12 U.S.C. 1757(7), 1757(8)): Loans to nonmember credit unions in an
aggregate amount not exceeding 25 percent of the lending credit union's
unimpaired capital and surplus; shares, share certificates or share deposits of
federally insured credit unions; shares or deposits of any central credit union
specifically authorized by the board of directors; and deposits of any section
107(8) institution, provided that where any such deposit, or any portion of it,
is not federally insured, a credit union shall analyze the credit quality of the
issuing institution prior to making the deposit. Where the deposit, or any
portion of it is not federally insured, a federal credit union shall also record
its credit decision respecting the investment in the records of the credit
union.
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(d) Repurchase transactions. A federal credit union may enter into an
investment-type repurchase transaction or a financial institution-type
repurchase transaction provided the purchase price of the security obtained in
the transaction is at or below the market price. A repurchase transaction not
qualifying as either an investment-type or financial institution-type repurchase
transaction will be considered a loan-type repurchase transaction subject to
section 107 of the Federal Credit Union Act (12 U.S.C. 1757), which generally
limits federal credit unions to making loans only to members.
(e) Reverse repurchase transactions. A federal credit union may enter into
a reverse repurchase transaction, provided that either any securities purchased
with the funds obtained from the transaction or the securities collateralizing
the transaction have a maturity date not later than the settlement date for the
reverse repurchase transaction. A reverse repurchase transaction is a borrowing
transaction subject to section 107(9) of the Federal Credit Union Act (12 U.S.C.
1757(9)), which limits a federal credit union's aggregate borrowing to 50
percent of its unimpaired capital and surplus.
(f) Federal funds. A federal credit union may sell Federal funds to a
section 107(8) institution, provided that the interest or other consideration
received from the financial institution is at the market rate for Federal funds
transaction and that the transaction has a maturity of 1 or more business days
or the credit union is able to require repayment at any time.
(g) Yankee Dollars. A federal credit union may invest in Yankee Dollar
deposits in a section 107(8) institution.
(h) Eurodollars. A federal credit union may invest in Eurodollar deposits
in a branch of a section 107(8) institution.
(i) Banker's acceptances. A federal credit union may invest in banker's
acceptances issued by a section 107(8) institution.
(j) Mutual funds. A federal credit union may invest in a mutual fund if the
investments and investment transactions of the fund are legally permissible for
federal credit unions under the Federal Credit Union Act and NCUA Rules and
Regulations.
12 C.F.R. SECTION 703.5 PROHIBITED ACTIVITIES
The prohibitions contained in paragraphs (f), (h) and (k) of this section
shall not apply to securities purchased prior to December 2, 1991. The
prohibition contained in paragraph (g) of this section shall not apply to
securities purchased prior to July 30, 1993.
(a) Except as provided in Sec. 701.21(i), a federal credit union may not
purchase or sell a standby commitment.
(b) A federal credit union may not buy or sell a futures contract.
(c) A federal credit union may not engage in adjusted trading.
(d) A federal credit union may not engage in a short sale.
(e) A federal credit union may not purchase shares or deposits in, or
otherwise transact business with a corporate credit union that does not operate
in compliance with part 704 of this chapter in significant respects, or is not
examined by NCUA.
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(f) Except as provided in paragraph (i) of this section, a federal credit
union may not purchase a Stripped Mortgage-Backed Security (SMBS).
(g) (1) Except as provided in paragraph (i) of this section, a federal
credit union may not purchase a CMO or REMIC which meets any of the following
three tests:
(i) Average Life Test. The CMO or REMIC has an expected average life
greater than 10 years.
(ii) Average Life Sensitivity Test. The average life of the CMO or
REMIC: (A) Extends by more than 4 years, assuming an immediate and
sustained parallel shift in the yield curve of plus 300 basis points, or
(B) Shortens by more than 6 years, assuming an immediate and sustained
parallel shift in the yield curve of minus 300 basis points.
(iii) Price Sensitivity Test. The estimated change in the price of the
CMO or REMIC is more than 17 percent, due to an immediate and sustained
parallel shift in the yield curve of plus or minus 300 basis points.
(2) The three tests contained in this paragraph (g) shall apply at the time
of purchase and on any subsequent re-testing date, assuming market interest
rates and prepayment speeds at the time that the tests are applied.
(h) Except as provided in paragraph (i) of this section, a federal credit
union may not purchase a residual interest in a CMO or REMIC transaction.
(i) The prohibitions contained in paragraphs (f), (g) and (h) of this
section shall not apply where an investment is made solely to reduce interest
rate risk and where:
(1) A monitoring and reporting system is in place that provides the
documentation necessary to evaluate the expected and actual performance of
the investment under different interest rate scenarios;
(2) The monitoring and reporting system is used to conduct and
document an analysis that shows, prior to purchase, that the proposed
investment will reduce the credit union's interest rate risk;
(3) The investment, subsequent to purchase, is evaluated at least
quarterly, to determine whether or not the investment has actually reduced
the credit union's interest rate risk;
(4) The investment is reported as a trading asset at market value or
as a held-for-sale asset at the lower of cost or market value until its
disposition.
(j) The average life and average life sensitivity tests contained in
paragraph (g) of this section shall not apply to a floating or adjustable rate
CMO/REMIC that has all of the following characteristics at the time of purchase
or on a subsequent testing date, irrespective of whether or not it has been
purchased to reduce interest-rate risk:
(1) The interest rate is reset at least annually.
(2) The interest rate of the instrument, at the time of purchase or at
a subsequent testing date, is below the contractual cap of the instrument.
(3) The index upon which the interest rate is based is a conventional
widely-used market interest rate such as the London Interbank Offered Rate
(LIBOR).
(4) The interest rate of the instrument varies directly (not
inversely) with the index upon which it is based and is not reset as a
multiple of the change in the related index.
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(k) A federal credit union may not purchase a zero coupon security with a
maturity date that is more than 10 years from the settlement date for purchase
of the security.
(l) A federal credit union's directors, officials, committee members and
senior management employees, and immediate family members of such individuals,
may not receive pecuniary consideration in connection with the making of an
investment or deposit by the federal credit union. The prohibition contained in
this subsection also applies to any employee not otherwise covered if the
employee is directly involved in investments or deposits unless the board of
directors determines that the employee's involvement does not present a conflict
of interest.
(m) All transactions with business associates or family members not
specifically prohibited by paragraph (1) of this section must be conducted at
arm's length and in the interest of the credit union.
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MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND ACCOUNT APPLICATION
MAIL TO:
STATE STREET BANK AND TRUST COMPANY,
P.O. BOX 8500,
BOSTON, MASSACHUSETTS 02266-8500
REGISTRATION: The account should be registered as follows:
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
Name of Account
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
Street
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
City State Zip Code
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
Occupation
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
Name of Employer
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
Street
/ / / / / / / / / / / / / / / / / / / / / /
- ------------------------------------------
City State Zip Code
INITIAL INVESTMENT:--Minimum $25,000
/ / The account has been opened by wire on ___________________________________
(Date) and the account no. assigned is ___________________________________
/ / Please establish an account with the enclosed check for $ ________________
payable to the Merrill Lynch Institutional Intermediate Fund.
/ / / /-/ / /-/ / / / /
- ----------------------
Soc. Sec. No. or Tax ID No.
/ / / /-/ / / / / / / /
- ----------------------
Merrill Lynch Brokerage Account No. (if applicable)
/ / / / /
- --------
Merrill Lynch Financial Consultant No. (if applicable)
___(_________)__________________________________________________________________
Area code Telephone
Citizen of
/ / U.S.
/ / Other (please specify) _____________________________________________________
- ---------
* Under the Federal income tax law, you are subject to certain penalties as
well as withholding of tax at a 31% rate if you do not provide a correct
number.
DISTRIBUTIONS
/ / Check this box if distributions are to be paid in cash. Otherwise
distributions will be reinvested automatically in additional shares of the
Fund.
TELEPHONE EXCHANGE PRIVILEGE (SEE PAGE 16)
YES NO
/ / / / I (We) hereby authorize telephone instructions to withdraw
amounts from my (our) account in the Fund and exchange for shares
of Merrill Lynch Treasury Fund, Merrill Lynch Government Fund,
Merrill Lynch Institutional Fund, and/or Merrill Lynch
Institutional Tax-Exempt Fund.
EXPEDITED REDEMPTION PAYMENTS Redemption proceeds will be sent to the bank or
(SEE PAGE 12) trust company listed below, for credit to the
If desired check box investor's account. If the investor wishes to
/ / send redemption proceeds to more than one such
and complete the rest institution, an additional application must be
of this section submitted for each institution. The investor
hereby authorizes State Street Bank to honor
telephone or written instructions, without a
signature guarantee, for redemption of Fund
shares. State Street Bank's records of such
instructions will be binding on all parties and
State Street Bank and the Fund will not be
liable for any loss, expense or cost arising
out of such transactions unless the Fund or
State Street Bank fail to employ reasonable
procedures to confirm that instructions
communicated by telephone are genuine.
Enclose a specimen of your check or deposit slip (marked 'VOID'), if applicable,
for the bank account listed below. TO FACILITATE THE WIRING OF YOUR REDEMPTION
PROCEEDS THE INDICATED BANK SHOULD BE A COMMERCIAL BANK.
Name of Bank: __________________________ Bank Account No.: ____________________
Address of Bank: ______________________________________________________________
Street City State Zip
Name on Account: ______________________________________________________________
CERTIFICATION: By the execution of this Application, the investor represents
and warrants that the investor has full right, power and authority to invest
in the Fund, and the person or persons signing on behalf of the investor
represent and warrant that they are duly authorized to sign this Application
and to purchase or redeem shares of the Fund on behalf of the investor. The
investor hereby affirms that he has received a current Fund Prospectus.
The undersigned hereby certifies under penalty of perjury that (1) the above
Social Security Number or Taxpayer Identification Number is correct and that
(2) he is not subject to backup withholding, because (a) he is exempt from
backup withholding, OR (b) he has not been notified by the Internal Revenue
Service that he is subject to backup withholding as a result of a failure to
report all interest or dividends, OR (c) the IRS has notified him that he is
no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--YOU MUST CROSS OUT ITEM 2 ABOVE IF YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING DUE
TO UNDERREPORTING OF INTEREST OR DIVIDENDS. THE UNDERSIGNED AUTHORIZES THE
FURNISHING OF THIS CERTIFICATION TO OTHER MERRILL LYNCH SPONSORED MUTUAL
FUNDS.
...................................... .......................................
Signature Title (Corporate Account only)
...................................... .......................................
Signature Title (Corporate Account only)
29
<PAGE>
[This page intentionally left blank]
30
<PAGE>
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center
Boston, Massachusetts 02111-2646
MANAGER
Merrill Lynch Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY BY THE FUND OR BY THE DISTRIBUTOR IN
ANY STATE IN WHICH SUCH OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY MAY
NOT LAWFULLY BE MADE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table................................... 2
Financial Highlights........................ 3
Investment Objective........................ 4
Investment Policies......................... 4
Investment Adviser.......................... 8
Distributor................................. 8
Management of the Fund...................... 9
Code of Ethics.............................. 10
Purchase of Shares.......................... 10
Redemption of Shares........................ 12
Dividends................................... 13
Net Asset Value............................. 14
Taxes....................................... 14
Portfolio Transactions...................... 15
Exchange Privilege.......................... 16
Performance Data............................ 17
Additional Information...................... 18
Appendix.................................... 20
Account Application......................... 29
<CAPTION>
Code 10431-0296
</TABLE>
[LOGO]
[ART]
[ART]
PROSPECTUS
February 26, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
<TABLE>
<S> <C>
ONE FINANCIAL CENTER FOR GENERAL INFORMATION
BOSTON, MASSACHUSETTS 02111-2646 AND PURCHASES CALL
617-357-1460 OR TOLL FREE 800-225-1576
</TABLE>
------------------------
Merrill Lynch Institutional Intermediate Fund (the 'Fund') is a
diversified, open-end management investment company which seeks current income.
The Fund intends to invest only in those assets (including assets subject to
repurchase agreements) which will permit shares of the Fund to qualify both as
'liquid assets' under regulations of the Office of Thrift Supervision ('OTS')
and as an investment permitted by the regulations of the National Credit Union
Administration.
------------------------
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the Prospectus of the Fund dated February
26, 1996 ('Prospectus') which has been filed with the Securities and Exchange
Commission and is available upon oral or written request without charge. Copies
of the Prospectus can be obtained by calling or by writing the Fund at the above
telephone numbers or address. This Statement of Additional Information has been
incorporated by reference into the Prospectus.
------------------------
The date of this Statement of Additional Information and the Prospectus is
February 26, 1996.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Reference is made to 'Investment Objective' and 'Investment Policies'
contained in the Prospectus for a discussion of the investment objective and
policies of the Fund. The Fund's investment objective and the investment
restrictions described below cannot be modified without shareholder approval.
REPURCHASE AGREEMENTS; PURCHASE AND SALE CONTRACTS
The Fund may invest in Eligible Investments subject to repurchase
agreements, and in Treasury obligations subject to purchase and sale contracts,
with any member bank of the Federal Reserve System or primary dealer in U.S.
Government securities. Under such instruments, the purchaser (i.e., the Fund)
acquires ownership of the obligation (debt security) and the seller agrees, at
the time of the sale, to repurchase the obligation at the mutually agreed upon
time and price, thereby determining the yield during the purchaser's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. In the case of repurchase agreements, the
prices at which the trades are conducted do not reflect 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, such as under one week. Repurchase agreements may be construed to be
collateralized loans by the purchaser to the seller secured by the securities
transferred to the purchaser. In the case of a repurchase agreement, the Fund
will require the seller to provide additional collateral if the market value of
the securities falls below the repurchase price any time during the term of the
repurchase agreement; the Fund does not have the right to seek additional
collateral in the case of purchase and sale contracts. In the event of default
by the seller under a repurchase agreement construed to be a collateralized
loan, the underlying securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs or possible losses in connection
with the disposition of 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 default under such a
repurchase agreement or purchase and sale contract, instead of the contractual
fixed rate of return, the rate of return to the Fund shall be dependent upon
intervening fluctuations of the market value of such securities and the accrued
interest on the securities. In such event, the Fund would have the rights
against the seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to perform. While
the substance of purchase and sale contracts is similar to repurchase
agreements, because of the different treatment with respect to accrued interest
and additional collateral, management believes that purchase and sale contracts
are not repurchase agreements as such are understood in the banking and
brokerage community.
INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the Prospectus, the
Fund has adopted the following investment restrictions, none of which may be
changed without the approval of a majority of the Fund's outstanding shares
(which for this purpose and under the Investment Company Act of 1940 means the
vote of (i) 67% or more of the Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding shares,
whichever is less). The Fund may not:
(1) Make investments for the purpose of exercising control or
management.
2
<PAGE>
(2) Purchase or sell real estate; provided that to the extent
permitted by the regulations of the OTS and the National Credit Union
Administration (the 'Regulations'), the Fund may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
(3) Purchase any securities on margin (except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities), or make short sales of securities or
maintain a short position.
(4) Make loans to other persons (except as provided in (11) below);
provided that for purposes of this restriction the acquisition of a portion
of an issue of publicly distributed bonds, debentures, or other corporate
debt securities and investment in governmental and supranational
obligations, short-term commercial paper, certificates of deposit, bankers'
acceptances and repurchase agreements shall not be deemed to be the making
of a loan.
(5) Underwrite securities of other issuers except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
(6) Purchase or sell interests in oil, gas or other mineral
exploration or development programs.
(7) Purchase or sell commodities or commodity contracts, except that
the Fund may purchase interest rate futures and related options to the
extent permitted by the Regulations (such transactions currently are not
permitted by the Regulations).
Additional investment restrictions which may be changed by the trustees,
but only if such changes would comply with the Regulations, provide that the
Fund may not:
(8) Invest in securities of issuers (other than U.S. Government
agencies or instrumentalities) having a record, together with predecessors,
of less than three years of continuous operation if more than 5% of the
Fund's total assets, taken at market value at the time of investment, would
be invested in such securities.
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization.
(10) Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof.
(11) Lend its portfolio securities, except that the Fund may lend
portfolio securities with an aggregate value up to 33 1/3 percent of its
total assets, taken at market value, in accordance with the guidelines set
forth below.
Subject to investment restriction (11) above, the Fund may from time to
time lend securities from its portfolio to brokers, dealers and financial
institutions and receive collateral in cash (or cash equivalents consisting of
securities issued or guaranteed by the U.S. Government which may be held as
portfolio securities pursuant to the Fund's investment policies) which will be
maintained in an amount equal to at least 102% of the current market value of
the loaned securities. During the period of the loan, the Fund receives income
on the loaned securities and a loan fee and thereby increases the current income
of the Fund. Such loans will be terminable at any time. 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. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans.
3
<PAGE>
The trustees have established the policy that the Fund will not purchase or
retain the securities of any issuer, if those individual officers and trustees
or directors of the Fund, the Investment Adviser or the Distributor for the Fund
each owning beneficially more than one-half of 1% of the securities of such
issuer own in the aggregate more than 5% of the securities of such issuer.
Portfolio securities of the Fund generally may not be purchased from, sold or
loaned to the Investment Adviser or its affiliates or any of their directors,
officers or employees, acting as principal, unless pursuant to a rule or
exemptive order under the Investment Company Act of 1940.
Because of the affiliation of the Investment Adviser with the Fund, the
Fund is prohibited from engaging in certain transactions involving the
Investment Adviser's affiliate, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch'), or its affiliates except for brokerage
transactions permitted under the Investment Company Act of 1940 involving only
usual and customary commissions or transactions pursuant to an exemptive order
under the Investment Company Act of 1940. See 'Portfolio Transactions.' Without
such an exemptive order, the Fund is prohibited from engaging in portfolio
transactions with Merrill Lynch or its affiliates acting as principal and from
purchasing securities in public offerings which are not registered under the
Securities Act of 1933 in which such firms or any of their affiliates
participate as an underwriter or dealer.
MANAGEMENT OF THE FUND
The trustees and executive officers of the Fund, their ages and their
principal occupations for the past five years are set forth below. Unless
otherwise noted, the address of each trustee and executive officer is One
Financial Center, Boston, Massachusetts 02111-2646.
ROBERT W. CROOK (59)--President and Trustee(1)(2)--Senior Vice President of
Merrill Lynch Asset Management ('MLAM'), and of Merrill Lynch Funds Distributor,
Inc. ('MLFD') since 1990 and Vice President of MLAM and MLFD prior thereto.
DAVID ALMY (54)--Trustee(2)--One Post Office Square, Boston, Massachusetts
02109. President of McCall & Almy, Inc. (real estate advisor) since 1990 and
President of Leggat McCall/Grubb & Ellis, Inc. prior thereto.
A. BRUCE BRACKENRIDGE (65)--Trustee(2)--9 Elm Lane, Bronxville, New York
10708. Group Executive of J.P. Morgan & Co., Inc. and Morgan Guaranty Trust
Company from 1979 to 1991 and an employee of J.P. Morgan in various capacities
from 1952 to 1991; Director of Parsons School of Design since 1988.
CHARLES C. CABOT, JR. (65)--Trustee(2)--One Post Office Square, Boston,
Massachusetts 02119. Partner of Sullivan & Worcester and associated with that
firm since 1966.
TERRY K. GLENN (55)--Trustee(1) (2)--P.O. Box 9011, Princeton, New Jersey
08543-9011. Executive Vice President of MLAM and Fund Asset Management, L.P.
('FAM') since 1983; Executive Vice President of Princeton Services, Inc. since
1993; President of MLFD since 1986 and Director thereof since 1991; President of
Princeton Administrators, Inc. since 1988 and Director of Financial Data
Services, Inc. since 1985.
W. CARL KESTER (44)--Trustee(2)--Harvard Business School, Morgan Hall, 393
Soldiers Field, Boston, Massachusetts 02163. MBA Class of 1958 Professor of
Business Administration of Harvard University Graduate School of Business
Administration since 1981; Independent Consultant since 1978.
4
<PAGE>
GEORGE W. HOLBROOK, JR. (64)--Trustee(2) --107 John Street, Southport,
Connecticut 06490. Managing Partner of Bradley Resources Company (private
investment company) and associated with that firm and its predecessor since
1953; Director of Canyon Resources Corporation and Thoratec Laboratories
Corporation.
WILLIAM E. ALDRICH (62)--Executive Vice President(2)--Vice President of
MLAM since 1993; Senior Vice President of MLFD since 1990; Vice President of
MLFD prior thereto and a Vice President of FAM since 1981.
MICHAEL J. BRADY (36)--Senior Vice President(2)--Vice President of MLAM
since 1993; Vice President of MLFD since 1990 and an employee of MLFD prior
thereto.
JAMES J. FATSEAS (39)--Senior Vice President(2)--Vice President of MLAM
since 1993; Vice President of MLFD since 1990 and Assistant Vice President of
MLFD prior thereto.
N. JOHN HEWITT (61)--Senior Vice President(2)--Senior Vice President of
Princeton Services, Inc. since 1993; P.O. Box 9011, Princeton, New Jersey
08543-9011. Senior Vice President of MLAM and FAM since 1980.
WILLIAM WASEL (37)--Senior Vice President(2)--Vice President of MLAM since
1993; Vice President of MLFD since 1990 and Assistant Vice President of MLFD
prior thereto.
KAREN D. BARBATO (31)--Vice President(2)--Employee of MLFD since 1982.
ANN CATLIN (35)--Vice President(2)--Employee of MLFD since 1986.
CHARLES O. DALY (61)--Vice President(2)--Employee of MLFD since 1981.
MARA DI BIASE (31)--Vice President(2)--Employee of MLFD since 1982.
DIANA FRANKLAND (60)--Vice President(2)--Employee of MLFD since 1979.
JAY C. HARBECK (61)--Vice President(2)--P.O. Box 9011, Princeton, New
Jersey 08543-9011. Vice President of MLAM since 1986.
MARK E. MAGUIRE (36)--Vice President(2)--Assistant Vice President of MLFD
since 1990 and an employee of MLFD since 1986.
PATRICIA A. SCHENA (38)--Vice President(2)--Employee of MLFD since 1980.
BARRY F. X. SMITH (30)--Vice President(2)--Employee of MLFD since 1987.
DIANNE F. MCDONOUGH (34)--Vice President(2)--Employee of MLFD since 1983.
GERALD M. RICHARD (46)--Treasurer (2)--P.O. Box 9011, Princeton, New Jersey
08543-9011. Senior Vice President and Treasurer of MLAM and FAM since 1984; Vice
President of MLFD since 1981; Treasurer of MLFD since 1984 and Senior Vice
President and Treasurer of Princeton Administrators, Inc. since 1988; Senior
Vice President of Princeton Services, Inc.
JERRY WEISS (37)--Secretary(1)--P.O. Box 9011, Princeton, New Jersey
08543-9011. Vice President of MLAM since 1990 and an attorney in private
practice prior thereto.
5
<PAGE>
At February 1, 1996, the officers and trustees of the Fund as a group (24)
owned an aggregate of less than 1/4 of 1% of the outstanding shares of common
stock of Merrill Lynch & Co., Inc. and owned an aggregate of less than 1% of the
outstanding shares of the Fund.
- ---------------
(1) These trustees may be deemed to be 'interested persons' of the Fund as that
term is defined in the Investment Company Act of 1940. Mr. Crook and Mr.
Glenn are officers of MLFD and MLAM.
(2) Director/trustee or officer of certain other investment companies for which
FAM or MLAM acts as investment adviser.
The trustees have an Audit and Nominating Committee, the members of which
are Messrs. Almy, Brackenridge, Cabot, Holbrook and Kester.
Set forth below is a chart showing the aggregate compensation paid by the
Fund to each of its trustees, as well as the total compensation paid to each
trustee of the Fund by the Fund and by other investment companies advised by the
Investment Adviser or FAM (collectively, the 'Fund Complex') for their services
as directors or trustees of such investment companies for the fiscal year ended
October 31, 1995.
<TABLE>
<CAPTION>
PENSIONS OR TOTAL COMPENSATION
RETIREMENT BENEFITS FROM FUND AND
AGGREGATE COMPENSATION ACCRUED AS PART FUND COMPLEX
NAME OF TRUSTEE FROM THE FUND OF FUND EXPENSES PAID TO TRUSTEES
- ------------------------------ ---------------------- ------------------- -----------------------
<S> <C> <C> <C>
David Almy(1)................. $6,000 None $30,000
A. Bruce Brackenridge(1)...... 6,000 None 30,000
Charles C. Cabot, Jr.(1)...... 6,000 None 30,000
Todd Goodwin(1)............... 6,000 None 30,000
George W. Holbrook(1)......... 6,000 None 30,000
</TABLE>
Note: Mr. Goodwin resigned from the Board of Trustees on December 11, 1995.
- ---------------
(1) The trustees serve on the boards of other FAM/MLAM advised funds as follows:
David Almy (5 funds and portfolios), A. Bruce Brackenridge (5 funds and
portfolios), Charles C. Cabot, Jr. (5 funds and portfolios), Todd Goodwin (5
funds and portfolios), and George W. Holbrook (5 funds and portfolios).
Each trustee who is not an officer or employee of Merrill Lynch & Co., Inc.
or its subsidiaries will be paid $6,000 annually in his capacity as trustee. All
trustees will be reimbursed for any expenses incurred in attending meetings of
the Board of Trustees of the Fund or of any committee thereof. No officer or
employee of Merrill Lynch & Co., Inc. or its subsidiaries will receive any
compensation from the Fund for acting as a trustee or officer of the Fund.
6
<PAGE>
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to 'Management of the Fund' in the Prospectus for certain
information concerning the management and advisory arrangements of the Fund.
Pursuant to the terms of the Investment Advisory Agreement, the Investment
Adviser, subject to the general supervision of the trustees of the Fund and in
conformance with the stated policies of the Fund, renders investment supervisory
and administrative services to the Fund. In this regard, it is the
responsibility of the Investment Adviser to make investment decisions for the
Fund and to place the purchase and sale orders for the portfolio transactions of
the Fund. In addition the Investment Adviser performs, or supervises the
performance of, administrative services in connection with the Fund, including
(i) supervision of all aspects of the Fund's administration and operations,
including processing services related to the purchase and redemption of Fund
shares, the general handling of shareholder relations, and portfolio management;
(ii) providing the Fund, at the Investment Adviser's expense, with the services
of persons competent to perform such administrative and clerical functions as
are necessary in order to provide effective administration of the Fund; and
(iii) providing the Fund, at the Investment Adviser's expense, with adequate
office space and related services. The Investment Adviser may arrange for the
provision of these administrative services and functions by MLFD or another
affiliate of Merrill Lynch & Co., Inc.
The Investment Advisory Agreement obligates the Investment Adviser to pay
all compensation of and furnish office space for officers and employees of the
Fund connected with investment and economic research, trading and investment
management of the Fund, as well as compensation of all trustees of the Fund who
are affiliated persons of Merrill Lynch & Co., Inc. or any of its subsidiaries.
The Fund pays all other expenses incurred in the operation of the Fund
including, among other things, taxes, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder reports, prospectuses
and statements of additional information (except to the extent paid by the
Distributor), charges of the custodian and the transfer agent, expenses of
redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under Federal and state securities 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 for the Fund by
the Investment Adviser, and the Fund reimburses the Investment Adviser for its
costs in connection with those services. MLFD pays certain of the expenses of
the Fund in connection with the continuous offering of Fund shares. See
'Purchase of Shares' in the Prospectus. Certain distribution expenses will be
financed by the Fund pursuant to the Distribution Plan in compliance with Rule
12b-1 under the Investment Company Act of 1940. See 'Distributor.'
As compensation for the services rendered under the Investment Advisory
Agreement, the Fund pays the Investment Adviser a fee, payable monthly, at an
annual rate of 0.40% of the Fund's average daily net assets. The Investment
Adviser has agreed that, in the event the operating expenses of the Fund
(including the fees payable to the Investment Adviser but excluding taxes,
interest, brokerage and extraordinary expenses), for any fiscal year ending on a
date on which the Investment Advisory Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or any
published regulations thereunder, it will reduce its fee by the extent of such
excess and, if required pursuant to any such laws or regulations, will reimburse
the Fund in the amount of such excess. At the date of this Statement of
Additional Information, the most restrictive expense limitations require that
the Investment Adviser reimburse the Fund in an amount necessary to prevent the
7
<PAGE>
Fund's aggregate ordinary operating expenses (excluding interest, taxes,
brokerage fees and commissions and extraordinary charges such as litigation
costs) from exceeding in any fiscal year 2.5% of the Fund's first $30 million of
average net assets, 2.0% of the Fund's next $70 million of average net assets
and 1.5% of the Fund's average net assets in excess of $100 million. No fee
payment will be made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed the pro rata expense limitation at the time of
such payment. For the fiscal years ended October 31, 1993, 1994 and 1995, the
Fund paid investment advisory fees of $429,133, $431,597 and $271,378,
respectively.
The Investment Advisory Agreement is effective as of October 31, 1986 and,
unless earlier terminated as described below, will continue in effect from year
to year if approved annually (a) by the Board of Trustees of the Fund or by a
majority of the outstanding shares of the Fund, and (b) by a majority of the
trustees who are not parties to that contract or interested persons (as defined
in the Investment Company Act of 1940) of any such party. The Investment
Advisory Agreement will terminate automatically upon its assignment and is
terminable at any time without penalty by the trustees of the Fund or by a vote
of a majority of the Fund's outstanding shares (as defined under 'Investment
Restrictions' herein) or by the Investment Adviser on 60 days' written notice to
the other party. The Investment Advisory Agreement was last renewed by the
Fund's Board of Trustees on December 11, 1995.
The investment advisory services of the Investment Adviser to the Fund are
not exclusive under the terms of the Investment Advisory Agreement and the
Investment Adviser is also free to, and does, render such services to others.
PORTFOLIO TRANSACTIONS
Reference is made to 'Portfolio Transactions' in the Prospectus.
The obligations in which the Fund invests are traded primarily in the
over-the-counter market but may be traded on an exchange. Where possible, the
Fund will deal directly with the dealers who make a market in the securities
involved 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. The
cost of executing portfolio transactions of the Fund will primarily consist of
dealer spreads and underwriting commissions.
Under the Investment Company Act of 1940, persons affiliated with the Fund
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 over-the-counter transactions conducted on an
agency basis. The Fund may not generally purchase securities from any
underwriting syndicate of which Merrill Lynch is a member.
The trustees of the Fund have considered the possibility of recapturing for
the benefit of the Fund brokerage commissions, dealer spreads and other expenses
of possible portfolio transactions, such as underwriting commissions, by
conducting such portfolio transactions through affiliated entities, including
Merrill Lynch. For example, brokerage commissions received by Merrill Lynch
could be offset against the management fee paid by the Fund to the Investment
Adviser. After considering all factors deemed relevant, the trustees made a
determination not to seek such recapture. The trustees will consider this matter
from time to time.
8
<PAGE>
In placing orders, it is the policy of the Fund to obtain the best net
results taking into account such factors as price (including the applicable
dealer spread), the size, type and difficulty of the transaction involved, the
firm's general execution and operational facilities, the firm's risk in
positioning the securities involved and the firm's provision of supplemental
investment research (such as economic data and market forecasts). Information so
received will be in addition to and not in lieu of the services required to be
performed by the Investment Adviser under its 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. In some cases, the
Investment Adviser may use such supplemental research in providing investment
advice to its other investment advisory accounts. While the Investment Adviser
generally seeks reasonably competitive spreads or commissions, the Fund will not
necessarily be paying the lowest spread or commission available. The Fund's
policy of investing in securities with short maturities will result in high
portfolio turnover.
Securities held by the Fund may also be held by or be appropriate
investments for other funds for which the Investment Adviser or its affiliates
act as an adviser or by investment advisory clients of the Investment 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 for the Fund or other funds for
which they act as investment adviser or for their 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.
PORTFOLIO TURNOVER
The Investment Adviser effects portfolio transactions without regard to
holding period if, in its judgment, such transactions are advisable in light of
a change in circumstances in general market, economic or financial conditions.
As a result of its investment policies, the Fund may engage in a substantial
number of portfolio transactions. 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. For the fiscal years ended October 31, 1994 and
October 31, 1995, the Fund's portfolio turnover rates were 172.51% and 47.90%,
respectively. See 'Dividends, Distributions and Taxes.'
REDEMPTION OF SHARES
Reference is made to 'Redemption of Shares' in the Prospectus. The right to
redeem shares or to receive payment with respect to any 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 a result
of which disposal of portfolio securities or determination of net asset value 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.
9
<PAGE>
The value of the 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to 'Dividends' and 'Taxes' in the Prospectus. It is the
Fund's intention to distribute all of its net investment income. Dividends from
such net investment income will be declared daily prior to the determination of
net asset value on that day and will be paid monthly. Net investment income for
dividend purposes consists of interest earned less expenses of the Fund accrued
for that dividend period. Shares will accrue dividends as long as they are
issued and outstanding. 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, will be distributed to the
Fund's shareholders annually after the close of the Fund's fiscal year.
FEDERAL INCOME TAXES
The Fund has qualified and intends to continue to qualify as a regulated
investment company under certain provisions of the Internal Revenue Code of
1986, as amended (the 'Code'). Under such provisions, the Fund will not be
subject to federal income tax on such part of its ordinary income and net
realized capital gains which it distributes to shareholders. To qualify for
treatment as a regulated investment company, the Fund must, among other
requirements, derive in each taxable year at least 90% of its gross income from
dividends, interest and gains from the sale or other disposition of securities
and derive less than 30% of its gross income each taxable year from gains
(without deduction for losses) from the sale or other disposition of stocks and
securities and certain options, futures and forward contracts held for less than
three months. If in any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to the Fund at
corporate rates.
Dividends will be taxable to shareholders as ordinary income, except for
(a) such portion as may exceed a shareholder's ratable share of the Fund's
earnings and profits as determined for tax purposes (which may differ from net
income for book purposes), which excess will be applied against and reduce the
shareholder's cost or other tax basis for his shares and (b) amounts
representing distributions of realized net long-term capital gains, if any. If
the amount described in (a) above were to exceed the shareholder's tax basis for
his shares, the excess over basis would be treated as gain from the sale or
exchange of such shares. The excess of any net long-term capital gains over net
short-term capital losses realized by the Fund will, to the extent distributed
by the Fund, be taxable to shareholders as long-term capital gains regardless of
the length of time a particular shareholder may have held his shares in the
Fund. Dividends and distributions are taxable as described above, whether
received in cash or reinvested in additional shares of the Fund.
At October 31, 1995, the Fund had a net capital loss carry-forward of
approximately $24,029,000 ($8,336,000 expires in 1996, $5,830,000 expires in
1997, $4,643,000 expires in 1998, $3,224,000 expires in 2002, and $1,996,000
expires in 2003), which will be available to offset like amounts of any future
taxable gains.
Dividends to shareholders who are non-resident aliens, trusts, estates,
partnerships or corporations may be subject to a 30% United States withholding
tax unless a reduced rate of withholding is provided for under an applicable
treaty. Shareholders who are non-resident aliens or foreign entities are urged
to consult their own tax advisors concerning the applicability of United States
withholding tax.
10
<PAGE>
Some shareholders may be subject to 31% withholding on reportable
dividends, capital gains distributions and redemption payments ('backup
withholding'). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not 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 penalties of
perjury that such number is correct and that he is not otherwise subject to
backup withholding.
The Code imposes a 4% nondeductible excise tax on regulated investment
companies, such as the Fund, if they do not distribute to their shareholders
during a calendar year an amount equal to 98% of their investment company
taxable income, with certain adjustments, for such calendar year, plus 98% of
their net capital gains for the 12-month period ending October 31 of such
calendar year. In addition, an amount equal to 100% of any undistributed
investment company taxable income or capital gain net income from the previous
calendar year must also be distributed to avoid the excise tax. The excise tax
is imposed on the amount by which the regulated investment company falls below
the foregoing distribution requirements.
Any dividend declared by the Fund in October, November or December of any
year and made payable to shareholders of record in such a month will be deemed
to be received on December 31 of such year if actually paid during the following
January. Accordingly, these dividends will be taxable to shareholders in the
year declared, and not in the year in which shareholders actually receive the
dividend.
STATE AND LOCAL TAXES
Depending upon the extent of the Fund's activities in those states and
localities in which its offices are maintained or in which its agents or
independent contractors are located, the Fund may be subject to tax in such
states or localities. In addition, in those states and localities which have
income tax laws, the treatment of the Fund's shareholders under such laws may
differ from their treatment under the Federal income tax laws. Under state or
local law, distributions of net investment income may be taxable to shareholders
as dividend income even though a portion of such distributions may be derived
from interest on U.S. Government obligations which, if realized directly, would
be exempt from such income taxes. Shareholders are advised to consult their tax
advisors concerning the application of state and local taxes.
DISTRIBUTOR
DISTRIBUTION AGREEMENT
The Fund has entered into a Distribution Agreement (the 'Distribution
Agreement') with Merrill Lynch Funds Distributor, Inc., a wholly-owned
subsidiary of the Investment Adviser. The address of MLFD is One Financial
Center, Fifteenth Floor, Boston, MA 02111-2646. Pursuant to the Distribution
Agreement, MLFD serves as the principal underwriter and distributor of the
Fund's shares, and in that capacity makes a continuous offering of the Fund's
shares and bears the costs and expenses of printing and distributing any copies
of any prospectuses and annual and interim reports of the Fund (after such items
have been prepared and set in type) which are used in connection with the
offering of shares to selected dealers or investors, and the cost and expenses
of preparing, printing and distributing any other literature used by MLFD or
furnished by it for use by selected dealers in connection with the offering of
shares for sale to the public. There will be no fee payable by the Fund pursuant
to the Distribution Agreement and there is no sales or redemption charge. The
continuance of the Distribution Agreement must be approved in the same manner as
the Investment Advisory Agreement and will terminate automatically if assigned
by either party thereto and is terminable at any time
11
<PAGE>
without penalty by the Board of Trustees of the Fund or MLFD or by vote of a
majority of the Fund's outstanding shares on 60 days' written notice. The
Distribution Agreement was last renewed by the Board of Trustees of the Fund on
December 11, 1995.
DISTRIBUTION PLAN
The Fund has adopted a Distribution and Shareholder Servicing Plan and
Agreement (the 'Plan') in compliance with Rule 12b-1 under the Investment
Company Act of 1940. Pursuant to the Plan, the Fund is authorized to pay MLFD a
fee at the annual rate of 0.15% of the Fund's average daily net assets in order
to compensate MLFD for services it provides and the expenses it bears, including
payments to selected dealers for their services in connection with the
distribution of Fund shares. As authorized by the Plan, MLFD has entered into an
agreement with Merrill Lynch which provides for the compensation of Merrill
Lynch for providing distribution-related services to the Fund. Such services
relate to the sale, promotion and marketing of the shares of the Fund. For the
fiscal year ended October 31, 1995, payments to MLFD pursuant to the Plan
totalled $101,765, all of which was paid to Merrill Lynch pursuant to the
Agreement. The trustees believe that the Fund's expenditures under the Plan
benefit the Fund and its shareholders by providing better shareholder services
and by affecting positively the sale and distribution of Fund shares.
Among other things, the Plan provides that MLFD shall provide and the
trustees of the Fund shall review quarterly reports of the expenditures made by
MLFD pursuant to the Plan. In their consideration of the Plan, the trustees must
consider all factors they deem relevant, including information as to the
benefits of the Plan to the Fund and its shareholders. The Plan further provides
that, so long as the Plan remains in effect, the selection and nomination of
trustees of the Fund who are not 'interested persons' of the Fund as defined in
the Investment Company Act of 1940 (the 'Independent Trustees') shall be
committed to the discretion of the Independent Trustees then in office.
The terms of the Plan were approved on February 19, 1988 by a vote of a
majority of the shareholders of the Fund at a meeting called for the purpose of
voting on such approval. The Plan will continue from year to year, provided such
continuance is approved at least annually by a vote of the trustees, including a
majority vote of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such continuance. The Plan was last renewed by the
Board of Trustees of the Fund on December 11, 1995. The 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 voting
securities of the Fund. Finally, the Plan cannot be amended to increase
materially the amount to be spent by the Fund thereunder without shareholder
approval, and all material amendments are required to be approved by vote of the
trustees of the Fund, including a majority of the Independent Trustees, cast in
person at a meeting called for that purpose. The Plan further requires the Fund
to preserve copies of the Plan and any report made pursuant to the Plan for a
period not less than six years, and for two years in an easily accessible place.
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 in
accordance with formulas specified by the Securities and Exchange Commission and
take into account the maximum sales charge.
12
<PAGE>
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charge.
The Fund also may quote annual, average 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
the rates of return calculated will not be average annual rates but rather
actual annual, annualized or aggregate rates of return. Actual annual or
annualized total return data generally will be lower than average annual total
return data since the average rates of return reflect compounding of return;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over a
longer period of time.
Set forth below is total return information.
<TABLE>
<CAPTION>
REDEEMABLE VALUE OF
EXPRESSED AS A A HYPOTHETICAL
PERCENTAGE BASED ON A $1,000 INVESTMENT
HYPOTHETICAL $1,000 AT THE END OF
PERIOD INVESTMENT THE PERIOD
- ----------------------------------- --------------------- -------------------
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
One Year Ended October 31, 1995.... 8.95% $1,089.50
Five Years Ended October 31,
1995............................. 7.44 1,431.60
Inception (November 6, 1986) to
October 31, 1995................. 7.17 1,863.40
<CAPTION>
PERIOD
- -----------------------------------
ANNUAL TOTAL RETURN
<S> <C> <C>
One Year Ended October 31, 1995.... 8.95% $1,089.50
One Year Ended October 31, 1994.... (1.54) 984.60
One Year Ended October 31, 1993.... 8.07 1,080.70
One Year Ended October 31, 1992.... 9.66 1,096.60
One Year Ended October 31, 1991.... 12.62 1,126.20
One Year Ended October 31, 1990.... 7.75 1,077.50
One Year Ended October 31, 1989.... 9.12 1,091.20
One Year Ended October 31, 1988.... 7.29 1,072.90
Inception (November 6, 1986)
through October 31, 1987......... 3.18 1,031.80
<CAPTION>
AGGREGATE TOTAL RETURN
<S> <C> <C>
Inception (November 6, 1986) to
October 31, 1995................. 86.34% $1,863.40
</TABLE>
13
<PAGE>
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company, P.O. Box 8500, Boston, Massachusetts
02266-8500, acts as Custodian of the Fund's assets and as its Transfer Agent.
The Custodian is responsible for safeguarding and controlling the Fund's cash
and securities, handling the delivery of securities and collecting interest on
the Fund's investments. The Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening, maintenance and servicing of
shareholder accounts.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Independent Auditors, 117 Campus Drive, Princeton,
New Jersey 08540, has been selected as the independent auditors of the Fund and
is responsible for auditing the annual financial statements of the Fund.
LEGAL COUNSEL
Rogers & Wells, New York, New York, is counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on October 31 of each year. The Fund sends
to its shareholders at least semi-annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements audited
by independent auditors, is sent to shareholders each year.
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 of 1933 and the
Investment Company Act of 1940, to which reference is hereby made.
To the knowledge of the Fund as of January 31, 1996, no entities owned
beneficially more than 5% of the Fund's outstanding shares other than: Fulton
Fish Market Welfare Fund, Attn: Nina Andrew, 140 Beekman Street, New York, New
York 10038-2012, which owned 349,879 shares, representing 5.61% of such
outstanding shares; Merrill Lynch Trust Company of America, Trustee FBO Central
Illinois Light Company, Attn: Rhonda Sherwin, P.O. Box 30532, New Brunswick, New
Jersey 08989-0532, which owned 556,020 shares, representing 8.9% of such
outstanding shares; Kingsbury Capital Partners L.P., Attn: Tim Wollaeger, 3655
Nobel Drive, Suite 490, San Diego, California 92122-1055, which owned 384,235
shares, representing 6.16% of such outstanding shares; Dearborn County Hospital,
Attn: Gail S. Arnow, 600 Wilson Creek Road, Lawrenceburg, Indiana 47025-2751,
which owned 316,697 shares, representing 5.08% of such outstanding shares; and
American Cancer Society, Illinois Division Inc., 77 East Monroe, Chicago,
Illinois 60603-5700, which owned 322,250 shares, representing 5.17% of such
outstanding shares.
The Declaration of Trust establishing the Fund, dated September 10, 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 Institutional Intermediate 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 Fund may be held to any personal liability, nor may 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 Fund's property
only shall be liable.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Institutional Intermediate Fund as
of October 31, 1995, the related statements of operations for the year then
ended and of changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the five-year
period then ended. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1995 by correspondence with the custodian. 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
Institutional Intermediate Fund as of October 31, 1995, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 1995
15
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Schedule of Investments
As of October 31, 1995
- ---------------------------------------------------------------------------
Interest Maturity Value
Issue Face Amount Rate Date (Note 1a)
- ---------------------------------------------------------------------------
US GOVERNMENT & AGENCY OBLIGATIONS--95.2%
- ---------------------------------------------------------------------------
US Treasury Notes $ 9,000,000 7.875% 2/15/96 $ 9,056,250
10,000,000 8.875 11/15/97 10,612,500
13,000,000 8.125 2/15/98 13,672,360
2,000,000 8.875 2/15/99 2,184,680
12,500,000 6.875 7/31/99 12,951,125
4,000,000 7.125 2/29/00 4,197,480
- ---------------------------------------------------------------------------
Federal National Mortgage
Association 4,000,000 7.00 8/11/99 4,067,480
- ---------------------------------------------------------------------------
Student Loan Marketing
Association 5,000,000 7.50 3/08/00 5,289,050
- ---------------------------------------------------------------------------
TOTAL US GOVERNMENT & AGENCY OBLIGATIONS (COST--$62,221,036).. 62,030,925
- ---------------------------------------------------------------------------
Face Amount REPURCHASE AGREEMENTS*--3.6%
- ---------------------------------------------------------------------------
$2,314,000 PaineWebber, Inc., purchased on
10/31/1995 to yield 5.83% to 11/01/1995 2,314,000
- ---------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (COST--$2,314,000) ............... 2,314,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS (COST--$64,535,036)--98.8% ................. 64,344,925
OTHER ASSETS LESS LIABILITIES--1.2% .......................... 793,794
-----------
Net Assets--100.0% ........................................... $65,138,719
===========
- ---------------------------------------------------------------------------
*Repurchase Agreements are fully collateralized by US Government Obligations.
See Notes to Financial Statements.
16
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Statement of Assets and Liabilities
As of October 31, 1995
- ----------------------------------------------------------------------------
ASSETS:
Investments, at value (identified
cost--$64,535,036) (Notes 1a & 1b) ........... $ 64,344,925
Cash ........................................... 95
Interest receivable ............................ 1,205,833
Prepaid registration fees and other assets
(Note 1e) .................................... 35,875
------------
Total assets ................................... 65,586,728
------------
LIABILITIES:
Payables:
Dividends to shareholders (Note 1f) ........... $338,129
Investment adviser (Note 2) ................... 21,479
Beneficial interest redeemed .................. 12,436
Distributor (Note 2) .......................... 8,054 380,098
--------
Accrued expenses and other liabilities ......... 67,911
------------
Total liabilities .............................. 448,009
------------
NET ASSETS ...................................... $ 65,138,719
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized ........ $ 663,090
Paid-in capital in excess of par ............... 88,694,573
Accumulated realized capital losses on
investments--net (Note 5) ..................... (24,028,833)
Unrealized depreciation on investments--net .... (190,111)
------------
NET ASSETS--Equivalent to $9.82 per share based
on 6,630,902 shares of beneficial interest
outstanding ................................... $ 65,138,719
============
See Notes to Financial Statements.
17
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Statement of Operations
For the Year Ended October 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1D):
Interest and amortization of premium and
discount earned ............................. $4,972,777
Other ......................................... 2,836
----------
Total income .................................. $ 4,975,613
EXPENSES:
Investment advisory fees (Note 2) ............. 271,378
Distribution fees (Note 2) .................... 101,765
Professional fees ............................. 73,563
Accounting services (Note 2) .................. 51,769
Registration fees (Note 1e) ................... 40,410
Printing and shareholder reports .............. 32,489
Transfer agent fees (Note 2) .................. 31,661
Trustees' fees and expenses ................... 30,000
Custodian fees ................................ 12,500
Insurance ..................................... 3,159
Pricing fees .................................. 376
Other ......................................... 583
----------
Total expenses ................................ 649,653
-----------
Investment income--net ........................ 4,325,960
REALIZED & UNREALIZED GAIN (LOSS) ON
INVESTMENTS--NET (NOTES 1D & 3):
Realized loss on investments--net ............. (1,995,513)
Change in unrealized depreciation on
investments--net ............................. 3,394,399
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................... $ 5,724,846
===========
See Notes to Financial Statements.
18
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------
For the Year
Ended October 31,
----------------------------
1995 1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Investment income--net ....................... $ 4,325,960 $ 5,985,527
Realized loss on investments--net ............ (1,995,513) (3,224,103)
Change in unrealized appreciation/depreciation
on investments--net ......................... 3,394,399 (4,828,530)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................... 5,724,846 (2,067,106)
------------ ------------
DIVIDENDS TO SHAREHOLDERS (NOTE 1F):
Investment income--net ....................... (4,325,960) (5,985,527)
------------ ------------
Net decrease in net assets resulting from
dividends to shareholders ................... (4,325,960) (5,985,527)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS (NOTE 4):
Net decrease in net assets derived from
beneficial interest transactions ............ (17,667,570) (32,823,135)
------------ ------------
NET ASSETS:
Total decrease in net assets ................. (16,268,684) (40,875,768)
Beginning of year ............................ 81,407,403 122,283,171
------------ ------------
End of year .................................. $ 65,138,719 $ 81,407,403
============ ============
See Notes to Financial Statements.
19
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Financial Highlights
- ------------------------------------------------------------------------------
The following per share data and ratios have
been derived from information provided
in the financial statements.
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------------------------------
INCREASE (DECREASE) IN NET ASSET VALUE: 1995 1994 1993 1992 1991
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ..... $ 9.60 $ 10.31 $ 10.06 $ 9.76 $ 9.35
------- ------- ------- ------- --------
Investment income--net ................. .62 .55 .54 .62 .72
Realized and unrealized gain (loss) on
investments--net ..................... .22 (.71) .25 .30 .41
------- ------- ------- ------- --------
Total from investment operations ....... .84 (.16) .79 .92 1.13
------- ------- ------- ------- --------
Less dividends from investment
income--net ........................... (.62) (.55) (.54) (.62) (.72)
------- ------- ------- ------- --------
Net asset value, end of year ........... $ 9.82 $ 9.60 $ 10.31 $ 10.06 $ 9.76
======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN:
Based on net asset value per share ..... 8.95% (1.54%) 8.07% 9.66% 12.62%
======= ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS:
Expenses, excluding distribution fees... .81% .68% .65% .67% .66%
======= ======= ======= ======= ========
Expenses ............................... .96% .83% .80% .82% .81%
======= ======= ======= ======= ========
Investment income--net ................. 6.38% 5.55% 5.34% 6.24% 7.66%
======= ======= ======= ======= ========
SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).. $65,139 $81,407 $122,283 $94,798 $125,888
======= ======= ======= ======= ========
Portfolio turnover ..................... 47.90% 172.51% 204.80% 156.12% 202.11%
======= ======= ======= ======= ========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Notes to Financial Statements
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Institutional Intermediate Fund (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities traded in the
over-the-counter markets are valued at the last available bid price or yield
equivalent as obtained from dealers who make a market in the securities. US
Government securities and securities issued by Federal agencies are traded in
the over-the-counter market. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market value.
(b) Repurchase agreements--The Fund invests in US Government securities
pursuant to repurchase agreements with a member bank of the Federal Reserve
System or a primary dealer in US Government securities. Under such
agreements, the bank or primary dealer agrees to repurchase the security at a
mutually agreed upon time and price. The Fund takes possession of the
underlying securities, marks to market such securities and, if necessary,
receives additions to such securities daily to ensure that the contract is
fully collateralized.
(c) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) 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 and premium) is
recognized on the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(f) 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.
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., Inc. ("ML & Co."), which is the limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plan 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 operations of the Fund. For such services, the Fund pays a
monthly fee at the annual rate of 0.40% of the average daily net assets of
the Fund. The Investment Advisory Agreement obligates MLAM to reimburse the
Fund to the extent the Fund's expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0%
of the Fund's next $70 million of average daily net assets, and 1.5% of the
average daily net assets in excess thereof. No fee payment will be made to
MLAM during any fiscal year which will cause expenses to exceed the pro rata
expense limitation at the time of such payment.
21
<PAGE>
Merrill Lynch Institutional Intermediate Fund
Notes to Financial Statements (concluded)
October 31, 1995
- -------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan (the "Plan") in accordance with Rule
12b-1 under the Investment Company Act of 1940 pursuant to which MLFD
receives a fee from the Fund at the end of each month at the annual rate of
0.15% of the average daily net assets of the Fund.
This fee is to compensate MLFD for the services it provides and the expenses
borne by MLFD under the Distribution Agreement. As authorized by the Plan,
MLFD has entered into an agreement with Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), which provides for the compensation of MLPF&S for providing
distribution-related services to the Fund. Such services relate to the sale,
promotion, and marketing of the shares of the Fund. For the year ended
October 31, 1995, MLFD earned $101,765 under the Plan, all of which was paid
to MLPF&S pursuant to the agreement.
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
MLAM, PSI, MLFD, MLPF&S, and/or ML & Co.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1995 were $30,635,641 and $46,167,982, respectively.
Net realized and unrealized losses as of October 31, 1995 were as follows:
- ----------------------------------------------------------------------------
Realized Unrealized
Losses Losses
- ----------------------------------------------------------------------------
Long-term investments ..................... $(1,995,513) $(190,111)
----------- ---------
Total ..................................... $(1,995,513) $(190,111)
=========== =========
- ----------------------------------------------------------------------------
As of October 31, 1995, net unrealized depreciation for Federal income tax
purposes aggregated $190,111, of which $998,432 related to appreciated
securities and $1,188,543 related to depreciated securities. The aggregate
cost of investments at October 31, 1995 for Federal income tax purposes was
$64,535,036.
4. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Transactions in shares of beneficial interest were as follows:
- ----------------------------------------------------------------------------
For the Year Ended Dollar
October 31, 1995 Shares Amount
- ----------------------------------------------------------------------------
Shares sold 2,117,377 $ 20,392,534
Shares issued to shareholders in
reinvestment of dividends ............... 344,636 3,329,426
--------- ------------
Total issued .............................. 2,462,013 23,721,960
Shares redeemed ........................... (4,312,941) (41,389,530)
--------- ------------
Net decrease .............................. (1,850,928) $(17,667,570)
========= ============
- ----------------------------------------------------------------------------
For the Year Ended Dollar
October 31, 1994 Shares Amount
- ----------------------------------------------------------------------------
Shares sold ............................... 5,913,743 $ 59,626,089
Shares issued to shareholders in
reinvestment of dividends ............... 463,849 4,617,973
--------- ------------
Total issued .............................. 6,377,592 64,244,062
Shares redeemed ........................... (9,756,363) (97,067,197)
--------- ------------
Net decrease .............................. (3,378,771) $(32,823,135)
========= ============
- ----------------------------------------------------------------------------
5. CAPITAL LOSS CARRYFORWARD:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $24,029,000, of which $8,336,000 expires in 1996, $5,830,000
expires in 1997, $4,643,000 expires in 1998, $3,224,000 expires in 2002, and
$1,996,000 expires in 2003. This amount will be available to offset like
amounts of any future taxable gains. Expired capital loss carryforward in the
amount of $17,070,619 has been reclassified to paid-in capital in excess of
par.
22
<PAGE>
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
One Financial Center, Fifteenth Floor
Boston, Massachusetts 02111-2646
MANAGER
Merrill Lynch Asset Management, L.P.
P.O. Box 9011
Princeton, New Jersey 08543-9011
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8500
Boston, Massachusetts 02266-8500
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.............. 2
Investment Restrictions........................ 2
Management of the Fund......................... 4
Management and Advisory
Arrangements................................. 7
Portfolio Transactions......................... 8
Redemption of Shares........................... 9
Dividends, Distributions and Taxes............. 10
Distributor.................................... 11
Performance Data............................... 12
General Information............................ 14
Independent Auditors' Report................... 15
Financial Statements........................... 16
</TABLE>
Code # 10432-0296
[LOGO]
MERRILL LYNCH
INSTITUTIONAL
INTERMEDIATE FUND
[ART]
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
February 26, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for each of the years in the eight-year period ended
October 31, 1995 and the period November 6, 1986 (commencement of
operations) to October 31, 1987
Contained in Part B:
Schedule of Investments, as of October 31, 1995
Statement of Assets and Liabilities, as of October 31, 1995
Statement of Operations for the year ended October 31, 1995
Statements of Changes in Net Assets for the years ended October 31, 1995
and 1994
Financial Highlights for each of the years in the five-year period ended
October 31, 1995.
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------
<S> <C> <C>
1 -- Declaration of Trust (incorporated by reference to Exhibit 1 to
Registrant's Registration Statement on Form N-1A (File No.
33-8708)).
2 -- By-Laws of Registrant (incorporated by reference to Exhibit 2 to
Registrant's Registration Statement on Form N-1A (File No.
33-8708)).
3 -- None.
4 -- Specimen Copy of Security (incorporated by reference to Exhibit 4
to Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-8708)).
5 -- Form of Investment Advisory Agreement (incorporated by reference
to Exhibit 5 to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-8708)).
6 -- Form of Distribution Agreement (incorporated by reference to
Exhibit 6 to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-8708)).
7 -- None.
8 -- Form of Custodian Agreement (incorporated by reference to Exhibit
8 to Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-8708)).
9 (a) -- Form of Transfer Agency and Dividend Disbursing Agreement
(incorporated by reference to Exhibit 9(a) to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-8708)).
9 (b) -- Form of Agreement relating to the use of the 'Merrill Lynch' name
(incorporated by reference to Exhibit 9(b) to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A (File No. 33-8708)).
10 -- Opinion of Counsel (incorporated by reference to Exhibit 10 to
Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-8708)).
11 -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.*
12 -- None.
13 -- None.
14 -- None.
</TABLE>
- ---------------
* Filed herewith.
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------
15 -- Form of Amended Distribution and Shareholder Servicing Plan
pursuant to Rule 12b-1 between Registrant and Merrill Lynch Funds
Distributor, Inc. (incorporated by reference to Exhibit 15 to
Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-8708)).
<S> <C> <C>
16 -- Schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 22
(incorporated by reference to Exhibit 16 to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form
N-1A (File No. 33-8708)).
17 (a) -- Power of Attorney under which certain trustees' signatures have
been executed (incorporated by reference to Post-Effective
Amendment No. 5 to Registrant's Registration Statement on Form
N-1A (File No. 33-8708)).
17 (b) -- Power of Attorney of A. Bruce Brackenridge.
17 (c) -- Power of Attorney of W. Carl Kester.*
27 -- Financial Data Schedule.*
</TABLE>
- ---------------
* Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS AT
TITLE OF CLASS JANUARY 31, 1996
- ------------------------------------------------------------ ----------------
<S> <C>
Shares of beneficial interest, par value $0.10 per share 374
</TABLE>
- ---------------
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust.
Insofar as the conditional advancing of indemnification monies 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 that
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 of 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling persons of the
Registrant 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 in
connection with the successful defense of any action,
C-2
<PAGE>
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management L.P., doing business as Merrill Lynch Asset
Management ('MLAM' or the 'Investment Adviser'), acts as investment adviser for
the following open-end investment companies: 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, Inc., Convertible Holdings, Inc.,
Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets,
Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fund For Tomorrow, Inc., Merrill Lynch Fundamental Growth Fund, Inc., Merrill
Lynch Global Allocation Fund, Inc., Merrill Lynch Global Convertible Fund, Inc.,
Merrill Lynch Global Small Cap Fund, Inc., Merrill Lynch Global Utility Fund,
Inc., Merrill Lynch Growth Fund for Investment and Retirement, Merrill Lynch
Healthcare Fund, Inc. (residents of Wisconsin must meet investor suitability
requirements), Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill
Lynch International Equity Fund, Merrill Lynch Institutional Intermediate Fund,
Merrill Lynch Global Holdings, Inc., Merrill Lynch Latin America Fund, Inc.,
Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Municipal Series
Trust, Merrill Lynch Global Resources Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Global Bond Fund for Investment
and Retirement, Merrill Lynch Retirement Asset Builder Program, Inc., Merrill
Lynch Retirement Series Trust, Merrill Lynch Series Fund, Inc., Merrill Lynch
Short-Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund,
Merrill Lynch Technology Fund, Merrill Lynch Variable Series Funds, Inc.,
Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund,
Inc. and Merrill Lynch U.S. Treasury Money Fund. Fund Asset Management, L.P.
('FAM'), an affiliate of the Investment Adviser, acts as the investment adviser
for the following registered investment companies: Merrill Lynch California
Municipal Series Trust, 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., 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 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., The Municipal Fund
Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., MuniAssets Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured 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, Inc., MuniYield Arizona Fund, Inc., MuniYield California Insured Fund II,
Senior High Income Portfolio, Senior High Income Portfolio II, Senior Strategic
Income Fund, Inc. MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest
Fund, Inc., Apex Municipal Fund, Inc., MuniYield California Fund, Inc.,
MuniYield California Insured Fund, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, 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, Inc.,
MuniYield Fund, Inc., MuniYield Quality Fund, Inc., MuniYield Quality Fund II,
Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc.,
Merrill Lynch World Income Fund, Inc. and Worldwide DollarVest, 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 02111-2665. The address of the Investment Adviser
and FAM is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of
Merrill Lynch Funds Distributor, Inc. ('MLFD') is P.O. Box 9081, Princeton, New
Jersey 08543-9081. The address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch') and Merrill Lynch & Co., Inc. ('ML & Co.') is
World Financial Center, North Tower, 250 Vesey Street, New York, New York 10281.
C-3
<PAGE>
Set forth below is a list of each executive officer and director of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person has been engaged since October
31, 1987 for his own account or in the capacity of director, officer, partner or
trustee. In addition, Mr. Zeikel is President and Mr. Richard is Treasurer of
all or substantially all of the investment companies described in the preceding
paragraph. Messrs. Giordano, Glenn, Harvey, Hewitt, Kirstein and Monagle are
directors or officers of one or more of such companies.
<TABLE>
<CAPTION>
POSITIONS WITH OTHER SUBSTANTIAL BUSINESS
NAME INVESTMENT ADVISER PROFESSION, VOCATION OR EMPLOYMENT
- ---------------------- ---------------------- ---------------------------------------------------
<S> <C> <C>
Arthur Zeikel......... President and Director President of FAM; President and Director of
Princeton Services, Inc.; Executive Vice
President of Merrill Lynch & Co.; and Director of
MLFD.
Terry K. Glenn........ Executive Vice Executive Vice President of FAM; President and
President Director of MLFD; Executive Vice President and
Director of Princeton Services, Inc.; President
of Princeton Administrators, L.P. and Director of
Financial Data Services, Inc.
Robert W. Crook....... Senior Vice President Senior Vice President of MLFD since 1990.
Vincent R. Giordano... Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
Norman R. Harvey...... Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
N. John Hewitt........ Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
Philip L. Kirstein.... Senior Vice President, Senior Vice President, General Counsel, Director
General Counsel, and Secretary of FAM; Senior Vice President of
Director and Princeton Services, Inc. since 1993.
Secretary
Ronald M. Kloss....... Senior Vice President Senior Vice President and Controller of FAM; Senior
Vice President of Princeton Services, Inc. since
1993.
Stephen M. M. Senior Vice President Executive Vice President of Princeton
Miller.............. Administrators, Inc. since 1989; Senior Vice
President of Princeton Services, Inc. since 1993;
Vice President and Secretary of Merrill Lynch
from 1982 to 1989; Secretary of Merrill Lynch &
Co. from 1982 to 1989.
Joseph T. Monagle..... Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
Richard L. Reller..... Senior Vice President Senior Vice President of FAM since 1995; Senior
Vice President of Princeton Services, Inc. since
1995.
Gerald M. Richard..... Senior Vice President Senior Vice President and Treasurer of FAM; Senior
and Treasurer Vice President of Princeton Services, Inc. since
1993; Vice President and Treasurer of MLFD.
Ronald Welburn........ Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
C-4
<PAGE>
Anthony Wiseman....... Senior Vice President Senior Vice President of FAM; Senior Vice President
of Princeton Services, Inc. since 1993.
</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., Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000,
Inc., MuniAssets 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,
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., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew
York Holdings, Inc. and Worldwide DollarVest, 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 Officers Crook,
Aldrich, Brady, Breen, Fatseas, Wasel, Maguire and Schena is One Financial
Center, Boston, Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2)
POSITIONS AND OFFICES (3)
(1) WITH POSITIONS AND OFFICES WITH
NAME UNDERWRITER REGISTRANT
- ------------------------- ----------------------- --------------------------
<S> <C> <C>
Terry K. Glenn........... President Trustee
Arthur Zeikel............ Director None
Philip L. Kirstein....... Director None
William E. Aldrich....... Senior Vice President Executive Vice President
Robert W. Crook.......... Senior Vice President President and Trustee
Michael J. Brady......... Vice President Senior Vice President
William M. Breen......... Vice President Assistant Treasurer
Sharon Creveling......... Vice President and
Assistant Treasurer None
Mark A. DeSario.......... Vice President None
James T. Fatseas......... Vice President Senior Vice President
Debra W. Vice President
Landsman-Yaros......... None
Michelle T. Lau.......... Vice President None
Gerald M. Richard........ Vice President and
Treasurer Treasurer
Kevin P. Boman........... Vice President None
Salvatore Venezia........ Vice President None
William Wasel............ Vice President Senior Vice President
Mark E. Maguire.......... Assistant Vice
President Vice President
Patricia A. Schena....... Assistant Vice Vice President and
President Assistant Secretary
Robert Harris............ Secretary None
</TABLE>
(c) Not applicable.
C-5
<PAGE>
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 and the Rules thereunder
will be maintained at the offices of the Registrant, Merrill Lynch Institutional
Intermediate Fund, One Financial Center, Fifteenth Floor, Boston, Massachusetts
02111-2646; its Investment Adviser, Merrill Lynch Asset Management, 800 Scudders
Mill Road, Plainsboro, New Jersey 08536; and its Custodian and Transfer Agent,
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management of the Fund' in the
Prospectus constituting Part A of the Registration Statement and under the
caption, 'Management and Advisory Arrangements' in the Statement of Additional
Information constituting Part B of the Registration Statement, the Registrant is
not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
The 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-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO ITS
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT TO ITS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
COUNTY OF SUFFOLK, AND COMMONWEALTH OF MASSACHUSETTS, ON THE 26TH DAY OF
FEBRUARY, 1996.
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
By: /s/ ROBERT W. CROOK
Robert W. Crook
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRANT'S REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- ------------------------------------- ------------------
<S> <C> <C>
/s/ROBERT W. CROOK President and Trustee February 26, 1996
Robert W. Crook (Principal Executive Officer)
/s/GERALD M. RICHARD Treasurer (Principal Financial and February 26, 1996
Gerald M. Richard Accounting Officer)
* Trustee
David Almy
* Trustee
A. Bruce Brackenridge
* Trustee
Charles C. Cabot, Jr.
* Trustee
Terry K. Glenn
* Trustee
George W. Holbrook, Jr.
* Trustee
W. Carl Kester
*By/s/ROBERT W. CROOK Attorney-in-Fact February 26, 1996
Robert W. Crook
Attorney-in-Fact
</TABLE>
C-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
11* -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant...............
17(c)* --Power of Attorney of W. Carl Kester......................................................
27* --Financial Data Schedule..................................................................
</TABLE>
- ---------------
* Filed herewith
DECLARATION OF TRUST
OF
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
THE DECLARATION OF TRUST of Merrill Lynch Institutional Intermediate Fund
is made the 10th day of September, 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:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Merrill Lynch Institutional Intermediate 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 the name of the Trust 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, as amended from time to time.
"Declaration" shall mean this Declaration of Trust as amended from time to
time. References in this Declaration to "Declaration", "hereof", "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set forth in
the Prospectus and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of the Trust
under the Securities Act of 1933, as amended.
"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 of Trust, 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 of Trust 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.
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 of the Trust). Any vacancy created by an increase in Trustees may 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 of Trust. 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 of Trust. A Trustee shall be an individual at least
21 years of age who is not under legal disability.
2.2. Term and Election. Each Trustee named herein, or elected or appointed
prior to the first meeting of Shareholders, shall (except in the event of
resignations or removals or vacancies pursuant to Section 2.3 or 2.4 hereof)
hold office until his successor has been elected at such meeting and has
qualified to serve as Trustee, as required under the 1940 Act. Beginning with
the Trustees elected at the first meeting of Shareholders, each Trustee shall
hold office during the lifetime of this Trust and until its termination as
hereinafter provided unless such Trustee resigns or is removed as provided in
Section 2.3 below. Trustees need not own Shares.
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 by the affirmative vote of the holders of two-thirds (2/3) of the Shares
or (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. 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 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,
adjudicted 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 of Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. In the case of a vacancy the holders of at
least a majority of the Shares entitled to vote, acting at any meeting of
Shareholders held in accordance with Section 10.1 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, an
Assistant 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 24 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 of Trust, 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 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 system 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.
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 securities including common and preferred
stock, warrants, bonds, debentures, time notes and all. other evidences of
indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options and other securities, 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 gencies 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 more persons, firms, associations, or
corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional securities in
which the Trust may invest should the investment 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 the 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 herein 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 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; and to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims 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 of Trust, 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 and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify any Person
with whom the Trust has dealings, including the Investment Adviser, Distributor
and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee 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 specificially
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 Trust Property.
ARTICLE IV
Management and Distribution Arrangements
4.1. Management Arrangments. Subject to a Majority Shareholder Vote, the
Trustees may in their discretion from time to time enter into advisory,
administration or management contracts whereby the other party to such contract
shall undertake to furnish the Trustees such advisory, administrative 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 of Trust, the
Trustees may authorize any advisor, administrator 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 advisor, administrator 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 Arrangments. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of the Shares of the
Trust to net the Trust not less than the par value per share, whereby the Trust
may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
4.3. Parties to Contract. Any contract of the character described in
Sections 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
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
Sections 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.
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) 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 trustees officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of good faith and reasonable belief as to the best interests of the
Trust, had been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or surety or other security for the performance of any of his
duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transter 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 securities 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 officers, employees or agents of the Trust. Every written
obligation contract, instrument, certificate, Share, other security of the Trust
or undertaking 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 of Trust, 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 selected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee.
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 $.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 and as the
Trustees may determine with respect to any series of Shares).
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 of Trust 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 (including, without
limitation, each business day in accordance with the maintenance of a constant
net asset value per share as set forth in Section 9.3 hereof), 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 changing the proportionate beneficial interests in the Trust.
Reductions in the number of outstanding Shares may be made pursuant to the
constant net asset value per share formula set forth in Section 9.3.
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 Trustees shall have power to employ
a transfer agent or transfer agents, and a registrar or registrars. The
transfer agent or transfer agents may keep the said register and record therein
the original issues and transfers, if any, of the said Shares. Any such
transfer agent and registrars shall perform the duties usually performed by
transfer agents and registrars of certificates of stock in a corporation, except
as modified by the Trustees.
6.7. Transfer of Shares. Shares shall be transferable on the records of
the Trust only by the record holder thereof or by his agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the 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. Treasury Shares. Shares held in the treasury shall, until reissued,
not confer any voting rights on the Trustees, nor shall such Shares be entitled
to any dividends or other distributions declared with respect to the Shares.
6.9. Series Designation. The Trustees, in their discretion, may authorize
the division of Shares into two or more Series, each series relating to a
separate portfolio of investments. The different Series shall be established
and designated, the variations in the relative rights and preferences as between
the different series shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be variations so fixed
and determined between different series as to investment objective, purchase
price, right of redemption, special and relative rights as to dividends and on
liquidation conversion rights, and conditions under which the several series
shall have separate voting rights. All references to Shares in the Declaration
shall be deemed to be-shares of any or all series as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
Series, the following provisions shall be applicable:
(a) The number of authorized Shares and the number of Shares of each
Series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more Series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other Series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Series reacquired by the Trust at their
discretion from time to time.
(b) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to the rights
of creditors and except as may otherwise be required by applicable tax laws, and
shall be so recorded upon the books of account of the Trust. In the event that
there are any assets, income, earnings, profits, and proceeds thereof, funds, or
payments which are not readily identifiable as belonging to any particular
Series, the Trustees shall allocate them among any one or more of the Series
established and designated from time to time in such manner and on such basis as
they, in their sole discretion, deem fair and equitable. Each such allocation
by the Trustees shall be conclusive and binding upon the shareholders of all
series for all purposes.
(c) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which terms are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(d) The power of the Trustees to pay dividends and make distributions
with respect to any one or more Series shall be governed by Section 9.2 of this
Trust. Dividends and distributions on Shares of a particular Series may be paid
with such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Trustees may determine, to the holders of Shares of
that Series, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Series, as the Trustees may determine, after
providing for, actual and accrued liabilities belonging to that Series. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions.
The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preference of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
6.10. 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 this last
known address as recorded on the register of the Trust.
ARTICLE VII
Custodian
7.1. Appointment and Duties. The Trustees shall at all times employ a
custodian or custodians, meeting the qualifications for custodians contained in
the 1940 Act, as custodian with authority as its agent, but subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust, and deliver the same
upon written order;
(2) to receive and receipt for any moneys due to the Trust, and
deposit the same in its own banking department or elsewhere as the Trustees
may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust, and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income
of the Trust;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote, the
custodian shall deliver and pay over all property of the Trust held by it as
specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
7.2. Central Certificate System. Subject to such rules, regulations and
orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance 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.
ARTICLE VIII
Redemption
8.1. Redemptions. All outstanding Shares may be redeemed at the option of
the holders thereof, upon and subject to the terms and conditions provided in
this Article VIII. The Trust shall, upon application of any Shareholder or
pursuant to authorization from any Shareholder, redeem or repurchase from such
Shareholder outstanding Shares for an amount per share determined by the
application of a formula adopted for such purpose by resolution of the Trustees
(which formula shall be consistent with the 1940 Act, and the rules and
regulations promulgated thereunder); provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each share
in the assets of the Trust at the time of the purchase or redemption and (b) if
so authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting such redemption, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act, and the rules and
regulations promulgated thereunder, and may, at any time and from time to time,
pursuant to such Act and such rules and regulations, suspend such right of
redemption. The procedures for effecting redemption shall be as set forth in
the Prospectus from time to time.
8.2. Redemption of Shares; Disclosure of Holding. If the Trustees shall,
at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption a number, or principal amount, of Shares or other securities of
the Trust sufficient, in the opinion of the Trustees, to maintain or bring the
direct or indirect ownership of Shares or other securities of the Trust into
conformity with the requirements for such qualification and (ii) to refuse to
transfer or issue Shares or other securities of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust in question would in
the opinion of the Trustees result in such disqualification. The redemption
shall be effected at a redemption price determined in accordance with Section
8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
8.3. Redemptions Pursuant to Constant Net Asset Value Formula. The Trust
may also reduce the number of outstanding Shares pursuant to the provisions of
Section 9.3.
8.4. Redemptions of Accounts of Less than $50,000. Due to the relatively
high cost of maintaining investment accounts of less than $50,000, 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 $50,000, or such lower amount as the Board of
Trustees may determine; provided, however, that the Trustees may not exercise
such power with respect to Shares 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 8.4., shareholders shall be notified that the
value of their account is less than $50,000 and allowed 30 days to make an
additional investment before redemption is processed.
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 plan, 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. Constant Net Asset Value; Reduction of Outstanding Shares. The
Trustees shall have the power to determine the net income of the Trust once on
each day the net asset value is determined as provided in Section 9.1 and at
each such determination to declare such net income as dividends with the result
that the net asset value per share shall remain at a constant dollar value. The
determination of net income and the resultant declaration of dividends shall be
as set forth in the Prospectus. In the event the Trustees determine net asset
value as described herein, fluctuations in value of shares will be reflected in
the number of outstanding Shares in each shareholder's account. It is expected
that the Trust will have a positive net income at the time of each
determination. If for any reason the net income is a negative amount, the Trust
may offset such amount against dividends accrued in the account of each
shareholder. If and to the extent such negative amount exceeds such accrued
dividends, the Trustees shall have authority to reduce the number of outstanding
Shares. Such reduction will be effected by having each Shareholder
proportionately contribute to the Trust's capital the necessary Shares that
represent the amount of the excess upon such determination. Each Shareholder
will be deemed to have agreed to such contribution in these circumstances by his
investment in the Trust. This procedure will permit the net asset value per
share to be maintained at a constant dollar value per share.
The Trustees, by resolution, may discontinue or amend the practice of
maintaining the net asset value per share at a constant dollar amount at any
time and such modification shall be evidenced by appropriate changes in the
Prospectus.
9.4. 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 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.
ARTICLE X
Shareholders
10.1. Meetings of Shareholders. 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 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, other applicable law, this Declaration or the
By-Laws of the Trust requires a greater number of affirmative votes.
10.2. 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.
10.3. 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 purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 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.
10.4. 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.
10.5. 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.
10.6. 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.
10.7. 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.
10.8. Voting. Each shareholder shall be entitled to vote on any matter
required to be submitted to shareholders by the provisions of this Declaration,
the 1940 Act, the laws of the Commonwealth of Massachusetts or otherwise.
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
indefinitely.
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 any such termination,
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Property to one or more persons at public or private sale
for consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and do all other
acts appropriate to liquidate its business; 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 of any Series, in cash or in kind or
partly each, among the Shareholders according to their respective rights.
(b) Upon 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. 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, 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
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 of Trust may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of its 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 a 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 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 a 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.
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto shall be filed in
the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and
acknowledged 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, 2 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, 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 1940 Act, the regulated investment company
provisions of the Internal Revenue Code 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.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/ William E. Aldrich
----------------------
William E. Aldrich
/s/ Barbara G. Fraser
----------------------
Barbara G. Fraser
/s/ Mark B. Goldfus
----------------------
Mark B. Goldfus
/s/ Philip L. Kirstein
----------------------
Philip L. Kirstein
STATE OF NEW JERSEY ) Township of Plainsboro
: ss.: September 9, 1986
COUNTY OF MIDDLESEX )
Then personally appeared before me, Barbara G. Fraser, who resides at 324
Cedar Lane, Swarthmore, Pennsylvania 19081, Mark B. Goldfus, who resides at 509
Bergen Street, Lawrenceville, New Jersey 08648, and Philip L. Kirstein, who
resides at 79 West Shore Drive, Pennington, New Jersey 08534, who acknowledged
the foregoing instrument to be their free act and deed and the free act and deed
of the Trustees of Merrill Lynch Institutional Intermediate Fund.
/s/ Dena B. Rosenberg
---------------------
Notary Public
My Commission Expires:
DENA B. ROSENBERG
Notary Public of New Jersey
My Commission Expires July 16, 1990
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. City of Boston,
September 10, 1986
Then personally appeared before me, William E. Aldrich, who resides at 111
Windsor Road, Needham, MA 02192, who acknowledged the foregoing instrument to be
his free act and deed and the free act and deed of a Trustee of Merrill Lynch
Institutional Intermediate Fund.
/s/ Patricia A. Schena
----------------------
Notary Public
My Commission Expires:
Patricia A. Schena
Notary Public
My Commission
Expires
February 28, 1991
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND,
dated September 10, 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
Shareholders 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 the President, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the meeting,
who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in person or by
duly executed proxy and each full share represented at the meeting shall have
one vote, all as provided in Article X of the Declaration. No proxy shall be
valid after eleven (11) months from the date of its execution, unless a longer
period is expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing Record Dates. For the
purpose of determining the Shareholders who are entitled to notice of or to vote
or act at a 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 10.3 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 request of one or more Shareholders or proxies, a majority of
Shares present shall determine whether one or three Inspectors are to be
appointed, but failure to allow such determination by the Shareholders shall not
affect the validity of the appointment of Inspectors of Election. In case any
person appointed as Inspector fails to appear or fails or refuses to act, the
vacancy may be filled by appointment made by the Trustees in advance of 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
meeting of Shareholders of the Trust and a list of the Shareholders of the
Trust, certified to be true and correct by the Secretary or other proper agent
of the Trust, as of the record date of the meeting or the date of closing of
transfer books, as the case may be. Such list of Shareholders shall contain the
name of each Shareholder in alphabetical order and the address 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. Regular meetings of the Trustees
may be held without call or notice at such place or places and times as the
Trustees may by resolution provide from time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall be
held upon the call of the Chairman, if any, the President, the Secretary or any
two Trustees, at such time, on such day and at such place, as shall be
designated in the notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by mail or by
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 48 hours preceding
the meeting and if given by telegram or personally, such telegram shall be sent
or 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, at the commencement of
such meeting, 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.
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 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. 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 organization 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.
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, or at 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 be
from time to time 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 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. 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 or the
Vice President designated by the Trustees, shall perform all of the duties of
President, and when so acting shall have all the powers of and be subject to all
of the restrictions upon the President. Subject to the direction 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 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 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 princial 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 on
behalf 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. 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. Depositories. In accordance with Section 7.1 of the
Declaration, the funds of the Trust shall be deposited in such depositories 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 the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation.
Section 4.4. Indemnification. Insofar as the conditional advancing of
indemnification monies under Section 5.3 of the Declaration of Trust 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 that
amount to which it is ultimately determined that he is entitled to receive from
the Trust 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 than any repayments may be obtained by the Trust 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
Trust'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.
ARTICLE V
Stock Certificates and Stock Transfers
Section 5.1. Stock Certificates. Certificates representing shares of
beneficial interest of the Trust ("Shares") shall not be issued unless expressly
requested by a shareholder.
Section 5.2. Transfers of Shares. Transfers of Shares shall be made on the
records of the Trust only upon delivery to the Trustees or a transfer agent for
the Trust of proper documentation as provided in Section 6.7 of the
Declaration. The Trust or any of its transfer agents is 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, is received.
Except as otherwise provided by law, the Trust shall be entitled to recognize
the exclusive right of a person in whose name any Share or Shares stand on the
record of Shareholders as the owner of such Share or Shares for all purposes,
including, without limitation, the rights to receive dividends or other
distributions, and to vote as such owner, and the Trust shall not be bound to
recognize any equitable or legal claim to or interest in any such Share or
Shares on the part of any other person.
Section 5.3. 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. They may appoint, or authorize any officer or officers to appoint,
one or more transfer agents or one or more transfer clerks and one or more
registrars and may require all certificates for Shares to bear the signature or
signatures of any of them.
Section 5.4. Transfer Agents, Registrars and the Like. As provided in
Section 6.6 of the Declaration, the Trustees shall 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. 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 Trustee.
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 of Trust establishing Merrill Lynch Institutional
Intermediate Fund, dated September 10, 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 Institutional Intermediate 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
Institutional Intermediate 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 Merrill
Lynch Institutional Intermediate Fund but the Trust Property only shall be
liable.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this day of October, 1986 by and between MERRILL
LYNCH INSTITUTIONAL INTERMEDIATE FUND, a Massachusetts business trust (the
"Fund"), and MERRILL LYNCH ASSET MANAGEMENT, INC., a Delaware corporation (the
"Investment Adviser");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Investment Adviser is engaged principally in rendering
management services and is registered as an investment adviser under the
Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Investment Adviser to render
investment supervisory and corporate administrative services to the Fund in the
manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:
ARTICLE 1. Duties of the Investment Adviser. The Fund hereby employs the
Investment Adviser to act as the manager and investment adviser of the Fund and
to furnish, or to arrange for affiliates to furnish, the Fund with investment
advisory and administrative service and to administer its affairs, subject to
the supervision of the Board of Trustees of the Fund 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 the services and to assume the obligations herein set forth for the
compensation provided for herein. The Investment Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
(a) Investment Advisory Services. In acting as investment adviser to
the Fund, the Investment Adviser shall regularly provide the Fund with such
investment research, advice and supervision as the latter may from time to time
consider necessary for the proper supervision of its funds and shall furnish
continuously an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund may
invest, subject always to the restrictions of the Fund's Declaration of Trust
and By-Laws, as amended from time to time, the provisions of the Investment
Company Act, and the statements relating to the Fund's investment objectives,
investment policies and investment restrictions as the same are set forth in the
currently effective prospectus of the Fund under the Securities Act of 1933 (the
"Prospectus"). Should the Board of Trustees of the Fund at any time, however,
make any definite determination as to investment policy and notify the
Investment Adviser thereof, 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 Fund, 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 Fund's account with brokers or dealers selected by it. In connection
with the selection of such brokers or dealers and the placing of such orders,
the Investment Adviser is directed at all times to seek to obtain for the Fund
the most favorable execution and price within the meaning of such terms as
determined by the Board of Trustees and set forth in the Prospectus. Subject to
this requirement and the provisions of the Investment Company Act, the
Securities Exchange Act of 1934, and other applicable provisions of law, nothing
shall prohibit the Investment Adviser from selecting brokers or dealers with
which it or the Fund is affiliated if permitted by applicable law or regulation.
(b) Administrative Services. In addition to the performance of
investment advisory services, the Investment Adviser shall perform, or supervise
the performance of, administrative services in connection with the management of
the Fund, including processing share orders, administering shareholder accounts
and handling shareholder relations. In this connection, the Investment Adviser
agrees to (i) assist in supervising all aspects of the Fund's operations,
including the coordination of all matters relating to the functions of the
custodian, transfer agent, other shareholder service agents, accountants,
attorneys and other parties performing services or operational functions for the
Fund, (ii) provide the Fund, at the Investment Adviser's expense, with the
services of persons competent to perform such administrative and clerical
functions as are necessary in order to provide effective administration of the
Fund, and (iii) provide the Fund, at the Investment Adviser's expense, with
adequate office space and related services necessary for its operations as
contemplated in this Agreement. The Fund agrees that the Investment Adviser may
arrange for the provision of services and the performance of functions referred
to in this subsection (b) by Merrill Lynch Funds Distributor, Inc., or other
affiliates of Merrill Lynch & Co., Inc.
ARTICLE 2. Allocation of Charges and Expenses.
(a) The Investment Adviser. The Investment Adviser assumes and shall
pay for maintaining the staff and personnel, and shall at its own expense
provide the equipment, office space and facilities necessary to perform its
obligations under this Agreement, and shall pay all compensation of officers of
the Fund and the fees of all Trustees of the Fund who are affiliated persons of
Merrill Lynch & Co., Inc. or its subsidiaries.
(b) The Fund. The Fund assumes and shall pay all expenses of the
Fund, including, without limitation: organization costs, taxes, expenses for
legal and auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses (except to the extent paid by the
Distributor), charges of the Custodian and Transfer Agent, expenses of
redemption of shares, Securities and Exchange Commission fees, expenses of
registering the shares under federal and state securities laws, fees and
expenses of directors who are not affiliated persons of Merrill Lynch & Co.,
Inc. or its subsidiaries, 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.
ARTICLE 3. Compensation of the Investment Adviser.
(a) Investment Advisory Fee. For the services rendered, the
facilities furnished and expenses assumed by the Investment Adviser, the Fund
shall pay to, the Investment Adviser at the end of each calendar month a fee at
an annual rate of 0.40% of the average daily value of the net assets of the
Fund, as determined and computed in accordance with the description of the
determination of net asset value contained in the Prospectus. During any period
when the determination of net asset value is suspended by the Board of Trustees
of the Fund, the net asset value 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
Fund, including the investment advisory fee 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
Fund imposed by state securities laws or published 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
Fund in the amount of such excess; provided, however, to the extent permitted by
law, 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 Fund. Whenever the
expenses of the Fund exceed a pro rata portion of the applicable annual expense
limitations, the estimated amounts of reimbursement under such limitations shall
be applicable as an offset against the monthly payment of the advisory fee due
to the Investment Adviser. Should two or more such expense 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 4. Limitation of Liability of Trustees, Shareholders, Officers,
Employees and Agents. The Declaration of Trust establishing the Fund, dated
September 10, 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 Institutional Intermediate
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 Fund may be held to any personal liability, nor may resort be
had to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Fund but the Fund Property only
shall be liable.
ARTICLE 5. 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 suffered by the Fund in connection with any investment
policy or the purchase, sale or redemption of any securities on the
recommendation of the Investment Adviser. Nothing herein contained shall be
construed to protect the Investment Adviser against any liability to the Fund or
its security holders to which the Investment Adviser shall otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence in the performance
of its duties on behalf of the Fund, reckless disregard of the Investment
Adviser's obligations and duties under this Agreement or the violation of any
applicable law. As used in this Article 5, the term "Investment Adviser" shall
include any affiliates of the Investment Adviser performing services for the
Fund contemplated hereby and directors, officers and employees of the Investment
Adviser and such affiliates.
ARTICLE 6. Activities of the Investment Adviser. The services of the
Investment Adviser under this Agreement are not to be deemed exclusive, and the
Investment Adviser shall be free to render similar services to others so long as
its services hereunder are not impaired thereby. It is understood that
trustees, officers, employees and the shareholders of the Fund are or may become
interested in the Investment Adviser, as directors, officers, employees or
shareholders or otherwise of the Investment Adviser and, are or may become
similarly interested in the Fund, and that the Investment Adviser is or may
become interested in the Fund as shareholder or otherwise.
ARTICLE 7. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force for two years and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of the
Fund, 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 Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Fund on sixty days notice to the
Investment Adviser, or by the Investment Adviser, on sixty days written notice
to the Fund. This Agreement shall automatically terminate in the event of its
assignment.
ARTICLE 8. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Board of
Trustees of the Fund, or by vote of a majority of the 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.
ARTICLE 9. Definition of Certain Terms. The terms "vote of a majority of
the outstanding voting securities", "assignment", "interested person" and
"affiliated person", when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
ARTICLE 10. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New Jersey
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 Jersey, or any
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
By
---------------------------
President
ATTEST:
- ------------------------
Secretary
MERRILL LYNCH ASSET MANAGEMENT, INC.
By
---------------------------
President
ATTEST:
- ------------------------
Secretary
DISTRIBUTION AGREEMENT
AGREEMENT made as of this day of October, 1986 between MERRILL LYNCH
INSTITUTIONAL INTERMEDIATE FUND, a Massachusetts business trust, hereinafter
called the "Fund", and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware
corporation, hereinafter called 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 to date (the "Investment Company Act"), as a diversified 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 shares of the Fund
after the effectiveness of the registration statement covering the shares of the
Fund filed under the Securities Act of 1933, as amended (the "Securities Act").
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
shares of the Fund to the public and the Distributor hereby accepts such
appointment. The Fund, during the term of this Agreement, shall sell its shares
to the Distributor upon the terms and conditions set forth below.
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 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 Fund shall not apply to 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 shares of any such company by
the Fund.
(c) Such exclusive rights shall also not apply to shares issued by the Fund
pursuant to reinvestment of dividends, capital gains distributions or otherwise
pursuant to its daily reinvestment program.
Section 3. Purchase of Shares from the Fund.
(a) The Distributor shall have the right to buy from the Fund the shares
needed, but not more than the shares needed (except for clerical errors in
transmission) to fill unconditional orders for shares of the Fund placed with
the Distributor by investors or securities dealers. The price which the
Distributor shall pay for the 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 shares are to be resold by the Distributor to investors at the
public offering price, as set forth in Section 3(c) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.
(c) The public offering price of the shares, i.e., the price per share at
which the Distributor or selected dealers may sell shares to the public, shall
be the public offering price as set forth in the currently effective prospectus
of the Fund under the Securities Act of 1933 (the "prospectus") relating to such
shares, but not to exceed the net asset value. If the resulting 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 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
Fund's most current prospectus and statement of additional information and
established by the Board of Trustees of the Fund.
(e) The Fund 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 Fund 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, Massachusetts, or
New York authorities, or if there shall have been some other extraordinary
event, which, in the judgment of the Fund, makes it impracticable to sell the
shares.
(f) The Fund, or any agent of the Fund designated in writing by it, shall
be promptly advised of all purchase orders for shares received by the
Distributor. Procedures may be established whereby purchase orders are
presented directly to the Fund or its designated agent upon the condition that
in such cases it shall be deemed that the issuance of the shares to be purchased
is made pursuant to Section 3 hereof. Any order may be rejected by the Fund or
the Distributor; provided, however, that neither will arbitrarily or without
reasonable cause refuse to accept or confirm orders for the purchase of shares.
The Fund (or its agent) will confirm orders upon their receipt, and will make
appropriate book entries pursuant to the instructions of the Distributor.
Purchase orders are effective when Federal Funds become available to the Fund.
The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Redemption or Repurchase of Shares by the Fund.
(a) Any of the outstanding shares may be tendered for redemption or
repurchase at any time, and the Fund shall redeem or repurchase the shares so
tendered in accordance with its obligations and rights as set forth in its
Declaration of Trust, as amended from time to time, and in accordance with the
applicable provisions set forth in the most current prospectus of the Fund.
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(d)
hereof. All payments by the Fund hereunder shall be made in the manner set
forth below.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor and in
accordance with the terms set forth in the most current prospectus of the Fund.
(b) The Fund reserves the right to reject any order for repurchase through
a securities dealer, but the right to redeem shares, or to receive payment with
respect to any such redemption, upon the presentation of properly submitted
redemption requests in accordance with the procedures set forth in the most
current prospectus of the Fund, may only be suspended for any period during
which trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists as defined by the Securities and Exchange Commission as a
result of which disposal of portfolio securities or determination of the net
asset value of the 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.
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 shares of the Fund and
this shall include one certified copy upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
most current prospectus as the Distributor shall reasonably request.
(b) The Board of Trustees shall take, from time to time, 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 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 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
qualifications.
(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 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 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 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 and regulations and the regulations of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the sale of such securities.
Neither the Distributor nor any selected dealer 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
or 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 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 form of selected dealer agreement shall be
approved by the Fund. Shares sold to selected dealers shall be for resale by
such dealers only in accordance with the provisions of the prospectus. The form
of selected dealers agreement is appended hereto as Exhibit A.
(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. Payments 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 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,
annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of shares to selected dealers or investors. 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.
Any expenses of advertising incurred in connection with such offering will be
the obligation of the Investment Adviser.
(c) The Fund shall bear the cost or expenses (other than auditing expenses)
of qualification of the shares for sale, and, if necessary or advisable in
connection therewith, of qualifying the Fund as a broker or dealer, in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), 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, as from time to time amended and supplemented, or the annual
or interim reports to shareholders of the Fund, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement, or (ii) is the Fund to be liable under its indemnity agreement
contained in this subsection (a) with respect to any claim made against the
Distributor or such controlling persons, unless the Distributor or such
controlling person, 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 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 in any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of any of the 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 9, 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, as from time to time amended, or the annual or interim
reports to the 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. Term of Agreement. This Agreement shall commence on the date
of its execution. Unless sooner terminated in accordance with the other
provisions hereof, this Agreement shall continue in effect from year to year
hereafter, but only so long as such continuance is specifically approved at
least annually by (i) the vote of a majority of the Trustees of the Fund who are
not parties to this Agreement or interested persons (within the meaning of the
Investment Company Act) of the Fund or the Distributor, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) either the
Trustees of the Fund or a vote of a majority (within the meaning of the
Investment Company Act) of the outstanding voting securities of the Fund.
Section 11. Termination and Assignment.
(a) This Agreement may be terminated at any time, without payment of any
penalty, by the Trustees of the Fund 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.
(b) This Agreement shall not be assignable by either party hereto and in
the event of assignment (as defined in the Investment Company Act) this
Agreement shall automatically terminate forthwith.
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 major4Lty of outstanding voting securities of the
Fund, and (ii) by 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. Notices. Any notice required or permitted to be given
hereunder by either party to the other shall be deemed sufficiently given if
sent by registered mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by such other party to
the party giving notice, and unless and until changed pursuant to the foregoing
provisions hereof addressed, if to the Fund at 125 High Street, Boston,
Massachusetts 02110 and if to the Distributor at 125 High Street, Boston,
Massachusetts 02110.
Section 14. Governing Law. This Agreement is to the extent applicable
governed and construed in accordance with the laws of the State of New Jersey
and the applicable provisions of the Investment Company Act. To the extent that
the applicable law of the State of New Jersey, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
Section 15. Limitation of Liability of Trustees, Shareholders, Officers,
Employees and Agents.
The Declaration of Trust establishing the Fund, dated September 10, 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 Institutional Intermediate 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 Fund may be held to any personal liability, nor may resort be had
to their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said Fund but the Fund Property only
shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By:
---------------------------------
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
By:
---------------------------------
Exhibit A
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
, 1986
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Institutional Intermediate Fund, a Massachusetts business
trust (the "Fund"), pursuant to which it acts as the distributor for the sale of
shares of beneficial interest, par value $.10 per share (the "shares"), of the
Fund, and as such has the right to distribute shares for resale. The Fund is a
diversified open-end investment company registered under the Investment Company
Act of 1940, as amended, and the shares being offered are registered under the
Securities Act of 1933, as amended. You have received a copy of the
Distribution Agreement between ourselves and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. The term
"Prospectus" as used herein refers to the prospectus on file with the Securities
and Exchange Commission which is part of the most recent effective registration
statement relating to the shares filed pursuant to the Securities Act of 1933,
as amended. As principal, we offer to sell to you as a selected dealer, shares
of the Fund 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 Fund or for us.
2. Shares may be offered by you only as described in the Prospectus.
Orders received from you will be accepted through us only at the public offering
price applicable to each order, as set forth in the Prospectus. The procedure
relating to the handling of orders shall be subject to Section 4 hereof and
instructions which we or the Fund shall forward to you from time to time. 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 Prospectus.
3. You agree that you will not place orders for any shares except in
accordance with the procedures described in the Prospectus. You agree that you
will not 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 (as then
amended or supplemented) and will not furnish to any person any information
relating to the shares which is inconsistent in any respect with the information
contained in the Prospectus (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 shares to be sold 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 Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement and the
Prospectus.
5. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding, eg., 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
except those contained in the Prospectus and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus. In purchasing shares through us you shall rely solely on the
representations contained in the Prospectus and supplemental information above
mentioned. Any printed information which we furnish you other than the Fund's
Prospectus, periodic reports and proxy solicitation material are our sole
responsibility and not the responsibility of the Fund, and you agree that the
Fund shall have no liability or responsibility to you in these respects unless
expressly assumed in connection therewith.
7. You agree to deliver to any purchasers whose shares you are holding as
record holder copies of the Prospectus, as amended from time to time, and the
annual and interim reports and proxy solicitation materials relating to the
Fund. You further agree to make reasonable efforts to endeavor to obtain
proxies from such purchasers whose shares you are holding as record holder.
Additional copies of the Prospectus, annual or interim reports and proxy
solicitation materials of the Fund 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 provisions 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 or other
jurisdictions 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 of New
York a Further State Notice with respect to the shares, if necessary.
12. We shall have full authority to act upon your express instructions to
effect transactions in shares through us on behalf of your customers under the
terms and conditions provided in the Prospectus. You agree to hold us free and
harmless as a result of action taken with respect to authorized repurchases or
exchanges upon your express instructions.
13. All communications to us should be sent to 125 High Street, Boston,
Massachusetts 02110. Any notice to you shall be duly given if mailed or
telegraphed to you at the address set forth below.
Please indicate your acceptance of this Agreement by signing and returning
one copy to us, at our address specified above.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By:
---------------------------------
(Authorized Signature)
Accepted:
Firm Name: Merrill Lynch Pierce Fenner & Smith Inc.
By:
-------------------------------------------
Address: One Liberty Plaza, New York, New York 10080
Date:
--------------------
<PAGE>
EX-99.6(b)
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
OF
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
PURSUANT TO RULE 12b-1
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN made as of the day of
, 1986 by and between Merrill Lynch Institutional Intermediate
Fund, 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 intends to engage in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
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;
WHEREAS, the Fund proposes to enter into a 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 shares of the Fund to the
public;
WHEREAS, the Fund desires to adopt this Distribution and Shareholder
Servicing Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant
to which the Fund will pay a distribution fee to MLFD; and
WHEREAS, the Trustees of the Fund have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, this Distribution and Shareholder Servicing Plan (the "Plan")
in accordance with Rule 12b-1 under the Investment Company Act on the following
terms and conditions:
1. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.15% of
<PAGE>
average daily net assets of the Fund to compensate MLFD and securities firms
with which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph 2 hereof for providing sales and promotional activities and services.
Such activities and services will relate to the sale, promotion and marketing of
the shares of the Fund and payments related to the furnishing of services to
shareholders by sales and marketing personnel. Such expenditures may consist of
sales commissions to financial consultants for selling 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, the costs of preparing
and distributing promotional materials and the costs of providing services 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 and services of the type referred to in Paragraph 1. MLFD may
reallocate all or a portion of its 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 requirements set forth in Paragraoh 3 hereof.
3. MLFD shall provide the Fund for review by the 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 distribution 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 voting securities 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
2
<PAGE>
Plan or any agreements related to it (the "Disinterested Trustees"), cast in
person at a meeting or meetings called for the purpose of voting on this Plan
and such related agreements.
6. This Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Paragraph 5.
7. This Plan may be terminated at any time by vote of a majority of the
Disinterested Trustees, or by vote of a majority of the outstanding voting
securities of the Fund, and will terminate in the event of its assignment (as
defined in the Act).
8. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in paragraph 1 hereof unless such amendment
is approved in the manner provided for initial approval in paragraph 4 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 this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees.
10. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
11. The Declaration of Trust establishing Merrill Lynch Institutional
Intermediate Fund, dated September 10, 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
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 Fund shall be held to any personal liability, nor shall resort
be had
3
<PAGE>
to their private property for the satisfaction of any obligation or claim of
said Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the Fund and the Distributor have executed this Plan of
Distribution on the day and year set forth below.
Date: , 1986
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
--------------------------------------
Attest:
- -------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
--------------------------------------
Attest:
- -------------------------
4
<PAGE>
DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of , 1986 by and
between Merrill Lynch Funds Distributor, Inc. a Delaware corporation (the
"Distributor"), and a corporation
("Securities Firm").
W I T N E S S E T H :
WHEREAS, the Distributor has entered into an agreement with Merrill Lynch
Institutional Intermediate Fund, a Massachusetts business trust (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of shares of
beneficial interest of the Fund;
WHEREAS, the Distributor and Fund have entered into a Distribution and
Shareholder Servicing Plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") pursuant to which the Distributor
receives a distribution fee from the Fund at the annual rate of 0.15% of average
daily net assets of the Fund for providing sales and promotional activities and
services related to the distribution of Fund shares;
WHEREAS, the Distributor desires the Securities Firm to perform certain
sales and promotional activities and services for the Fund's 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 sales and promotional activities and
services with respect to the sale of the shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 1 of the Plan.
2. As compensation for its services performed under this Sub-Agreement; the
Distributor 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 the Distributor, at least quarterly,
such information as reasonably requested by the Distributor to enable the
Distributor 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>
4. This Sub-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 this Plan
or any agreements related to it, cast in person at a meeting or meetings called
for the purpose of voting on this Agreement.
5. This Sub-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 Sub-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
----------------------------------
-------------------------------------
By
----------------------------------
2
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
OF
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
PURSUANT TO RULE 12b-1
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN made as of the 1st day of
November, 1986, and amended as of March 23, 1987, by and between Merrill Lynch
Institutional Intermediate Fund, 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 intends to engage in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
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;
WHEREAS, the Fund proposes to enter into a 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 shares of the Fund to the
public;
WHEREAS, the Fund desires to adopt this Distribution and Shareholder
Servicing Plan pursuant to Rule 12b-1 under the Investment Company Act, pursuant
to which the Fund will pay a distribution fee to MLFD; and
WHEREAS, the Trustees of the Fund have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby agrees
to the terms of, this Distribution and Shareholder Servicing Plan (the "Plan")
in accordance with Rule 12b-1 under the Investment Company Act on the following
terms and conditions:
1. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0. 15% of average daily net assets of the Fund
to compensate MLFD and securities firms with which MLFD enters into related
agreements
<PAGE>
("Sub-Agreements") pursuant to Paragraph 2 hereof for providing sales and
promotional activities and services. Such activities and services will relate
to the sale, promotion and marketing of the shares of the Fund, including
clearing and support services incident thereto, and payments related to the
furnishing of services to shareholders by sales and marketing personnel. Such
expenditures may consist of sales commissions to financial consultants for
selling 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,
the costs of preparing and distributing promotional materials and the costs of
providing services 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 and services of the type referred to in Paragraph 1. MLFD may
reallocate all or a portion of its 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 requirements set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the 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 distribution 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 voting securities 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 "Disinterested Trustees"), cast in person at a meeting or
meetings called for the purpose of voting on this Plan and such related
agreements.
6. This Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Paragraph 5.
<PAGE>
7. This Plan may be terminated at any time by vote of a majority of the
Disinterested Trustees, or by vote of a majority of the outstanding voting
securities of the Fund, and will terminate in the event of its assignment (as
defined in the Act).
8. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in paragraph 1 hereof unless such amendment
is approved in the manner provided for initial approval in paragraph 4 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 this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees.
10. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 6 hereof, for a period of not less
than six years from the date of this Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
11. The Declaration of Trust establishing Merrill Lynch Institutional
Intermediate Fund, dated September 10, 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
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 Fund shall be held to any personal
<PAGE>
liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of said Fund, but the Trust Estate only
shall be liable.
IN WITNESS WHEREOF, the Fund and the Distributor have executed this Plan of
Distribution on the day and year set forth below.
Date: , 19
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
--------------------------------------
Attest:
- -------------------------
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
--------------------------------------
Attest:
- -------------------------
<PAGE>
DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of 1986 by and
between Merrill Lynch Funds Distributor, Inc., a Delaware corporation (the
"Distributor"), and a corporation ("Securities Firm").
W I T N E S S E T H:
WHEREAS, the Distributor has entered into an agreement with Merrill Lynch
Institutional Intermediate Fund, a Massachusetts business trust (the "Fund"),
pursuant to which it acts as the exclusive distributor for the sale of shares of
beneficial interest of the Fund;
WHEREAS, the Distributor and Fund have entered into a Distribution and
Shareholder Servicing Plan (the "Plan") pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") pursuant to which the Distributor
receives a distribution fee from the Fund at the annual rate of 0.15% of average
daily net assets of the Fund for providing sales and promotional activities and
services related to the distribution of Fund shares;
WHEREAS, the Distributor desires the Securities Firm to perform certain
sales and promotional activities and services for the Fund's 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 sales and promotional activities and
services with respect to the sale of the shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 1 of the Plan.
2. As compensation for its services performed under this Sub-Agreement,
the Distributor 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 the Distributor, at least quarterly,
such information as reasonably requested by the Distributor to enable the
Distributor to comply with the reporting requirements of Rule 12b-1 regarding
the disbursement of the fee during such period referred to in Paragraph 3 of the
Plan.
4. This Sub-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 this
<PAGE>
Plan or any agreements related to it, cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
5. This Sub-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 Sub-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
----------------------------------
-------------------------------------
By
----------------------------------
100386-1
CUSTODIAN CONTRACT
Between
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
and
STATE STREET BANK AND TRUST COMPANY
SCS 6/86
TABLE OF CONTENTS
Page
____
1. Employment of Custodian and Property to be Held By It 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 7
2.4 Bank Accounts 7
2.5 Payments for Shares 8
2.6 Investment and Availability of Federal Funds 8
2.7 Collection of Income 9
2.8 Payment of Fund Moneys 10
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased 12
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund 12
2.11 Appointment of Agents 13
2.12 Deposit of Fund Assets in Securities System 14
2.13 Segregated Account 17
2.14 Ownership Certificate for Tax Purposes 18
2.15 Proxies 18
2.16 Communications Relating to Fund
Portfolio Securities 18
2.17 Proper Instructions 19
2.18 Actions Permitted Without Express Authority 20
2.19 Evidence of Authority 21
3. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income 21
4. Records 22
5. Opinion of Fund's Independent Accountants 22
6. Reports to Fund by Independent Public Accountants 23
7. Compensation of Custodian 23
8. Responsibility of Custodian 23
9. Effective Period, Termination and Amendment 25
10. Successor Custodian 26
11. Interpretive and Additional Provisions 27
12. Massachusetts Law to Apply 28
13. Prior Contracts 28
CUSTODIAN CONTRACT
This Contract between Merrill Lynch Institutional Intermediate Fund, a
business trust organized and existing under the laws of Massachusetts, having
its principal place of business at 125 High Street, Boston, Massachusetts 02110
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:
NOW THEREFOR, 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
pursuant to the provisions of the 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 ("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.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an applicable vote by the Trustees of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and receipt of
payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other similar
offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Fund or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
7) To the broker selling the same for examination in accordance with the
"street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new Securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may be in the
form of cash or obligations issued by the United States government, its
agencies of instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for the
delivery of securities owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization
or organizations, regarding escrow or other arrangements in connection
with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits
in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described
from time to time in the Fund's currently effective prospectus and
statement of additional information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Trustees or of the Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in common
with other registered investment companies having the same investment
adviser as the Fund, or in the name or nominee name of any agent appointed
pursuant to Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted by
the Custodian on behalf of the Fund under the terms of this Contract shall
be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks
or trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified
to act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved by vote of a majority of the
Trustees of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and deposit
into the Fund's account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund and the Transfer Agent of any
receipt by it of payments for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions, make federal funds available to the Fund as of
specified times agreed upon from time to time by the Fund and the Custodian
in the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 2.2 (10) shall be
the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with
such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Fund is properly entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to futures contracts
or options on futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the conditions
set forth in Section 2.12 hereof or (c) in the case of repurchase
agreements entered into between the Fund and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing purchase
by the Fund of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Fund;
2) In connection with conversion, exchange or surrender of securities
owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as set
forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant to the governing
documents of the Fund;
6) For payment in the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Trustees or
of the Executive Committee of the Fund signed by an officer of the Fund
and certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such payment
is to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the
account of the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if the securities had
been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From such
funds as may be available for the purpose but subject to the limitations of
the Declaration of Trust and any applicable votes of the Trustees of the
Fund pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of
Shares who have delivered to the Transfer Agent a request for redemption or
repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming shareholders. In connection
with the redemption or repurchase of Shares of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Fund and the
Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Fund in a Securities System
provided that such securities are represented in an account ("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by
book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon (i) receipt of advice
from the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System
of transfers of securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall furnish the
Fund confirmation of each transfer to or from the account of the Fund in
the form of a written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained by the
Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited
in the Securities System;
5) The Custodian shall have received the initial or annual certificate,
as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees or from failure of the Custodian or any
such agent to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claim
against the Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in an
account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodion and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Fund, (ii) for purposes of segregating cash or government securities
in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating to
the maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Trustees or of the Executive
Committee signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of the Fund held by it and in connection with
transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Fund or a nominee of the Fund all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
2.16 Communications Relating to Fund Portfolio Securities. The Custodian shall
transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations
of rights in connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts purchased
or sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this Article 2
means a writing signed or initialled by one or more person or persons as
the Trustees shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Trustees of the Fund accompanied
by a detailed description of procedures approved by the Trustees, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trustees and the
Custodian are satisfied that such procedures afford adequate safeguards for
the Fund's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to the
Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise
directed by the Trustees of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed by
or on behalf of the Fund. The Custodian may receive and accept a
certified copy of a vote of the Trustees of the Fund as conclusive evidence
(a) of the authority of any person to act in accordance with such vote or
(b) of any determination or of any action by the Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share and
the daily income of the Fund shall be made at the time or times described from
time to time in the Fund's currently effective prospectus.
4. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be
the property of the Fund and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Fund and employees and agents of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply the
Fund with a tabulation of securities owned by the Fund and held by the Custodian
and shall, when requested to do so by the Fund and for such compensation as
shall be agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fuud and
the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties. The Custodian shall
be held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence. It shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Fund) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund shall be
security therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of Fund
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.12 hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that the
Trustees of the Fund have approved the initial use of a particular Securities
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Trustees have reviewed the use by the Fund of such Securities
System, as required in each case by Rule 17f-4 under the Investment Company Act
of 1940, as amended; provided further, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust, and further provided,
that the Fund may at any time by action of its Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Trustees of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Trustees of the
Fund, deliver at the office of the Custodian and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Trustees to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Declaration of Trust of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
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 day of , 198 .
ATTEST MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
By
- -------------------------- -----------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
By
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Assistant Secretary Vice President
100786-1
TRANSFER AGENCY AND SERVICE AGREEMENT
between
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
and
STATE STREET BANK AND TRUST COMPANY
SA2 5/86
TABLE OF CONTENTS
Page
Article 1 Terms of Appointment; Duties of the Bank 1
Article 2 Fees and Expenses 4
Article 3 Representations and Warranties of the Bank 5
Article 4 Representations and Warranties of the Fund 6
Article 5 Indemnification 6
Article 6 Covenants of the Fund and the Bank 9
Article 7 Termination of Agreement 11
Article 8 Assignment 11
Article 9 Amendment 12
Article 10 Massachusetts Law to Apply 12
Article 11 Merger of Agreement 12
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of , 1986, by and between
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND, a Massachusetts business trust,
having its principal office and place of business at 125 High Street, Boston,
Massachusetts 02110 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts corporation having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and the Bank desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act
as its transfer agent for the Fund's authorized and issued shares of its
beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of the Fund ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund,
including without limitation any periodic investment plan or periodic withdrawal
program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
Custodian of the Fund authorized pursuant to the Declaration of Trust
of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions
and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by
the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund; and
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of shares of the Fund and maintain pursuant to
SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund
which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. Bank shall also provide the Fund on a regular
basis with the total number of shares which are authorized and issued
and outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of such shares,
which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), the Bank shall: (i) perform all of the customary services of a
transfer agent, dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including without limitation
any periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder
reports and prospectuses to current Shareholders, withholding taxes on
non-resident alien accounts, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all purchases
and redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State. The
Fund shall (i) identify to the Bank in writing those transactions and assets to
be treated as exempt from blue sky reporting for each State and (ii) verify the
establishment of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State. The responsibility of
the Bank for the Fund's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky compliance by the
Fund and the reporting of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and the Bank.
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Fund
agrees to pay the Bank an annual maintenance fee for each Shareholder account as
set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02 below may be
changed from time to time subject to mutual written agreement between the Fund
and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees
to reimburse the Bank for out-of-pocket expenses or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within five
days following the mailing of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Fund at least seven
(7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.03 It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
4.04 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities law
filings have been made and will continue to be made, with respect to all Shares
of the Fund being offered for sale.
Article 5 Indemnification
5.01 The Bank shall not be responsible for, and the Fund shall indemnify
and hold the Bank harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of the Bank or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The XXXXXX XX or use by the Bank or its agents or subcontractors of
information, records and documents which (i) are received by the Bank or its
agents or subcontractors and furnished to it by or on behalf of the Fund, and
(ii) have been prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Bank shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Covenants of the Fund and the Bank
6.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the Fund
authorizing the appointment of the Bank and the execution and delivery of this
Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.04 The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secue instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, the Bank reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
Article 8 Assignment
8.01 Except as provided in Section 8.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with (i) Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934 ("Section 17A(c)(1)"), or (ii) a BFDS subsidiary duly registered as a
transfer agent pursuant to Section 17A(c)(1); provided, however, that the Bank
shall be as fully responsible to the Fund for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 9 Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Trustees of the Fund.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Merger of Agreement
11.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
MERRILL LYNCH INSTITUTIONAL
INTERMEDIATE FUND
BY:
------------------------------
ATTEST:
- --------------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
------------------------------
Vice President
ATTEST:
- --------------------------------------
Assistant Secretary
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the day of 1986, by, between and among MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, a Delaware corporation ("Merrill Lynch"),
MERRILL LYNCH ASSET MANAGEMENT, INC., a Delaware corporation ("MLAM") and
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND, a Massachusetts business trust
(the "Fund").
W I T N E S S E T H :
WHEREAS, Merrill Lynch was incorporated under the laws of the State of
Delaware on November 10, 1958 under the corporate name "Merrill Lynch, Pierce,
Fenner & Smith Incorporated" and has used such name at all times thereafter;
WHEREAS, Merrill Lynch was duly qualified as a foreign corporation under
the laws of the State of New York on January 2, 1959 and has remained so
qualified at all times thereafter;
WHEREAS, MLAM was incorporated under the laws of the State of Delaware on
March 22, 1976 under the corporate name "Merrill Lynch Money Management
Services, Inc." which name was changed on April 13, 1976, pursuant to an
amendment of MLAM's Certificate of Incorporation, to "Merrill Lynch Asset
Management, Inc. and MLAM has used such name at all times thereafter;
WHEREAS, MLAM was duly qualified as a foreign corporation under the laws of
the State of New York on April 26, 1976 and has remained so qualified at all
times thereafter;
WHEREAS, the Fund was organized under the laws of the Commonwealth of
Massachusetts on September 10, 1986; and
WHEREAS, the Fund has requested Merrill Lynch and MLAM to give their
consent to the use of the name "Merrill Lynch" in the Fund's name.
NOW, THEREFORE, in consideration of the premises and of the convenants
hereinafter contained, Merrill Lynch, MLAM and the Fund hereby agree as follows:
1. Merrill Lynch and MLAM hereby grant the Fund a non-exclusive license to
use the words "Merrill Lynch" in its name.
2. Merrill Lynch hereby consents to the qualification of the Fund to do
business under the laws of any state of the United States with the words
"Merrill Lynch" in its name and agrees to execute such formal consents as may be
necessary in connection with such filing; and MLAM joins in such consent.
3. The non-exclusive license hereinabove referred to has been given and is
given by Merrill Lynch and MLAM on the condition that they may at any time, in
their sole and absolute discretion, withdraw the non-exclusive license to the
use of the words "Merrill Lynch" in the name of the Fund; and, as soon as
practicable after receipt by the Fund of written notice of the withdrawal of
such non-exclusive license, and in no event later than ninety days thereafter,
the Fund will change its name so that such name will not thereafter include the
words "Merrill Lynch" or any variation thereof.
4. Merrill Lynch reserves and shall have the right to grant to any other
company, including without limitation, any other investment company, the right
to use the words "Merrill Lynch" or variations thereof in its name and no
consent or permission of the Fund shall be necessary; but, if required by an
applicable law of any state, the Fund will forthwith grant all requisite
consents.
5. The Fund will not grant to any other company the right to use a name
similar to that of the Fund or Merrill Lynch without the written consent of
Merrill Lynch.
6. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Merrill Lynch" or any variation thereof from such name, the
Fund hereby grants to Merrill Lynch and MLAM the right to cause the organization
of other voluntary associations or the incorporation of corporations which have
names similar to that of the Fund or to that to which the Fund may change its
name and to own all or any portion of the shares of such other corporations or
associations and to enter into contractual relationships with such other
corporations or associations, subject to any requisite approval of a majority of
the Fund's shareholders and the Securities and Exchange Commission and subject
to the payment of a reasonable amount to be determined at the time of use, and
the Fund agrees to give and execute any such formal consents or agreements as
may be necessary in connection therewith.
7. This Agreement may be amended at any time by a writing signed by the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
----------------------------------
Vice President
MERRILL LYNCH ASSET MANAGEMENT, INC.
By
----------------------------------
Vice President
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE
FUND
By
----------------------------------
President
EXHIBIT 16
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
TOTAL RETURN
From Annual
Inception Total
1 Year 11/6/86 Return*
------ ------- -------
Initial Investment $1,000.00 $1,000.00 $1,000.00
Divided by Maximum Offering Price 9.57 10.00
--------- ---------
Divided by Net Asset Value 104.49 100.00 9.57
---------
Equals Shares Purchased 104.49
Plus Shares Acquired through
Dividend Reinvestment 9.16 17.27 9.16
--------- --------- ---------
Equals Shares Held at 10/31/88 113.65 117.27 113.65
Multiplied by Net Asset Value
at 10/31/88 9.44 9.44 9.44
--------- --------- ---------
Equals Ending Redeemable Value
at $1,000 Investment (ERV)
at 10/31/88 $1,072.90 $1,107.00 $1,072.90
Divided by $1,000 (P) 1.0729 1.1070 1.0729
Subtract 1 0.0729 0.1070 0.0729
Expressed as a percentage equals
the Aggregate Total Return
for the Period (T) 7.29% 10.70%
========= =========
Expressed as a percentage equals
the Aggregate Total Return
for the Period 7.29%
=========
ERV divided by P 1.0729 1.1070
Raise to the power of 1 1/1.98
Equals 1.0729 1.0525
Subtract 1 0.0729 0.0525
Expressed as a percentage equals
the Average Annualized
Total Return 7.29% 5.25%
========= =========
- ----------
* Does not include sales charge for the period.
EXHIBIT 16
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND
STANDARDIZED YIELD COMPUTATION
Long term income generally based on yield to maturity times
market value of each security $2,098,761
Plus short term income accured for the past thirty days 61,002
------------
Equals Total Income 2,159,763
Less expenses for the past thirty days (146,059)
------------
Equals net monthly income for yield calculation 2,013,704
------------
Average shares outstanding for the month 32,648,732
Times the maximum offering price 9.44
------------
Equals total dollars $308,204,030
============
Net monthly income divided by total dollars equals 0.006533672
Add 1 1.006533672
Raise to the power of 6 1.039847970
Subtract 1 0.039847970
Times 2 0.079695940
Expressed as a percentage equals the standardized yield
for the month 7.97%
============
<PAGE>
INDEPENDENT AUDITORS' CONSENT
MERRILL LYNCH INSTITUTIONAL INTERMEDIATE FUND:
We consent to the use in Post-Effective Amendment No. 9 to Registration
Statement No. 33-8708 of our report dated December 8, 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
February 23, 1996
POWER OF ATTORNEY
Know all persons by these presents, that W. Carl Kester
hereby constitutes and appoints Robert W. Crook and Gerald M.
Richard, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to
sign any and all Amendments (including pre-effective and post-
effective amendments) to the Registration Statement (File No. 33-
8708) of the Merrill Lynch Institutional Intermediate Fund, and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Dated: February 16, 1996 /s/ W. Carl Kester
W. Carl Kester
<TABLE> <S> <C>
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