As filed with the Securities and Exchange Commission on January 27, 2000
Securities Act File No. 333-
Investment Company Act File No. 811-5576
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
|_| Pre-Effective Amendment No.
|_| Post-Effective Amendment No.
(Check appropriate box or boxes)
-------------------
Merrill Lynch Global Allocation Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
-------------------
(609) 282-2800
(Area Code and Telephone Number)
-------------------
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
-------------------
Terry K. Glenn
Merrill Lynch Global Allocation Fund, Inc.
800 Scudders Mill Road, Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011, Princeton, New Jersey 08543-9011
(Name and Address of Agent for Service)
-------------------
Copies to:
FRANK P. BRUNO, ESQ. MICHAEL J. HENNEWINKEL, ESQ.
Brown & Wood LLP Merrill Lynch Asset Management
One World Trade Center 800 Scudders Mill Road
New York, NY 10048-0557 Plainsboro, NJ 08543-9011
-------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933.
Title of Securities Being Registered: Common Stock, Par Value $.10 per
share. No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
-------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
MERRILL LYNCH ASSET GROWTH FUND, INC.
MERRILL LYNCH ASSET INCOME FUND, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
-------------------
NOTICE OF SPECIAL MEETINGS OF STOCKHOLDERS
-------------------
To Be Held On April 26, 2000
TO THE STOCKHOLDERS OF
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
holding shares of The Global Opportunity Portfolio
MERRILL LYNCH ASSET GROWTH FUND, INC.
MERRILL LYNCH ASSET INCOME FUND, INC.
NOTICE IS HEREBY GIVEN that special meetings of stockholders (the
"Meetings") of the Global Opportunity Portfolio ("Global Opportunity") of
Merrill Lynch Asset Builder Program, Inc. ("Asset Builder"), Merrill Lynch Asset
Growth Fund, Inc. ("Asset Growth") and Merrill Lynch Asset Income Fund, Inc.
("Asset Income") will be held at the offices of Merrill Lynch Asset Management,
L.P., 800 Scudders Mill Road, Plainsboro, New Jersey on Wednesday, April 26,
2000, at Eastern Time (for Asset Builder), Eastern time (for Asset
Growth), and Eastern time (for Asset Income), for the following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization (the
"Agreement and Plan") providing for the acquisition of substantially all of the
assets of Asset Growth, Asset Income and Global Opportunity, a portfolio of
Asset Builder, by Merrill Lynch Global Allocation Fund, Inc. ("Global
Allocation"), and the assumption of substantially all of the liabilities of
Global Opportunity, Asset Growth and Asset Income by Global Allocation, in
exchange solely for an equal aggregate value of shares of Global Allocation. The
Agreement and Plan also provides for distribution of such shares of Global
Allocation to stockholders of Global Opportunity, Asset Growth and Asset Income.
A vote in favor of this proposal by the stockholders of Global Opportunity,
Asset Growth or Asset Income will constitute a vote in favor of (i) the
acquisition by Global Allocation of substantially all of the assets of, and the
assumption of substantially all of the liabilities of, that Fund in exchange for
newly-issued shares of common stock of Global Allocation having an aggregate net
asset value equal to the aggregate net asset value of the common stock of that
Acquired Fund; (ii) the distribution, on a proportionate basis, of shares of
Global Allocation common stock received by such Fund to its common stockholders;
and (iii) with respect to Asset Income or Asset Growth, the deregistration and
dissolution of such Fund, and with respect to Global Opportunity, the
termination by Asset Builder of Global Opportunity as a series of Asset Builder.
(2) To transact such other business as properly may come before the
Meeting or any adjournment thereof. The Boards of Directors of Asset Builder,
Asset Growth and Asset Income have fixed the close of business on March 15, 2000
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Meetings or any adjournment thereof.
A complete list of the stockholders of Global Opportunity, Asset Growth
and Asset Income entitled to vote at the Meetings will be available and open to
the examination of any stockholders of Global Opportunity, Asset Growth and
Asset Income, respectively, for any purpose germane to the Meetings during
ordinary business hours from and after April 12, 2000 at the offices of Asset
Builder, Asset Growth and Asset Income, 800 Scudders Mill Road, Plainsboro, New
Jersey.
You are cordially invited to attend the Meetings. Stockholders who do not
expect to attend the Meetings in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Boards of
Directors of Asset Builder, Asset Growth and Asset Income.
By Order of the Boards of Directors,
BARBARA G. FRASER
Secretary
Merrill Lynch Asset Builder Program, Inc.
Merrill Lynch Asset Growth Fund, Inc.
Merrill Lynch Asset Income Fund, Inc.
Plainsboro, New Jersey
Dated:
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not use this prospectus to sell securities until the registration statement
containing this prospectus, which has been filed with the Securities and
Exchange Commission, is effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to but these securities in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROXY STATEMENT AND PROSPECTUS DATED JANUARY 27, 2000
JOINT PROXY STATEMENT OF
MERRILL LYNCH ASSET GROWTH FUND, INC.
MERRILL LYNCH ASSET INCOME FUND, INC.
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
AND PROSPECTUS OF
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
P.O. Box 9011, Princeton, New Jersey 08543-9011
(609) 282-2800
-------------------
SPECIAL MEETINGS OF STOCKHOLDERS OF
MERRILL LYNCH ASSET GROWTH FUND, INC.
MERRILL LYNCH ASSET INCOME FUND, INC.
THE GLOBAL OPPORTUNITY PORTFOLIO OF
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
-------------------
April 26, 2000
This Joint Proxy Statement and Prospectus is furnished in connection with
the solicitation of proxies on behalf of the Boards of Directors of Merrill
Lynch Asset Builder Program, Inc. ("Asset Builder"), with respect to the Global
Opportunity Portfolio ("Global Opportunity"), Merrill Lynch Asset Growth Fund,
Inc. ("Asset Growth") and Merrill Lynch Asset Income Fund, Inc. ("Asset Income,"
and together with Global Opportunity and Asset Growth, the "Acquired Funds"),
all Maryland corporations, for use at the Special Meetings of Stockholders of
Asset Growth, Asset Income and Global Opportunity, a portfolio of Asset Builder,
(the "Meetings"). The Meetings were called so that the stockholders of each
Acquired Fund could approve or disapprove the proposed reorganization of that
Acquired Fund whereby Merrill Lynch Global Allocation Fund, Inc., a Maryland
corporation ("Global Allocation"), will acquire substantially all of the assets,
and will assume substantially all of the liabilities, of the Acquired Fund, in
exchange solely for an equal aggregate value of newly-issued shares of Global
Allocation (each a "Reorganization"). With respect to each Acquired Fund,
immediately upon the receipt by Global Allocation of the assets of an Acquired
Fund and the assumption by Global Allocation of the liabilities of that Acquired
Fund, the Acquired Fund will distribute the shares of Global Allocation received
in the Reorganization to its stockholders. Thereafter, Asset Growth and Asset
Income will terminate their respective registrations under the Investment
Company Act of 1940, as amended (the "Investment Company Act") and will dissolve
in accordance with the laws of the State of Maryland, and Asset Builder will
terminate Global Opportunity as a series of Asset Builder.
In each Reorganization, holders of shares in the Acquired Fund will
receive shares of that class of Global Allocation having the same letter
designation (i.e., Class A, Class B, Class C or Class D) (the "Corresponding
Shares"), as the shares of the Acquired Fund held by them immediately prior to
the Reorganization. Each class of shares of Global Opportunity, Global
Allocation and Asset Growth have the same distribution fees, account maintenance
fees, and sales charges (including contingent deferred sales charges ("CDSCs")),
if any. The initial sales charges and distribution fees of the classes of shares
of Asset Income are lower than these charges with respect to the same class of
shares of Global Allocation. After the Reorganization involving Asset Income,
Class B and Class C stockholders of Asset Income will hold Corresponding Shares
of Global Allocation with higher ongoing distribution fees. See "Summary--Pro
Forma Fee Tables." The aggregate net asset value of the Corresponding Shares of
Global Allocation to be issued to the stockholders of Global Opportunity, Asset
Growth and Asset Income will equal the aggregate net asset value of the
outstanding shares of Global Opportunity, Asset Growth and Asset Income,
respectively. Global Opportunity, Asset Growth, Asset Income and Global
Allocation sometimes are referred to herein collectively as the "Funds" and
individually as a "Fund," as the context requires. The Fund resulting from the
Reorganization is sometimes referred to herein as the "Combined Fund."
(continued on following page...)
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT
AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------
The date of this Joint Proxy Statement and Prospectus is , 2000.
<PAGE>
This Joint Proxy Statement and Prospectus serves as a prospectus of Global
Allocation under the Securities Act of 1933, as amended (the "Securities Act"),
in connection with the issuance of shares of Global Allocation pursuant to the
terms of the Reorganization.
Asset Builder, Asset Growth and Global Allocation are open-end management
investment companies with similar, although not identical, investment
objectives. Global Allocation, Asset Growth and Global Opportunity seek to
provide stockholders with high total investment income (i.e., the combination of
capital appreciation and investment income) utilizing U.S. and foreign equity,
debt and money market securities. Asset Income seeks a high level of current
income and, secondarily, capital appreciation by investing in U.S. and foreign
debt, equity and money market securities. Global Allocation, Asset Growth, and
Asset Income are non-diversified investment companies. Global Opportunity is a
diversified investment company.
The current prospectus relating to Global Allocation, dated [ ], 2000 (the
"Global Allocation Prospectus") accompanies this Proxy Statement and Prospectus
and is incorporated herein by reference. The Annual Report to Stockholders of
Global Allocation for the year ended October 31, 1999 also accompanies this
Proxy Statement and Prospectus. A statement of additional information relating
to Global Allocation, dated [ ], 2000 (the "Global Allocation Statement"), a
prospectus and statement of additional information relating to Asset Builder,
each dated June 1, 1999 (the "Asset Builder Prospectus" and "Asset Builder
Statement"), a prospectus and statement of additional information relating to
Asset Growth, each dated December 7, 1999 (the "Asset Growth Prospectus" and
"Asset Growth Statement") and a prospectus and statement of additional
information relating to Asset Income (the "Asset Income Prospectus" and "Asset
Income Statement"), each dated April 30, 1999 have been filed with the
Securities and Exchange Commission (the "Commission"). Such documents may be
obtained, without charge, by writing each of the Funds at the address above, or
by calling 1-800-456-4587, ext. 123.
This Joint Proxy Statement and Prospectus sets forth concisely the
information about Global Allocation that stockholders of Global Opportunity,
Asset Growth and Asset Income should know before considering the Reorganization
and should be retained for future reference. Asset Builder, Asset Growth and
Asset Income have authorized the solicitation of proxies in connection with the
Reorganization solely on the basis of this Proxy Statement and Prospectus and
the accompanying documents.
A statement of additional information relating to the Reorganization (the
"Statement of Additional Information") is on file with the Commission. It is
available from Global Allocation without charge, upon oral request by calling
the toll free telephone number set forth above or upon written request by
writing Global Allocation at its principal executive offices. The Statement of
Additional Information, dated , is incorporated by reference into this
Joint Proxy Statement and Prospectus.
The address of the principal executive offices of Asset Builder, Asset
Growth, Asset Income and Global Allocation is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and the telephone number is (609) 282-2800.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION .............................................................. 4
SUMMARY ................................................................... 4
The Reorganization ..................................................... 4
Pro Forma Fee Tables ................................................... 5
RISK FACTORS AND SPECIAL CONSIDERATIONS ................................... 14
COMPARISON OF THE FUNDS ................................................... 17
Financial Highlights ................................................... 17
Investment Objectives and Policies ..................................... 33
A Note About Year 2000 ................................................. 36
Other Investment Policies .............................................. 36
Information Regarding Futures And Options Transactions ................. 37
Investment Restrictions ................................................ 37
Management ............................................................. 37
Compensation of Directors .............................................. 38
Purchase of Shares ..................................................... 39
Redemption of Shares ................................................... 39
Performance ............................................................ 39
Stockholder Rights ..................................................... 41
Dividends .............................................................. 41
Automatic Dividend Reinvestment Plan ................................... 41
Tax Information ........................................................ 41
Portfolio Transactions ................................................. 41
Portfolio Turnover ..................................................... 41
Additional Information ................................................. 42
THE REORGANIZATION ........................................................ 43
General ................................................................ 43
Procedure .............................................................. 43
Terms of the Agreement and Plan ........................................ 44
Potential Benefits to Stockholders of the
Funds as a Result of the Reorganization .............................. 45
Tax Consequences of the Reorganization ................................. 46
Capitalization ......................................................... 46
INFORMATION CONCERNING THE SPECIAL MEETINGS ............................... 47
Date, Time and Place of Meetings ....................................... 47
Solicitation, Revocation and Use of Proxies ............................ 47
Record Date and Outstanding Shares ..................................... 48
Security Ownership of Certain Beneficial Owners and
Management of Global Opportunity, Asset Growth, Asset
Income and Global Allocation ......................................... 48
Voting Rights and Required Vote ........................................ 50
ADDITIONAL INFORMATION .................................................... 51
LEGAL PROCEEDINGS ......................................................... 51
LEGAL OPINIONS ............................................................ 52
EXPERTS ................................................................... 52
STOCKHOLDER PROPOSALS ..................................................... 52
EXHIBIT I AGREEMENT AND PLAN OF REORGANIZATION ........................... I-1
3
<PAGE>
INTRODUCTION
This Joint Proxy Statement and Prospectus is furnished in connection with
the solicitation of proxies on behalf of the Board of Directors of Asset Builder
with respect to the stockholders of Global Opportunity, and the Boards of
Directors of Asset Growth and Asset Income for use at the Meetings to be held at
the offices of Merrill Lynch Asset Management, L.P. ("MLAM"), 800 Scudders Mill
Road, Plainsboro, New Jersey on Wednesday, April 26, 2000, at Eastern time (for
Asset Builder), Eastern time (for Asset Growth) and Eastern time (for Asset
Income). The mailing address for Asset Builder, Asset Growth and Asset Income is
P.O. Box 9011, Princeton, New Jersey 08543-9011. The approximate mailing date of
this Proxy Statement and Prospectus is March 24, 2000.
Any person giving a proxy may revoke it at any time prior to its exercise
by executing a superseding proxy, by giving written notice of the revocation to
the Secretary of Asset Builder, Asset Growth or Asset Income, at the address
indicated above, or by voting in person at the Meetings. All properly executed
proxies received prior to the Meetings will be voted at the Meetings in
accordance with the instructions marked thereon or otherwise as provided
therein. Unless instructions to the contrary are marked, properly executed
proxies of an Acquired Fund will be voted "FOR" the proposal to approve the
Agreement and Plan of Reorganization between that Acquired Fund and Global
Allocation (the "Agreement and Plan").
Each Acquired Fund will vote on the Agreement and Plan separately from the
other Acquired Funds. Approval of the Agreement and Plan with respect to the
Acquired Fund will require the affirmative vote of stockholders of that Acquired
Fund representing a majority of the total number of votes entitled to be cast
thereon by the stockholders of that Acquired Fund. Stockholders of each Acquired
Fund will vote as a single class on the proposal to approve the Agreement and
Plan. See "Information Concerning the Special Meetings." If the Agreement and
Plan of Reorganization is approved by the stockholders of one or more Acquired
Funds, the Reorganization will take place with respect to any Acquired Fund
whose stockholders have approved it.
The Boards of Directors of Asset Builder, Asset Growth and Asset Income
know of no business other than that discussed above which will be presented for
consideration at the Meetings. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxies to vote in accordance
with their best judgment.
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement and Prospectus (including documents incorporated by
reference) and is qualified in its entirety by reference to the more complete
information contained in this Joint Proxy Statement and Prospectus and in the
Agreement and Plan, attached hereto as Exhibit I.
In this Joint Proxy Statement and Prospectus, the term "Reorganization"
refers individually with respect to an Acquired Fund or collectively, as the
context requires, to the acquisition of substantially all of the assets and the
assumption of substantially all of the liabilities of Global Opportunity, Asset
Growth and Asset Income by Global Allocation in exchange for the Corresponding
Shares and the subsequent distribution of Corresponding Shares of Global
Allocation to the stockholders of Global Opportunity, Asset Growth and Asset
Income.
The Reorganization
At meetings of the Boards of Directors of Asset Builder, Asset Growth and
Asset Income held on January 12, 2000, the Board of Directors of each Acquired
Fund approved the proposal that Global Allocation acquire substantially all of
the assets, and assume substantially all of the liabilities of that Acquired
Fund in exchange solely for shares of Global Allocation that would thereafter be
distributed to the stockholders of that Acquired Fund.
Based upon their evaluation of all relevant information, the Directors of
Asset Builder, Asset Growth and Asset Income have determined that the
Reorganization will potentially benefit the stockholders of Global Opportunity,
Asset Growth and Asset Income. Specifically, the Directors considered that,
after the Reorganization, stockholders of the Acquired Funds will remain
invested in an open-end fund with a substantially larger net asset value. As
part of a larger fund (as of November 30, 1999 the net assets of Global
Allocation were approximately $7 billion), stockholders of the Acquired Funds
are likely to benefit from reduced overall operating
4
<PAGE>
expenses (on a pro forma basis) as a result of certain economies of scale
expected after the Reorganization. See "Summary--Pro Forma Fee Tables."
The Boards of Directors of Asset Builder, Asset Growth and Asset Income,
including all of the Directors who are not "interested persons," as defined in
the Investment Company Act, have determined that the Reorganization is in the
best interests of Global Opportunity, Asset Growth and Asset Income. In
addition, since the Corresponding Shares will be issued at net asset value and
the shares of each Acquired Fund will be valued at net asset value for the
purposes of the exchange by the stockholders of that Acquired Fund of such
shares for the Corresponding Shares, the interests of existing stockholders of
the Acquired Funds will not be diluted as a result of effecting the
Reorganization.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganizations will occur as soon as practicable after such approval, provided
that Asset Builder, Asset Growth, Asset Income and Global Allocation have
obtained prior to that time either (a) a favorable private letter ruling from
the Internal Revenue Service (the "IRS") or (b) an opinion of counsel concerning
the tax consequences of the Reorganization as set forth in the Agreement and
Plan. The Agreement and Plan may be terminated as to any Acquired Fund and the
Reorganization involving that Acquired Fund may be abandoned, whether before or
after approval by the stockholders of such Acquired Fund, at any time prior to
the Exchange Date (as defined below), (i) by consent of the Board of Directors
of an Acquired Fund, if any condition to the obligations of such Acquired Fund
has not been fulfilled or waived by such Board; or (ii) by the Board of
Directors of Global Allocation if any condition to Global Allocation's
obligations has not been fulfilled or waived by such Board.
Pro Forma Fee Tables
Pro Forma Fee Table for Class A Stockholders of Asset Income, Asset Growth,
Global Opportunity, Global Allocation and Pro Forma Global Allocation
as of November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------
Actual
-------------------------------------------- Pro Forma
Asset Asset Global Global Global
Income Growth Opportunity Allocation Allocation
-------- ------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stockholder Fees (fees paid directly from a
stockholder's investment)(a):
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of
offering price) ................................. 4.00%(c) 5.25%(c) 5.25%(c) 5.25%(c) 5.25%(c)
Maximum Deferred Sales Charge (Load)
(as a percentage of original
purchase price or redemption proceeds,
whichever is lower) ............................. None(d) None(d) None(d) None(d) None(d)
Maximum Sales Charge (Load) Imposed on
Dividend Reinvestments .......................... None None None None None
Redemption Fee .................................... None None None None None
Exchange Fee ...................................... None None None None None
Annual Fund Operating Expenses
(expenses that are deducted from
Fund assets):
Management Fees ................................... 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees(e) ....... None None None None None
Other Expenses (including transfer
agency fees) (f) ................................ 3.24% 4.23% 0.94% 0.22% 0.22%
----- ----- ----- ----- -----
Total Annual Fund Operating Expenses(g) ........... 3.99% 4.98% 1.69% 0.97% 0.97%
===== ===== ===== ===== =====
</TABLE>
- -------------
See footnotes on page 7
5
<PAGE>
Pro Forma Fee Table for Class B Stockholders of Asset Income, Asset Growth,
Global Opportunity, Global Allocation and Pro Forma Global Allocation
as of November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Class B Shares(b)
--------------------------------------------------------
Actual
-------------------------------------------- Pro Forma
Asset Asset Global Global Global
Income Growth Opportunity Allocation Allocation
-------- ------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stockholder Fees (fees paid directly from a
stockholder's investment)(a):
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of
offering price) ................................. None None None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original
purchase price or redemption proceeds,
whichever is lower) ............................. 4.0%(c) 4.0%(c) 4.0%(c) 4.0%(c) 4.0%(c)
Maximum Sales Charge (Load) Imposed on
Dividend Reinvestments .......................... None None None None None
Redemption Fee .................................... None None None None None
Exchange Fee ...................................... None None None None None
Annual Fund Operating Expenses (expenses that
are deducted from Fund assets):
Management Fees ................................... 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees(e) ....... 0.75% 1.00% 1.00% 1.00% 1.00%
Other Expenses (including transfer
agency fees)(f) ................................. 3.24% 4.23% 0.94% 0.22% 0.22%
----- ----- ----- ----- -----
Total Annual Fund Operating Expenses(g) ........... 4.74% 5.98% 2.69% 1.97% 1.97%
===== ===== ===== ===== =====
</TABLE>
Pro Forma Fee Table for Class C Stockholders of Asset Income, Asset Growth,
Global Opportunity, Global Allocation and Pro Forma Global Allocation
as of November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Class C Shares
--------------------------------------------------------
Actual
-------------------------------------------- Pro Forma
Asset Asset Global Global Global
Income Growth Opportunity Allocation Allocation
-------- ------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stockholder Fees (fees paid directly from a
stockholder's investment)(a):
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of
offering price) ................................. None None None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original
purchase price or redemption proceeds,
whichever is lower) ............................. 1.0%(c) 1.0%(c) 1.0%(c) 1.0%(c) 1.0%(c)
Maximum Sales Charge (Load) Imposed on
Dividend Reinvestments .......................... None None None None None
Redemption Fee .................................... None None None None None
Exchange Fee ...................................... None None None None None
Annual Fund Operating Expenses (expenses
that are deducted from Fund assets):
Management Fees ................................... 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees(e) ....... 0.80% 1.00% 1.00% 1.00% 1.00%
Other Expenses (including transfer
agency fees)(f) ................................. 3.24% 4.23% 0.94% 0.22% 0.22%
----- ----- ----- ----- -----
Total Annual Fund Operating Expenses(g) ............. 4.79% 5.98% 2.69% 1.97% 1.97%
===== ===== ===== ===== =====
</TABLE>
- -------------
See footnotes on next page
6
<PAGE>
Pro Forma Fee Table for Class D Stockholders of Asset Income, Asset Growth,
Global Opportunity, Global Allocation and ProForma Global Allocation
as of November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Class D Shares
--------------------------------------------------------
Actual
-------------------------------------------- Pro Forma
Asset Asset Global Global Global
Income Growth Opportunity Allocation Allocation
-------- ------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stockholder Fees (fees paid directly from a
stockholder's investment)(a):
Maximum Sales Charge (Load) imposed on
purchases (as a percentage of
offering price) ................................. 4.00%(c) 5.25%(c) 5.25%(c) 5.25%(c) 5.25%(c)
Maximum Deferred Sales Charge (Load)
(as a percentage of original
purchase price or redemption proceeds,
whichever is lower) ............................. None(d) None(d) None(d) None(d) None(d)
Maximum Sales Charge (Load) Imposed on
Dividend Reinvestments .......................... None None None None None
Redemption Fee .................................... None None None None None
Exchange Fee ...................................... None None None None None
Annual Fund Operating Expenses (expenses that
are deducted from Fund assets):
Management Fees ................................... 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees(e) ....... 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (including transfer
agency fees)(f) ................................. 3.24% 4.23% 0.94% 0.22% 0.22%
----- ----- ----- ----- -----
Total Annual Fund Operating Expenses(g) ........... 4.24% 5.23% 1.94% 1.22% 1.22%
===== ===== ===== ===== =====
</TABLE>
- -----------
(a) In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") may charge clients a processing fee (currently $5.35) when a
client buys or sells shares.
(b) Class B shares of Asset Growth, Global Opportunity and Global Allocation
automatically convert to Class D shares about eight years after initial
purchase. Class B shares of Asset Income automatically convert to Class D
shares about ten years after initial purchase. After the Reorganization,
Asset Income Class B stockholders will be subject to the shorter eight
year conversion period. After such conversion, such shares will be subject
to the same lower distribution fees as are payable by Pro Forma Global
Allocation Class D stockholders.
(c) Some investors may qualify for reductions in the sales charge (load). See
"Comparison of the Funds -- Purchase of Shares."
(d) A stockholder may pay a deferred sales charge if such stockholder
purchases $1 million or more and redeems within one year.
(e) The Funds call the "Service Fee" an "Account Maintenance Fee." Account
Maintenance Fee is the term used in the Prospectuses of the Funds and all
other Fund materials. If a stockholder holds Class B or Class C shares for
a long time, it may cost that stockholder more in distribution (12b-1)
fees than the maximum sales charge that such stockholder would have paid
if he or she had bought one of the other classes.
(f) The Funds pay the Transfer Agent $11.00 for each Class A and Class D
stockholder account and $14.00 for each Class B and Class C stockholder
account and reimburse the Transfer Agent's out-of-pocket expenses. The
Funds pay a 0.10% fee for certain accounts that participate in the Merrill
Lynch Mutual Fund Advisor program. The Funds also pay a $0.20 monthly
closed account charge, which is assessed upon all accounts that close
during the year. This fee begins the month following the month the account
is closed and ends at the end of the calendar year. For the fiscal year
ended October 31, 1999, Global Allocation paid the Transfer Agent fees
totaling $14,822,335, for the fiscal year ended December 31, 1998, Asset
Income paid the Transfer Agent fees totaling $19,204, for the fiscal year
ended August 31, 1999, Asset Growth paid the Transfer Agent fees totaling
$35,761 and for the fiscal year ended January 31, 1999, Global Opportunity
paid the Transfer Agent fees totaling $393,308. MLAM provides accounting
services to the Funds at cost. For the fiscal year ended October 31, 1999,
Global Allocation reimbursed MLAM $582,004 for these services, for the
fiscal year ended December 31, 1998 Asset Income reimbursed MLAM $55,769
for these services, for the fiscal year ended August 31, 1999, Asset
Growth reimbursed MLAM $60,879 for these services and for the fiscal year
ended January 31, 1999 Global Opportunity reimbursed MLAM $52,604 for
these services.
(g) Global Allocation has agreed to pay, and Pro Forma Global Allocation will
pay, MLAM a fee at the annual rate of 0.75% of average daily net assets.
MLAM has agreed to waive a portion of its fee so that MLAM will receive a
fee equal to 0.75% of the average daily net assets for the first $2.5
billion; 0.70% of the average daily net assets from $2.5 billion to $5.0
billion; 0.65% of the average daily net assets from $5.0 billion to $7.5
billion; 0.625% of the average daily net assets from $7.5 billion to $10
billion; and 0.60% of the average daily net assets above $10 billion. MLAM
may discontinue or reduce this waiver of fees at any time without notice.
As of November 30, 1999, the management fee (reflecting the fee waiver) is
equal to 0.70% of the Fund's net assets. With such fee waiver in effect,
the Total Annual Fund Operating Expenses for each class for Global
Allocation and Pro Forma Global Allocation was .92% Class A, 1.92%, Class
B, 1.92% Class C and 1.17% Class D. MLAM voluntarily waived the entire
management fee payable by Asset Growth for the fiscal year ended August
31, 1999 and by Asset Income for the fiscal year ended December 31, 1999
and reimbursed Asset Income for a portion of its expenses. With such fee
waiver in effect, as of November 30, 1999, the Total Annual Fund Operating
Expenses for each class of shares of Asset Growth was 4.23% Class A, 5.23%
Class B, 5.23% Class C, and 4.48% Class D, and the Total Annual Fund
Operating Expenses for each class of shares of Asset Income was 0.50%
Class A, 1.25% Class B, 1.30% Class C, and 0.75% Class D.
7
<PAGE>
EXAMPLES:
These examples assume that you invest $10,000 in the relevant Fund for the
time periods indicated, that your investment has a 5% return each year, that you
pay the sales charges, if any, that apply to the particular class and that the
Fund's operating expenses remain the same. This assumption is not meant to
indicate you will receive a 5% annual rate of return. Your annual return may be
more or less than the 5% used in these examples. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXPENSES IF YOU DID REDEEM YOUR SHARES:**
---
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------
Asset Income $785 $1,567 $2,364 $4,430
Asset Growth $997 $1,941 $2,885 $5,248
Global Opportunity $688 $1,030 $1,395 $2,418
Global Allocation $619 $818 $1,033 $1,652
Pro Forma Global Allocation+ $619 $818 $1,033 $1,652
- ----------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------
Asset Income $875 $1,628 $2,385 $4,802
Asset Growth $995 $1,968 $2,918 $5,565*
Global Opportunity $672 $1,035 $1,425 $2,841*
Global Allocation $600 $818 $1,062 $2,102*
Pro Forma Global Allocation+ $600 $818 $1,062 $2,102*
- ----------------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------
Asset Income $580 $1,442 $2,408 $4,841
Asset Growth $695 $1,768 $2,918 $5,695
Global Opportunity $372 $835 $1,425 $3,022
Global Allocation $300 $618 $1,062 $2,296
Pro Forma Global Allocation+ $300 $618 $1,062 $2,296
- ----------------------------------------------------------------------------------------------------------
Class D
- ----------------------------------------------------------------------------------------------------------
Asset Income $809 $1,635 $2,474 $4,628
Asset Growth $1,020 $2,007 $2,989 $5,424
Global Opportunity $712 $1,102 $1,517 $2,670
Global Allocation $643 $892 $1,160 $1,925
Pro Forma Global Allocation+ $643 $892 $1,160 $1,925
</TABLE>
- -----------
+ Assuming the Reorganization had taken place on November 30, 1999.
* Assumes conversion of Class B shares to Class D shares approximately eight
years after initial purchase in the case of Asset Growth, Global Opportunity
and Global Allocation. Class B shares of Asset Income convert to Class D
shares approximately ten years after purchase.
** Assuming no fee waivers.
EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:**
-------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
Asset Income $785 $1,567 $2,364 $4,430
Asset Growth $997 $1,941 $2,885 $5,248
Global Opportunity $688 $1,030 $1,395 $2,418
Global Allocation $619 $818 $1,033 $1,652
Pro Forma Global Allocation+ $619 $818 $1,033 $1,652
- ---------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------
Asset Income $475 $1,428 $2,385 $4,802
Asset Growth $595 $1,768 $2,918 $5,565*
Global Opportunity $272 $835 $1,425 $2,841*
Global Allocation $200 $618 $1,062 $2,102*
Pro Forma Global Allocation+ $200 $618 $1,062 $2,102*
- ---------------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------------
Asset Income $480 $1,442 $2,408 $4,841
Asset Growth $595 $1,768 $2,918 $5,695
Global Opportunity $272 $835 $1,425 $3,022
Global Allocation $200 $618 $1,062 $2,296
Pro Forma Global Allocation+ $200 $618 $1,062 $2,296
- ---------------------------------------------------------------------------------------------------------
Class D
- ---------------------------------------------------------------------------------------------------------
Asset Income $809 $1,635 $2,474 $4,628
Asset Growth $1,020 $2,007 $2,989 $5,424
Global Opportunity $712 $1,102 $1,517 $2,670
Global Allocation $643 $892 $1,160 $1,925
Pro Forma Global Allocation+ $643 $892 $1,160 $1,925
</TABLE>
- ------------
+ Assuming the Reorganization had taken place on November 30, 1999.
* Assumes conversion of Class B shares to Class D shares approximately eight
years after purchase in the case of Asset Growth, Global Opportunity and
Global Allocation. Class B shares of Asset Income convert to Class D shares
approximately ten years after purchase.
** Assuming no fee waivers.
8
<PAGE>
The foregoing Fee Tables are intended to assist investors in understanding
the costs and expenses that a stockholder of Global Opportunity, Asset Growth,
Asset Income or Global Allocation will bear directly or indirectly as compared
to the costs and expenses that would be borne by such investors taking into
account the Reorganization. The Examples set forth above assume reinvestment of
all dividends and distributions and utilize a 5% annual rate of return as
mandated by Commission regulations. The Examples should not be considered a
representation of past or future expenses or annual rates of return, and actual
expenses or annual rates of return may be more or less than those assumed for
purposes of the Examples. See "Summary," "Comparison of the Funds--Management,"
"--Purchase of Shares," "--Redemption of Shares," and "The
Reorganization--Potential Benefits to Stockholders of the Funds as a Result of
the Reorganization."
Business of Global Allocation ...... Global Allocation was incorporated under
the laws of the State of Maryland on
June 9, 1988 and commenced
operations on February 3, 1989.
Global Allocation is a
non-diversified, open-end management
investment company. As of November
30, 1999, Global Allocation had net
assets of approximately
$7,412,643,580.
Business of Asset Builder ........... Asset Builder was incorporated under
the laws of the State of Maryland on
May 12, 1994 and commenced
operations on February 1, 1995.
Asset Builder is a diversified,
open-end management investment
company. Global Opportunity is one
of five series of Asset Builder and
commenced operations on February 1,
1995. As of November 30, 1999,
Global Opportunity had net assets of
approximately $62,393,855.
Business of Asset Growth Asset ...... Growth was incorporated under the
laws of the State of Maryland on
June 6, 1994 and commenced
operations on September 2, 1994.
Asset Growth is a non-diversified
open-end management investment
company. As of November 30, 1999,
Asset Growth had net assets of
approximately $6,622,246.
Business of Asset Income Asset ...... Income was incorporated under the
laws of the State of Maryland on
June 6, 1964 and commenced
operations on September 2, 1994.
Asset Income is a non-diversified
open-end management investment
company. As of November 30, 1999,
Asset Income had net assets of
approximately $10,383,739.
Comparison of the Funds ............. Investment Objectives. The investment
objectives of Global Allocation,
Asset Growth and Global Opportunity
are substantially similar. Each of
those Funds seeks high total
investment return through an
investment policy utilizing United
States and foreign equity, debt and
money market securities. Asset
Income seeks a high level of current
income by investing in U.S. and
foreign debt, equity and money
market securities and, secondarily,
capital appreciation. Global
Allocation, Asset Growth and Asset
Income are non-diversified
investment companies. Global
Opportunity is diversified.
Investment Policies. Each of the Funds
invests in a portfolio of equity,
debt and money market securities.
Each Fund's portfolio generally
includes both equity and debt
securities with the combination
varying in
9
<PAGE>
response to changing markets and
economic trends. At any given time,
Global Allocation and Global
Opportunity may emphasize either
debt or equity securities. Under
normal conditions, Asset Growth will
invest at least 65% of its total
assets in equity securities and
Asset Income will invest at least
65% of its total assets in debt
securities.
Equities. In selecting equity
securities, all Funds seek
securities that Fund management
believes are under-valued, including
small capitalization and emerging
growth securities.
Debt. Global Allocation and Global
Opportunity may invest in all types
of debt securities and generally
will invest in those that are rated
investment grade by Standard &
Poor's ("S&P") or Moody's Investors
Service, Inc. ("Moody's") or unrated
securities which in the opinion of
either Fund's investment adviser are
of comparable quality. Each Fund
other than Asset Income may also
invest in high yield or "junk"
bonds. Asset Growth and Global
Opportunity are limited to investing
35% and 34% of their respective
assets in high yield or "junk"
bonds. Asset Growth will not invest
in debt securities rated CC or lower
by S&P or Ca or lower by Moody's.
Global Allocation is limited to
investing 35% of its assets in junk
bonds, corporate loans and
distressed securities. Asset Income
invests in debt obligations of
governmental issuers and in
corporate debt securities, including
convertible debt securities, rated A
or better by Standard & Poor's or by
Moody's Investors Service, Inc., or
which are judged to be of comparable
quality.
Foreign Securities. Global Allocation
invests primarily in the securities
of corporate and governmental
issuers in North and South America,
Western Europe, Australia and the
Far East. Asset Growth invests
primarily in the United States,
Canada, Western Europe and Asia.
Global Opportunity focuses on
investments in Canada, Western
Europe, the Far East, and Latin
America, as well as the United
States. Global Allocation and Global
Opportunity each normally invest in
at least three countries at any
given time. Asset Growth's
investments will normally be
denominated in at least three
currencies or multinational units.
Each of Global Allocation, Asset
Growth and Global Opportunity may
emphasize foreign securities when
Fund management expects such
securities to outperform U.S.
securities. Asset Income may also
invest in foreign securities but
only up to 25% of its total assets.
Advisory Fees. The Investment Adviser
for each of the Funds is MLAM. MLAM
is responsible for the management of
each Fund's investment portfolio and
for providing administrative
services to each Fund.
10
<PAGE>
The portfolio manager of Global
Opportunity, Asset Growth and Asset
Income is Thomas R. Robinson. Bryan
N. Ison serves as portfolio manager
of Global Allocation and will serve
as portfolio manager of the Combined
Fund.
Pursuant to separate investment advisory
agreements with MLAM, each Fund pays
MLAM a monthly fee at the annual
rate of 0.75% of average daily net
assets of the relevant Fund.
However, MLAM has voluntarily waived
all or a portion of such fees as
follows: (i) MLAM has waived all of
the investment advisory fees payable
by Asset Growth since its
commencement of operations, (ii)
MLAM has waived all of the
investment advisory fees payable by
Asset Income and reimbursed certain
other expenses with respect to Asset
Income since its commencement of
operations, and (iii) MLAM has
agreed to waive a portion of the
investment advisory fee payable by
Global Allocation so that such fee
is equal to 0.75% of average daily
net assets not exceeding $2.5
billion; 0.70% of average daily net
assets exceeding $2.5 billion but
not exceeding $5.0 billion; 0.65% of
average daily net assets exceeding
$5.0 billion but not exceeding $7.5
billion; 0.625% of average daily net
assets exceeding $7.5 billion but
not exceeding $10 billion; and 0.60%
of average daily net assets
exceeding $10 billion. There can be
no assurance that MLAM will continue
to waive all or a portion of such
fees in the future. MLAM may
discontinue or reduce such waivers
at any time without notice.
MLAM has retained Merrill Lynch Asset
Management U.K. Limited ("MLAM
U.K.") as sub-adviser with respect
to each of the Funds. MLAM has
entered into separate sub-advisory
agreements with MLAM U.K. with
respect to each of the Funds, under
which MLAM may pay MLAM U.K. a fee
for services it receives.
Class Structure. Each Fund offers four
classes of shares under the Merrill
Lynch Select Pricing(SM) System. The
Class A, Class B, Class C and Class
D shares issued by Global Allocation
are identical in all respects to the
Class A, Class B, Class C and Class
D shares issued by Global
Opportunity and Asset Growth, except
that they represent ownership
interests in a different investment
portfolio. Currently the initial
sales charges with respect to Class
A and Class D shares and the
distribution fees with respect to
Class B and Class C shares of Asset
Income are lower than the same fees
with respect to the shares of Global
Allocation, Asset Growth and Global
Opportunity. In addition, Class B
shares of Asset Income convert to
Class D shares approximately ten
years after purchase, as compared to
approximately eight years after
purchase for Global Allocation,
Asset Growth and Global Opportunity.
See "Summary--Pro Forma Fee Tables."
Overall Expense Ratio. The overall
operating expense ratio as of
November 30, 1999 (excluding
applicable
11
<PAGE>
fee waivers and expense
reimbursements) was 1.69% for Global
Opportunity based on net assets of
approximately $62,393,855, 4.98% for
Asset Growth, based on net assets of
approximately $6,622,246, 3.99% for
Asset Income based on net assets of
approximately $10,383,739, and 0.97%
for Global Allocation, based on net
assets of approximately
$7,412,643,580. If the
Reorganization had taken place on
November 30, 1999, the estimated
operating expense ratio for the
Combined Fund would have been 0.97%
based on net assets of approximately
$7,492,043,420.
The foregoing expense ratios are for
each Fund on an overall basis. Such
ratios differ among Class A, Class
B, Class C and Class D shares as a
result of class specific
distribution and account maintenance
expenditures. See "Summary--Pro
Forma Fee Tables."
Purchase of Shares. Shares of Global
Allocation are offered continuously
for sale to the public in exactly
the same manner as shares of Global
Opportunity, Asset Growth and Asset
Income. See "Comparison of the
Funds--Purchase of Shares."
Redemption of Shares. The redemption
procedures for shares of Global
Allocation are the same as the
redemption procedures for shares of
Global Opportunity, Asset Growth and
Asset Income. For purposes of
computing any contingent deferred
sales charge ("CDSC") that may be
payable upon disposition of
Corresponding Shares of Global
Allocation acquired by an Acquired
Fund stockholder in the
Reorganization, the holding period
of the Acquired Fund shares
outstanding on the date the
Reorganization takes place will be
"tacked" onto the holding period of
the Corresponding Shares of Global
Allocation acquired in the
Reorganization. See "Comparison of
the Funds--Redemption of Shares."
Dividends. The policies of Global
Opportunity, Asset Growth and Asset
Income with respect to dividends are
identical to those of Global
Allocation. See "Comparison of the
Funds--Dividends."
Net Asset Value. Each of the Funds
determines net asset value of each
class of shares once daily as of the
close of business on the New York
Stock Exchange ("NYSE"), generally
4:00 p.m. Eastern time, on each day
the NYSE is open for trading based
on prices at the time of closing.
The Funds compute net asset value
per share in the same manner. See
"Comparison of the Funds--Additional
Information--Net Asset Value."
12
<PAGE>
Voting Rights. The corresponding
voting rights of the holders of
shares of common stock of each Fund
are substantially the same. See
"Comparison of the Funds--Additional
Information--Capital Stock."
Other Significant Considerations.
Stockholder services, available to
Global Opportunity, Asset Growth,
Asset Income and Global Allocation
stockholders, including exchange
privileges and the provision of
annual or semi-annual reports, are
substantially the same. See
"Comparison of the Funds--Additional
Information--Stockholder Services."
An automatic dividend reinvestment
plan is available to stockholders of
each Fund. The plans are identical.
See "Comparison of the
Funds--Automatic Dividend
Reinvestment Plan."
Tax Considerations .................. Global Opportunity, Asset Growth, Asset
Income and Global Allocation jointly
have requested a private letter
ruling from the Internal Revenue
Service ("IRS") with respect to the
Reorganizations to the effect that,
among other things, no Fund will
recognize gain or loss on the
transaction, and stockholders of the
Acquired Funds will not recognize
gain or loss on the exchange of
their shares of the Acquired Fund's
stock for Corresponding Shares of
Global Allocation. The consummation
of the Reorganization is subject to
the receipt of such ruling or
receipt of an opinion of counsel to
the same effect. The Reorganization
will not affect the status of Global
Allocation as a regulated investment
company.
13
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Many of the investment risks associated with an investment in Global
Allocation are substantially the same as those with respect to an investment in
Asset Growth and Global Opportunity. Such risks include investing on an
international basis and in equity and fixed income securities generally, as well
as in derivative instruments. The risks associated with Global Allocation are
significantly different from those associated with Asset Income. The differences
in risks for the Funds are described below. See "Investment Risks" in the Global
Allocation, Asset Growth and Asset Income Prospectuses and "Investment Objective
and Policies" in the Global Allocation, Asset Growth and Asset Income Statements
and "Global Opportunity Portfolio -- Investment Risks for Global Opportunity
Portfolio in the Asset Builder Prospectus and "Investment Objective and Policies
- -- Global Opportunity Portfolio" in the Asset Builder Statement for a more
detailed discussion of investment risks associated with an investment in the
Funds.
Investments in Foreign and Emerging Markets. There are no restrictions on
the percentage of total assets that Global Allocation, Global Opportunity or
Asset Growth may invest in foreign securities. Asset Income may invest up to 25%
of its total assets in foreign securities. Because Asset Income is primarily a
domestic income fund, it is not subject to the risks of foreign investing to the
same degree as Global Allocation.
Foreign companies are not generally subject to uniform accounting,
auditing and financial standards and requirements comparable to those applicable
to U.S. companies. Foreign securities exchanges, brokers and listed companies
may be subject to less government supervision and regulation than exists in the
United States. Dividend and interest income may be subject to withholding and
other foreign taxes which may adversely affect the net return on such
investments. In addition, with respect to certain countries, there are risks of
expropriation, confiscatory taxation, political or social instability or
diplomatic developments which could affect assets of a Fund held in foreign
countries.
There may be less publicly available information about a foreign company
than a U.S. company. Foreign securities markets may have substantially less
volume than U.S. securities markets and some foreign company securities are less
liquid and more volatile than comparable securities of U.S. companies. A
portfolio of foreign securities may also be adversely affected by fluctuations
in the rates of exchange between the currencies of different nations and by
exchange control regulations. Foreign markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have failed to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. Delays in settlement could
result in temporary periods when assets of the Fund are uninvested and no return
is earned thereon. The inability of a Fund to make intended securities purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to a Fund due to subsequent declines in
value of such portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser.
In addition, the operating expense ratios of Global Allocation, Global
Opportunity, Asset Growth and Asset Income can be expected to be higher than
that of investment companies investing exclusively in U.S. securities because
expenses, such as custodial costs, may be higher.
High Yield Bonds. Global Allocation, Global Opportunity and Asset Growth
are authorized to invest in fixed income securities of governmental issuers and
of corporate issuers rated below investment grade by a nationally recognized
statistical rating organization or in unrated securities which, in MLAM's
judgment, possess similar credit characteristics ("high yield" or "junk" bonds).
Investment grade means that a security is rated in one of the top four ratings
categories (AAA, AA, A and BBB for S&P and Aaa, Aa, A and Baa for Moody's)
Global Allocation and Asset Growth are limited to investing up to 35% of net
assets in high yield securities and Global Opportunity is limited to investing
up to 34% of net assets in such securities. Although debt securities ranked in
the fourth highest rating category by either S&P or Moody's are considered to be
investment grade, they have more speculative characteristics and are more likely
to be downgraded than securities rated in the three highest rating categories.
Asset Growth may invest in fixed income securities that are not investment grade
but will not invest in debt securities rated CC or lower by S&P or Ca or lower
by Moody's. Asset Income may not invest in high yield bonds.
Investment in high yield bonds involves substantial risk. These securities
are predominantly speculative with respect to capacity to pay interest and to
repay principal in accordance with the terms of the security and generally
involve greater volatility of price than securities in higher ratings
categories. See "Comparison of the Funds--Investment Objectives and Policies."
Non-Diversified Status. Global Allocation, Asset Growth and Asset Income
are organized as non-diversified investment companies and may invest more of
their assets in fewer companies than if they were diversified funds.
14
<PAGE>
Global Opportunity is diversified. A diversified fund is subject to the
requirement that, with respect to 75% of its assets, it may not invest more than
5% of its total assets in the securities of any one issuer (excluding U.S.
Government securities) or purchase more than 10% of the voting securities of any
one issuer (excluding U.S. Government securities). To the extent that a
non-diversified fund assumes large positions in the securities of a small number
of issuers, that fund's net asset value may fluctuate to a greater extent than
that of a diversified company as a result of changes in the financial condition
or in the market's assessment of the issuers, and the fund may be more
susceptible to any single economic, political or regulatory occurrence than a
diversified company. However, each of the Funds qualify for the special tax
treatment afforded "regulated investment companies" under the Internal Revenue
Code of 1986, as amended (the "Code"). See "Comparison of the Funds--Other
Investment Policies."
The following is a summary discussion of risks specific to investing in
Global Allocation which are not currently associated with investing in one or
more of the Acquired Funds.
Warrants -- A warrant gives Global Allocation the right to buy a quantity
of stock. The warrant specifies the amount of underlying stock, the purchase (or
"exercise") price, and the date the warrant expires. Global Allocation has no
obligation to exercise the warrant and buy the stock. Asset Income may also
invest in warrants.
A warrant has value only if a Fund exercises it before it expires. If the
price of the underlying stock does not rise above the exercise price before the
warrant expires, the warrant generally expires without any value and the Fund
loses any amount it paid for the warrant. Thus, investments in warrants may
involve substantially more risk than investments in common stock. Warrants may
trade in the same markets as their underlying stock; however, the price of the
warrant does not necessarily move with the price of the underlying stock.
Swap Agreements -- Swap agreements involve the risk that the party with
whom Global Allocation has entered into the swap will default on its obligation
to pay Global Allocation and the risk that Global Allocation will not be able to
meet its obligations to pay the other party to the agreement.
Convertibles -- Convertibles are generally debt securities or preferred
stocks that may be converted into common stock. Convertibles typically pay
current income, as either interest (debt security convertibles) or dividends
(preferred stocks). A convertible's value usually reflects both the stream of
current income payments and the value of the underlying common stock. The market
value of a convertible performs like regular debt securities; that is, if market
interest rates rise, the value of a convertible usually falls. Since it is
convertible into common stock, the convertible also has the same types of market
and issuer risk as the value of the underlying common stock. Asset Income may
also invest in convertibles.
Asset Backed Securities -- Like traditional fixed income securities, the
value of asset backed securities typically increases when interest rates fall
and decreases when interest rates rise. Certain asset backed securities may also
be subject to the risk of prepayment. In a period of declining interest rates,
borrowers may pay what they owe on the underlying assets more quickly than
anticipated. Prepayment reduces the yield to maturity and the average life of
the asset backed securities. In addition, when Global Allocation reinvests the
proceeds of a prepayment it may receive a lower interest rate than the rate on
the security that was prepaid. In a period of rising interest rates, prepayments
may occur at a slower rate than expected. As a result, the average maturity of
Global Allocation's portfolio will increase. The value of longer term securities
generally changes more widely in response to changes in interest rates than
shorter term securities. Asset Income may also invest in asset backed
securities.
Corporate Loans -- Commercial banks and other financial institutions make
corporate loans to companies that need capital to grow or restructure. Borrowers
generally pay interest on corporate loans at rates that change in response to
changes in market interest rates such as the London Interbank Offered Rate
(LIBOR) or the prime rates of U.S. banks. As a result, the value of corporate
loan investments is generally less responsive to shifts in market interest
rates. Because the trading market for corporate loans is less developed than the
secondary market for bonds and notes, Global Allocation may experience
difficulties in selling its corporate loans. Borrowers frequently provide
collateral to secure repayment of these obligations. Leading financial
institutions often act as agent for a broader group of lenders, generally
referred to as a syndicate. The syndicate's agent arranges the corporate loans,
holds collateral and accepts payments of principal and interest. If the agent
develops financial problems, Global Allocation may not recover its investment or
recovery may be delayed. By investing in a corporate loan, Global Allocation
becomes a member of the syndicate.
15
<PAGE>
The corporate loans in which Global Allocation invests can be expected to
provide higher yields than bonds and notes that have investment grade ratings,
but may be subject to greater risk of loss of principal and income. Borrowers do
not always provide collateral for corporate loans, or the value of the
collateral may not completely cover the borrower's obligations at the time of a
default. If a borrower files for protection from its creditors under the U.S.
bankruptcy laws, these laws may limit Global Allocation's rights to its
collateral. In addition, the value of collateral may erode during a bankruptcy
case. In the event of a bankruptcy the holder of a corporate loan may not
recover its principal, may experience a long delay in recovering its investment
and may not receive interest during the delay.
Distressed Securities -- Distressed securities are securities that are
subject to bankruptcy proceedings or are in default, or at risk of being in
default. Distressed securities are speculative and involve substantial risks.
Generally, Global Allocation will invest in distressed securities when Fund
management believes they offer significant potential for higher returns or can
be exchanged for other securities that offer this potential. However, there can
be no assurance that the issuer will make an exchange offer or adopt a plan of
reorganization. Global Allocation will generally not receive interest payments
on the distressed securities and may incur costs to protect its investment. In
addition, the Fund's principal may not be repaid. Distressed securities and any
securities received in an exchange may be difficult to sell and may be subject
to restriction on resale.
Precious Metal Related Securities -- Securities of precious metals
historically have been very volatile. The high volatility of precious metal
prices may adversely affect the financial condition of companies involved with
precious metals. The production and sale of precious metals by governments or
central banks or other larger holders can be affected by various economic,
financial, social and political factors, which may be unpredictable and may have
a significant impact on the prices of precious metals. Other factors that may
affect the prices of precious metals and securities related to them include
changes in inflation, the outlook for inflation and changes in industrial and
commercial demand for precious metal. Asset Income may also invest in precious
metal related securities.
Real Estate Related Securities -- Real estate related securities are
subject to the risks associated with real estate. The main risk of real estate
related securities is that the value of the real estate may go down. Many
factors may affect real estate values. These factors include both the general
and local economies, the laws and regulations (including zoning and tax laws)
affecting real estate and the costs of owning, maintaining and improving real
estate. The availability of mortgages and changes in interest rates may also
affect real estate values.
If Global Allocation's real estate related investments are concentrated in
one geographic area or in one property type, the Fund will be particularly
subject to the risks associated with that area or property type. Asset Income
may also invest in real estate related securities.
16
<PAGE>
COMPARISON OF THE FUNDS
Financial Highlights
Global Allocation. 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.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A+
-------------------------------------------------------------------
For the Year Ended October 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $13.25 $15.92 $15.17 $14.21 $13.07
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .67 .67 .71 .78 .79
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ................ 2.53 (1.28) 1.57 1.59 1.04
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 3.20 (.61) 2.28 2.37 1.83
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.61) (.86) (.88) (.98) (.39)
Realized gain on investments--net ................... (1.05) (1.20) (.65) (.43) (.30)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (1.66) (2.06) (1.53) (1.41) (.69)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $14.79 $13.25 $15.92 $15.17 $14.21
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 26.30% (4.43)% 16.08% 17.81% 14.81%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios To Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ .91% .84% .83% .86% .90%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. .97% .93% .91% .93% .90%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ 4.86% 4.62% 4.64% 5.31% 5.98%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $1,305,473 $1,513,999 $2,132,254 $1,841,974 $1,487,805
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 26.95% 49.67% 55.42% 51.26% 36.78%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
17
<PAGE>
Global Allocation--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B+
-------------------------------------------------------------------
For the Year Ended October 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $13.01 $15.65 $14.95 $14.01 $12.91
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .52 .52 .55 .62 .65
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ................ 2.49 (1.26) 1.52 1.59 1.01
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 3.01 (.74) 2.07 2.21 1.66
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.45) (.70) (.72) (.84) (.26)
Realized gain on investments--net ................... (1.05) (1.20) (.65) (.43) (.30)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (1.50) (1.90) (1.37) (1.27) (.56)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $14.52 $13.01 $15.65 $14.95 $14.01
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 25.08% (5.37)% 14.82% 16.71% 13.54%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios To Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 1.94% 1.86% 1.85% 1.87% 1.93%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 1.99% 1.95% 1.93% 1.95% 1.93%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ 3.84% 3.60% 3.62% 4.29% 4.96%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $4,496,037 $6,743,780 $9,879,603 $8,660,279 $6,668,499
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 26.95% 49.67% 55.42% 51.26% 36.78%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
18
<PAGE>
Global Allocation--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C+
-------------------------------------------------------------------
For the Year Ended October 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $12.86 $15.50 $14.83 $13.94 $12.91
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .51 .51 .54 .61 .64
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ................ 2.46 (1.24) 1.52 1.58 1.02
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 2.97 (.73) 2.06 2.19 1.66
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.45) (.71) (.74) (.87) (.33)
Realized gain on investments--net ................... (1.05) (1.20) (.65) (.43) (.30)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (1.50) (1.91) (1.39) (1.30) (.63)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $14.33 $12.86 $15.50 $14.83 $13.94
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 25.05% (5.38)% 14.84% 16.68% 13.58%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 1.95% 1.88% 1.86% 1.88% 1.95%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 2.01% 1.96% 1.94% 1.95% 1.95%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ 3.84% 3.61% 3.60% 4.24% 4.80%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $322,238 $503,556 $671,467 $385,753 $102,361
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 26.95% 49.67% 55.42% 51.26% 36.78%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
19
<PAGE>
Global Allocation--Financial Highlights (concluded)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class D+
-------------------------------------------------------------------
For the Year Ended October 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $13.23 $15.89 $15.15 $14.19 $13.08
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .64 .64 .68 .77 .77
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ................ 2.52 (1.28) 1.55 1.57 1.01
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 3.16 (.64) 2.23 2.34 1.78
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.57) (.82) (.84) (.95) (.37)
Realized gain on investments--net ................... (1.05) (1.20) (.65) (.43) (.30)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (1.62) (2.02) (1.49) (1.38) (.67)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $14.77 $13.23 $15.89 $15.15 $14.19
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 26.01% (4.63)% 15.76% 17.59% 14.43%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 1.16% 1.10% 1.08% 1.10% 1.16%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses 1.21% 1.18% 1.16% 1.18% 1.16%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ 4.61% 4.40% 4.38% 5.04% 5.63%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $1,229,415 $1,316,994 $1,479,711 $1,044,136 $256,525
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 26.95% 49.67% 55.42% 51.26% 36.78%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
20
<PAGE>
Global Opportunity--Financial Highlights
Global Opportunity. The financial information in the table below, except
for the six-months ended July 31, 1999, which is unaudited, and has been
provided by MLAM, has been audited in conjunction with the annual audits of the
financial statements of Global Opportunity by Deloitte & Touche LLP, independent
auditors.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A++
-------------------------------------------------------------------
For the Year Ended January 31,
-------------------------------------------------
For the
Six Months
Ended
July 31, 1999
(Unaudited) 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $12.46 $11.40 $11.93 $10.82 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .05 .16 .16 .15 .34
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .30 .94 .69 1.21 .77
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .35 1.10 .85 1.36 1.11
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- -- (.05) -- (.20)
In excess of investment income
on investments--net ................................. -- -- (.20) (.13) (.06)
Realized gain on investments--net ................... -- -- (.99) (.12) --
In excess of realized gain on
investments--net .................................... -- (.04) (.14) -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... -- (.04) (1.38) (.25) (.29)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $12.81 $12.46 $11.40 $11.93 $10.82
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 2.81%# 9.63% 7.27% 12.68% 11.15%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 1.71%* 1.72% 1.87% 2.47% 2.01%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 1.71%* 1.72% 1.87% 2.90% 2.32%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .85%* 1.37% 1.28% 1.83% 2.92%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $189 $193 $167 $129 $3,025
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 55.21% 134.89% 99.11% 125.68% 83.14%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Global Opportunity commenced operations on February 1, 1995.
++ Based on average shares outstanding.
# Aggregate total investment return.
21
<PAGE>
Global Opportunity--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B++
--------------------------------------------------------------------
For the Year Ended January 31,
--------------------------------------------------
For the
Six Months
Ended
July 31, 1999
(Unaudited) 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $12.23 $11.30 $11.86 $10.76 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.01) .03 .02 (.04) .13
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .28 .93 .68 1.29 .85
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .27 .96 .70 1.25 .98
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- -- (.02) -- (.15)
In excess of investment income
on investments--net ................................. -- -- (.11) (.03) (.04)
Realized gain on investments--net ................... -- -- (.99) (.12) --
In excess of realized gain on
investments--net .................................... -- (.03) (.14) -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... -- (.03) (1.26) (.15) (.22)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $12.50 $12.23 $11.30 $11.86 $10.76
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 2.21%# 8.48% 5.97% 11.67% 9.89%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 2.81%* 2.82% 2.96% 3.76% 3.50%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses 2.81%* 2.82% 2.96% 4.01% 3.61%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.25)%* .26% .18% (.39%) 1.20%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $40,149 $44,455 $40,687 $30,469 $16,117
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 55.21% 134.89% 99.11% 125.68% 83.14%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Global Opportunity commenced operations on February 1, 1995.
++ Based on average shares outstanding.
# Aggregate total investment return.
22
<PAGE>
Global Opportunity--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C++
-------------------------------------------------------------------
For the Year Ended January 31,
-------------------------------------------------
For the
Six Months
Ended
July 31, 1999
(Unaudited) 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $12.20 $11.28 $11.84 $10.75 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net (.02) .02 .02 (.05) .12
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .29 .93 .68 1.29 .85
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .27 .95 .70 1.24 .97
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- -- (.02) -- (.15)
In excess of investment income
on investments--net ................................. -- -- (.11) (.03) (.04)
Realized gain on investments--net ................... -- -- (.99) (.12) --
In excess of realized gain on
investments--net .................................... -- (.03) (.14) -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... -- (.03) (1.26) (.15) (.22)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $12.47 $12.20 $11.28 $11.84 $10.75
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 2.21%# 8.40% 5.99% 11.61% 9.81%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 2.86%* 2.87% 3.00% 3.81% 3.58%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 2.86%* 2.87% 3.00% 4.06% 3.65%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.30)%* .20% .13% (.46%) 1.07%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $17,591 $18,342 $15,951 $10,659 $4,770
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 55.21% 134.89% 99.11% 125.68% 83.14%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Global Opportunity commenced operations on February 1, 1995.
++ Based on average shares outstanding.
# Aggregate total investment return.
23
<PAGE>
Global Opportunity--Financial Highlights (concluded)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class D++
-------------------------------------------------------------------
For the Year Ended January 31,
-------------------------------------------------
For the
Six Months
Ended
July 31, 1999
(Unaudited) 1999 1998 1997 1996+
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $12.42 $11.39 $11.92 $10.80 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .04 .13 .13 .05 .22
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .29 .94 .70 1.29 .85
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .33 1.07 .83 1.34 1.07
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- -- (.04) -- (.18)
In excess of investment income
on investments--net ................................. -- -- (.19) (.10) (.06)
Realized gain on investments--net ................... -- -- (.99) (.12) --
In excess of realized gain on
investments--net .................................... -- (.04) (.14) -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... -- (.04) (1.36) (.22) (.27)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $12.75 $12.42 $11.39 $11.92 $10.80
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 2.66%# 9.35% 7.02% 12.56% 10.80%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 1.96%* 1.97% 2.12% 2.91% 2.67%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 1.96%* 1.97% 2.12% 3.17% 2.77%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .60%* 1.11% 1.03% .48% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $3,035 $3,375 $3,149 $2,596 $1,513
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 55.21% 134.89% 99.11% 125.68% 83.14%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Global Opportunity commenced operations on February 1, 1995.
++ Based on average shares outstanding.
# Aggregate total investment return.
24
<PAGE>
Asset Growth--Financial Highlights
Asset Growth. 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.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
For the
Period
For the Year Ended Aug. 31, Sept. 2, 1994+
-------------------------------------------------- to Aug. 31,
1999++ 1998++ 1997++ 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $9.57 $12.28 $10.13 $9.90 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.23) .03 .01 .12 .16
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net ..................................... 1.83 (.87) 2.30 .34 (.22)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 1.60 (.84) 2.31 .46 (.06)
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- (.32) (.01) (.16) (.04)
In excess of investment income--net ................. -- (.03) (.15) (.07) --
Realized gain on investments--net ................... (.07) (1.52) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.07) (1.87) (.16) (.23) (.04)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $11.10 $9.57 $12.28 $10.13 $9.90
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 16.76% (7.49)% 23.06% 4.71% (.59)%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 4.46% 2.82% 2.79% 2.47% 2.47%*
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 5.22% 3.57% 3.61% 3.75% 3.31%*
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (2.40)% .31% .13% 1.16% 1.46%*
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $502 $2,053 $1,803 $1,352 $1,677
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 141.99% 104.48% 128.28% 120.43% 42.50%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
# Aggregate total investment return.
25
<PAGE>
Asset Growth--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------
For the
Period
For the Year Ended Aug. 31, Sept. 2, 1994+
-------------------------------------------------- to Aug. 31,
1999++ 1998++ 1997++ 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $9.51 $12.20 $10.09 $9.83 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.44) (.08) (.11) .01 .05
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net ..................................... 1.93 (.86) 2.30 .35 (.21)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 1.49 (.94) 2.19 .36 (.16)
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net -- (.21) --## (.07) (.01)
In excess of investment income--net ................. -- (.02) (.08) (.03) --
Realized gain on investments--net ................... (.05) (1.52) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.05) (1.75) (.08) (.10) (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $10.95 $9.51 $12.20 $10.09 $9.83
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 15.66% (8.45)% 21.81% 3.65% (1.60)%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 6.15% 3.86% 3.84% 3.50% 3.50%*
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 6.89% 4.61% 4.67% 4.78% 4.37%*
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (4.17)% (.73)% (.94)% .13% .43%*
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $5,080 $5,946 $8,403 $8,141 $11,835
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 141.99% 104.48% 128.28% 120.43% 42.50%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
# Aggregate total investment return.
## Amount is less than $.01 per share.
26
<PAGE>
Asset Growth--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------
For the
Period
For the Year Ended Aug. 31, Oct. 21, 1994+
-------------------------------------------------- to Aug. 31,
1999++ 1998++ 1997++ 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $9.45 $12.13 $10.05 $9.82 $9.85
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.44) (.08) (.11) (.04) .04
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ..................................... 1.92 (.86) 2.28 .39 (.05)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 1.48 (.94) 2.17 .35 (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- (.20) --## (.08) (.02)
In excess of investment income--net ................. -- (.02) (.09) (.04) --
Realized gain on investments--net ................... (.05) (1.52) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.05) (1.74) (.09) (.12) (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $10.88 $9.45 $12.13 $10.05 $9.82
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 15.65% (8.47)% 21.71% 3.61% (.05%)#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 6.16% 3.88% 3.86% 3.52% 3.51%*
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 6.91% 4.63% 4.68% 4.81% 4.58%*
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (4.19)% (.73)% (.94)% .09% .51%*
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $373 $459 $572 $438 $735
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 141.99% 104.48% 128.28% 120.43% 42.50%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
# Aggregate total investment return.
## Amount is less than $.01 per share.
27
<PAGE>
Asset Growth--Financial Highlights (concluded)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class D
-------------------------------------------------------------------
For the
Period
For the Year Ended Aug. 31, Oct. 21, 1994+
-------------------------------------------------- to Aug. 31,
1999++ 1998++ 1997++ 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $9.61 $12.28 $10.11 $9.88 $9.86
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (.36) --## (.02) .08 .10
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ..................................... 1.94 (.86) 2.30 .36 (.04)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 1.58 (.86) 2.28 .44 .06
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. -- (.27) (.01) (.15) (.04)
In excess of investment income--net ................. -- (.02) (.10) (.06) --
Realized gain on investments--net ................... (.05) (1.52) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.05) (1.81) (.11) (.21) (.04)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ........................ $11.14 $9.61 $12.28 $10.11 $9.88
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:**
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... 16.45% (7.66)% 22.66% 4.51% .59%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ 5.39% 3.07% 3.05% 2.72% 2.75%*
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 6.14% 3.82% 3.92% 4.00% 4.32%*
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss)--net ......................... (3.42%) .02% (.21)% .93% 1.43%*
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) .............. $233 $309 $564 $1,313 $1,697
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... 141.99% 104.48% 128.28% 120.43% 42.50%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Commencement of operations.
++ Based on average shares outstanding.
# Aggregate total investment return.
## Amount is less than $.01 per share.
28
<PAGE>
Asset Income--Financial Highlights
Asset Income. 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.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
For the Year Ended December 31,
-------------------------------------------------------------------
1999** 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $ $10.32 $10.53 $10.62 $9.68
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .43 .49 .50 .60
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .58 .71 .23 1.04
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... 1.01 1.20 .73 1.64
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.43) (.49) (.50) (.60)
In excess of investment income--net ................. -- -- (.05) --
Realized gain on investments--net ................... (.27) (.92) (.27) (.01)
In excess of realized gain on
investments--net .................................... -- -- -- (.09)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.70) (1.41) (.82) (.70)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $ $10.63 $10.32 $10.53 $10.62
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... % 10.01% 11.67% 7.11% 17.38%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ % .50% .50% .25% .00%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. % 3.10% 3.28% 3.48% 5.12%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ % 4.03% 4.58% 4.73% 5.78%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $ $4,558 $2,188 $3,918 $3,872
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... % 155.44% 155.57% 342.71% 46.75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
** To be filed by amendment.
29
<PAGE>
Asset Income--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------------
For the Year Ended December 31,
-------------------------------------------------------------------
1999** 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ $10.32 $10.53 $10.62 $9.68
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net .35 .41 .42 .51
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net .58 .71 .23 1.04
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .93 1.12 .65 1.55
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net (.35) (.41) (.42) (.51)
In excess of investment income--net -- -- (.05) --
Realized gain on investments--net (.27) (.92) (.27) (.01)
In excess of realized gain on
investments--net -- -- -- (.09)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions (.62) (1.33) (.74) (.61)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ $10.63 $10.32 $10.53 $10.62
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share % 9.19% 10.84% 6.31% 16.51%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement % 1.25% 1.25% 1.00% .75%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses % 3.90% 4.01% 4.24% 5.94%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net % 3.32% 3.79% 3.99% 5.06%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $ $9,230 $8,078 $8,690 $9,236
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover % 155.44% 155.57% 342.71% 46.75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
** To be filed by amendment.
30
<PAGE>
Asset Income--Financial Highlights (continued)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------------
For the Year Ended December 31,
-------------------------------------------------------------------
1999** 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $ $10.32 $10.53 $10.62 $9.69
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .35 .41 .41 .52
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .58 .71 .23 1.03
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .93 1.12 .64 1.55
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.35) (.41) (.42) (.52)
In excess of investment income--net ................. -- -- (.04) --
Realized gain on investments--net ................... (.27) (.92) (.27) (.01)
In excess of realized gain on investments--net ...... -- -- -- (.09)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.62) (1.33) (.73) (.62)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $ $10.63 $10.32 $10.53 $10.62
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... % 9.14% 10.79% 6.25% 16.33%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ % 1.30% 1.30% 1.04% .80%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses............................................... 3.94% 4.12% 4.28% 6.02%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ %* 3.25% 3.78% 3.95% 4.99%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $ $656 $575 $357 $418
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... % 155.44% 155.57% 342.71% 46.75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
** To be filed by amendment.
31
<PAGE>
Asset Income--Financial Highlights (concluded)
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
Class D
-------------------------------------------------------------------
For the Year Ended December 31,
-------------------------------------------------------------------
1999** 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Asset Value:
Per Share Operating Performance:
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................... $ $10.31 $10.53 $10.62 $9.69
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ .41 .47 .46 .57
- ------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
and foreign currency transactions--net ................ .58 .70 .24 1.03
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...................... .99 1.17 .70 1.60
- ------------------------------------------------------------------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............................. (.41) (.47) (.47) (.57)
In excess of investment income--net ................. -- -- (.05) --
Realized gain on investments--net ................... (.27) (.92) (.27) (.01)
In excess of realized gain on investments--net ...... -- -- -- (.09)
- ------------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions ..................... (.68) (1.39) (.79) (.67)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year .......................... $ $10.62 $10.31 $10.53 $10.62
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Return:*
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................... % 9.74% 11.29% 6.84% 16.97%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement ........................ %* .75% .75% .50% .25%
- ------------------------------------------------------------------------------------------------------------------------------
Expenses .............................................. 3.35% 3.54% 3.70% 5.44%
- ------------------------------------------------------------------------------------------------------------------------------
Investment income--net ................................ %* 3.78% 4.32% 4.48% 5.53%
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ................ $ $664 $318 $633 $771
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover .................................... % 155.44% 155.57% 342.71% 46.75%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Total investment returns exclude the effects of sales charges.
** To be filed by amendment.
32
<PAGE>
Investment Objectives and Policies
Investment Objectives. The investment objectives of Global Allocation,
Asset Growth and Global Opportunity are substantially similar. Each of those
Funds seeks high total investment return through an investment policy utilizing
U.S. and foreign equity, debt and money market securities, the combination of
which will be varied from time to time both with respect to types of securities
and markets in response to changing economic and market trends. Asset Income
seeks a high level of current income by investing in United States and foreign
debt, equity and money market securities and, secondarily, capital appreciation.
Global Allocation, Asset Growth and Asset Income are non-diversified investment
companies. Global Opportunity is diversified.
There can be no assurance that, after the Reorganization, the Combined
Fund will achieve its investment objective.
Investment Policies Generally. All of the Funds seek to achieve their
objectives through investment policies utilizing United States and foreign
equity, debt and money market securities. Global Allocation and Global
Opportunity have a fully managed investment approach and may vary the percentage
of their assets invested in equity and debt securities with no limit on the
amount of equity and debt in the portfolio. Under normal conditions Asset Growth
will invest at least 65% and as much as all of its total assets in equity
securities and Asset Income will invest at least 65% and as much as all of its
total assets in debt securities, with no more than 25% of its total assets in
foreign securities.
Each Fund may vary its emphasis on current income and capital appreciation
by varying the combination of United States and foreign equity, debt and money
market securities in its portfolio in response to changing market and economic
trends. This approach provides each of those Funds with the opportunity to
benefit from unanticipated shifts in the relative performance of different types
of securities and different capital markets. Each Fund may employ a variety of
instruments and techniques to enhance income and to hedge against market and
currency risk.
To reduce overall exposure to risk, each Fund may spread its investments
over companies in a variety of industries. However, no Fund may invest more than
25% of its assets, taken at market value, in the securities of any particular
industry (excluding U.S. Government securities and its agencies and
instrumentalities).
MLAM believes that the securities currently held in the Global
Opportunity, Asset Growth and Asset Income portfolios are consistent with the
investment objectives and policies of Global Allocation and are not prohibited
by the investment restrictions of Global Allocation. Global Allocation has no
plan or intention to sell or otherwise dispose of any of the assets of Global
Opportunity, Asset Growth or Asset Income acquired in the Reorganization, except
for dispositions made in the ordinary course of business.
A more specific comparison of the investment policies of Global
Opportunity, Asset Growth, Asset Income and Global Allocation follows.
Equity Securities. In choosing common stocks for investments, each Fund
will emphasize issues with high total return relative to alternative equity
investments. The Funds generally seek to invest in securities that MLAM believes
to be undervalued. Such undervalued issues include (i) securities selling at a
discount from the price-to-book value ratios and price/earnings ratios computed
with respect to the relevant stock market averages, (ii) securities selling at a
discount from their historic price-to-book value or price/earnings ratio, even
though these ratios may be above the ratios for the stock market averages, and
(iii) securities offering dividend yields higher than the yields for the
relevant stock market averages or higher than such securities' historic yield.
Each Fund may also invest in the securities of small and emerging growth
companies when such companies are expected to provide a higher total return than
other equity investments. Such companies are characterized by rapid historical
growth rates, above-average returns on equity or special investment values in
their products or services, research capabilities or other attributes. MLAM will
seek to identify for investment by Global Allocation those small and emerging
growth companies that possess superior management, marketing ability, research
and product development skills as well as sound balance sheets.
Fixed Income Securities. All of the Funds may invest in debt securities.
The debt securities in which the Funds may invest include securities issued or
guaranteed by the U.S. Government and its agencies or instrumentalities, debt
obligations issued by U.S. and foreign entities, mortgage-backed securities
issued or guaranteed by governmental entities or by private issuers, securities
issued by foreign governments (including foreign states, provinces and
municipalities) and agencies or instrumentalities thereof and debt securities
issued
33
<PAGE>
or guaranteed by international organizations designed or supported by multiple
governmental entities (which are not obligations of the U.S. Government or
foreign governments) to promote economic reconstruction or development
("supranational entities") such as the International Bank for Reconstruction and
Development (the "World Bank").
U.S. Government securities include: (i) U.S. Treasury obligations (bills,
notes and bonds), which differ in their interest rates, maturities and times of
issuance, all of which are backed by the full faith and credit of the U.S.; and
(ii) obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, including government guaranteed mortgage-related securities,
some of which are backed by the full faith and credit of the U.S. Treasury
(e.g., direct pass-through certificates of the Government National Mortgage
Association), some of which are supported by the right of the issuer to borrow
from the U.S. Government (e.g., obligations of Federal Home Loan Banks) and some
of which are backed only by the credit of the issuer itself (e.g., obligations
of the Student Loan Marketing Association).
Global Opportunity, Asset Growth and Global Allocation have similar rating
criteria for the debt securities in which they may invest. The Funds are
authorized to invest in debt securities of governmental issuers and of corporate
issuers including convertible debt securities, rated in the top four categories
by Moody's or S&P (i.e., rated BBB or better by S&P or Baa or better by
Moody's), or in unrated securities which, in MLAM's judgment, possess similar
credit characteristics. Global Opportunity and Asset Growth are authorized to
invest 34% and 35% of their respective assets in fixed income securities of
governmental issuers and of corporate issuers rated below investment grade (i.e.
rated below the top four ratings categories) by a nationally recognized
statistical rating organization or in unrated securities which, in MLAM's
judgment, possess similar credit characteristics ("high yield" or "junk" bonds).
Global Allocation is authorized to invest 35% of its assets in junk bonds,
corporate loans and distressed securities. Neither Global Opportunity nor Global
Allocation is authorized to invest in debt securities in the lowest rating
categories (CC or lower for S&P or Ca or lower for Moody's) unless MLAM believes
that the financial condition of the issuer or the protection afforded the
particular securities is stronger than would otherwise be indicated by such low
ratings. Asset Growth will not invest in such debt securities at all. Asset
Income invests at least 65% of its assets in the securities of governmental
issuers and corporate debt securities, including convertible debt securities,
rated A or better by S&P or Moody's or which, in MLAM's judgment, possess
similar credit characteristics. Asset Income does not invest in junk bonds.
Risks Associated With Investments in Certain Fixed Income Securities. As
discussed above, each of Global Allocation, Global Opportunity and Asset Growth
is permitted to invest a limited percentage of its assets in high yield bonds.
Such securities are considered to have varying degrees of speculative
characteristics. Consequently, although high yield bonds can be expected to
provide higher yields, such securities may be subject to greater market price
fluctuations and risk of loss of principal than lower yielding, higher rated
fixed income securities.
High yield bonds may be issued by less creditworthy companies or by
larger, highly leveraged companies and are frequently issued in corporate
restructurings such as mergers and leveraged buyouts. Such securities are
particularly vulnerable to adverse changes in the issuer's industry and in
general economic conditions. High yield bonds frequently are junior obligations
of their issuers, so that in the event of the issuer's bankruptcy, claims of the
holders of high yield bonds will be satisfied only after satisfaction of the
claims of senior security holders. While the high yield bonds in which a Fund
may invest normally do not include securities which, at the time of investment,
are in default or the issuers of which are in bankruptcy, there can be no
assurance that such events will not occur after the Fund purchases a particular
security, in which case the Fund may experience losses and incur costs.
High yield bonds tend to be more volatile than higher rated fixed income
securities so that adverse economic events may have a greater impact on the
prices of high yield bonds than on higher rated fixed income securities. Like
higher rated fixed income securities, high yield bonds are generally purchased
and sold through dealers who make a market in such securities for their own
accounts. However, there are fewer dealers in the high yield bond market, which
may be less liquid than the market for higher rated fixed income securities even
under normal economic conditions. Also, there may be significant disparities in
the prices quoted for high yield bonds by various dealers. Adverse economic
conditions or investor perceptions (whether or not based on economic
fundamentals) may impair the liquidity of this market and may cause the prices
each Fund receives for its high yield bonds to be reduced, or a Fund may
experience difficulty in liquidating a portion of its portfolio. Under such
conditions, judgment may play a greater role in valuing certain of a Fund's
portfolio securities than in the case of securities trading in a more liquid
market.
34
<PAGE>
As discussed above, each Fund may invest in mortgage-related debt
securities and debt obligations of foreign government entities. Investment in
these securities involves certain risks. For a discussion of these risks, see
"Details About the Fund--Investment Risks" in the Global Allocation Prospectus.
To the extent a Fund invests in fixed income securities, its net asset
value will be affected by the general level of interest rates.
Foreign Securities. Global Allocation, Global Opportunity and Asset Growth
may each invest an unlimited amount of its assets in foreign securities. Asset
Income may invest up to 25% of its assets in foreign equity and debt markets.
There are no prescribed limits on the geographical allocation of the
foreign assets held by the Funds. Global Opportunity generally invests primarily
in securities of issuers in Canada, Western Europe and the Far East, as well as
in the U.S. Global Opportunity normally invests in at least three countries at
any given time. Similarly, Asset Growth and Asset Income have made substantial
investments in securities in issuers in Canada, Western Europe and the Far East.
It is anticipated that Global Allocation will invest primarily in the securities
of issuers domiciled or located in North and South America, Western Europe,
Australia and the Far East, and that a portion of Global Allocation's assets
normally will be invested in the U.S. securities markets and the other major
capital markets. Under normal conditions, Global Allocation's investments will
be denominated in at least three currencies or multinational currency units.
Each Fund reserves the right to invest substantially all of its assets in the
U.S. market or in U.S. dollar-denominated obligations when MLAM believes market
conditions warrant such investment.
In selecting securities denominated in foreign currencies for investment
by Global Allocation, MLAM will consider, among other factors, the effect of
movements in currency exchange rates on the U.S. dollar value of such
securities.
Money Market Securities. Each of the Funds may invest in money market
securities in furtherance of achieving its investment objective. Global
Opportunity reserves the right to invest all or a portion of its assets in money
market securities for purposes of enhancing liquidity and avoiding the effects
of declining securities prices when it seems advisable to do so in light of
prevailing market or economic conditions.
Specifically, Global Opportunity may invest in short term, high quality
money market securities (such as U.S. Treasury bills, certificates of deposit
issued by U.S. banks having more than $1 billion in assets, commercial paper and
repurchase agreements with respect to U.S. Government securities and U.S.
Government agency securities). In addition, Global Opportunity may invest only
in commercial paper that is rated in the highest category by a nationally
recognized rating agency or may hold its assets in cash.
Global Allocation, Asset Growth and Asset Income may invest in short-term
securities issued or guaranteed by the U.S. Government and its agencies and
instrumentalities; commercial paper, including variable amount master demand
notes, rated at least "A" by S&P or "Prime" by Moody's; and repurchase
agreements, purchase and sale contracts, and money market instruments issued by
commercial banks, domestic savings banks, and savings and loan associations with
total assets of at least $1 billion. The obligations of commercial banks may be
issued by U.S. banks, foreign branches of U.S. banks ("Eurodollar" obligations)
or U.S. branches of foreign banks ("Yankeedollar" obligations).
Real Estate-Related Securities. Global Allocation and Asset Income may
invest in real estate-related securities. Global Opportunity and Asset Growth
generally do not invest in such securities, although they are not prohibited
from doing so. The real estate-related securities that are emphasized by Global
Allocation are equity and convertible debt securities of real estate investment
trusts, which own income-producing properties, and mortgage real estate
investment trusts which make various types of mortgage loans often combined with
equity features. The securities of such trusts generally pay above average
dividends and may offer the potential for capital appreciation. Such securities
may be subject to the risks customarily associated with the real estate
industry, including declines in the value of the real estate investments of the
trusts. Real estate values are affected by numerous factors including (i)
governmental regulation (such as zoning and environmental laws) and changes in
tax laws; (ii) operating costs; (iii) the location and the attractiveness of the
properties; (iv) changes in economic conditions (such as fluctuations in
interest and inflation rates and business conditions); and (v) supply and demand
for improved real estate. Such trusts also are dependent on management skill and
may not be diversified in their investments.
35
<PAGE>
Indexed and Inverse Securities. Each Fund may invest in indexed and
inverse securities. Indexed securities are securities whose potential investment
return is based on the change in particular measurements of value and/or rate
(an "index"). As an illustration, the Funds may invest in a security that pays
interest and returns principal based on the change in an index of interest
rates. Interest and principal payable on a security may also be based on
relative changes among particular indices. In addition, each Fund may invest in
securities whose potential investment return is inversely based on the change in
particular indices. For example, each Fund may invest in securities that pay a
higher rate of interest and principal when a particular index decreases and pay
a lower rate of interest and principal when the value of the index increases. To
the extent that the Funds invest in such types of securities, they will be
subject to the risks associated with changes in the particular indices, which
may include reduced or eliminated interest payments and losses of invested
principal.
Certain indexed securities, including certain inverse securities, may have
the effect of providing a degree of investment leverage, because they may
increase or decrease in value at a rate that is a multiple of the changes in
applicable indices. As a result, the market value of such securities will
generally be more volatile than the market values of fixed-rate securities. MLAM
believes that indexed securities, including inverse securities, represent
flexible portfolio management instruments that may allow the Funds to seek
potential investment rewards, hedge other portfolio positions, or vary the
degree of portfolio leverage relatively efficiently under different market
conditions.
Precious Metal-Related Securities. Global Allocation and Asset Income may
invest in precious metal-related securities. Global Opportunity and Asset Growth
generally do not invest in such securities, although they are not prohibited
from doing so. For a description of precious metal-related securities, as well
as a discussion of the risks associated with investment therein, See "Details
About the Fund--Investment Risks--Precious Metal-Related Securities" in the
Global Allocation Prospectus.
A Note About Year 2000
As the year 2000 began, there were few problems caused by the inability of
certain computer systems to tell the difference between the year 2000 and the
year 1900 (commonly known as the "Year 2000 Problem"). It is still possible that
some computer systems could malfunction in the future because of the Year 2000
Problem or as a result of actions taken to address the Year 2000 Problem. Fund
management does not anticipate that its services or those of the Fund's other
service providers will be adversely affected, but Fund management will continue
to monitor the situation. If malfunctions related to the Year 2000 Problem do
arise, the Fund and its investments could be negatively affected.
Other Investment Policies
Global Opportunity, Asset Growth, Asset Income and Global Allocation have
adopted certain other investment policies as set forth below:
Borrowings. Each of the Funds is permitted to borrow up to 331/3% of total
assets, as a matter of operating policy. Such borrowings may be made only from
banks as a temporary measure for extraordinary or emergency purposes such as
redemption of Fund shares. No Fund will purchase securities while borrowings
exceed 5% (taken at market value) of its total assets.
Non-Diversified Status. Global Allocation, Asset Growth and Asset Income
are classified as "non-diversified" within the meaning of the Investment Company
Act, which means that the Funds are not limited by such Act in (i) the
percentage of total assets that they may invest in securities of a single issuer
(excluding U.S. Government securities) or (ii) the amount of voting securities
of a single issuer (excluding U.S. Government securities) that it may purchase.
However, the Funds' investments will be limited so as to qualify for the special
treatment afforded regulated investment companies under the Code. To qualify,
among other requirements, Global Allocation, Asset Growth and Asset Income will
limit their investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the market value of each Fund's total assets will
be invested in the securities of a single issuer, and (ii) with respect to 50%
of the market value of its total assets, (a) not more than 5% of the market
value of each Fund's total assets will be invested in the securities of a single
issuer, and (b) each Fund will not own more than 10% of the outstanding voting
securities of a single issuer. As in the case of the Investment Company Act
requirements discussed above, investment in the securities of the U.S.
Government, its agencies and instrumentalities are not included within the
definition of "issuer" for purposes of the diversification requirements of the
Code. Global Opportunity, which elects to be classified as "diversified" under
the Investment Company Act, must satisfy the foregoing 5% and 10% requirements
with respect to 75% of its total assets. To the extent that Global Allocation,
Asset Growth and Asset Income assume large positions in the securities of a
small number of issuers, the Funds' respective returns may fluctuate to a
greater extent than those of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.
36
<PAGE>
Standby Commitment Agreements. Each Fund may from time to time enter into
standby commitment agreements. For a description of standby commitment
agreements and the risks associated with investment therein, see "Details About
the Fund--Investment Risks--Standby Commitment Agreements" in the Global
Allocation Prospectus.
Repurchase Agreements. Each Fund may enter into repurchase agreements. For
a description of repurchase agreements and the risks associated with investment
therein, see "Details About the Fund--Investment Risks--Repurchase Agreements,
Purchase and Sale Contracts" in the Global Allocation Prospectus.
Lending of Portfolio Securities. Each Fund may from time to time lend
securities from its portfolio with a value not exceeding 331/3% 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.
Information Regarding Futures And Options Transactions
Each Fund may engage in various portfolio strategies to seek to increase
its return through the use of options on portfolio securities and to hedge its
portfolio against movements in the equity, debt and currency markets. Each Fund
has authority to write (i.e. sell) covered call options on its portfolio
securities, purchase put options on securities and engage in transactions in
stock index options, stock index futures and financial futures, and related
options on such futures. Each Fund may also deal in forward foreign exchange
transactions and foreign currency options and futures, and related options on
such futures. In addition, each Fund may write covered put options and purchase
call options.
Certain differences exist with respect to each Fund's ability to engage in
the foregoing strategies. Specifically, Global Opportunity may not write covered
call options on underlying securities in an amount exceeding 15% of the value of
its total assets. Global Allocation, Asset Growth and Asset Income have no
percentage limitation on their ability to write covered call options.
The investment policies of each Fund with respect to futures and options
transactions are not fundamental policies and may be modified by the Boards of
Directors of each Fund without the approval of the Fund's stockholders. Each
Fund is subject to the restrictions of the Commodity Futures Trading Commission
with respect to its investments in futures and options thereon.
For a detailed discussion of the Funds' investment policies regarding
futures and options, including the risks associated therewith, see "Details
About The Fund--How The Fund Invests" in the Global Allocation, Asset Growth and
Asset Income Prospectuses and "Details About the Program--Investment Strategies"
in the Asset Builder Prospectus; and see "Dividends and Taxes--Tax Treatment of
Options, Futures and Forward Exchange Transactions" in the Global Allocation
Statement, "Dividends and Taxes--Tax Treatment of Options Transactions" in the
Asset Growth Statement, "Dividends and Taxes--Taxes" in the Asset Income
Statement and "Other Investment Policies and Practices of the
Portfolios--Derivatives" in the Asset Builder Statement.
Investment Restrictions
Other than as noted above under "Comparison of the Funds--Investment
Objectives and Policies," Global Opportunity, Asset Growth, Asset Income and
Global Allocation have identical investment restrictions. See "Investment
Policies--Investment Restrictions" in the Global Allocation Statement. See
"Investment Objective and Policies--Other Investment Policies and
Practices--Investment Restrictions" in the Asset Builder, Asset Growth and Asset
Income Statements.
Management
Directors. The Board of Directors of Global Allocation consists of five
individuals, three of whom are not "interested persons" as defined in the
Investment Company Act. The Global Allocation Directors will serve as the
Directors of the Combined Fund after the Reorganization. The Board of Directors
of Asset Builder, Asset Growth and Asset Income consists of the same seven
individuals, five of whom are not "interested persons." The Directors of each
Fund are responsible for the overall supervision of the operation of such Fund
and perform the various duties imposed on the directors of investment companies
by the Investment Company Act. Arthur Zeikel and Terry K. Glenn are Directors of
all of the Funds. There is otherwise no overlap between the Boards of the Funds.
See "Management of the Fund--Directors and Officers" in the Statements of
Additional Information for Global Allocation, Asset Growth and Asset Income and
see "Management of the Program--Directors and Officers" in the Asset Builder
Statement of Additional Information.
37
<PAGE>
Information about the Directors of Global Allocation, including their ages
and their principal occupation for at least the last five years is set forth
below. Unless otherwise noted, the address of each Director is P.O. Box 9011,
Princeton, New Jersey 08543-9011.
TERRY K. GLENN (59) -- President and Director (1)(2) -- Executive Vice
President of the Manager and Fund Asset Management, L.P. ("FAM") (which terms as
used herein include their corporate predecessors) since 1983; President of
Princeton Funds Distributor, Inc. ("PFD") since 1986 and Director thereof since
1991; Executive Vice President and Director of Princeton Services, Inc.
("Princeton Services") since 1993; President of Princeton Administrators, L.P.
since 1988.
CHARLES C. REILLY (68) -- Director (2)(3) -- 9 Hampton Harbor Road,
Hampton Bays, New York 11946 -- Self-employed financial consultant since 1990;
President and Chief Investment Officer of Verus Capital, Inc. from 1979 to 1990;
Senior Vice President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990;
Adjunct Professor, Columbia University Graduate School of Business from 1990 to
1991; Adjunct Professor, Wharton School, University of Pennsylvania from 1989 to
1990; Partner, Small Cities Cable Television since 1986.
RICHARD R. WEST (61) -- Director (2)(3) -- Box 604, Genoa, Nevada 89411 --
Professor of Finance since 1984, Dean from 1984 to 1993, currently Dean Emeritus
of New York University Leonard N. Stern School of Business Administration;
Director of Bowne & Co., Inc. (financial printers), Vornado Realty Trust, Inc.
(real estate holding company), Vornado Operating Company, Inc. and Alexander's,
Inc. (real estate company).
ARTHUR ZEIKEL (67) -- Director (1)(2) -- 300 Woodland Avenue, Westfield,
New Jersey 07090 -- Chairman of the Manager and FAM from 1997 to 1999 and
President thereof from 1977 to 1997; Chairman of Princeton Services from 1997 to
1999; Director thereof from 1993 to 1999 and President thereof from 1993 to
1997; Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") from
1990 to 1999.
EDWARD D. ZINBARG (65) -- Director (2)(3) -- 5 Hardwell Road, Short Hills,
New Jersey 07078 -- Executive Vice President of The Prudential Insurance Company
of America 1988 to 1994; former Director of Prudential Reinsurance Company and
former Trustee of The Prudential Foundation.
- ----------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Director or officer is a director, trustee or officer of certain
other investment companies for which the Manager or FAM acts a the
investment adviser or manager.
(3) Member of the Fund's Audit and Nominating Committee, which is responsible
for the selection of the independent auditors and the selection and
nomination of non-interested Directors.
Compensation of Directors
Global Allocation pays each non-interested Director a fee of $3,500 per
year plus $500 per Board meeting attended. Global Allocation also compensates
each member of the Audit and Nominating Committee (the "Committee"), which
consists of the non-interested Directors, at a rate of $500 per Committee
meeting attended and pays the Chairman of the Committee an additional fee of
$250 per Committee meeting attended and reimburses each non-interested Director
for his out-of-pocket expenses relating to attendance at Board and Committee
meetings.
The following table shows the compensation earned by the non-interested
Directors of Global Allocation for the fiscal year ended October 31, 1999 and
the aggregate compensation paid to them from all registered investment companies
advised by the Manager and its affiliate, FAM ("MLAM/FAM-advised fund"), for the
calendar year ended December 31, 1999.
<TABLE>
<CAPTION>
Aggregate
Pension or Compensation
Retirement Estimated fromFund and
Benefits Annual Other
Accrued as Benefits MLAM/FAM-
Position with Compensation Part of Fund upon Advised
Name Fund from Fund Expense Retirement Funds(1)
- ------------------ ------------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Charles C. Reilly Director $7,500 None None $400,025
Richard R. West Director $7,500 None None $388,775
Edward D. Zinbarg Director $7,500 None None $140,875
</TABLE>
- ----------
(1) The Directors serve on the boards of MLAM/FAM-advised funds as follows: Mr.
Reilly (61 registered investment companies consisting of 74 portfolios); Mr.
West (71 registered investment companies consisting of 77 portfolios); and
Mr. Zinbarg (18 registered investment companies consisting of 18
portfolios).
38
<PAGE>
Directors of Global Allocation may purchase Class A shares of Global
Allocation at net asset value. See "Purchase of Shares--Reduced Initial Sales
Charges--Purchase Privilege of Certain Persons" in the Global Allocation
Statement.
Management and Advisory Arrangements. MLAM serves as the manager for Asset
Builder, Asset Growth, Asset Income and Global Allocation pursuant to separate
investment advisory agreements (each, an "Advisory Agreement") that, except for
certain minor differences, are identical.
MLAM is paid a monthly advisory fee by each Fund based upon the average
daily value of each Fund's net assets at the following annual rates:
Global Opportunity Global Allocation
------------------ -----------------
0.75% of average daily net assets. 0.75% of average daily net assets.
(However, MLAM has voluntarily agreed to
waive a portion of its investment
advisory fee so that such fee is equal
to 0.75% of average daily net assets not
exceeding $2.5 billion; 0.70% of average
daily net assets exceeding $2.5 billion
but not exceeding $5.0 billion; 0.65% of
average daily net assets exceeding $5.0
billion but not exceeding $7.5 billion;
0.625% of average daily net assets
exceeding $7.5 billion but not exceeding
$10 billion; and 0.60% of average daily
assets exceeding $10 billion.)
Asset Growth Asset Income
------------ ------------
0.75% of average daily net assets. 0.75% of average daily net assets.
(However, since Asset Growth's (However, since Asset Income's
commencement of operations on commencement of operations on
September 2, 1994, MLAM has September 2, 1994, MLAM has voluntarily
voluntarily waived all of the waived all of the investment advisory
investment advisory fee payable.) fee payable and has reimbursed certain
other expenses.)
MLAM has retained MLAM U.K. as sub-adviser to each of the Funds. Pursuant
to a separate sub-advisory agreement between MLAM and MLAM U.K. with respect to
each Fund, MLAM pays MLAM U.K. a fee for providing investment advisory services
to MLAM with respect to each Fund, in an amount to be determined from time to
time by MLAM and MLAM U.K. but in no event in excess of the amount MLAM actually
receives for providing services to each Fund pursuant to such Fund's Advisory
Agreement. The address of MLAM U.K. is 55 King William Street, P.O. Box 18135,
London EC4R 9LA.
Purchase of Shares
The class structure and purchase and distribution procedures for shares of
Global Opportunity, Asset Growth and Asset Income are substantially the same as
those of Global Allocation. For a complete discussion of the four classes of
shares and the purchase and distribution procedures related thereto, see "Your
Account--Merrill Lynch Select Pricing(SM) System" and "How to Buy, Sell,
Transfer and Exchange Shares" in each Fund's Prospectus.
Redemption of Shares
The procedure for redeeming shares of Global Allocation is substantially
the same as the procedure for redeeming shares of Global Opportunity, Asset
Growth and Asset Income. For purposes of computing any CDSC that may be payable
upon disposition of Corresponding Shares of Global Allocation acquired by Global
Opportunity, Asset Growth and Asset Income stockholders in the Reorganization,
the holding period of Global Opportunity, Asset Growth and Asset Income shares
outstanding on the date the Reorganization takes place will be tacked onto the
holding period of the Corresponding Shares of Global Allocation acquired in the
Reorganization. See "Redemption of Shares" in each Fund's Prospectus.
Performance
General. The following tables provide performance information for each
class of shares of each Fund, including and excluding maximum applicable sales
charges, for the periods indicated. Past performance is not indicative of future
performance.
39
<PAGE>
Global Allocation
Average Annual Total Return
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class D Shares
----------------- ----------------- ------------------- -------------------
Without With Without With Without With Without With
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge* Charge Charge* Charge Charge* Charge Charge*
Period % % % % % % % %
- ------ ------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 ................ +22.75 +16.31 +21.52 +17.52 +21.46 +20.46 +22.39 +15.96
Five Years Ended 11/30/99 .......... +14.45 +13.22 +13.29 +13.29 +13.28 +13.28 +14.16 +12.93
Ten Years Ended 11/30/99 .......... +13.53 +12.92 +12.38 +12.38 +12.60** +12.60** +13.49** +12.30**
</TABLE>
- ----------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum contingent deferred sales
charge ("CDSC") on Class B shares is 4.0% and is reduced to 0% after 4 years.
Class C shares are subject to a 1.0% CDSC for one year.
** Since Inception October 21, 1994.
Global Opportunity
Average Annual Total Return
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class D Shares
----------------- ----------------- ------------------- -------------------
Without With Without With Without With Without With
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge* Charge Charge* Charge Charge* Charge Charge*
Period % % % % % % % %
- ------ ------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 ................ +17.26 +11.10 +15.96 +11.96 +15.82 +14.82 +16.87 +10.73
Inception** through 11/30/99 ....... +10.32 +9.09 +9.13 +9.13 +9.08 +9.08 +10.05 +8.83
</TABLE>
- ----------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum CDSC on Class B shares is
4.0% and is reduced to 0% after 4 years. Class C shares are subject to a 1.0%
CDSC for one year.
** February 1, 1995.
Asset Growth
Average Annual Total Return
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class D Shares
----------------- ----------------- ------------------- -------------------
Without With Without With Without With Without With
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge* Charge Charge* Charge Charge* Charge Charge*
Period % % % % % % % %
- ------ ------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 ................ +16.95 +10.81 +15.84 +11.84 +15.73 +14.73 +16.76 +10.63
Five Years Ended 11/30/99 .......... +9.15 +7.97 +8.04 +8.04 +7.98 +7.98 +8.88 +7.71
Inception** through 11/30/99 ....... +7.60 +6.50 +6.52 +6.52 +6.97 +6.97 +7.85 +6.72
</TABLE>
- ----------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum CDSC on Class B shares is
4.0% and is reduced to 0% after 4 years. Class C shares are subject to a 1.0%
CDSC for one year.
** The Fund's inception periods are from 9/2/94 for Class A and Class B shares
and from 10/21/94 for Class C and Class D shares.
Asset Income
Average Annual Total Return
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class D Shares
----------------- ----------------- ------------------- -------------------
Without With Without With Without With Without With
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge* Charge Charge* Charge Charge* Charge Charge*
Period % % % % % % % %
- ------ ------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 ................ +2.65 -1.46 +1.79 -1.98 +1.64 +0.70 +2.20 -1.89
Five Years Ended 11/30/99 .......... +9.33 +8.44 +8.49 +8.49 +8.44 +8.44 +9.02 +8.13
Inception** through 11/30/99 ....... +8.53 +7.69 +7.71 +7.71 +7.99 +7.99 +8.56 +7.70
</TABLE>
- ----------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 4.0%. The maximum CDSC on Class B shares is
4.0% and is reduced to 0% after 4 years. Class C shares are subject to a 1.0%
CDSC for one year.
** The Fund's inception periods are from 9/2/94 for Class A and Class B shares
and from 10/21/94 for Class C and Class D shares.
40
<PAGE>
Stockholder Rights
Stockholders of Global Allocation are entitled to one vote for each share
held and fractional votes for fractional shares held and will vote on the
election of Directors and any other matter submitted to a stockholder vote.
Global Allocation does not intend to hold meetings of stockholders in any year
in which the Investment Company Act does not require stockholders to act upon
any of the following matters: (i) election of Directors; (ii) approval of an
investment advisory agreement; (iii) approval of distribution arrangements; and
(iv) ratification of selection of independent accountants. Voting rights for
Directors are not cumulative. Shares of Global Allocation to be issued to
stockholders of the Acquired Funds in the Reorganization will be fully paid and
non-assessable, will have no preemptive rights, and will have the conversion
rights described in this Joint Proxy Statement and Prospectus and in the Global
Allocation Prospectus. Each share of Global Allocation common stock is entitled
to participate equally in dividends declared by the Fund and in the net assets
of the Fund on liquidation or dissolution after satisfaction of outstanding
liabilities, except that Class B, Class C and Class D shares bear certain
additional expenses. Rights attributable to shares of Global Opportunity, Asset
Growth and Asset Income are identical to those described above.
Dividends
The current policy of Global Opportunity, Asset Growth and Asset Income
with respect to dividends is substantially the same as Global Allocation's
policy. In addition, each Fund distributes all net realized long- or short-term
capital gains, if any, to stockholders at least annually.
Automatic Dividend Reinvestment Plan
Each of the Funds offers its stockholders an Automatic Dividend
Reinvestment Plan (the "Plan") with substantially similar terms. Pursuant to the
Plans, dividends will be automatically reinvested, without sales charge, in
additional full and fractional shares of the relevant Fund unless a stockholder
has elected to receive such dividends in cash. For further information about the
Plans, See "Your Account--How to Buy, Sell, Transfer and Exchange Shares" in the
Prospectus for each of the Funds.
After the Reorganization, a Global Opportunity, Asset Growth or Asset
Income stockholder who has elected to receive dividends in cash will continue to
receive dividends in cash; all other Global Opportunity, Asset Growth or Asset
Income stockholders will have their dividends automatically reinvested in shares
of the Combined Fund. However, if a stockholder owns shares of Global Allocation
and shares of one or more of the Acquired Funds, after the Reorganization the
stockholder's election with respect to the dividends of Global Allocation will
control unless the stockholder specifically elects a different option at that
time.
Tax Information
The tax consequences associated with investment in shares of Global
Opportunity, Asset Growth and Asset Income are substantially the same as the tax
consequences associated with investment in shares of Global Allocation. See
"Summary--Tax Considerations" and "The Reorganization--Tax Consequences of the
Reorganization" herein and "Your Account--Dividends and Taxes" in the Global
Allocation Prospectus.
Portfolio Transactions
The procedures for engaging in portfolio transactions are generally the
same for all of the Funds. For a discussion of these procedures, See "Portfolio
Transactions and Brokerage" in the Global Allocation Statement.
Each Fund may effect portfolio transactions on foreign securities
exchanges and may incur settlement delays on certain of such exchanges. In
addition, costs associated with transactions in foreign securities are generally
higher than such costs associated with transactions in U.S. securities.
Portfolio Turnover
Generally, the Funds do not purchase securities for short-term trading
profits. However, the Funds may dispose of securities without regard to the time
that they have been held when such action, for defensive or other reasons,
appears advisable to MLAM. The portfolio turnover rates for Global Opportunity
for its fiscal years ended January 31, 1999 and 1998 were 134.89% and 99.11%,
respectively. The portfolio turnover rates for Asset Growth for its fiscal years
ended August 31, 1999 and 1998 were 141.99% and 104.48%, respectively. The
portfolio turnover rates for Asset Income for its fiscal years ended December
31, 1999 and 1998 were % and 155.44%, respectively. The portfolio turnover rates
for Global Allocation for its fiscal years ended October 31, 1999 and 1998 were
26.95% and 49.67%, respectively. A high portfolio turnover may involve certain
tax consequences, such as an increase in capital gain dividends and may also
involve correspondingly greater transactional costs in the form of dealer
spreads and brokerage commissions, which are borne directly by the Fund.
41
<PAGE>
Additional Information
Net Asset Value. All of the Funds determine net asset value of each class
of shares once daily Monday through Friday as of the close of business on the
NYSE on each day during which the NYSE is open for trading based on prices at
the time of closing. The NYSE generally closes at 4:00 p.m. Eastern time. Net
asset value is computed by dividing the market value of the securities held by
the Fund plus any cash or other assets (including interest and dividends accrued
but not yet received) minus all liabilities (including accrued expenses) by the
total number of shares outstanding at such time.
Stockholder Services. Global Allocation offers a number of stockholder
services and investment plans designed to facilitate investment in shares of the
Fund. In addition, U.S. stockholders of each class of shares of Global
Allocation have an exchange privilege with certain other MLAM-advised mutual
funds. Stockholder services, including exchange privileges, available to
stockholders of Global Opportunity, Asset Growth and Asset Income are
substantially the same as those of Global Allocation. For a description of these
services, see "Shareholder Services" in the Global Allocation Statement.
Custodian. Brown Brothers Harriman & Co. ("Brown Brothers") acts as
custodian for Global Allocation. Brown Brothers' principal business address is
40 Water Street, Boston, Massachusetts 02109. The Bank of New York, ("BONY")
acts as custodian of the cash and securities of Asset Builder. The principal
business address of BONY is 90 Washington Street, 12th Floor, New York, New York
11286. The Chase Manhattan Bank, N.A. ("Chase") acts as custodian of the cash
and securities of both Asset Growth and Asset Income. The principal business
address of Chase is 4 Metro Tech Center, 18th Floor, Brooklyn, New York 11245.
It is presently anticipated that after the Reorganization Brown Brothers will
serve as the custodian of the Combined Fund.
Transfer Agent, Dividend Disbursing Agent and Registrar. Financial Data
Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484, an
affiliate of MLAM, serves as the transfer agent, dividend disbursing agent and
registrar with respect to each Fund (the "Transfer Agent"), at the same fee
schedule, pursuant to separate registrar, transfer agency and service agreements
with each of the Funds.
Capital Stock. Global Opportunity has authorized capital of 28,750,000
shares of common stock, par value $0.10 per share, divided into four classes,
designated Class A, Class B, Class C and Class D Common Stock and consists of
6,250,000 Class A shares, 10,000,000 Class B shares, 6,250,000 Class C shares
and 6,250,000 Class D shares.
Asset Growth has an authorized capital of 400,000,000 shares of common
stock, par value $0.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D common stock, of which each class consists of
100,000,000 shares.
Asset Income has an authorized capital of 400,000,000 shares of common
stock, par value $0.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D common stock, of which each class consists of
100,000,000 shares.
Global Allocation has an authorized capital of 3,550,000,000 shares of
common stock, par value $0.10 per share, divided into four classes, designated
Class A, Class B, Class C and Class D common stock, of which Class A consists of
450,000,000 shares, Class B consists of 2,000,000,000 shares, Class C consists
of 200,000,000 shares and Class D consists of 900,000,000 shares.
The rights and preferences attributable to the Class A, Class B, Class C
and Class D shares of Asset Builder, Asset Growth and Asset Income are identical
in all respects to those of the Class A, Class B, Class C and Class D shares of
Global Allocation except that the Class B, C and D shares of Global Allocation,
Asset Builder, Asset Growth and Asset Income bear certain expenses related to
the account maintenance and/or distribution of such shares and have exclusive
voting rights with respect to matters relating to such account maintenance
and/or distribution expenditures. The expenses attributable to all classes of
shares of Global Opportunity, Asset Growth and Global Allocation are the same.
The distribution fees of the Class B and Class C shares of Asset Income are
lower than the distribution fees associated with the Class B and Class C shares
of the other Funds. After the Reorganization the holders of Class B or Class C
shares of Asset Income will be subject to these higher ongoing distribution
fees. It is anticipated that Asset Income stockholders will benefit, however,
from being invested in a larger fund with lower overall operating expenses. In
addition, Class B shares will convert to Class D shares, which have lower
ongoing expenses, approximately eight years after purchase instead of
approximately ten years after purchase. See "Summary--Pro Forma Fee Tables."
Stockholder Inquiries. Stockholder inquiries with respect to Global
Opportunity, Asset Growth, Asset Income and Global Allocation may be addressed
to each Fund by telephone at (609) 282-2800 or at the address set forth on the
cover page of this Proxy Statement and Prospectus.
42
<PAGE>
THE REORGANIZATION
General
Under the Agreement and Plan (attached hereto as Exhibit I), subject to
receiving the requisite approval of the stockholders of an Acquired Fund, Global
Allocation will acquire substantially all of the assets, and will assume
substantially all of the liabilities, of that Acquired Fund in exchange solely
for an equal aggregate value of Corresponding Shares. Upon receipt by the
Acquired Fund of such Corresponding Shares, the Acquired Fund will distribute
the Corresponding Shares to its stockholders as described below. The
Reorganization may take place in three separate transactions at different times,
and the consummation of one transaction is not dependent on the consummation of
any other.
Generally, the assets transferred by an Acquired Fund to Global Allocation
will equal all investments of such Acquired Fund held in its portfolio after the
close of business on the NYSE on the business day prior to the date the
Reorganization takes place ("Valuation Time") and all other assets of such
Acquired Fund as of such time.
An Acquired Fund will distribute the Corresponding Shares of Global
Allocation received by it pro rata to its stockholders in exchange for such
stockholders' proportional interests in that Acquired Fund. The Corresponding
Shares received by that Acquired Fund's stockholders will be of the same class
and have the same aggregate net asset value as each such stockholder's interest
in that Acquired Fund as of the Valuation Time. (See "Terms of the Agreement and
Plan--Valuation of Assets and Liabilities" for information concerning the
calculation of net asset value.) The distribution will be accomplished by
opening new accounts on the books of Global Allocation in the names of all
stockholders of that Acquired Fund including stockholders holding shares in
certificate form, and transferring to each stockholder's account the
Corresponding Shares representing such stockholder's interest previously
credited to the account of that Acquired Fund. Stockholders holding shares of an
Acquired Fund in certificate form may receive certificates representing the
Corresponding Shares of Global Allocation credited to their account in respect
of such Acquired Fund shares by sending the certificates representing the
Acquired Fund shares to the Transfer Agent accompanied by a written request for
such exchange.
Since the Corresponding Shares will be issued at net asset value and the
shares of an Acquired Fund will be valued at net asset value for the purposes of
the exchange by the Acquired Fund stockholders of such shares for the
Corresponding Shares, the holders of shares of an Acquired Fund will not be
diluted as a result of the Reorganization. However, upon consummation of the
Reorganization with respect to an Acquired Fund, a stockholder of that Acquired
Fund likely would hold a reduced percentage of ownership in the Combined Fund
than he or she did in the Acquired Fund prior to the Reorganization.
Procedure
On January 12, 2000, the Boards of Directors of Asset Builder, Asset
Growth and Asset Income, including all of the Directors who are not "interested
persons," as defined in the Investment Company Act, approved the Agreement and
Plan and the submission of such Agreement and Plan to Global Opportunity, Asset
Growth and Asset Income stockholders for approval. The Board of Directors of
Global Allocation, including all of the Directors who are not interested
persons, approved the Agreement and Plan on January 20, 2000.
If the stockholders of an Acquired Fund approve the Reorganization and all
required regulatory approvals are obtained, the Reorganization will take place
with respect to that Acquired Fund as early as possible in calendar year 2000.
If the stockholders of one or more of the Acquired Funds do not approve
the Reorganization, the Reorganization will take place with respect to those
Funds whose stockholders have approved the Reorganization.
The Board of Directors of Asset Builder recommends that Global Opportunity
stockholders approve the Agreement and Plan.
The Board of Directors of Asset Growth recommends that Asset Growth
stockholders approve the Agreement and Plan.
The Board of Directors of Asset Income recommends that Asset Income
stockholders approve the Agreement and Plan.
43
<PAGE>
Terms of the Agreement and Plan
The following is a summary of the significant terms of the Agreement and
Plan. This summary is qualified in its entirety by reference to the Agreement
and Plan, attached hereto as Exhibit I.
Valuation of Assets and Liabilities. The respective assets of Global
Opportunity, Asset Growth, Asset Income and Global Allocation will be valued as
of the Valuation Time. The assets in each Fund will be valued according to the
procedures set forth under "Your Account--How Shares Are Priced" in the Global
Allocation Prospectus. Purchase orders for Global Opportunity, Asset Growth or
Asset Income shares which have not been confirmed as of the Valuation Time will
be treated as assets of Global Opportunity, Asset Growth or Asset Income for
purposes of the Reorganization; redemption requests which have not settled as of
the Valuation Time will be treated as liabilities for purposes of the
Reorganization.
Distribution of Corresponding Shares. On the next full business day
following the Valuation Time (the "Exchange Date"), Global Allocation will issue
to Asset Builder, Asset Growth and Asset Income a number of shares the aggregate
net asset value of which will equal the respective aggregate net asset values of
shares of Global Opportunity, Asset Growth and Asset Income as of the Valuation
Time. Each holder of Global Opportunity, Asset Growth and Asset Income shares
will receive, in exchange for his or her proportionate interest in Global
Opportunity, Asset Growth or Asset Income, Corresponding Shares of the same
class and having the same aggregate net asset value as the Global Opportunity,
Asset Growth or Asset Income shares held by such stockholder as of the Valuation
Time.
Expenses. The expenses of the Reorganization that are directly attributable
to each Acquired Fund and the conduct of its business will be deducted from the
assets of that Fund as of the Valuation Time. These expenses are expected to
include the expenses incurred in preparing, printing and mailing the proxy
materials to be utilized in connection with the special meetings of stockholders
and the expenses related to the solicitation of proxies to be voted at those
meetings. Each Acquired Fund will bear its pro rata share of such expenses based
on the number of stockholder accounts. The expenses attributable to Global
Allocation include the costs of printing sufficient copies of its Prospectus and
Annual Report to accompany the Joint Proxy Statement and Prospectus. The
expenses of the Reorganization, including expenses in connection with obtaining
the IRS ruling, the preparation of the Agreement and Plan, legal fees and audit
fees, will be borne equally by each Fund. MLAM has agreed to bear the expenses
of the Reorganization attributable to Global Allocation.
Required Approvals. Under the Articles of Incorporation (as amended to
date) of each Acquired Fund and relevant Maryland law, stockholder approval of
the Agreement and Plan with respect to an Acquired Fund requires the affirmative
vote of stockholders of that Acquired Fund representing a majority of the total
number of votes of that Acquired Fund entitled to be cast thereon.
Termination and Deregistration of the Acquired Funds. Following the
transfer of the assets and liabilities of an Acquired Fund to Global Allocation
and distribution of Corresponding Shares of Global Allocation to that Acquired
Fund's stockholders, (i) Asset Income and Asset Growth will each terminate their
registrations under the Investment Company Act and their incorporation under
Maryland law, and (ii) Asset Builder will take action to terminate the Global
Opportunity series under Maryland law.
Amendments and Conditions. The Agreement and Plan may be amended at any
time prior to the Exchange Date with respect to any of the terms therein. The
obligations of an Acquired Fund and Global Allocation pursuant to the Agreement
and Plan are subject to various conditions, including a registration statement
on Form N-14 being declared effective by the Commission, approval of the
Reorganization by that Acquired Fund's stockholders, a favorable IRS ruling or
an opinion of counsel being received as to tax matters, an opinion of counsel
being received as to securities matters and the continuing accuracy of various
representations and warranties of that Acquired Fund and Global Allocation being
confirmed by the respective parties.
Postponement, Termination. The Agreement and Plan may be terminated, and
the Reorganization with respect to an Acquired Fund abandoned at any time,
whether before or after adoption thereof by the stockholders of that Acquired
Fund, prior to the Exchange Date or the Exchange Date may be postponed: (i) by
mutual consent of the Boards of Directors of Global Allocation and that Acquired
Fund; (ii) by the Board of Directors of the Acquired Fund if any condition to
such Acquired Fund's obligations has not been fulfilled or waived by such Board;
or (iii) by the Board of Directors of Global Allocation if any condition to
Global Allocation's obligations has not been fulfilled or waived by such Board.
44
<PAGE>
Potential Benefits to Stockholders of the Funds as a Result of the
Reorganization
MLAM and the Board of Directors of each Acquired Fund have determined that
stockholders are likely to benefit from the Reorganization. With respect to
Global Opportunity and Asset Growth, following the Reorganization, their
respective stockholders will remain invested in an open-end fund that has
investment objectives and policies similar to those of such Funds. In addition,
the stockholders of each of the Acquired Funds are likely to experience certain
additional benefits, including lower expenses per share, economies of scale and
greater flexibility in portfolio management.
As previously stated, since the commencement of their operations, MLAM has
voluntarily waived all of its investment advisory fees and reimbursed certain
other expenses with respect to Asset Income, and voluntarily waived all of its
investment advisory fees with respect to Asset Growth. In addition MLAM has
agreed to voluntarily waive a portion of its fee with respect to Global
Allocation so that MLAM receives a fee at the annual rate of 0.75% of the
average daily net assets of Global Allocation for the first $2.5 billion; 0.70%
of the average daily net assets from $2.5 billion to $5.0 billion; 0.65% of the
average daily net assets from $5.0 billion to $7.5 billion; 0.625% of the
average daily net assets from $7.5 billion to $10 billion; and 0.60% of the
average daily net assets above $10 billion. MLAM is not currently waiving any
portion of its investment advisory fee or reimbursing any expenses with respect
to Global Opportunity. The table below sets forth the total operating expense
ratio of each of the Funds and the Pro Forma Global Allocation both including
and excluding any applicable fee waivers and excluding any distribution and
account maintenance fees.
<TABLE>
<CAPTION>
Total Operating Total Operating
Net Assets as of Expense Ratio Expense Ratio
November 30, 1999 (excluding fee waivers) (including fee waivers)
----------------- ----------------------- -----------------------
<S> <C> <C> <C>
Global Allocation ............. $7,412,643,580 0.97% 0.92%
Asset Income .................. $ 10,383,739 3.99% 0.50%
Asset Growth .................. $ 6,622,246 4.98% 4.23%
Global Opportunity ............ $ 62,393,855 1.69% 1.69%
Pro Forma Global Allocation.... $7,492,043,420 0.97% 0.92%
</TABLE>
MLAM may discontinue waiving its fee with respect to Global Allocation,
Asset Income and Asset Growth and reimbursing expenses with respect to Asset
Income. In the event that all waivers and reimbursements with respect to the
Funds, including Global Allocation, were discontinued, after the Reorganization,
on a pro forma basis, the total operating expenses of the Combined Fund, as a
percentage of net assets, would be 0.97% which is 3.02% lower than the ratio of
Asset Income's current operating expenses to net assets, 4.01% lower than the
ratio of Asset Growth's current operating expenses to net assets, and 0.72%
lower than the ratio of Global Opportunity's current operating expenses to net
assets. This ratio represents no change for Global Allocation. MLAM believes
that the decreases are attributable to the fact that certain fixed costs, such
as costs of printing stockholder reports and proxy statements, legal expenses,
audit fees, registration fees, mailing costs and other expenses would be spread
across a larger asset base, thereby lowering the expense ratio borne by
stockholders of the Acquired Funds as part of the Combined Fund. This
information is based on the aggregate net assets of the Funds; for information
on a class basis which excludes fee waivers, see "Summary--Pro Forma Fee
Tables."
MLAM believes that the Reorganization is in the best interests of the
stockholders of each of the Funds.
Based on the foregoing, the Boards of Directors of Asset Builder, Asset
Growth and Asset Income concluded that the Reorganization presents no
significant risks or costs (including legal, accounting and administrative
costs) that would outweigh the benefits discussed above. In approving the
Reorganization, the Board of Directors of each of the Funds determined that the
interests of existing stockholders of the Fund would not be diluted as a result
of the Reorganization.
Tax Consequences of the Reorganization
General. The Reorganization has been structured with the intention that it
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Global Allocation and each Acquired Fund have
elected and qualified for the special tax treatment afforded "regulated
investment companies" under the Code, and Global Allocation intends to continue
to so qualify after the Reorganization. The
45
<PAGE>
Funds have jointly requested a private letter ruling from the IRS to the effect
that for Federal income tax purposes: (i) the transfer by each Acquired Fund of
substantially all of its assets to Global Allocation in exchange solely for
shares of Global Allocation as provided in the Agreement and Plan will
constitute a reorganization within the meaning of Section 368(a)(1)(C) of the
Code, and each Fund will be deemed to be a "party" to the Reorganization within
the meaning of Section 368(b); (ii) in accordance with Section 361(a) of the
Code, no gain or loss will be recognized by an Acquired Fund as a result of the
asset transfer solely in exchange for Global Allocation shares or on the
distribution of the Global Allocation stock to its stockholders under Section
361(c)(1); (iii) under Section 1032 of the Code, no gain or loss will be
recognized by Global Allocation on the receipt of assets of an Acquired Fund in
exchange for Global Allocation shares; (iv) in accordance with Section 354(a)(1)
of the Code, no gain or loss will be recognized by the stockholders of an
Acquired Fund on the receipt of Corresponding Shares of Global Allocation in
exchange for their shares of the Acquired Fund; (v) in accordance with Section
362(b) of the Code, the tax basis of an Acquired Fund's assets in the hands of
Global Allocation will be the same as the tax basis of such assets in the hands
of the Acquired Fund immediately prior to the consummation of the
Reorganization; (vi) in accordance with Section 358 of the Code, immediately
after the Reorganization, the tax basis of the Corresponding Shares of Global
Allocation received by the stockholders of an Acquired Fund in the
Reorganization will be equal to the tax basis of the shares of the Acquired Fund
surrendered in exchange; (vii) in accordance with Section 1223 of the Code, a
stockholder's holding period for the Corresponding Shares of Global Allocation
will be determined by including the period for which such stockholder held the
Acquired Fund shares exchanged therefor, provided, that such shares were held as
a capital asset; (viii) in accordance with Section 1223 of the Code, Global
Allocation's holding period with respect to an Acquired Fund's assets
transferred will include the period for which such assets were held by the
Acquired Fund; and (ix) the taxable year of each Acquired Fund will end on the
effective date of the Reorganization, and pursuant to Section 381(a) of the Code
and regulations thereunder, Global Allocation will succeed to and take into
account certain tax attributes of each Acquired Fund, such as earnings and
profits, capital loss carryovers and method of accounting.
Asset Income has significant undistributed net realized capital losses as
of November 30, 1999, which are completely offset by net unrealized appreciation
as of the same date. Global Allocation has some undistributed net realized
capital gains as of November 30, 1999 and also has a significant amount of net
unrealized appreciation as of the same date. After the Reorganization, Acquired
Fund stockholders will share in the net unrealized appreciation of Global
Allocation, and to the extent such appreciation is realized, will be subject to
any tax consequences related to that appreciation. Also, after the
Reorganization, current Global Allocation stockholders as well as stockholders
of the other Acquired Funds will benefit from the ability of Global Allocation
to share in a portion of the undistributed net realized capital losses of Asset
Income, which can be used to offset realized capital gains. It is anticipated
that over time the reduction in expenses experienced by Acquired Fund
stockholders as a result of the Reorganization will offset in whole or in part
any potential increased tax liability.
Status as a Regulated Investment Company. Global Allocation and each
Acquired Fund have elected and qualified to be taxed as regulated investment
companies under Sections 851-855 of the Code, and after the Reorganization
Global Allocation intends to continue to operate so as to qualify as a regulated
investment company.
Capitalization
The following table sets forth as of November 30, 1999: (i) the
capitalization of Global Opportunity, Asset Growth and Asset Income (ii) the
capitalization of Global Allocation and (iii) the pro forma capitalization of
the Combined Fund as adjusted to give effect to the Reorganization assuming all
three transactions were consummated as of that date.
46
<PAGE>
Pro Forma Capitalization of Global Opportunity, Asset Growth, Asset Income,
Global Allocation and Combined Fund as of November 30, 1999
<TABLE>
<CAPTION>
Global Opportunity
---------------------------------------------------------------
Class A Class B Class C Class D
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Net Assets: ............. $191,933 $40,826,756 $18,301,949 $3,073,217
Shares Outstanding: ........... 14,125 3,088,979 1,388,448 227,423
Net Asset Value Per Share:... $13.59 $13.22 $13.18 $13.51
</TABLE>
<TABLE>
<CAPTION>
Asset Growth
---------------------------------------------------------------
Class A Class B Class C Class D
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Net Assets: ............. $615,126 $5,320,772 $411,899 $274,449
Shares Outstanding: ........... 52,234 459,258 35,775 23,223
Net Asset Value Per Share:... $11.78 $11.59 $11.51 $11.82
</TABLE>
<TABLE>
<CAPTION>
Asset Income
---------------------------------------------------------------
Class A Class B Class C Class D
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Net Assets: ............. $315,008 $7,820,626 $663,756 $1,584,349
Shares Outstanding: ........... 31,056 772,137 65,502 156,510
Net Asset Value Per Share: .. $10.14 $10.13 $10.13 $10.12
</TABLE>
<TABLE>
<CAPTION>
Global Allocation
---------------------------------------------------------------
Class A Class B Class C Class D
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Net Assets: ............. $1,325,663,419 $4,510,365,498 $325,149,008 $1,251,465,655
Shares Outstanding: ........... 87,907,547 305,013,247 22,286,658 83,167,758
Net Asset Value Per Share: .. $15.08 $14.79 $14.59 $15.05
</TABLE>
<TABLE>
<CAPTION>
Combined Fund*
---------------------------------------------------------------
Class A Class B Class C Class D
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Total Net Assets: ............. $1,326,785,486 $4,564,333,652 $344,526,612 $1,256,397,670
Shares Outstanding: ........... 87,983,122 308,609,442 23,613,887 83,481,573
Net Asset Value Per Share: .. $15.08 $14.79 $14.59 $15.05
</TABLE>
- ----------
* Total Net Assets and Net Asset Value Per Share includes the aggregate value
of the net assets of Global Opportunity, Asset Growth and Asset Income which
would have been transferred to Global Allocation had all three transactions
comprising the Reorganization been consummated on November 30, 1999. Data
does not take into account expenses incurred in connection with the
Reorganization or the actual number of shares that would have been issued. No
assurance can be given as to how many shares of Global Allocation the
stockholders of Global Opportunity, Asset Growth and Asset Income will
receive on the date the Reorganization takes place, and the foregoing should
not be relied upon to reflect the number of shares of Global Allocation that
actually will be received on or after such date.
INFORMATION CONCERNING THE SPECIAL MEETINGS
Date, Time and Place of Meetings
The Meetings will be held on April 26, 2000, at the offices of Merrill
Lynch Asset Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey at
Eastern time (for Asset Builder), Eastern time (for Asset Growth) and Eastern
time (for Asset Income).
Solicitation, Revocation and Use of Proxies
A stockholder executing and returning a proxy has the power to revoke it
at any time prior to its exercise by executing a superseding proxy or by
submitting a notice of revocation to the Secretary of the appropriate Fund.
Although mere attendance at the Meetings will not revoke a proxy, a stockholder
present at the Meeting may withdraw his proxy and vote in person.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meetings in accordance with
the directions on the proxies; if no direction is indicated on a properly
executed proxy, such shares will be voted "FOR" the approval of the Agreement
and Plan.
47
<PAGE>
It is not anticipated that any matters other than the adoption of the
Agreement and Plan will be brought before the Meetings. If, however, any other
business properly is brought before the Meetings, proxies will be voted in
accordance with the judgment of the persons designated on such proxies.
Record Date and Outstanding Shares
Only holders of record of shares of Global Opportunity, Asset Growth and
Asset Income at the close of business on March 15, 2000 (the "Record Date") are
entitled to vote at the Meetings or any adjournment thereof. At the close of
business on the Record Date, for each Acquired Fund the number of shares of
common stock issued and outstanding and entitled to vote is shown below.
Global Opportunity
Asset Growth
Asset Income
Security Ownership of Certain Beneficial Owners and Management of Global
Opportunity, Asset Growth, Asset Income and Global Allocation
To the knowledge of Global Opportunity, as of the Record Date, no person
or entity owned beneficially or of record 5% or more of any class of shares of
Global Opportunity or of all classes of Global Opportunity shares in the
aggregate.
At the Record Date, the Directors and officers of Asset Builder as a group
(16 persons) owned an aggregate of less than 1% of the outstanding shares of
Global Opportunity. At such date, Mr. Glenn, the President and a Director of
Asset Builder, Mr. Zeikel, a Director of Asset Builder, and the other Directors
and officers of Asset Builder owned an aggregate of less than 1% of the
outstanding shares of common stock of ML & Co.
To the knowledge of Asset Growth, as of the Record Date, no person or
entity owned beneficially or of record 5% or more of any class of shares of
Asset Growth or of all classes of Asset Growth shares in the aggregate with the
exception of:
Name and Address Percent and Class
---------------- -----------------
Merrill Lynch Trust Co. 54.00% Class A
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Co. of America, Trustee 10.77% Class A
FBO MLSIP Investment Acct.
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Co. of America, Trustee 5.33% Class A
FBO Employee Savings Plan of Mobil Oil Corp.
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Co. 19.80% Class D
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Asset Management L.P. 13.61% Class A
P.O. Box 9011
Princeton, NJ 08543-9011
48
<PAGE>
Name and Address Percent and Class
---------------- -----------------
Juanita H. Loveranes and 13.06% Class A
Mariano D. Loveranes A TBE
13466 Route 6
Corry, PA 16407
Judy C. Bishop 6.53% Class A
P.O. Box 1165
Trinity, TX 75862
Merrill Lynch Trust Company 19.61% Class B
P.O. Box 30532
New Brunswick, NJ 08989
At the Record Date, the Directors and officers of Asset Growth as a group
(12 persons) owned an aggregate of less than 1% of the outstanding shares of
Asset Growth. At such date, Mr. Glenn, the President and a Director of Asset
Growth, Mr. Zeikel, a Director of Asset Growth and the other Directors and
officers of Asset Growth owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
To the knowledge of Asset Income, as of the Record Date, no person or
entity owned beneficially or of record 5% or more of any class of shares of
Asset Income or of all classes of Asset Income shares in the aggregate with the
exception of:
Name and Address Percent and Class
---------------- -----------------
Vivian S. Pawley TTEE U/A DTD 9/4/92 19.5% Class A
by Lawrence W. & Vivian S. Pawley Rev Trust,
41 Newgate PI
Liberty Twp. OH 45044
Merrill Lynch Asset Management, L.P. 18.9% Class A
P.O. Box 9011
Princeton, NJ 08543
Robert C. Dunlap Jr. TTEE 11.8% Class A
Loften Boyd Donlap TTEE
U/W Rachael B Dunlap,
Rt 2 Box 70C
Buffalo, TX 75831
Donna Gomez IRRA 10.7% Class A
FBO Donna Gomez
P.O. Box 917
Dulce, NM 87528
Stanford S. Davidson IRA 9.6% Class A
FBO Stanford S. Davidson
234 Lyman Hall
Savannah, GA 31410
Hamilton Resources Corp. 13.4% Class B
401K Profit Sharing Trust
U/A 10/01/1998
4000 Legato Rd. #800
Fairfax, VA 22033
Bruce E. Stille IRRA 7.7% Class C
FBO Bruce E. Stille
Rte. 6 Box 560
Macon, GA 31201
49
<PAGE>
Name and Address Percent and Class
---------------- -----------------
Frederick A. Walker IRRA 6.7% Class C
FBO Frederick A Walker
P.O. Box 1525
Carmel, CA 93921
Olcie L. Wilson Jr. IRA 6.3% Class C
FBO Olcie L Wilson Jr
4392 Richwood Place
Memphis, TN 38125
Merrill Lynch Trust Company of America, Trustee 44.1% Class C
FBO Hunter Automated Machinery Corp.
Attn: Central Region
P.O. Box 30532
New Brunswick, NJ 08989
Merrill Lynch Trust Company of America, Trustee 5.0% Class D
FBO Interlaken Capital Retirement
Attn: East Region
P.O. Box 30532
New Brunswick, NJ 08989
E. Clay Jorgenson SEP 5.0% Class D
FBO Dr E. Clay Jorgenson
225 Nolan Brown Pl.
Cheney, WA 99004
At the Record Date, the Directors and officers of Asset Income as a group
(11 persons) owned an aggregate of less than 1% of the outstanding shares of
Asset Income. At such date, Mr. Glenn, the President and a Director of Asset
Income, Mr. Zeikel, a Director of Asset Income, and the other Directors and
officers of Asset Income owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
To the knowledge of Global Allocation, as of the Record Date, no person or
entity owned beneficially or of record 5% or more of any class of shares of
Global Allocation or of all classes of Global Allocation shares in the
aggregate.
At the Record Date, the officers and Directors of Global Allocation as a
group (8 persons) owned an aggregate of less than 1% of the outstanding shares
of Global Allocation. At such date, Mr. Glenn, the President and a Director of
Global Allocation, Mr. Zeikel, a Director of Global Allocation, and the other
Directors and officers of Global Allocation owned less than 1% of the
outstanding shares of stock of ML & Co.
Voting Rights and Required Vote
For purposes of this Proxy Statement and Prospectus, each share of each
class of Global Opportunity, Asset Growth and Asset Income is entitled to one
vote. With respect to each Acquired Fund, approval of the Agreement and Plan by
that Fund requires the affirmative vote of the stockholders of that Acquired
Fund representing a majority of the total votes entitled to be cast thereon,
with all shares voting as a single class.
Under Maryland law, stockholders of a registered open-end investment
company such as Asset Builder, Asset Growth and Asset Income are not entitled to
demand the fair value of their shares upon a transfer of assets and will be
bound by the terms of the Reorganization if approved at the Meetings. However,
any stockholder of Global Opportunity, Asset Growth and Asset Income may redeem
his or her respective shares prior to the Reorganization.
A quorum for purposes of the Meeting of each Acquired Fund consists of a
majority of the shares entitled to vote at the Meeting, present in person or by
proxy. If, by the time scheduled for the Meetings, a quorum of the stockholders
of one of the Acquired Funds is not present or if a quorum is present but
sufficient votes in favor of the Agreement and Plan are not received from the
stockholders of Global Opportunity, Asset Growth or Asset Income, as the case
may be, the persons named as proxies may propose one or more adjournments of the
Meetings
50
<PAGE>
with respect to that Acquired Fund to permit further solicitation of proxies
from stockholders of that Fund. Any such adjournment will require the
affirmative vote of a majority of the shares of that Fund present in person or
by proxy and entitled to vote at the session of the Meeting to be adjourned. The
persons named as proxies will vote in favor of any such adjournment if they
determine that adjournment and additional solicitation are reasonable and in the
interests of the Fund's stockholders.
If the Reorganization is approved by the stockholders of one or two but
not all of the Acquired Funds, subject to obtaining any other required
approvals, the Reorganization will be consummated as to that Fund or Funds in
accordance with the terms of the Agreement and Plan. The meeting of the
stockholders of the non-approving Fund would be adjourned to allow further
solicitation of stockholders in order to secure the required vote. The
Reorganization would then be consummated as to that Fund at a later date.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and Joint Proxy Statement will be borne pro rata
by the Acquired Funds based on the number of stockholder accounts. Such expenses
are currently estimated to be $196,000.
Global Opportunity, Asset Growth and Asset Income likewise will reimburse
banks, brokers and others for their reasonable expenses in forwarding proxy
solicitation materials to the beneficial owners of shares of Global Opportunity,
Asset Growth and Asset Income and certain persons that these Funds may employ
for their reasonable expenses in assisting in the solicitation of proxies from
such beneficial owners of shares of these Funds.
In order to obtain the necessary quorum at the Meetings, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of Asset Builder, Asset Growth and Asset Income. Asset Builder, Asset
Growth and Asset Income have retained, at their expense, Shareholder
Communication Corporation, with offices at 17 State Street, New York, New York
10004, to aid in the solicitation of proxies at a cost of approximately $10,000,
plus out-of-pocket expenses.
Broker-dealer firms, including Merrill Lynch, holding shares of Global
Opportunity, Asset Growth and Asset Income in "street name" for the benefit of
their customers and clients will request the instructions of such customers and
clients on how to vote their shares before the Meeting. Broker-dealer firms,
including Merrill Lynch, will not be permitted to vote without instructions with
respect to the approval of the Agreement and Plan. Properly executed proxies
which are returned but which are marked "abstain" or with respect to which a
broker-dealer has received no instructions and therefore has declined to vote on
the proposal ("broker non-votes") will be counted as present for the purposes of
determining a quorum. However, abstentions and broker non-votes will have the
same effect as a vote against the Agreement and Plan.
This Proxy Statement and Prospectus does not contain all of the
information set forth in the registration statements and the exhibits relating
thereto which Asset Builder, Asset Growth, Asset Income and Global Allocation,
respectively, have filed with the Commission, under the Securities Act and the
Investment Company Act, to which reference is hereby made.
Asset Builder, Asset Growth, Asset Income and Global Allocation all file
reports and other information with the Securities and Exchange Commission.
Reports, proxy statements, registration statements and other information filed
by Asset Builder, Asset Growth, Asset Income and Global Allocation can be
inspected and copied at the public reference facilities of the Commission in
Washington, D.C. and at the New York Regional Office of the Commission at Seven
World Trade Center, New York, New York 10048. Copies of such materials also can
be obtained by mail from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Commission, Washington, D.C. 20549, at prescribed
rates. The Commission maintains a web site (http://www.sec.gov) that contains
the Statement of Additional Information, the Global Allocation Prospectus, the
Global Allocation Statement, the Asset Builder Prospectus, the Asset Builder
Statement, the Asset Growth Prospectus, the Asset Growth Statement, the Asset
Income Prospectus, the Asset Income Statement and other material incorporated by
reference and other information regarding the Funds.
LEGAL PROCEEDINGS
There are no material legal proceedings to which Asset Builder, Asset
Growth, Asset Income or Global Allocation is a party.
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LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be passed
upon for Asset Builder and Global Allocation by Brown & Wood LLP, One World
Trade Center, New York, New York 10048 and for Asset Growth and Asset Income by
Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166.
Clifford Chance Rogers & Wells LLP will rely as to matters of Maryland law on
the opinion of Brown & Wood LLP, 1666 K Street, N.W., Washington, D.C.
20006-1208.
EXPERTS
The financial highlights of Global Opportunity, Asset Growth, Asset Income
and Global Allocation included in this Joint Proxy Statement and Prospectus,
except for the financial highlights for the six-month period ended July 31, 1999
for Global Opportunity, have been so included in reliance on the reports of
Deloitte & Touche LLP ("D&T"), independent auditors, given on their authority as
experts in auditing and accounting. The principal business address of D&T is
Princeton Forrestal Village, 116-300 Village Boulevard, Princeton, New Jersey
08540-6400. D&T will serve as the independent auditors for the Combined Fund
after the Reorganization.
STOCKHOLDER PROPOSALS
A stockholder proposal intended to be presented at any subsequent meetings
of stockholders of Asset Builder, Asset Growth and Asset Income must be received
by Asset Builder, Asset Growth and Asset Income in a reasonable time before the
Boards of Directors' solicitation relating to such meeting is to be made in
order to be considered in such Fund's proxy statement and form of proxy relating
to the meeting.
By Order of the Boards of Directors,
BARBARA G. FRASER
Secretary
Merrill Lynch Asset Builder Program, Inc.
Merrill Lynch Asset Growth Fund, Inc.
Merrill Lynch Asset Income Fund, Inc.
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EXHIBIT I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the th day of , 2000, by and between Merrill Lynch Asset Builder
Program, Inc., a Maryland corporation ("Asset Builder"), Merrill Lynch Asset
Income Fund, Inc. a Maryland corporation ("Asset Income"), Merrill Lynch Asset
Growth Fund, Inc., a Maryland corporation ("Asset Growth"), and Merrill Lynch
Global Allocation Fund, Inc., a Maryland corporation ("Global Allocation").
PLAN OF REORGANIZATION
The reorganization will comprise the following:
(a)(1) the acquisition by Global Allocation of substantially all of the
assets, and the assumption of substantially all of the liabilities, of Global
Opportunity, a portfolio of Asset Builder, in exchange solely for an equal
aggregate value of newly issued shares of Global Allocation's common stock, with
a par value of $.10 per share, and (2) the subsequent distribution of
Corresponding Shares (defined below) of Global Allocation to Global Opportunity
stockholders in exchange for their shares of common stock of Global Opportunity,
with a par value of $.10 per share;
(b)(1) the acquisition by Global Allocation of substantially all of the
assets, and the assumption of substantially all of the liabilities, of Asset
Income, in exchange solely for an equal aggregate value of newly issued shares
of Global Allocation's common stock, with a par value of $.10 per share, and (2)
the subsequent distribution of Corresponding Shares (defined below) of Global
Allocation to Asset Income stockholders in exchange for their shares of common
stock of Asset Income, with a par value of $.10 per share; and
(c)(1) the acquisition by Global Allocation of substantially all of the
assets, and the assumption of substantially all of the liabilities, of Asset
Growth, in exchange solely for an equal aggregate value of newly issued shares
of Global Allocation's common stock, with a par value of $.10 per share, and (2)
the subsequent distribution of Corresponding Shares (defined below) of Global
Allocation to Asset Growth stockholders in exchange for their shares of common
stock of Asset Growth, with a par value of $.10 per share.
The transaction described in each of the paragraphs (a), (b) and (c) above
may be consummated upon and subject to the terms hereinafter set forth without
the consummation of the transactions described in the other paragraphs and would
be referred to singly or collectively as the "Reorganization." Asset Builder and
Global Opportunity are sometimes referred to herein as "Global Opportunity;"
Global Opportunity, Asset Income, Asset Growth and Global Allocation are
sometimes referred to herein collectively as the "Funds;" and Global
Opportunity, Asset Income and Asset Growth are sometimes referred to herein
collectively as the "Acquired Funds."
In the course of the Reorganization, shares of Global Allocation will be
distributed to stockholders of each Acquired Fund as follows: each holder of
Acquired Fund shares will be entitled to receive shares of that class of Global
Allocation having the same letter designation (e.g., Class A, Class B, Class C
or Class D) ("Corresponding Shares"), as the shares of that Acquired Fund owned
by such stockholder as of the Valuation Time (as defined in Section 5(c) of this
Agreement). The aggregate net asset value of the Corresponding Shares of Global
Allocation to be received by each stockholder of an Acquired Fund will equal the
aggregate net asset value of the shares of that Acquired Fund owned by such
stockholder as of the Valuation Time. In consideration therefor, on the Exchange
Date (as defined in Section 9 of this Agreement), Global Allocation shall
acquire substantially all of the assets of each Acquired Fund and assume
substantially all of that Acquired Fund's obligations and liabilities then
existing, whether absolute, accrued, contingent or otherwise. It is intended
that the Reorganization described in this Plan shall be a reorganization within
the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any successor provision.
As promptly as practicable after the consummation of the Reorganization,
the Directors of Asset Income and Asset Growth shall take such action necessary
to dissolve each of those Funds in accordance with the laws of the State of
Maryland and to terminate each of their registrations under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Directors of Asset
Builder shall take such action necessary to terminate Global Opportunity as a
series of Asset Builder in accordance with the laws of the State of Maryland.
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AGREEMENT
In order to consummate the Reorganization and in consideration of the
premises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, each of the Funds hereby agrees as follows:
1. Representations and Warranties of Asset Builder.
Asset Builder represents and warrants to, and agrees with Global
Allocation that:
(a) Asset Builder is a corporation duly organized, validly existing and in
good standing in conformity with the laws of the State of Maryland, and has the
power to own all of its assets and to carry out this Agreement. Asset Builder
has all necessary Federal, state and local authorizations to carry on its
business as it is now being conducted and to carry out this Agreement.
(b) Asset Builder is duly registered under the 1940 Act as an open-end
management investment company (File No. 811-7177), and such registration has not
been revoked or rescinded and is in full force and effect. Asset Builder has
elected and qualified Global Opportunity for the special tax treatment afforded
regulated investment companies ("RICs") under Sections 851-855 of the Code at
all times since Global Opportunity's inception and intends to continue to so
qualify Global Opportunity for the taxable year in which the Exchange Date
occurs.
(c) As used in this Agreement, the term "Global Opportunity Investments"
shall mean (i) the investments of Global Opportunity shown on the schedule of
its investments as of the Valuation Time (as defined in Section 5(c) of this
Agreement) furnished to Global Allocation; and (ii) all other assets owned by
Global Opportunity or liabilities incurred as of the Valuation Time.
(d) Asset Builder has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto.
(e) Global Allocation has been furnished with a statement of assets and
liabilities and a schedule of investments of Global Opportunity, each as of
January 31, 1999, said financial statements having been audited by Deloitte &
Touche LLP, independent public accountants. An unaudited statement of assets and
liabilities of Global Opportunity and an unaudited schedule of investments of
Global Opportunity, each as of the Valuation Time, will be furnished to each of
Asset Income, Asset Growth and Global Allocation at or prior to the Exchange
Date for the purpose of determining the number of shares of Global Allocation to
be issued pursuant to Section 6 of this Agreement; and each will fairly present
the financial position of Global Opportunity as of the Valuation Time in
conformity with generally accepted accounting principles applied on a consistent
basis.
(f) Global Allocation has been furnished with Asset Builder's Annual
Report to Stockholders for the year ended January 31, 1999 and any subsequent
Semi-Annual Report to Stockholders which may be available, and the financial
statements appearing in such reports fairly present the financial position of
Asset Builder and Global Opportunity as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(g) Global Allocation has been furnished with the prospectus and statement
of additional information of Asset Builder with respect to Global Opportunity,
each dated June 1, 1999, and said prospectus and statement of additional
information do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Asset Builder, threatened against it or Global
Opportunity which assert liability on the part of Asset Builder, which
materially affect its financial condition or its ability to consummate the
Reorganization. Neither Asset Builder nor Global Opportunity is charged with
nor, to the best of the knowledge of Asset Builder, threatened with any
violation or investigation of any possible violation of any provisions of any
Federal, state or local law or regulation or administrative ruling relating to
any aspect of its business.
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<PAGE>
(i) There are no material contracts outstanding relating to Global
Opportunity to which Asset Builder is a party that have not been disclosed in
the N-14 Registration Statement (as defined in subsection (o) below) or will not
otherwise be disclosed to Asset Income, Asset Growth or Global Allocation prior
to the Valuation Time.
(j) Asset Builder is not a party to or obligated under any contract or
other commitment or obligation, and is not subject to any order or decree, and
there is no provision of its Articles of Incorporation, as amended, or its
by-laws, as amended, which would be violated by its execution of or performance
under this Agreement.
(k) Global Opportunity has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of assets and
liabilities referred to above, those incurred in the ordinary course of its
business as an investment company since the date of its most recent Annual or
Semi-Annual Report, and those incurred in connection with the Reorganization. As
of the Valuation Time, Asset Builder will advise Global Allocation in writing of
all known liabilities, contingent or otherwise, whether or not incurred in the
ordinary course of business, existing or accrued as of such time with respect to
Global Opportunity.
(l) Asset Builder has filed, or has obtained extensions to file, all
Federal, state and local tax returns which are required to be filed by it, and
has paid or has obtained extensions to pay, all Federal, state and local taxes
shown on said returns to be due and owing and all assessments received by it, up
to and including the taxable year in which the Exchange Date occurs. All tax
liabilities of Asset Builder have been adequately provided for on its books, and
no tax deficiency or liability of Asset Builder has been asserted and no
question with respect thereto has been raised by the Internal Revenue Service or
by any state or local tax authority for taxes in excess of those already paid,
up to and including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, Asset Builder will
have full right, power and authority to sell, assign, transfer and deliver the
Global Opportunity Investments. At the Exchange Date, subject only to the
delivery of the Global Opportunity as contemplated by this Agreement, Asset
Builder will have good and marketable title to all of the Global Opportunity
Investments, and Global Allocation will acquire all of the Global Opportunity
Investments free and clear of any encumbrances, liens or security interests and
without any restrictions upon the transfer thereof (except those imposed by the
Federal or state securities laws and those imperfections of title or
encumbrances as do not materially detract from the value or use of the Global
Opportunity Investments or materially affect title thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Asset Builder of the
Reorganization, except such as may be required under the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the 1940 Act or state securities laws (which term as used
herein shall include the laws of the District of Columbia and Puerto Rico).
(o) The registration statement filed by Global Allocation on Form N-14
relating to the shares of Global Allocation to be issued pursuant to this
Agreement, which includes the combined proxy statement of the Acquired Funds and
the prospectus of Global Allocation with respect to the transactions
contemplated herein, and any supplement or amendment thereto or to the documents
therein (as amended, the "N-14 Registration Statement"), on the effective date
of the N-14 Registration Statement, at the time of the stockholders meetings
referred to in Section 8(a) of this Agreement and on the Exchange Date, insofar
as it relates to Global Opportunity (i) complied or will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder, and (ii) did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
and the prospectus included therein did not or will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations and
warranties in this subsection shall apply only to statements in or omissions
from the N-14 Registration Statement made in reliance upon and in conformity
with information furnished by Global Opportunity for use in the N-14
Registration Statement as provided in Section 8(d) of this Agreement.
(p) Asset Builder is authorized to issue 2,000,000,000 shares of common
stock, par value $.10 per share, of which 28,750,000 have been designated to
Global Opportunity as follows: 6,250,000 Class A shares, 10,000,000 Class B
shares, 6,250,000 Class C shares and 6,250,000 Class D shares, each outstanding
share of which is fully paid, and nonassessable and has full voting rights.
I-3
<PAGE>
(q) The books and records of Asset Builder with respect to Global
Opportunity made available to Global Allocation and/or its counsel are
substantially true and correct and contain no material misstatements or
omissions with respect to the operations of Global Opportunity.
(r) Asset Builder will not sell or otherwise dispose of any of the shares
of Global Allocation to be received in the Reorganization, except in
distribution to the stockholders of Global Opportunity.
2. Representations and Warranties of Asset Income.
Asset Income represents and warrants to, and agrees with Global Allocation
that:
(a) Asset Income is a corporation duly organized, validly existing and in
good standing in conformity with the laws of the State of Maryland, and has the
power to own all of its assets and to carry out this Agreement. Asset Income has
all necessary Federal, state and local authorizations to carry on its business
as it is now being conducted and to carry out this Agreement.
(b) Asset Income is duly registered under the 1940 Act as a
non-diversified, open-end management investment company (File No. 811-7181), and
such registration has not been revoked or rescinded and is in full force and
effect. Asset Income has elected and qualified for the special tax treatment
afforded RICs under Sections 851-855 of the Code at all times since its
inception and intends to continue to so qualify for the taxable year in which
the Exchange Date occurs.
(c) As used in this Agreement, the term "Asset Income Investments" shall
mean (i) the investments of Asset Income shown on the schedule of investments of
Asset Income as of the Valuation Time (as defined in Section 5(c) of this
Agreement) furnished to Global Allocation; and (ii) all other assets owned by
Asset Income or liabilities incurred as of the Valuation Time.
(d) Asset Income has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto.
(e) Global Allocation has been furnished with a statement of assets and
liabilities and a schedule of investments of Asset Income, each as of December
31, 1998, said financial statements having been audited by Deloitte & Touche
LLP, independent public accountants. An unaudited statement of assets and
liabilities of Asset Income and an unaudited schedule of investments of Asset
Income, each as of the Valuation Time, will be furnished to Global Allocation at
or prior to the Exchange Date for the purpose of determining the number of
shares of Global Allocation to be issued pursuant to Section 6 of this
Agreement; and each will fairly present the financial position of Asset Income
as of the Valuation Time in conformity with generally accepted accounting
principles applied on a consistent basis.
(f) Global Allocation has been furnished with Asset Income's Annual Report
to Stockholders for the year ended December 31, 1998, and any subsequent
Semi-Annual Report to Stockholders which may be available, and the financial
statements appearing in such reports fairly present the financial position of
Asset Income as of the respective dates indicated, in conformity with generally
accepted accounting principles applied on a consistent basis.
(g) Global Allocation has been furnished with the prospectus and statement
of additional information of Asset Income, each dated April 30, 1999, and said
prospectus and statement of additional information do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Asset Income, threatened against it which assert
liability on the part of Asset Income or which materially affect its financial
condition or its ability to consummate the Reorganization. Asset Income is not
charged with or, to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal, state
or local law or regulation or administrative ruling relating to any aspect of
its business.
(i) There are no material contracts outstanding to which Asset Income is a
party that have not been disclosed in the N-14 Registration Statement or will
not otherwise be disclosed to Global Allocation prior to the Valuation Time.
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<PAGE>
(j) Asset Income is not a party to or obligated under any contract or
other commitment or obligation, and is not subject to any order or decree, and
there is no provision of its Articles of Incorporation, as amended, or its
by-laws, as amended, which would be violated by its execution of or performance
under this Agreement.
(k) Asset Income has no known liabilities of a material amount, contingent
or otherwise, other than those shown on its statements of assets and liabilities
referred to above, those incurred in the ordinary course of its business as an
investment company since the date of its most recent Annual or Semi-Annual
Report, and those incurred in connection with the Reorganization. As of the
Valuation Time, Asset Income will advise Global Allocation in writing of all
known liabilities, contingent or otherwise, whether or not incurred in the
ordinary course of business, existing or accrued as of such time with respect to
Asset Income.
(l) Asset Income has filed, or has obtained extensions to file, all
Federal, state and local tax returns which are required to be filed by it, and
has paid or has obtained extensions to pay, all Federal, state and local taxes
shown on said returns to be due and owing and all assessments received by it, up
to and including the taxable year in which the Exchange Date occurs. All tax
liabilities of Asset Income have been adequately provided for on its books, and
no tax deficiency or liability of Asset Income has been asserted and no question
with respect thereto has been raised by the Internal Revenue Service or by any
state or local tax authority for taxes in excess of those already paid, up to
and including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, Asset Income will
have full right, power and authority to sell, assign, transfer and deliver the
Asset Income Investments. At the Exchange Date, subject only to the delivery of
the Asset Income Investments as contemplated by this Agreement, Asset Income
will have good and marketable title to all of the Asset Income Investments, and
Global Allocation will acquire all of the Asset Income Investments free and
clear of any encumbrances, liens or security interests and without any
restrictions upon the transfer thereof (except those imposed by the Federal or
state securities laws and those imperfections of title or encumbrances as do not
materially detract from the value or use of the Asset Income Investments or
materially affect title thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Asset Income of the
Reorganization, except such as may be required under the 1933 Act, the 1934 Act
and the 1940 Act or state securities laws.
(o) The N-14 Registration Statement, on its effective date, at the time of
the stockholders' meetings referred to in Section 8(a) of this Agreement and on
the Exchange Date, insofar as it relates to Asset Income (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by Asset Income for use in the N-14
Registration Statement as provided in Section 8(d) of this Agreement.
(p) Asset Income is authorized to issue 400,000,000 shares of common
stock, par value $0.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D common stock, each of which consists of 100,000,000
shares, each outstanding share of which is fully paid, and nonassessable and has
full voting rights.
(q) The books and records of Asset Income made available to Global
Allocation and/or its counsel are substantially true and correct and contain no
material misstatements or omissions with respect to the operations of Asset
Income.
(r) Asset Income will not sell or otherwise dispose of any of the shares
of Global Allocation to be received in the Reorganization, except in
distribution to the stockholders of Asset Income.
3. Representations and Warranties of Asset Growth.
Asset Growth represents and warrants to, and agrees with Global Allocation
that:
(a) Asset Growth is a corporation duly organized, validly existing and in
good standing in conformity with the laws of the State of Maryland, and has the
power to own all of its assets and to carry out this Agreement. Asset
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Growth has all necessary Federal, state and local authorizations to carry on its
business as it is now being conducted and to carry out this Agreement.
(b) Asset Growth is duly registered under the 1940 Act as a
non-diversified, open-end management investment company (File No. 811-7183), and
such registration has not been revoked or rescinded and is in full force and
effect. Asset Growth has elected and qualified for the special tax treatment
afforded RICs under Sections 851-855 of the Code at all times since its
inception and intends to continue to so qualify for the taxable year in which
the Exchange Date occurs.
(c) As used in this Agreement, the term "Asset Growth Investments" shall
mean (i) the investments of Asset Growth shown on the schedule of its
investments as of the Valuation Time (as defined in Section 5(c) of this
Agreement) furnished to Global Allocation; and (ii) all other assets owned by
Asset Growth or liabilities incurred as of the Valuation Time. The Asset Growth
Investments together with the Global Opportunity Investments and the Asset
Income Investments may sometimes be referred to herein collectively as the
"Acquired Fund Investments."
(d) Asset Growth has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, and this Agreement constitutes a valid and binding contract
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto.
(e) Global Allocation has been furnished with a statement of assets and
liabilities and a schedule of investments of Asset Growth, each as of August 31,
1999, said financial statements having been audited by Deloitte & Touche LLP,
independent public accountants. An unaudited statement of assets and liabilities
of Asset Growth and an unaudited schedule of investments of Asset Growth, each
as of the Valuation Time, will be furnished to Global Allocation at or prior to
the Exchange Date for the purpose of determining the number of shares of Global
Allocation to be issued pursuant to Section 6 of this Agreement; and each will
fairly present the financial position of Asset Growth as of the Valuation Time
in conformity with generally accepted accounting principles applied on a
consistent basis.
(f) Global Allocation has been furnished with Asset Growth's Annual Report
to Stockholders for the year ended August 31, 1999, and any subsequent
Semi-Annual Report to Stockholders which may be available, and the financial
statements appearing in such reports fairly present the financial position of
Asset Growth as of the respective dates indicated, in conformity with generally
accepted accounting principles applied on a consistent basis.
(g) Global Allocation has been furnished with the prospectus and statement
of additional information of Asset Growth, each dated December 7, 1999, and said
prospectus and statement of additional information do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Asset Growth, threatened against it which assert
liability on the part of Asset Growth or which materially affect its financial
condition or its ability to consummate the Reorganization. Asset Growth is not
charged with or, to the best of its knowledge, threatened with any violation or
investigation of any possible violation of any provisions of any Federal, state
or local law or regulation or administrative ruling relating to any aspect of
its business.
(i) There are no material contracts outstanding to which Asset Growth is a
party that have not been disclosed in the N-14 Registration Statement or will
not otherwise be disclosed to Global Allocation prior to the Valuation Time.
(j) Asset Growth is not a party to or obligated under any contract or
other commitment or obligation, and is not subject to any order or decree, and
there is no provision of its Articles of Incorporation, as amended, or its
by-laws, as amended, which would be violated by its execution of or performance
under this Agreement.
(k) Asset Growth has no known liabilities of a material amount, contingent
or otherwise, other than those shown on its statements of assets and liabilities
referred to above, those incurred in the ordinary course of its business as an
investment company since the date of its most recent Annual or Semi-Annual
Report, and those incurred in connection with the Reorganization. As of the
Valuation Time, Asset Growth will advise Global
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<PAGE>
Allocation in writing of all known liabilities, contingent or otherwise, whether
or not incurred in the ordinary course of business, existing or accrued as of
such time with respect to Asset Growth.
(l) Asset Growth has filed, or has obtained extensions to file, all
Federal, state and local tax returns which are required to be filed by it, and
has paid or has obtained extensions to pay, all Federal, state and local taxes
shown on said returns to be due and owing and all assessments received by it, up
to and including the taxable year in which the Exchange Date occurs. All tax
liabilities of Asset Growth have been adequately provided for on its books, and
no tax deficiency or liability of Asset Growth has been asserted and no question
with respect thereto has been raised by the Internal Revenue Service or by any
state or local tax authority for taxes in excess of those already paid, up to
and including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, Asset Growth will
have full right, power and authority to sell, assign, transfer and deliver the
Asset Growth Investments. At the Exchange Date, subject only to the delivery of
the Asset Growth Investments as contemplated by this Agreement, Asset Growth
will have good and marketable title to all of the Asset Growth Investments, and
Global Allocation will acquire all of the Asset Growth Investments free and
clear of any encumbrances, liens or security interests and without any
restrictions upon the transfer thereof (except those imposed by the Federal or
state securities laws and those imperfections of title or encumbrances as do not
materially detract from the value or use of the Investments or materially affect
title thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Asset Growth of the
Reorganization, except such as may be required under the 1933 Act, the 1934 Act
and the 1940 Act or state securities laws.
(o) The N-14 Registration Statement, on its effective date, at the time of
the stockholders' meetings referred to in Section 8(a) of this Agreement and on
the Exchange Date, insofar as it relates to Asset Growth (i) complied or will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and the prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information furnished by Asset Growth for use in the N-14
Registration Statement as provided in Section 8(d) of this Agreement.
(p) Asset Growth is authorized to issue 400,000,000 shares of common
stock, par value $0.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D common stock, each of which consists of 100,000,000
shares, each outstanding share of which is fully paid, and nonassessable and has
full voting rights.
(q) The books and records of Asset Growth made available to Global
Allocation and/or its counsel are substantially true and correct and contain no
material misstatements or omissions with respect to the operations of Asset
Growth.
(r) Asset Growth will not sell or otherwise dispose of any of the shares
of Global Allocation to be received in the Reorganization, except in
distribution to the stockholders of Asset Growth.
4. Representations and Warranties of Global Allocation.
Global Allocation represents and warrants to, and agrees with, each of
Global Opportunity, Asset Income and Asset Growth that:
(a) Global Allocation is a corporation duly organized, validly existing
and in good standing in conformity with the laws of the State of Maryland, and
has the power to own all of its assets and to carry out this Agreement. Global
Allocation has all necessary Federal, state and local authorizations to carry on
its business as it is now being conducted and to carry out this Agreement.
(b) Global Allocation is duly registered under the 1940 Act as a
non-diversified, open-end management investment company (File No. 811-5576), and
such registration has not been revoked or rescinded and is in full force and
effect. Global Allocation has elected and qualified for the special tax
treatment afforded RICs under Sections 851-855 of the Code at all times since
its inception, and intends to continue to so qualify both until consummation of
the Reorganization and thereafter.
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(c) Each of the Acquired Funds has been furnished with a statement of
assets and liabilities and a schedule of investments of Global Allocation, each
as of October 31, 1999, said financial statements having been audited by
Deloitte & Touche LLP, independent public accountants. An unaudited statement of
assets and liabilities of Global Allocation and an unaudited schedule of
investments of Global Allocation, each as of the Valuation Time, will be
furnished to each of the Acquired Funds at or prior to the Exchange Date for the
purpose of determining the number of shares of Global Allocation to be issued
pursuant to Section 6 of this Agreement; and each will fairly present the
financial position of Global Allocation as of the Valuation Time in conformity
with generally accepted accounting principles applied on a consistent basis.
(d) Each of the Acquired Funds has been furnished with Global Allocation's
Annual Report to Stockholders for the year ended October 31, 1999, and the
audited financial statements appearing therein fairly present the financial
position of Global Allocation as of the respective dates indicated, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(e) Each of the Acquired Funds has been furnished with the prospectus and
statement of additional information of Global Allocation, each dated March 1,
1999, and said prospectus and statement of additional information do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(f) Global Allocation has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Directors and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(g) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Global Allocation, threatened against it which
assert liability on the part of Global Allocation or which materially affect its
financial condition or its ability to consummate the Reorganization. Global
Allocation is not charged with or, to the best of its knowledge, threatened with
any violation or investigation of any possible violation of any provisions of
any Federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(h) Global Allocation is not a party to or obligated under any contract or
other commitment or obligation, and is not subject to any order or decree, and
there is no provision of its Articles of Incorporation, as amended, or its
by-laws, as amended, which would be violated by its execution of or performance
under this Agreement.
(i) There are no material contracts outstanding to which Global Allocation
is a party that have not been disclosed in the N-14 Registration Statement or
will not otherwise be disclosed to each of the Acquired Funds prior to the
Valuation Time.
(j) Global Allocation has no known liabilities of a material amount,
contingent or otherwise, other than those shown on Global Allocation's
statements of assets and liabilities referred to above, those incurred in the
ordinary course of its business as an investment company since the date of its
most recent Annual or Semi-Annual Report and those incurred in connection with
the Reorganization. As of the Valuation Time, Global Allocation will advise each
of the Acquired Funds in writing of all known liabilities, contingent or
otherwise, whether or not incurred in the ordinary course of business, existing
or accrued as of such time.
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Global Allocation of
the Reorganization, except such as may be required under the 1933 Act, the 1934
Act, the 1940 Act or state securities laws.
(l) The N-14 Registration Statement, on its effective date, at the time of
the stockholders' meetings referred to in Section 8(a) of this Agreement and at
the Exchange Date, insofar as it relates to Global Allocation (i) complied or
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did
not or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the prospectus included therein did not
or will not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection only shall apply to
statements in or omissions from the N-14 Registration Statement made in reliance
upon and in conformity with information furnished by Global Allocation for use
in the N-14 Registration Statement as provided in Section 8(d) of this
Agreement.
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<PAGE>
(m) Global Allocation is authorized to issue 3,550,000,000 shares of
common stock, par value $.10 per share, divided into four classes, designated
Class A, Class B, Class C and Class D Common Stock. Class A consists of
450,000,000 shares, Class B consists of 2,000,000,000 shares, Class C consists
of 200,000,000 shares and Class D consists of 900,000,000 shares, each
outstanding share of which is fully paid and nonassessable and has full voting
rights.
(n) The Global Allocation shares to be issued to each Acquired Fund for
distribution to the stockholders of such Acquired Fund pursuant to this
Agreement will have been duly authorized and, when issued and delivered pursuant
to this Agreement, will be legally and validly issued and will be fully paid and
nonassessable and will have full voting rights, and no stockholder of Global
Allocation will have any preemptive right of subscription or purchase in respect
thereof.
(o) At or prior to the Exchange Date, the Global Allocation shares to be
transferred to each Acquired Fund for distribution to the stockholders of such
Acquired Fund on the Exchange Date will be duly qualified for offering to the
public in all states of the United States in which the sale of shares of the
Acquired Funds presently are qualified, and there are a sufficient number of
such shares registered under the 1933 Act and with each pertinent state
securities commission to permit the transfers contemplated by this Agreement to
be consummated.
(p) At or prior to the Exchange Date, Global Allocation will have obtained
any and all regulatory, Director and stockholder approvals, necessary to issue
the shares of Global Allocation to each Acquired Fund for distribution to the
stockholders of such Acquired Fund.
5. The Reorganization.
(a) Subject to receiving the requisite approval of the stockholders of an
Acquired Fund, and to the other terms and conditions contained herein, such
Acquired Fund agrees to convey, transfer and deliver to Global Allocation for
the benefit of Global Allocation and Global Allocation agrees to acquire from
such Acquired Fund for the benefit of Global Allocation, on the Exchange Date or
Dates all of the Acquired Fund Investments (including interest accrued as of the
relevant Valuation Time on debt instruments) of that Acquired Fund, and assume
substantially all of the liabilities of that Acquired Fund, in exchange solely
for that number of shares of Global Allocation provided in Section 6 of this
Agreement. Pursuant to this Agreement, as soon as practicable on or after the
Exchange Date, each Acquired Fund will distribute all Global Allocation shares
received by it to its respective stockholders in exchange for their
corresponding shares of that Acquired Fund. Such distribution shall be
accomplished by the opening of stockholder accounts on the stock ledger records
of Global Allocation in the amounts due the stockholders of each Acquired Fund
based on their respective holdings in such Acquired Fund as of the applicable
Valuation Time.
(b) Each Acquired Fund will pay or cause to be paid to Global Allocation
any interest it receives on or after the applicable Exchange Date with respect
to the Acquired Fund Investments transferred to Global Allocation hereunder.
(c) The Valuation Time shall be 4:00 p.m. New York time, on , 2000,
or such earlier or later day and time as may be mutually agreed upon in writing
(the "Valuation Time"). As used herein, the term Valuation Time shall mean the
date and time stated in the preceding sentence or with respect to an Acquired
Fund that does not obtain the required vote of its stockholders prior to the
stated date and time, such later date and time as may be agreed upon by such
Acquired Fund and Global Allocation.
(d) Global Allocation will acquire substantially all of the assets of, and
assume all of the known liabilities of, each Acquired Fund, except that recourse
for such liabilities will be limited substantially to the net assets of that
Acquired Fund acquired by Global Allocation. The known liabilities of each
Acquired Fund as of the Valuation Time shall be confirmed in writing to Global
Allocation by that Acquired Fund pursuant to Sections 1(k), 2(k) and 3(k) of
this Agreement.
(e) Global Allocation and each Acquired Fund will jointly file Articles of
Transfer with the State Department of Assessments and Taxation of Maryland and
any such other instrument as may be required by the State of Maryland to effect
the transfer of the Acquired Fund Investments to Global Allocation.
(f) Following the distribution referred to in subparagraph 5(a) above,
Asset Income and Asset Growth will be dissolved by filing Articles of
Dissolution with the State Department of Assessments and Taxation of Maryland,
and Global Opportunity shall be terminated by Asset Builder as a series of Asset
Builder by such action necessary in accordance with the laws of the State of
Maryland.
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6. Issuance and Valuation of Global Allocation Shares in the Reorganization.
Full shares of Global Allocation, and to the extent necessary, any
fractional shares of Global Allocation, of an aggregate net asset value equal to
the net asset value of the assets of each Acquired Fund acquired, determined as
hereinafter provided, reduced by the amount of liabilities of such Acquired Fund
assumed by Global Allocation, shall be issued by Global Allocation in exchange
for such assets of that Acquired Fund. The net asset value of each of the
Acquired Funds and Global Allocation shall be determined in accordance with the
procedures described in the prospectus of Global Allocation dated March 1, 1999
as of the Valuation Time. Such valuation and determination shall be made by
Global Allocation in cooperation with each Acquired Fund. Global Allocation
shall issue its Class A, Class B, Class C and Class D shares to each Acquired
Fund in certificates or share deposit receipts (one in respect of each Class)
registered in the name of that Acquired Fund. Each Acquired Fund shall
distribute Corresponding Shares of Global Allocation to its stockholders by
redelivering such certificates to Financial Data Services, Inc.
7. Payment of Expenses.
(a) With respect to expenses incurred in connection with the
Reorganization, the expenses of the Reorganization that are directly
attributable to each Acquired Fund and the conduct of its business will be
deducted from the assets of that Fund as of the Valuation Time. These expenses
are expected to include the expenses incurred in preparing, printing and mailing
the proxy materials to be utilized in connection with the special meetings of
stockholders and the expenses related to the solicitation of proxies to be voted
at those meetings. Each Acquired Fund will bear its pro rata share of such
expenses based on the number of stockholder accounts. The expenses attributable
to Global Allocation include the costs of printing sufficient copies of its
Prospectus and Annual Report to accompany the Joint Proxy Statement and
Prospectus. The expenses of the Reorganization, including expenses in connection
with obtaining the IRS ruling, the preparation of the Agreement and Plan, legal
fees and audit fees, will be borne equally by each Fund. MLAM has agreed to bear
the expenses of the Reorganization attributable to Global Allocation.
(b) If for any reason the Reorganization is not consummated, no party
shall be liable to any other party for any damages resulting therefrom,
including, without limitation, consequential damages.
8. Covenants of the Funds.
(a) Each Acquired Fund agrees to call a special meeting of its
stockholders to be held as soon as is practicable after the effective date of
the N-14 Registration Statement for the purpose of considering the
Reorganization as described in this Agreement, and it shall be a condition to
the obligations of Global Allocation and each Acquired Fund that the holders of
a majority of the shares of such Acquired Fund issued and outstanding and
entitled to vote thereon, shall have approved this Agreement at such special
meeting at or prior to the Valuation Time.
(b) Each Fund covenants to operate its respective business as presently
conducted between the date hereof and the Exchange Date.
(c) Each Acquired Fund agrees that following the consummation of the
Reorganization, it will dissolve or otherwise terminate in accordance with the
laws of the State of Maryland and any other applicable law, it will not make any
distributions of any Global Allocation shares other than to its stockholders and
without first paying or adequately providing for the payment of all of its
liabilities not assumed by Global Allocation, if any, and on and after the
Exchange Date it shall not conduct any business except in connection with its
dissolution.
(d) Asset Income and Asset Growth each undertakes that if the
Reorganization is consummated, it will file an application pursuant to Section
8(f) of the 1940 Act for an order declaring that Asset Income or Asset Growth,
as the case may be, has ceased to be a registered investment company.
(e) Global Allocation will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. The Acquired Funds and Global Allocation agree to
cooperate fully with each other, and each will furnish to the other the
information relating to itself to be set forth in the N-14 Registration
Statement as required by the 1933 Act, the 1934 Act, the 1940 Act, and the rules
and regulations thereunder and the state securities laws.
(f) No Acquired Fund has any plan or intention to sell or otherwise
dispose of its assets to be acquired in the Reorganization, except for
dispositions made in the ordinary course of business.
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<PAGE>
(g) The Acquired Funds and Global Allocation each agree that by the
Exchange Date all of their Federal and other tax returns and reports required to
be filed on or before such date shall have been filed and all taxes shown as due
on said returns either have been paid or adequate liability reserves have been
provided for the payment of such taxes. In connection with this covenant, Global
Allocation and each Acquired Fund agree to cooperate with each other in filing
any tax return, amended return or claim for refund, determining a liability for
taxes or a right to a refund of taxes or participating in or conducting any
audit or other proceeding in respect of taxes. Global Allocation agrees to
retain for a period of ten (10) years following the Exchange Date all returns,
schedules and work papers and all material records or other documents relating
to tax matters of each Acquired Fund for its taxable period first ending after
the Exchange Date and for all prior taxable periods. Any information obtained
under this subsection shall be kept confidential except as otherwise may be
necessary in connection with the filing of returns or claims for refund or in
conducting an audit or other proceeding. After the Exchange Date, each Acquired
Fund shall prepare, or cause its agents to prepare, any Federal, state or local
tax returns, including any Forms 1099, required to be filed by or with respect
to it with respect to its final taxable year ending with its complete
liquidation and for any prior periods or taxable years and further shall cause
such tax returns and Forms 1099 to be duly filed with the appropriate taxing
authorities. Notwithstanding the aforementioned provisions of this subsection,
each Acquired Fund shall bear any expenses incurred by it (other than for
payment of taxes) in connection with the preparation and filing of said tax
returns and Forms 1099 after the Exchange Date to the extent that the Acquired
Fund accrued such expenses in the ordinary course without regard to the
Reorganization; any excess expenses shall be borne by Merrill Lynch Asset
Management, L.P. ("MLAM") at the time such tax returns and Forms 1099 are
prepared.
(h) Each Acquired Fund agrees to mail to its stockholders of record
entitled to vote at the special meeting of stockholders at which action is to be
considered regarding this Agreement, in sufficient time to comply with
requirements as to notice thereof, a combined Proxy Statement and Prospectus
which complies in all material respects with the applicable provisions of
Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act, and the rules
and regulations, respectively, thereunder.
(i) Following the consummation of the Reorganization, Global Allocation
expects to stay in existence and continue its business as an open-end management
investment company registered under the 1940 Act.
9. Exchange Date.
(a) Delivery of the assets of each Acquired Fund to be transferred,
together with any other Acquired Fund Investments of such Acquired Fund, and the
Global Allocation shares to be issued to such Acquired Fund, shall be made at
the offices of Brown & Wood LLP, One World Trade Center, New York, New York
10048, at 10:00 A.M. on the next full business day following the Valuation Time,
or at such other place, time and date agreed to by such Acquired Fund and Global
Allocation, the date and time upon which such delivery is to take place being
referred to herein as the "Exchange Date." To the extent that any Acquired Fund
Investments of an Acquired Fund, for any reason, are not transferable on the
Exchange Date, such Acquired Fund shall cause such Investments to be transferred
to Global Allocation's account with Brown Brothers Harriman & Co. at the
earliest practicable date thereafter.
(b) Each of the Acquired Funds will deliver to Global Allocation on the
Exchange Date confirmations or other adequate evidence as to the tax basis of
each of their respective Acquired Fund Investments delivered to Global
Allocation hereunder, certified by Deloitte & Touche LLP.
(c) As soon as practicable after the close of business on the Exchange
Date, each Acquired Fund shall deliver to Global Allocation a list of the names
and addresses of all of its stockholders of record on the Exchange Date and the
number of shares owned by each such stockholder, certified to the best of its
knowledge and belief by the transfer agent for that Acquired Fund or by its
President.
(d) As used in this section and throughout this Agreement, Exchange Date
shall mean the date on which the Reorganization is consummated as to an Acquired
Fund. The parties agree that the Reorganization may be consummated separately as
to each Acquired Fund on one or more Exchange Dates.
10. Conditions of the Acquired Funds.
The obligations of each Acquired Fund hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the affirmative vote of the holders of a majority
of the shares of that Acquired Fund, issued and outstanding and entitled to vote
thereon, voting together as a single class, and the affirmative vote of a
majority of the Board of
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Directors of Global Allocation; and that Global Allocation shall have delivered
to that Acquired Fund a copy of the resolution approving this Agreement adopted
by Global Allocation's Board of Directors, certified by the Secretary of Global
Allocation.
(b) That Global Allocation shall have furnished to that Acquired Fund a
statement of Global Allocation's assets and liabilities, with values determined
as provided in Section 6 of this Agreement, together with a schedule of its
investments, all as of the Valuation Time, certified on Global Allocation's
behalf by its President (or any Vice President) and its Treasurer, and a
certificate signed by Global Allocation's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that as of the
Valuation Time and as of the Exchange Date there has been no material adverse
change in the financial position of Global Allocation since the date of Global
Allocation's most recent Annual or Semi-Annual Report as applicable, other than
changes in its portfolio securities since that date or changes in the market
value of its portfolio securities.
(c) That Global Allocation shall have furnished to that Acquired Fund a
certificate signed by Global Allocation's President (or any Vice President) and
its Treasurer, dated as of the Exchange Date, certifying that, as of the
Valuation Time and as of the Exchange Date all representations and warranties of
Global Allocation made in this Agreement are true and correct in all material
respects with the same effect as if made at and as of such dates, and that
Global Allocation has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied at or prior to each of
such dates.
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(e) That each Acquired Fund shall have received an opinion of Brown & Wood
LLP, as counsel to Global Allocation, in form satisfactory to that Acquired Fund
and dated the Exchange Date, to the effect that (i) Global Allocation is a
corporation duly organized, validly existing and in good standing in conformity
with the laws of the State of Maryland; (ii) the Corresponding Shares of Global
Allocation to be issued pursuant to this Agreement are duly authorized and, upon
delivery, will be validly issued and outstanding and fully paid and
nonassessable by Global Allocation, and no stockholder of Global Allocation has
any preemptive right to subscription or purchase in respect thereof (pursuant to
the Articles of Incorporation, as amended, or the by-laws of Global Allocation
or, to the best of such counsel's knowledge, otherwise); (iii) this Agreement
has been duly authorized, executed and delivered by Global Allocation, and
represents a valid and binding contract, enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto; provided, such counsel shall express
no opinion with respect to the application of equitable principles in any
proceeding, whether at law or in equity; (iv) the execution and delivery of this
Agreement does not, and the consummation of the Reorganization will not, violate
any material provisions of Maryland law or of the Articles of Incorporation, as
amended, the by-laws, or any agreement (known to such counsel) to which Global
Allocation is a party or by which Global Allocation is bound, except insofar as
the parties have agreed to amend such provision as a condition precedent to the
Reorganization; (v) to the best of such counsel's knowledge, no consent,
approval, authorization or order of any United States federal court, Maryland
state court or governmental authority is required for the consummation by Global
Allocation of the Reorganization, except such as have been obtained under
Maryland law; (vi) the N-14 Registration Statement has become effective under
the 1933 Act, no stop order suspending the effectiveness of the N-14
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the 1933 Act, and the N-14
Registration Statement, and each amendment or supplement thereto, as of their
respective effective dates, appear on their face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, the 1934 Act and
the 1940 Act and the published rules and regulations of the Commission
thereunder; (vii) the descriptions in the N-14 Registration Statement of
statutes, legal and governmental proceedings and contracts and other documents
are accurate and fairly present the information required to be shown; (viii)
such counsel does not know of any statutes, legal or governmental proceedings or
contracts or other documents related to the Reorganization of a character
required to be described in the N-14 Registration Statement which are not
described therein or, if required to be filed, filed as required; (ix) Global
Allocation, to the knowledge of such counsel, is not required to qualify to do
business as a foreign corporation in any jurisdiction except as may be required
by state securities laws, and except where it has so qualified or the failure so
to qualify would not have a material adverse effect on Global Allocation or its
stockholders; (x) such counsel does not have actual knowledge of any material
suit, action or legal or administrative proceeding pending or threatened against
Global Allocation, the unfavorable outcome of which would materially and
adversely affect Global Allocation; (xi) all corporate actions required to
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<PAGE>
be taken by Global Allocation to authorize this Agreement and to effect the
Reorganization have been duly authorized by all necessary corporate actions; and
(xii) such opinion is solely for the benefit of that Acquired Fund and its
Directors and officers. Such opinion also shall state that (x) while such
counsel cannot make any representation as to the accuracy or completeness of
statements of fact in the N-14 Registration Statement or any amendment or
supplement thereto, nothing has come to their attention that would lead them to
believe that, on the respective effective dates of the N-14 Registration
Statement and any amendment or supplement thereto, (1) the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (2) the
proxy statement and prospectus included in the N-14 Registration Statement
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (y) such counsel
does not express any opinion or belief as to the financial statements or other
financial or statistical data relating to Global Allocation contained or
incorporated by reference in the N-14 Registration Statement. In giving the
opinion set forth above, Brown & Wood LLP may state that it is relying on
certificates of officers of Global Allocation with regard to matters of fact and
certain certificates and written statements of governmental officials with
respect to the good standing of Global Allocation.
(f) That the Acquired Funds shall have received either (a) a private
letter ruling from the Internal Revenue Service or (b) an opinion of Brown &
Wood LLP to the effect that for Federal income tax purposes (i) the transfer of
substantially all of the Investments of the Acquired Funds to Global Allocation
in exchange solely for shares of Global Allocation as provided in this Agreement
will constitute a reorganization within the meaning of Section 368(a)(1)(C) of
the Code, each Acquired Fund and Global Allocation will be deemed to be a
"party" to the Reorganization within the meaning of Section 368(b); (ii) in
accordance with Section 361(a) of the Code, no gain or loss will be recognized
to an Acquired Fund as a result of the asset transfer solely in exchange for
Global Allocation shares or on the distribution of the Global Allocation stock
to stockholders of the Acquired Fund under Section 361(c)(1); (iii) under
Section 1032 of the Code, no gain or loss will be recognized to Global
Allocation on the receipt of assets of an Acquired Fund in exchange for Global
Allocation shares; (iv) in accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized to the stockholders of the Acquired Fund on the
receipt of Corresponding Shares of Global Allocation in exchange for their
shares of the Acquired Fund; (v) in accordance with Section 362(b) of the Code,
the tax basis of the Acquired Fund's assets in the hands of Global Allocation
will be the same as the tax basis of such assets in the hands of the Acquired
Fund immediately prior to the consummation of the Reorganization; (vi) in
accordance with Section 358 of the Code, immediately after the Reorganization,
the tax basis of the Corresponding Shares of Global Allocation received by the
stockholders of the Acquired Fund in the Reorganization will be equal to the tax
basis of the shares of the Acquired Fund surrendered in exchange; (vii) in
accordance with Section 1223 of the Code, a stockholder's holding period for the
Corresponding Shares of Global Allocation will be determined by including the
period for which such stockholder held the Acquired Fund shares exchanged
therefor, provided, that such shares were held as a capital asset; (viii) in
accordance with Section 1223 of the Code, Global Allocation's holding period
with respect to the Acquired Fund's assets transferred will include the period
for which such assets were held by the Acquired Fund; and (ix) pursuant to
Section 381(a) of the Code and regulations thereunder, Global Allocation will
succeed to and take into account certain tax attributes of the Acquired Fund,
such as earnings and profits, capital loss carryovers and method of accounting.
(g) That all proceedings taken by Global Allocation and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to that Acquired Fund and its counsel.
(h) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Global Allocation, contemplated by the
Commission.
(i) That the Acquired Fund shall have received from Deloitte & Touche LLP
a letter dated within three days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Exchange Date, in form and substance satisfactory to it, to the effect that (i)
they are independent public accountants with respect to Global Allocation within
the meaning of the 1933 Act and the applicable published rules and regulations
thereunder; (ii) in their opinion, the financial statements and supplementary
information of Global Allocation included or incorporated by reference in the
N-14 Registration Statement and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and
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the published rules and regulations thereunder; and (iii) on the basis of
limited procedures agreed upon by the Acquired Fund and described in such letter
(but not an examination in accordance with generally accepted auditing
standards) consisting of a reading of any unaudited interim financial statements
and unaudited supplementary information of Global Allocation included in the
N-14 Registration Statement, and inquiries of certain officials of Global
Allocation responsible for financial and accounting matters, nothing came to
their attention that caused them to believe that (a) such unaudited financial
statements and related unaudited supplementary information do not comply as to
form in all material respects with the applicable accounting requirements of the
1933 Act and the published rules and regulations thereunder, (b) such unaudited
financial statements are not fairly presented in conformity with generally
accepted accounting principles, applied on a basis substantially consistent with
that of the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by the Acquired Fund and described in such letter
(but not an examination in accordance with generally accepted auditing
standards), the information relating to Global Allocation appearing in the N-14
Registration Statement, which information is expressed in dollars (or
percentages derived from such dollars) (with the exception of performance
comparisons, if any), if any, has been obtained from the accounting records of
Global Allocation or from schedules prepared by officials of Global Allocation
having responsibility for financial and reporting matters and such information
is in agreement with such records, schedules or computations made therefrom.
(j) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
with respect to that Acquired Fund under Section 25(c) of the 1940 Act, and no
other legal, administrative or other proceeding shall be instituted or
threatened which would materially affect the financial condition of Global
Allocation or would prohibit the Reorganization with respect to that Acquired
Fund.
(k) That Acquired Fund shall have received from the Commission such orders
or interpretations as Brown & Wood LLP, as counsel to Global Opportunity, or
Clifford Chance Rogers & Wells LLP, as counsel to Asset Income and Asset Growth,
deem reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization, with respect to that Acquired Fund provided,
that such counsel shall have requested such orders as promptly as practicable,
and all such orders shall be in full force and effect.
11. Global Allocation Conditions.
The obligations of Global Allocation hereunder with respect to each
Acquired Fund shall be subject to the following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Directors of that Acquired Fund and by
the affirmative vote of the holders of a majority of the shares of common stock
of that Acquired Fund issued and outstanding and entitled to vote thereon,
voting together as a single class; and that such Acquired Fund shall have
delivered to Global Allocation a copy of the resolution approving this Agreement
adopted by that Acquired Fund's Board of Directors, and a certificate setting
forth the vote that Acquired Fund's stockholders obtained, each certified by the
Secretary of that Acquired Fund.
(b) That Acquired Fund shall have furnished to Global Allocation a
statement of its assets and liabilities, with values determined as provided in
Section 6 of this Agreement, together with a schedule of investments with their
respective dates of acquisition and tax costs, all as of the Valuation Time,
certified on such Acquired Fund's behalf by its President (or any Vice
President) and its Treasurer, and a certificate of both such officers, dated the
Exchange Date, certifying that as of the Valuation Time and as of the Exchange
Date there has been no material adverse change in the financial position of the
Acquired Fund since the date of such Acquired Fund's most recent Annual or
Semi-Annual Report, as applicable, other than changes in the Acquired Fund
Investments of that Acquired Fund since that date or changes in the market value
of the Acquired Fund Investments of that Acquired Fund.
(c) That Acquired Fund shall have furnished to Global Allocation a
certificate signed by such Fund's President (or any Vice President) and its
Treasurer, dated the Exchange Date, certifying that as of the Valuation Time and
as of the Exchange Date all representations and warranties of the Acquired Fund
made in this Agreement are true and correct in all material respects with the
same effect as if made at and as of such dates and the Acquired Fund has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied at or prior to such dates.
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<PAGE>
(d) That Acquired Fund shall have delivered to Global Allocation a letter
from Deloitte & Touche LLP, dated the Exchange Date, stating that such firm has
performed a limited review of the Federal, state and local income tax returns of
the Acquired Fund for the period ended January 31, 1999 with respect to Global
Opportunity, December 31, 1998 with respect to Asset Income and August 31, 1999
with respect to Asset Growth (which returns were prepared and filed by the
respective Acquired Fund), and that based on such limited review, nothing came
to their attention which caused them to believe that such returns did not
properly reflect, in all material respects, the Federal, state and local income
taxes of the Acquired Fund for the period covered thereby; and that for the
period from February 1, 1999 with respect to Global Opportunity, January 1, 1999
with respect to Asset Income and September 1, 1999 with respect to Asset Growth,
to and including the Exchange Date and for any taxable year of such Acquired
Fund ending upon the liquidation of that Acquired Fund, such firm has performed
a limited review to ascertain the amount of applicable Federal, state and local
taxes, and has determined that either such amount has been paid or reserves
established for payment of such taxes, this review to be based on unaudited
financial data; and that based on such limited review, nothing has come to their
attention which caused them to believe that the taxes paid or reserves set aside
for payment of such taxes were not adequate in all material respects for the
satisfaction of Federal, state and local taxes for the period from February 1,
1999 with respect to Global Opportunity, January 1, 1999 with respect to Asset
Income and September 1, 1999 with respect to Asset Growth, to and including the
Exchange Date and for any taxable year of that Acquired Fund ending upon the
liquidation of such Acquired Fund or that such Acquired Fund would not continue
to qualify as a regulated investment company for Federal income tax purposes.
(e) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(f) That with respect to Global Opportunity, Global Allocation shall have
received an opinion of Brown & Wood LLP, as counsel to Asset Builder, in form
and substance satisfactory to Global Allocation and dated the Exchange Date, to
the effect that (i) Asset Builder is a corporation duly organized, validly
existing and in good standing in conformity with the laws of the State of
Maryland; (ii) this Agreement has been duly authorized, executed and delivered
by Asset Builder, represents a valid and binding contract, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto; provided,
such counsel shall express no opinion with respect to the application of
equitable principles in any proceeding, whether at law or in equity; (iii) the
execution and delivery of this Agreement does not, and the consummation of the
Reorganization will not, violate any material provisions of Maryland law or of
the Articles of Incorporation, as amended, the by-laws, or any agreement (known
to such counsel) to which Asset Builder is a party or by which Global
Opportunity is bound, except insofar as the parties have agreed to amend such
provision as a condition precedent to the Reorganization; (iv) Asset Builder has
the power to sell, assign, transfer and deliver the assets transferred by it
hereunder and, upon consummation of the Reorganization in accordance with the
terms of this Agreement, Asset Builder will have duly transferred such assets
and liabilities in accordance with this Agreement; (v) to the best of such
counsel's knowledge, no consent, approval, authorization or order of any United
States federal court, Maryland state court or governmental authority is required
for the consummation by Global Opportunity of the Reorganization, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and the
published rules and regulations of the Commission thereunder and such as may be
required under state securities laws and Maryland law; (vi) the proxy statement
of Asset Builder contained in the N-14 Registration Statement, and each
amendment or supplement thereto, as of their respective effective dates, appear
on their face to be appropriately responsive in all material respects to the
requirements of the 1933 Act, the 1934 Act and the 1940 Act and the published
rules and regulations of the Commission thereunder insofar as those requirements
relate to information regarding Asset Builder and Global Opportunity; (vii) the
descriptions in the proxy statement contained in the N-14 Registration Statement
of statutes, legal and governmental proceedings insofar as those requirements
relate to information regarding Asset Builder and Global Opportunity and
contracts and other documents are accurate and fairly present the information
required to be shown; (viii) such counsel does not know of any statutes, legal
or governmental proceedings or contracts or other documents related to the
Reorganization of a character required to be described in the N-14 Registration
Statement which are not described therein or, if required to be filed, filed as
required; (ix) Asset Builder, to the knowledge of such counsel, is not required
to qualify to do business as a foreign corporation in any jurisdiction except as
may be required by state securities laws, and except where it has so qualified
or the failure so to qualify would not have a material adverse effect on Asset
Builder, or its stockholders; (x) such counsel does not have actual knowledge of
any material suit, action or legal or administrative proceeding pending or
threatened against Asset Builder, the
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<PAGE>
unfavorable outcome of which would materially and adversely affect Asset
Builder; (xi) all corporate actions required to be taken by Asset Builder to
authorize this Agreement and to effect the Reorganization have been duly
authorized by all necessary corporate actions; and (xii) such opinion is solely
for the benefit of Global Allocation and its Directors and officers. Such
opinion also shall state that (a) while such counsel cannot make any
representation as to the accuracy or completeness of statements of fact in the
N-14 Registration Statement or any amendment or supplement thereto, nothing has
come to their attention that would lead them to believe that, on the respective
effective dates of the N-14 Registration Statement and any amendment or
supplement thereto, (1) the N-14 Registration Statement or any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and (2) the proxy statement and
prospectus included in the N-14 Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (b) such counsel does not express any opinion or
belief as to the financial statements or other financial or statistical data
relating to Asset Builder or Global Opportunity contained or incorporated by
reference in the N-14 Registration Statement. In giving the opinion set forth
above, Brown & Wood LLP may state that it is relying on certificates of officers
of Asset Builder with regard to matters of fact and certain certificates and
written statements of governmental officials with respect to the good standing
of Asset Builder.
(g) That Global Allocation shall have received an opinion of Brown & Wood
LLP, as Maryland counsel to both Asset Income and Asset Growth, as to Maryland
law in form satisfactory to Global Allocation and dated the Exchange Date, to
the effect that (i) each of Asset Income and Asset Growth is a corporation duly
organized, validly existing and in good standing in conformity with the laws of
the State of Maryland; (ii) this Agreement has been duly authorized, executed
and delivered by each of Asset Income and Asset Growth, and represents a valid
and binding contract, enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto; provided, such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding, whether at
law or in equity; (iii) Asset Growth and Asset Income each has the power to
sell, assign, transfer and deliver the assets transferred by it hereunder and,
upon consummation of the Reorganization in accordance with this Agreement, Asset
Growth and Asset Income will each have duly transferred such assets and
liabilities in accordance with this Agreement; (iv) the execution and delivery
of this Agreement by Asset Growth and Asset Income do not, and the consummation
of the Reorganization will not, violate any material provisions of Maryland law
or of the Articles of Incorporation, as amended, or the by-laws, as amended, of
such Fund (v) to the best of counsel's knowledge no consent, approval,
authorization or order of any Maryland court or governmental authority is
required for the consummation by Asset Income or Asset Growth of the
Reorganization, except such as have been obtained under Maryland law; (vi) all
corporate actions required to be taken by Asset Growth or Asset Income to
authorize this Agreement and to effect the Reorganization have been duly
authorized by all necessary corporate actions; and (vii) such opinion is solely
for the benefit of Global Allocation and its Directors and officers. In giving
the opinion set forth above, Brown & Wood LLP may state that it is relying on
certificates of officers of Asset Income or Asset Growth with regard to matters
of fact and certain certificates and written statements of government officials
with respect to the good standing of Asset Income or Asset Growth.
(h) That Global Allocation shall have received an opinion of Clifford
Chance Rogers & Wells LLP, as counsel to both Asset Income and Asset Growth, in
form satisfactory to Global Allocation and dated the Exchange Date, to the
effect that (i) upon consummation of the Reorganization in accordance with the
terms of this Agreement, each of Asset Income and Asset Growth will have duly
transferred its assets and liabilities in accordance with this Agreement; (ii)
to the best of such counsel's knowledge, no consent, approval, authorization or
order of any United States federal court or governmental authority is required
for the consummation by Asset Income or Asset Growth of the Reorganization,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act and the published rules and regulations of the Commission thereunder and
such as may be required under state securities laws; (iii) the proxy statement
of Asset Growth and Asset Income contained in the N-14 Registration Statement,
and each amendment or supplement thereto, as of their respective effective
dates, appear on their face to be appropriately responsive in all material
respects to the requirements of the 1933 Act, the 1934 Act and the 1940 Act and
the published rules and regulations of the Commission thereunder insofar as
those requirements relate to information regarding Asset Income or Asset Growth;
(iv) insofar as those requirements relate to information regarding Asset Income
or Asset Growth, the descriptions in the proxy statement contained in the N-14
Registration Statement of statutes, legal and governmental proceedings and
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<PAGE>
contracts and other documents are accurate and fairly present the information
required to be shown; (v) such counsel does not know of any statutes, legal or
governmental proceedings or contracts or other documents related to the
Reorganization of Asset Income or Asset Growth of a character required to be
described in the N-14 Registration Statement which are not described therein or,
if required to be filed, filed as required; (vi) neither Asset Income nor Asset
Growth, to the knowledge of such counsel, is required to qualify to do business
as a foreign corporation in any jurisdiction except as may be required by state
securities laws, and except where each has so qualified or the failure so to
qualify would not have a material adverse effect on Asset Income or Asset
Growth, or their respective stockholders; (vii) such counsel does not have
actual knowledge of any material suit, action or legal or administrative
proceeding pending or threatened against Asset Income or Asset Growth, the
unfavorable outcome of which would materially and adversely affect Global
Allocation; and (viii) such opinion is solely for the benefit of Global
Allocation and its Directors and officers. Such opinion also shall state that
(x) while such counsel cannot make any representation as to the accuracy or
completeness of statements of fact in the N-14 Registration Statement or any
amendment or supplement thereto, nothing has come to their attention that would
lead them to believe that, on the respective effective dates of the N-14
Registration Statement and any amendment or supplement thereto, (1) the N-14
Registration Statement or any amendment or supplement thereto insofar as it
relates to Asset Income or Asset Growth contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (2) the
proxy statement and prospectus included in the N-14 Registration Statement
insofar as it relates to Asset Income or Asset Growth contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (y) such counsel does not express any opinion or
belief as to the financial statements or other financial or statistical data
relating to Asset Income or Asset Growth contained or incorporated by reference
in the N-14 Registration Statement. In giving the opinion set forth above,
Clifford Chance Rogers & Wells LLP may state that it is relying on certificates
of officers of Asset Income and Asset Growth with regard to matters of fact and
certain certificates and written statements of governmental officials with
respect to the good standing of Asset Income and Asset Growth and on the opinion
of Brown & Wood LLP as to matters of Maryland law.
(i) That Global Allocation shall have received a private letter ruling
from the Internal Revenue Service or an opinion of Brown & Wood LLP with respect
to the matters specified in Section 10(f) of this Agreement.
(j) With respect to each Acquired Fund, that Global Allocation shall have
received from Deloitte & Touche LLP a letter dated within three days prior to
the effective date of the N-14 Registration Statement and a similar letter dated
within five days prior to the Exchange Date, in form and substance satisfactory
to Global Allocation, to the effect that (i) they are independent public
accountants with respect to that Acquired Fund within the meaning of the 1933
Act and the applicable published rules and regulations thereunder; (ii) in their
opinion, the financial statements and supplementary information of that Acquired
Fund included or incorporated by reference in the N-14 Registration Statement
and reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder; (iii) on the basis of limited procedures agreed upon by
the Acquired Fund and Global Allocation and described in such letter (but not an
examination in accordance with generally accepted auditing standards) consisting
of a reading of any unaudited interim financial statements and unaudited
supplementary information of the Acquired Fund included in the N-14 Registration
Statement, and inquiries of certain officials of the Acquired Fund responsible
for financial and accounting matters, nothing came to their attention that
caused them to believe that (a) such unaudited financial statements and related
unaudited supplementary information do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder, (b) such unaudited financial
statements are not fairly presented in conformity with generally accepted
accounting principles, applied on a basis substantially consistent with that of
the audited financial statements, or (c) such unaudited supplementary
information is not fairly stated in all material respects in relation to the
unaudited financial statements taken as a whole; and (iv) on the basis of
limited procedures agreed upon by Global Allocation and the Acquired Fund and
described in such letter (but not an examination in accordance with generally
accepted auditing standards), the information relating to the Acquired Fund
appearing in the N-14 Registration Statement, which information is expressed in
dollars (or percentages derived from such dollars) (with the exception of
performance comparisons, if any), if any, has been obtained from the accounting
records of such Acquired Fund or from schedules prepared by officials of such
Acquired Fund having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations made
therefrom.
I-17
<PAGE>
(k) That the Acquired Fund Investments of that Acquired Fund to be
transferred to Global Allocation shall not include any assets or liabilities
which Global Allocation, by reason of charter limitations or otherwise, may not
properly acquire or assume.
(l) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of that Acquired Fund, contemplated by the
Commission.
(m) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
with respect to that Acquired Fund under Section 25(c) of the 1940 Act, and no
other legal, administrative or other proceeding shall be instituted or
threatened which would materially affect the financial condition of the Acquired
Fund or would prohibit the Reorganization with respect to that Acquired Fund.
(n) That Global Allocation shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to Global Allocation,
deems reasonably necessary or desirable under the 1933 Act and the 1940 Act in
connection with the Reorganization with respect to that Acquired Fund, provided,
that such counsel shall have requested such orders as promptly as practicable,
and all such orders shall be in full force and effect.
(o) That all proceedings taken by that Acquired Fund and its counsel in
connection with the Reorganization and all documents incidental thereto shall be
satisfactory in form and substance to Global Allocation.
(p) That prior to the Exchange Date, that Acquired Fund shall have
declared a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its stockholders all of its
investment company taxable income for the period to and including the Exchange
Date, if any (computed without regard to any deduction for dividends paid), and
all of its net capital gain, if any, realized to and including the Exchange
Date.
12. Termination, Postponement and Waivers.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization with respect to an
Acquired Fund abandoned at any time (whether before or after adoption thereof by
the stockholders of that Acquired Fund) prior to the Exchange Date, or the
Exchange Date may be postponed with respect to that Reorganization, (i) by
mutual consent of the Boards of Directors of Global Allocation and that Acquired
Fund; (ii) by the Board of Directors of the Acquired Fund if any condition of
that Acquired Fund's obligations set forth in Section 10 of this Agreement has
not been fulfilled or waived by such Board; or (iii) by the Board of Directors
of Global Allocation if any condition of Global Allocation's obligations with
respect to that Reorganization set forth in Section 11 of this Agreement has not
been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement with respect to the
Reorganization of an Acquired Fund have not been consummated by , 2000,
this Agreement automatically shall terminate on that date with respect to that
Acquired Fund, unless a later date is mutually agreed to by the Boards of
Directors of Global Allocation and that Acquired Fund.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof with respect to the Reorganization of an Acquired Fund, the
same shall become void and have no further effect, and there shall not be any
liability on the part of Global Allocation and that Acquired Fund or persons who
are their directors, trustees, officers, agents or stockholders in respect of
this Agreement.
(d) At any time prior to the Exchange Date, any of the terms or conditions
of this Agreement may be waived by the Board of Directors of any Fund (whichever
is entitled to the benefit thereof), if, in the judgment of such Board after
consultation with its counsel, such action or waiver will not have a material
adverse effect on the benefits intended under this Agreement to the stockholders
of the Fund, on behalf of which such action is taken. In addition, the Boards of
Directors of the Funds have delegated to MLAM the ability to make non-material
changes to the transaction if it deems it to be in the best interests of the
Funds to do so.
(e) The respective representations and warranties contained in Sections 1,
2, 3 and 4 of this Agreement relating to Global Allocation and each of the
Acquired Funds shall expire with, and be terminated by, the consummation of the
Reorganization with respect to that Acquired Fund, and neither Global Allocation
or that
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<PAGE>
Acquired Fund nor any of its officers, directors or trustees, agents or
stockholders shall have any liability with respect to such representations or
warranties after the Exchange Date for that Reorganization. This provision shall
not protect any officer, director or trustee, agent or stockholder of any Fund
against any liability to the entity for which that officer, director or trustee,
agent or stockholder so acts or to its stockholders, to which that officer,
director or trustee, agent or stockholder otherwise would be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties in the conduct of such office.
(f) If any order or orders of the Commission with respect to this
Agreement relating to the Reorganization of an Acquired Fund shall be issued
prior to the Exchange Date and shall impose any terms or conditions which are
determined by action of the Boards of Directors of Global Allocation and that
Acquired Fund to be acceptable, such terms and conditions shall be binding as if
a part of this Agreement without further vote or approval of the stockholders of
the Acquired Fund unless such terms and conditions shall result in a change in
the method of computing the number of shares of Global Allocation to be issued
to the Acquired Fund in which event, unless such terms and conditions shall have
been included in the proxy solicitation materials furnished to the stockholders
of the Acquired Fund prior to the meeting at which that Reorganization shall
have been approved, as to that Reorganization this Agreement shall not be
consummated and shall terminate unless the Acquired Fund promptly shall call a
special meeting of stockholders at which such conditions so imposed shall be
submitted for approval.
13. Indemnification.
(a) Each Acquired Fund hereby agrees severally to indemnify and hold
Global Allocation harmless from all loss, liability and expense (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which Global Allocation may incur or sustain by reason of the fact that
(i) Global Allocation shall be required to pay any corporate obligation of such
Acquired Fund, whether consisting of tax deficiencies or otherwise, based upon a
claim or claims against such Acquired Fund which were omitted or not fairly
reflected in the financial statements to be delivered to Global Allocation in
connection with the Reorganization of that Acquired Fund; (ii) any
representations or warranties made by such Acquired Fund in this Agreement
should prove to be false or erroneous in any material respect; (iii) any
covenant of such Acquired Fund has been breached in any material respect; or
(iv) any claim is made alleging that (a) the N-14 Registration Statement
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or (b) the Proxy Statement and Prospectus delivered to
the stockholders of that Acquired Fund and forming a part of the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such claim is based on written information furnished to the
Acquired Fund by Global Allocation or the other Acquired Funds.
(b) Global Allocation hereby agrees to indemnify and hold each Acquired
Fund harmless severally from all loss, liability and expenses (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which such Acquired Fund may incur or sustain by reason of the fact that
(i) any representations or warranties made by Global Allocation in this
Agreement should prove false or erroneous in any material respect, (ii) any
covenant of Global Allocation has been breached in any material respect, or
(iii) any claim is made alleging that (a) the N-14 Registration Statement
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, not misleading or (b) the Joint Proxy Statement and Prospectus
delivered to stockholders of the Acquired Fund and forming a part of the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such claim is based on written information furnished to Global
Allocation by the Acquired Fund seeking indemnification.
(c) In the event that any claim is made against Global Allocation in
respect of which indemnity may be sought by Global Allocation from an Acquired
Fund under Section 13(a) of this Agreement, or in the event that any claim is
made against an Acquired Fund in respect of which indemnity may be sought by
such Acquired Fund from Global Allocation under Section 13(b) of this Agreement,
then the party seeking indemnification (the "Indemnified Party"), with
reasonable promptness and before payment of such claim, shall give written
notice of such claim to the other party (the "Indemnifying Party"). If no
objection as to the validity of the claim is made in writing to the Indemnified
Party by the Indemnifying Party within thirty (30) days after the giving of
notice
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hereunder, then the Indemnified Party may pay such claim and shall be entitled
to reimbursement therefor, pursuant to this Agreement. If, prior to the
termination of such thirty-day period, objection in writing as to the validity
of such claim is made to the Indemnified Party, the Indemnified Party shall
withhold payment thereof until the validity of such claim is established (i) to
the satisfaction of the Indemnifying Party, or (ii) by a final determination of
a court of competent jurisdiction, whereupon the Indemnified Party may pay such
claim and shall be entitled to reimbursement thereof, pursuant to this
Agreement, or (iii) with respect to any tax claims, within seven (7) calendar
days following the earlier of (A) an agreement between the Acquired Fund seeking
indemnification and Global Allocation that an indemnity amount is payable, (B)
an assessment of a tax by a taxing authority, or (C) a "determination" as
defined in Section 1313(a) of the Code. For purposes of this Section 13, the
term "assessment" shall have the same meaning as used in Chapter 63 of the Code
and Treasury Regulations thereunder, or any comparable provision under the laws
of the appropriate taxing authority. In the event of any objection by the
Indemnifying Party, the Indemnifying Party promptly shall investigate the claim,
and if it is not satisfied with the validity thereof, the Indemnifying Party
shall conduct the defense against such claim. All costs and expenses incurred by
the Indemnifying Party in connection with such investigation and defense of such
claim shall be borne by it. These indemnification provisions are in addition to,
and not in limitation of, any other rights the parties may have under applicable
law.
14. Other Matters.
(a) Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization is,
to its knowledge, an affiliate of a party to the Reorganization pursuant to Rule
145(c), Global Allocation will cause to be affixed upon the certificate(s)
issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT TO MERRILL LYNCH GLOBAL ALLOCATION FUND, INC. (OR ITS
STATUTORY SUCCESSOR) (THE "FUND") OR ITS PRINCIPAL UNDERWRITER
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (2) IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION IS
NOT REQUIRED.
and, further, that stop transfer instructions will be issued to Global
Allocation's transfer agent with respect to such shares. Each Acquired Fund will
provide Global Allocation on the Exchange Date with the name of any stockholder
who is to the knowledge of such Acquired Fund an affiliate of that Acquired Fund
on such date.
(b) All covenants, agreements, representations and warranties made under
this Agreement and any certificates delivered pursuant to this Agreement shall
be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.
(c) Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to any Fund, in each case at 800
Scudders Mill Road, Plainsboro, New Jersey 08536, Attn: Terry K. Glenn,
President.
(d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization of each Acquired
Fund, constitutes the only understanding with respect to that Reorganization,
may not be changed except by a letter of agreement signed by each party to that
Reorganization and shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in said state.
(e) Copies of the Articles of Incorporation, as amended and supplemented,
of each Fund are on file with the Department of Assessments and Taxation of the
State of Maryland and notice is hereby given that this instrument is executed on
behalf of the Directors of each Fund.
I-20
<PAGE>
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
By:_____________________________________
Attest:
___________________________________
Secretary
MERRILL LYNCH ASSET INCOME FUND, INC.
By:_____________________________________
Attest:
___________________________________
Secretary
MERRILL LYNCH ASSET GROWTH FUND, INC.
By:_____________________________________
Attest:
___________________________________
Secretary
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
By:_____________________________________
Attest:
___________________________________
Secretary
I-21
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED JANUARY 27, 2000
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH ASSET GROWTH FUND, INC.
MERRILL LYNCH ASSET INCOME FUND, INC.
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
(609) 282-2800
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Joint Proxy Statement and Prospectus of Merrill
Lynch Asset Growth Fund, Inc. ("Asset Growth"), Merrill Lynch Asset Income Fund,
Inc. ("Asset Income"), Merrill Lynch Asset Builder Program, Inc. ("Asset
Builder") and Merrill Lynch Global Allocation Fund, Inc. ("Global Allocation")
dated [Date], 2000 (the "Joint Proxy Statement and Prospectus"), which has been
filed with the Securities and Exchange Commission and can be obtained, without
charge, by calling Global Allocation at 1-800-456-4587, ext. 123, or by writing
to Global Allocation at the above address. This Statement of Additional
Information has been incorporated by reference into the Joint Proxy Statement
and Prospectus.
Further information about Global Allocation is contained in and
incorporated by reference to its Statement of Additional Information, dated [ ],
2000 which is incorporated by reference into this Statement of Additional
Information. Global Allocation's Statement of Additional Information accompanies
this Statement of Additional Information.
The Commission maintains a web site (http://www.sec.gov) that contains the
prospectus and statement of additional information of each of Asset Growth,
Asset Income, Asset Builder and Global Allocation, other material incorporated
by reference and other information regarding Asset Growth, Asset Income, Asset
Builder and Global Allocation.
The date of this Statement of Additional Information is , 2000.
<PAGE>
TABLE OF CONTENTS
General Information ........................................................ 2
Financial Statements ....................................................... 2
GENERAL INFORMATION
The stockholders of Asset Growth, Asset Income and the Global Opportunity
Portfolio of Asset Builder ("Global Opportunity"), are each being asked to
approve the acquisition of substantially all of the assets of Asset Growth,
Asset Income and Global Opportunity, and the assumption of substantially all of
the liabilities of Asset Growth, Asset Income and Global Opportunity by Global
Allocation in exchange solely for an equal aggregate value of shares of Global
Allocation (each, a "Reorganization"). Global Allocation is an open-end
management investment company organized as a Maryland corporation. Special
Meetings of Stockholders of Asset Growth, Asset Income and Global Opportunity to
consider the Reorganization will be held at 800 Scudders Mill Road, Plainsboro,
New Jersey, on April 26, 2000, at ___ a.m., Eastern time (Asset Growth) ____
a.m. Eastern time, (Asset Income) and ___ a.m. Eastern time (Global
Opportunity).
For detailed information about each Reorganization, stockholders of Asset
Growth, Asset Income and Global Opportunity should refer to the Joint Proxy
Statement and Prospectus. For further information about Global Allocation,
stockholders should refer to Global Allocation's Statement of Additional
Information, dated [ ], 2000, which accompanies this Statement of Additional
Information and is incorporated by reference herein.
FINANCIAL STATEMENTS
In accordance with Part B, Item 14(a) of Form N-14, pro forma financial
statements reflecting consummation of each Reorganization have not been prepared
since the aggregate net asset value of Asset Growth, Asset Income and Global
Opportunity, neither individually nor in the aggregate, exceeds 10% of Global
Allocation's net asset value as of November 30, 1999.
Global Allocation
Audited financial statements and accompanying notes for the fiscal year
ended October 31, 1999, and the independent auditor's report thereon, dated
[ ], of Global Allocation are incorporated by reference from Global
Allocation's Annual Report to Stockholders.
Asset Growth
Audited financial statements and accompanying notes for the fiscal year
ended August 31, 1999, and the independent auditor's report thereon, dated
[ ], of Asset Growth, are incorporated by reference from Asset Growth's
Annual Report to Stockholders.
Asset Income
Audited financial statements and accompanying notes for the fiscal year
ended December 31, 1999, and the independent auditor's report thereon, dated
[ ], of Asset Income, are incorporated by reference from Asset Income's
Annual Report to Stockholders.
Asset Builder
Audited financial statements and accompanying notes for the fiscal year
ended January 31, 1999, and the independent auditor's report thereon, dated
March 19, 1999, of Global Opportunity, are incorporated by reference from Asset
Builder's Annual Report to Stockholders. Unaudited financial statements and
accompanying notes for the six months ended July 31, 1999 of Global Opportunity
are incorporated by reference from Asset Builder's Semi-Annual Report to
Stockholders.
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification.
Reference is made to Article VI of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the Class A, Class B, Class C and Class D
Distribution Agreements.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Absent a court determination that
an officer or director seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, the decision by the
Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent directors, after
review of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Each officer and director of the Registrant claiming indemnification
within the scope of Article VI of the By-Laws shall be entitled to advances from
the Registrant for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the full
extent permitted under the General Laws of the State of Maryland, provided,
however, that the person seeking indemnification shall provide to the Registrant
a written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Registrant has been met and a written
undertaking to repay any such advance, if it should ultimately be determined
that the standard of conduct has not been met, and provided further that at
least one of the following additional conditions is met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Registrant for his undertaking; (b) the Registrant is insured against losses
arising by reason of the advance; (c) a majority of a quorum of non-party
independent directors, or independent legal counsel in a written opinion, shall
determine, based on a review of facts readily available to the Registrant at the
time the advance is proposed to be made, that there is reason to believe that
the person seeking indemnification will ultimately be found to be entitled to
indemnification.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his or her activities as an
officer or director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her office.
The Registrant may indemnify, make advances or purchase insurance to the
extent provided in Article VI of the By-Laws on behalf of an employee or agent
who is not an officer or director of the Registrant.
In Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the
Distributor within the meaning of the Securities Act of 1933 (the "1933 Act"),
against certain types of civil liabilities arising in connection with the
Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to Directors, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will,
C-1
<PAGE>
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 1933 Act
and will be governed by the final adjudication of such issue.
Item 16. Exhibits.
1(a) -- Articles of Incorporation of the Registrant, dated June 7, 1988.(a)
1(b) -- Articles of Amendment to Articles of Incorporation of the Registrant,
dated November 28, 1988.(a)
1(c) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, dated December 7, 1992 (a)
1(d) -- Articles Supplementary to the Articles of Incorporation of the
Registrant. Dated July 13, 1993(d)
1(e) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, dated December 16, 1993.(d)
1(f) -- Articles of Amendment to the Articles of Incorporation of the
Registrant, dated October 17, 1994.(b)
1(g) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, dated October 17, 1994.(b)
1(h) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, Dated September 9, 1996.(d)
1(i) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, dated November 6, 1996 (including Certificate of
Correction dated February 19, 1997 filed with respect thereto).(d)
1(j) -- Articles Supplementary to the Articles of Incorporation of the
Registrant, dated November 12, 1997.(h)
2 -- By-Laws of the Registrant.(c)
3 Not applicable.
4 Form of Agreement and Plan of Reorganization between the Registrant,
Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset Growth
Fund, Inc. and Merrill Lynch Asset Income Fund, Inc.(j)
5 Copies of instruments defining the rights of stockholders, including
the relevant portions of the Articles of Incorporation, as amended and
supplemented, and the By-Laws of the Registrant defining rights of
Shareholders.(e)
6(a) -- Management Agreement between the Registrant and Merrill Lynch Asset
Management, Inc., dated December 13, 1988(c)
6(b) Supplement to Management Agreement between the Registrant and Merrill
Lynch Asset Management LP, dated January 3, 1994.(f)
6(c) Sub-Advisory Agreement between Merrill Lynch Asset Management LP and
Merrill Lynch Asset Management U.K. Limited dated January 18, 1989.(c)
7(a) -- Class A Shares Distribution Agreement between the Registrant and
Merrill Lynch Funds Distributor, Inc. (now known as Princeton Funds
Distributor, Inc.) (the "Distributor").(f)
7(b) -- Class B Shares Distribution Agreement between the Registrant and the
Distributor.(e)
7(c) -- Class C Shares Distribution Agreement between the Registrant and the
Distributor.(f)
7(d) -- Class D Shares Distribution Agreement between the Registrant and the
Distributor.(f)
8 -- None.
9 -- Form of Custody Agreement between the Registrant and Brown Brothers
Harriman & Co.(c)
10(a) Amended and Restated Class B Shares Distribution Plan and Class B
Shares Distribution Plan Sub-Agreement of the Registrant. (a)
10(b) -- Form of Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement of the Registrant.(f)
10(c) -- Form of Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement of the Registrant.(f)
10(d) -- Merrill Lynch Select Pricing4 System Plan pursuant to Rule l8f-3.(g)
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the
Registrant.(i)
12 -- Private Letter Ruling from the Internal Revenue Service.(i)
C-2
<PAGE>
13 -- Not applicable.
14(a) -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
14(b) -- Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Builder Program, Inc.
14(c) Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Growth Fund, Inc.
14(d) Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Income Fund, Inc.
15 -- Not applicable.
16 -- Power of Attorney (included on the signature page of this Registration
Statement).
17(a) -- Prospectus dated January , 2000, and Statement of Additional
Information dated January , 2000, of Merrill Lynch Global Allocation
Fund, Inc.(i)
17(b) -- Annual Report to Stockholders of the Registrant.(i)
17(c) -- Annual Report to Stockholders of Merrill Lynch Asset Growth Fund,
Inc.(i)
17(d) -- Annual Report to Stockholders of Merrill Lynch Asset Income Fund,
Inc.(i)
17(e) -- Annual Report to Stockholders of Merrill Lynch Asset Builder Program,
Inc.(i).
17(f) -- Semi-Annual Report to Stockholders of Merrill Lynch Asset Builder
Program, Inc.(i)
17(g) -- Forms of Proxy
- ----------
(a) Filed on February 24, 1994 as an Exhibit to Post-Effective Amendment No. 7
to the Registrant's Registration Statement on Form N-1A (File No.
33-22462) under the Securities Act of 1933 (the "Registration Statement").
(b) Filed on February 27, 1995 as an Exhibit to Post-Effective Amendment No. 9
to the Registration Statement.
(c) Filed on February 27, 1996, as an Exhibit to Post-Effective Amendment No.
10 to the Registration Statement.
(d) Filed on February 25, 1997, as an Exhibit to Post-Effective Amendment No.
11 to the Registration Statement.
(e) Reference is made to Article III (Sections 3 and 4), Article V, Article VI
(Sections 2, 3, 5 and 6, Article VII, Article VIII and Article X of the
Registrant's Articles of Incorporation as amended and supplemented, filed
as Exhibits 1(a), 1(b), 1(c), 1(d), 1(e), 1(f), 1(g), 1(h), 1(i) and 1(j)
to this Registration Statement, and Article II, Article III (Sections 1,
3, 5, 6 and 17), Article IV (Section I), Article V (Section 7), Article
VI, Article XII, Article XIII, and Article XIV of the Registrant's By-Laws
filed as Exhibit 2 to the Registration Statement.
(f) Filed on October 18, 1994, as an Exhibit to Post-Effective Amendment No. 8
to the Registration Statement.
(g) Incorporated by reference to Exhibit 18 to Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A under the Securities Act of
1933, as amended, filed on January 25, 1996, relating to shares of Merrill
Lynch New York Municipal Bond Fund series of Merrill Lynch Multi-State
Municipal Series Trust (File No. (2-99473).
(h) Filed on February 12, 1998, as an Exhibit to Post-Effective Amendment
No.12 to the Registration Statement.
(i) To be filed by amendment.
(j) Included as Exhibit 1 to the Proxy Statement and Prospectus contained in
this Registration Statement.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through use of a prospectus which is part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of securities at that time shall be deemed to be the initial bona
fide offering of them.
(3) The Registrant undertakes to file, by post-effective amendment, either a
copy of the Internal Revenue Service private letter ruling applied for or
an opinion of counsel as to certain tax matters, within a reasonable time
after receipt of such ruling or opinion.
C-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the Township of Plainsboro and State
of New Jersey, on the 27th day of January, 2000.
MERRILL LYNCH GLOBAL ALLOCATION FUND, INC.
(Registrant)
By /s/ Terry K. Glenn
-------------------------------------
(Terry K. Glenn, President)
Each person whose signature appears below hereby authorizes Terry K. Glenn,
Donald C. Burke and Phillip S. Gillespie or any of them, as attorney-in-fact, to
sign on his behalf, individually and in each capacity stated below, any
amendments to this Registration Statement (including post-effective amendments)
and to file the same, with all exhibits thereto, with the Securities and
Exchange Commission.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- ----
/s/ Terry K. Glenn President and Director
- ----------------------------- (Principal Executive Officer) January 27, 2000
(Terry K. Glenn)
/s/ Donald C. Burke Vice President and Treasurer
- ----------------------------- (Principal Financial January 27, 2000
(Donald C. Burke) and Accounting Officer)
/s/ Charles C. Reilly Director January 27, 2000
- ----------------------------
(Charles C. Reilly)
/s/ Richard R. West Director January 27, 2000
- ----------------------------
(Richard R. West)
/s/ Arthur Zeikel Director January 27, 2000
- ----------------------------
(Arthur Zeikel)
/s/ Edward D. Zinbarg Director January 27, 2000
- ----------------------------
(Edward D. Zinbarg)
C-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
14(a) -- Consent of Deloitte & Touche LLP, independent auditors for Registrant
14(b) -- Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Builder Program, Inc.
14(c) -- Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Growth Fund, Inc.
14(d) -- Consent of Deloitte & Touche LLP, independent auditors for Merrill
Lynch Asset Income Fund, Inc.
17(g) -- Forms of Proxy
C-5
Exhibit 14(a)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Global Allocation Fund, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of our report dated December 16, 1999 appearing in the annual report
to shareholders of Merrill Lynch Global Allocation Fund, Inc. for the year ended
October 31, 1999, and to the reference to us under the captions "COMPARISON OF
THE FUNDS--Financial Highlights" and "EXPERTS" appearing in the Proxy Statement
and Prospectus, which is a part of this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Princeton, New Jersey
January 24, 2000
Exhibit 14(b)
INDEPENDENT AUDITORS' CONSENT
The Global Opportunity Portfolio of Merrill Lynch Asset Builder Program, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of Merrill Lynch Global Allocation Fund, Inc. of our report dated
March 19, 1999 appearing in the annual report to shareholders of Merrill Lynch
Asset Builder Program, Inc. (includes the Global Opportunity Portfolio) for the
year ended January 31, 1999, and to the reference to us under the captions
"COMPARISON OF THE FUNDS--Financial Highlights" and "EXPERTS" appearing in the
Proxy Statement and Prospectus, which is a part of this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Princeton, New Jersey
January 24, 2000
Exhibit 14(c)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Asset Growth Fund, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form N-14 of Merrill Lynch Global Allocation Fund, Inc. of our report dated
October 7, 1999 appearing in the annual report to shareholders of Merrill Lynch
Asset Growth Fund, Inc. for the year ended August 31, 1999, and to the reference
to us under the captions "COMPARISON OF THE FUNDS--Financial Highlights" and
"EXPERTS" appearing in the Proxy Statement and Prospectus, which is a part of
this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Princeton, New Jersey
January 24, 2000
Exhibit 14(d)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Asset Income Fund, Inc.
We consent to the reference to us under the captions "COMPARISON OF THE
FUNDS--Financial Highlights" and "EXPERTS" for Merrill Lynch Asset Income Fund,
Inc. appearing in such Proxy Statement and Prospectus, which is a part of this
Registration Statement on Form N-14 of Merrill Lynch Global Allocation Fund,
Inc.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Princeton, New Jersey
January 24, 2000
Exhibit 17(g)
MERRILL LYNCH ASSET BUILDER PROGRAM, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and
Barbara G. Fraser as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all of the shares of common stock of the Global Opportunity
Portfolio of Merrill Lynch Asset Builder Program, Inc. ("Global Opportunity")
held of record by the undersigned on March 15, 2000 at a Special Meeting of
Stockholders of Global Opportunity to be held on April 26, 2000 or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1.
By signing and dating this card, you authorize the proxies to vote each
proposal as marked, or if not marked, to vote "FOR" each proposal, and to use
their discretion to vote for any other matter as may properly come before the
meeting or any adjournment thereof. If you do not intend to personally attend
the meeting, please complete and return this card at once in the enclosed
envelope.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
persons.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED DETACH AND RETURN
THIS PORTION ONLY
Vote on Proposal
1. To approve the Agreement and Plan of Reorganization between Merrill Lynch
Global Allocation Fund, Inc. and Merrill Lynch Asset Builder Program, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
- ---------------------------------------- -----------------------------------
- ---------------------------------------- -----------------------------------
Signature (PLEASE SIGN Date Signature (PLEASE SIGN Date
WITHIN BOX) WITHIN BOX)
<PAGE>
MERRILL LYNCH ASSET GROWTH FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and
Barbara G. Fraser as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all of the shares of common stock of Merrill Lynch Asset
Growth Fund, Inc. (the "Fund") held of record by the undersigned on March 15,
2000 at a Special Meeting of Stockholders of the Fund to be held on April 26,
2000 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1.
By signing and dating this card, you authorize the proxies to vote each
proposal as marked, or if not marked, to vote "FOR" each proposal, and to use
their discretion to vote for any other matter as may properly come before the
meeting or any adjournment thereof. If you do not intend to personally attend
the meeting, please complete and return this card at once in the enclosed
envelope.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
persons.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED DETACH AND RETURN
THIS PORTION ONLY
Vote on Proposal
2. To approve the Agreement and Plan of Reorganization between Merrill Lynch
Global Allocation Fund, Inc. and Merrill Lynch Asset Growth Fund, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
- ---------------------------------------- -----------------------------------
- ---------------------------------------- -----------------------------------
Signature (PLEASE SIGN Date Signature (PLEASE SIGN Date
WITHIN BOX) WITHIN BOX)
<PAGE>
MERRILL LYNCH ASSET INCOME FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
PROXY
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Terry K. Glenn, Donald C. Burke and
Barbara G. Fraser as proxies, each with the power to appoint his or her
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all of the shares of common stock of Merrill Lynch Asset
Income Fund, Inc. (the "Fund") held of record by the undersigned on March 15,
2000 at a Special Meeting of Stockholders of the Fund to be held on April 26,
2000 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1.
By signing and dating this card, you authorize the proxies to vote each
proposal as marked, or if not marked, to vote "FOR" each proposal, and to use
their discretion to vote for any other matter as may properly come before the
meeting or any adjournment thereof. If you do not intend to personally attend
the meeting, please complete and return this card at once in the enclosed
envelope.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
persons.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED DETACH AND RETURN
THIS PORTION ONLY
Vote on Proposal
3. To approve the Agreement and Plan of Reorganization between Merrill Lynch
Global Allocation Fund, Inc. and Merrill Lynch Asset Income Fund, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
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Signature (PLEASE SIGN Date Signature (PLEASE SIGN Date
WITHIN BOX) WITHIN BOX)
