AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 2000
SECURITIES ACT FILE NO. 333- INVESTMENT COMPANY ACT FILE NO. 811-5723
- -------------------------------------------------------------------------------
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 DEVELOPING CAPITAL MARKETS FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS 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 DEVELOPING CAPITAL MARKETS 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 08536
------------------------------
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.
- -------------------------------------------------------------------------------
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 2000
TO THE STOCKHOLDERS OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Meeting") of Merrill Lynch Middle East/Africa Fund, Inc. ("Middle East/Africa
Fund") 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 the following purposes:
(1) To approve or disapprove an Agreement and Plan of
Reorganization (the "Agreement and Plan of Reorganization") providing
for the acquisition of substantially all of the assets of Middle
East/Africa Fund by Merrill Lynch Developing Capital Markets Fund, Inc.
("Developing Capital Markets Fund"), and the assumption of
substantially all of the liabilities of Middle East/Africa Fund by
Developing Capital Markets Fund, in exchange solely for an equal
aggregate value of newly-issued shares of Developing Capital Markets
Fund. The Agreement and Plan of Reorganization also provides for
distribution of such shares of Developing Capital Markets Fund to
stockholders of Middle East/Africa Fund in liquidation of Middle
East/Africa Fund. A vote in favor of this proposal will constitute a
vote in favor of the liquidation and dissolution of Middle East/Africa
Fund and the termination of its registration under the Investment
Company Act of 1940, as amended; and
(2) To transact such other business as properly may come
before the Meeting or any adjournment thereof.
The Board of Directors of Middle East/Africa Fund has 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 Meeting or any
adjournment thereof.
A complete list of the stockholders of Middle East/Africa Fund entitled to
vote at the Meeting will be available and open to the examination of any
stockholders of Middle East/Africa Fund for any purpose germane to the Meeting
during ordinary business hours from and after April 12, 2000 at the offices of
Middle East/Africa Fund, 800 Scudders Mill Road, Plainsboro, New Jersey.
You are cordially invited to attend the Meeting. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING 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 Board of
Directors of Middle East/Africa Fund.
By Order of the Board of Directors,
SUSAN B. BAKER
SECRETARY
Plainsboro, New Jersey
Dated: [Date], 2000
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 buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROXY STATEMENT AND PROSPECTUS DATED FEBRUARY 2, 2000
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
MERRILL LYNCH DEVELOPING CAPITAL MARKETS FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(609) 282-2800
SPECIAL MEETING OF STOCKHOLDERS OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Merrill Lynch
Middle East/Africa Fund, Inc., a Maryland corporation ("Middle East/Africa
Fund"), for use at the Special Meeting of Stockholders of Middle East/Africa
Fund (the "Meeting") called to approve or disapprove the proposed reorganization
whereby Merrill Lynch Developing Capital Markets Fund, Inc., a Maryland
corporation ("Developing Capital Markets Fund"), will acquire substantially all
of the assets, and will assume substantially all of the liabilities, of Middle
East/Africa Fund in exchange solely for an equal aggregate value of newly-issued
shares of Developing Capital Markets Fund (the "Reorganization"). Immediately
upon the receipt by Developing Capital Markets Fund of the assets of Middle
East/Africa Fund and the assumption by Developing Capital Markets Fund of the
liabilities of Middle East/Africa Fund, Middle East/Africa Fund will distribute
the shares of Developing Capital Markets Fund received in the Reorganization to
the stockholders of Middle East/Africa Fund. Thereafter, Middle East/Africa Fund
will terminate its registration 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.
Holders of shares in Middle East/Africa Fund will receive that class of
shares of Developing Capital Markets Fund having the same letter designation
(I.E., Class A, Class B, Class C or Class D) and the same distribution fees,
account maintenance fees and sales charges (including contingent deferred sales
charges ("CDSCs")), if any (the "Corresponding Shares"), as the shares of Middle
East/Africa Fund held by them immediately prior to the Reorganization. The
aggregate net asset value of the Corresponding Shares of Developing Capital
Markets Fund to be issued to the stockholders of Middle East/Africa Fund will
equal the aggregate net asset value of the outstanding shares of Middle
East/Africa Fund as set forth in the Agreement and Plan of Reorganization
between Developing Capital Markets Fund and Middle East/Africa Fund ( the
"Agreement and Plan"). Middle East/Africa Fund and Developing Capital Markets
Fund 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" and
sometimes as "Pro Forma Developing Capital."
This Proxy Statement and Prospectus serves as a prospectus of Developing
Capital Markets Fund under the Securities Act of 1933, as amended (the
"Securities Act"), in connection with the issuance of shares of Developing
Capital Markets Fund to Middle East/Africa Fund pursuant to the terms of the
Agreement and Plan.
Both Middle East/Africa Fund and Developing Capital Markets Fund are
open-end management investment companies with similar, though not identical,
investment objectives. Each Fund seeks long term capital appreciation.
Developing Capital Markets Fund invests in securities, principally equities, of
issuers in countries having smaller capital markets. Middle East/Africa Fund
invests primarily in equity and debt securities of corporations and government
issuers in the Middle East and Africa. There can be no assurance that, after the
Reorganization, the Combined Fund will achieve its investment objective.
The current prospectus relating to Developing Capital Markets Fund, dated
October 29, 1999 (the "Developing Capital Markets Fund Prospectus"), accompanies
this Proxy Statement and Prospectus and is incorporated herein by reference. The
Annual Report to Stockholders of Developing Capital Markets Fund as of June 30,
1999 and the Semi-Annual Report to Stockholders as of December 31, 1999 also
accompany this Proxy Statement and Prospectus. A statement of additional
information relating to Developing Capital Markets Fund, dated October 29, 1999
(the "Developing Capital Markets Fund Statement"), a prospectus of Middle
East/Africa Fund, dated February , 2000 (the "Middle East/Africa Fund
Prospectus") and a statement of additional information relating to Middle
East/Africa Fund, dated February , 2000 (the "Middle East/Africa Fund
Statement"), have been filed with the Securities and Exchange Commission (the
"Commission"). Such documents may be obtained, without charge, by writing either
Middle East/Africa Fund or Developing Capital Markets Fund at the address above,
or by calling 1-800-456-4587, ext. 123.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
This Proxy Statement and Prospectus sets forth concisely the information
about Developing Capital Markets Fund that stockholders of Middle East/Africa
Fund should know before considering the Reorganization and should be retained
for future reference. Middle East/Africa Fund has 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 Developing Capital Markets Fund without charge, upon oral
request by calling the toll free telephone number set forth above or upon
written request by writing Developing Capital Markets Fund at its principal
executive offices. The Statement of Additional Information, dated , 2000
is incorporated by reference into this Proxy Statement and Prospectus. The
Commission maintains a web site (http://www.sec.gov) that contains the
Statement of Additional Information, the Developing Capital Markets Fund
Prospectus, the Middle East/Africa Fund Prospectus, the Developing Capital
Markets Fund Statement, the Middle East/Africa Fund Statement, other material
incorporated by reference and other information regarding the Funds.
The address of the principal executive offices of both Middle
East/Africa Fund and Developing Capital Markets Fund is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536, and the telephone number is (609) 282-2800.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS , 2000
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
INTRODUCTION......................................................................................................3
SUMMARY...........................................................................................................3
The Reorganization...........................................................................................3
Pro Forma Fee Tables.........................................................................................5
RISK FACTORS AND SPECIAL CONSIDERATIONS..........................................................................12
COMPARISON OF THE FUNDS..........................................................................................14
Financial Highlights........................................................................................14
Investment Objectives and Policies..........................................................................18
Other Investment Policies...................................................................................20
Information Regarding Options, Futures and Foreign Exchange Transactions....................................21
Investment Restrictions.....................................................................................21
Management..................................................................................................22
Purchase of Shares..........................................................................................23
Redemption of Shares........................................................................................23
Performance.................................................................................................24
Stockholder Rights..........................................................................................24
Dividends...................................................................................................25
Automatic Dividend Reinvestment Plan........................................................................25
Tax Information.............................................................................................25
Portfolio Transactions......................................................................................25
Portfolio Turnover..........................................................................................25
Additional Information......................................................................................25
THE REORGANIZATION...............................................................................................26
General.....................................................................................................26
Procedure...................................................................................................27
Terms of the Agreement and Plan.............................................................................27
Potential Benefits to Stockholders as a Result of the Reorganization........................................28
Tax Consequences of the Reorganization......................................................................29
Capitalization..............................................................................................30
INFORMATION CONCERNING THE SPECIAL MEETING.......................................................................31
Date, Time and Place of Meeting.............................................................................31
Solicitation, Revocation and Use of Proxies.................................................................31
Record Date and Outstanding Shares..........................................................................32
Security Ownership of Certain Beneficial Owners and Management of Middle East/Africa Fund and
Developing Capital Markets Fund.............................................................................32
Voting Rights and Required Vote.............................................................................32
ADDITIONAL INFORMATION...........................................................................................33
LEGAL PROCEEDINGS................................................................................................33
LEGAL OPINIONS...................................................................................................34
EXPERTS..........................................................................................................34
STOCKHOLDER PROPOSALS............................................................................................34
EXHIBIT I-AGREEMENT AND PLAN OF REORGANIZATION..................................................................I-1
</TABLE>
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Middle
East/Africa Fund for use at the Meeting to be held at the offices of MLAM, 800
Scudders Mill Road, Plainsboro, New Jersey on April 26, 2000, at , Eastern
time. The mailing address for Middle East/Africa Fund is P.O. Box 9011,
Princeton, New Jersey 08543-9011. The approximate mailing date of this Proxy
Statement and Prospectus is March , 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 Middle East/Africa Fund at the address indicated above or by
voting in person at the Meeting. All properly executed proxies received prior to
the Meeting will be voted at the Meeting in accordance with the instructions
marked thereon or otherwise as provided therein. Unless instructions to the
contrary are marked, properly executed proxies will be voted "FOR" the proposal
to approve the Agreement and Plan.
Approval of the Agreement and Plan will require the affirmative vote of
Middle East/Africa Fund stockholders representing a majority of the total number
of votes entitled to be cast thereon. Stockholders will vote as a single class
on the proposal to approve the Agreement and Plan. See "Information Concerning
the Special Meeting."
The Board of Directors of Middle East/Africa Fund knows of no business
other than that discussed above which will be presented for consideration at the
Meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS 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 PROXY STATEMENT AND PROSPECTUS AND IN THE
AGREEMENT AND PLAN, ATTACHED HERETO AS EXHIBIT I.
IN THIS PROXY STATEMENT AND PROSPECTUS, THE TERM "REORGANIZATION" REFERS
COLLECTIVELY TO (I) THE ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS AND THE
ASSUMPTION OF SUBSTANTIALLY ALL OF THE LIABILITIES OF MIDDLE EAST/AFRICA FUND BY
DEVELOPING CAPITAL MARKETS FUND IN EXCHANGE FOR THE CORRESPONDING SHARES AND THE
SUBSEQUENT DISTRIBUTION OF CORRESPONDING SHARES OF DEVELOPING CAPITAL MARKETS
FUND TO THE STOCKHOLDERS OF MIDDLE EAST/AFRICA FUND; AND (II) THE SUBSEQUENT
DEREGISTRATION AND DISSOLUTION OF MIDDLE EAST/AFRICA FUND.
THE REORGANIZATION
At a meeting of the Board of Directors of Middle East/Africa Fund held on
January 20, 2000, the Board of Directors approved a proposal that Developing
Capital Markets Fund acquire substantially all of the assets, and assume
substantially all of the liabilities, of Middle East/Africa Fund in exchange
solely for shares of Developing Capital Markets Fund to be distributed to the
stockholders of Middle East/Africa Fund.
Based upon their evaluation of all relevant information, the Directors of
Middle East/Africa Fund have determined that the Reorganization will
potentially benefit the stockholders of Middle East/Africa Fund. Specifically,
the Directors considered that after the Reorganization, Middle East/Africa
Fund stockholders will remain invested in an open-end fund with a
substantially larger asset value. As part of a larger fund (as of November 30,
1999 the net assets of Developing Capital Markets Fund were approximately
$200.8 million) Middle East/Africa Fund stockholders are likely to benefit
from reduced overall operating expenses per share on a pro forma basis as a
result of certain economies of scale expected after the Reorganization.
Additionally, the Corresponding Shares received by Middle East/Africa Fund
stockholders will not be subject to the redemption fee that is applicable to
any Middle East/Africa Fund shares redeemed within 12 months of purchase. In
addition, as stockholders of Developing Capital Markets Fund, they will have
an exchange privilege with certain other funds utilizing the Merrill Lynch
Select Pricing (Service Mark) System ("Select Pricing") which is not available
to Middle East/Africa Fund stockholders. See "Summary-Pro Forma Fee Tables"
and "The Reorganization--Potential Benefits to Stockholders as a Result of the
Reorganization."
The Board of Directors of Middle East/Africa Fund, including all of the
Directors who are not "interested persons," as defined in the Investment Company
Act, has determined that the Reorganization is in the best interests of Middle
East/Africa Fund and that the interests of existing Middle East/Africa Fund
stockholders will not be diluted as a result of effecting the Reorganization.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganization will occur as soon as practicable after such approval, provided
that Middle East/Africa Fund and Developing Capital Markets Fund 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, and the Reorganization abandoned,
whether before or after approval by the stockholders of Middle East/Africa Fund,
at any time prior to the Exchange Date (as defined below), (i) by mutual consent
of the Board of Directors of Middle East/Africa Fund and the Board of Directors
of Developing Capital Markets Fund; (ii) by the Board of Directors of Middle
East/Africa Fund if any condition to Middle East/Africa Fund's obligations has
not been fulfilled or waived by such Board; or (iii) by the Board of Directors
of Developing Capital Markets Fund if any condition to Developing Capital
Markets Fund's obligations has not been fulfilled or waived by such Board.
PRO FORMA FEE TABLES
<TABLE>
<CAPTION>
PRO FORMA FEE TABLE FOR CLASS A AND CLASS B STOCKHOLDERS OF MIDDLE EAST/AFRICA FUND,
DEVELOPING CAPITAL MARKETS FUND AND PRO FORMA DEVELOPING CAPITAL
AS OF NOVEMBER 30, 1999 (UNAUDITED)
CLASS A SHARES CLASS B SHARES (B)
--------------------------------------------- ---------------------------------------------
ACTUAL ACTUAL
----------------------------- -----------------------------
PRO FORMA PRO FORMA
MIDDLE DEVELOPING DEVELOPING MIDDLE DEVELOPING DEVELOPING
EAST/AFRICA CAPITAL CAPITAL EAST/AFRICA CAPITAL CAPITAL
-------------- -------------- --------------- -------------- -------------- ---------------
STOCKHOLDER FEES (FEES PAID DIRECTLY FROM A STOCKHOLDER'S INVESTMENT) (A):
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)
imposed on
purchases (as a
percentage of offering
price)...................... 5.25%(c) 5.25%(c) 5.25%(c) None None None
Maximum Deferred Sales Charge
(Load) (as a percentage
of original purchase
price or redemption
proceeds,
whichever is lower)......... None(d) None(d) None(d) 4.0%(c) 4.0%(c) 4.0%(c)
Maximum Sales Charge (Load)
Imposed on Dividend
Reinvestments............... None None None None None None
Redemption Fee (as a
percentage of net asset
value of shares redeemed
within 12 months of
purchase)................... 2.0% None None 2.0% None None
Exchange Fee.................... None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS):
Management Fee................ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service
(12b-1) Fees(e)........... None None None 1.00% 1.00% 1.00%
Other Expenses (including
transfer agent fees) (f).. 9.74% 0.79% 0.79% 9.74% 0.79% 0.79%
---- ---- ---- ---- ---- ----
Total Annual Fund Operating
Expenses.................. 10.74%(g) 1.79% 1.79% 11.74%(g) 2.79% 2.79%
===== ==== ==== ===== ==== ====
- -----------------
FOOTNOTES APPEAR ON NEXT PAGE
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FEE TABLE FOR CLASS C AND CLASS D STOCKHOLDERS OF MIDDLE EAST/AFRICA FUND,
DEVELOPING CAPITAL MARKETS FUND AND PRO FORMA DEVELOPING CAPITAL
AS OF NOVEMBER 30, 1999 (UNAUDITED)
CLASS C SHARES CLASS D SHARES
--------------------------------------------- ---------------------------------------------
ACTUAL ACTUAL
----------------------------- -----------------------------
PRO FORMA PRO FORMA
MIDDLE DEVELOPING DEVELOPING MIDDLE DEVELOPING DEVELOPING
EAST/AFRICA CAPITAL CAPITAL EAST/AFRICA CAPITAL CAPITAL
-------------- -------------- --------------- -------------- -------------- ---------------
STOCKHOLDER FEES (FEES PAID DIRECTLY
FROM STOCKHOLDER'S INVESTMENT) (A):
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)
imposed on
purchases (as a
percentage of offering
price).................... None None None 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)....... 1.0 %(c) 1.0 %(c) 1.0 %(c) None(d) None(d) None(d)
Maximum Sales Charge (Load)
Imposed on Dividend
Reinvestments............. None None None None None None
Redemption Fee (as a
percentage of net asset
value of shares redeemed
within 12 months of
purchase)................. 2.0% None None 2.0% None None
Exchange Fee.................. None None None None None None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS):
Management Fee.............. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service 1.00% 1.00% 1.00% 0.25% 0.25% 0.25%
(12b-1) Fees(e).........
Other Expenses (including 9.74% 0.79% 0.79% 9.74% 0.79% 0.79%
---- ---- ---- ---- ---- ----
transfer agent fees) (f)
Total Annual Fund Operating 11.74%(g) 2.79% 2.79% 10.99%(g) 2.04% 2.04%
===== ==== ==== ===== ==== ====
Expenses................
- -----------
(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 convert to Class D shares automatically approximately eight years after initial purchase and will no longer
be subject to distribution fees.
(c) Some investors may qualify for reductions in the sales charge (load).
(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 June 30,
1999, Developing Capital Markets Fund paid the Transfer Agent fees totaling $1,005,323; for the fiscal year ended
November 30, 1999, Middle East/Africa Fund paid the Transfer Agent fees totaling $10,337. MLAM provides accounting
services to the Funds at cost. For the fiscal year ended June 30, 1999, Developing Capital Markets Fund reimbursed MLAM
$205,571 for these services; for the fiscal year ended November 30, 1999, Middle East/Africa Fund reimbursed MLAM $77,575
for these services.
(g) For the fiscal year ended November 30, 1999, MLAM voluntarily waived the entire management fee due from Middle
East/Africa Fund and voluntarily reimbursed such Fund for a portion of its other expenses (excluding Rule 12b-1 fees).
Total Annual Fund Operating Expenses, after giving effect to this waiver of fees and reimbursement of expenses, were
0.50% for Class A shares, 1.50% for Class B shares, 1.50% for Class C shares and 0.75% for Class D shares.
</TABLE>
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
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,692* $3,323 $4,931 $8,210
Developing Capital Markets Fund $ 697 $1,059 $1,444 $2,520
Pro Forma Developing Capital+ $ 697 $1,059 $1,444 $2,520
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS B
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,734* $3,379 $4,957 $8,455**
Developing Capital Markets Fund $ 682 $1,065 $1,474 $2,940**
Pro Forma Developing Capital+ $ 682 $1,065 $1,474 $2,940**
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS C
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,434* $3,179 $4,957 $8,455
Developing Capital Markets Fund $ 382 $ 865 $1,474 $3,119
Pro Forma Developing Capital+ $ 382 $ 865 $1,474 $3,119
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS D
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,713* $3,377 $5,006 $8,296
Developing Capital Markets Fund $ 721 $1,131 $1,566 $2,770
Pro Forma Developing Capital+ $ 721 $1,131 $1,566 $2,770
EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:
-------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS A
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,513 $3,323 $4,931 $8,210
Developing Capital Markets Fund $ 697 $1,059 $1,444 $2,520
Pro Forma Developing Capital+ $ 697 $1,059 $1,444 $2,520
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS B
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,134 $3,179 $4,957 $8,455**
Developing Capital Markets Fund $ 282 $ 865 $1,474 $2,940**
Pro Forma Developing Capital+ $ 282 $ 865 $1,474 $2,940**
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS C
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,134 $3,179 $4,957 $8,455
Developing Capital Markets Fund $ 282 $ 865 $1,474 $3,119
Pro Forma Developing Capital+ $ 282 $ 865 $1,474 $3,119
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
CLASS D
- -------------------------------------------------- ---------------- --------------- ---------------- ----------------
Middle East/Africa Fund $1,535 $3,377 $5,006 $8,296
Developing Capital Markets Fund $ 721 $1,131 $1,566 $2,770
Pro Forma Developing Capital+ $ 721 $1,131 $1,566 $2,770
- -----------
</TABLE>
+ Assuming the Reorganization had taken place on November 30, 1999.
* Reflects the 2% redemption fee charged on redemptions made within one year
of purchase.
** Assumes conversion of Class B shares to Class D shares approximately eight
years after initial purchase.
The foregoing Pro Forma Fee Tables and Examples are intended to assist
investors in understanding the costs and expenses that a Middle East/Africa
Fund or Developing Capital Markets Fund stockholder bears 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 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," "The
Reorganization--Potential Benefits to Stockholders as a Result of the
Reorganization" and "Comparison of the Funds--Management," "--Purchase of
Shares" and "--Redemption of Shares."
BUSINESS OF MIDDLE EAST/AFRICA FUND Middle East/Africa Fund was incorporated
under the laws of the State of Maryland
on March 15, 1994 and commenced
operations on December 30, 1994. Middle
East/Africa Fund is a non-diversified,
open-end management investment company.
As of November 30, 1999, Middle
East/Africa Fund had net assets of
approximately $3.3 million.
BUSINESS OF DEVELOPING CAPITAL
MARKETS FUND Developing Capital Markets Fund
was incorporated under the laws of
the State of Maryland on April 14,
1989 and commenced operations on
September 1, 1989. Developing
Capital Markets Fund is a
non-diversified, open-end
management investment company.
As of November 30, 1999, Developing
Capital Markets Fund had net
assets of approximately $200.8
million.
COMPARISON OF THE FUNDS INVESTMENT OBJECTIVES. The investment
objectives of Developing Capital Markets
Fund and Middle East/Africa Fund are
similar, though not identical. Each Fund
seeks long term capital appreciation.
Developing Capital Markets Fund invests
in securities, principally equities, of
issuers in countries having smaller
capital markets. Middle East/Africa Fund
invests primarily in equity and debt
securities of corporations and government
issuers in the Middle East and Africa.
INVESTMENT POLICIES. Developing Capital
Markets Fund invests, under normal
circumstances, at least 65% of its
total assets in equity securities of
countries having smaller capital
markets. To a lesser extent, Developing
Capital Markets Fund may invest in
securities convertible into common
stock, in preferred stock, or in
derivative securities. Developing
Capital Markets Fund may invest up to
35% of its assets in non-convertible
debt securities. Middle East/Africa
invests at least 65% of its assets in
equity and debt securities of issuers
located in countries in the Middle East
and Africa. Although Middle East/Africa
Fund is not required to have any set
percentage of its assets invested in
equity securities, it tends to invest
primarily in equity securities,
including common stock, preferred
stock, warrants and stock purchase
rights, in order to achieve its goal of
long term capital appreciation. Middle
East/Africa Fund may also invest in
derivative securities.
Both Funds may invest heavily in
securities denominated in currencies
other than the United States dollar. In
addition, each Fund may engage in
various portfolio strategies to hedge
its portfolio against movements in the
equity markets, interest rates and
exchange rates between currencies.
Developing Capital Markets Fund and
Middle East/Africa Fund are each
subject to a fundamental investment
restriction, which provides that the
Fund may borrow from banks in amounts
up to 33-1/3% of its total assets taken
at market value and may borrow an
additional 5% of its total assets for
temporary purposes. As a
non-fundamental restriction each Fund
is further limited and may not borrow
money or pledge its assets, except that
either Fund may borrow from banks (but
for Developing Capital Markets Fund
only up to 20% of its total assets) as
a temporary measure for extraordinary
or emergency purposes or to meet
redemptions.
MANAGEMENT FEES. The manager for
both Middle East/Africa Fund and
Developing Capital Markets Fund is
MLAM. MLAM is responsible for the
management of each Fund's
investment portfolio and for
providing administrative services
to each Fund.
A. Grace Pineda serves as portfolio
manager for both Funds. Ms. Pineda has
served as Portfolio Manager of Developing
Capital Markets Fund since its
inception (September 1, 1989) and
has served as Portfolio Manager of
Middle East/Africa Fund since its
inception (December 30, 1994).
Pursuant to a separate management
agreement between each Fund and
MLAM, each Fund pays MLAM a monthly
fee at the annual rate of 1.00% of
the average daily net assets of the
Fund. After the Reorganization, the
advisory fee paid by the Combined
Fund would be 1.00% of the average
daily net assets of the Combined
Fund. See "Summary--Pro Forma Fee
Tables" and "Comparison of the
Funds--Management."
MLAM has retained Merrill Lynch Asset
Management U.K. Limited ("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 management agreement.
CLASS STRUCTURE. Each Fund offers four
classes of shares under the Select
Pricing system. The Class A, Class B,
Class C and Class D shares issued by
Developing Capital Markets Fund are
identical in all respects to the Class
A, Class B, Class C and Class D shares
issued by Middle East/Africa Fund,
except that (a) they represent
ownership interests in a different
investment portfolio, (b) all classes
of Middle East/Africa Fund shares are
subject to a redemption fee of 2.0% of
the net asset value of any shares
redeemed within 12 months of purchase
and (c) Developing Capital Markets Fund
shares have an exchange privilege with
certain other funds utilizing select
pricing. See "Comparison of the
Funds--Purchase of Shares,"
"--Redemption of Shares" and
"Additional Information --Stockholder
Services."
OVERALL EXPENSE RATIO. As of November
30, 1999, the overall operating expense
ratio (excluding class specific
distribution and account maintenance
fees) for Middle East/Africa Fund was
10.74% (based on net assets of
approximately $3.3 million and without
giving effect to any fee waiver or
reimbursement of expenses) and for
Developing Capital Markets Fund was
1.79% (based on net assets of
approximately $200.8 million). If the
Reorganization had taken place on that
date, the estimated operating expense
ratio (excluding class specific
distribution and account maintenance
fees) for Pro Forma Developing Capital
would have been 1.79% (based on net
assets of approximately $204.1 million).
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
Developing Capital Markets Fund are
offered continuously for sale to
the public in substantially the
same manner as shares of Middle
East/Africa Fund. See "Comparison
of the Funds--Purchase of Shares."
REDEMPTION OF SHARES. The redemption
procedures for shares of Developing
Capital Markets Fund are substantially
the same as the redemption procedures
for shares of Middle East/Africa Fund
except that all classes of shares of
Middle East/Africa Fund are subject to
a redemption fee of 2.0% of the net
asset value of any shares redeemed
within 12 months of purchase. For
purposes of computing any CDSC that
may be payable upon disposition of
Corresponding Shares of Developing
Capital Markets Fund acquired by
Middle East/Africa Fund
stockholders in the Reorganization,
the holding period of Middle
East/Africa Fund shares outstanding
on the date the Reorganization
takes place will be "tacked" onto
the holding period of the
Corresponding Shares of Developing
Capital Markets Fund acquired in
the Reorganization. See "Comparison
of the Funds--Redemption of
Shares."
DIVIDENDS. Middle East/Africa Fund's
policies with respect to dividends are
substantially the same as those of
Developing Capital Markets Fund.
See "Comparison of the
Funds--Dividends."
NET ASSET VALUE. Both Middle East/Africa
Fund and Developing Capital Markets Fund
determine net asset value of each
class of shares once daily as of
the close of business on the New
York Stock Exchange (the "NYSE") on
each day 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.
Both Funds compute net asset value
per share in the same manner. See
"Comparison of the
Funds--Additional Information--Net
Asset Value."
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
Middle East/Africa Fund stockholders,
such as providing the annual and
semi-annual reports, are substantially
the same as those available to
Developing Capital Markets Fund
stockholders, however, Developing
Capital Markets Fund stockholders have
an exchange privilege with certain
other funds utilizing Select Pricing
that is not available to Middle
East/Africa Fund stockholders. This
exchange privilege will be available
for the Corresponding Shares acquired
by Middle East/Africa Fund stockholders
in the Reorganization. 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" and
"Comparison of the Funds--Additional
Information-- Stockholder Services."
TAX CONSIDERATIONS Middle East/Africa Fund and Developing
Capital Markets Fund jointly have
requested a private letter ruling from
the IRS with respect to the
Reorganization to the effect that,
among other things, neither Middle
East/Africa Fund nor Developing
Capital Markets Fund will recognize
gain or loss on the transaction,
and Middle East/Africa Fund
stockholders will not recognize
gain or loss on the exchange of
their shares of Middle East/Africa
Fund stock for Corresponding Shares
of Developing Capital Markets Fund.
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
Developing Capital Markets Fund as
a regulated investment company.
Developing Capital Markets Fund has
significant net realized capital
losses. After the Reorganization,
Middle East/Africa Fund stockholders
may benefit from the ability of
Developing Capital Markets Fund to
offset these capital losses against its
realized capital gains, if any, subject
to certain limitations. See
"The Reorganization--Tax
Consequences of the Reorganization."
RISK FACTORS AND SPECIAL CONSIDERATIONS
Many of the investment risks associated with an investment in Developing
Capital Markets Fund are substantially the same as those of Middle East/Africa
Fund. Such risks include investing in derivative instruments and illiquid
securities as well as investing on an international basis and in emerging
markets. As a result of the Reorganization, the risk factors applicable to
Middle East/Africa Fund as part of the Combined Fund will be modified by the
wider geographic area in which the Combined Fund will invest.
INVESTING ON AN INTERNATIONAL BASIS. Because a substantial portion of each
Fund's assets may be invested in securities of non-U.S. issuers, investors
should be aware of certain risk factors and special considerations relating to
international investing, which may involve risks that are not typically
associated with investments in securities of U.S. issuers, including
fluctuations in foreign exchange rates, future political and economic
developments, different legal systems and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. Securities prices
in different countries are subject to different economic, financial, political
and social factors. Since both Funds invest heavily in securities denominated or
quoted in currencies other than the U.S. dollar, changes in foreign currency
exchange rates may affect the value of securities in each Fund and the
unrealized appreciation or depreciation of investments so far as U.S. investors
are concerned. Currencies of certain countries may be volatile and, therefore,
may affect the value of securities denominated in such currencies. In addition,
with respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, difficulty in obtaining or
enforcing a court judgment, economic, political or social instability or
diplomatic developments that could affect investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain foreign investments also may be subject to foreign
withholding taxes. These risks often are heightened for investments in smaller,
emerging capital markets.
As a result of these potential risks, MLAM may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. Both Funds may
invest in countries in which foreign investors, including MLAM, have had no or
limited prior experience.
Many of the foreign securities held by the Funds will not be registered
with the Commission, nor will the issuers thereof be subject to the reporting
requirements of such agency. Accordingly, there may be less publicly available
information about a foreign issuer than about a U.S. issuer and such foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of U.S. issuers. As a result,
traditional investment measurements, such as price/earnings ratios, as used in
the United States, may not be applicable to certain smaller, emerging foreign
capital markets. Foreign issuers, and issuers in smaller, emerging capital
markets in particular, may not be subject to uniform accounting, auditing and
financial reporting standards or to practices and requirements comparable to
those applicable to domestic issuers.
Foreign financial markets, while often growing in trading volume, have, for
the most part, substantially less volume than U.S. markets, and securities of
many foreign companies are less liquid and their prices may be more volatile
than securities of comparable domestic companies. Foreign markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have failed to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Further, satisfactory custodial services for investment securities may not be
available in some countries that have smaller, emerging capital markets, which
may result in the Funds incurring additional costs and delays in transporting
and custodying such securities outside such countries. Delays in settlement
could result in periods when assets of the Funds are uninvested and no return is
earned thereon. The inability of the Funds to make intended security purchases
due to settlement problems or the risk of intermediary counterparty failures
could cause the Funds to miss attractive investment opportunities. The inability
to dispose of a portfolio security due to settlement problems could result
either in losses to the Funds due to subsequent declines in the value of such
portfolio security or, if a contract to sell the security has been entered,
could result in possible liability to the purchaser.
There generally is less governmental supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the United
States. For example, there may be no comparable provisions under certain foreign
laws to insider trading and similar investor protection securities laws that
apply with respect to securities transactions consummated in the United States.
Further, brokerage commissions and other transaction costs on foreign securities
exchanges generally are higher than in the United States.
Some countries prohibit or impose substantial restrictions on investments
in their capital markets, particularly their equity markets, by foreign entities
such as Developing Capital Markets Fund. As illustrations, certain countries
require governmental approval prior to investments by foreign persons, or limit
the amount of investment by foreign persons in a company to only a specific
class of securities that may have less advantageous terms than securities of the
company available for purchase by nationals. Certain countries may restrict
investment opportunities in issuers or industries deemed important to national
interests.
BORROWING. Each Fund may borrow up to 331/3% of its total assets (including
the amount borrowed), taken at market value, but only from banks as a temporary
measure for extraordinary or emergency purposes, including to meet redemptions
(so as not to force a Fund to liquidate securities at a disadvantageous time) or
to settle securities transactions. Neither Fund will purchase securities at any
time when borrowings exceed 5% of its total assets. Developing Capital Markets
Fund is further limited by a non-fundamental investment restriction that it may
not borrow amounts in excess of 20% of its total assets and then only from banks
as a temporary measure for extraordinary or emergency purposes.
DERIVATIVE INVESTMENTS. Each Fund may engage in transactions in certain
instruments that may be characterized as derivatives. These instruments include
options on portfolio positions or currencies, options on stock or other
financial indices, financial and currency futures, options on such futures and
forward foreign currency transactions. The Funds may engage in these
transactions for hedging purposes, including anticipatory hedges and Developing
Capital Markets Fund may use derivatives to seek to increase its return.
Transactions involving options, futures, options on futures or currencies
may involve the loss of an opportunity to profit from a price movement in the
underlying asset beyond certain levels or a price increase on other portfolio
assets (in the case of transactions for hedging purposes) or expose the Funds to
potential losses that exceed the amount originally invested by the Fund in such
instruments.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid. Liquidity of a security relates to the ability to dispose
easily of the security and the price to be obtained upon disposition of the
security, which may be less than would be obtained for a comparable more liquid
security. Investment of a Fund's assets in illiquid securities may restrict the
ability of a Fund to dispose of its investments in a timely fashion and for a
fair price as well as its ability to take advantage of market opportunities. The
risks associated with illiquidity will be particularly acute in situations in
which a Fund's operations require cash, such as when a Fund redeems shares or
pays dividends, and could result in a Fund borrowing to meet short term cash
requirements or incurring capital losses on the sale of illiquid investments.
Further, issuers whose securities are not publicly traded are not subject to the
disclosure and other investor protection requirements that would be applicable
if their securities were publicly traded. In making investments in such
securities, a Fund may obtain access to material nonpublic information which may
restrict the Fund's ability to conduct portfolio transactions in such
securities. In addition, each of the Funds may invest in privately placed
securities (including securities restricted to "qualified institutional buyers"
under Rule 144A under the Securities Act) that may or may not be freely
transferable under the laws of the applicable jurisdiction or due to contractual
restrictions on resale.
WITHHOLDING AND OTHER TAXES. Income and capital gains on securities held by
the Funds may be subject to withholding and other taxes imposed by certain
jurisdictions, which would reduce the return to the respective Fund on those
securities. The Funds intend, unless ineligible, to elect to "pass-through" to
their respective stockholders the amount of foreign taxes paid by that Fund. If
certain holding period requirements are met, the taxes passed through to
stockholders will be included in each stockholder's income and could potentially
be offset by either a deduction or a credit. Certain stockholders, including
non-U.S. stockholders, will not be entitled to the benefit of a deduction or
credit with respect to foreign taxes paid at the Fund level. Non-U.S.
stockholders may nevertheless be subject to withholding tax on the foreign taxes
included in their income. Other taxes, such as transfer taxes, may be imposed on
the Funds, but would not give rise to a credit or deduction for stockholders.
<TABLE>
<CAPTION>
COMPARISON OF THE FUNDS
FINANCIAL HIGHLIGHTS
DEVELOPING CAPITAL MARKETS FUND The financial information in the table below, except for the six months ended December 31,
1999, which is unaudited, has been audited in conjunction with the annual audits of the financial statements of Developing Capital
Markets Fund by Deloitte & Touche LLP, independent auditors.
The following per share data and ratios have been derived from information provided in the financial statements
CLASS A
--------------------------------------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED
DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
------------------------------------------------------------------------------
1999++ 1999++ 1998++ 1997++ 1996++ 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN (UNAUDITED)
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 10.44 $ 17.23 $ 15.05 $ 13.35 $ 14.61
-------- -------- -------- -------- --------
Investment income (loss)--net .18 .08 .36 .23 .24
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.32 (6.18) 2.21 1.71 (.40)
------- -------- -------- --------- --------
Total from investment
operations 1.50 (6.10) 2.57 1.94 (.16)
------- -------- -------- --------- --------
Less dividends and
distributions:
Investment income--net -- (.12) (.28) (.24) (.04)
In excess of investment
income--net -- (.09) -- -- --
Realized gain on
investments--net -- -- (.11) -- (.60)
In excess of realized
gain on investments--net (.06) (.48) -- -- (.46)
--------- --------- ------- ------- --------
Total dividends and
distributions (.06) (.69) (.39) (.24) (1.10)
--------- --------- ------- -------- --------
Net asset value, end of
period $ 11.88 $ 10.44 $ 17.23 $ 15.05 $ 13.35
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 14.60% (36.00)% 17.66% 14.82% (1.67)%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.97% 1.63% 1.53% 1.54% 1.62%
======== ======== ======== ======== ========
Investment income (loss)--net 1.94% .53% 2.32% 1.66% 1.56%
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $83,115 $219,422 $471,790 $342,884 350,081
======== ======== ======== ======== ========
Portfolio turnover 84.92% 98.16% 86.68% 71.01% 63.37%
======== ======== ======== ======== ========
</TABLE>
Table Continued
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------
FOR THE SIX FOR THE
MONTHS PERIOD
ENDED JULY 1, 1994+
DECEMBER 31, FOR THE YEAR ENDED JUNE 30, TO JUNE 30,
------------------------------------------------------------
1999++ 1999++ 1998++ 1997++ 1996++ 1995
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN (UNAUDITED)
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period $ 10.28 $ 17.04 $ 14.90 $ 13.24 $ 14.54
--------- --------- ------- ------- --------
Investment income (loss)--net .08 (.07) .19 .09 .08
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.27 (6.08) 2.20 1.69 (.32)
--------- --------- ------- ------- --------
Total from investment
operations 1.35 (6.15) 2.39 1.78 (.24)
--------- --------- ------- ------- --------
Less dividends and
distributions:
Investment income--net -- (.07) (.14) (.12) --
In excess of investment
income--net -- (.06) -- -- --
Realized gain on
investments--net -- -- (.11) -- (.60)
In excess of realized
gain on investments--net (.06) (.48) -- -- (.46)
--------- --------- ------- ------- --------
Total dividends and
distributions (.06) (.61) (.25) (.12) (1.06)
--------- --------- ------- ------- --------
Net asset value, end of
period $ 11.57 $ 10.28 $ 17.04 $ 14.90 $ 13.24
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 13.37% (36.68)% 16.39% 13.63% (2.22)%#
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3.04% 2.67% 2.57% 2.56% 2.79%*
======== ======== ======== ======== ========
Investment income (loss)--net .91% (.53)% 1.22% .65% 1.01%*
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $ 92,104 $164,929 $398,468 $302,183 $162,774
======== ======== ======== ======== ========
Portfolio turnover 84.92% 98.16% 86.68% 71.01% 63.37%
======== ======== ======== ======== ========
- ----------
</TABLE>
+ Commencement of operations.
++ Based on average shares outstanding.
# Aggregate total investment return.
* Annualized.
** Total investment returns exclude the effects of sales charges.
<TABLE>
<CAPTION>
DEVELOPING CAPITAL MARKETS FUND-FINANCIAL HIGHLIGHTS (CONCLUDED)
CLASS C
--------------------------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS OCTOBER 21, 1994+
ENDED to
DECEMBER 31, FOR THE YEAR ENDED JUNE 30, June 30,
---------------------------------------------------------------
1999++ 1999++ 1998++ 1997++ 1996++ 1995
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN (UNAUDITED)
NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.24 $ 16.99 $ 14.87 $ 13.22 $ 16.71
--------- --------- ------- ------- --------
Investment income (loss)-net .08 (.07) .18 .09 .08
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions-net 1.27 (6.08) 2.20 1.70 (2.50)
--------- --------- ------- ------- --------
Total from investment operations 1.35 (6.15) 2.38 1.79 (2.42)
--------- --------- ------- ------- --------
Less dividends and distributions:
Investment income-net -- (.07) (.15) (.14) (.01)
In excess of investment
income-net -- (.05) -- -- --
Realized gain on
investments-net -- -- (.11) -- (.60)
In excess of realized gain on
investments-net (.06) (.48) -- -- (.46)
--------- --------- ------- ------- --------
Total dividends and distributions (.06) (.60) (.26) (.14) (1.07)
--------- --------- ------- ------- --------
Net asset value, end of period $ 11.53 $10.24 $ 16.99 $ 14.87 $ 13.22
======== ======== ======== ======== =======
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share 13.42% (36.69)% 16.37% 13.68% (14.97)%#
======== ======== ======== ======== =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 3.04% 2.68% 2.58% 2.56% 2.96%*
======== ======== ======== ======== =======
Investment income (loss)-net .90% (.51)% 1.19% .67% 1.32%*
======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 17,768 $ 32,339 $ 71,769 $ 46,983 $ 18,573
======== ======== ======== ======== ========
Portfolio turnover 84.92% 98.16% 86.68% 71.01% 63.37%
======== ======== ======== ======== ========
</TABLE>
Table continued
<TABLE>
<CAPTION>
CLASS D
--------------------------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS OCTOBER 21,
ENDED 1994+ TO
DECEMBER 31, FOR THE YEAR ENDED JUNE 30, JUNE 30,
-----------------------------------------------------------------
1999++ 1999++ 1998++ 1997++ 1996++ 1995
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN (UNAUDITED)
NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.41 $ 17.19 $ 15.02 $ 13.33 $ 16.77
-------- ------- -------- ------- --------
Investment income (loss)-net .16 .04 .32 .21 .13
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions-net 1.30 (6.15) 2.20 1.69 (2.48)
-------- ------- -------- ------- --------
Total from investment operations 1.46 (6.11) 2.52 1.90 (2.35)
-------- ------- -------- ------- --------
Less dividends and distributions:
Investment income-net -- (.11) (.24) (.21) (.03)
In excess of investment
income-net -- (.08) -- -- --
Realized gain on
investments-net -- -- (.11) -- (.60)
In excess of realized gain on
investments-net (.06) (.48) -- -- (.46)
-------- ------- -------- ------- --------
Total dividends and distributions (.06) (.67) (.35) (.21) (1.09)
-------- ------- -------- ------- --------
Net asset value, end of period $ 11.81 $ 10.41 $ 17.19 $ 15.02 $ 13.33
======== ======= ======== ======= ========
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share 14.26% (36.13)% 17.30% 14.55% (14.49)%#
======== ======= ======== ======= ========
RATIOS TO AVERAGE NET ASSETS:
Expenses 2.20% 1.88% 1.78% 1.76% 2.19%*
======== ======= ======== ======= ========
Investment income (loss)-net 1.74% .28% 2.06% 1.48% 2.10%*
======== ======= ======== ======= ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $ 19,648 $ 31,686 $ 73,686 $ 57,821 $ 21,899
======== ======= ======== ======== ========
Portfolio turnover 84.92% 98.16% 86.68% 71.01% 63.37%
======== ======= ======== ======== ========
</TABLE>
- ----------
* Annualized.
** Total investment returns exclude the effects of sales charges.
# Aggregate total investment return.
+ Commencement of operations.
++ Based on the average shares outstanding.
MIDDLE EAST/AFRICA FUND. The financial information in the table below has
been audited in conjunction with the annual audits of the financial statements
of Middle East/Africa 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
DECEMBER 30,
1994+ TO
FOR THE YEAR ENDED NOVEMBER 30, NOVEMBER 30,
--------------------------------------------------------------
1999++ 1998++ 1997++ 1996++ 1995
-------- -------- ------- -------- --------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.18 $ 10.96 $ 9.40 $ 10.66 $ 10.00
-------- -------- ------- ------- ---------
Investment income--net .32 .40 .48 .42 .57
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.64 (2.80) 1.52 (.80) .09
------ ------- ------ ------ -----
Total from investment
operations 1.96 (2.40) 2.00 (.38) .66
------ ------- ------ ------ -----
Less dividends and
distributions:
Investment income--net -- (.38) (.44) (.85) --
Realized gain on
investments--net -- -- -- (.03) --
---- ---- ---- ------ ----
Total dividends and
distributions -- (.38) (.44) (.88) --
---- ------ ------ ------ ----
Net asset value, end of
period $ 10.14 $ 8.18 $ 10.96 $ 9.40 $ 10.66
======== ======= ======== ======= =========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 23.96% (22.59)% 22.43% (4.17)% 6.60%#
======= ======== ======= ======= =========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement .46% .47% .47% .47% .00%*
======== ======= ======== ======= =========
Expenses 12.23% 6.51% 6.36% 4.84% 4.63%*
======== ======= ======== ======= =========
Investment income--net 3.55% 3.93% 4.35% 4.24% 8.43%*
======== ======= ======== ======= =========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $543 $563 $989 $399 $648
======== ======= ======== ======= =========
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
======== ======= ======== ======= =========
</TABLE>
<TABLE>
<CAPTION>
Table continued
CLASS B
-------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 30,
1994+ TO
FOR THE YEAR ENDED NOVEMBER 30, NOVEMBER 30,
-----------------------------------------------------------
1999++ 1998++ 1997++ 1996++ 1995
-------- -------- ------- -------- --------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.11 $ 10.87 $ 9.31 $ 10.56 $ 10.00
-------- -------- ------- -------- --------
Investment income--net .22 .29 .37 .32 .79
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.61 (2.78) 1.51 (.80) (.23)
----- ------- -------- ------ ------
Total from investment
operations 1.83 (2.49) 1.88 (.48) .56
------ ------- ------ ------ -----
Less dividends and
distributions:
Investment income--net -- (.27) (.32) (.74) --
Realized gain on
investments--net -- -- -- (.03) --
---- ---- ---- ------ ----
Total dividends and
distributions -- (.27) (.32) (.77) --
---- ----- ------- ------ ----
Net asset value, end of
period $ 9.94 $ 8.11 $ 10.87 $ 9.31 $ 10.56
======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 22.56% (23.40)% 21.02% (5.14)% 5.60%#
======= ======== ======= ======= ======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement 1.51% 1.51% 1.51% 1.50% 1.01%*
====== ====== ====== ======= ======
Expenses 13.09% 7.51% 7.46% 5.90% 5.68%*
======= ====== ====== ======= ======
Investment income--net 2.48% 2.91% 3.40% 3.15% 8.33%*
====== ====== ====== ====== =======
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $ 2,207 $3,096 $5,947 $5,699 $7,701
======= ====== ====== ====== ======
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
======= ====== ====== ===== =====
- -------------------
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges; results
would be lower if sales charges were included.
# Aggregate total investment return.
+ Commencement of operations.
++ Based on average shares outstanding.
<TABLE>
<CAPTION>
MIDDLE EAST/AFRICA FUND-FINANCIAL HIGHLIGHTS (CONCLUDED)
CLASS C
-------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 30,
1994+ TO
FOR THE YEAR ENDED NOVEMBER 30, NOVEMBER 30,
---------------------------------------------------------
1999++ 1998++ 1997++ 1996++ 1995
-------- -------- ------- -------- --------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.12 $ 10.89 $ 9.31 $ 10.56 $ 10.00
-------- -------- ------- -------- -------
Investment income--net .22 .30 .36 .31 .83
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.61 (2.79) 1.55 (.79) (.27)
------ -------- ------- -------- -------
Total from investment
operations 1.83 (2.49) 1.91 (.48) .56
------- -------- ------- -------- -------
Less dividends and
distributions:
Investment income--net -- (.28) (.33) (.74) --
Realized gain on
investments--net -- -- -- (.03) --
------ ------- ------ -------- ------
Total dividends and
distributions -- (.28) (.33) (.77) --
------ -------- -------- -------- ------
Net asset value, end of
period $ 9.95 $ 8.12 $ 10.89 $ 9.31 $ 10.56
======== ======= ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 22.54% (23.38)% 21.42% (5.16)% 5.60%#
======== ======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement 1.55% 1.53% 1.52% 1.50% 1.01%*
======== ======= ======= ======= =======
Expenses 13.13% 7.45% 7.47% 5.91% 5.67%*
======== ======= ======= ======= =======
Investment income--net 2.47% 2.90% 3.33% 3.14% 8.45%*
======== ======= ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $ 215 $ 317 $ 723 $ 692 $1,012
====== ====== ====== ======= ======
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
====== ====== ====== ======= ======
Table Continued
CLASS D
-------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 30,
1994+ TO
FOR THE YEAR ENDED NOVEMBER 30, NOVEMBER 30,
---------------------------------------------------------
1999++ 1998++ 1997++ 1996++ 1995
-------- -------- ------- -------- --------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.15 $ 10.93 $ 9.38 $ 10.63 $ 10.00
-------- -------- ------- -------- --------
Investment income--net .29 .37 .46 .40 .77
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--net 1.64 (2.79) 1.50 (.80) (.14)
------ ------- ------- ------- --------
Total from investment
operations 1.93 (2.42) 1.96 (.40) .63
------ ------- ------- ------- --------
Less dividends and
distributions:
Investment income--net -- (.36) (.41) (.82) --
Realized gain on
investments--net -- -- -- (.03) --
------ ---- ----- -------- ------
Total dividends and
distributions -- (.36) (.41) (.85) --
------ ------ ------- -------- ------
Net asset value, end of
period $ 10.08 $ 8.15 $ 10.93 $ 9.38 $ 10.63
======= ====== ======= ======= =======
TOTAL INVESTMENT RETURN:**
Based on net asset value
per share 23.68% (22.84)% 21.95%% (4.31)% 6.30%#
======= ====== ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement .71% .72% .72% .72% .25%*
===== ====== ======= ======= =======
Expenses 12.33% 6.70% 6.67% 5.08% 4.89%*
======= ====== ======= ======= =======
Investment income--net 3.23% 3.69% 4.18% 4.01% 9.07%*
======= ====== ======= ======= =======
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $ 380 $ 550 $ 1,109 $ 969 $ 1,569
====== ===== ======= ====== =======
Portfolio turnover 83.78% 17.03% 78.12% 46.36% 40.97%
====== ====== ======= ======== =======
</TABLE>
- -------------------
* Annualized.
** Total investment returns exclude the effects of sales charges; results
would be lower if sales charges were included.
# Aggregate total investment return.
+ Commencement of operations.
++ Based on the average shares outstanding.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of Developing Capital Markets Fund and Middle
East/Africa Fund are similar, though not identical. Each Fund seeks long term
capital appreciation. Developing Capital Markets Fund invests in securities,
principally equities, of issuers in countries having smaller capital markets.
Middle East/Africa Fund invests primarily in equity and debt securities of
corporations and government issuers in the Middle East and Africa. The
investment objective of each Fund described in this paragraph is a fundamental
policy of each Fund and may not be changed without the approval of the holders
of a majority of that Fund's outstanding voting securities. Both Funds are
non-diversified.
There can be no assurance that, after the Reorganization, Developing
Capital Markets Fund will achieve its investment objective.
Each Fund invests in a portfolio of securities primarily of issuers located
outside of the United States. Middle East/Africa Fund invests at least 65% of
the Fund's assets in the securities of issuers in all countries in the Middle
East and Africa. Although the Fund is not required to invest in any particular
market within that region, Middle East/Africa Fund currently emphasizes
investments in securities of issuers in Botswana, Ghana, Morocco, South Africa,
Turkey, Israel, Jordan and Zimbabwe. Developing Capital Markets Fund invests at
least 65% of the Fund's assets in equity securities of countries having smaller
capital markets. Developing Capital Markets Fund considers "smaller capital
markets" to be all markets other than the four largest (based on equity market
capitalization). This currently precludes Developing Capital Markets Fund from
investing in Japan, the United Kingdom, the United States and Germany (except
for short term cash positions).
SECURITIES. Developing Capital Markets Fund invests principally in equity
securities including common stock, preferred stock, convertible securities and
derivative securities the value of which is based on a common stock or group of
common stocks. Developing Capital Markets Fund may also invest up to 35% of its
assets in non-convertible debt securities. Although Middle East/Africa Fund may
invest in equity and debt securities of corporations and government issuers, the
Fund tends to invest primarily in equity securities in order to achieve its goal
of long term capital appreciation. Middle East/Africa Fund can invest in all
types of equity securities including common stock, preferred stock, warrants and
stock purchase rights. Middle East/Africa Fund may also invest in derivative
securities.
TEMPORARY INVESTMENTS. Developing Capital Markets Fund reserves the right,
as a temporary defensive measure to hold, without limitation, cash or cash
equivalents and short term securities, including money market instruments
denominated in U.S. dollars or foreign currencies ("Temporary Investments"). A
portion of the Developing Capital Markets Fund may be held in Temporary
Investments in anticipation of investment in equity securities or to provide for
possible redemptions. Middle East/Africa Fund also reserves the right, as a
temporary defensive measure and to provide for redemptions to hold, without
limitation, cash or cash equivalents and short term securities, including money
market instruments denominated in U.S. dollars or foreign currencies in such
proportions as, in the opinion of MLAM, prevailing market or economic conditions
warrant.
DEPOSITARY RECEIPTS. Developing Capital Markets Fund and Middle East/Africa
Fund may each invest in the securities of foreign issuers in the form of
Depositary Receipts or other securities convertible into securities of foreign
issuers. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying securities into which they may be converted. American
Depositary Receipts ("ADRs") are receipts typically issued by an American bank
or trust company that evidence ownership of underlying securities issued by a
foreign corporation. European Depositary Receipts ("EDRs") are receipts issued
in Europe that evidence a similar ownership arrangement. Global Depositary
Receipts ("GDRs") are receipts issued throughout the world that evidence a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets, and EDRs, in bearer form, are designed for use
in European securities markets. GDRs are tradable both in the U.S. and in Europe
and are designed for use throughout the world. Each Fund may invest in
unsponsored Depositary Receipts. The issuers of unsponsored Depositary Receipts
are not obligated to disclose material information in the United States, and
therefore, there may be less information available regarding such issuers and
there may not be a correlation between such information and the market value of
the Depositary Receipts.
WARRANTS. Middle East/Africa Fund may invest in warrants. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. In addition, warrants involve
the risk that the price of the security underlying the warrant may not exceed
the exercise price of the warrant and the warrant may expire without any value.
CONVERTIBLE SECURITIES. Each of the Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. A convertible security entitles
the holder to receive interest generally paid or accrued on debt or the dividend
paid on preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Convertible securities have several unique investment
characteristics such as (i) higher yields than common stocks, but lower yields
than comparable nonconvertible securities, (ii) a lesser degree of fluctuation
in value than the underlying stock since they have fixed-income characteristics
and (iii) the potential for capital appreciation if the market price of the
underlying common stock increases. A convertible security might be subject to
redemption at the option of the issuer at a price established in the convertible
security's governing instrument. If a convertible security held by one of the
Funds is called for redemption, the Fund may be required to permit the issuer to
redeem the security, convert it into the underlying common stock or sell it to a
third party.
HIGH YIELD OR "JUNK" BONDS. Each Fund may invest in high yield or "junk"
bonds. Junk bonds are debt securities that are rated below investment grade by
the major rating agencies or are unrated securities that Fund management
believes are of comparable quality. Although junk bonds generally pay higher
rates of interest than investment grade bonds, they are high risk investments
that may cause income and principal losses for the Fund. Junk bonds generally
are less liquid and experience more price volatility than higher rated debt
securities. The issuers of junk bonds may have a larger amount of outstanding
debt relative to their assets than issuers of investment grade bonds. In the
event of an issuer's bankruptcy, claims of other creditors may have priority
over the claims of junk bond holders, leaving few or no assets available to
repay junk bond holders. Junk bonds may be subject to greater call and
redemption risk than higher rated debt securities.
DISTRESSED SECURITIES. Middle East/Africa Fund may also invest in
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
Middle East/Africa Fund invests 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. Middle East/Africa Fund generally does not receive interest
payments on the distressed securities and may incur costs to protect its
investment. In addition, Middle East/Africa 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.
SOVEREIGN DEBT. Each Fund may invest in sovereign debt securities. These
securities are issued or guaranteed by foreign government entities. Investments
in sovereign debt are subject to the risk that a government entity may delay or
refuse to pay interest or repay principal on its sovereign debt. Some of these
reasons may include cash flow problems, insufficient foreign currency reserves,
political considerations, the relative size of its debt position to its economy
or its failure to put in place economic reforms required by the International
Monetary Fund or other multilateral agencies. If a government entity defaults,
it may ask for more time in which to pay or for further loans. There is no legal
process for collecting sovereign debts that a government does not pay or
bankruptcy proceeding by which all or part of sovereign debt that a government
entity has not repaid may be collected.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid. Liquidity of a security relates to the ability to dispose
easily of the security and the price to be obtained upon disposition of the
security, which may be less than would be obtained for a comparable more liquid
security. Investment of a Fund's assets in illiquid securities may restrict the
ability of that Fund to dispose of its investments in a timely fashion and for a
fair price as well as its ability to take advantage of market opportunities.
Each Fund may invest in securities restricted to "qualified institutional
buyers" under Rule 144A under the Securities Act and in securities of issuers
that are sold in private placement transactions between the issuers and their
purchasers and that are neither listed on an exchange nor traded in other
established markets. In many cases, privately placed securities will be subject
to contractual or legal restrictions on transfer.
INDEXED AND INVERSE SECURITIES. Each Fund may invest in securities the
potential return of which is based on the change in particular measurements of
value or rate (an "index"). As an illustration, either Fund may invest in a debt
security that pays interest and returns principal based on the change in the
value of a securities index or a basket of securities, or based on the relative
changes of two indices. In addition, each Fund may invest in securities the
potential return on which is based inversely on the change in an index. For
example, either Fund may invest in securities that pay a higher rate of interest
when a particular index decreases and pay a lower rate of interest (or do not
fully return principal) when the value of the index increases. If a Fund invests
in such securities, it may be subject to reduced or eliminated interest payments
or loss of principal in the event of an adverse movement in the relevant index
or indices.
Certain indexed and inverse securities may have the effect of providing
investment leverage because the rate of interest or amount of principal payable
increases or decreases at a rate that is a multiple of the changes in the
relevant index. As a consequence, the market value of such securities may be
substantially more volatile than the market values of other debt securities. The
Funds believe that indexed and inverse securities may provide portfolio
management flexibility that permits the Funds to seek enhanced returns, hedge
other portfolio positions or vary the degree of portfolio leverage with greater
efficiency than would otherwise be possible under certain market conditions.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each Fund may invest in other
investment companies whose investment objectives and policies are consistent
with those of the respective Fund. In accordance with the Investment Company
Act, a Fund may invest up to 10% of its total assets in securities of other
investment companies. In addition, under the Investment Company Act, a Fund may
not own more than 3% of the total outstanding voting stock of any investment
company and not more than 5% of the value of the Fund's total assets may be
invested in the securities of any investment company. If a Fund acquires shares
in investment companies, stockholders would bear both their proportionate share
of expenses in the Fund (including management and advisory fees) and,
indirectly, the expenses of such investment companies (including management and
advisory fees). Investments by a Fund in wholly owned investment entities
created under the laws of certain countries will not be deemed an investment in
other investment companies.
OTHER INVESTMENT POLICIES
Developing Capital Markets Fund and Middle East/Africa Fund have adopted
certain other investment policies as set forth below:
BORROWINGS. Developing Capital Markets Fund and Middle East/Africa Fund
are each subject to a fundamental investment restriction, which provides that
the Fund may borrow from banks in amounts up to 331/3% of its total assets
taken at market value and may borrow an additional 5% of its total assets for
temporary purposes. As a non-fundamental restriction, each Fund is further
limited and may not borrow money or pledge its assets, except that either Fund
may borrow from banks (but for Developing Capital Markets Fund only up to 20%
of its total assets) as a temporary measure for extraordinary or emergency
purposes or to meet redemptions. Neither Fund will purchase securities while
borrowings exceed 5% of its total assets.
HEDGING TECHNIQUES. Both Developing Capital Markets Fund and Middle
East/Africa Fund may engage in various portfolio strategies to hedge their
respective portfolios against investment, interest rate and currency risks. For
a description of hedging instruments and risks associated with investment in
such instruments, see "Details About the Fund--Investment Risks--Derivatives" in
the Developing Capital Markets Fund Prospectus.
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 in such agreements, see
"Details About the Fund--Investment Risks--Standby Commitment Agreements" in the
Developing Capital Markets Fund Prospectus.
REPURCHASE AGREEMENTS AND PURCHASE AND SALE CONTRACTS. Each Fund may
enter into repurchase agreements and purchase and sale contracts. For a
description of repurchase agreements and the risks associated with investment
in such agreements, see "Details About the Fund--Investment Risks--Repurchase
Agreements; Purchase and Sale Contracts" in the Developing Capital Markets
Fund Prospectus.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. Each Funds may
purchase or sell securities on a delayed delivery basis or on a when-issued
basis at fixed purchase or sale terms. For a description of when-issued
securities and delayed delivery transactions, including the risks associated
with investment therein, see "Details About the Fund--Investment Risks--When
Issued Securities, Delayed Delivery Securities and Forward Commitments" in the
Developing Capital Markets Fund 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 in the case of Middle East/Africa Fund, or 20% of total assets in the
case of Developing Capital Markets Fund, to banks, brokers and other financial
institutions and receive collateral in cash or securities issued or guaranteed
by the U.S. Government, see "Details About the Fund--Investment Risks--
Securities Lending" in the Developing Capital Markets Fund Prospectus.
NON-DIVERSIFIED STATUS. Each Fund is classified as a non-diversified
fund under the Investment Company Act, which means that it may invest more of
its assets in securities of a single issuer than if it were a diversified fund.
By concentrating in a smaller number of issuers, the Fund's risk is increased
because developments affecting an individual issuer may have a greater impact on
the Fund's performance.
INFORMATION REGARDING OPTIONS, FUTURES AND FOREIGN EXCHANGE TRANSACTIONS
Each Fund may engage in certain investment practices including the use of
options, futures and foreign exchange. Middle East/Africa Fund may utilize these
strategies for hedging purposes, including anticipatory hedges. Developing
Capital Markets Fund may engage in such transactions for hedging purposes,
including anticipatory hedges and to seek to increase its return. Each Fund has
authority to write (I.E., sell) put or call options, purchase put or call
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.
The investment policies of each Fund with respect to futures and options
transactions are not fundamental policies and may be modified by the Board 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 "Investment
Objective and Policies--Derivatives" in the Developing Capital Markets Fund
Statement, and "Investment Objective and Policies--Derivatives" in the Middle
East/Africa Fund Statement.
INVESTMENT RESTRICTIONS
Other than as noted above, Developing Capital Markets Fund and Middle
East/Africa Fund have identical investment restrictions. See "Investment
Objective and Policies--Investment Restrictions" in the Developing Capital
Markets Fund Statement and "Investment Objective and Policies--Investment
Restrictions" in the Middle East/Africa Fund Statement.
MANAGEMENT
DIRECTORS. The Boards of Directors of Developing Capital Markets Fund and
Middle East/Africa Fund consist of the same five individuals, three of whom are
not "interested persons" as defined in the Investment Company Act. The Directors
are responsible for the overall supervision of the operation of each Fund and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act.
Information about the Directors of Developing Capital Markets Fund,
including their ages and their principal occupations 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 Arnold 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 from 1986 to 1997.
RICHARD R. WEST (61)-- DIRECTOR (2)(3)-- Box 604, Genoa, Nevada 89411.
Professor of Finance since 1984, Dean from 1984 to 1993, and 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 (64) -- 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.
MANAGEMENT AND ADVISORY ARRANGEMENTS. MLAM serves as the manager for both
Developing Capital Markets Fund and Middle East/Africa Fund pursuant to separate
management agreements (each, a "Management Agreement") that, except for certain
minor differences, are identical.
Pursuant to the separate Management Agreement between each Fund and MLAM,
each Fund pays MLAM a management fee at the annual rate of 1.00% of the average
daily net assets of the Fund. After the Reorganization, the Combined Fund will
pay the management fee at the current rate of 1.00%. See "Summary--Pro Forma
Fee Tables."
MLAM has retained MLAM U.K. as sub-adviser to each of Middle East/Africa
Fund and Developing Capital Markets Fund. 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 its Management Agreement. The address of MLAM
U.K. is 33 King William Street, London EC4R 9AS, England.
PURCHASE OF SHARES
The class structure and purchase and distribution procedures for shares of
Middle East/Africa Fund are substantially the same as those of Developing
Capital Markets Fund. 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(Service Mark) System" and "--Participation
in Merrill Lynch Fee Based Programs" in the Developing Capital Markets Fund
Prospectus and the Middle East/Africa Fund Prospectus and "Your Account--How to
Buy, Sell, Transfer and Exchange Shares" in the Developing Capital Markets Fund
Prospectus and "Your Account--How to Buy, Sell and Transfer Shares" in the
Middle East/Africa Fund Prospectus.
REDEMPTION OF SHARES
The procedure for redeeming shares of Developing Capital Markets Fund is
substantially the same as the procedure for redeeming shares of Middle
East/Africa Fund except that all classes of shares of Middle East/Africa Fund
are subject to a redemption fee of 2.0% of the net asset value of any shares
redeemed within 12 months of purchase. The exchange of shares in the
Reorganization and the Corresponding Shares received by Middle East/Africa Fund
stockholders in the Reorganization will not be subject to this redemption fee.
For purposes of computing any CDSC that may be payable upon disposition of
Corresponding Shares of Developing Capital Markets Fund acquired by Middle
East/Africa Fund stockholders in the Reorganization, the holding period of
Middle East/Africa Fund shares outstanding on the date the Reorganization takes
place will be tacked onto the holding period of the Corresponding Shares of
Developing Capital Markets Fund acquired in the Reorganization. See "Your
Account--Merrill Lynch Select Pricing(Service Mark) System" and "--Participation
in Merrill Lynch Fee Based Programs" in the Developing Capital Markets Fund
Prospectus and the Middle East/Africa Fund Prospectus and "Your Account--How to
Buy, Sell, Transfer and Exchange Shares" in the Developing Capital Markets Fund
Prospectus and "Your Account--How to Buy, Sell and Transfer Shares" in the
Middle East/Africa Fund Prospectus.
PERFORMANCE
GENERAL. The following tables provide performance information for each
class of shares of Middle East/Africa Fund and Developing Capital Markets Fund,
including and excluding maximum applicable sales charges, for the periods
indicated. Past performance is not indicative of future performance.
<TABLE>
<CAPTION>
DEVELOPING CAPITAL MARKETS FUND
AVERAGE ANNUAL TOTAL RETURN
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
-------------- -------------- -------------- --------------
WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES
SALES CHARGE* SALES CHARGE* SALES CHARGE* SALES CHARGE*
PERIOD CHARGE CHARGE CHARGE CHARGE
------ --------- ---------- --------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 43.12% 35.60% 41.63% 37.63% 41.54% 40.54% 42.85% 35.35%
Five Years Ended 11/30/99 -1.37% -2.42% -2.40% -2.40% -2.41% -2.41% -1.62% -2.67%
Ten Years Ended 11/30/99 6.40% 5.83% N/A N/A N/A N/A N/A N/A
Inception+ through
11/30/99 6.38% 5.83% -0.62% -0.62% -3.34% -3.34% -2.56% -3.58%
- -------------
* 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 four years.
Class C shares are subject to a 1.0% CDSC for one year.
+ Class A shares commenced operations on September 1, 1989. Class B shares commenced operations on July 1, 1994. Class C and
Class D shares commenced operations on October 21, 1994.
</TABLE>
<TABLE>
<CAPTION>
MIDDLE EAST/AFRICA FUND
AVERAGE ANNUAL TOTAL RETURN
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
-------------- -------------- -------------- --------------
WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES
SALES CHARGE* SALES CHARGE* SALES CHARGE* SALES CHARGE*
PERIOD CHARGE CHARGE CHARGE CHARGE
------ --------- ---------- --------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 11/30/99 23.96% 15.10% 22.56% 16.11% 22.54% 19.09% 23.68% 14.84%
Inception+ through 3.78% 2.64% 2.67% 2.67% 2.73% 2.73% 3.49% 2.36%
11/30/99
- -----------------
* 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 four years. Class C shares are subject to a 1.0% CDSC
for one year.
+ All classes commenced operations on December 30, 1994.
</TABLE>
STOCKHOLDER RIGHTS
Stockholders of Developing Capital Markets Fund 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. Developing Capital Markets Fund 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 a management agreement; (iii) approval
of distribution arrangements; and (iv) ratification of selection of
independent accountants. Voting rights for Directors are not cumulative.
Shares of Developing Capital Markets Fund to be issued to Middle East/Africa
Fund stockholders in the Reorganization will be fully paid and non-assessable,
will have no preemptive rights and will have the conversion rights described
in this Prospectus and Proxy Statement and in the Developing Capital Markets
Fund Prospectus. Each share of Developing Capital Markets Fund 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 Middle
East/Africa Fund are substantially identical to those described above.
DIVIDENDS
The current policy of Middle East/Africa Fund with respect to dividends
is substantially identical to the policy of Developing Capital Markets Fund.
It is each Fund's intention to distribute all of its net investment income, if
any. In addition, each Fund distributes all net realized 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 "Shareholder Services--Automatic Dividend
Reinvestment Plan" in the Developing Capital Markets Fund Statement or in the
Middle East/Africa Fund Statement.
After the Reorganization, a Middle East/Africa Fund stockholder who has
elected to receive dividends in cash will continue to receive dividends in
cash; all other Middle East/Africa Fund stockholders will have their dividends
automatically reinvested in shares of the Combined Fund. However, if a
stockholder owns shares of both Funds, after the Reorganization the
stockholder's election with respect to the dividends of Developing Capital
Markets Fund will control unless the stockholder specifically elects a
different option at that time.
TAX INFORMATION
The tax consequences associated with investment in shares of Middle
East/Africa Fund are substantially identical to the tax consequences
associated with investment in shares of Developing Capital Markets Fund. See
"Your Account--Dividends and Taxes" in the Developing Capital Markets Fund
Prospectus.
PORTFOLIO TRANSACTIONS
The procedures for engaging in portfolio transactions are generally the
same for both Middle East/Africa Fund and Developing Capital Markets Fund. For
a discussion of these procedures, see "Portfolio Transactions and Brokerage"
in the Developing Capital Markets Fund 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, neither Middle East/Africa Fund nor Developing Capital Markets
Fund purchases securities for short term trading profits. However, either Fund
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.
Neither Fund has any limit on its rate of portfolio turnover. The portfolio
turnover rates for Middle East/Africa Fund for its fiscal years ended November
30, 1998 and 1999 were 17.03% and 83.78%, respectively. The portfolio turnover
rates for Developing Capital Markets Fund for its fiscal years ended June 30,
1998 and 1999 were 98.16% and 84.92%, respectively. A high portfolio turnover
involves certain tax consequences, and correspondingly greater transaction
costs in the form of dealer spreads and brokerage commissions which are borne
directly by the Fund such as an increase in capital gain dividends or in
ordinary income dividends of accrued market discount.
ADDITIONAL INFORMATION
NET ASSET VALUE. Both Developing Capital Markets Fund and Middle
East/Africa Fund determine net asset value of each class of its shares once
daily 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. Developing Capital Markets Fund 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
Developing Capital Markets Fund have an exchange privilege with certain other
funds utilizing Select Pricing. Stockholder services available to stockholders
of Middle East/Africa Fund are substantially identical to the stockholder
services of Developing Capital Markets Fund except that Middle East/Africa
Fund stockholders do not have an exchange privilege. For a description of
these services, see "Shareholder Services" in the Developing Capital Markets
Fund Prospectus.
CUSTODIAN. Brown Brothers Harriman & Co. ("Brown Brothers") acts as
custodian of the cash and securities of both Developing Capital Markets Fund
and Middle East/Africa Fund. The principal business address of Brown Brothers
is 40 Water Street, Boston, MA 02109. It is presently anticipated that Brown
Brothers will serve as the custodian of the Combined Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND STOCKHOLDER SERVICING
AGENT. Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484, serves as the transfer agent, dividend disbursing agent
and stockholder servicing agent with respect to each Fund (the "Transfer
Agent"), at the same fee schedule, pursuant to separate agreements with each
of the Funds.
CAPITAL STOCK. Middle East/Africa Fund has an authorized capital of
400,000,000 shares of common stock, par value $.10 per share, divided into
four classes, designated Class A, Class B, Class C and Class D shares each of
which consists of 100,000,000 shares. Developing Capital Markets Fund has an
authorized capital of 400,000,000 shares of common stock, par value $.10 per
share, divided into four classes, designated Class A, Class B, Class C and
Class D shares each of which consists of 100,000,000 shares. The rights,
preferences and expenses attributable to the Class A, Class B, Class C and
Class D shares of Middle East/Africa Fund are identical in all respects to
those of the Class A, Class B, Class C and Class D shares of Developing
Capital Markets Fund except as described in "Comparison of the
Funds--Redemption of Shares" and "Comparison of the Funds--Additional
Information--Stockholder Services" above.
STOCKHOLDER INQUIRIES. Stockholder inquiries with respect to Middle
East/Africa Fund and Developing Capital Markets Fund may be addressed to
either Fund by telephone at (609) 282-2800 or at the address set forth on the
cover page of this Proxy Statement and Prospectus.
THE REORGANIZATION
GENERAL
Under the Agreement and Plan (attached hereto as Exhibit I), Developing
Capital Markets Fund will acquire substantially all of the assets, and will
assume substantially all of the liabilities, of Middle East/Africa Fund, in
exchange solely for an equal aggregate value of shares to be issued by
Developing Capital Markets Fund. Upon receipt by Middle East/Africa Fund of
such shares, Middle East/Africa Fund will distribute the shares to the holders
of shares of Middle East/Africa Fund, as described below.
Generally, the assets transferred by Middle East/Africa Fund to
Developing Capital Markets Fund will equal all investments of Middle
East/Africa Fund held in its portfolio as of the Valuation Time (as defined in
the Agreement and Plan) and all other assets of Middle East/Africa Fund as of
such time.
Middle East/Africa Fund will distribute the shares of Developing Capital
Markets Fund received by it pro rata to its stockholders in exchange for such
stockholders' proportional interests in Middle East/Africa Fund. The shares of
Developing Capital Markets Fund received by Middle East/Africa Fund
stockholders will be of the same class and have the same aggregate net asset
value as each such stockholder's interest in Middle East/Africa Fund as of the
Valuation Time (previously defined as the "Corresponding Shares"). (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
Developing Capital Markets Fund in the names of all stockholders of Middle
East/Africa Fund, including stockholders holding Middle East/Africa Fund
shares in certificate form, and transferring to each stockholder's account the
Corresponding Shares of Developing Capital Markets Fund representing such
stockholder's interest previously credited to the account of Middle
East/Africa Fund. Stockholders holding Middle East/Africa Fund shares in
certificate form may receive certificates representing the Corresponding
Shares of Developing Capital Markets Fund credited to their account in respect
of such Middle East/Africa Fund shares by sending the certificates to the
Transfer Agent accompanied by a written request for such exchange.
Since the Corresponding Shares of Developing Capital Markets Fund will be
issued at net asset value and the shares of Middle East/Africa Fund will be
valued at net asset value for the purposes of the exchange by the stockholders
of Middle East/Africa Fund of such shares for the Corresponding Shares, the
holders of shares of Middle East/Africa Fund will not be diluted as a result
of the Reorganization. However, as a result of the Reorganization, a
stockholder of Middle East/Africa Fund or Developing Capital Markets Fund
would hold a reduced percentage of ownership in the Combined Fund than he or
she did in Middle East/Africa Fund or Developing Capital Markets Fund prior to
the Reorganization.
PROCEDURE
On January 20, 2000, the Board of Directors of Middle East/Africa Fund,
including all of the Directors who are not "interested persons," as defined by
the Investment Company Act, approved the Agreement and Plan and the submission
of such Agreement and Plan to Middle East/Africa Fund stockholders for
approval. The Board of Directors of Developing Capital Markets Fund, including
all of the Directors who are not interested persons, also approved the
Agreement and Plan on January 20, 2000.
If the stockholders of Middle East/Africa Fund approve the Reorganization
at the Meeting, all required regulatory approvals are obtained and certain
conditions are either met or waived, it is presently anticipated that the
Reorganization will take place during the second calendar quarter of 2000.
THE BOARD OF DIRECTORS OF MIDDLE EAST/AFRICA FUND RECOMMENDS THAT MIDDLE
EAST/AFRICA FUND STOCKHOLDERS APPROVE THE AGREEMENT AND PLAN.
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 Middle
East/Africa Fund and Developing Capital Markets Fund 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
Developing Capital Markets Fund Prospectus. Purchase orders for Middle
East/Africa Fund shares which have not been confirmed as of the Valuation Time
will be treated as assets of Middle East/Africa Fund for purposes of the
Reorganization; redemption requests with respect to Middle East/Africa Fund
shares which have not settled as of the Valuation Time will be treated as
liabilities of Middle East/Africa Fund for purposes of the Reorganization.
DISTRIBUTION OF DEVELOPING CAPITAL MARKETS FUND SHARES. On the next full
business day following the Valuation Time (the "Exchange Date"), Developing
Capital Markets Fund will issue to Middle East/Africa Fund a number of shares
the aggregate net asset value of which will equal the aggregate net asset
value of shares of Middle East/Africa Fund as of the Valuation Time. Each
holder of Middle East/Africa Fund shares will receive, in exchange for his or
her proportionate interest in Middle East/Africa Fund, Corresponding Shares of
Developing Capital Markets Fund of the same class and having the same
aggregate net asset value as the Middle East/Africa Fund shares held by such
stockholder as of the Valuation Time.
EXPENSES. The expenses of the Reorganization that are directly
attributable to Middle East/Africa Fund and the conduct of its business will
be deducted from the assets of Middle East/Africa 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 Meeting and the expenses related to the solicitation of
proxies to be voted at that Meeting. The expenses attributable to Developing
Capital Markets Fund include the costs of printing sufficient copies of its
Prospectus, Annual Report and Semi-Annual Report to accompany the 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 Developing Capital Markets Fund.
REQUIRED APPROVALS. Under Middle East/Africa Fund's Articles of
Incorporation (as amended to date) and relevant Maryland law, stockholder
approval of the Agreement and Plan requires the affirmative vote of Middle
East/Africa Fund stockholders representing a majority of the total number of
votes entitled to be cast thereon.
DEREGISTRATION AND DISSOLUTION. Following the transfer of the assets and
liabilities of Middle East/Africa Fund to Developing Capital Markets Fund and
the distribution of Corresponding Shares of Developing Capital Markets Fund to
Middle East/Africa Fund stockholders, Middle East/Africa Fund will terminate
its registration under the Investment Company Act and its incorporation under
Maryland law and will withdraw its authority to do business in any state where
it is required to do so.
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 Middle East/Africa Fund and Developing Capital Markets Fund
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 Middle East/Africa Fund
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 Middle East/Africa Fund and Developing Capital Markets Fund being confirmed
by the respective parties.
TERMINATION, POSTPONEMENT AND WAIVERS. The Agreement and Plan may be
terminated, and the Reorganization abandoned at any time, whether before or
after adoption thereof by the Middle East/Africa Fund stockholders, prior to
the Exchange Date, or the Exchange Date may be postponed: (i) by mutual
consent of the Boards of Directors of Middle East/Africa Fund and Developing
Capital Markets Fund; (ii) by the Board of Directors of Middle East/Africa
Fund if any condition to Middle East/Africa Fund's obligations has not been
fulfilled or waived by such Board; or (iii) by the Board of Directors of
Developing Capital Markets Fund if any condition to Developing Capital Markets
Fund's obligations has not been fulfilled or waived by such Board.
POTENTIAL BENEFITS TO STOCKHOLDERS AS A RESULT OF THE REORGANIZATION
MLAM and the Board of Directors of Middle East/Africa Fund have
determined that stockholders are likely to benefit from the Reorganization.
First, following the Reorganization, Middle East/Africa Fund stockholders will
remain invested in an open-end fund that has investment objectives and
policies similar, though not identical, to that of Middle East/Africa Fund. In
addition, Middle East/Africa Fund stockholders are likely to experience
certain additional benefits, including lower expenses per share, economies of
scale and greater flexibility in portfolio management. Additionally, the
Corresponding Shares received by Middle East/Africa Fund stockholders will not
be subject to the redemption fee of 2.0% of the net asset value that is
applicable to any Middle East/Africa Fund shares redeemed within 12 months of
purchase and will have an exchange privilege with certain other funds
utilizing Select Pricing. See "Comparison of the Funds--Redemption of Shares"
and "--Additional Information--Stockholder Services."
Specifically, after the Reorganization the total operating expenses of
Pro Forma Developing Capital, as a percent of net assets, would be less than
the current operating expenses for Middle East/Africa Fund (excluding any fee
waiver or expense reimbursement). See "Summary--Pro Forma Fee Tables." In
addition, 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 Middle East/Africa Fund stockholders. To
illustrate the potential economies of scale for Middle East/Africa Fund, on
November 30, 1999, the total operating expense ratio (excluding class specific
distribution and account maintenance fees) for Middle East/Africa Fund was
10.74% (based on fund net assets of approximately $3.3 million and without
giving effect to any fee waiver or expense reimbursement) and for Developing
Capital Markets Fund was 1.79% (based on fund net assets of approximately
$200.8 million). If the Reorganization had taken place on that date, the total
operating expense ratio (excluding class specific distribution and account
maintenance fees) for Pro Forma Developing Capital would have been 1.79%
(based on fund net assets of approximately $204.1 million).
The following table sets forth (i) the net assets of Middle East/Africa
Fund for the last three fiscal year ends and (ii) the net assets of Developing
Capital Markets Fund for the last three fiscal year ends and as of November
30, 1999.
DEVELOPING CAPITAL MARKETS FUND MIDDLE EAST/AFRICA FUND
---------------------------------------- ---------------------------------
PERIOD NET ASSETS PERIOD NET ASSETS
- ----------------------------------------- ---------------------------------
As of 6/30/97 $ 1,015,713,159 As of 11/30/97 $ 8,767,500
As of 6/30/98 $ 448,376,235 As of 11/30/98 $ 4,525,878
As of 6/30/99 $ 212,634,936 As of 11/30/99 $ 3,344,748
As of 11/30/99 $ 200,821,724
The net assets of Middle East/Africa Fund as of November 30, 1999 are
substantially smaller than the net assets of Developing Capital Markets Fund.
MLAM believes that the economies of scale that may be realized as a result of
the Reorganization would be beneficial to Middle East/Africa Fund
stockholders.
Based on the foregoing, the Board of Directors of Middle East/Africa Fund
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 Fund determined that the interests of existing stockholders
of that 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. Middle East/Africa Fund and Developing
Capital Markets Fund have elected and qualified for the special tax treatment
afforded "regulated investment companies" under the Code, and Developing
Capital Markets Fund intends to continue to so qualify after the
Reorganization. Middle East/Africa Fund and Developing Capital Markets Fund
have jointly requested a private letter ruling from the IRS to the effect that
for Federal income tax purposes: (i) the transfer of substantially all of the
assets of Middle East/Africa Fund to Developing Capital Markets Fund in
exchange solely for shares of Developing Capital Markets Fund as provided in
this Agreement will constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and Middle East/Africa Fund and Developing Capital
Markets Fund will each be deemed to be a "party" to the Reorganization within
the meaning of Section 368(b) of the Code; (ii) in accordance with Section
361(a) of the Code, no gain or loss will be recognized to Middle East/Africa
Fund as a result of the asset transfer solely in exchange for Developing
Capital Markets Fund shares or on the distribution of the Developing Capital
Markets Fund stock to Middle East/Africa Fund stockholders under Section
361(c)(1) of the Code; (iii) under Section 1032 of the Code, no gain or loss
will be recognized to Developing Capital Markets Fund on the receipt of assets
of Middle East/Africa Fund in exchange for Developing Capital Markets Fund
shares; (iv) in accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized to the stockholders of Middle East/Africa Fund on the
receipt of Corresponding Shares of Developing Capital Markets Fund in exchange
for their shares of Middle East/Africa Fund; (v) in accordance with Section
362(b) of the Code, the tax basis of the Middle East/Africa Fund assets in the
hands of Developing Capital Markets Fund will be the same as the tax basis of
such assets in the hands of Middle East/Africa 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 Developing Capital Markets Fund received by the stockholders of
Middle East/Africa Fund in the Reorganization will be equal, to the tax basis
of the shares of Middle East/Africa Fund surrendered in exchange; (vii) in
accordance with Section 1223 of the Code, a stockholder's holding period for
the Corresponding Shares of Developing Capital Markets Fund will be determined
by including the period for which such stockholder held the shares of Middle
East/Africa Fund exchanged therefor, PROVIDED, that such Middle East/Africa
Fund shares were held as a capital asset; (viii) in accordance with Section
1223 of the Code, Developing Capital Market Fund's holding period with respect
to the Middle East/Africa Fund assets transferred will include the period for
which such assets were held by Middle East/Africa Fund; and (ix) the taxable
year of Middle East/Africa Fund will end on the effective date of the
Reorganization, and pursuant to Section 381(a) of the Code and regulations
thereunder, Developing Capital Markets Fund will succeed to and take into
account certain tax attributes of Middle East/Africa Fund, such as earnings
and profits, capital loss carryovers and method of accounting. If the IRS does
not issue a favorable private letter ruling in advance of the selected closing
date, the Funds may proceed with the closing of the Reorganization upon
receipt of an opinion of counsel regarding the tax matters covered by the
ruling request.
As of November 30, 1999, Developing Capital Markets Fund has significant
per share net realized capital losses. After the Reorganization, Middle
East/Africa Fund stockholders may benefit from the ability of Developing
Capital Markets Fund to offset these capital losses against its realized
capital gains, if any, subject to certain limitations. Stockholders should
consult their tax advisers regarding the effect of the Reorganization in light
of their individual circumstances. As the foregoing relates only to Federal
income tax consequences, stockholders also should consult their tax advisers
as to the foreign, state and local tax consequences of the Reorganization.
STATUS AS A REGULATED INVESTMENT COMPANY. Both Middle East/Africa Fund
and Developing Capital Markets Fund have elected and qualified to be taxed as
regulated investment companies under Sections 851-855 of the Code, and after
the Reorganization, Developing Capital Markets Fund intends to continue to
operate so as to qualify as a regulated investment company. Following the
liquidation and dissolution of Middle East/Africa Fund and distribution of
shares of Developing Capital Markets Fund to Middle East/Africa Fund
stockholders, Middle East/Africa Fund will terminate its registration under
the Investment Company Act and its incorporation under Maryland law.
CAPITALIZATION
The following table sets forth as of November 30, 1999: (i) the
capitalization of Middle East/Africa Fund, (ii) the capitalization of
Developing Capital Markets Fund and (iii) the capitalization of Pro Forma
Developing Capital as adjusted to give effect to the Reorganization.
<TABLE>
<CAPTION>
PRO FORMA CAPITALIZATION OF DEVELOPING CAPITAL MARKETS FUND, MIDDLE EAST/AFRICA FUND AND
PRO FORMA DEVELOPING CAPITAL AS OF NOVEMBER 30, 1999
DEVELOPING CAPITAL MARKETS FUND
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS D
--------------- --------------- ----------------- ----------------
Total Net Assets: $ 78,023,697 $ 86,002,740 $ 17,044,464 $ 19,750,823
Shares Outstanding: 6,281,596 7,136,667 1,419,816 1,600,295
Net Asset Value Per Share: $ 12.42 $ 12.05 $ 12.00 $ 12.34
MIDDLE EAST/AFRICA FUND
CLASS A CLASS B CLASS C CLASS D
--------------- --------------- --------------- ----------------
Total Net Assets: $ 542,947 $ 2,206,954 $ 214,681 $ 380,166
Shares Outstanding: 53,567 222,014 21,578 37,722
Net Asset Value Per Share: $ 10.14 $ 9.94 $ 9.95 $ 10.08
PRO FORMA DEVELOPING CAPITAL
CLASS A CLASS B CLASS C CLASS D
--------------- --------------- --------------- ----------------
Total Net Assets*: $ 78,566,644 $ 88,209,694 $ 17,259,145 $ 20,130,989
Shares Outstanding: 6,325,817 7,320,307 1,438,262 1,631,361
Net Asset Value Per Share*: $ 12.42 $ 12.05 $ 12.00 $ 12.34
</TABLE>
- ---------------------
* Total Net Assets and Net Asset Value Per Share include the aggregate
value of Middle East/Africa Fund's net assets which would have been
transferred to Developing Capital Markets Fund had the Reorganization
been consummated on November 30, 1999. The 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 Developing Capital Markets Fund the Middle
East/Africa Fund stockholders will receive on the date the Reorganization
takes place, and the foregoing should not be relied upon to reflect the
number of shares of Developing Capital Markets Fund that actually will be
received on or after such date.
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Meeting 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.
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 Middle East/Africa Fund.
Although mere attendance at the Meeting 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 Meeting in accordance with
the directions on the proxies; if no direction is indicated on a properly
executed proxy, such shares will be voted "FOR" approval of the Agreement and
Plan.
It is not anticipated that any matters other than the adoption of the
Agreement and Plan will be brought before the Meeting. If, however, any other
business properly is brought before the Meeting, 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 Middle East/Africa Fund at the close
of business on March 15, 2000 (the "Record Date") are entitled to vote at the
Meeting or any adjournment thereof. At the close of business on the Record
Date, there were [ ] shares of Middle East/Africa Fund common stock issued and
outstanding and entitled to vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MIDDLE
EAST/AFRICA FUND AND DEVELOPING CAPITAL MARKETS FUND
To the knowledge of Middle East/Africa Fund, no person or entity owned
beneficially or of record 5% or more of the shares of Middle East/Africa Fund
outstanding on the Record Date.
At the Record Date, the Directors and officers of Middle East/Africa Fund
as a group (8 persons) owned an aggregate of approximately [ ]% of the
outstanding shares of Middle East/Africa Fund and owned an aggregate of less
than 1% of the outstanding shares of common stock of ML & Co.
To the knowledge of Developing Capital Markets Fund, no person or entity
owned beneficially or of record 5% or more of the shares of Developing Capital
Markets Fund outstanding on the Record Date.
At the Record Date, the Directors and officers of Developing Capital
Markets Fund as a group (8 persons) owned an aggregate of less than 1% of the
outstanding shares of Developing Capital Markets Fund and owned less than 1%
of the outstanding shares of common stock of ML & Co.
VOTING RIGHTS AND REQUIRED VOTE
For purposes of this Proxy Statement and Prospectus, each share of each
class of Middle East/Africa Fund is entitled to one vote. Approval of the
Agreement and Plan requires the affirmative vote of Middle East/Africa Fund
stockholders 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 Middle East/Africa Fund 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 Meeting. However, any stockholder of
Middle East/Africa Fund may redeem his or her Middle East/Africa Fund shares
prior to the Reorganization.
A quorum for purposes of the Meeting 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 Meeting, a quorum of Middle East/Africa Fund's
stockholders 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
Middle East/Africa Fund, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
stockholders. Any such adjournment will require the affirmative vote of a
majority of the shares of Middle East/Africa 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 stockholders of Middle East/Africa Fund.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by Middle East/Africa Fund. Such expenses are currently estimated to be
$51,000.
Middle East/Africa Fund will reimburse banks, brokers and others for
their reasonable expenses in forwarding proxy solicitation materials to the
beneficial owners of shares of Middle East/Africa Fund and will reimburse
certain persons that Middle East/Africa Fund may employ for their reasonable
expenses in assisting in the solicitation of proxies from such beneficial
owners of shares of Middle East/Africa Fund.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview
by officers of Middle East/Africa Fund. Middle East/Africa Fund has retained
Shareholder Communication Corporation, 17 State Street, New York, New York
10004, to aid in the solicitation of proxies, at a cost to be borne by Middle
East/Africa Fund of approximately $3,500, plus out-of-pocket expenses.
Broker-dealer firms, including Merrill Lynch, holding shares of Middle
East/Africa Fund 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 that are
returned but that 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 approval of 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 Middle East/Africa Fund and Developing Capital Markets Fund,
respectively, have filed with the Commission under the Securities Act and the
Investment Company Act, to which reference is hereby made.
Middle East/Africa Fund and Developing Capital Markets Fund both file
reports and other information with the Commission. Reports, proxy statements,
registration statements and other information filed by Middle East/Africa Fund
and Developing Capital Markets Fund 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,
Securities and Exchange 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 Developing Capital Markets Fund
Prospectus, the Middle East/Africa Fund Prospectus, the Developing Capital
Markets Fund Statement, the Middle East/Africa Fund Statement, other material
incorporated by reference and other information regarding the Funds.
LEGAL PROCEEDINGS
There are no material legal proceedings to which Middle East/Africa Fund
or Developing Capital Markets Fund is a party.
LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be
passed upon for Middle East/Africa Fund and Developing Capital Markets Fund by
Brown & Wood LLP, One World Trade Center, New York, New York 10048.
EXPERTS
The financial highlights of Middle East/Africa Fund and Developing
Capital Markets Fund included in this Proxy Statement and Prospectus 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. 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
meeting of stockholders of Middle East/Africa Fund must be received by Middle
East/Africa Fund in a reasonable time before Middle East/Africa Fund begins to
print and mail the proxy solicitation materials to be utilized in connection
with such meeting in order to be considered in Middle East/Africa Fund's proxy
statement and form of proxy relating to the meeting.
By Order of the Board of Directors,
Susan B. Baker
SECRETARY, MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as
of the day of , 2000, by and between Merrill Lynch Developing
Capital Markets Fund, Inc., a Maryland corporation ("Developing Capital
Markets"), and Merrill Lynch Middle East/Africa Fund, Inc., a Maryland
corporation ("Middle East/Africa" and, together with Developing Capital
Markets, the "Funds").
PLAN OF REORGANIZATION
The reorganization will comprise the acquisition by Developing Capital
Markets of substantially all of the assets, and the assumption of
substantially all of the liabilities, of Middle East/Africa in exchange solely
for an equal aggregate value of newly issued shares, with a par value of $.10
per share, of Developing Capital Markets and the subsequent distribution of
Corresponding Shares (defined below) of Developing Capital Markets to the
stockholders of Middle East/Africa in exchange for their shares of common
stock, par value $.10 per share, of Middle East/Africa, in liquidation of
Middle East/Africa, all upon and subject to the terms hereinafter set forth
(the "Reorganization").
In the course of the Reorganization, shares of Developing Capital Markets
will be distributed to Middle East/Africa stockholders as follows: each holder
of Middle East/Africa shares will be entitled to receive the same class of
shares of Developing Capital Markets (I.E., Class A, Class B, Class C or Class
D) (the "Corresponding Shares") as they held in Middle East/Africa immediately
prior to the Reorganization. The same distribution fees, account maintenance
fees and sales charges (including contingent deferred sales charges), if any,
shall apply to the Corresponding Shares as applied to shares of Middle
East/Africa immediately prior to the Reorganization except that the redemption
fee applicable to shares of Middle East/Africa shall not apply to the
corresponding shares. The aggregate net asset value of the Corresponding
Shares of Developing Capital Markets to be received by each stockholder of
Middle East/Africa will equal the aggregate net asset value of the Middle
East/Africa shares owned by such stockholder on the Exchange Date (defined
below). In consideration therefor, on the Exchange Date, Developing Capital
Markets shall acquire substantially all of Middle East/Africa's assets and
assume substantially all of Middle East/Africa'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,
Middle East/Africa shall be dissolved in accordance with the laws of the State
of Maryland and will terminate its registration under the Investment Company
Act of 1940, as amended (the "1940 Act").
AGREEMENT
In order to consummate the Reorganization and in consideration of the
promises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, Developing Capital Markets and Middle East/Africa hereby
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF DEVELOPING CAPITAL MARKETS.
Developing Capital Markets represents and warrants to, and agrees with,
Middle East/Africa that:
(a) Developing Capital Markets 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. Developing Capital Markets 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) Developing Capital Markets is duly registered under the 1940 Act as a
non-diversified, open-end management investment company (File No. 811-5723),
and such registration has not been revoked or rescinded and is in full force
and effect. Developing Capital Markets has elected and qualified for the
special tax treatment afforded regulated investment companies ("RICs") under
Sections 851-855 of the Code at all times since its inception and intends to
continue to so qualify until consummation of the Reorganization and
thereafter.
(c) Middle East/Africa has been furnished with a statement of assets and
liabilities and a schedule of investments of Developing Capital Markets, each
as of June 30, 1999, said financial statements having been audited by Deloitte
& Touche LLP, independent public accountants. An unaudited statement of assets
and liabilities of Developing Capital Markets and an unaudited schedule of
investments of Developing Capital Markets, each as of the Valuation Time
(defined below), will be furnished to Middle East/Africa at or prior to the
Exchange Date for the purpose of determining the number of shares of
Developing Capital Markets to be issued pursuant to Section 4 of this
Agreement; and each will fairly present the financial position of Developing
Capital Markets as of the Valuation Time in conformity with generally accepted
accounting principles applied on a consistent basis.
(d) Middle East/Africa has been furnished with Developing Capital
Markets' Annual Report to Stockholders for the year ended June 30, 1999 and
Semi-Annual Report to Stockholders for the six month period ended December 31,
1999 and the financial statements appearing therein fairly present the
financial position of Developing Capital Markets as of the dates indicated in
conformity with generally accepted accounting principles applied on a
consistent basis.
(e) Middle East/Africa has been furnished with the prospectus and
statement of additional information of Developing Capital Markets, each dated
October 29, 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) Developing Capital Markets 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 Developing Capital Markets, threatened against
it which assert liability on the part of Developing Capital Markets or which
materially affect its financial condition or its ability to consummate the
Reorganization. Developing Capital Markets 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) Developing Capital Markets is not a party to or obligated under any
provision of its Articles of Incorporation, or its by-laws, or any contract or
other commitment or obligation, and is not subject to any order or decree
which would be violated by its execution of or performance under this
Agreement.
(i) There are no material contracts outstanding to which Developing
Capital Markets is a party that have not been disclosed in the N-14
Registration Statement (as defined in subsection (l) below) or will not
otherwise be disclosed to Middle East/Africa prior to the Valuation Time.
(j) Developing Capital Markets 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 Developing
Capital Markets' most recent annual or semi-annual report to stockholders; and
those incurred in connection with the Reorganization. As of the Valuation
Time, Developing Capital Markets will advise Middle East/Africa 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 Developing Capital
Markets 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).
(l) The registration statement filed by Developing Capital Markets on
Form N-14 relating to the shares of Developing Capital Markets to be issued
pursuant to this Agreement which includes the proxy statement of Middle
East/Africa and the prospectus of Developing Capital Markets with respect to
the transaction contemplated herein, and any supplement, or amendment thereto
or to the documents therein (as amended, the "N-14 Registration Statement"),
on its effective date, at the time of the stockholders' meeting referred to in
Section 6(a) of this Agreement and at the Exchange Date, insofar as it relates
to Developing Capital Markets (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 Developing
Capital Markets for use in the N-14 Registration Statement as provided in
Section 6(e) of this Agreement.
(m) Developing Capital Markets is authorized to issue 400,000,000 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 each of which
consists of 100,000,000 shares; each outstanding share is fully paid and
nonassessable and has full voting rights.
(n) Developing Capital Markets shares to be issued to Middle East/Africa
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 Developing Capital Markets will have any preemptive right of
subscription or purchase in respect thereof.
(o) At or prior to the Exchange Date, Developing Capital Markets shares
to be transferred to Middle East/Africa for distribution to the stockholders
of Middle East/Africa 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 Middle East/Africa presently are qualified, and there are a sufficient
number of such shares registered under the 1933 Act and, as may be necessary,
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, Developing Capital Markets will
have obtained any and all regulatory, Director and stockholder approvals
necessary to issue the shares of Developing Capital Markets to Middle
East/Africa.
2. REPRESENTATIONS AND WARRANTIES OF MIDDLE EAST/AFRICA.
Middle East/Africa represents and warrants to, and agrees with,
Developing Capital Markets that:
(a) Middle East/Africa 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. Middle
East/Africa 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) Middle East/Africa is duly registered under the 1940 Act as a
non-diversified, open-end management investment company (File No. 811-07155),
and such registration has not been revoked or rescinded and is in full force
and effect. Middle East/Africa 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 its taxable year
ending upon liquidation.
(c) As used in this Agreement, the term "Investments" shall mean (i) the
investments of Middle East/Africa shown on the schedule of its investments as
of the Valuation Time (as defined in Section 3(c) of this Agreement) furnished
to Developing Capital Markets, and (ii) all other assets owned by Middle
East/Africa or liabilities incurred as of the Valuation Time.
(d) Middle East/Africa has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have 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) Developing Capital Markets has been furnished with a statement of
assets and liabilities and a schedule of investments of Middle East/Africa,
each as of November 30, 1999, said financial statements having been audited by
Deloitte & Touche LLP, independent public accountants. An unaudited statement
of assets and liabilities of Middle East/Africa and an unaudited schedule of
investments of Middle East/Africa, each as of the Valuation Time, will be
furnished to Developing Capital Markets at or prior to the Exchange Date for
the purpose of determining the number of shares of Developing Capital Markets
to be issued pursuant to Section 4 of this Agreement; and each will fairly
present the financial position of Middle East/Africa as of the Valuation Time
in conformity with generally accepted accounting principles applied on a
consistent basis.
(f) Developing Capital Markets has been furnished with Middle
East/Africa's Annual Report to Stockholders for the year ended November 30,
1999 and the financial statements appearing therein fairly present the
financial position of Middle East/Africa as of the dates indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis.
(g) Developing Capital Markets has been furnished with the prospectus and
statement of additional information of Middle East/Africa, each dated March
31, 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 Middle East/Africa, threatened against it
which assert liability on the part of Middle East/Africa or which materially
affect its financial condition or its ability to consummate the
Reorganization. Middle East/Africa 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 Middle
East/Africa is a party that have not been disclosed in the N-14 Registration
Statement or will not otherwise be disclosed to Developing Capital Markets
prior to the Valuation Time.
(j) Middle East/Africa is not a party to or obligated under any provision
of its Articles of Incorporation, as amended and restated, or its by-laws, as
amended, or any contract or other commitment or obligation, and is not subject
to any order or decree which would be violated by its execution of or
performance under this Agreement.
(k) Middle East/Africa 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 November 30, 1999 and those
incurred in connection with the Reorganization. As of the Valuation Time,
Middle East/Africa will advise Developing Capital Markets 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.
(l) Middle East/Africa 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 Middle East/Africa have been adequately provided for on its
books, and no tax deficiency or liability of Middle East/Africa 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, Middle East/Africa
will have full right, power and authority to sell, assign, transfer and
deliver the Investments. At the Exchange Date, subject only to the delivery of
the Investments as contemplated by this Agreement, Middle East/Africa will
have good and marketable title to all of the Investments, and Developing
Capital Markets will acquire all of the 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 Middle East/Africa
of the Reorganization, except such as may be required under the 1933 Act, the
1934 Act, the 1940 Act or state securities laws.
(o) The N-14 Registration Statement, on its effective date, at the time
of the stockholders' meeting referred to in Section 6(a) of this Agreement and
on the Exchange Date, insofar as it relates to Middle East/Africa (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 Middle East/Africa for use in the N-14 Registration Statement as
provided in Section 6(e) of this Agreement.
(p) Middle East/Africa is authorized to issue 400,000,000 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, each of which consists of
100,000,000 shares; each outstanding share is fully paid and nonassessable and
has full voting rights.
(q) The books and records of Middle East/Africa made available to
Developing Capital Markets and/or its counsel are substantially true and
correct and contain no material misstatements or omissions with respect to the
operations of Middle East/Africa.
(r) Middle East/Africa will not sell or otherwise dispose of any of the
shares of Developing Capital Markets to be received in the Reorganization,
except in distribution to the stockholders of Middle East/Africa.
3. THE REORGANIZATION.
(a) Subject to receiving the requisite approval of the stockholders of
Middle East/Africa, and to the other terms and conditions contained herein,
Middle East/Africa agrees to convey, transfer and deliver to Developing
Capital Markets and Developing Capital Markets agrees to acquire from Middle
East/Africa, on the Exchange Date, all of the Investments (including interest
accrued as of the Valuation Time on debt instruments) of Middle East/Africa,
and assume substantially all of the liabilities of Middle East/Africa, in
exchange solely for that number of shares of Developing Capital Markets
provided in Section 4 of this Agreement. Pursuant to this Agreement, as soon
as practicable on or after the Exchange Date Middle East/Africa will
distribute all shares of Developing Capital Markets received by it to its
stockholders in exchange for their corresponding Middle East/Africa shares.
Such distribution shall be accomplished by the opening of stockholder accounts
on the stock ledger records of Developing Capital Markets in the amounts due
the stockholders of Middle East/Africa based on their respective holdings in
Middle East/Africa as of the Valuation Time.
(b) Middle East/Africa will pay or cause to be paid to Developing Capital
Markets any interest or dividends it receives on or after the Exchange Date
with respect to the Investments transferred to Middle East/Africa hereunder.
(c) The Valuation Time shall be 4:00 P.M., Eastern time, on
________________, 2000, or such earlier or later day and time as may be
mutually agreed upon in writing (the "Valuation Time").
(d) Developing Capital Markets will acquire substantially all of the
assets of, and assume substantially all of the known liabilities of, Middle
East/Africa, except that recourse for such liabilities will be limited to the
net assets of Middle East/Africa acquired by Developing Capital Markets. The
known liabilities of Middle East/Africa as of the Valuation Time shall be
confirmed in writing to Developing Capital Markets by Middle East/Africa
pursuant to Section 2(k) of this Agreement.
(e) Developing Capital Markets and Middle East/Africa will jointly file
Articles of Transfer with the State Department of Assessments and Taxation of
Maryland and any other such instrument as may be required by the State of
Maryland to effect the transfer of the Investments of Middle East/Africa to
Developing Capital Markets.
(f) Middle East/Africa will be dissolved following the Exchange Date by
filing Articles of Dissolution with the State Department of Assessments and
Taxation of Maryland.
4. ISSUANCE AND VALUATION OF SHARES OF DEVELOPING CAPITAL MARKETS IN THE
REORGANIZATION.
Full shares of Developing Capital Markets, and to the extent necessary,
fractional shares of Developing Capital Markets, of an aggregate net asset
value equal to the net asset value of the assets of Middle East/Africa
acquired, determined as hereinafter provided, reduced by the amount of
liabilities of Middle East/Africa assumed by Developing Capital Markets, shall
be issued by Developing Capital Markets in exchange for such assets of Middle
East/Africa. The net asset value of Middle East/Africa and Developing Capital
Markets shall be determined in accordance with the procedures described in the
prospectus of Developing Capital Markets as of the Valuation Time. Such
valuation and determination shall be made by Developing Capital Markets in
cooperation with Middle East/Africa. Developing Capital Markets shall issue
its Class A, Class B, Class C and Class D shares to Middle East/Africa in
certificates or share deposit receipts (one in respect of each class)
registered in the name of Middle East/Africa. Middle East/Africa shall
distribute Corresponding Shares of Developing Capital Markets to its
stockholders by redelivering such certificates to Financial Data Services,
Inc.
5. PAYMENT OF EXPENSES.
(a) With respect to expenses incurred in connection with the
Reorganization, the expenses of the Reorganization that are directly
attributable to Middle East/Africa and the conduct of its business will
be deducted from the assets of Middle East/Africa 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 meeting of stockholders and the expenses related
to the solicitation of proxies to be voted at that meeting. The expenses
attributable to Developing Capital Markets include the costs of printing
sufficient copies of its Prospectus, Annual Report and Semi-Annual Report to
accompany the Proxy Statement and Prospectus. The expenses of the
Reorganization, including expenses in connection with obtaining the IRS
ruling, the preparation of this Agreement, legal fees and audit fees,
will be borne equally by each Fund.
(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.
6. COVENANTS OF DEVELOPING CAPITAL MARKETS AND MIDDLE EAST/AFRICA.
(a) Middle East/Africa agrees to call a special meeting of the
stockholders of Middle East/Africa 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 each of the parties hereto that the holders
of a majority of the shares of Middle East/Africa issued and outstanding and
entitled to vote thereon, shall have approved this Agreement at such a meeting
at or prior to the Valuation Time.
(b) Developing Capital Markets and Middle East/Africa each covenants to
operate the business of Developing Capital Markets and Middle East/Africa,
respectively, as presently conducted between the date hereof and the Exchange
Date.
(c) Middle East/Africa agrees that following the consummation of the
Reorganization, it will dissolve in accordance with the laws of the State of
Maryland and any other applicable law, it will not make any distributions of
any Developing Capital Markets shares other than to the stockholders of Middle
East/Africa and without first paying or adequately providing for the payment
of all of Middle East/Africa's liabilities not assumed by Developing Capital
Markets, if any, and on and after the Exchange Date it shall not conduct any
business except in connection with its dissolution.
(d) Middle East/Africa 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 Middle East/Africa has ceased to be a
registered investment company.
(e) Developing Capital Markets 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. Developing Capital Markets and Middle
East/Africa 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 and the 1940
Act, and the rules and regulations thereunder and the state securities laws.
(f) Developing Capital Markets has no plan or intention to sell or
otherwise dispose of the assets of Middle East/Africa to be acquired in the
Reorganization, except for dispositions made in the ordinary course of
business.
(g) Middle East/Africa and Developing Capital Markets each agrees that by
the Exchange Date all of its 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, the Funds 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. Developing Capital Markets 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 Middle East/Africa 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, Middle
East/Africa shall prepare, or cause its agents to prepare, any Federal, state
or local tax returns, including any Forms 1099, required to be filed by Middle
East/Africa with respect to Middle East/Africa's 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, any expenses incurred by Middle East/Africa (other than
for payment of taxes) in connection with the preparation and filing of said
tax returns and Forms 1099 after the Exchange Date shall be borne by Middle
East/Africa to the extent such expenses have been accrued by Middle
East/Africa 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) Middle East/Africa 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, Developing Capital
Markets expects to stay in existence and continue its business as a
non-diversified, open-end management investment company registered under the
1940 Act.
7. EXCHANGE DATE.
(a) Delivery of the assets of Middle East/Africa to be transferred,
together with any other Investments, and the Developing Capital Markets shares
to be issued, 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 Middle East/Africa and Developing Capital Markets, 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 Investments, for any reason, are
not transferable on the Exchange Date, Middle East/Africa shall cause such
Investments to be transferred to Developing Capital Markets' account with
Brown Brothers Harriman & Co. at the earliest practicable date thereafter.
(b) Middle East/Africa will deliver to Developing Capital Markets on the
Exchange Date confirmations or other adequate evidence as to the tax basis of
each of the Investments delivered to Developing Capital Markets hereunder,
certified by Deloitte & Touche LLP.
(c) As soon as practicable after the close of business on the Exchange
Date, Middle East/Africa shall deliver to Developing Capital Markets a list of
the names and addresses of all of the stockholders of record of Middle
East/Africa on the Exchange Date and the number of shares of Middle
East/Africa owned by each such stockholder, certified to the best of their
knowledge and belief by the transfer agent for Middle East/Africa or by its
President.
8. MIDDLE EAST/AFRICA CONDITIONS.
The obligations of Middle East/Africa 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 Middle East/Africa, issued and outstanding and entitled to
vote thereon, voting together as a single class, and by the Board of Directors
of Developing Capital Markets; and that Developing Capital Markets shall have
delivered to Middle East/Africa a copy of the resolution approving this
Agreement adopted by Developing Capital Markets' Board of Directors, certified
by the Secretary of Developing Capital Markets.
(b) That Developing Capital Markets shall have furnished to Middle
East/Africa a statement of Developing Capital Markets' assets and liabilities,
with values determined as provided in Section 4 of this Agreement, together
with a schedule of its investments, all as of the Valuation Time, certified on
Developing Capital Markets' behalf by its President (or any Vice President)
and its Treasurer, and a certificate signed by Developing Capital Markets'
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
Developing Capital Markets since the date of Developing Capital Markets' most
recent annual or semi-annual report to stockholders, other than changes in its
portfolio securities since the date of such report or changes in the market
value of its portfolio securities.
(c) That Developing Capital Markets shall have furnished to Middle
East/Africa a certificate signed by Developing Capital Markets' 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 Developing Capital Markets 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 Developing Capital Markets 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 Middle East/Africa shall have received an opinion of Brown &
Wood LLP, as counsel to both Developing Capital Markets and Middle
East/Africa, in form and substance satisfactory to Middle East/Africa and
dated the Exchange Date, to the effect that (i) each of Developing Capital
Markets and Middle East/Africa 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 Developing Capital Markets to be
issued pursuant to this Agreement are duly authorized and, upon delivery, will
be validly issued and fully paid and nonassessable by Developing Capital
Markets, and no stockholder of Developing Capital Markets has any preemptive
right to subscription or purchase in respect thereof (pursuant to the Articles
of Incorporation or the by-laws of Developing Capital Markets or, to the best
of such counsel's knowledge, otherwise); (iii) this Agreement has been duly
authorized, executed and delivered by each of Developing Capital Markets and
Middle East/Africa, and represents a valid and binding contract, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws pertaining to the
enforcement of 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 the Articles of Incorporation, as amended, restated and
supplemented, the by-laws, as amended, or any agreement (known to such
counsel) to which either Developing Capital Markets or Middle East/Africa is a
party or by which either Developing Capital Markets or Middle East/Africa is
bound, except insofar as the parties have agreed to amend such provision as a
condition precedent to the Reorganization; (v) Middle East/Africa 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, Middle East/Africa will have duly transferred such
assets and liabilities in accordance with this Agreement; (vi) 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 Developing Capital Markets and Middle
East/Africa 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 under Maryland law and such as
may be required under state securities laws; (vii) 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; (viii) 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; (ix) 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; (x) neither Developing Capital
Markets nor Middle East/Africa, 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 Developing Capital Markets, Middle East/Africa or their respective
stockholders; (xi) such counsel does not have actual knowledge of any material
suit, action or legal or administrative proceeding pending or threatened
against Developing Capital Markets or Middle East/Africa, the unfavorable
outcome of which would materially and adversely affect Developing Capital
Markets or Middle East/Africa; (xii) all corporate actions required to be
taken by Developing Capital Markets and Middle East/Africa to authorize this
Agreement and to effect the Reorganization have been duly authorized by all
necessary corporate actions on the part of Developing Capital Markets and
Middle East/Africa; and (xiii) such opinion is solely for the benefit of
Developing Capital Markets and Middle East/Africa and their 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 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 Developing Capital Markets or Middle
East/Africa 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 Developing Capital Markets
and Middle East/Africa with regard to matters of fact and certain certificates
and written statements of governmental officials with respect to the good
standing of Developing Capital Markets and Middle East/Africa.
(f) That Middle East/Africa 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 Middle East/Africa to Developing
Capital Markets in exchange solely for shares of Developing Capital Markets as
provided in this Agreement will constitute a reorganization within the meaning
of Section 368(a)(1)(C) of the Code, and Middle East/Africa and Developing
Capital Markets will each be deemed to be a "party" to the Reorganization
within the meaning of Section 368(b) of the Code; (ii) in accordance with
Section 361(a) of the Code, no gain or loss will be recognized to Middle
East/Africa as a result of the asset transfer solely in exchange for
Developing Capital Markets shares or on the distribution of the Developing
Capital Markets stock to Middle East/Africa stockholders under Section
361(c)(1) of the Code; (iii) under Section 1032 of the Code, no gain or loss
will be recognized to Developing Capital Markets on the receipt of assets of
Middle East/Africa in exchange for Developing Capital Markets shares; (iv) in
accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized to the stockholders of Middle East/Africa on the receipt of
Corresponding Shares of Developing Capital Markets in exchange for their
shares of Middle East/Africa; (v) in accordance with Section 362(b) of the
Code, the tax basis of the Middle East/Africa assets in the hands of
Developing Capital Markets will be the same as the tax basis of such assets in
the hands of Middle East/Africa 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
Developing Capital Markets received by the stockholders of Middle East/Africa
in the Reorganization will be equal, to the tax basis of the shares of Middle
East/Africa surrendered in exchange; (vii) in accordance with Section 1223 of
the Code, a stockholder's holding period for the Corresponding Shares of
Developing Capital Markets will be determined by including the period for
which such stockholder held the shares of Middle East/Africa exchanged
therefor, provided, that such Middle East/Africa shares were held as a capital
asset; (viii) in accordance with Section 1223 of the Code, Developing Capital
Markets' holding period with respect to the Middle East/Africa assets
transferred will include the period for which such assets were held by Middle
East/Africa; and (ix) the taxable year of Middle East/Africa will end on the
effective date of the Reorganization, and pursuant to Section 381(a) of the
Code and regulations thereunder, Developing Capital Markets will succeed to
and take into account certain tax attributes of Middle East/Africa, such as
earnings and profits, capital loss carryovers and method of accounting.
(g) That all proceedings taken by Developing Capital Markets and its
counsel in connection with the Reorganization and all documents incidental
thereto shall be satisfactory in form and substance to Middle East/Africa.
(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 Developing Capital Markets, be
contemplated by the Commission.
(i) That Middle East/Africa 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 Middle East/Africa,
to the effect that (i) they are independent public accountants with respect to
Developing Capital Markets 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 Developing Capital
Markets 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; and (iii) on the basis of limited procedures
agreed upon by Middle East/Africa and Developing Capital Markets 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 Developing Capital
Markets included in the N-14 Registration Statement, and inquiries of certain
officials of Developing Capital Markets 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, or (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; and (iv) on the basis of limited
procedures agreed upon by Middle East/Africa and Developing Capital Markets
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the information relating to Developing
Capital Markets 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 Developing Capital Markets or from
schedules prepared by officials of Developing Capital Markets 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
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 Developing Capital Markets or would prohibit
the Reorganization.
(k) That Middle East/Africa shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to Middle
East/Africa, deems reasonably necessary or desirable under the 1933 Act and
the 1940 Act in connection with the Reorganization, provided, that such
counsel shall have requested such orders as promptly as practicable, and all
such orders shall be in full force and effect.
9. DEVELOPING CAPITAL MARKETS CONDITIONS.
The obligations of Developing Capital Markets 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 Board of Directors of Middle East/Africa and
by the affirmative vote of the holders of a majority of the shares of common
stock of Middle East/Africa issued and outstanding and entitled to vote
thereon, voting together as a single class; and that Middle East/Africa shall
have delivered to Developing Capital Markets a copy of the resolution
approving this Agreement adopted by Middle East/Africa's Board of Directors,
and a certificate setting forth the vote Middle East/Africa stockholders
obtained, each certified by the Secretary of Middle East/Africa.
(b) That Middle East/Africa shall have furnished to Developing Capital
Markets a statement of Middle East/Africa's assets and liabilities, with
values determined as provided in Section 4 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 Middle East/Africa's behalf
by its President (or any Vice President) and its Treasurer, and a certificate
signed by Middle East/Africa'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 Middle East/Africa since the date of Middle
East/Africa's most recent annual or semi-annual report to stockholders, other
than changes in the Investments since the date of such report or changes in
the market value of the Investments.
(c) That Middle East/Africa shall have furnished to Developing Capital
Markets a certificate signed by Middle East/Africa'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 Middle East/Africa 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 Middle East/Africa 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.
(d) That Middle East/Africa shall have delivered to Developing Capital
Markets 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 Middle East/Africa for the period ended November 30,
1999 (which returns originally were prepared and filed by Middle East/Africa),
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 Middle
East/Africa for the period covered thereby; and that for the period from
December 1, 1999, to and including the Exchange Date and for any taxable year
of Middle East/Africa ending upon the liquidation of Middle East/Africa, 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 have been 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 December 1, 1999, to and including the
Exchange Date and for any taxable year of Middle East/Africa ending upon the
liquidation of Middle East/Africa or that Middle East/Africa would not
continue to qualify as a RIC for Federal income tax purposes for the tax years
in question.
(e) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(f) That Developing Capital Markets shall have received an opinion of
Brown & Wood LLP, as counsel to both Developing Capital Markets and Middle
East/Africa, in form and substance satisfactory to Developing Capital Markets
and dated the Exchange Date, with respect to the matters specified in Section
8(e) of this Agreement and such other matters as Developing Capital Markets
reasonably may deem necessary or desirable.
(g) That Developing Capital Markets 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 8(f) of this Agreement.
(h) That Developing Capital Markets 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 Developing Capital
Markets, to the effect that (i) they are independent public accountants with
respect to Middle East/Africa 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 Middle East/Africa
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 Middle East/Africa and Developing Capital Markets 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 Middle East/Africa
included in the N-14 Registration Statement, and inquiries of certain
officials of Middle East/Africa 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 Developing Capital Markets and Middle East/Africa and described
in such letter (but not an examination in accordance with generally accepted
auditing standards), the information relating to Middle East/Africa 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
Middle East/Africa or from schedules prepared by officials of Middle
East/Africa having responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or computations made
therefrom.
(i) That the Investments to be transferred to Developing Capital Markets
shall not include any assets or liabilities which Developing Capital Markets,
by reason of charter limitations or otherwise, may not properly acquire or
assume.
(j) 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 Middle East/Africa, be contemplated by
the Commission.
(k) 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
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 Middle East/Africa or would prohibit the
Reorganization.
(l) That Developing Capital Markets shall have received from the
Commission such orders or interpretations as Brown & Wood LLP, as counsel to
Developing Capital Markets, deems reasonably necessary or desirable under the
1933 Act and the 1940 Act in connection with the Reorganization, provided,
that such counsel shall have requested such orders as promptly as practicable,
and all such orders shall be in full force and effect.
(m) That all proceedings taken by Middle East/Africa and its counsel in
connection with the Reorganization and all documents incidental thereto shall
be satisfactory in form and substance to Developing Capital Markets.
(n) That prior to the Exchange Date, Middle East/Africa 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 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.
10. TERMINATION, POSTPONEMENT AND WAIVERS.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the stockholders of Middle
East/Africa) prior to the Exchange Date, or the Exchange Date may be
postponed, (i) by mutual consent of the Boards of Directors of Middle
East/Africa and Developing Capital Markets; (ii) by the Board of Directors of
Middle East/Africa if any condition of Middle East/Africa's obligations set
forth in Section 8 of this Agreement has not been fulfilled or waived by such
Board; or (iii) by the Board of Directors of Developing Capital Markets if any
condition of Developing Capital Markets' obligations set forth in Section 9 of
this Agreement has not been fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by December 31, 2000, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of Middle East/Africa and Developing Capital Markets.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of either Middle East/Africa or
Developing Capital Markets 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 either
Middle East/Africa or Developing Capital Markets, respectively (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 their respective fund, on behalf of which such action is
taken. In addition, the Boards of Directors of Middle East/Africa and
Developing Capital Markets 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 Middle East/Africa and Developing Capital Markets to do so.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and neither Middle East/Africa nor
Developing Capital Markets nor any of their officers, directors or trustees,
agents or stockholders shall have any liability with respect to such
representations or warranties after the Exchange Date. This provision shall
not protect any officer, director or trustee, agent or stockholder of Middle
East/Africa or Developing Capital Markets 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 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 Middle East/Africa and Developing Capital Markets 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 Middle East/Africa unless such
terms and conditions shall result in a change in the method of computing the
number of shares of Developing Capital Markets to be issued to Middle
East/Africa in which event, unless such terms and conditions shall have been
included in the proxy solicitation materials furnished to the stockholders of
Middle East/Africa prior to the meeting at which the Reorganization shall have
been approved, this Agreement shall not be consummated and shall terminate
unless Middle East/Africa promptly shall call a special meeting of
stockholders at which such conditions so imposed shall be submitted for
approval.
11. INDEMNIFICATION.
(a) Middle East/Africa hereby agrees to indemnify and hold Developing
Capital Markets harmless from all loss, liability and expense (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which Developing Capital Markets may incur or sustain by reason of the
fact that (i) Developing Capital Markets shall be required to pay any
corporate obligation of Middle East/Africa, whether consisting of tax
deficiencies or otherwise, based upon a claim or claims against Middle
East/Africa which were omitted or not fairly reflected in the financial
statements to be delivered to Developing Capital Markets in connection with
the Reorganization; (ii) any representations or warranties made by Middle
East/Africa in this Agreement should prove to be false or erroneous in any
material respect; (iii) any covenant of Middle East/Africa 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 Middle East/Africa 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 Middle East/Africa by Developing Capital Markets.
(b) Developing Capital Markets hereby agrees to indemnify and hold Middle
East/Africa harmless from all loss, liability and expenses (including
reasonable counsel fees and expenses in connection with the contest of any
claim) which Middle East/Africa may incur or sustain by reason of the fact
that (i) any representations or warranties made by Developing Capital Markets
in this Agreement should prove false or erroneous in any material respect,
(ii) any covenant of Developing Capital Markets 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 Proxy Statement and
Prospectus delivered to stockholders of Middle East/Africa 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 Developing Capital Markets by Middle East/Africa.
(c) In the event that any claim is made against Developing Capital
Markets in respect of which indemnity may be sought by Developing Capital
Markets from Middle East/Africa under Section 11(a) of this Agreement, or in
the event that any claim is made against Middle East/Africa in respect of
which indemnity may be sought by Middle East/Africa from Developing Capital
Markets under Section 11(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 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 Middle East/Africa and
Developing Capital Markets 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 11, 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.
12. 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), Developing Capital Markets 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 DEVELOPING CAPITAL
MARKETS FUND, INC. (OR ITS STATUTORY SUCCESSOR) OR ITS
PRINCIPAL UNDERWRITER UNLESS (I) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT
OF 1933 OR (II) 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 Developing
Capital Markets' transfer agent with respect to such shares. Middle East/Africa
will provide Developing Capital Markets on the Exchange Date with the name of
any Middle East/Africa stockholder who is to the knowledge of Middle East/Africa
an affiliate of Middle East/Africa 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 Middle East/Africa
or Developing Capital Markets, in either 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, constitutes
the only understanding with respect to the Reorganization, may not be changed
except by a letter of agreement signed by each party 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, restated and
supplemented, of Middle East/Africa and Developing Capital Markets 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.
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 DEVELOPING
CAPITAL MARKETS FUND, INC.
BY
--------------------------------------------
(TERRY K. GLENN, PRESIDENT)
ATTEST:
- ---------------------------------------
(SUSAN B. BAKER, SECRETARY)
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
BY:
-------------------------------------------
(DONALD C. BURKE, VICE PRESIDENT AND
TREASURER)
ATTEST:
- ---------------------------------------
(SUSAN B. BAKER, SECRETARY)
The information in this statement of additional information is not complete
and may be changed. This statement of additional information is not an offer to
sell these securities and is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 2, 2000
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
MERRILL LYNCH DEVELOPING CAPITAL MARKETS 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 Proxy Statement and Prospectus of Merrill
Lynch Middle East/Africa Fund, Inc. ("Middle East/Africa Fund") and Merrill
Lynch Developing Capital Markets Fund, Inc. ("Developing Capital Markets
Fund") dated , 2000 (the "Proxy Statement and Prospectus"), which has
been filed with the Securities and Exchange Commission and can be obtained,
without charge, by calling Developing Capital Markets Fund at 1-800-456-4587,
ext. 123, or by writing to Developing Capital Markets Fund at the above
address. This Statement of Additional Information has been incorporated by
reference into the Proxy Statement and Prospectus.
Further information about Developing Capital Markets Fund is contained in
and incorporated by reference to its Statement of Additional Information,
dated October 29, 1999, which is incorporated by reference into and
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 Middle
East/Africa Fund and Developing Capital Markets Fund, other material
incorporated by reference and other information regarding Middle East/Africa
Fund and Developing Capital Markets Fund.
The date of this Statement of Additional Information is , 2000.
TABLE OF CONTENTS
General Information............................................................2
Financial Statements...........................................................2
GENERAL INFORMATION
The stockholders of Middle East/Africa Fund are being asked to approve
the acquisition of substantially all of the assets of Middle East/Africa Fund,
and the assumption of substantially all of the liabilities of Middle
East/Africa Fund, by Developing Capital Markets Fund in exchange solely for an
equal aggregate value of shares of Developing Capital Markets Fund (the
"Reorganization"). Developing Capital Markets Fund is an open-end management
investment company organized as a Maryland corporation. A Special Meeting of
Stockholders of Middle East/Africa Fund to consider the Reorganization will be
held at 800 Scudders Mill Road, Plainsboro, New Jersey, on April 26, 2000, at
a.m., Eastern time.
For detailed information about the Reorganization, stockholders of Middle
East/Africa Fund should refer to the Proxy Statement and Prospectus. For
further information about Developing Capital Markets Fund, stockholders should
refer to Developing Capital Markets Fund's Statement of Additional
Information, dated October 29, 1999, 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 the Reorganization are not required to
be provided in this Statement of Additional Information since the net asset
value of Middle East/Africa Fund does not exceed 10% of the net asset value of
Developing Capital Markets Fund as of a current date.
DEVELOPING CAPITAL MARKETS FUND
Audited financial statements and accompanying notes for the fiscal year
ended June 30, 1999, and the independent auditor's report thereon, dated
August 16, 1999, of Developing Capital Markets Fund are incorporated by
reference from Developing Capital Markets Fund's Annual Report to
Stockholders. Unaudited financial statements and accompanying notes for the
six months ended December 31, 1999 of Developing Capital Markets Fund are
incorporated by reference from Developing Capital Markets Fund's Semi-Annual
Report to Stockholders.
MIDDLE EAST/AFRICA FUND
Audited financial statements and accompanying notes for the fiscal year
ended November 30, 1999, and the independent auditor's report thereon, dated [
], of Middle East/Africa Fund are incorporated by reference from Middle
East/Africa Fund's Annual Report to Stockholders.
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, 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.
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS.
<S> <C>
(1)(a) Articles of Incorporation of the Registrant, dated April 13, 1989.(a)
(1)(b) Articles of Amendment to Articles of Incorporation of the Registrant, dated May 17,
1989.(a)
(c) Articles of Amendment to Articles of Incorporation of the Registrant, dated June 16,
1989.(a)
(d) Form of Articles Supplementary to the Articles of Incorporation of the Registrant. (a)
(e) Articles of Amendment to Articles of Incorporation of the Registrant, dated October 17,
1994. (b)
(f) Articles Supplementary to the Articles of Incorporation of the Registrant, dated October
17, 1994. (b)
(2) By-Laws of the Registrant.(b)
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization between the Registrant and Merrill Lynch
Middle East/Africa Fund, Inc.(c)
(5) Copies of instruments defining the rights of stockholders, including the relevant
portions of the Articles of Incorporation, and the By-Laws of the Registrant.(d)
(6)(a) Management Agreement between the Registrant and Merrill Lynch Asset Management, L.P.
("MLAM").(b)
(6)(b) Supplement to Management Agreement between the Registrant and MLAM. (a)
(6)(c) Form of Sub-Advisory Agreement between MLAM and Merrill Lynch Asset Management U.K.
Limited.(e)
(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").(h)
(7)(b) Class B Shares Distribution Agreement between the Registrant and the
Distributor.(a)
(7)(c) Class C Shares Distribution Agreement between the
Registrant and the Distributor.(h)
(7)(d) Class D Shares Distribution Agreement between the Registrant and the Distributor.(h)
(8) None.
(9) Form of Custody Agreement between the Registrant and Brown Brothers Harriman &
Co.(i)
(10)(a) 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.(h)
(10)(c) Form of Class D Shares Distribution Plan and Class D Shares Distribution Plan
Sub-Agreement of the Registrant.(h)
(10)(d) Merrill Lynch Select Pricing(Service Mark) System Plan pursuant to Rule
l8f-3.(e)
(11) Opinion and Consent of Brown & Wood LLP, counsel for the
Registrant.(f)
(12) Private Letter Ruling from the Internal Revenue
Service.(f)
(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 Middle
East/Africa Fund, Inc.
(15) Not applicable.
(16) Power of Attorney (included on the signature page of this Registration Statement).
(17)(a) Prospectus dated October 29, 1999, and Statement of Additional Information dated October
29, 1999, of the Registrant.(f)
(17)(b) Annual Report to Stockholders of the Registrant, as of June 30, 1999.(f)
(17)(c) Semi-Annual Report to Stockholders of the Registrant, as of December 31, 1999.(f)
(17)(d) Prospectus dated February , 2000, and Statement of Additional Information dated
February , 2000, of Merrill Lynch Middle East/Africa Fund, Inc.(f)
(17)(e) Annual Report to Stockholders of Merrill Lynch Middle East/Africa Fund, Inc. as of November 30, 1999.(f)
(17(f) Form of Proxy
</TABLE>
- ---------------
(a) Filed on May 13, 1994, as an Exhibit to Post-Effective Amendment No. 7 to
the Registrant's Registration Statement on Form N-1A (File No. 33-28248)
under the Securities Act of 1933 (the "Registration Statement").
(b) Filed on October 25, 1995 as an Exhibit to Post-Effective Amendment No. 9
to the Registration Statement.
(c) Included as Exhibit 1 to the Proxy Statement and Prospectus contained in
this Registration Statement.
(d) Reference is made to Articles V, VI, VII, VIII and 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) and 1(f) to the Registration Statement; and to
Articles II, III (Sections 1, 3, 5, 6 and 17), VI, VII, XII, XIII and XIV
of the Registrant's By-Laws, filed as Exhibit 2 to the Registration
Statement.
(e) 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).
(f) To be filed by amendment.
(g) Filed on September 29, 1997, as an Exhibit to Post-Effective Amendment
No. 11 to the Registration Statement.
(h) Filed on October 17, 1994, as an Exhibit to Post-Effective Amendment No. 8
to the Registration Statement.
(i) Filed on October 28, 1996, as an Exhibit to Post Effective Amendment No. 10
to the 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.
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 2nd day of February, 2000.
MERRILL LYNCH DEVELOPING CAPITAL MARKETS 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 Susan B. Baker, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ TERRY K. GLENN President and Director February 2, 2000
- ----------------------------------------------- (Principal Executive Officer)
(TERRY K. GLENN)
Vice President and Treasurer
/S/ DONALD C. BURKE (Principal Financial February 2, 2000
- ----------------------------------------------- and Accounting Officer)
(DONALD C. BURKE)
/S/ CHARLES C. REILLY Director February 2, 2000
- -----------------------------------------------
(CHARLES C. REILLY)
/S/ RICHARD R. WEST Director February 2, 2000
- -----------------------------------------------
(RICHARD R. WEST)
/S/ ARTHUR ZEIKEL Director February 2, 2000
- -----------------------------------------------
(ARTHUR ZEIKEL)
/S/ EDWARD D. ZINBARG Director February 2, 2000
- -----------------------------------------------
(EDWARD D. ZINBARG)
</TABLE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
14(a) -- Consent of Deloitte & Touche LLP, independent auditors
for the Registrant.
14(b) -- Consent of Deloitte & Touche LLP, independent auditors for
Middle East/Africa Fund, Inc.
17((f) -- Form of Proxy
Exhibit 14(a)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Developing Capital Markets Fund, Inc.:
We consent to the reference to us under the captions "COMPARISON OF THE FUNDS
- - Financial Highlights" and "EXPERTS" for Merrill Lynch Developing Capital
Markets Fund, Inc. appearing in the Proxy Statement and Prospectus, which is a
part of this Registration Statement on Form N-14 of Developing Capital Markets
Fund, Inc.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
January 31, 2000
Exhibit 14(b)
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Middle East/Africa Fund, Inc.:
We consent to the reference to us under the captions "COMPARISON OF THE FUNDS
- - Financial Highlights" and "EXPERTS" for Merrill Lynch Middle East/Africa
Fund, Inc. appearing in the Proxy Statement and Prospectus, which is a
part of this Registration Statement on Form N-14 of Merrill Lynch Developing
Capital Markets Fund, Inc.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Princeton, New Jersey
January 31, 2000
MERRILL LYNCH MIDDLE EAST/AFRICA 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, Robert Harris and Susan
B. Baker 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 Middle East/Africa 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 the
proposal as marked, or if not marked, to vote "FOR" the 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 OF 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
Developing Capital Markets Fund, Inc. and Merrill Lynch Middle East/Africa
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)
