<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 1995
SECURITIES ACT FILE NO. 33-4162 2 INVESTMENT COMPANY ACT FILE NO. 811-6349
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH LATIN AMERICA FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL MERRILL LYNCH LATIN AMERICA FUND, INC. 800 SCUDDERS MILL ROAD,
PLAINSBORO, NEW JERSEY MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY
08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN
BROWN & WOOD MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
ATTENTION: THOMAS R. SMITH JR., ESQ.
FRANK P. BRUNO, ESQ.
----------------
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(i)
[_] on (date) pursuant to paragraph (a)(i)
[_] 75 days after filing pursuant to paragraph (a)(ii)
[_] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
----------------
The Registrant has registered an indefinite number of its shares of common
stock under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The notice required by such rule for the
Registrant's most recent fiscal year was filed on January 26, 1995.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. LOCATION
-------- --------
<C> <S> <C>
PART A
Item 1. Cover Page............... Cover Page
Item 2. Synopsis................. Prospectus Summary; Fee Table; Merrill
Lynch Select Pricing SM System
Condensed Financial
Item 3. Information.............. Consolidated Financial Highlights
Item 4. General Description of
Registrant............... Investment Objective and Policies;
Additional Information
Item 5. Management of the Fund... Investment Objective and Policies;
Prospectus Summary; Fee Table;
Management of the Fund; Inside Back
Cover Page
Item 5A. Management's Discussion
of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other
Securities............... Cover Page; Additional Information
Item 7. Purchase of Securities
Being Offered............ Cover Page; Prospectus Summary; Fee
Table; Purchase of Shares; Merrill
Lynch Select Pricing SM System;
Shareholder Services; Additional
Information; Inside Back Cover Page
Item 8. Redemption or Repurchase. Prospectus Summary; Fee Table; Merrill
Lynch Select Pricing SM System;
Purchase of Shares; Redemption of
Shares
Item 9. Pending Legal
Proceedings.............. Not Applicable
PART B
Item 10. Cover Page............... Cover Page
Item 11. Table of Contents........ Back Cover Page
Item 12. General Information and
History.................. Not Applicable
Item 13. Investment Objectives and
Policies................. Investment Objective and Policies
Item 14. Management of the Fund... Management of the Fund
Item 15. Control Persons and
Principal Holders of
Securities.............. Management of the Fund
Item 16. Investment Advisory and
Other Services........... Management of the Fund; Purchase of
Item 17. Brokerage Allocation and Shares; General Information
Other Practices.......... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other
Securities............... General Information--Description of
Item 19. Purchase, Redemption and Shares
Pricing of Securities
Being Offered........... Purchase of Shares; Redemption of
Shares; Determination of Net Asset
Value; Shareholder Services; General
Information
Item 20. Tax Status............... Additional Information--Dividends and
Distributions; Additional
Information--Taxes
Item 21. Underwriters............. Purchase of Shares
Item 22. Calculation of
Performance Data......... Performance Data
Item 23. Financial Statements..... Consolidated Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
MARCH 27, 1995
MERRILL LYNCH LATIN AMERICA FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Latin America Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company seeking long-term capital appreciation
by investing primarily in Latin American equity and debt securities. This
objective of the Fund reflects the belief that investment opportunities may
result in Latin America from an evolving long-term international trend
encouraging greater market orientation and diminishing governmental
intervention in economic affairs. It is expected that under normal conditions
at least 65% of the Fund's total assets will be invested in Latin American
securities. The Fund may attempt to hedge against market and currency risk.
There can be no assurance that the Fund's investment objective will be
achieved. Investments on an international basis in Latin American securities
involve certain risk factors, and the Fund has established no rating criteria
for the debt securities in which it may invest. See "Risk Factors and Special
Considerations". For more information on the Fund's investment objective and
policies, please see "Investment Objective and Policies" on page 16.
Pursuant to the Merrill Lynch Select Pricing SM System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select Pricing SM System permits an
investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. As a
result of the implementation of the Merrill Lynch Select Pricing SM System,
Class A shares of the Fund outstanding prior to October 21, 1994, were
redesignated Class D shares. The Class A shares offered by this Prospectus
differ from the Class A shares offered prior to October 21, 1994, in many
respects, including sales charges, exchange privilege and the classes of
persons to whom such shares are offered. See "Merrill Lynch Select Pricing SM
System" on page 5.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9011, Princeton, New Jersey 08543-9011 [(609)
282-2800], and other securities dealers which have entered into selected
dealers agreements with the Distributor, including Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"). The minimum initial purchase is
$1,000, and the minimum subsequent purchase is $50, except that for retirement
plans the minimum initial purchase is $100, and the minimum subsequent purchase
is $1. Merrill Lynch may charge its customers a processing fee (presently
$4.85) for confirming purchases and repurchases. Purchases and redemptions
directly through the Fund's transfer agent are not subject to the processing
fee. See "Purchase of Shares" and "Redemption of Shares".
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------------
This Prospectus is a concise statement of information about the Fund that is
relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated March 27, 1995 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and
is available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
----------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Fund follows:
<TABLE>
<CAPTION>
CLASS A(A) CLASS B(B) CLASS C CLASS D
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSAC-
TION EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of of-
fering price)..... 5.25%(c) None None 5.25%(c)
Sales Charge Im-
posed on Dividend
Reinvestments..... None None None None
Deferred Sales
Charge (as a per-
centage of origi-
nal purchase price
or redemption pro-
ceeds, whichever 4.0% during the first
is lower)......... None(d) year, 1% for one None(d)
decreasing 1.0% annually year
thereafter to 0.0% after
the
fourth year
Exchange Fee....... None None None None
ANNUAL FUND OPERAT-
ING EXPENSES (AS A
PERCENTAGE OF AVER-
AGE NET
ASSETS) (E):
Management Fees(f). 1.00% 1.00% 1.00% 1.00%
Rule 12b-1 Fees(g):
Account Maintenance
Fees.............. None 0.25% 0.25% 0.25%
Distribution Fees.. None 0.75% 0.75% None
(Class B shares convert
to
Class D shares
automatically
after approximately
eight years
and cease being subject
to
distribution fees)
Other Expenses:
Custodial Fees..... 0.14% 0.14% 0.14% 0.14%
Shareholder Servic-
ing Costs(h)...... 0.13% 0.16% 0.16% 0.13%
Other.............. 0.21% 0.21% 0.21% 0.21%
----- ----- ----- -----
Total Other Ex- 0.48% 0.51% 0.51% 0.48%
penses........... ----- ----- ----- -----
Total Fund Operat- 1.48% 2.51% 2.51% 1.73%
ing Expenses...... ===== ===== ===== =====
</TABLE>
--------
(a) Class A shares are sold to a limited group of investors including certain
retirement plans and certain investment programs. See "Purchase of
Shares--Initial Sales Charge Alternatives--Class A and Class D Shares"--
page 35.
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares"--page 37.
(c) Reduced for purchases of $25,000 and over. Class A or Class D purchases of
$1,000,000 or more may not be subject to an initial sales charge. See
"Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class
D Shares"--page 35.
(d) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that purchases of $1,000,000 or more which are not
subject to an initial sales charge may instead be subject to a CDSC of
1.0% of amounts redeemed within the first year of purchase.
(e) Information for Class B and Class D shares is stated for the fiscal year
ended November 30, 1994. Information under "Other Expenses" for Class A
and Class C shares is estimated for the fiscal year ending November 30,
1995.
(f) See "Management of the Fund--Management and Advisory Arrangements"--page
30.
(g) See "Purchase of Shares--Distribution Plans"--page 40.
(h) See "Management of the Fund--Transfer Agency Services"--page 32.
2
<PAGE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE PERIOD OF:
-------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment including the
maximum $52.50 initial sales
charge (Class A and Class D
shares only) and assuming (1)
the Total Fund Operating
Expenses for each class set
forth above, (2) a 5% annual
return throughout the periods
and (3) redemption at the end
of the period:
Class A...................... $67 $ 97 $129 $220
Class B...................... $65 $ 98 $134 $266*
Class C...................... $35 $ 78 $134 $285
Class D...................... $69 $104 $141 $246
An investor would pay the
following expenses on the same
$1,000 investment assuming no
redemption at the end of the
period:
Class A...................... $67 $ 97 $129 $220
Class B...................... $25 $ 78 $134 $266*
Class C...................... $25 $ 78 $134 $285
Class D...................... $69 $104 $141 $246
</TABLE>
--------
*Assumes conversion to Class D shares approximately eight years after purchase.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES OF
RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN
THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C shareholders who
hold their shares for an extended period of time may pay more in Rule 12b-1
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted under the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. ("NASD"). Merrill Lynch may charge its customers a
processing fee (presently $4.85) for confirming purchases and redemptions.
Purchases and redemptions directly through the Fund's transfer agent are not
subject to the processing fee. See "Purchase of Shares" and "Redemption of
Shares".
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus and in the Statement
of Additional Information.
THE FUND
Merrill Lynch Latin America Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation by investing primarily in Latin American equity and debt
securities. The Fund seeks to benefit from economic and other developments in
Latin America. The investment objective of the Fund reflects the belief that
investment opportunities may result in Latin America from an evolving long-term
international trend encouraging greater market orientation and diminishing
governmental intervention in economic affairs. This trend may be facilitated by
local or international political, economic or financial developments that could
benefit the capital markets of certain Latin American countries. There can be
no assurance that the Fund's investment objective will be achieved. See
"Investment Objective and Policies".
In recent years, there has been a significant trend in Latin America towards
democracy and market-oriented economic reform. While there have been distinct
differences in the approaches taken by the various countries and the degrees of
success in accomplishing the economic objectives, the countries have generally
sought to reduce the government's role in economic affairs and implement policy
initiatives designed to control inflation, reduce financial deficits and
external debt, establish stable currency exchange rates, liberalize trade
restrictions, increase foreign investment, privatize state-owned companies and
develop and modernize the securities markets. While considerable difficulties
remain, the economies of certain Latin American countries have improved, and
these improvements have been reflected in the performance of the securities
markets and the reversal of the capital flight which prevailed in the early
1980's. The Fund presently contemplates that it will emphasize investments in
the equity and debt markets of Argentina, Brazil, Chile, Mexico and Venezuela.
The Fund may also seek capital appreciation through investment in Latin
American debt securities. Capital appreciation in debt securities may arise as
a result of a favorable change in relative foreign exchange rates, in relative
interest rate levels, or in the creditworthiness of issuers. The receipt of
income from such debt securities is incidental to the Fund's objective of long-
term capital appreciation.
The Fund is authorized to employ a variety of investment techniques to hedge
against market and currency risk, although at the present time suitable hedging
instruments may not be available with respect to Latin American securities on a
timely basis and on acceptable terms. Furthermore, even if hedging techniques
are available, the Fund will only engage in hedging activities from time to
time and may not necessarily be engaging in hedging activities when market or
currency movements occur.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investments in securities of Latin American issuers involve special
considerations and risks not typically associated with investments in
securities of U.S. issuers, including the risks associated with international
investing generally, such as currency fluctuations, the risks of investing in
countries with smaller capital markets, such as limited liquidity, price
volatility and restrictions on foreign investment, and the risks associated
with Latin American economies, including high inflation and interest rates,
large amounts of external debt and political and social uncertainties.
Although there have been significant improvements in recent years, the Latin
American economies continue to experience significant problems, including high
inflation rates and high interest rates. The
4
<PAGE>
emergence of the Latin American economies and securities markets will require
economic and fiscal discipline, which has been lacking at times in the past,
as well as stable political and social conditions. Recovery may also be
influenced by international economic conditions, particularly those in the
United States, and by world prices for oil and other commodities. There is no
assurance that the economic initiatives will be successful.
THE MANAGER
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management (the "Manager"), which is owned and controlled by Merrill Lynch &
Co., Inc. ("ML&Co."), acts as the manager for the Fund and provides the Fund
with management services. The Manager, or an affiliate, Fund Asset Management,
L.P. ("FAM"), acts as the investment adviser for more than 130 other
registered investment companies. MLAM and FAM also offer portfolio management
and portfolio analysis services to individuals and institutions. As of
February 28, 1995, the Manager and FAM had a total of approximately $168.2
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of MLAM. See "Management of the
Fund--Management and Advisory Arrangements".
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share subject to the sales charges and ongoing fee
arrangements described below. See "Merrill Lynch Select Pricing SM System" and
"Purchase of Shares".
Shareholders may redeem their Class A, Class B, Class C and Class D shares
at any time at the next determined net asset value, except that the redemption
price for shares will be subject to any applicable contingent deferred sales
charge. See "Redemption of Shares".
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute all its net investment income.
Dividends from such net investment income are paid at least annually. All net
realized long-term and short-term capital gains, if any, will be distributed
to the Fund's shareholders at least annually. See "Additional Information--
Dividends and Distributions".
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined by the Manager once daily as
of 15 minutes after the close of business on the New York Stock Exchange
(generally, 4:00 p.m., New York time) on each day during which such exchange
is open for business. See "Additional Information--Determination of Net Asset
Value".
MERRILL LYNCH SELECT PRICING SM SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
Pricing SM System. The shares of each class may be purchased at a price equal
to the next determined net asset value per share subject to the
5
<PAGE>
sales charges and ongoing fee arrangements described below. Shares of Class A
and Class D are sold to investors choosing the initial sales charge
alternatives, and shares of Class B and Class C are sold to investors choosing
the deferred sales charge alternatives. The Merrill Lynch Select Pricing SM
System is used by more than 50 mutual funds advised by MLAM or an affiliate of
MLAM, FAM. Funds advised by MLAM or FAM are referred to herein as "MLAM-
advised mutual funds".
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on the Class D shares, are imposed directly against those classes and
not against all assets of the Fund and, accordingly, such charges will not
affect the net asset value of any other class or have any impact on investors
choosing another sales charge option. Dividends paid by the Fund for each
class of shares will be calculated in the same manner at the same time and
will differ only to the extent that account maintenance and distribution fees
and any incremental transfer agency costs relating to a particular class are
borne exclusively by that class. Each class has different exchange privileges.
See "Shareholder Services--Exchange Privilege".
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Fund. The distribution-
related revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select Pricing SM System,
followed by a more detailed description of each class and a discussion of the
factors that investors should consider in determining the method of purchasing
shares under the Merrill Lynch Select Pricing SM System that the investor
believes is most beneficial under his particular circumstances. More detailed
information as to each class of shares is set forth under "Purchase of
Shares".
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE(/1/) FEE FEE FEATURE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
---------------------------------------------------------------------------------------
B CDSC for a period of 4 years, 0.25% 0.75% B shares convert to
at a rate of 4.0% during the D shares automatically
first year, decreasing 1.0% after approximately
annually to 0.0% eight years(/4/)
---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
---------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</TABLE>
(footnotes appear on following page)
6
<PAGE>
--------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. Contingent deferred sales charges ("CDSCs") are
imposed if the redemption occurs within the applicable CDSC time period.
The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares--Eligible Class A
Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more will not be subject to an initial sales
charge but instead may be subject to a 1.0% CDSC for one year. See "Class
A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other MLAM-
advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Fund are exchanged for Class B
shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
Class A: Class A shares incur an initial sales charge when they are purchased
and bear no ongoing distribution or account maintenance fees. Class A
shares of the Fund are offered to a limited group of investors and
also will be issued upon reinvestment of dividends on outstanding
Class A shares. Investors that currently own Class A shares in a
shareholder account are entitled to purchase additional Class A
shares of the Fund in that account. Other eligible investors include
certain retirement plans and participants in certain investment
programs. In addition, Class A shares will be offered to directors
and employees of ML & Co. and its subsidiaries (the term
"subsidiaries", when used herein with respect to ML & Co. includes
the Manager, FAM and certain other entities directly or indirectly
wholly-owned and controlled by ML & Co.) and to members of the Boards
of MLAM-advised mutual funds. The maximum initial sales charge is
5.25%, which is reduced for purchases of $25,000 and over. Purchases
of $1,000,000 or more may not be subject to an initial sales charge
but if the initial sales charge is waived, such purchases will be
subject to a 1.0% CDSC if the shares are redeemed within one year
after purchase. Sales charges also are reduced under a right of
accumulation which takes into account the investor's holdings of all
classes of all MLAM-advised mutual funds. See "Purchase of Shares--
Initial Sales Charge Alternatives--Class A and Class D Shares".
Class B: Class B shares do not incur a sales charge when they are purchased,
but they are subject to an ongoing account maintenance fee of 0.25%
and an ongoing distribution fee of 0.75% of the Fund's average net
assets attributable to the Class B shares and a CDSC if they are
redeemed within four years of purchase. Approximately eight years
after issuance, Class B shares will convert automatically into Class
D shares of the Fund, which are subject to an account maintenance fee
but no distribution fee; Class B shares of certain other MLAM-advised
mutual funds into which exchanges may be made convert into Class D
shares automatically after approximately ten years. If Class B shares
of the Fund are exchanged for Class B shares of another MLAM-advised
mutual fund, the conversion period applicable to the Class B shares
acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked onto the holding period for the
shares acquired. Automatic conversion of Class B shares into Class D
shares will occur at least once a month on the basis of the relative
net asset values of the shares of the two classes on the conversion
date, without the imposition of any sales load, fee or other charge.
Conversion of Class B shares to Class D shares will not be deemed a
purchase or sale of the shares for Federal income tax purposes.
Shares purchased through reinvestment of dividends on Class B shares
also will convert automatically to Class D shares. The conversion
period for dividend reinvestment shares and for certain retirement
plans is modified as described under "Purchase of Shares--Deferred
Sales Charge Alternatives--Class B and Class C Shares--Conversion of
Class B Shares to Class D Shares".
7
<PAGE>
Class C: Class C shares do not incur a sales charge when they are purchased,
but they are subject to an ongoing account maintenance fee of 0.25%
and an ongoing distribution fee of 0.75% of the Fund's average net
assets attributable to Class C shares. Class C shares are also
subject to a CDSC if they are redeemed within one year of purchase.
Although Class C shares are subject to a 1.0% CDSC for only one year
(as compared to four years for Class B), Class C shares have no
conversion feature and, accordingly, an investor that purchases Class
C shares will be subject to distribution fees that will be imposed on
Class C shares for an indefinite period subject to annual approval by
the Fund's Board of Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
Fund's average net assets attributable to Class D shares. Class D
shares are not subject to an ongoing distribution fee or any CDSC
when they are redeemed. Purchases of $1,000,000 or more may not be
subject to an initial sales charge but if the initial sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the
shares are redeemed within one year after purchase. The schedule of
initial sales charges and reductions for Class D shares is the same
as the schedule for Class A shares. Class D shares also will be
issued upon conversion of Class B shares as described above under
"Class B". See "Purchase of Shares--Initial Sales Charge
Alternatives--Class A and Class D Shares".
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing SM System that the investor believes is most beneficial under his
particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class
A shares rather than Class D shares because there is an account maintenance
fee imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative
particularly attractive because similar sales charge reductions are not
available with respect to the deferred sales charges imposed in connection
with purchases of Class B or Class C shares. Investors not qualifying for
reduced initial sales charges who expect to maintain their investment for an
extended period of time also may elect to purchase Class A or Class D shares,
because over time the accumulated ongoing account maintenance and distribution
fees on Class B or Class C shares may exceed the initial sales charge and, in
the case of Class D shares, the account maintenance fee. Class A, Class B,
Class C and Class D share holdings will count toward a right of accumulation
which may qualify the investor for reduced initial sales charges on new
initial sales charge purchases. In addition, the ongoing Class B and Class C
account maintenance and distribution fees will cause Class B and Class C
shares to have higher expense ratios, pay lower dividends and have lower total
returns than the initial sales charge shares. The ongoing Class D account
maintenance fees will cause Class D shares to have a higher expense ratio, pay
lower dividends and have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the
benefit of putting all of the investor's dollars to work from the time the
investment is made. The deferred sales charge alternatives may be particularly
appealing to investors who do not qualify for a reduction in initial sales
charges. Both Class B and Class C shares are subject to ongoing account
maintenance fees and distribution fees; however, the ongoing account
maintenance
8
<PAGE>
and distribution fees potentially may be offset to the extent any return is
realized on the additional funds initially invested in Class B or Class C
shares. In addition, Class B shares will be converted into Class D shares of
the Fund after a conversion period of approximately eight years, and thereafter
investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend
to hold their shares for an extended period of time. Investors in Class B
shares should take into account whether they intend to redeem their shares
within the CDSC period and, if not, whether they intend to remain invested
until the end of the conversion period and thereby take advantage of the
reduction in ongoing fees resulting from the conversion into Class D shares.
Other investors, however, may elect to purchase Class C shares if they
determine that it is advantageous to have all their assets invested initially
and they are uncertain as to the length of time they intend to hold their
assets in MLAM-advised mutual funds. Although Class C shareholders are subject
to a shorter CDSC period at a lower rate, they forgo the Class B conversion
feature, making their investment subject to account maintenance and
distribution fees for an indefinite period of time. In addition, while both
Class B and Class C distribution fees are subject to the limitations on asset-
based sales charges imposed by the NASD, the Class B distribution fees are
further limited under a voluntary waiver of asset-based sales charges. See
"Purchase of Shares--Limitations on the Payment of Deferred Sales Charges".
9
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the annual audits of the consolidated financial statements of the Fund by
Deloitte & Touche LLP, independent auditors. Consolidated financial statements
for the fiscal year ended November 30, 1994, and the independent auditors'
report thereon are included in the Statement of Additional Information. Further
information about the performance of the Fund is contained in the Fund's most
recent annual report to shareholders which may be obtained, without charge, by
calling or by writing the Fund at the telephone number or address on the front
cover of this Prospectus.
The following per share data and ratios have been derived from information
provided in the consolidated financial statements.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- ----------------------------------------- --------
FOR THE FOR THE FOR THE
PERIOD FOR THE PERIOD PERIOD
OCT. 21, YEAR ENDED SEPT. 27, OCT. 21,
1994+ TO NOVEMBER 30, 1991+ TO 1994+ TO
NOV. 30 ----------------------------- NOV. 30, NOV. 30
1994## 1994## 1993 1992 1991 1994##
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 18.22 $ 14.39 $ 9.83 $ 9.80 $ 10.00 $18.10
------- -------- -------- -------- ------- ------
Investment income
(loss)--net............ -- (.09) .10 .08 .04 (.02)
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... (.85) 2.99 4.68 .05 (.24) (.84)
------- -------- -------- -------- ------- ------
Total from investment
operations............. (.85) 2.90 4.78 .13 (.20) (.86)
------- -------- -------- -------- ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net.. -- (.05) (.13) (.10) -- --
Realized gain on
investments--net....... -- -- (.09) -- ++ -- --
------- -------- -------- -------- ------- ------
Total dividends and
distributions.......... -- (.05) (.22) (.10) -- --
------- -------- -------- -------- ------- ------
Net asset value, end of
period................. $17.37 $ 17.24 $ 14.39 $ 9.83 $ 9.80 $17.24
======= ======== ======== ======== ======= ======
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share.............. (4.67%)# 20.19% 49.80% 1.30% (2.00%)# (4.75%)#
======= ======== ======== ======== ======= ======
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees...... 1.85%* 1.51% 1.59% 1.65% 1.73%* 1.93%*
======= ======== ======== ======== ======= ======
Expenses................ 1.85%* 2.51% 2.59% 2.65% 2.73%* 2.93%*
======= ======== ======== ======== ======= ======
Investment income--net.. (.20%)* (.54%) 1.09% 1.30% 3.28%* (1.22%)*
======= ======== ======== ======== ======= ======
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands).. $10,350 $937,221 $305,301 $126,344 $63,012 $5,069
======= ======== ======== ======== ======= ======
Portfolio turnover...... 30.15% 30.15% 24.74% 36.50% 0% 30.15%
======= ======== ======== ======== ======= ======
<CAPTION>
CLASS D
----------------------------------------
FOR THE
FOR THE PERIOD
YEAR ENDED SEPT. 27,
NOVEMBER 30, 1991+ TO
---------------------------- NOV. 30,
1994 1993 1992 1991
--------- -------- --------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 14.45 $ 9.90 $ 9.81 $ 10.00
--------- -------- --------- -----------
Investment income
(loss)--net............ .03 .18 .15 .06
Realized and unrealized
gain (loss) on
investments and foreign
currency transactions--
net.................... 3.00 4.69 .06 (.25)
--------- -------- --------- -----------
Total from investment
operations............. 3.03 4.87 .21 (.19)
--------- -------- --------- -----------
LESS DIVIDENDS AND
DISTRIBUTIONS:
Investment income--net.. (.11) (.23) (.12) --
Realized gain on
investments--net....... -- (.09) -- ++ --
--------- -------- --------- -----------
Total dividends and
distributions.......... (.11) (.32) (.12) --
--------- -------- --------- -----------
Net asset value, end of
period................. $ 17.37 $ 14.45 $ 9.90 $ 9.81
========= ======== ========= ===========
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share.............. 21.07% 50.86% 2.19% (1.90%)#
========= ======== ========= ===========
RATIOS TO AVERAGE NET
ASSETS:
Expenses, excluding
account maintenance and
distribution fees...... 1.48% 1.58% 1.64% 1.72%*
========= ======== ========= ===========
Expenses................ 1.73% 1.83% 1.89% 1.97%*
========= ======== ========= ===========
Investment income--net.. .23% 1.83% 2.18% 4.05%*
========= ======== ========= ===========
SUPPLEMENTAL DATA:
Net assets, end of
period (in thousands).. $204,907 $75,085 $30,685 $18,074
========= ======== ========= ===========
Portfolio turnover...... 30.15% 24.74% 36.50% 0%
========= ======== ========= ===========
</TABLE>
-------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Amount less than $.01 per share.
# Aggregate total investment return.
## Based on average shares outstanding during the period.
10
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
GENERAL
Because the Fund intends to invest primarily in Latin American securities, an
investor in the Fund should be aware of certain risk factors and special
considerations relating not only to investing in Latin American economies, but
also, more generally, to international investing and investing in smaller
capital markets, each of which may involve risks which are not typically
associated with investments in securities of U.S. issuers. Consequently, the
Fund should be considered as a means of diversifying an investment portfolio
and not in itself a balanced investment program.
INVESTING ON AN INTERNATIONAL BASIS AND IN COUNTRIES WITH SMALLER CAPITAL
MARKETS
Investing on an international basis and in countries with smaller capital
markets involves certain risks not involved in domestic investments, including
fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. Since the Fund will invest heavily in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
in the portfolio and the unrealized appreciation or depreciation of investments
insofar as U.S. investors are concerned. In addition, with respect to certain
foreign countries, there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability or diplomatic
developments which could affect investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Certain foreign investments may also be subject to foreign
withholding taxes. These risks are often heightened for investments in smaller
capital markets and in Latin American countries.
Most of the securities held by the Fund will not be registered with the
Securities and Exchange Commission nor will the issuers thereof be subject to
the reporting requirements of such agency. Accordingly, there may be less
publicly available information about a foreign company than about a U.S.
company, and such foreign companies may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those to which
U.S. companies are subject. As a result, traditional investment measurements,
such as price/earnings ratios, as used in the United States, may not be
applicable to certain smaller capital markets. Foreign companies, and companies
in smaller capital markets in particular, are not generally subject to uniform
accounting, auditing and financial reporting standards or to practices and
requirements comparable to those applicable to domestic companies. Foreign
markets also have different clearance and settlement procedures, and in certain
markets there have been times when settlements have failed to keep pace with
the volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when
assets of the Fund are uninvested and no return is earned thereon. The
inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of
such portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Brokerage
commissions and other transaction costs on foreign securities exchanges
11
<PAGE>
are generally higher than in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in U.S. securities since
the expenses of the Fund, such as management and advisory fees and custodial
costs, are higher.
INVESTING IN LATIN AMERICAN SECURITIES MARKETS AND ECONOMIES
The Latin American securities markets are not as large as the U.S. securities
markets and have substantially less trading volume, resulting in a lack of
liquidity and high price volatility. There is also a high concentration of
market capitalization and trading volume in a small number of issuers
representing a limited number of industries, as well as a high concentration of
investors and financial intermediaries. Latin American brokers typically are
fewer in number and less capitalized than brokers in the United States. These
factors, combined with the U.S. regulatory requirements for open-end funds and
the restrictions on foreign investments discussed below, result in potentially
fewer investment opportunities for the Fund and may have an adverse impact on
the investment performance of the Fund. The Fund may not invest more than 15%
(10% to the extent required by certain state laws) of its total assets in
securities which are determined by the Manager to be illiquid securities.
The investment objective of the Fund reflects the belief that investment
opportunities may result in Latin America from an evolving long-term
international trend encouraging greater market orientation and diminishing
governmental intervention in economic affairs. The Latin American economies
have experienced considerable difficulties in the past decade. Although there
have been significant improvements in recent years, the Latin American
economies continue to experience significant problems, including high inflation
rates and high interest rates. The emergence of the Latin American economies
and securities markets will require continued economic and fiscal discipline
which has been lacking at times in the past, as well as stable political and
social conditions. Recovery may also be influenced by international economic
conditions, particularly those in the United States, and by world prices for
oil and other commodities. There is no assurance that the economic initiatives
will be successful.
Certain of the risks associated with international investments and investing
in smaller capital markets are heightened for investments in Latin American
countries. For example, some of the currencies of Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
adjustments have been made in certain of such currencies periodically. In
addition, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government owns or controls many companies,
including the largest in the country. Accordingly, government actions in the
future could have a significant effect on economic conditions in Latin American
countries, which could affect private sector companies and the Fund, as well as
the value of securities in the Fund's portfolio.
In addition to the relative lack of publicly available information about
Latin American issuers and the possibility that such issuers may not be subject
to the same accounting, auditing and financial reporting standards as are
applicable to U.S. companies, inflation accounting rules in some Latin American
countries require, for companies that keep accounting records in the local
currency, for both tax and accounting
12
<PAGE>
purposes, that certain assets and liabilities be restated on the company's
balance sheet in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate losses or
profits for certain Latin American companies.
Satisfactory custodial services for investment securities may not be
available in some Latin American countries, which may result in the Fund
incurring additional costs and delays in transporting and custodying such
securities outside such countries.
Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Trading in debt obligations ("sovereign debt")
issued or guaranteed by Latin American governments or their agencies and
instrumentalities ("governmental entities") involves a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
willing or able to repay the principal and/or interest when due in accordance
with the terms of such obligations. A governmental entity's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the relative size of the debt
service burden to the economy as a whole, the governmental entity's dependence
on expected disbursements from third parties, the governmental entity's policy
toward the International Monetary Fund and the political constraints to which a
governmental entity may be subject. As a result, governmental entities may
default on their sovereign debt. Holders of sovereign debt (including the Fund)
may be requested to participate in the rescheduling of such debt and to extend
further loans to governmental entities. There is no bankruptcy proceeding by
which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part.
As a result, management of the Fund may determine that, notwithstanding
otherwise favorable investment criteria, it may not be practicable or
appropriate to invest in a particular Latin American country. The Fund may
invest in countries in which foreign investors, including management of the
Fund, have had no or limited prior experience.
RESTRICTIONS ON FOREIGN INVESTMENTS
Some Latin American countries prohibit or impose substantial restrictions on
investments in their capital markets, particularly their equity markets, by
foreign entities such as the Fund. As illustrations, certain countries may
require governmental approval prior to investments by foreign persons or limit
the amount of investment by foreign persons in a particular company or limit
the investment by foreign persons to only a specific class of securities of a
company which 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.
Substantial limitations may exist in certain countries with respect to the
Fund's ability to repatriate investment income, capital or the proceeds of
sales of securities by foreign investors. For example, in Chile, with limited
exceptions, invested capital cannot be repatriated for three years. The Fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as
13
<PAGE>
well as by the application to the Fund of any restrictions on investments. No
more than 15% (10% to the extent required by certain state laws) of the Fund's
total assets will be comprised, in the aggregate, of assets which are (i)
subject to material legal restrictions on repatriation or (ii) invested in
illiquid securities.
A number of Latin American countries, such as Chile and Brazil, have
authorized the formation of publicly traded closed-end investment companies to
facilitate indirect foreign investment in their capital markets. In accordance
with the Investment Company Act, the Fund may invest up to 10% of its total
assets in securities of other investment companies, not more than 5% of which
may be invested in any one such company. This restriction on investments in
securities of investment companies may limit opportunities for the Fund to
invest indirectly in certain Latin American countries. Shares of certain
investment companies may at times be acquired only at market prices
representing premiums to their net asset values. If the Fund acquires shares in
other investment companies, shareholders would bear both their proportionate
share of expenses of the Fund (including management and advisory fees) and,
indirectly, the expenses of such other investment companies.
In some countries, such as Venezuela, banks or other financial institutions
may constitute a substantial number of the leading companies or the companies
with the most actively traded securities. The Investment Company Act restricts
the Fund's investments in any equity security of an issuer which, in its most
recent fiscal year, derived more than 15% of its revenues from "securities
related activities", as defined by the rules thereunder. These provisions may
restrict the Fund's investments in certain foreign banks and other financial
institutions.
LIMITATIONS ON SHARE TRANSACTIONS
To permit the Fund to invest the net proceeds from the sale of its shares in
an orderly manner, the Fund may, from time to time, suspend the sale of its
shares, except for dividend reinvestments. The Fund also reserves the right to
limit the number of its shares that may be purchased by a person during a
specified period of time or in the aggregate.
FEES AND EXPENSES
The management fee (at the annual rate of 1.00% of the Fund's average daily
net assets) and other operating expenses of the Fund are higher than the
management fees and operating expenses of other mutual funds managed by the
Manager and other investment advisers. Any limitations on the growth of the
Fund could adversely affect its operating expense ratio.
HEDGING STRATEGIES
The Fund may engage in various portfolio strategies to seek to hedge against
movements in the equity markets, interest rates and exchange rates between
currencies by the use of options, futures, options on futures and forward
currency transactions. However, suitable hedging instruments may not be
available with respect to Latin American securities on a timely basis and on
acceptable terms. Furthermore, even if hedging techniques are available, the
Fund will only engage in hedging activities from time to time and may not
necessarily be engaging in hedging activities when market or currency movements
occur. In addition, utilization of options and futures transactions involves
the risk of imperfect correlation in movements in the
14
<PAGE>
price of options and futures and movements in the price of the securities,
interest rates or currencies which are the subject of the hedge. Hedging
transactions in foreign markets are also subject to the risk factors associated
with foreign investments generally, as discussed above. Investors should be
aware that U.S. dollar denominated securities may not be available in some or
all Latin American countries; that the forward currency market for the purchase
of U.S. dollars in most, if not all, Latin American countries is not highly
developed; and that, in certain Latin American countries, no forward market for
foreign currencies currently exists or such market may be closed to investment
by the Fund.
NO RATING CRITERIA FOR DEBT SECURITIES
The Fund has established no rating criteria for the debt securities in which
it may invest, and such securities may not be rated at all for
creditworthiness. Securities rated in the medium to lower rating categories of
nationally recognized statistical rating organizations and unrated securities
of comparable quality ("high yield/high risk securities") are predominately
speculative with respect to the capacity to pay interest and repay principal in
accordance with the terms of the security and generally involve a greater
volatility of price than securities in higher rating categories. The sovereign
debt instruments in which the Fund may invest involve great risk and are deemed
to be the equivalent in terms of quality to high yield/high risk securities.
The Fund may have difficulty disposing of certain sovereign debt obligations
because there may be no liquid secondary trading market for such securities.
The Fund may invest up to 5% of its total assets in sovereign debt that is in
default. See "Investment Objective and Policies--Certain Risks of Debt
Securities".
BORROWING
The Fund currently may borrow up to 20% of its total assets, taken at market
value (including the amount borrowed), but only from a bank as a temporary
measure for extraordinary or emergency purposes including to meet redemptions
or to settle securities transactions. The Fund will not purchase securities
while borrowings exceed 5% of its total assets except (a) to honor prior
commitments or (b) to exercise subscription rights where outstanding borrowings
have been obtained exclusively for settlements of other securities
transactions. The purchase of securities while borrowings are outstanding will
have the effect of leveraging the Fund. Such leveraging increases the Fund's
exposure to capital risk, and borrowed funds are subject to interest costs
which will reduce net income.
NON-DIVERSIFIED STATUS
As a non-diversified investment company, the Fund may invest a larger
percentage of its assets in individual issuers than a diversified investment
company. In this regard, the Fund is not subject to the general limitation that
it may not invest more than 5% of its total assets in the securities of any one
issuer. To the extent the Fund makes investments in excess of 5% of its assets
in a particular issuer, its exposure to credit and market risks associated with
that issuer is increased. Also, as a non-diversified investment company, since
a relatively high percentage of the Fund's assets may be invested in the
securities of a limited number of issuers, the Fund may be more susceptible to
any single economic, political or regulatory occurrence than a diversified
investment company.
15
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a non-diversified, open-end management investment company. The
investment objective of the Fund is to seek long-term capital appreciation by
investing primarily in Latin American equity and debt securities. Except for
Temporary Investments, as discussed below, at least 65% of the Fund's assets
will consist of direct or indirect investments in Latin American equity and
debt securities, including common stocks, preferred stocks, debt securities
convertible into common stocks and non-convertible debt securities. This
investment objective is a fundamental policy of the Fund and may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities, as defined in the Investment Company Act. The Fund is
authorized to employ a variety of investment techniques to hedge against market
and currency risk, although suitable hedging instruments may not be available
on a timely basis and on acceptable terms. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund seeks to benefit from economic and other developments in Latin
America. The investment objective of the Fund reflects the belief that
investment opportunities may result in Latin America from an evolving long-term
international trend encouraging greater market orientation and diminishing
governmental intervention in economic affairs. This trend may be facilitated by
local or international political, economic or financial developments that could
benefit the capital markets of certain Latin American countries.
In recent years, there has been a significant trend in Latin America towards
democracy and market-oriented economic reform. While there have been distinct
differences in the approaches taken by the various countries and the degrees of
success in accomplishing the economic objectives, the countries have generally
sought to reduce the government's role in economic affairs and implement policy
initiatives designed to control inflation, reduce financial deficits and
external debt, establish stable currency exchange rates, liberalize trade
restrictions, increase foreign investment, privatize state-owned companies and
develop and modernize the securities markets. While considerable difficulties
remain, the economies of certain Latin American countries have improved, and
these improvements have been reflected in the performance of the securities
markets and the reversal of the capital flight which prevailed in the early
1980's.
The Fund will not necessarily seek to diversify investments on a geographic
basis within Latin America. The allocation of the Fund's assets among the
various securities markets of Latin America will be determined by the Manager.
It is presently contemplated that the Fund will emphasize investments in the
equity and debt markets of Argentina, Brazil, Chile, Mexico and Venezuela.
Under certain adverse investment conditions, the Fund may restrict the Latin
American securities markets in which its assets are invested.
Many investors, particularly individuals, lack the information, capability or
inclination to invest in Latin American countries. It also may not be
permissible for such investors to invest directly in certain Latin American
capital markets. Unlike many intermediary investment vehicles, such as closed-
end investment companies that invest in a single country, the Fund intends to
diversify investment risk among the capital markets of a number of countries.
For the purpose of the Fund's investment objective, Latin America includes
Mexico, Central America, South America and the Spanish speaking islands of the
Caribbean, including Puerto Rico. A security ordinarily will be considered to
be a Latin American security when its issuer is organized in Latin America or
its primary trading market is located in Latin America. The Fund may consider a
security to be Latin
16
<PAGE>
American, without reference to its issuer's domicile or to its primary trading
market, when at least 50% of the issuer's non-current assets, capitalization,
gross revenues or profits in any one of the two most recent fiscal years
represents (directly or indirectly through subsidiaries) assets or activities
located in such countries. The Fund may acquire Latin American securities that
are denominated in currencies other than a Latin American currency. The Fund
also may consider a debt security that is denominated in a Latin American
currency to be a Latin American security without reference to its principal
trading market or to the location of its issuer. The Fund may consider
investment companies to be located in the country or countries in which they
primarily make their portfolio investments.
The Fund may also seek capital appreciation through investment in Latin
American debt securities. Capital appreciation in debt securities may arise as
a result of a favorable change in relative foreign exchange rates, in relative
interest rate levels, or in the creditworthiness of issuers. The receipt of
income from such debt securities is incidental to the Fund's objective of long-
term capital appreciation. In accordance with its investment objective, the
Fund will not seek to benefit from anticipated short-term fluctuations in
currency exchange rates. The Fund may, from time to time, invest in debt
securities with relatively high yields (as compared to other debt securities
meeting the Fund's investment criteria), notwithstanding that the Fund may not
anticipate that such securities will experience substantial capital
appreciation. Such income can be used, however, to offset the operating
expenses of the Fund. For a description of the risks involved in investing in
high yield debt see "Certain Risks of Debt Securities" below.
The Fund may invest in debt securities ("sovereign debt") issued or
guaranteed by Latin American governments (including Latin American countries,
provinces and municipalities) or their agencies and instrumentalities
("governmental entities"), debt securities issued or guaranteed by
international organizations designated or supported by multiple foreign
governmental entities (which are not obligations of foreign governments) to
promote economic reconstruction or development ("supranational entities"), debt
securities issued by corporations or financial institutions or debt securities
issued by the U.S. Government or an agency or instrumentality thereof.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related governmental
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank") and the Inter-American Development Bank. The
governmental members, or "stockholders", usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings.
The Fund reserves the right, as a temporary defensive measure or to provide
for redemptions or in anticipation of investment in Latin American countries,
to hold cash or cash equivalents (in U.S. dollars or foreign currencies) and
short-term securities including money market securities denominated in U.S.
dollars or foreign currencies ("Temporary Investments"). The Fund may invest in
the securities of Latin American issuers in the form of American Depositary
Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary
Receipts (GDRs) or other securities convertible into securities of Latin
American issuers. The Fund may invest in unsponsored ADRs. The issuers of
unsponsored ADRs are not obligated to disclose material information in the
U.S., and therefore, there may not be a correlation between such information
and the market value of such ADRs.
17
<PAGE>
CERTAIN RISKS OF DEBT SECURITIES
No Rating Criteria for Debt Securities. The Fund has established no rating
criteria for the debt securities in which it may invest, and such securities
may not be rated at all for creditworthiness. Securities rated in the medium to
lower rating categories of nationally recognized statistical rating
organizations such as Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("Moody's") and unrated securities of comparable
quality (referred to herein as "high yield/high risk securities") are
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with the terms of such securities and generally
involve a greater volatility of price than securities in higher rating
categories. These securities are commonly referred to as "junk" bonds. In
purchasing such securities, the Fund will rely on the Manager's judgment,
analysis and experience in evaluating the creditworthiness of an issuer of such
securities. The Manager will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and
trends, its operating history, the quality of the issuer's management and
regulatory matters. The Fund is not authorized to purchase debt securities that
are in default, except for sovereign debt (discussed below) in which the Fund
may invest no more than 5% of its total assets while such sovereign debt
securities are in default.
The market values of high yield/high risk securities tend to reflect
individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of high yield/high risk securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During such periods, such issuers may not have sufficient revenues to meet
their interest payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific issuer developments or
the issuer's inability to meet specific projected business forecasts or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of high yield/high risk
securities because such securities may be unsecured and may be subordinated to
other creditors of the issuer.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund likely would have to replace such called securities with lower yielding
securities, thus decreasing the net investment income to the Fund and dividends
to shareholders.
The Fund may have difficulty disposing of certain high yield/high risk
securities because there may be a thin trading market for such securities. To
the extent that a secondary trading market for high yield/high risk securities
does exist, it is generally not as liquid as the secondary market for higher
rated securities. Reduced secondary market liquidity may have an adverse impact
on market price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain high yield/high risk securities
also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available on many high yield/high risk securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers
or prices for actual sales.
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Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Fund's net asset value. In addition, the Fund
may incur additional expenses to the extent it is required to seek recovery
upon a default on a portfolio holding or to participate in the restructuring of
the obligation.
Sovereign Debt. Certain Latin American countries such as Argentina, Brazil
and Mexico are among the largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared moratoria
on the payment of principal and/or interest on outstanding debt.
Investment in sovereign debt involves a high degree of risk. The governmental
entity that controls the repayment of sovereign debt may not be able or willing
to repay the principal and/or interest when due in accordance with the terms of
such debt. A governmental entity's willingness or ability to repay principal
and interest due in a timely manner may be affected by, among other factors,
its cash flow situation, the extent of its foreign reserves, the availability
of sufficient foreign exchange on the date a payment is due, the relative size
of the debt service burden to the economy as a whole, the governmental entity's
policy towards the International Monetary Fund and the political constraints to
which a governmental entity may be subject. Governmental entities may also be
dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a governmental entity's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest when
due may result in the cancellation of such third parties' commitments to lend
funds to the governmental entity, which may further impair such debtor's
ability or willingness to timely service its debts. Consequently, governmental
entities may default on their sovereign debt.
Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which sovereign
debt on which a governmental entity has defaulted may be collected in whole or
in part.
The sovereign debt instruments in which the Fund may invest involve great
risk and are deemed to be the equivalent in terms of quality to high yield/high
risk securities discussed above and are subject to many of the same risks as
such securities. Similarly, the Fund may have difficulty disposing of certain
sovereign debt obligations because there may be a thin trading market for such
securities. The Fund will not invest more than 5% of its total assets in
sovereign debt which is in default.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
The Fund is authorized to engage in various portfolio strategies to hedge its
portfolio against adverse movements in the equity, debt and currency markets.
The Fund has authority to write (i.e., sell) covered put and call options on
its portfolio securities, purchase put and call options on securities and
engage in transactions in stock index options, stock index futures and
financial futures, and related options on such futures. The Fund may also deal
in forward foreign exchange transactions and foreign currency options and
futures, and related options on such futures. Each of these portfolio
strategies is described below. Although
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certain risks are involved in options and futures transactions (as discussed
below and in "Risk Factors in Options and Futures Transactions" further below),
the Manager believes that, because the Fund will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of options and futures transactions. While
the Fund's use of hedging strategies is intended to reduce the volatility of
the net asset value of its shares, the net asset value of the Fund's shares
will fluctuate. When the Fund engages in transactions denominated in foreign
currencies, it will be subject to the risks of adverse changes in the exchange
rates between such foreign currencies and the U.S. dollar, the currency used to
value the Fund's assets. Reference is made to the Statement of Additional
Information for further information concerning these strategies.
There can be no assurance that the Fund's hedging transactions will be
effective. Suitable hedging instruments may not be available with respect to
Latin American securities on a timely basis and on acceptable terms.
Furthermore, the Fund will only engage in hedging activities from time to time
and will not necessarily engage in hedging transactions when movements in any
particular equity, debt and currency markets occur.
Set forth below are descriptions of certain hedging strategies in which the
Fund is authorized to engage.
Writing Covered Options. The Fund is authorized to write (i.e., sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to certain of such options. A covered call
option is an option where the Fund in return for a premium gives another party
a right to buy specified securities owned by the Fund at a specified future
date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects
a closing purchase transaction. A closing purchase transaction cancels out the
Fund's position as the writer of an option by means of an offsetting purchase
of an identical option prior to the expiration of the option it has written.
Covered call options serve as a partial hedge against the price of the
underlying security declining.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options, which means that so
long as the Fund is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S.
Government securities or other high grade liquid debt or equity securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, the Fund will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise for as long as the option is outstanding. The
Fund may engage in closing transactions in order to terminate put options that
it has written. The Fund will not write put options if the aggregate value of
the obligations underlying the put shall exceed 50% of the Fund's net assets.
Purchasing Options. The Fund is authorized to purchase put options to hedge
against a decline in the market value of its securities. By buying a put option
the Fund has a right to sell the underlying security at the stated exercise
price, thus limiting the Fund's risk of loss through a decline in the market
value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset
by the amount of the premium paid for the put option and any related
transaction
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costs. Prior to its expiration, a put option may be sold in a closing sale
transaction and profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out the Fund's
position as the purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased.
In certain circumstances, the Fund may purchase call options on securities
held in its portfolio on which it has written call options or on securities
which it intends to purchase. The Fund will not purchase options on securities
(including stock index options discussed below) if as a result of such
purchase, the aggregate cost of all outstanding options on securities held by
the Fund would exceed 5% of the market value of the Fund's total assets.
Stock Index Options and Futures and Financial Futures. The Fund is authorized
to engage in transactions in stock index options and futures and financial
futures, and related options on such futures. The Fund may purchase or write
put and call options on stock indices to hedge against the risks of market-wide
stock price movements in the securities in which the Fund invests. Options on
indices are similar to options on securities except that on exercise or
assignment, the parties to the contract pay or receive an amount of cash equal
to the difference between the closing value of the index and the exercise price
of the option times a specified multiple. The Fund may invest in stock index
options based on a broad market index or based on a narrow index representing
an industry or market segment.
The Fund may also purchase and sell stock index futures contracts and
financial futures contracts ("futures contracts") as a hedge against adverse
changes in the market value of its portfolio securities as described below. A
futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract
to sell a security for a set price on a future date. Unlike most other futures
contracts, a stock index futures contract does not require actual delivery of
securities but results in cash settlement based upon the difference in value of
the index between the time the contract was entered into and the time of its
settlement. The Fund may effect transactions in stock index futures contracts
in connection with the equity securities in which it invests and in financial
futures contracts in connection with the debt securities in which it invests.
Transactions by the Fund in stock index futures and financial futures are
subject to limitations as described below under "Restrictions on the Use of
Futures Transactions".
The Fund may sell futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When the Fund is not fully
invested in the securities markets and anticipates a significant market
advance, it may purchase futures in order to gain rapid market exposure that
may in part or entirely offset increases in the cost of securities that the
Fund intends to purchase. As such purchases are made, an equivalent amount of
futures contracts will be terminated by offsetting sales. The Manager does not
consider purchases of futures contracts to be a speculative practice under
these circumstances. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase such securities upon termination of the
long futures position, whether the long position is the purchase of a futures
contract or the purchase of a call option or the writing of a put option on a
future, but under unusual circumstances (e.g., the Fund experiences a
significant amount of redemptions), a long futures position may be terminated
without the corresponding purchase of securities.
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The Fund also has authority to purchase and write call and put options on
futures contracts and stock indices in connection with its hedging activities.
Generally, these strategies are utilized under the same market and market
sector conditions (i.e., conditions relating to specific types of investments)
in which the Fund enters into futures transactions. The Fund may purchase put
options or write call options on futures contracts and stock indices rather
than selling the underlying futures contract in anticipation of a decrease in
the market value of its securities. Similarly, the Fund may purchase call
options, or write put options on futures contracts and stock indices, as a
substitute for the purchase of such futures to hedge against the increased cost
resulting from an increase in the market value of securities which the Fund
intends to purchase.
The Fund may engage in options and futures transactions on U.S. and foreign
exchanges and in the over-the-counter markets ("OTC options"). Exchange-traded
contracts are third-party contracts (i.e., performance of the parties'
obligations is guaranteed by an exchange or clearing corporation) which, in
general, have standardized strike prices and expiration dates. OTC options
transactions are two-party contracts with prices and terms negotiated by the
buyer and seller. See "Restrictions on OTC Options" below for information as to
restrictions on the use of OTC options.
To trade futures contracts, the Fund is not required to deposit funds equal
to the value of the futures contract. The Fund need only make a deposit, called
an "initial margin deposit", equal to a small percentage (typically between 2%
and 15%) of the value of the futures contract. As a result, a relatively small
adverse move in the price of a futures contract may result in immediate and
substantial loses to the Fund. For example, if at the time of purchase 10% of
the price of a futures contract is deposited as margin, a 10% decrease in the
price of that contract would, if the contract were then closed out, result in a
total loss of the initial margin deposit before any deduction for brokerage
commissions and other transaction costs. A decrease of more than 10% would
result in a loss of more than the total initial margin deposit.
To some extent, options on futures contracts are even more highly leveraged
than futures contracts. For example, if an in-the-money call (put) option is
sold for its intrinsic value plus a premium representing the time value of that
option, a 10% rise (drop) in the value of the underlying futures contract does
not create a loss equal to just 10% of the value of the option. Such a rise
(drop) creates a loss approximately equal to 10% of the value of the underlying
interest, less the time value, which loss may be many times greater than the
price for which the Fund sold the option. In addition, investors who sell
options are required only to deposit a percentage of the value of the option at
the time of sale as margin, thereby leveraging the investment even further.
Foreign Currency Hedging. The Fund has authority to deal in forward foreign
exchange among currencies of the different countries in which it will invest
and multinational currency units as a hedge against possible variations in the
foreign exchange rates among these currencies. This is accomplished through
contractual agreements to purchase or sell a specified currency at a specified
future date and price set at the time of the contract. The Fund's dealings in
forward foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or
sale of forward foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase and sale of its
portfolio securities, the sale and redemption of shares of the Fund or the
payment of dividends and distributions by the Fund. Position hedging is the
sale of forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. The Fund has no limitation on
transaction hedging. The Fund will not speculate in forward foreign exchange.
If the Fund enters into a
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position hedging transaction, the Fund's custodian will place cash or liquid
debt securities in a separate account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of such forward
contract. If the value of the securities placed in the separate account
declines, additional cash or securities will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to such contracts. Hedging against a decline in the value of a
currency does not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline. Such transactions
also preclude the opportunity for gain if the value of the hedged currency
should rise. Moreover, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. Investors should be aware that U.S. dollar denominated securities
may not be available in some or all Latin American countries, that the forward
currency market for the purchase of U.S. dollars in most, if not all, Latin
American countries is not highly developed and that in certain Latin American
countries no forward market for foreign currencies currently exists or such
market may be closed to investment by the Fund.
The Fund is also authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible variations
in foreign exchange rates. Such transactions may be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Fund, sold by
the Fund but not yet delivered, or committed or anticipated to be purchased by
the Fund. As an illustration, the Fund may use such techniques to hedge the
stated value in U.S. dollars of an investment in a Mexican peso denominated
security. In such circumstances, for example, the Fund may purchase a foreign
currency put option enabling it to sell a specified amount of Mexican pesos
for dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in the value of the Mexican peso relative to the dollar
will tend to be offset by an increase in the value of the put option. To
offset, in whole or in part, the cost of acquiring such a put option, the Fund
may also sell a call option which, if exercised, requires it to sell a
specified amount of Mexican pesos for dollars at a specified price by a future
date (a technique called a "straddle"). By selling a call option in this
illustration, the Fund gives up the opportunity to profit without limit from
increases in the relative value of the Mexican peso to the dollar. The Manager
believes that "straddles" of the type which may be utilized by the Fund
constitute hedging transactions and are consistent with the policies described
above.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or sell a currency at a fixed price on a future date. A futures contract
on a foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge a currency
substantially in excess of the market value of the securities denominated in
such currency which it owns, the expected acquisition price of securities
which it has committed or anticipates to purchase which are denominated in
such currency and, in the case of securities which have been sold by the Fund
but not yet delivered, the proceeds thereof in its denominated currency.
Further, the Fund will segregate at its custodian U.S. Government or other
high quality securities having a market value substantially representing any
subsequent net decrease in the market value of such hedged positions,
including net positions with respect to cross-currency hedges. The Fund may
not incur potential net liabilities of more than 20% of its total assets from
foreign currency options, futures or related options.
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In connection with its trading in forward foreign currency contracts, the
Fund will contract with a foreign or domestic bank, or foreign or domestic
securities dealer, to make or take future delivery of a specified amount of a
particular currency. There are no limitations on daily price moves in such
forward contracts, and banks and dealers are not required to continue to make
markets in such contracts. There have been periods during which certain banks
and dealers have refused to quote prices for such forward contracts or have
quoted prices with an unusually wide spread between the price at which the
bank or dealer is prepared to buy and that at which it is prepared to sell.
Governmental imposition of credit controls might limit any such forward
contract trading. With respect to its trading of forward contracts, if any,
the Fund will be subject to the risk of bank or dealer failure and the
inability of, or refusal by, a bank or dealer to perform with respect to such
contacts. Any such default would deprive the Fund or any profit potential or
force the Fund to cover its commitments for resale, if any, at the then-market
price and could result in a loss to the Fund.
Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission applicable to the Fund provide that the
futures trading activities described herein will not result in the Fund being
deemed a "commodity pool" under such regulations if the Fund adheres to
certain restrictions. In particular, the Fund may purchase and sell futures
contracts and options thereon (i) for bona fide hedging purposes, and (ii) for
non-hedging purposes, if the aggregate initial margin and premiums required to
establish positions in such contracts and options does not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts and options.
These restrictions are in addition to other restrictions on the Fund's hedging
activities mentioned herein.
When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will
be deposited in a segregated account with the Fund's custodian so that the
amount so segregated, plus the amount of initial and variation margin held in
the account of its broker, equals the market value of the futures contract,
thereby ensuring that the use of such futures contract is unleveraged.
Restrictions on OTC Options. The Fund will engage in OTC options, including
over-the-counter stock index options, over-the-counter foreign currency
options and options on foreign currency futures, only with member banks of the
Federal Reserve System and primary dealers in U.S. Government securities or
with affiliates of such banks or dealers that have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of at
least $50 million or any other bank or dealer having capital of at least $150
million or whose obligations are guaranteed by an entity having capital of at
least $150 million.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC
options are illiquid securities. Therefore, the Fund has adopted an investment
policy pursuant to which it will not purchase or sell OTC options (including
OTC options on futures contracts) if, as a result of such transaction, the sum
of the market value of OTC options currently outstanding which are held by the
Fund, the market value of the underlying securities covered by OTC call
options currently outstanding which were sold by the Fund and margin deposits
on the Fund's existing OTC options on futures contracts exceeds 15% (10% to
the extent required by certain state laws) of the total assets of the Fund,
taken at market value, together with all other assets of the Fund which are
illiquid or are not otherwise readily marketable. However, if the OTC option
is sold by the Fund to a primary U.S. Government securities dealer recognized
by the Federal Reserve Bank of New York and if the Fund has the unconditional
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contractual right to repurchase such OTC option from the dealer at a
predetermined price, then the Fund will treat as illiquid such amount of the
underlying securities as is equal to the repurchase price less the amount by
which the option is "in-the-money" (i.e., current market value of the
underlying security minus the option's strike price). The repurchase price with
the primary dealers is typically a formula price which is generally based on a
multiple of the premium received for the option, plus the amount by which the
option is "in-the-money". This policy as to OTC options is not a fundamental
policy of the Fund and may be amended by the Directors of the Fund without the
approval of the Fund's shareholders. However, the Fund will not change or
modify this policy prior to the change or modification by the Securities and
Exchange Commission staff of its position.
Risk Factors in Options and Futures Transactions. Utilization of options and
futures transactions to hedge the portfolio involves the risk of imperfect
correlation in movements in the price of options and futures and movements in
the price of the securities or currencies which are the subject of the hedge.
If the price of the options or futures moves more or less than the price of the
hedged securities or currencies, the Fund will experience a gain or loss which
will not be completely offset by movements in the price of the subject of the
hedge. The successful use of options and futures also depends on the Manager's
ability to predict correctly price movements in the market involved in a
particular options or futures transaction. In addition, options and futures
transactions in foreign markets are subject to the risk factors associated with
foreign investments generally. See "Risk Factors and Special Considerations".
The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, the
Manager believes the Fund can receive on each business day at least two
independent bids or offers, unless a quotation from only one dealer is
available, in which case only that dealer's price will be used, or which can be
sold at a formula price provided for in the OTC option agreement. There can be
no assurance, however, that a liquid secondary market will exist at any
specific time. Thus, it may not be possible to close an options or futures
position. The inability to close options and futures positions also could have
an adverse impact on the Fund's ability to hedge effectively its portfolio.
There is also the risk of loss by the Fund of margin deposits or collateral in
the event of the bankruptcy of a broker with whom the Fund has an open position
in an option, a futures contract or a related option.
The exchanges on which the Fund intends to conduct options transactions
generally have established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or
through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts that any person may trade on a particular trading day. The
Manager does not believe that these trading and position limits will have any
adverse impact on the portfolio strategies for hedging the Fund's portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES
Non-Diversified Status. The Fund is classified as non-diversified within the
meaning of the Investment Company Act, which means that the Fund is not limited
by such Act in the proportion of its assets that it may invest in the
securities of a single issuer. The Fund's investments will be limited, however,
in order to
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qualify for the special tax treatment afforded regulated investment companies
under the Internal Revenue Code of 1986, as amended (the "Code"). See
"Additional Information--Taxes". To qualify, the Fund must comply with certain
requirements, including limiting its investments so that at the close of each
quarter of the taxable year (i) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities
of a single issuer, and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer. Foreign government securities (unlike
U.S. Government securities) are not exempt from the diversification
requirements of the Code and are considered obligations of a single issuer. A
fund which elects to be classified as "diversified" under the Investment
Company Act must satisfy the foregoing 5% and 10% requirements with respect to
75% of its total assets. To the extent that the Fund assumes large positions in
the securities of a small number of issuers, the Fund's net asset value may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the
issuers, and the Fund may be more susceptible to any single economic, political
or regulatory occurrence than a diversified company.
Portfolio Transactions. Since portfolio transactions may be effected on
foreign securities exchanges, the Fund may incur settlement delays on certain
of such exchanges. See "Risk Factors and Special Considerations". In executing
the Fund's portfolio transactions, the Manager seeks to obtain the best net
results for the Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved and the firm's risk
in positioning a block of securities. The Fund may invest in certain securities
traded in the over-the-counter market and, where possible, will deal directly
with the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Such portfolio securities
are generally traded on a net basis and do not normally involve either
brokerage commissions or transfer taxes. Securities firms may receive brokerage
commissions on certain portfolio transactions, including options, futures and
options on futures transactions and the purchase and sale of underlying
securities upon exercise of options. The Fund has no obligation to deal with
any broker in the execution of transactions in portfolio securities. Under the
Investment Company Act, persons affiliated with the Fund and persons who are
affiliated with such affiliated persons, including Merrill Lynch, are
prohibited from dealing with the Fund as a principal in the purchase and sale
of securities unless a permissive order allowing such transactions is obtained
from the Securities and Exchange Commission. Affiliated persons of the Fund,
and affiliated persons of such affiliated persons, may serve as its broker in
transactions conducted on an exchange and in over-the-counter transactions
conducted on an agency basis and may receive brokerage commissions from the
Fund. In addition, consistent with the Rules of Fair Practice of the NASD, the
Fund may consider sales of shares of the Fund as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund. It is
expected that the majority of the shares of the Fund will be sold by Merrill
Lynch. Costs associated with transactions in foreign securities are generally
higher than those associated with transactions in U.S. securities, although the
Fund will endeavor to achieve the best net results in effecting such
transactions.
Portfolio Turnover. The Manager will effect portfolio transactions without
regard to holding period, if, in its judgment, such transactions are advisable
in light of a change in circumstance in general market, economic or financial
conditions. As a result of its investment policies, the Fund may engage in a
substantial
26
<PAGE>
number of portfolio transactions. Accordingly, while the Fund anticipates that
its annual portfolio turnover rate should not exceed 100% under normal
conditions, it is impossible to predict portfolio turnover rates. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales
or purchases of portfolio securities (exclusive of purchases or sales of
securities whose maturities at the time of acquisition were one year or less)
by the monthly average value of the securities in the portfolio during the
year. A high portfolio turnover rate involves correspondingly greater
transaction costs in the form of dealer spreads and brokerage commissions,
which are borne directly by the Fund.
When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase securities on a when-issued basis, and it may purchase or sell
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future to secure what is considered an advantageous yield and price to the Fund
at the time of entering into the transaction. Although the Fund has not
established any limit on the percentage of its assets that may be committed in
connection with such transactions, the Fund will maintain a segregated account
with its custodian of cash, cash equivalents, U.S. Government securities or
other high grade liquid debt or equity securities denominated in U.S. dollars
or non-U.S. currencies in an aggregate amount equal to the amount of its
commitment in connection with such purchase transactions.
Standby Commitment Agreements. The Fund may from time to time enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a fixed income security which
may be issued and sold to the Fund at the option of the issuer. The price and
coupon of the security is fixed at the time of the commitment. At the time of
entering into the agreement, the Fund is paid a commitment fee, regardless of
whether or not the security is ultimately issued, which is typically
approximately 0.5% of the aggregate purchase price of the security which the
Fund has committed to purchase. The Fund will enter into such agreements only
for the purpose of investing in the security underlying the commitment at a
yield and price which is considered advantageous to the Fund. The Fund will not
enter into a standby commitment with a remaining term in excess of 45 days and
will limit its investment in such commitments so that the aggregate purchase
price of the securities subject to such commitments, together with the value of
portfolio securities subject to legal restrictions on resale, will not exceed
15% (10% to the extent required by certain state laws) of its total assets
taken at the time of acquisition of such commitment or security. The Fund will
at all times maintain a segregated account with its custodian of cash, cash
equivalents, U.S. Government securities or other high grade liquid debt
securities denominated in U.S. dollars or non-U.S. currencies in an aggregate
amount equal to the purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to a standby commitment
will be issued, and the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the Fund may bear the
risk of a decline in the value of such security and may not benefit from an
appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the security can
reasonably be expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net asset value. The
cost basis of the
27
<PAGE>
security will be adjusted by the amount of the commitment fee. In the event the
security is not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.
Repurchase Agreements: Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Under a repurchase agreement, the seller agrees, upon entering into the
contract with the Fund, to repurchase a security (typically a security issued
or guaranteed by the U.S. government) at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed yield for the Fund insulated from fluctuations in the market value of
the underlying security during such period, although, to the extent the
repurchase agreement is not denominated in U.S. dollars, the Fund's return may
be affected by currency fluctuations. Repurchase agreements may be entered into
only with a member bank of the Federal Reserve System, a primary dealer in U.S.
Government securities or an affiliate thereof. A purchase and sale contract is
similar to a repurchase agreement, but purchase and sale contracts, unlike
repurchase agreements, allocate interest on the underlying security to the
purchaser during the term of the agreement. In all instances, the Fund takes
possession of the underlying securities when investing in repurchase agreements
or purchase and sale contracts. Nevertheless, if the seller were to default on
its obligation to repurchase a security under a repurchase agreement or
purchase and sale contract and the market value of the underlying security at
such time was less than the Fund had paid to the seller, the Fund would realize
a loss. The Fund may not invest more than 15% (10% to the extent required by
certain state laws) of its total net assets in repurchase agreements or
purchase and sale contracts maturing in more than seven days, together with all
other illiquid securities.
Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its total
assets to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government.
Such collateral will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. During the period of
such a loan, the Fund receives the income on the loaned securities and receives
either the income on the collateral or other compensation, i.e., negotiated
loan premium or fee, for entering into the loan and thereby increases its
yield. Such loans are terminable at any time, and the borrower, after notice,
will be required to return borrowed securities within five business days. In
the event that the borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund could experience
delays and costs in gaining access to the collateral and could suffer a loss to
the extent that the value of the collateral falls below the market value of the
borrowed securities.
Investment Restrictions. The Fund's investment activities are subject to
further restrictions that are described in the Statement of Additional
Information. Investment restrictions and policies which are fundamental
policies may not be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities (which for this purpose and under
the Investment Company Act means the lesser of (a) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (b) more than 50% of the outstanding shares). Among its
fundamental policies, the Fund may not invest more than 25% of its assets,
taken at market value, in the securities of issuers in any particular industry
(excluding the U.S. Government and its agencies or instrumentalities). In
addition, the Fund has adopted non-fundamental restrictions which may be
changed by the Board of Directors. Among its non-fundamental policies, the Fund
may not:
28
<PAGE>
--Invest in securities which cannot be readily resold because of legal or
contractual restrictions or which cannot otherwise be marketed, redeemed or put
to the issuer or a third party, if at the time of acquisition more than 15% of
its total assets would be invested in such securities. This restriction shall
not apply to securities which mature within seven days or securities which the
Board of Directors of the Fund has otherwise determined to be liquid pursuant
to applicable law. As explained further in the Statement of Additional
Information, under state law the Fund is presently limited with respect to
investment in certain illiquid securities to 10% of its total assets.
--Notwithstanding the less restrictive fundamental investment restriction
recited in the Statement of Additional Information, borrow amounts in excess of
20% of its total assets, taken at market value (including the amount borrowed),
and then only from a bank as a temporary measure for extraordinary or emergency
purposes including to meet redemptions or to settle securities transactions.
The Fund will not purchase securities while borrowings exceed 5% of total
assets except (a) to honor prior commitments or (b) to exercise subscription
rights where outstanding borrowings have been obtained exclusively for
settlements of other securities transactions.
The purchase of securities while borrowings are outstanding will have the
effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk, and borrowed funds are subject to interest
costs which will reduce net income. While the Fund will not purchase illiquid
securities in an amount exceeding 15% (10% to the extent required by certain
state laws) of its total assets, the Fund may purchase, without regard to that
limitation, securities that are not registered under the Securities Act of
1933, as amended (the "Securities Act"), but that can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act,
provided that the Fund's Board of Directors continuously determines, based on
the trading markets for the specific Rule 144A security, that it is liquid. The
Board of Directors may adopt guidelines and delegate to the Manager the daily
function of determining and monitoring liquidity of restricted securities. The
Board of Directors, however, will retain sufficient oversight and be ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
of Directors will carefully monitor the Fund's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.
Although not a fundamental policy, the Fund will include OTC options and the
securities underlying such options in calculating the amount of its total
assets subject to the limitation set forth in the first non-fundamental
restriction recited above. However, as discussed above, the Fund may treat the
securities it uses as cover for written OTC options as liquid and, therefore,
will exclude such securities from this restriction, provided it follows a
specified procedure. The Fund will not change or modify this policy prior to
the change or modification by the Securities and Exchange Commission staff of
its position regarding OTC options, as discussed above.
29
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Board of Directors of the Fund consists of six individuals, five of whom
are not "interested persons" of the Fund as defined in the Investment Company
Act. The Board of Directors of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies by the Investment Company
Act.
The Directors of the Fund are:
Arthur Zeikel*--President of the Manager and FAM; President and Director of
Princeton Services, Inc.; Executive Vice President of ML&Co.; Executive Vice
President of Merrill Lynch; Director of the Distributor.
Donald Cecil--Special Limited Partner of Cumberland Partners (an investment
partnership).
Edward H. Meyer--Chairman of the Board, President and Chief Executive
Officer of Grey Advertising Inc.
Charles C. Reilly--Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital, Inc.; former Senior Vice President
of Arnhold and S. Bleichroeder, Inc.; Adjunct Professor, Columbia University
Graduate School of Business.
Richard R. West--Professor of Finance, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration.
Edward D. Zinbarg--Former Executive Vice President of The Prudential
Insurance Company of America.
--------
* Interested person, as defined in the Investment Company Act, of the Fund.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Manager, Merrill Lynch Asset Management, L.P., which does business as
Merrill Lynch Asset Management, is owned and controlled by ML & Co., a
financial services holding company and the parent of Merrill Lynch. The
Manager provides the Fund with management and investment advisory services.
The Manager or an affiliate, Fund Asset Management, L.P. ("FAM"), acts as the
investment adviser for more than 130 other registered investment companies.
The Manager or FAM also offers portfolio management and portfolio analysis
services to individuals and institutions. As of February 28, 1995, the Manager
and FAM had a total of approximately $168.2 billion in investment company and
other portfolio assets under management, including accounts of certain
affiliates of the Manager.
The management agreement with the Manager (the "Management Agreement")
provides that, subject to the direction of the Board of Directors of the Fund,
the Manager is responsible for the actual management
30
<PAGE>
of the Fund's portfolio and constantly reviews the Fund's holdings in light of
its own research analysis and that from other relevant sources. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Manager, subject to review by the Board of Directors.
The Manager provides the portfolio manager for the Fund who considers
analyses from various sources (including brokerage firms with which the Fund
does business), makes the necessary decisions, and places transactions
accordingly. The Manager is also obligated to perform certain administrative
and management services for the Fund and is obligated to provide all of the
office space, facilities, equipment and personnel necessary to perform its
duties under the Management Agreement.
The Fund pays the Manager a monthly fee at the annual rate of 1.00% of the
average daily net assets of the Fund. This fee is higher than that of most
mutual funds, including most other mutual funds managed by the Manager and
other investment advisers, but management of the Fund believes this fee is
justified by the additional investment research and analysis required in
connection with investing in Latin American capital markets. For the fiscal
year ended November 30, 1994, the Manager received a fee of $9,298,782 (based
on average net assets of approximately $941.8 million). At February 28, 1995,
the net assets of the Fund aggregated $679.4 million. At this asset level, the
annual management fee would aggregate approximately $6.8 million.
Grace Pineda, Vice President of the Fund, is the Fund's Portfolio Manager.
Ms. Pineda has been a Vice President of the Manager and Senior Portfolio
Manager since 1989. Ms. Pineda has been primarily responsible for the
management of the Fund's portfolio since it commenced operations.
The Management Agreement obligates the Fund to pay certain expenses incurred
in its operations including, among other things, the management fee, legal and
audit fees, registration fees, unaffiliated Directors' fees and expenses,
custodian and transfer agency fees, accounting costs, the costs of issuing and
redeeming shares and certain of the costs of printing proxies, shareholder
reports, prospectuses and statements of additional information. Accounting
services are provided to the Fund by the Manager, and the Fund reimburses the
Manager for its costs in connection with such services on a semi-annual basis.
For the fiscal year ended November 30, 1994, the Fund reimbursed the Manager
$211,687 for accounting services. For the fiscal year ended November 30, 1994,
the ratio of total expenses to average net assets for each class of shares was
as follows: Class A, 1.85% (annualized) (for the period October 21, 1994
(commencement of operations) to October 31, 1994); Class B, 2.51% (for the
fiscal year); Class C, 2.93% (annualized) (for the period October 21, 1994
(commencement of operations) to October 31, 1994); and Class D, 1.73% (for the
fiscal year and giving effect to the October 21, 1994 redesignation of
outstanding Class A shares as Class D shares).
CODE OF ETHICS
The Board of Directors of the Fund has adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act which incorporates the Code of Ethics of
the Manager (together, the "Codes"). The Codes significantly restrict the
personal investing activities of all employees of the Manager and, as described
below, impose additional, more onerous, restrictions on fund investment
personnel.
31
<PAGE>
The Codes require that all employees of the Manager preclear any personal
securities investment (with limited exceptions, such as government securities).
The preclearance requirement and associated procedures are designed to identify
any substantive prohibition or limitation applicable to the proposed
investment. The substantive restrictions applicable to all employees of the
Manager include a ban on acquiring any securities in a "hot" initial public
offering and a prohibition from profiting on short-term trading in securities.
In addition, no employee may purchase or sell any security which at the time is
being purchased or sold (as the case may be), or to the knowledge of the
employee is being considered for purchase or sale, by any fund advised by the
Manager. Furthermore, the Codes provide for trading "blackout periods" which
prohibit trading by investment personnel of the Fund within periods of trading
by the Fund in the same (or equivalent) security (15 or 30 days depending upon
the transaction).
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a wholly-owned
subsidiary of ML&Co., acts as the Fund's transfer agent pursuant to a Transfer
Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement
(the "Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement,
the Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. Pursuant to the
Transfer Agency Agreement, the Transfer Agent receives an annual fee of $11.00
per Class A or Class D shareholder account and $14.00 per Class B or Class C
shareholder account, nominal miscellaneous fees (e.g., account closing fees)
and is entitled to reimbursement for out-of-pocket expenses incurred by it
under the Transfer Agency Agreement. For the fiscal year ended November 30,
1994, the fee paid by the Fund to the Transfer Agent was $1,354,808. At
February 28, 1995, the Fund had 5,904 Class A shareholder accounts, 106,630
Class B shareholder accounts, 1,970 Class C shareholder accounts and 18,949
Class D shareholder accounts. At this level of accounts, the annual fee payable
to the Transfer Agent would aggregate approximately $1.8 million, plus
miscellaneous and out-of-pocket expenses.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of
both the Manager and Merrill Lynch, acts as the Distributor of the shares of
the Fund. Shares of the Fund are offered continuously for sale by the
Distributor and other eligible securities dealers (including Merrill Lynch).
Shares of the Fund may be purchased from securities dealers or by mailing a
purchase order directly to the Transfer Agent. The minimum initial purchase is
$1,000, and the minimum subsequent purchase is $50, except that for retirement
plans, the minimum initial purchase is $100, and the minimum subsequent
purchase is $1.
To permit the Fund to invest the net proceeds from the sale of its shares in
an orderly manner or in response to conditions in the securities markets or
otherwise, the Fund or the Distributor may from time to time, suspend the sale
of its shares, except for dividend reinvestments. The Fund may, thereafter,
resume such offering from time to time. The Fund also reserves the right to
limit the number of shares that may be purchased by a person during a specified
period of time or in the aggregate.
32
<PAGE>
The Fund is offering its shares in four classes at a public offering price
equal to the next determined net asset value per share plus sales charges
imposed either at the time of purchase or on a deferred basis depending upon
the class of shares selected by the investor under the Merrill Lynch Select
Pricing SM System, as described below. The applicable offering price for
purchase orders is based upon the net asset value of the Fund next determined
after receipt of the purchase orders by the Distributor. As to purchase orders
received by securities dealers prior to the close of business on the New York
Stock Exchange (generally, 4:00 p.m., New York time), which includes orders
received after the close of business on the previous day, the applicable
offering price will be based on the net asset value determined as of 15 minutes
after the close of business on the New York Stock Exchange, on that day,
provided the Distributor in turn receives the order from the securities dealer
prior to 30 minutes after the close of business on the New York Stock Exchange
on that day. If the purchase orders are not received prior to 30 minutes after
the close of business on the New York Stock Exchange, such orders shall be
deemed received on the next business day. The Fund or the Distributor may
suspend the continuous offering of the Fund's shares of any class at any time
in response to conditions in the securities markets or otherwise and may
thereafter resume such offering from time to time. Any order may be rejected by
the Distributor or the Fund. Neither the Distributor nor the dealers are
permitted to withhold placing orders to benefit themselves by a price change.
Merrill Lynch may charge its customers a processing fee (presently $4.85) to
confirm a sale of shares to such customers. Purchases directly through the
Transfer Agent are not subject to the processing fee.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing SM System, which permits each investor to choose the method of
purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Shares of Class A and Class D are sold
to investors choosing the initial sales charge alternatives, and shares of
Class B and Class C are sold to investors choosing the deferred sales charge
alternatives. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Fund with the investment
thereafter being subject to a contingent deferred sales charge and ongoing
distribution fees. A discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing SM System is set forth under "Merrill Lynch Select Pricing SM System"
on page 5.
Each Class A, Class B, Class C and Class D share of the Fund represents
identical interests in the investment portfolio of the Fund and has the same
rights, except the Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, will be imposed directly against those classes and
not against all assets of the Fund and, accordingly, such charges will not
affect the net asset value of any other class or have any impact on investors
choosing another sales charge option. Dividends paid by the Fund for each class
of shares will be calculated in the same manner at the same time and will
differ only to the extent that account maintenance and distribution fees and
any incremental transfer agency costs relating to a particular class are borne
exclusively by that class. Class B, Class C and Class D shares each have
exclusive voting rights with respect to the Rule 12b-1
33
<PAGE>
distribution plan adopted with respect to such class pursuant to which account
maintenance and/or distribution fees are paid. See "Distribution Plans" below.
Each class has different exchange privileges. See "Shareholder Services--
Exchange Privilege".
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in
that the sales charges applicable to each class provide for the financing of
the distribution of the shares of the Fund. The distribution-related revenues
paid with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares. Investors are advised
that only Class A and Class D shares may be available for purchase through
securities dealers, other than Merrill Lynch, which are eligible to sell
shares.
The following table sets forth a summary of the distribution arrangements for
each class of shares under the Merrill Lynch Select Pricing SM System, followed
by a more detailed description of each class.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE(/1/) FEE FEE FEATURE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Maximum 5.25% initial sales No No No
charge(/2/)(/3/)
---------------------------------------------------------------------------------------
B CDSC for a period of 4 years, 0.25% 0.75% B shares convert to
at a rate of 4.0% during the D shares automatically
first year, decreasing 1.0% after approximately
annually to 0.0% eight years(/4/)
---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
---------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</TABLE>
--------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs may be imposed if the redemption occurs within
the applicable CDSC time period. The charge will be assessed on an amount
equal to the lesser of the proceeds of redemption or the cost of the shares
being redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge
Alternatives--Class A and Class D Shares--Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more will not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other MLAM-
advised mutual funds into which exchanges may be made have a ten year
conversion period. If Class B shares of the Fund are exchanged for Class B
shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
34
<PAGE>
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible to
purchase Class A shares should purchase Class A shares rather than Class D
shares because there is an account maintenance fee imposed on Class D shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
SALES LOAD AS SALES LOAD AS DISCOUNT TO
PERCENTAGE PERCENTAGE* OF SELECTED DEALERS
OF OFFERING THE NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE PRICE INVESTED THE OFFERING PRICE
------------------ ------------- -------------- ------------------
<S> <C> <C> <C>
Less than $25,000.............. 5.25% 5.54% 5.00%
$25,000 but less than $50,000.. 4.75 4.99 4.50
$50,000 but less than $100,000. 4.00 4.17 3.75
$100,000 but less than
$250,000...................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000.................... 2.00 2.04 1.80
$1,000,000 and over**.......... 0.00 0.00 0.00
</TABLE>
--------
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more made on or after October 21, 1994. If the sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. Class A purchases made prior to
October 21, 1994, may be subject to a CDSC if the shares are redeemed within
one year of purchase at the following rates: 1.00% on purchases of
$1,000,000 to $2,500,000; 0.60% on purchases of $2,500,001 to $3,500,000;
0.40% on purchases of $3,500,001 to $5,000,000; and 0.25% on purchases of
more than $5,000,000 in lieu of paying an initial sales charge. The charge
will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. A sales charge of 0.75%
will be charged on purchases of $1,000,000 or more of Class A or Class D
shares by certain Employer Sponsored Retirement or Savings Plans.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and
Class D shares of the Fund will receive a concession equal to most of the sales
charge, they may be deemed to be underwriters under the Securities Act.
As noted above, as a result of the implementation of the Merrill Lynch Select
Pricing System, Class A shares of the Fund outstanding prior to October 21,
1994, were redesignated Class D shares. The Class A shares offered by this
Prospectus differ from the Class A shares offered prior to October 21, 1994, in
many respects, including sales charges, exchange privilege and the classes of
persons to whom such shares are offered.
During the fiscal period October 21, 1994 (commencement of public offering)
through November 30, 1994, the Fund sold 753,289 of its new Class A shares for
aggregate net proceeds to the Fund of $13,593,383. The Distributor and Merrill
Lynch did not receive sales charges for the sale of such Class A shares for
such period. During such period, the Distributor received no CDSCs with respect
to redemptions within one year after purchase of the Class A shares purchased
subject to front-end sales charge waivers.
35
<PAGE>
During the fiscal year ended November 30, 1994, the Fund sold 12,305,213 of
its Class D shares (including redesignated Class A shares) for aggregate net
proceeds to the Fund of $213,150,837. The gross sales charges for the sale of
its Class D shares for the period were $3,143,372, of which $225,515 and
$2,917,858 were received by the Distributor and Merrill Lynch, respectively.
During such period, the Distributor received no CDSCs with respect to
redemptions within one year after purchase of the Class D shares (including
redesignated Class A shares) purchased subject to front-end sales charge
waivers.
Eligible Class A Investors. Class A shares are offered to a limited group of
investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares. Investors who currently own Class A shares in a
shareholder account, including participants in the Merrill Lynch Blueprint SM
Program, are entitled to purchase additional Class A shares in that account.
Certain employer sponsored retirement or savings plans, including eligible
401(k) plans, may purchase Class A shares at net asset value provided such
plans meet the required minimum number of eligible employees or required
amount of assets advised by MLAM or any of its affiliates. Class A shares are
available at net asset value to corporate warranty insurance reserve fund
programs provided that the program has $3 million or more initially invested
in MLAM-advised mutual funds. Also eligible to purchase Class A shares at net
asset value are participants in certain investment programs including TMA SM
Managed Trusts to which Merrill Lynch Trust Company provides discretionary
trustee services and certain purchases made in connection with the Merrill
Lynch Mutual Fund Adviser program. In addition, Class A shares are offered at
net asset value to ML & Co. Inc. and its subsidiaries and their directors and
employees and to members of the Boards of MLAM-advised investment companies,
including the Fund. Certain persons who acquired shares of certain MLAM-
advised closed-end funds who wish to reinvest the net proceeds from a sale of
their closed-end fund shares of common stock in shares of the Fund also may
purchase Class A shares of the Fund if certain conditions set forth in the
Statement of Additional Information are met. For example, Class A shares of
the Fund and certain other MLAM-advised mutual funds are offered at net asset
value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. who
wish to reinvest the net proceeds from a sale of certain of their shares of
common stock of Merrill Lynch Senior Floating Rate Fund, Inc. in shares of
such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges
also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A
investors as set forth above under "Eligible Class A Investors".
Class D shares are offered at net asset value without sales charge to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met. Class D shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement
or Savings Plans, is set forth in the Statement of Additional Information.
36
<PAGE>
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net
asset value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately eight years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend reinvestment with respect to
those shares, are automatically converted into Class D shares of the Fund and
thereafter will be subject to lower continuing fees. See "Conversion of Class B
Shares to Class D Shares" below. Both Class B and Class C shares are subject to
an account maintenance fee of 0.25% of net assets and a distribution fee of
0.75% of net assets as discussed below under "Distribution Plans". The proceeds
from the account maintenance fees are used to compensate Merrill Lynch for
providing continuing account maintenance activities.
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment.
Merrill Lynch compensates its financial consultants for selling Class B and
Class C shares at the time of purchase from its own funds. See "Distribution
Plans" below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor
and are used in whole or in part by the Distributor to defray the expenses of
dealers (including Merrill Lynch) related to providing distribution-related
services to the Fund in connection with the sale of the Class B and Class C
shares, such as the payment of compensation to financial consultants for
selling Class B and Class C shares, from its own funds. The combination of the
CDSC and the ongoing distribution fee facilitates the ability of the Fund to
sell the Class B and Class C shares without a sales charge being deducted at
the time of purchase. Approximately eight years after issuance, Class B shares
will convert automatically into Class D shares of the Fund, which are subject
to an account maintenance fee but no distribution fee; Class B shares of
certain other MLAM-advised mutual funds into which exchanges may be made
convert into Class D shares automatically after approximately ten years. If
Class B shares of the Fund are exchanged for Class B shares of another MLAM-
advised mutual fund, the conversion period applicable to the Class B shares
acquired in the exchange will apply, and the holding period for the shares
exchanged will be tacked onto the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C shares
is limited by the NASD asset-based sales charge rule. See "Limitations on the
Payment of Deferred Sales Charges" below. The proceeds from the ongoing account
maintenance fee are used to compensate Merrill Lynch for providing continuing
account maintenance activities. Class B shareholders of the Fund exercising the
exchange privilege described under "Shareholder Services--Exchange Privilege"
will continue to be subject to the Fund's CDSC schedule if such schedule is
higher than the CDSC schedule relating to the Class B shares acquired as a
result of the exchange.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which are
redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar
37
<PAGE>
amount subject thereto. The charge will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed.
Accordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price. In addition, no CDSC will be assessed on shares derived
from reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE
OF DOLLAR AMOUNT
YEAR SINCE PURCHASE PAYMENT MADE SUBJECT TO CHARGE
-------------------------------- -----------------
<S> <C>
0-1...................................................... 4.00%
1-2...................................................... 3.00
2-3...................................................... 2.00
3-4...................................................... 1.00
4 and thereafter......................................... 0.00
</TABLE>
For the fiscal year ended November 30, 1994, the Distributor received CDSCs of
$1,483,069 with respect to the redemption of Class B shares, all of which was
paid to Merrill Lynch. For the fiscal period October 21, 1994 (commencement of
public offering) to November 30, 1994, the Distributor received CDSCs of $11
with respect to the redemption of Class C shares, all of which was paid to
Merrill Lynch.
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in the manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first of shares
held for over four years or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the four-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. A transfer of
shares from a shareholder's account to another account will be assumed to be
made in the same order as a redemption.
To provide an example, assume an investor purchases 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to a CDSC because of dividend reinvestment. With respect to
the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate of
2.0% (the applicable rate in the third year after purchase for shares purchased
after October 21, 1994).
The Class B CDSC is waived on redemptions of shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
("IRA") or other retirement plan or following the death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a shareholder. The
Class B CDSC also is waived on redemptions of shares by certain eligible 401(a)
and eligible 401(k) plans. The CDSC also is waived for any Class B shares which
are purchased by eligible 401(k) or eligible 401(a) plans which are rolled over
into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such
38
<PAGE>
account at the time of redemption. The Class B CDSC also is waived for any
Class B shares which are purchased by a Merrill Lynch rollover IRA that was
funded by a rollover from a terminated 401(k) plan managed by the MLAM Private
Portfolio Group and held in such account at the time of redemption. Additional
information concerning the waiver of the Class B CDSC is set forth in the
Statement of Additional Information.
Contingent Deferred Sales Charges--Class C Shares. Class C shares which are
redeemed within one year after purchase may be subject to a 1.0% CDSC charged
as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the proceeds of redemption or the
cost of the shares being redeemed. Accordingly, no Class C CDSC will be imposed
on increases in net asset value above the initial purchase price. In addition,
no Class C CDSC will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest
possible rate being charged. Therefore, it will be assumed that the redemption
is first of shares held for over one year or shares acquired pursuant to
reinvestment of dividends or distributions and then of shares held longest
during the one-year period. The charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase. A
transfer of shares from a shareholder's account to another account will be
assumed to be made in the same order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately eight
years (the "Conversion Period"), Class B shares will be converted automatically
into Class D shares of the Fund. Class D shares are subject to an ongoing
account maintenance fee of 0.25% of net assets but are not subject to the
distribution fee that is borne by Class B shares. Automatic conversion of Class
B shares into Class D shares will occur at least once each month (on the
"Conversion Date") on the basis of the relative net asset values of the shares
of the two classes on the Conversion Date, without the imposition of any sales
load, fee or other charge. Conversion of Class B shares to Class D shares will
not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
outstanding. If at a Conversion Date the conversion of Class B shares to Class
D shares of the Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the Fund
held in the account on the Conversion Date will be converted to Class D shares
of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual
39
<PAGE>
funds will convert approximately ten years after initial purchase. If, during
the Conversion Period, a shareholder exchanges Class B shares with an eight-
year Conversion Period for Class B shares with a ten-year Conversion Period, or
vice versa, the Conversion Period applicable to the Class B shares acquired in
the exchange will apply, and the holding period for the shares exchanged will
be tacked onto the holding period for the shares acquired.
The Conversion Period is modified for shareholders who purchased Class B
shares through certain retirement plans which qualified for a waiver of the
CDSC normally imposed on purchases of Class B shares ("Class B Retirement
Plans"). When the first share of any MLAM-advised mutual fund purchased by a
Class B Retirement Plan has been held for ten years (i.e., ten years from the
date the relationship between MLAM-advised mutual funds and the Class B
Retirement Plan was established), all Class B shares of all MLAM-advised mutual
funds held in that Class B Retirement Plan will be converted into Class D
shares of the appropriate funds. Subsequent to such conversion, that Class B
Retirement Plan will be sold Class D shares of the appropriate funds at net
asset value.
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for Class B, Class C and
Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a
"Distribution Plan") with respect to the account maintenance and/or
distribution fees paid by the Fund to the Distributor with respect to such
classes. The Class B and Class C Distribution Plans provide for the payment of
account maintenance fees and distribution fees, and the Class D Distribution
Plan provides for the payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Fund pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual
rate of 0.25% of the average daily net assets of the Fund attributable to
shares of the relevant class in order to compensate the Distributor and Merrill
Lynch (pursuant to a sub-agreement) in connection with account maintenance
activities.
The Distribution Plans for Class B and Class C shares each provide that the
Fund also pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the shares of the
relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for providing shareholder and distribution
services, and bearing certain distribution-related expenses of the Fund,
including payments to financial consultants for selling Class B and Class C
shares of the Fund. The Distribution Plans relating to Class B and Class C
shares are designed to permit an investor to purchase Class B and Class C
shares through dealers without the assessment of an initial sales charge and at
the same time permit the dealer to compensate its financial consultants in
connection with the sale of the Class B and Class C shares. In this regard, the
purpose and function of the ongoing distribution fees and the CDSC are the same
as those of the initial sales charge with respect to the Class A and Class D
shares of the Fund in that the deferred sales charges provide for the financing
of the distribution of the Fund's Class B and Class C shares.
For the fiscal year ended November 30, 1994, the Fund paid the Distributor
$7,506,994 pursuant to the Class B Distribution Plan (based on average net
assets subject to the Class B Distribution Plan of approximately $750.7
million), all of which was paid to Merrill Lynch for providing account
maintenance
40
<PAGE>
and distribution-related activities and services in connection with Class B
shares. During the fiscal period October 21, 1994 (commencement of public
offering) to November 30, 1994, the Fund paid the Distributor $3,895 pursuant
to the Distribution Plan relating to the Class C shares (based on average net
assets subject to such Distribution Plan of approximately $3.6 million), all of
which was paid to Merrill Lynch for providing account maintenance and
distribution-related activities and services in connection with Class C shares.
For the fiscal year ended November 30, 1994, the Fund paid the Distributor
$444,282 pursuant to the Distribution Plan relating to the Class D shares
(including the redesignated Class A shares) (based on average net assets
subject to such Distribution Plan of approximately $177.7 million), all of
which was paid to Merrill Lynch for providing account maintenance services in
connection with such shares. At February 28, 1995, the net assets of the Fund
subject to the Class B Distribution Plan aggregated approximately $543.1
million. At this asset level, the annual fee payable pursuant to the Class B
Distribution Plan would aggregate approximately $5.4 million. At February 28,
1995, the net assets of the Fund subject to the Class C Distribution Plan
aggregated approximately $6.9 million. At this asset level, the annual fee
payable pursuant to the Class C Distribution Plan would aggregate approximately
$68,869. At February 28, 1995, the net assets of the Fund subject to the Class
D Distribution Plan aggregated approximately $117.0 million. At this asset
level, the annual fee payable pursuant to the Class D Distribution Plan would
aggregate approximately $292,469.
The payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred, and accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C Distribution
Plans. This information is presented annually as of December 31 of each year on
a "fully allocated accrual" basis and quarterly on a "direct expense and
revenue/cash" basis. On the fully allocated accrual basis, revenues consist of
the account maintenance fees, distribution fees, the CDSCs and certain other
related revenues, and expenses consist of financial consultant compensation,
branch office and regional operation center selling and transaction processing
expenses, advertising, sales promotion and marketing expenses, corporate
overhead and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and CDSCs,
and the expenses consist of financial consultant compensation. As of December
31, 1994, for Class B shares, the fully allocated accrual expenses for the
period since September 27, 1991 (commencement of operations) incurred by the
Distributor and Merrill Lynch exceeded fully allocated accrual revenues by
approximately $15,926,000 (2.13% of Class B net assets at that date). As of
December 31, 1994, for Class B shares, direct cash revenues for the period
since September 27, 1991 (commencement of operations) exceeded direct cash
expenses by $1,187,964 (0.20% of Class B net assets at that date). Similar
fully allocated accrual data is not yet available with respect to Class C
shares which the Fund commenced offering to the public on October 21, 1994. As
of December 31, 1994, for Class C shares, direct cash expenses for the period
since October 21, 1994 (commencement of public offering) exceeded direct cash
revenues by $24,169 (0.40% of Class C net assets at that date).
The Fund has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with Class B, Class C and Class D shares, and there is no assurance
that the Directors of the Fund will approve the continuance of the Distribution
Plans from year to year. However, the Distributor intends to seek annual
continuation of the Distribution Plans. In their review of the Distribution
Plans, the Directors will be asked to take into consideration expenses incurred
41
<PAGE>
in connection with the account maintenance and/or distribution of each class of
shares separately. The initial sales charges, the account maintenance fee, the
distribution fee and/or the CDSCs received with respect to one class will not
be used to subsidize the sale of shares of another class. Payments of the
distribution fee on Class B shares will terminate upon conversion of those
Class B shares into Class D shares as set forth under "Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares to Class
D Shares".
Limitations on the Payment of Deferred Sales Charges. The maximum sales
charge rule in the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD") imposes a limitation on certain asset-based
sales charges such as the distribution fee and the CDSC borne by the Class B
and Class C shares but not the account maintenance fee. The maximum sales
charge rule is applied separately to each class. As applicable to the Fund, the
maximum sales charge rule limits the aggregate of distribution fee payments and
CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of Class B
shares and Class C shares, computed separately (defined to exclude shares
issued pursuant to dividend reinvestments and exchanges), plus (2) interest on
the unpaid balance for the respective class, computed separately, at the prime
rate plus 1% (the unpaid balance being the maximum amount payable minus amounts
received from the payment of the distribution fee and the CDSC). In connection
with the Class B shares, the Distributor has voluntarily agreed to waive
interest charges on the unpaid balance in excess of 0.50% of eligible gross
sales. Consequently, the maximum amount payable to the Distributor (referred to
as the "voluntary maximum") in connection with the Class B shares is 6.75% of
eligible gross sales. The Distributor retains the right to stop waiving the
interest charges at any time. To the extent payments would exceed the voluntary
maximum, the Fund will not make further payments of the distribution fee with
respect to Class B shares, and any CDSCs will be paid to the Fund rather than
to the Distributor; however, the Fund will continue to make payments of the
account maintenance fee. In certain circumstances the amount payable pursuant
to the voluntary maximum may exceed the amount payable under the NASD formula.
In such circumstances payment in excess of the amount payable under the NASD
formula will not be made.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all full and fractional shares of the
Fund upon receipt of a written request in proper form. The redemption price is
the net asset value per share next determined after the initial receipt of
proper notice of redemption. Except for any CDSC which may be applicable, there
will be no charge for redemption if the redemption request is sent directly to
the Transfer Agent. Shareholders liquidating their holdings will receive upon
redemption all dividends reinvested through the date of redemption. The value
of shares at the time of redemption may be more or less than the shareholder's
cost, depending on the market value of the securities held by the Fund at such
time.
REDEMPTION
A shareholder wishing to redeem shares may do so by tendering the shares
directly to the Fund's Transfer Agent, Financial Data Services, Inc., Transfer
Agency Mutual Fund Operations, P.O. Box 45289, Jacksonville, Florida 32232-
5289. Redemption requests delivered other than by mail should be delivered to
Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800
Deer Lake Drive East,
42
<PAGE>
Jacksonville, Florida 32246-6484. Proper notice of redemption in the case of
shares deposited with the Transfer Agent may be accomplished by a written
letter requesting redemption. Proper notice of redemption in the case of shares
for which certificates have been issued may be accomplished by a written letter
as noted above accompanied by certificates for the shares to be redeemed.
Redemption requests should not be sent to the Fund. A redemption request
requires the signature(s) of all persons in whose name(s) the shares are
registered, signed exactly as the name(s) appear(s) on the Transfer Agent's
register or on the certificate, as the case may be. The signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution"
(including, for example, Merrill Lynch branch offices and certain other
financial institutions) as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the existence and
validity of which may be verified by the Transfer Agent through the use of
industry publications. Notarized signatures are not sufficient. In certain
instances, the Transfer Agent may require additional documents such as, but not
limited to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority. For shareholders
redeeming directly with the Transfer Agent, payment will be mailed within seven
days of receipt of a proper notice of redemption.
At various times the Fund may be requested to redeem shares for which it has
not yet received good payment (e.g., cash, Federal funds or a certified check
drawn on a U.S. bank). The Fund may delay or cause to be delayed the mailing of
a redemption check until such time as good payment has been collected for the
purchase of such shares. Normally this delay will not exceed 10 days.
REPURCHASE
The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request
for repurchase is received by the dealer prior to the close of business on the
New York Stock Exchange on the day received and that such request is received
by the Fund from such dealer not later than 30 minutes after the close of
business on the New York Stock Exchange (generally, 4:00 p.m., New York time),
on the same day. Dealers have the responsibility of submitting such repurchase
requests to the Fund not later than 30 minutes after the close of business on
the New York Stock Exchange in order to obtain that day's closing price.
The foregoing repurchase arrangements are for the convenience of shareholders
and do not involve a charge by the Fund (other than any applicable CDSC).
Securities firms which do not have selected dealer agreements with the
Distributor, however, may impose a transaction charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its
customers a processing fee (presently $4.85) to confirm a repurchase of shares.
Redemptions directly through the Transfer Agent are not subject to the
processing fee. The Fund reserves the right to reject any order for repurchase,
which right of rejection might affect adversely shareholders seeking redemption
through the repurchase procedure. However, a shareholder whose order for
repurchase is rejected by the Fund may redeem shares as set forth above.
Redemption payments will be made within seven days of the proper tender of
the certificates, if any, and stock power or letter requesting redemption, in
each instance with signatures guaranteed as noted above.
43
<PAGE>
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES
Shareholders who have redeemed their Class A or Class D shares have a one-
time privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, of the Fund at net asset value without a sales
charge up to the dollar amount redeemed. The reinstatement privilege may be
exercised by sending a notice of exercise along with a check for the amount to
be reinstated to the Transfer Agent within 30 days after the date the request
for redemption was accepted by the Transfer Agent or the Distributor. The
reinstatement will be made at the net asset value per share next determined
after the notice of reinstatement is received and cannot exceed the amount of
the redemption proceeds. The reinstatement privilege is a one-time privilege
and may be exercised by the Class A or Class D shareholder only the first time
such shareholder makes a redemption.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
described below which are designed to facilitate investment in shares of the
Fund. Full details as to each of such services, copies of the various plans
described below and instructions as to how to participate in the various plans
and services, or to change options with respect thereto, can be obtained from
the Fund by calling the telephone number on the cover page or from the
Distributor or Merrill Lynch. Certain of these services are available only to
U.S. investors.
Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive statements, at least
quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of
ordinary income dividends and long-term capital gain distributions. The
statements will also show any other activity in the account since the preceding
statement. Shareholders will receive separate transaction confirmations for
each purchase or sale transaction other than automatic investment purchases and
the reinvestment of ordinary income dividends and long-term capital gain
distributions. Shareholders may make additions to their Investment Account any
time by mailing a check directly to the Transfer Agent. Shareholders also may
maintain their accounts through Merrill Lynch. Upon the transfer of shares out
of a Merrill Lynch brokerage account, an Investment Account in the transferring
shareholder's name will be opened, automatically, without charge at the
Transfer Agent. Shareholders considering transferring their Class A or Class D
shares from Merrill Lynch to another brokerage firm or financial institution
should be aware that, if the firm to which the Class A or Class D shares are to
be transferred will not take delivery of shares of the Fund, a shareholder
either must redeem the Class A or Class D shares (paying any applicable CDSC)
so that the cash proceeds can be transferred to the account at the new firm or
such shareholder must continue to maintain an Investment Account at the
Transfer Agent for those Class A or Class D shares. Shareholders interested in
transferring their Class B or Class C shares from Merrill Lynch and who do not
wish to have an Investment Account maintained for such shares at the Transfer
Agent may request their new brokerage firm to maintain such shares in an
account registered in the name of the brokerage firm for the benefit of the
shareholder at the Transfer Agent. Shareholders considering transferring a tax-
deferred retirement account such as an individual retirement account from
Merrill Lynch to another brokerage firm or financial institution should be
aware that, if the firm to which the retirement account is to be transferred
will not take delivery of shares of the Fund, a shareholder must either redeem
the shares (paying any
44
<PAGE>
applicable redemption fee) so that the cash proceeds can be transferred to the
account at the new firm, or such shareholder must continue to maintain a
retirement account at Merrill Lynch for those shares.
Exchange Privilege. Shareholders of each class of shares of the Fund have an
exchange privilege with certain other MLAM-advised mutual funds. There is
currently no limitation on the number of times a shareholder may exercise the
exchange privilege. The exchange privilege may be modified or terminated in
accordance with the rules of the Securities and Exchange Commission.
Under the Merrill Lynch Select Pricing SM System, Class A shareholders may
exchange Class A shares of the Fund for Class A shares of a second MLAM-
advised mutual fund if the shareholder holds any Class A shares of the second
fund in his account in which the exchange is made at the time of the exchange
or is otherwise eligible to purchase Class A shares of the second fund. If the
Class A shareholder wants to exchange Class A shares for shares of a second
MLAM-advised mutual fund, and the shareholder does not hold Class A shares of
the second fund in his account at the time of the exchange and is not
otherwise eligible to acquire Class A shares of the second fund, the
shareholder will receive Class D shares of the second fund as a result of the
exchange. Class D shares also may be exchanged for Class A shares of a second
MLAM-advised mutual fund at any time as long as, at the time of the exchange,
the shareholder holds Class A shares of the second fund in the account in
which the exchange is made or is otherwise eligible to purchase Class A shares
of the second fund.
Exchanges of Class A and Class D shares are made on the basis of the
relative net asset values per Class A or Class D share, respectively, plus an
amount equal to the difference, if any, between the sales charge previously
paid on the Class A or Class D shares being exchanged and the sales charge
payable at the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares are exchangeable with shares of the same
class of other MLAM-advised mutual funds.
Shares of the Fund which are subject to a CDSC are exchangeable on the basis
of relative net asset value per share without the payment of any CDSC that
might otherwise be due upon redemption of the shares of the Fund. For purposes
of computing the CDSC that may be payable upon a disposition of the shares
acquired in the exchange, the holding period for the previously owned shares
of the Fund is "tacked" to the holding period of the newly acquired shares of
the other Fund.
Class A, Class B, Class C and Class D shares also are exchangeable for
shares of certain MLAM-advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares
are held in a money market fund, however, will not count toward satisfaction
of the holding period requirement for reduction of any CDSC imposed on such
shares, if any, and, with respect to Class B shares, toward satisfaction of
the Conversion Period.
Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the new Class B shares. In addition, Class
B shares of the Fund acquired through use of the exchange privilege will be
subject to the
45
<PAGE>
Fund's CDSC schedule if such schedule is higher than the CDSC schedule relating
to the Class B shares of the MLAM-advised mutual fund from which the exchange
has been made.
Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes. For further information, see "Shareholder Services--Exchange
Privilege" in the Statement of Additional Information.
The Fund's exchange privilege is modified with respect to purchases of Class
A and Class D shares under the Merrill Lynch Mutual Fund Adviser ("MFA")
program. First, the initial allocation of assets is made under the MFA program.
Then, any subsequent exchange under the MFA program of Class A or Class D
shares of a MLAM-advised mutual fund for Class A or Class D shares of the Fund
will be made solely on the basis of the relative net asset values of the shares
being exchanged. Therefore, there will not be a charge for any difference
between the sales charge previously paid on the shares of the other MLAM-
advised mutual fund and the sales charge payable on the shares of the Fund
being acquired in the exchange under the MFA program.
Automatic Reinvestment of Dividends and Distributions. All dividends and
capital gains distributions are reinvested automatically in full and fractional
shares of the Fund, without a sales charge, at the net asset value per share
next determined on the ex-dividend date of such dividend or distribution. A
shareholder may at any time, by written notification to Merrill Lynch if the
shareholder's account is maintained with Merrill Lynch or by written
notification or telephone call (1-800-MER-FUND) to the Transfer Agent if the
shareholder's account is maintained with the Transfer Agent, elect to have
subsequent dividend or capital gains distributions, or both, paid in cash,
rather than reinvested, in which event payment will be mailed on or about the
payment date. Cash payments can also be directly deposited to the shareholder's
bank account. No CDSC will be imposed on redemption of shares issued as a
result of the automatic reinvestment of dividends or capital gains
distributions. The Automatic Investment Program is not available to
shareholders whose shares are held in a brokerage account with Merrill Lynch
other than a CMA (R) account.
Systematic Withdrawal Plans. A Class A or Class D shareholder may elect to
receive systematic withdrawal payments from his Investment Account in the form
of payments by check or through automatic payment by direct deposit to his bank
account on either a monthly or quarterly basis. A Class A or Class D
shareholder whose shares are held within a CMA (R), CBA (R) or Retirement
Account may elect to have shares redeemed on a monthly, bimonthly, quarterly,
semiannual or annual basis through the CMA (R)/CBA (R) Systematic Redemption
Program, subject to certain conditions.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C
and Class D shares may be made to an investor's Investment Account by
prearranged charges of $50 or more to his regular bank account. Investors who
maintain CMA (R) or CBA (R) accounts may arrange to have periodic investments
made in the Fund in their CMA (R) or CBA (R) accounts or in certain related
accounts in amounts of $100 or more through the CMA (R)/CBA (R) Automated
Investment Program.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return for
various specified periods in advertisements or information furnished to present
or prospective shareholders. Average annual total return
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<PAGE>
is computed separately for Class A, Class B, Class C and Class D shares in
accordance with a formula specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any capital gains or losses on portfolio investments over
such periods) that would equate the initial amount invested to the redeemable
value of such investment at the end of each period. Average annual total return
will be computed assuming all dividends and distributions are reinvested and
taking into account all applicable recurring and nonrecurring expenses,
including any CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period such as in the case of Class B
and Class C shares and the maximum sales charge in the case of Class A and
Class D shares. Dividends paid by the Fund with respect to all shares, to the
extent any dividends are paid, will be calculated in the same manner at the
same time on the same day and will be in the same amount, except that account
maintenance fees and distribution charges and any incremental transfer agency
costs relating to each class of shares will be borne exclusively by that class.
The Fund will include performance data for all classes of shares of the Fund in
any advertisement or information including performance data of the Fund.
The Fund also may quote total return and aggregate total return performance
data for various specified time periods. Such data will be calculated
substantially as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return, and (2) the maximum applicable sales
charges will not be included with respect to annual or annualized rates of
return calculations. Aside from the impact on the performance data calculations
of including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average annual
total return data since the average annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over longer
periods of time. In advertisements distributed to investors whose purchases are
subject to waiver of the CDSC in the case of Class B and Class C shares (such
as investors in certain retirement plans) or to reduced sales charges in the
case of Class A and Class D shares, performance data may take into account the
reduced, and not the maximum, sales charges or may not take into account the
CDSC and therefore may reflect greater total return since, due to the reduced
sales charges or waiver of the CDSC, a lower amount of expenses may be
deducted. See "Purchase of Shares". The Fund's total return may be expressed
either as a percentage or as a dollar amount in order to illustrate the effect
of such total return on a hypothetical $1,000 investment in the Fund at the
beginning of each specified period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate, and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, or
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week,
CDA Investment Technology, Inc., Forbes Magazine, Fortune Magazine or other
industry publications. In addition, from time to time the Fund may include the
Fund's risk-adjusted performance ratings assigned by
47
<PAGE>
Morningstar Publications, Inc. in advertising or supplemental sales literature.
As with other performance data, performance comparisons should not be
considered indicative of the Fund's relative performance for any future period.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute all of its net investment income, if
any. Dividends from such net investment income are paid at least annually. All
net realized long-or short-term capital gains, if any, are distributed to the
Fund's shareholders at least annually. See "Determination of Net Asset Value"
below. Dividends and distributions may be reinvested automatically in shares of
the Fund, at net asset value without a sales charge. Shareholders may, at any
time, in writing or by telephone (1-800-MER-FUND) to the Transfer Agent, elect
to receive any such dividends or distributions, or both, in cash. See
"Shareholder Services-- Automatic Reinvestment of Dividends and Distributions"
for information as to how to elect either dividend reinvestment or cash
payments. Dividends and distributions are taxable to shareholders as described
below whether they are reinvested in shares of the Fund or received in cash.
From time to time, the Fund may declare a special distribution at or about the
end of the calendar year in order to comply with a Federal income tax
requirement that certain percentages of its ordinary income and capital gains
be distributed during the calendar year.
The per share dividends and distributions on each class of shares will be
reduced as a result of any account maintenance, distribution and transfer
agency fees applicable to that class. See "Determination of Net Asset Value"
below.
Certain gains or losses attributable to foreign currency related gains or
losses from certain of the Fund's investments may increase or decrease the
amount of the Fund's income available for distribution to shareholders. If such
losses exceed other income during a taxable year, (a) the Fund would not be
able to make any ordinary dividend distributions, and (b) distributions made
before the losses were realized would be recharacterized as returns of capital
to shareholders, rather than as ordinary dividends, reducing each shareholder's
tax basis in his Fund shares for Federal income tax purposes. For a detailed
discussion of the Federal tax considerations relevant to foreign currency
transactions, see "Taxes" below. If in any fiscal year the Fund has net income
from certain foreign currency transactions, such income will be distributed
annually.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes of the Fund is determined
once daily as of 15 minutes after the close of business on the New York Stock
Exchange (generally, 4:00 p.m., New York time), on each day during which the
New York Stock Exchange is open for trading. Any assets or liabilities
initially expressed in terms of non-U.S. dollar currencies are translated into
U.S. dollars at the prevailing market rates as quoted by one or more banks or
dealers on the day of valuation. The net asset value is computed by dividing
the market value of the securities held by the Fund plus any cash or other
assets (including interest and dividends accrued but not yet received) minus
all liabilities (including accrued expenses) by the total number of shares
outstanding at such time. Expenses, including the management fees payable to
the Manager and
48
<PAGE>
any account maintenance and/or distribution fees payable to the Distributor,
are accrued daily. The per share net asset value of Class A shares will
generally be higher than the per share net asset value of shares of the other
classes, reflecting the daily expense accruals of the account maintenance,
distribution and higher transfer agency fees applicable with respect to Class B
and Class C shares and the daily expense accruals of the account maintenance
fees applicable with respect to Class D shares; moreover, the per share net
asset value of the Class D shares generally will be higher than the per share
net asset value of Class B and Class C shares, reflecting the daily expense
accruals of the distribution and the higher transfer agency fees applicable
with respect to Class B and Class C shares. It is expected, however, that the
per share net asset value of the classes will tend to converge (although not
necessarily meet) immediately after the payment of dividends or distributions
which will differ by approximately the amount of the expense accrual
differentials between the classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to time of
valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund
are valued at their last sale price in the case of exchange-traded options or,
in the case of options traded in the over-the-counter market, the last bid
price. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not
its shareholders) will not be subject to Federal income tax on the part of its
net ordinary income and net realized capital gains which it distributes to
Class A, Class B, Class C and Class D shareholders (together, the
"shareholders"). The Fund intends to distribute substantially all of such
income.
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures or options)
("capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Distributions in excess of the Fund's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written
49
<PAGE>
notice designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
which was declared in the previous October, November or December to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and
received by its shareholders on December 31 of the year in which such dividend
was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
U.S. withholding tax.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate shares
as taxes paid by them, and deduct such proportionate shares in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation may
be subject to U.S. withholding tax on the income resulting from the Fund's
election described in this paragraph but may not be able to claim a credit or
deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. The Fund will report annually to its shareholders the
amount per share of such withholding taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no taxpayer identification number is
on file with the Fund or who, to the Fund's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalty of perjury that such number is correct and that such investor is not
otherwise subject to backup withholding.
Due to investment laws in certain Latin American countries, it is anticipated
that the Fund's investments in equity securities in such countries will consist
primarily of shares of investment companies (or similar investment entities)
organized under foreign law or of ownership interests in special accounts,
trusts or partnerships. The Fund currently may invest up to 10% of its total
assets in securities of other investment companies. If the Fund purchases
shares of an investment company (or similar investment entity) organized under
foreign law, the Fund will be treated as owning shares in a passive foreign
investment company ("PFIC") for U.S. Federal income tax purposes. The Fund may
be subject to U.S. Federal income tax, and an additional tax in the nature of
interest (the "interest charge"), on a portion of the distributions from such
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<PAGE>
a company and on gain from the disposition of the shares of such a company
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. The Fund
may be eligible to make an election with respect to certain PFICs in which it
owns shares that will allow it to avoid the taxes on excess distributions.
However, such election may cause the Fund to recognize income in a particular
year in excess of the distributions received from such PFICs. Alternatively,
under proposed regulations the Fund would be able to elect to "mark to market"
at the end of each taxable year all shares that it holds in PFICs. If it made
this election, the Fund would recognize as ordinary income any increase in the
value of such shares. Unrealized losses, however, would not be recognized. By
making the mark-to-market election, the Fund could avoid imposition of the
interest charge with respect to its distributions from PFICs, but in any
particular year might be required to recognize income in excess of the
distributions it received from PFICs and its proceeds from dispositions of PFIC
stock.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are
not "regulated futures contracts" and from unlisted options will generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would not be able to make any
ordinary income dividend distributions, and any distributions made before the
losses were realized but in the same taxable year would be recharacterized as a
return of capital to shareholders, thereby reducing the basis of each
shareholder's Fund shares and resulting in a capital gain for any shareholder
who received a distribution greater than the shareholder's tax basis in Fund
shares (assuming the shares were held as a capital asset).
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares into Class D shares. A shareholder's basis in the Class
D shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period of the acquired Class D shares will
include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of acquiring
the shares, then the loss the shareholder can recognize on the exchange will be
reduced (or the gain increased) to the extent any sales charge paid to the Fund
on the exchanged shares reduces any sales charge the shareholder would have
owed upon purchase of the new shares in the absence of the exchange privilege.
Instead, such sales charge will be treated as an amount paid for the new
shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
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<PAGE>
Certain states exempt from state income taxation dividends paid by RICs which
are derived from interest on U.S. Government obligations. State law varies as
to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Fund.
ORGANIZATION OF THE FUND
The Fund was incorporated under Maryland law on July 1, 1991. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and
Class D Common Stock, each of which consists of 100,000,000 shares. Class A,
Class B, Class C and Class D Common Stock represent an interest in the same
assets of the Fund and are identical in all respects except that the Class B,
Class C and Class D shares bear certain expenses related to the account
maintenance associated with such shares, and Class B and Class C shares bear
certain expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to such account
maintenance and/or distribution expenditures. See "Purchase of Shares". The
Fund has received an order from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of common stock. The
Directors of the Fund may classify and reclassify the shares of the Fund into
additional classes of common stock at a future date. The creation of additional
classes would require an additional order from the Securities and Exchange
Commission. There is no assurance that such an additional order would be
issued.
Shareholders 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 matters submitted to a shareholder vote. The Fund does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
does not require shareholders to act upon any of the following matters: (i)
election of Directors; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of selection of
independent accountants. Also, the by-laws of the Fund require that a special
meeting of shareholders be held upon the written request of at least 10% of the
outstanding shares of the Fund entitled to vote at such meeting. Voting rights
for Directors are not cumulative. Shares issued are fully paid and non-
assessable and have no preemptive rights. Shares have the conversion rights
described in this Prospectus. Each share of Common Stock is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund upon liquidation or dissolution after satisfaction
of outstanding liabilities, except that, as noted above, expenses related to
the distribution and/or account maintenance of the shares of a class will be
borne solely by such class.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
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<PAGE>
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this, please call your Merrill Lynch financial
consultant or Financial Data Services, Inc. at 1-800-637-3863.
53
<PAGE>
[This page is intentionally left blank.]
54
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC. -- AUTHORIZATION FORM (PART 1)
-------------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION
I, being of legal age, wish to purchase: (choose one)
[_] Class A shares [_] Class B shares [_] Class C shares
[_] Class D shares
of Merrill Lynch Latin America Fund, Inc. and establish an Investment Account
as described in the Prospectus. In the event that I am not eligible to
purchase Class A shares, I understand that Class D shares will be purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data Services,
Inc. as an initial investment (minimum $1,000). I understand that this
purchase will be executed at the applicable offering price next to be
determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the right of accumulation as outlined in the Statement of
Additional Information: Please list all funds. (Use a separate sheet of
paper if necessary.)
1. .................................. 4. ..................................
2. .................................. 5. ..................................
3. .................................. 6. ..................................
Name...........................................................................
First Name Initial Last Name
Name of Co-Owner (if any)......................................................
First Name Initial Last Name
Address........................................................................
................................................. Date........................
(Zip Code)
Occupation........................... Name and Address of Employer ........
.....................................
.....................................
..................................... .....................................
Signature of Owner Signature of Co-Owner (if any)
(In the case of co-owners, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.)
-------------------------------------------------------------------------------
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
Ordinary Income Dividends Long-Term Capital
Gains
[_] Reinvest
SELECT ONE:
[_] Cash
SELECT ONE:
[_] Reinvest
[_] Cash
If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU: [_] Check
or [_] Direct Deposit to bank account
IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:
I hereby authorize payment of dividend and capital gain distributions by
direct deposit to my bank account and, if necessary, debit entries and
adjustments for any credit entries made to my account in accordance with the
terms I have selected on the Merrill Lynch Latin America Fund, Inc.
Authorization Form.
Specify type of account (check one): [_] checking [_] savings
Name on your account ..........................................................
Bank Name .....................................................................
Bank Number ...................... Account Number ............................
Bank Address ..................................................................
I agree that this authorization will remain in effect until I provide written
notification to Financial Data Services, Inc. amending or terminating this
service.
Signature of Depositor ........................................................
Signature of Depositor ............................... Date...................
(if joint account, both must sign)
NOTE: If direct deposit to bank account is selected, your blank, unsigned
check marked "VOID" or a deposit slip from your savings account should
accompany this application.
55
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC. -- AUTHORIZATION FORM (PART 1) --
(CONTINUED)
-------------------------------------------------------------------------------
3. SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number or Taxpayer Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security Number or Taxpayer Identification Number and (2)
that I am not subject to backup withholding (as discussed in the Prospectus
under "Additional Information--Taxes") either because I have not been notified
that I am subject thereto as a result of a failure to report all interest or
dividends, or the Internal Revenue Service ("IRS") has notified me that I am
no longer subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDER-REPORTING AND
IF YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS
BEEN TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS
CERTIFICATION TO OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
..................................... .....................................
Signature of Owner Signature of Co-Owner (if any)
-------------------------------------------------------------------------------
4. LETTER OF INTENTION--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
..................., 19......
Dear Sir/Madam: Date of Initial Purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Latin America Fund, Inc. or any other investment company with an initial
sales charge or deferred sales charge for which Merrill Lynch Funds
Distributor, Inc. acts as distributor over the next 13 month period which will
equal or exceed:
[_] $25,000 [_] $50,000 [_] $100,000 [_] $250,000 [_] $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Merrill Lynch Latin America
Fund, Inc. Prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc. my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Latin America Fund, Inc. held as security.
.....................................
By: ............................
Signature of Owner Signature of Co-Owner
(If registered in joint names, both must sign)
In making purchases under this letter, the following are the related
accounts on which reduced offering prices are to apply:
(1) Name............................. (2) Name.............................
Account Number.......................
Account Number.......................
-------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp We hereby authorize Merrill Lynch
Funds Distributor, Inc. to act as
- - our agent in connection with
transactions under this
authorization form and agree to
notify the Distributor of any
purchases made under a Letter of
Intention or Systematic Withdrawal
Plan. We guarantee the shareholder's
signature.
- -
This form when completed should be
mailed to:
Merrill Lynch Latin America Fund, Inc.
c/o Financial Data Services, Inc. .....................................
Dealer Name and Address
Transfer Agency Mutual Fund Operations
P.O. Box 45289
By ..................................
Authorized Signature of Dealer
-------------
F/C Last Name
Jacksonville, FL 32232-5289
[ ][ ][ ] [ ][ ][ ][]
Branch Code F/C No.
[ ][ ][ ] [ ][ ][ ][ ][ ]
Dealer's Customer A/C No.
56
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC. -- AUTHORIZATION FORM (PART 2)
-------------------------------------------------------------------------------
NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE SYSTEMATIC WITHDRAWAL OR
AUTOMATIC INVESTMENT PLANS ONLY.
-------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
(Please Print)
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security No. or
Name of Owner................. Taxpayer Identification
First Name Initial Last Name Number
Name of Co-Owner (if any)..........
First Name
Initial
Last Name
Address............................ Account Number ....................
(if existing account)
...................................
(Zip Code)
-------------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
MINIMUM REQUIREMENTS: $10,000 for monthly disbursements, $5,000 for quarterly,
of [_] Class A or [_] Class D shares in Merrill Lynch Latin America Fund, Inc.
at cost or current offering price. Withdrawals to be made either (check one)
[_] Monthly on the 24th day of each month, or [_] Quarterly on the 24th day of
March, June, September and December. If the 24th falls on a weekend or
holiday, the next succeeding business day will be utilized. Begin systematic
withdrawal on or as soon as possible thereafter.
(month)
SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE): [_] $
or [_] % of the current value of [_] Class A or [_] Class D shares in the
account.
SPECIFY WITHDRAWAL METHOD: [_] check or [_] direct deposit to bank account
(check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(a)I hereby authorize payment by check
[_] as indicated in Item 1.
[_] to the order of..........................................................
Mail to (check one)
[_] the address indicated in Item 1.
[_] Name (Please Print)......................................................
Address .......................................................................
..........................................................................
Signature of Owner................................ Date..................
Signature of Co-Owner (if any)............................................
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO BANK ACCOUNT AND, IF
NECESSARY, DEBIT ENTRIES AND ADJUSTMENTS FOR ANY CREDIT ENTRIES MADE TO MY
ACCOUNT. I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I PROVIDE
WRITTEN NOTIFICATION TO FINANCIAL DATA SERVICES, INC. AMENDING OR TERMINATING
THIS SERVICE.
Specify type of account (check one): [_] checking [_] savings
Name on your Account...........................................................
Bank Name......................................................................
Bank Number........................ Account Number............................
Bank Address...................................................................
........................................................................
Signature of Depositor................................. Date..................
Signature of Depositor.........................................................
(If joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID"
OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS APPLICATION.
57
<PAGE>
MERRILL LYNCH LATIN AMERICA FUND, INC.--AUTHORIZATION FORM (PART 2)--
(CONTINUED)
-------------------------------------------------------------------------------
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw an automated
clearing house ("ACH") debit on my checking account as described below each
month to purchase: (choose one)
[_] Class A shares [_] Class B shares [_] Class C
shares [_] Class D shares
of Merrill Lynch Latin America Fund, Inc. subject to the terms set forth
below. In the event that I am not eligible to purchase Class A shares, I
understand that Class D shares will be purchased.
AUTHORIZATION TO HONOR ACH DEBITS
FINANCIAL DATA SERVICES, INC. DRAWN BY FINANCIAL DATA SERVICES,
INC.
You are hereby authorized to draw an
ACH debit each month on my bank
account for investment in Merrill
Lynch Latin America Fund, Inc., as
indicated below:
To...............................Bank
(Investor's Bank)
Bank Address.........................
City...... State...... Zip......
Amount of each ACH debit $...
As a convenience to me, I hereby
Account No. ...................... request and authorize you to pay and
charge to my account ACH debits
drawn on my account by and payable
to Financial Data Services, Inc., I
agree that your rights in respect to
each such debit shall be the same as
if it were a check drawn on you and
signed personally by me. This
authority is to remain in effect
until revoked by me in writing.
Until you receive such notice, you
shall be fully protected in honoring
any such debit. I further agree that
if any such debit be dishonored,
whether with or without cause and
whether intentionally or
inadvertently, you shall be under no
liability.
Please date and invest ACH debits on
the 20th of each month
beginning or as soon as
thereafter as possible.
(month)
I agree that you are drawing these
ACH debits voluntarily at my request
and that you shall not be liable for
any loss arising from any delay in
preparing or failure to prepare any
such debit. If I change banks or
desire to terminate or suspend this
program, I agree to notify you
promptly in writing. I hereby
authorize you to take any action to
correct erroneous ACH debits of my
bank account or purchases of fund
shares including liquidating shares
of the Fund and crediting my bank
account. I further agree that if a
debit is not honored upon
presentation, Financial Data
Services, Inc. is authorized to
discontinue immediately the Automatic
Investment Plan and to liquidate
sufficient shares held in my account
to offset the purchase made with the
dishonored debit.
............ .....................
Date Signature of
Depositor
............ .....................
Bank Signature of Depositor
Account (If joint account,
Number both must sign)
............ .....................
Date Signature of
Depositor
......................
Signature of Depositor
(If joint account,
both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED "VOID" SHOULD ACCOMPANY THIS APPLICATION.
58
<PAGE>
MANAGER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
The Chase Manhattan Bank, N.A.
Global Securities Services
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND, THE MANAGER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Prospectus Summary......................................................... 3
Merrill Lynch Select Pricing SM System..................................... 5
Consolidated Financial Highlights.......................................... 10
Risk Factors and Special Considerations.................................... 11
Investment Objective and Policies.......................................... 16
Certain Risks of Debt Securities......................................... 18
Portfolio Strategies Involving Options and Futures....................... 19
Other Investment Policies and Practices.................................. 25
Management of the Fund..................................................... 30
Board of Directors....................................................... 30
Management and Advisory Arrangements..................................... 30
Code of Ethics........................................................... 31
Transfer Agency Services................................................. 32
Purchase of Shares......................................................... 32
Initial Sales Charge Alternatives --
Class A and Class D Shares............................................. 35
Deferred Sales Charge Alternatives -- Class B and Class C Shares......... 37
Distribution Plans....................................................... 40
Redemption of Shares....................................................... 42
Redemption............................................................... 42
Repurchase............................................................... 43
Reinstatement Privilege -- Class A and Class D Shares.................... 44
Shareholder Services....................................................... 44
Performance Data........................................................... 46
Additional Information..................................................... 48
Dividends and Distributions.............................................. 48
Determination of Net Asset Value......................................... 48
Taxes.................................................................... 49
Organization of the Fund................................................. 52
Shareholder Inquiries.................................................... 52
Shareholder Reports...................................................... 53
Authorization Form......................................................... 55
</TABLE>
Code #13989-0395
LOGO MERRILL LYNCH
Merrill Lynch
Latin America Fund, Inc.
[ART]
PROSPECTUS
March 27, 1995
Distributor:
Merrill Lynch
Funds Distributors, Inc.
This prospectus should be retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH LATIN AMERICA FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Latin America Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company seeking long-term capital appreciation
by investing primarily in Latin American equity and debt securities. This
objective of the Fund reflects the belief that investment opportunities may
result in Latin America from an evolving long-term international trend
encouraging greater market orientation and diminishing governmental
intervention in economic affairs. The Fund may employ a variety of instruments
and techniques to hedge against market and currency risk, although suitable
hedging investments may not be available on a timely basis and on acceptable
terms.
Pursuant to the Merrill Lynch Select Pricing SM System, the Fund offers four
classes of shares each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select Pricing SM System permits an
investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances.
----------------
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Fund, dated March 27,
1995 (the "Prospectus"), which has been filed with the Securities and Exchange
Commission and can be obtained, without charge, by calling or by writing the
Fund at the above telephone number or address. This Statement of Additional
Information has been incorporated by reference into the Prospectus.
----------------
MERRILL LYNCH ASSET MANAGEMENT -- MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
----------------
The date of this Statement of Additional Information is March 27, 1995.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation by investing primarily in Latin American equity and debt
securities. Reference is made to "Investment Objective and Policies" in the
Prospectus for a discussion of the investment objective and policies of the
Fund.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, Merrill Lynch Asset Management, L.P., doing business as
Merrill Lynch Asset Management (the "Manager"), will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a
particular company or within a particular industry or due to general market,
economic or financial conditions. Accordingly, while the Fund anticipates that
its annual portfolio turnover rate should not exceed 100% under normal
conditions, it is impossible to predict portfolio turnover rates. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales
or purchases of portfolio securities (exclusive of purchases or sales of U.S.
Government securities and of all other securities whose maturities at the time
of acquisition were one year or less) by the monthly average value of
securities in the portfolio during the year. The Fund's portfolio turnover
rates for the fiscal years ended November 30, 1993, and 1994 were 24.74% and
30.15%, respectively. The Fund is subject to the Federal income tax requirement
that less than 30% of the Fund's gross income must be derived from gains from
the sale or other disposition of securities held for less than three months.
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such
as the Fund. If such restrictions should be reinstituted, it might become
necessary for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate. Any changes
in the investment objective or in the fundamental policies set forth under
"Investment Restrictions" below would require the approval of the holders of a
majority of the Fund's outstanding voting securities.
The Fund's ability and decisions to purchase or sell portfolio securities may
be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a
daily basis on each day the Fund determines its net assets in U.S. dollars, the
Fund intends to manage its portfolio so as to give reasonable assurance that it
will be able to obtain U.S. dollars to the extent necessary to meet anticipated
redemptions. See "Redemption of Shares". Under present conditions, the Manager
does not believe that these considerations will have any significant effect on
its portfolio strategy, although there can be no assurance in this regard.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
Reference is made to the discussion under the caption "Investment Objective
and Policies--Portfolio Strategies Involving Options and Futures" in the
Prospectus for information with respect to various portfolio strategies
involving options and futures. The Fund may seek to hedge its portfolio against
movements in the equity, debt and currency markets. The Fund has authority to
write (i.e., sell) covered put and call options on its portfolio securities,
purchase put and call options on securities and engage in transactions in stock
index options, stock index futures and stock futures and financial futures, and
related options on such futures. The Fund may also deal in forward foreign
exchange transactions, foreign currency options and futures and
2
<PAGE>
related options on such futures. Each of such portfolio strategies is described
in the Prospectus. Although certain risks are involved in options and futures
transactions (as discussed in the Prospectus and below), the Manager believes
that, because the Fund will engage in options and futures transactions only for
hedging purposes, the options and futures portfolio strategies of the Fund will
not subject the Fund to the risks frequently associated with the speculative
use of options and futures transactions. While the Fund's use of hedging
strategies is intended to reduce the volatility of the net asset value of its
shares, the net asset value of the Fund's shares will fluctuate. There can be
no assurance that the Fund's hedging transactions will be effective. Suitable
hedging instruments may not be available with respect to Latin American
securities on a timely basis and on acceptable terms. The following is further
information relating to portfolio strategies involving options and futures that
the Fund may utilize.
Writing Covered Options. The Fund is authorized to write (i.e., sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to certain of such options. A covered call
option is an option where the Fund, in return for a premium, gives another
party a right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects
a closing purchase transaction. A closing purchase transaction cancels out the
Fund's position as the writer of an option by means of an offsetting purchase
of an identical option prior to the expiration of the option it has written.
Covered call options serve as a particular hedge against the price of the
underlying security declining.
The writer of a covered call option has no control over when he may be
required to sell his securities since he may be assigned an exercise notice at
any time prior to the termination of his obligation as a writer. If an option
expires unexercised, the writer would realize a gain in the amount of the
premium. Such a gain, of course, may be offset by a decline in the market value
of the underlying security during the option period. If a call option is
exercised, the writer would realize a gain or loss from the sale of the
underlying security.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options which means that so
long as the Fund is obligated as the writer of the option, it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S.
Government securities or other high grade liquid debt or equity securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities. By writing a put, the Fund will be obligated to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise for as long as the option is outstanding. The
Fund may engage in closing transactions in order to terminate put options that
it has written. The Fund will not write put options if the aggregate value of
the obligations underlying puts shall exceed 50% of the Fund's net assets.
Options referred to herein and in the Fund's Prospectus may be options traded
on foreign securities exchanges. An options position may be closed out only on
an exchange which provides a secondary market for an option of the same series.
If a secondary market does not exist, it might not be possible to effect
closing
3
<PAGE>
transactions in particular options, with the result, in the case of a covered
call option, that the Fund will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange
or the clearing corporation may not, at all times, be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
The Fund may also enter into over-the-counter options transactions ("OTC
options"), which are two party contracts with prices and terms negotiated
between the buyer and seller. The staff of the Securities and Exchange
Commission has taken the position that OTC options and the assets used as cover
for written OTC options are illiquid securities.
Purchasing Options. The Fund may purchase put options to hedge against a
decline in the market value of its equity holdings. By buying a put, the Fund
has a right to sell the underlying security at the exercise price, thus
limiting the Fund's risk of loss through a decline in the market value of the
security until the put option expires. The amount of any appreciation in the
value of the underlying security will be offset partially by the amount of the
premium paid for the put option and any related transaction costs. Prior to its
expiration, a put option may be sold in a closing sale transaction; profit or
loss from the sale will depend on whether the amount received is more or less
than the premium paid for the put option plus the related transaction cost. A
closing sale transaction cancels out the Fund's position as the purchaser of an
option by means of an offsetting sale of an identical option prior to the
expiration of the option it has purchased. In certain circumstances, the Fund
may purchase call options on securities held in its portfolio on which it has
written call options or on securities which it intends to purchase. The Fund
may purchase either exchange-traded options or OTC options. The Fund will not
purchase options on securities (including stock index options discussed below)
if as a result of such purchase, the aggregate cost of all outstanding options
on securities held by the Fund would exceed 5% of the market value of the
Fund's total assets.
Stock Index Options and Futures and Financial Futures. As described in the
Prospectus, the Fund is authorized to engage in transactions in stock index
options and futures and financial futures, and related options on such futures.
Set forth below is further information concerning futures transactions.
A futures contract is an agreement between two parties to buy and sell a
security, or, in the case of an index-based futures contract, to make and
accept a cash settlement for a set price on a future date. A majority of
transactions in futures contracts, however, do not result in the actual
delivery of the underlying instrument or cash settlement, but are settled
through liquidation, i.e., by entering into an offsetting transaction.
The purchase or sale of a futures contract differs from the purchase or sale
of a security in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to the broker and the
4
<PAGE>
relevant contract market, which varies, but is typically between 2% and 15% of
the value of the futures contract, must be deposited with the broker. This
amount is known as "initial margin" and represents a "good faith" deposit
assuring the performance of both the purchaser and seller under the futures
contract. Subsequent payments to and from the broker, called "variation
margin", are required to be made on a daily basis as the price of the futures
contract fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "mark to the market". At any
time prior to the settlement date of the futures contract, the position may be
closed out by taking an opposite position which will operate to terminate the
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid to or released by the broker,
and the purchaser realizes a loss or gain. In addition, a nominal commission is
paid on each completed sale transaction.
An order has been obtained from the Securities and Exchange Commission
exempting the Fund from the provisions of Section 17(f) and Section 18(f) of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
in connection with its strategy of investing in futures contracts. Section
17(f) relates to the custody of securities and other assets of an investment
company and may be deemed to prohibit certain arrangements between the Fund and
commodities brokers with respect to initial and variation margin. Section 18(f)
of the Investment Company Act prohibits an open-end investment company such as
the Fund from issuing a "senior security" other than a borrowing from a bank.
The staff of the Securities and Exchange Commission has in the past indicated
that a futures contract may be a "senior security" under the Investment Company
Act.
Foreign Currency Hedging. Generally, the foreign exchange transactions of the
Fund will be conducted on a spot, i.e., cash basis at the spot rate for
purchasing or selling currency prevailing in the foreign exchange market. This
rate under normal market conditions differs from the prevailing exchange rate
in an amount generally less than one tenth of one percent due to the costs of
converting from one currency to another. The Fund has authority, however, to
deal in forward foreign exchange among currencies of the different countries in
which it will invest as a hedge against possible variations in the foreign
exchange rate among these currencies. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's dealings in forward
foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or
sale of forward foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase and sale of its
portfolio securities, the sale and redemption of shares of the Fund or the
payment of dividends and distributions by the Fund. Position hedging is the
sale of forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. The Fund will not speculate in
forward foreign exchange. The Fund may not position hedge with respect to the
currency of a particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that particular foreign currency. If the Fund enters
into a position hedging transaction, its custodian bank will place cash or
liquid securities in a separate account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of such forward
contract. If the value of the securities placed in the separate account
declines, additional cash or securities will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to such contracts. The Fund will enter into such transactions only to
the extent, if any, deemed appropriate by the Manager. The Fund will not enter
into a forward contract with a term of more than one year. Investors should be
aware that U.S. dollar
5
<PAGE>
denominated securities may not be available in some or all Latin American
countries, that the forward currency market for the purchase of U.S. dollars in
most, if not all, Latin American countries is not highly developed and that in
certain Latin American countries, no forward market for foreign currencies
currently exists or such market may be closed to investment by the Fund.
The Fund is also authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible variations
in foreign exchange rates. Such transactions may be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased by the
Fund. As an illustration, the Fund may use such techniques to hedge the stated
value in U.S. dollars of an investment in a Mexican peso denominated security.
In such circumstances, for example, the Fund may purchase a foreign currency
put option enabling it to sell a specified amount of Mexican pesos for dollars
at a specified price by a future date. To the extent the hedge is successful, a
loss in the value of the Mexican pesos relative to the dollar will tend to be
offset by an increase in the value of the put option. To offset, in whole or in
part, the cost of acquiring such a put option, the Fund may also sell a call
option which, if exercised, requires it to sell a specified amount of Mexican
pesos for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such call option in this illustration, the Fund gives
up the opportunity to profit without limit from increases in the relative value
of the Mexican peso to the dollar. The Manager believes that "straddles" of the
type which may be utilized by the Fund constitute hedging transactions and are
consistent with the policies described above.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. The cost to the
Fund of engaging in foreign currency transactions varies with such factors as
the currencies involved, the length of the contract period and the market
conditions then prevailing. Since transactions in foreign currency exchange
usually are conducted on a principal basis, no fees or commissions are
involved.
Risk Factors in Options and Futures Transactions. Utilization of futures
transactions involves the risk of imperfect correlation in movements in the
prices of options and futures and movements in the prices of the securities and
currencies which are the subject of the hedge. If the prices of the options and
futures move more or less than the prices of the hedged securities or
currencies, the Fund will experience a gain or loss which will not be
completely offset by movements in the prices of the securities and currencies
which are the subject of the hedge. The successful use of options and futures
also depends on the Manager's ability to correctly predict price movements in
the market involved in a particular options or futures transaction.
Prior to exercise or expiration, an exchange-traded option or futures
position can only be terminated by entering into a closing purchase or sale
transaction. This requires a secondary market on an exchange for call or put
options of the same series. The Fund will enter into an option or futures
transaction on an exchange only if there appears to be a liquid secondary
market for such options or futures. However, there can be no assurance that a
liquid secondary market will exist for any particular call or put option or
futures contract at any specific time. Thus, it may not be possible to close an
option or futures position. The Fund will acquire only OTC options for which
management believes the Fund can receive on each business day at least two
6
<PAGE>
independent bids or offers (one of which will be from an entity other than a
party to the option), unless there is only one dealer, in which case such
dealer's price is used, or which can be sold at a formula price provided for in
the OTC option agreement. In the case of a futures position or an option on a
futures position written by the Fund in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the security or currency underlying the futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on the Fund's ability to hedge effectively its
portfolio. There is also the risk of loss by the Fund of margin deposits in the
event of bankruptcy of a broker with whom the Fund has an open position in a
futures contract or related option. The risk of loss from investing in futures
transactions is theoretically unlimited.
The exchanges on which the Fund intends to conduct options transactions
generally have established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not
covered) which may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or
through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts which any person may trade on a particular trading day. An
exchange may order the liquidation of positions found to be in violation of
these limits, and it may impose other sanctions or restrictions. The Manager
does not believe that these trading and position limits will have any adverse
impact on the portfolio strategies for hedging the Fund's portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES
Non-Diversified Status. The Fund is classified as non-diversified within the
meaning of the Investment Company Act, which means that the Fund is not limited
by such Act in the proportion of its assets that it may invest in securities of
a single issuer. The Fund's investments will be limited, however, in order to
qualify for the special tax treatment afforded regulated investment companies
under the Internal Revenue Code of 1986, as amended (the "Code"). See
"Dividends, Distributions and Taxes--Taxes". To qualify, the Fund will comply
with certain requirements, including limiting its investments so that at the
close of each quarter of the taxable year (i) not more than 25% of the market
value of the Fund's total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its total assets,
not more than 5% of the market value of its total assets will be invested in
the securities of a single issuer, and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A fund which elects to be
classified as "diversified" under the Investment Company Act must satisfy the
foregoing 5% and 10% requirements with respect to 75% of its total assets. To
the extent that the Fund assumes large positions in the securities of a small
number of issuers, the Fund's net asset value may fluctuate to a greater extent
than that of a diversified company as a result of changes in the financial
condition or in the market's assessment of the issuers, and the Fund may be
more susceptible to any single economic, political or regulatory occurrence
than a diversified company.
When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase securities on a when-issued basis, and it may purchase or sell
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future to secure
7
<PAGE>
what is considered an advantageous yield and price to the Fund at the time of
entering into the transaction. Although the Fund has not established any limit
on the percentage of its assets that may be committed in connection with such
transactions, the Fund will maintain a segregated account with its custodian of
cash, cash equivalents, U.S. Government securities or other high grade liquid
debt or equity securities denominated in U.S. dollars or non-U.S. currencies in
an aggregate amount equal to the amount of its commitment in connection with
such purchase transactions.
Standby Commitment Agreements. The Fund may from time to time enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a fixed income security which
may be issued and sold to the Fund at the option of the issuer. The price and
coupon of the security is fixed at the time of the commitment. At the time of
entering into the agreement, the Fund is paid a commitment fee, regardless of
whether or not the security is ultimately issued, which is typically
approximately 0.5% of the aggregate purchase price of the security that the
Fund has committed to purchase. The Fund will enter into such agreements only
for the purpose of investing in the security underlying the commitment at a
yield and price that is considered advantageous to the Fund. The Fund will not
enter into a standby commitment with a remaining term in excess of 45 days and
will limit its investment in such commitments so that the aggregate purchase
price of the securities subject to such commitments, together with the value of
portfolio securities subject to legal restrictions on resale, will not exceed
15% (10% to the extent required by certain state laws) of its total assets
taken at the time of acquisition of such commitment or security. The Fund will
at all times maintain a segregated account with its custodian of cash, cash
equivalents, U.S. Government securities or other high grade liquid debt or
equity securities denominated in U.S. dollars or non-U.S. currencies in an
aggregate amount equal to the purchase price of the securities underlying the
commitment.
There can be no assurance that the security subject to a standby commitment
will be issued, and the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Because the issuance of the
security underlying the commitment is at the option of the issuer, the Fund may
bear the risk of a decline in the value of such security and may not benefit
from an appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby agreement and the related
commitment fee will be recorded on the date which the security can reasonably
be expected to be issued, and the value of the security will thereafter be
reflected in the calculation of the Fund's net asset value. The cost basis of
the security will be adjusted by the amount of the commitment fee. In the event
the security is not issued, the commitment fee will be recorded as income on
the expiration date of the standby commitment.
Repurchase Agreements and Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements may be entered into only with a member bank of the
Federal Reserve System or primary dealer in U.S. Government securities or an
affiliate thereof. Purchase and sale contracts may be entered into only with
financial institutions which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
Under such agreements, the other party agrees, upon entering into the contract
with the Fund, to repurchase the security at a mutually agreed upon time and
price in a specified currency, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from market
fluctuations during such period although it may be affected by currency
fluctuations. In the case of repurchase
8
<PAGE>
agreements, the prices at which the trades are conducted do not reflect the
accrued interest on the underlying obligations; whereas, in the case of
purchase and sale contracts, the prices take into account accrued interest.
Such agreements usually cover short periods, often less than one week.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the purchaser.
In the case of a repurchase agreement, as a purchaser, the Fund will require
the seller to provide additional collateral if the market value of the
securities falls below the repurchase price at any time during the term of the
repurchase agreement; the Fund does not have the right to seek additional
collateral in the case of purchase and sale contracts. In the event of default
by the seller under a repurchase agreement construed to be a collateralized
loan, the underlying securities are not owned by the Fund but constitute only
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs or possible losses in
connection with the disposition of the collateral. A purchase and sale contract
differs from a repurchase agreement in that the contract arrangements stipulate
that the securities are owned by the Fund. In the event of a default under such
a repurchase agreement or under a purchase and sale contract, instead of the
contractual fixed rate of return, the rate of return to the Fund would depend
on intervening fluctuations of the market values of such securities and the
accrued interest on the securities. In such event, the Fund would have rights
against the seller for breach of contract with respect to any losses resulting
from market fluctuations following the failure of the seller to perform. The
Fund may not invest more than 15% (10% to the extent required by certain state
laws) of its total assets in repurchase agreements or purchase and sale
contracts maturing in more than seven days. While the substance of purchase and
sale contracts is similar to the substance of repurchase agreements, because of
the different treatment with respect to accrued interest and additional
collateral, management believes that purchase and sale contracts are not
repurchase agreements as such term is understood in the banking and brokerage
community.
Lending of Portfolio Securities. Subject to the investment restriction stated
below, the Fund may lend securities from its portfolio to approved borrowers
and receive collateral therefor in cash or securities issued or guaranteed by
the U.S. Government which are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The purpose of
such loans is to permit the borrower to use such securities for delivery to
purchasers when such borrower has sold short. If cash collateral is received by
the Fund, it is invested in short-term money market securities, and a portion
of the yield received in respect of such investment is retained by the Fund.
Alternatively, if securities are delivered to the Fund as collateral, the Fund
and the borrower negotiate a rate for the loan premium to be received by the
Fund for lending its portfolio securities. In either event, the total yield on
the Fund's portfolio is increased by loans of its portfolio securities. The
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights and
rights to dividends, interest or other distributions. Such loans are terminable
at any time, and the borrower, after notice, will be required to return
borrowed securities within five business days. The Fund may pay reasonable
finder's, administrative and custodial fees in connection with such loans. With
respect to the lending of portfolio securities, there is the risk of failure by
the borrower to return the securities involved in such transactions.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of fundamental and non-fundamental restrictions
and policies relating to the investment of its assets and its activities. The
fundamental policies set forth below may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities (which
for this
9
<PAGE>
purpose and under the Investment Company Act means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares).
Under the fundamental investment restrictions, the Fund may not:
1. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).
2. Make investments for the purpose of exercising control or management.
Investments by the Fund in wholly-owned investment entities created under
the laws of certain countries will not be deemed the making of investments
for the purpose of exercising control or management.
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that the Fund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
5. Issue senior securities to the extent such issuance would violate
applicable law.
6. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the Fund
may purchase securities on margin to the extent permitted by applicable
law. The Fund may not pledge its assets other than to secure such
borrowings or, to the extent permitted by the Fund's investment policies as
set forth in its Prospectus and Statement of Additional Information, as
they may be amended from time to time, in connection with hedging
transactions, short sales, when-issued and forward commitment transactions
and similar investment strategies.
7. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act") in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to
the extent that the Fund may do so in accordance with applicable law and
the Fund's Prospectus and Statement of Additional Information, as they may
be amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
10
<PAGE>
In addition, the Fund has adopted non-fundamental restrictions which may be
changed by the Board of Directors. Under the non-fundamental investment
restrictions, the Fund may not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except to
the extent permitted by applicable law. The Fund currently does not intend
to engage in short sales, except short sales "against the box".
c. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which cannot otherwise be marketed, redeemed
or put to the issuer or a third party, if at the time of acquisition more
than 15% of its total assets would be invested in such securities. This
restriction shall not apply to securities which mature within seven days or
securities which the Board of Directors of the Fund has otherwise
determined to be liquid pursuant to applicable law. Notwithstanding the 15%
limitation herein, to the extent the laws of any state in which the Fund's
shares are registered or qualified for sale require a lower limitation, the
Fund will observe such limitation. As of the date hereof, therefore, the
Fund will not invest more than 10% of its total assets in securities which
are subject to this investment restriction (c). Securities purchased in
accordance with Rule 144A under the Securities Act (a "Rule 144A security")
and determined to be liquid by the Fund's Board of Directors are not
subject to the limitations set forth in this investment restriction (c).
Notwithstanding the fact that the Board may determine that a Rule 144A
security is liquid and not subject to limitations set forth in this
investment restriction (c), the State of Ohio does not recognize Rule 144A
securities as securities that are free of restrictions as to resale. To the
extent required by Ohio law, the Fund will not invest more than 50% of its
total assets in securities of issuers that are restricted as to
disposition, including Rule 144A securities, or in securities of issuers
having a record, together with predecessors, of less than three years of
continuous operation.
d. Invest in warrants if, at the time of acquisition, its investments in
warrants, valued at the lower of cost or market value, would exceed 5% of
the Fund's net assets; included within such limitation, but not to exceed
2% of the Fund's net assets, are warrants which are not listed on the New
York Stock Exchange or American Stock Exchange or a major foreign exchange.
For purposes of this restriction, warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities, asset-
backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those individual
officers and directors of the Fund, the officers and general partner of the
Manager, the directors of such general partner or the officers and
directors of any subsidiary thereof each owning beneficially more than one-
half of one percent of the securities of such issuer own in the aggregate
more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs,
except that the Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
11
<PAGE>
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restriction (6) above, borrow
amounts in excess of 20% of its total assets taken at market value
(including the amount borrowed) and then only from a bank as a temporary
measure for extraordinary or emergency purposes including to meet
redemptions or to settle securities transactions. The Fund will not
purchase securities while borrowings exceed 5% of total assets except (a)
to honor prior commitments or (b) to exercise subscription rights where
outstanding borrowings have been obtained exclusively for settlements of
other securities transactions.
The staff of the Securities and Exchange Commission (the "Commission") has
taken the position that purchased OTC options and the assets used as cover for
written OTC options are illiquid securities. Therefore, the Fund has adopted an
investment policy pursuant to which it will not purchase or sell OTC options
if, as a result of such transaction, the sum of the market value of OTC options
currently outstanding which are held by the Fund, the market value of the
underlying securities covered by OTC call options currently outstanding which
were sold by the Fund and margin deposits on the Fund's existing OTC options on
futures contracts exceeds 15% (10% to the extent required by certain state
laws) of the total assets of the Fund, taken at market value, together with all
other assets of the Fund which are illiquid or are otherwise not readily
marketable. However, if the OTC option is sold by the Fund to a primary U.S.
Government securities dealer recognized by the Federal Reserve Bank of New York
and the Fund has the unconditional contractual right to repurchase such OTC
option from the dealer at a predetermined price, then the Fund will treat as
illiquid such amount of the underlying securities equal to the repurchase price
less the amount by which the option is "in-the-money" (i.e., current market
value of the underlying securities minus the option's strike price). The
repurchase price with the primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option, plus the
amount by which the option is "in-the-money". This policy as to OTC options is
not a fundamental policy of the Fund and may be amended by the Directors of the
Fund without the approval of the Fund's shareholders. However, the Fund will
not change or modify this policy prior to the change or modification by the
Commission staff of its position.
Portfolio securities of the Fund generally may not be purchased from, sold or
loaned to the Manager or its affiliates or any of their directors, general
partners, officers or employees, acting as principal, unless pursuant to a rule
or exemptive order under the Investment Company Act. Because of the affiliation
of the Manager with the Fund, the Fund is prohibited from engaging in certain
transactions involving the Manager's affiliate Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") or its affiliates except for brokerage
transactions permitted under the Investment Company Act involving only usual
and customary commissions or transactions pursuant to an exemptive order under
the Investment Company Act. See "Portfolio Transactions and Brokerage". Without
such an exemptive order, the Fund would be prohibited from engaging in
portfolio transactions with Merrill Lynch or its affiliates acting as principal
and from purchasing securities in public offerings which are not registered
under the Securities Act in which such firm or any of its affiliates
participate as an underwriter or dealer.
12
<PAGE>
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund, their ages and their
principal occupations for at least the last five years are set forth below.
Unless otherwise noted, the address of each executive officer and Director is
P.O. Box 9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel (62)--President and Director(1)(2)--President of the Manager
(which term as used herein includes its corporate predecessors) since 1977;
President of FAM (which term as used herein includes its corporate
predecessors) since 1977; President and Director of Princeton Services, Inc.
("Princeton Services") since 1993; Executive Vice President of Merrill Lynch
since 1990 and a Senior Vice President thereof from 1985 to 1990; Executive
Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990; Director
of the Distributor.
Donald Cecil (68)--Director(2)--1114 Avenue of the Americas, New York, New
York 10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.
Edward H. Meyer (68)--Director(2)--777 Third Avenue, New York, New York
10017. President of Grey Advertising Inc. since 1968, Chief Executive Officer
since 1970 and Chairman of the Board of Directors since 1972; Director of The
May Department Stores Company, Bowne & Co., Inc. (financial printers), Ethan
Allen Interiors Inc. and Harman International Industries, Inc.
Charles C. Reilly (63)--Director(2)--9 Hampton Harbor Road, Hampton Bays,
N.Y. 11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; former Senior
Vice President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business since 1990; Adjunct
Professor, Wharton School, University of Pennsylvania, 1990; Director, Harvard
Business School Alumni Association.
Richard R. West (57)--Director(2)--482 Tepi Drive, Southbury, Connecticut
06488. Professor of Finance since 1984, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration; Director of
Bowne & Co., Inc. (financial printers), Re Capital Corp. (reinsurance holding
company), Vornado, Inc. (real estate holding company), Smith-Corona
Corporation (manufacturer of typewriters and word processors) and Alexander's
Inc. (real estate company).
Edward D. Zinbarg (60)--Director(2)--5 Hardwell Road, Short Hills, New
Jersey 07078-2117. Executive Vice President of The Prudential Insurance
Company of America from 1988 to 1994; former Director of Prudential
Reinsurance Company and former Trustee of the Prudential Foundation.
Terry K. Glenn (54)--Executive Vice President(1)(2)--Executive Vice
President of the Manager and FAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President and Director of the
Distributor since 1986.
Norman R. Harvey (61)--Senior Vice President(1)(2)--Senior Vice President of
the Manager and FAM since 1982; Senior Vice President of Princeton Services
since 1993.
13
<PAGE>
Grace Pineda (38)--Vice President(2)--Vice President of the Manager and
Senior Portfolio Manager since 1989; analyst and portfolio manager at Clemente
Capital, Inc. from 1982 to 1989.
Donald C. Burke (34)--Vice President(1)(2)--Vice President and Director of
Taxation of the Manager since 1990; employee of Deloitte & Touche llp from
1982 to 1990.
Gerald M. Richard (45)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Manager and FAM since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.
Mark B. Goldfus (48)--Secretary(1)(2)--Vice President of the Manager and FAM
since 1985.
--------
(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 its subsidiary FAM,
acts as investment adviser or manager.
At February 28, 1995, the officers and Directors of the Fund as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund. At such date, Mr. Zeikel, a Director of the Fund, and the other officers
of the Fund owned less than 1% of the outstanding shares of common stock of
Merrill Lynch & Co., Inc.
COMPENSATION OF DIRECTORS
The Fund pays each Director not affiliated with the Manager a fee of $3,500
per year plus $500 per meeting attended, together with such Director's actual
out-of-pocket expenses relating to attendance at meetings. The Fund also
compensates members of its Audit Committee, which consists of all of the non-
affiliated Directors, at a rate of $500 per meeting attended. The Chairman of
the Audit Committee receives an additional fee of $250 per year. For the
fiscal year ended November 30, 1994, fees and expenses paid to such
nonaffiliated Directors aggregated $35,456+.
The following table sets forth for the fiscal year ended November 30, 1994,
compensation paid by the Fund to the non-interested Directors and for the
calendar year ending December 31, 1994, the aggregate compensation paid by all
investment companies advised by the Manager and its affiliate, FAM ("MLAM/FAM
Advised Funds") to the non-interested Directors.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
BENEFITS FROM FUND AND OTHER
AGGREGATE ACCRUED AS MLAM/FAM
NAME OF COMPENSATION PART OF FUND ADVISED FUNDS PAID
DIRECTOR FROM FUND EXPENSES TO DIRECTORS (1)
-------- ------------ ------------ -------------------
<S> <C> <C> <C>
Donald Cecil..................... $9,750 None $276,350
Edward H. Meyer.................. $8,500 None $251,600
Charles C. Reilly................ $8,500 None $276,900
Richard R. West.................. $8,500 None $300,900
Edward D. Zinbarg*............... $8,500 None $121,500
</TABLE>
--------
* Projected annual compensation for the Fund's current fiscal year. Mr.
Zinbarg was elected to the Fund's Board of Directors effective October 25,
1994.
(1) In addition to the Fund, the Directors serve on the boards of other
MLAM/FAM Advised Funds as follows: Mr. Cecil (34 boards); Mr. Meyer (34
boards); Mr. Reilly (40 boards); Mr. West (40 boards); and Mr. Zinbarg (16
boards).
--------
+ During most of the fiscal year ended November 30, 1994, the Board
consisted of five Directors, four of whom were non-interested.
14
<PAGE>
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Fund--Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or other investment advisory clients for which the
Manager or its affiliates act as an adviser. Because of different objectives or
other factors, a particular security may be bought for one or more clients when
one or more clients are selling the same security. If purchases or sales of
securities by the Manager for the Fund or other funds for which it acts as
investment adviser or for its other advisory clients arise for consideration at
or about the same time, transactions in such securities will be made, insofar
as feasible, for the respective funds and clients in a manner deemed equitable
to all. To the extent that transactions on behalf of more than one client of
the Manager or its affiliates during the same period may increase the demand
for securities being purchased or the supply of securities being sold, there
may be an adverse effect on price.
The Fund has entered into a management agreement (the "Management Agreement")
with the Manager. As discussed in the Prospectus, the Manager receives for its
services to the Fund monthly compensation at the annual rate of 1.00% of the
average daily net assets of the Fund. For the fiscal years ended November 30,
1994, 1993 and 1992, the management fees paid by the Fund to the Manager
aggregated $9,298,782, $2,091,529 and $1,404,072, respectively.
The State of California imposes limitations on the expenses of the Fund. At
the date of this Statement of Additional Information, these annual expense
limitations require that the Manager reimburse the Fund in any amount necessary
to prevent the aggregate ordinary operating expenses (excluding custodian
costs, taxes, brokerage fees and commissions, distribution fees and
extraordinary charges such as litigation costs) from exceeding in any fiscal
year 2.5% of the Fund's first $30 million of average net assets, 2.0% of the
next $70 million of average net assets and 1.5% of the remaining average net
assets. Such reimbursement, if any, will be subtracted from the monthly
management fee. No fee payment will be made to the Manager during any fiscal
year which will cause such expenses to exceed the expense limitations at the
time of such payment.
The Fund has received an order from the State of California partially waiving
the expense limitations described above. Pursuant to the terms of such waiver,
the expense limitations that would otherwise apply are waived to the extent
that the Fund's expenses for management and auditing fees exceed the average of
such fees of a group of funds managed by the Manager or its subsidiary which
primarily invest domestically. Since the commencement of operations of the
Fund, no reimbursement of expenses has been required pursuant to the applicable
expense limitation provisions discussed above.
The Management Agreement obligates the Manager to provide investment advisory
services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research,
trading and investment management of the Fund, as well as the fees of all
Directors of the Fund who are affiliated persons of the Manager or any of its
affiliates. The Fund pays all other expenses incurred in its operation,
including, among other things, taxes; expenses for legal and auditing services;
costs of printing proxies, stock certificates, shareholder reports and
prospectuses and statements of additional information (except to the extent
paid by the Distributor); charges of the custodian, any sub-custodian and
transfer agent; expenses of redemption of shares; Securities and Exchange
Commission fees; expenses of
15
<PAGE>
registering the shares under Federal, state or foreign laws; fees and expenses
of unaffiliated Directors; accounting and pricing costs (including the daily
calculation of net asset value); insurance; interest; brokerage costs;
litigation and other extraordinary or non-recurring expenses; and other
expenses properly payable by the Fund. Accounting services are provided to the
Fund by the Manager, and the Fund reimburses the Manager for its costs in
connection with such services on a semi-annual basis. For the fiscal years
ended November 30, 1994, 1993 and 1992, the amount of such reimbursement was
$211,687, $130,471 and $92,838, respectively. The Distributor will pay certain
promotional expenses of the Fund incurred in connection with the offering of
its shares. Certain expenses will be financed by the Fund pursuant to
distribution plans in compliance with Rule 12b-1 under the Investment Company
Act. See "Purchase of Shares--Distribution Plans".
ML & Co. and Princeton Services, Inc. are "controlling persons" of the
Manager as defined under the Investment Company Act because of their ownership
of its voting securities or their power to exercise a controlling influence
over its management or policies.
Duration and Termination. Unless earlier terminated as described herein, the
Management Agreement will remain in effect from year to year if approved
annually (a) by the Board of Directors or by a majority of the outstanding
shares of the Fund and (b) by a majority of the Directors who are not parties
to such contract or interested persons (as defined in the Investment Company
Act) of any such party. Such contract is not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party
thereto or by the vote of the shareholders of the Fund.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares. The Fund issues four classes of
shares under the Merrill Lynch Select Pricing SM System: shares of Class A and
Class D are sold to investors choosing the initial sales charge alternatives,
and shares of Class B and Class C are sold to investors choosing the deferred
sales charge alternatives. Each Class A, Class B, Class C and Class D share of
the Fund represents identical interests in the investment portfolio of the
Fund and has the same rights, except that Class B, Class C and Class D shares
bear the expenses of the ongoing account maintenance fees, and Class B and
Class C shares bear the expenses of the ongoing distribution fees and the
additional incremental transfer agency costs resulting from the deferred sales
charge arrangements. Class B, Class C and Class D shares each have exclusive
voting rights with respect to the Rule 12b-1 distribution plan adopted with
respect to such class pursuant to which account maintenance and/or
distribution fees are paid. Each class has different exchange privileges. See
"Shareholder Services--Exchange Privilege".
The Merrill Lynch Select Pricing SM System is used by more than 50 mutual
funds advised by the Manager or its affiliate, FAM. Funds advised by the
Manager or FAM are referred to herein as "MLAM-advised mutual funds".
The Fund has entered into separate distribution agreements with the
Distributor in connection with the continuous offerings of each class of
shares of the Fund (the "Distribution Agreements"). The Distribution
Agreements obligate the Distributor to pay certain expenses in connection with
the offering of each class of
16
<PAGE>
shares of the Fund. After the prospectuses, statements of additional
information and periodic reports have been prepared, set in type and mailed to
shareholders, the Distributor pays for the printing and distribution of copies
thereof used in connection with the offering to dealers and investors. The
Distributor also pays for other supplementary sales literature and advertising
costs. The Distribution Agreements are subject to the same renewal
requirements and termination provisions as the Management Agreement described
above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
As a result of the implementation of the Merrill Lynch Select Pricing SM
System, Class A shares of the Fund outstanding prior to October 21, 1994, were
redesignated Class D shares. The Class A shares currently being offered differ
from the Class A shares offered prior to October 21, 1994, in many respects,
including sales charges, exchange privilege and the classes of persons to whom
such shares are offered. The gross sales charges for the sale of its former
Class A shares for the fiscal year ended November 30, 1992, were $108,884, of
which the Distributor received $2,793, and Merrill Lynch received $106,091.
The gross sales charges for the sale of its former Class A shares for the
fiscal year ended November 30, 1993, were $693,130, of which the Distributor
received $52,202, and Merrill Lynch received $640,928. The gross sales charges
for the sale of its Class D shares (including redesignated Class A shares) for
the fiscal year ended November 30, 1994, were $3,143,373, of which the
Distributor received $225,515, and Merrill Lynch received $2,917,858. The
Distributor and Merrill Lynch received no sales charges for the sale of its
new Class A shares for the fiscal period October 21, 1994 (commencement of
public offering) to November 30, 1994. During such periods, the Distributor
received no contingent deferred sales charges ("CDSCs") with respect to
redemptions within one year after purchase of Class A or Class D shares
purchased subject to front-end sales charge waivers. For information as to
brokerage commissions received by Merrill Lynch, see "Portfolio Transactions
and Brokerage".
The term "purchase" as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Fund refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and to single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the "Code"))
although more than one beneficiary is involved. The term "purchase" also
includes purchases by any "company", as that term is defined in the Investment
Company Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than
the purchase of shares of the Fund or shares of other registered investment
companies at a discount. The term "purchase" shall not include purchases by
any group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of an
insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser. The term "purchase" also includes purchases by employee
benefit plans not qualified under Section 401 of the Code, including purchases
by employees or by employers on behalf of employees, by means of a payroll
deduction plan or otherwise, of shares of the Fund. Purchases by such a
company or non-qualified employee benefit plan will qualify for the quantity
discounts discussed above only if the Fund and the Distributor are able to
realize economies of scale in sales effort and sales related expense by means
of the company, employer or plan making the Fund's
17
<PAGE>
Prospectus available to individual investors or employees and forwarding
investments by such persons to the Fund and by any such employer or plan
bearing the expense of any payroll deduction plan.
Closed-End Fund Investment Option. Class A shares of the Fund and other
MLAM-advised mutual funds ("Eligible Class A Shares") are offered at net asset
value to shareholders of certain closed-end funds advised by MLAM or the
Investment Adviser who purchased such closed-end fund shares prior to
October 21, 1994 (the date the Merrill Lynch Select Pricing SM System
commenced operations) and wish to reinvest the net proceeds from a sale of
their closed-end fund shares of common stock in Eligible Class A Shares, if
the conditions set forth below are satisfied. Alternatively, closed-end fund
shareholders who purchased such shares on or after October 21, 1994, and wish
to reinvest the net proceeds from a sale of their closed-end fund shares are
offered Class A shares (if eligible to buy Class A shares) or Class D shares
of the Fund and other MLAM-advised mutual funds ("Eligible Class D Shares"),
if the following conditions are met. First, the sale of the closed-end fund
shares must be made through Merrill Lynch, and the net proceeds therefrom must
be immediately reinvested in Eligible Class A or Class D Shares. Second, the
closed-end fund shares must either have been acquired in the initial public
offering or be shares representing dividends from shares of common stock
acquired in such offering. Third, the closed-end fund shares must have been
continuously maintained in a Merrill Lynch securities account. Fourth, there
must be a minimum purchase of $250 to be eligible for the investment option.
Class A shares of the Fund are offered at net asset value to shareholders of
Merrill Lynch Senior Floating Rate Fund, Inc. ("Senior Floating Rate Fund")
who wish to reinvest the net proceeds from a sale of certain of their shares
of common stock of Senior Floating Rate Fund in shares of the Fund. In order
to exercise this investment option, Senior Floating Rate Fund shareholders
must sell their Senior Floating Rate Fund shares to the Senior Floating Rate
Fund in connection with a tender offer conducted by the Senior Floating Rate
Fund and reinvest the proceeds immediately in the Fund. This investment option
is available only with respect to the proceeds of Senior Floating Rate Fund
shares as to which no Early Withdrawal Charge (as defined in the Senior
Floating Rate Fund prospectus) is applicable. Purchase orders from Senior
Floating Rate Fund shareholders wishing to exercise this investment option
will be accepted only on the day that the related Senior Floating Rate Fund
tender offer terminates and will be effected at the net asset value of the
Fund at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. The reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value
or cost, whichever is higher, of the purchaser's combined holdings of all
classes of shares of the Fund and of other MLAM-advised mutual funds. For any
such right of accumulation to be made available, the Distributor must be
provided at the time of purchase, by the purchaser or the purchaser's
securities dealer, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation. The right of accumulation may be amended or terminated at any
time. Shares held in the name of a nominee or custodian under pension, profit
sharing or other employee benefit plans may not be combined with other shares
to qualify for the right of accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Fund or of any
other MLAM-advised mutual funds made within a thirteen-
18
<PAGE>
month period starting with the first purchase pursuant to a Letter of Intention
in the form provided in the Prospectus. The Letter of Intention is available
only to investors whose accounts are maintained at the Fund's transfer agent.
The Letter of Intention is not available to employee benefit plans for which
Merrill Lynch provides plan-participant record-keeping services. The Letter of
Intention is not a binding obligation to purchase any amount of Class A or
Class D shares; however, its execution will result in the purchaser paying a
lower sales charge at the appropriate quantity purchase level. A purchase not
originally made pursuant to a Letter of Intention may be included under a
subsequent Letter of Intention executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period.
The value of Class A and Class D shares of the Fund and of other MLAM-advised
mutual funds presently held, at cost or maximum offering price (whichever is
higher), on the date of the first purchase under the Letter of Intention, may
be included as a credit toward completion of such Letter but the reduced sales
charge applicable to the amount covered by such Letter will be applied only to
new purchases. If the total amount of shares purchased does not equal the
amount stated in the Letter of Intention (minimum of $25,000), the investor
will be notified and must pay, within 20 days of the expiration of such Letter,
the difference between the sales charge on the Class A or Class D shares
purchased at the reduced rate and the sales charge applicable to the shares
actually purchased through the Letter. Class A or Class D shares equal to five
percent of the intended amount will be held in escrow during the thirteen-month
period (while remaining registered in the name of the purchaser) for this
purpose. The first purchase under the Letter of Intention must be at least five
percent of the dollar amount of such Letter. If a purchase during the term of
such Letter would otherwise be subject to a further reduced sales charge based
on the right of accumulation, the purchaser will be entitled on that purchase
and subsequent purchases to the reduced percentage sales charge which would be
applicable to a single purchase equal to the total dollar value of the Class A
or Class D shares then being purchased under such Letter, but there will be no
retroactive reduction of the sales charges on any previous purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be deducted
from the total purchases made under such Letter. An exchange from a MLAM-
advised money market fund into the Fund that creates a sales charge will count
toward completing a new or existing Letter of Intention from the Fund.
Employer Sponsored Retirement and Savings Plans. Class A and Class D shares
are offered at net asset value to employer sponsored retirement or savings
plans, such as tax qualified retirement plans within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), deferred
compensation plans within the meaning of Sections 403(b) and 457 of the Code,
other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system,
herein referred to as "Employer Sponsored Retirement or Savings Plans",
provided the plan has accumulated $20 million or more in MLAM-advised mutual
funds (in the case of the Class A shares) or $5 million or more in MLAM-advised
mutual funds (in the case of Class D shares). Class D shares may be offered at
net asset value to new Employer Sponsored Retirement or Savings Plans, provided
the plan has $3 million or more initially invested in MLAM-advised mutual
funds. Assets of Employer Sponsored Retirement or Savings Plans sponsored by
the same sponsor or an affiliated sponsor may be aggregated. Class A shares and
Class D shares also are offered at net asset value to Employer Sponsored
Retirement or Savings Plans that have at least 1,000 employees eligible to
participate in the plan (in the case of Class A shares) or between 500 and 999
employees eligible to participate in the plan (in the case of Class D shares).
Employees eligible to
19
<PAGE>
participate in Employer Sponsored Retirement or Savings Plans of the same
sponsoring employer or its affiliates may be aggregated. Tax qualified
retirement plans within the meaning of Section 401(a) of the Code meeting any
of the foregoing requirements and which are provided specialized services
(e.g., plans whose participants may direct on a daily basis their plan
allocations among a wide range of investments including individual corporate
equities and other securities in addition to mutual fund shares) by the
Merrill Lynch Blueprint SM Program, are offered Class A shares at a price
equal to net asset value per share plus a reduced sales charge of 0.50%.
Any Employer Sponsored Retirement or Savings Plan which does not meet the
above described qualifications to purchase Class A or Class D shares at net
asset value has the option of (i) purchasing Class D shares at the initial
sales charge schedule disclosed in the Prospectus for purchases of up to
$1,000,000 and at 0.75% for purchases of $1,000,000 or more, (ii) if the
Employer Sponsored Retirement or Savings Plan meets the specified
requirements, purchasing Class B shares with a waiver of the CDSC upon
redemption, or (iii) if the Employer Sponsored Retirement or Savings Plan does
not qualify to purchase Class B shares with a waiver upon redemption,
purchasing Class B or Class C shares at their respective CDSC schedule
disclosed in the Prospectus.
Certain Employer Sponsored Retirement or Savings Plans, which were permitted
prior to October 21, 1994, to purchase Class A shares at the initial sales
charge schedule in the then current prospectus for purchases up to $1,000,000
and at 0.75% for purchases of $1,000,000 or more, may purchase Class A shares
at the initial sales charge schedule disclosed in the Prospectus for purchases
of up to $1,000,000 and at 0.75% for purchases of $1,000,000 or more.
The minimum initial and subsequent purchase requirements are waived in
connection with all the above referenced Employer Sponsored Retirement or
Savings Plans.
Purchase Privilege of Certain Persons. Directors of the Fund, members of the
Boards of other MLAM-advised investment companies, ML & Co. and its
subsidiaries (the term "subsidiaries", when used herein with respect to ML &
Co., includes MLAM, FAM and certain other entities directly or indirectly
wholly-owned and controlled by ML & Co.) and their directors and employees,
and any trust, pension, profit-sharing or other benefit plan for such persons
may purchase Class A shares of the Fund at net asset value.
Class D shares of the Fund are offered at net asset value, without a sales
charge, to an investor who has a business relationship with a financial
consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchase by such investor if the following
conditions are satisfied. First, the investor must advise Merrill Lynch that
it will purchase Class D shares of the Fund with proceeds from a redemption of
a mutual fund that was sponsored by the financial consultant's previous firm
and was subject to a sales charge either at the time of purchase or on a
deferred basis. Second, the investor also must establish that such redemption
had been made within 60 days prior to the investment in the Fund, and the
proceeds from the redemption had been maintained in the interim in cash or a
money market fund.
Class D shares of the Fund are also offered at net asset value, without
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who has invested in a mutual fund sponsored by
a non-Merrill Lynch company for which Merrill Lynch has served as a selected
dealer and where Merrill Lynch has either received or given notice that such
arrangement will be terminated ("notice"),
20
<PAGE>
if the following conditions are satisfied: first, the investor must purchase
Class D shares of the Fund with proceeds from a redemption of shares of such
other mutual fund and the shares of such other fund were subject to a sales
charge either at the time of purchase or on a deferred basis; second, such
purchase of Class D shares must be made within 90 days after such notice.
Class D shares of the Fund are offered at net asset value, without a sales
charge, to an investor who has a business relationship with a Merrill Lynch
financial consultant and who has invested in a mutual fund for which Merrill
Lynch has not served as a selected dealer if the following conditions are
satisfied: First, the investor must advise Merrill Lynch that it will purchase
Class D shares of the Fund with proceeds from the redemption of such shares of
other mutual funds and that such shares have been outstanding for a period of
no less than six months. Second, such purchase of Class D shares must be made
within 60 days after the redemption and the proceeds from the redemption must
be maintained in the interim in cash or a money market fund.
TMA SM Managed Trusts. Class A shares are offered to TMA SM Managed Trusts
to which Merrill Lynch Trust Company provides discretionary trustee services
at net asset value.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares of the Fund may be reduced to the net asset value per Class D
share in connection with the acquisition of the assets of or merger or
consolidation with a public or private investment company. The value of the
assets or company acquired in a tax-free transaction may be adjusted in
appropriate cases to reduce possible adverse tax consequences to the Fund
which might result from an acquisition of assets having net unrealized
appreciation which is disproportionately higher at the time of acquisition
than the realized or unrealized appreciation of the Fund. The issuance of
Class D shares for consideration other than cash is limited to bona fide
reorganizations, statutory mergers or other acquisitions of portfolio
securities which (i) meet the investment objectives and policies of the Fund;
(ii) are acquired for investment and not for resale (subject to the
understanding that the disposition of the Fund's portfolio securities shall at
all times remain within its control); and (iii) are liquid securities, the
value of which is readily ascertainable, which are not restricted as to
transfer either by law or liquidity of market (except that the Fund may
acquire through such transactions restricted or illiquid securities to the
extent the Fund does not exceed the applicable limits on acquisition of such
securities set forth under "Investment Objective and Policies" herein).
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be
needed in obtaining such investments.
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares--Distribution Plans" in the
Prospectus for certain information with respect to the separate distribution
plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the
Investment Company Act (each a "Distribution Plan") with respect to the
account maintenance and/or distribution fees paid by the Fund to the
Distributor with respect to such classes.
Payments of the account maintenance fees and/or distribution fees are
subject to the provisions of Rule 12b-1 under the Investment Company Act.
Among other things, each Distribution Plan provides that the Distributor shall
provide and the Directors shall review quarterly reports of the disbursement
of the account
21
<PAGE>
maintenance fees and/or distribution fees paid to the Distributor. In their
consideration of each Distribution Plan, the Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Fund and its related class of shareholder. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund, as defined in the Investment Company Act (the
"Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that such Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors
or by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to
increase materially the amount to be spent by the Fund without the approval of
the related class of shareholder, and all material amendments are required to
be approved by the vote of the Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
Distribution Plan, cast in person at a meeting called for that purpose. Rule
12b-1 further requires that the Fund preserve copies of each Distribution Plan
and any report made pursuant to such plan for a period of not less than six
years from the date of such Distribution Plan or such report, the first two
years in an easily accessible place.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") imposes a limitation on
certain asset-based sales charges such as the distribution fee and the CDSC
borne by the Class B and Class C shares but not the account maintenance fee.
The maximum sales charge rule is applied separately to each class. As
applicable to the Fund, the maximum sales charge rule limits the aggregate of
distribution fee payments and CDSCs payable by the Fund to (1) 6.25% of
eligible gross sales of Class B shares and Class C shares, computed separately
(defined to exclude shares issued pursuant to dividend reinvestments and
exchanges), plus (2) interest on the unpaid balance for the respective class,
computed separately, at the prime rate plus 1% (the unpaid balance being the
maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). In connection with the Class B shares, the
Distributor has voluntarily agreed to waive interest charges on the unpaid
balance in excess of 0.50% of eligible gross sales. Consequently, the maximum
amount payable to the Distributor (referred to as the "voluntary maximum") in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any time.
To the extent payments would exceed the voluntary maximum, the Fund will not
make further payments of the distribution fee with respect to Class B shares,
and any CDSCs will be paid to the Fund rather than to the Distributor; however,
the Fund will continue to make payments of the account maintenance fee. In
certain circumstances the amount payable pursuant to the voluntary maximum may
exceed the amount payable under the NASD formula. In such circumstances payment
in excess of the amount payable under the NASD formula will not be made.
The following table sets forth comparative information as of November 30,
1994, with respect to the Class B and Class C shares of the Fund indicating the
maximum allowable payments that can be made under the NASD maximum sales charge
rule and, with respect to Class B shares, the Distributor's voluntary maximum.
22
<PAGE>
DATA CALCULATED AS OF NOVEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANNUAL
ALLOWABLE AMOUNTS DISTRIBUTION
ELIGIBLE AGGREGATE INTEREST MAXIMUM PREVIOUSLY AGGREGATE FEE AT CURRENT
GROSS SALES ON UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE LEVEL(4)
-------- --------- ---------- ------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class B Shares (for the
fiscal period September
27, 1991 commencement
of operations) to
November 30, 1994):
Under NASD Rule as
Adopted............... $820,913 $51,307 $3,989 $55,296 $10,214 $45,082 $7,032
Under Distributor's
Voluntary Waiver...... $820,913 $51,307 $4,105 $55,412 $10,214 $45,198 $7,032
Class C Shares (for the
fiscal period October
21, 1994 (commencement
of public offering) to
November 30, 1994):
Under NASD Rule as
Adopted............... $ 4,511 $ 282 $ 1 $ 283 $ 3 $ 280 $ 38
</TABLE>
--------
(1) Purchase price of all eligible Class B or Class C shares sold during
period indicated other than shares acquired through dividend reinvestment
and the exchange privilege.
(2) Interest is computed on a monthly basis based upon the prime rate, as
reported in The Wall Street Journal, plus 1%, as permitted under the NASD
Rule.
(3) Consists of CDSC payments, distribution fee payments and accruals. Of the
distribution fee payments made with respect to Class B shares prior to
July 7, 1993, under the distribution plan in effect at that time, at the
1.00% rate, 0.75% of average daily net assets has been treated as a
distribution fee and 0.25% of average daily net assets has been deemed to
have been a service fee and not subject to the NASD maximum sales charge
rule.
(4) Provided to illustrate the extent to which the current level of
distribution fee payments (not including any CDSC payments) is amortizing
the unpaid balance. No assurance can be given that payments of the
distribution fee will reach either the NASD maximum or, with respect to
Class B shares, the voluntary maximum.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Fund shares.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended only for any period during which trading on the
New York Stock Exchange is restricted as determined by the Commission or such
Exchange is closed (other than customary weekend and holiday closings) for any
period during which an emergency exists, as defined by the Commission, as a
result of which disposal of portfolio securities or determination of the net
asset value of the Fund is not reasonably practicable, and for such other
periods as the Commission may by order permit for the protection of
shareholders of the Fund.
DEFERRED SALES CHARGES--CLASS B AND CLASS C SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares
redeemed within four years of purchase are subject to a CDSC under most
circumstances, the charge is waived on redemptions of Class B shares in
connection with certain post-retirement withdrawals from an Individual
Retirement Account ("IRA") or other retirement plan or following
23
<PAGE>
the death or disability of a Class B shareholder. Redemptions for which the
waiver applies are: (a) any partial or complete redemption in connection with a
tax-free distribution following retirement under a tax-deferred retirement plan
or attaining age 59 1/2 in the case of an IRA or other retirement plan, or part
of a series of equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) or any redemption resulting from the tax-free
return of an excess contribution to an IRA; or (b) any partial or complete
redemption following the death or disability (as defined in the Code) of a
Class B shareholder (including one who owns the Class B shares as joint tenant
with his or her spouse), provided the redemption is requested within one year
of the death or initial determination of disability. For the fiscal year ended
November 30, 1994, the Distributor received CDSCs of $1,483,069 with respect to
redemptions of Class B shares, all of which was paid to Merrill Lynch. For the
fiscal period October 21, 1994 (commencement of operations) to November 30,
1994, the Distributor received CDSCs of $11 with respect to redemptions of
Class C shares, all of which was paid to Merrill Lynch. For the fiscal year
ended November 30, 1993, the Distributor received CDSCs of $641,317, all of
which was paid to Merrill Lynch. For the fiscal year ended November 30, 1992,
the Distributor received CDSCs of $276,150, all of which was paid to Merrill
Lynch.
Retirement Plans. Any Retirement Plan which does not meet the qualifications
to purchase Class A or Class D shares at net asset value has the option of
purchasing Class A or Class D shares at the sales charge schedule disclosed in
the Prospectus, or if the Retirement Plan meets the following requirements,
then it may purchase Class B shares with a waiver of the CDSC upon redemption.
The CDSC is waived for any Eligible 401(k) Plan redeeming Class B shares.
"Eligible 401(k) Plan" is defined as a retirement plan qualified under Section
401(k) of the Code with a salary reduction feature offering a menu of
investments to plan participants. The CDSC is also waived for redemptions from
a 401(a) plan qualified under the Code, provided, however, that each such plan
has the same or an affiliated sponsoring employer as an Eligible 401(k) Plan
purchasing Class B shares of MLAM-advised mutual funds ("Eligible 401(a)
Plan"). Other tax qualified retirement plans within the meaning of Sections
401(a) and 403(b) of the Code which are provided specialized services (e.g.,
plans whose participants may direct on a daily basis their plan allocations
among a menu of investments) by independent administration firms contracted
through Merrill Lynch also may purchase Class B shares with a waiver of the
CDSC. The CDSC also is waived for any Class B shares which are purchased by an
Eligible 401(k) Plan or Eligible 401(a) Plan and are rolled over into a Merrill
Lynch or Merrill Lynch Trust Company custodied IRA and held in such account at
the time of redemption. The Class B CDSC also is waived for any Class B shares
which are purchased by a Merrill Lynch rollover IRA that was funded by a
rollover from a terminated 401(k) plan managed by the MLAM Private Portfolio
Group and held in such account at the time of redemption. The minimum initial
and subsequent purchase requirements are waived in connection with all the
above referenced Retirement Plans.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Reference is made to "Investment Objective and Policies--Other Investment
Policies and Practices--Portfolio Transactions" in the Prospectus.
Subject to policies established by the Board of Directors of the Fund, the
Manager seeks to obtain the best net results for the Fund, taking into account
such factors as price (including the applicable brokerage
24
<PAGE>
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning
a block of securities. Subject to obtaining the best price and execution,
brokers who provide supplemental investment research to the Manager may receive
orders for transactions by the Fund. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Manager under the Management Agreement, and the expenses of the Manager will
not necessarily be reduced as a result of the receipt of such supplemental
information. It is possible that certain of the supplementary investment
research so received will primarily benefit one or more other investment
companies or other accounts for which investment discretion is exercised.
Conversely, the Fund may be the primary beneficiary of the research or services
received as a result of portfolio transactions effected for such other accounts
or investment companies.
The Fund anticipates that its brokerage transactions involving securities of
companies domiciled in countries other than the United States generally will be
conducted primarily on the principal stock exchanges of such countries.
Brokerage commissions and other transaction costs on foreign stock exchange
transactions are generally higher than in the United States, although the Fund
will endeavor to achieve the best net results in effecting its portfolio
transactions. There is generally less governmental supervision and regulation
of foreign stock exchanges and brokers than in the United States.
The Fund invests in certain securities traded in the over-the-counter market
and, where possible, deals directly with the dealers who make a market in the
securities involved, except in those circumstances in which better prices and
execution are available elsewhere. Under the Investment Company Act, persons
affiliated with the Fund and persons who are affiliated with such affiliated
persons are prohibited from dealing with the Fund as principal in the purchase
and sale of securities unless a permissive order allowing such transactions is
obtained from the Commission. Since transactions in the over-the-counter market
usually involve transactions with dealers acting as principal for their own
accounts, affiliated persons of the Fund, including Merrill Lynch and any of
its affiliates, will not serve as the Fund's dealer in such transactions.
However, affiliated persons of the Fund may serve as its broker in listed or
over-the-counter transactions conducted on an agency basis provided that, among
other things, the fee or commission received by such affiliated broker is
reasonable and fair compared to the fee or commission received by non-
affiliated brokers in connection with comparable transactions.
For the fiscal year ended November 30, 1994, the Fund paid total brokerage
commissions of $2,970,555, of which $112,754, or 3.8%, was paid to Merrill
Lynch for effecting 6.0% of the aggregate amount of transactions on which the
Fund paid brokerage commissions. For the fiscal year ended November 30, 1993,
the Fund paid total brokerage commissions of $53,608, of which $8,790, or
16.4%, was paid to Merrill Lynch for effecting 19.6% of the aggregate amount of
transactions on which the Fund paid brokerage commissions. For the fiscal year
ended November 30, 1992, the Fund paid total brokerage commissions of $624,609,
of which $2,689, or 0.43%, was paid to Merrill Lynch for effecting 0.67% of the
aggregate amount of transactions on which the Fund paid brokerage commissions.
The Fund's ability and decisions to purchase or sell portfolio securities may
be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a
daily basis in U.S. dollars, the Fund intends to manage its portfolio so as to
give reasonable assurance that it will be able to obtain U.S. dollars to the
extent necessary to meet anticipated redemptions.
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<PAGE>
Under present conditions, it is not believed that these considerations will
have any significant effect on its portfolio strategy.
Section 11(a) of the Securities Exchange Act of 1934, as amended, generally
prohibits members of the U.S. national securities exchanges from executing
exchange transactions for their affiliates and institutional accounts which
they manage unless the member (i) has obtained prior express authorization
from the account to effect such transactions, (ii) at least annually furnishes
the account with the aggregate compensation received by the member in
effecting such transactions, and (iii) complies with any rules the Commission
has prescribed with respect to the requirements of clauses (i) and (ii). To
the extent Section 11(a) would apply to Merrill Lynch acting as a broker for
the Fund in any of its portfolio transactions executed on any such securities
exchange of which it is a member, appropriate consents have been obtained from
the Fund and annual statements as to aggregate compensation will be provided
to the Fund.
The Directors have considered the possibility of seeking to recapture for
the benefit of the Fund brokerage commissions and other expenses of possible
portfolio transactions by conducting portfolio transactions through affiliated
entities. For example, brokerage commissions received by affiliated brokers
could be offset against the advisory fee paid by the Fund. After considering
all factors deemed relevant, the Directors made a determination not to seek
such recapture. The Directors will reconsider this matter from time to time.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information--Determination of Net Asset
Value" in the Prospectus concerning the determination of net asset value. The
net asset value of the shares of the Fund is determined once daily Monday
through Friday as of 15 minutes after the close of business on the New York
Stock Exchange (generally, 4:00 p.m., New York time), on each day the New York
Stock Exchange is open for trading. The New York Stock Exchange is not open on
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Any assets or liabilities
initially expressed in terms of non-U.S. dollar currencies are translated into
U.S. dollars at the prevailing market rates as quoted by one or more banks or
dealers on the day of valuation. Net asset value is computed by dividing the
value of the securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time. Expenses, including the management fees and any
account maintenance and/or distribution fees, are accrued daily. The per share
net asset value of the Class B, Class C and Class D shares generally will be
lower than the per share net asset value of the Class A shares reflecting the
daily expense accruals of the account maintenance, distribution and higher
transfer agency fees applicable with respect to the Class B and Class C shares
and the daily expense accruals of the account maintenance fees applicable with
respect to the Class D shares; moreover, the per share net asset value of the
Class B and Class C shares generally will be lower than the per share net
asset value of Class D shares reflecting the daily expense accruals of the
distribution fees and higher transfer agency fees applicable with respect to
Class B and Class C shares of the Fund. It is expected, however, that the per
share net asset value of the four classes will tend to converge (although not
necessarily meet) immediately after the payment of dividends or distributions,
which will differ by approximately the amount of the expense accrual
differentials between the classes.
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<PAGE>
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to time of
valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund
are valued at their last sale price in the case of exchange-traded options or,
in the case of options traded in the over-the-counter market, the last bid
price. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund. Such valuation and procedures
will be reviewed periodically by the Board of Directors.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services described below which are
designed to facilitate investment in its shares. Full details as to each of
such services and copies of the various plans described below can be obtained
from the Fund, the Distributor or Merrill Lynch. Certain of these services are
available only to U.S. investors.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the transfer agent has an
Investment Account and will receive statements, at least quarterly, from the
transfer agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of ordinary income
dividends and long-term capital gain distributions. The statements will also
show any other activity in the account since the preceding statement.
Shareholders also will receive separate confirmations for each purchase or sale
transaction other than reinvestment of dividends and capital gains
distributions. A shareholder may make additions to his Investment Account at
any time by mailing a check directly to the transfer agent.
Share certificates are issued only for full shares and only upon the specific
request of the shareholder. Issuance of certificates representing all or only
part of the full shares in an Investment Account may be requested by a
shareholder directly from the transfer agent.
Shareholders considering transferring their Class A or Class D shares from
Merrill Lynch to another brokerage firm or financial institution should be
aware that, if the firm to which the Class A or Class D shares are to be
transferred will not take delivery of shares of the Fund, a shareholder either
must redeem the Class A or Class D shares (paying any applicable CDSC) so that
the cash proceeds can be transferred to the account at the new firm or such
shareholder must continue to maintain an Investment Account at the transfer
agent for those Class A or Class D shares. Shareholders interested in
transferring their Class B or Class C shares from Merrill Lynch and who do not
wish to have an Investment Account maintained for such
27
<PAGE>
shares at the transfer agent may request their new brokerage firm to maintain
such shares in an account registered in the name of the brokerage firm for the
benefit of the shareholder at the transfer agent. If the new brokerage firm is
willing to accommodate the shareholder in this manner, the shareholder must
request that he be issued certificates for his shares and then must turn the
certificates over to the new firm for re-registration as described in the
preceding sentence.
AUTOMATIC INVESTMENT PLANS
A shareholder may make additions to an Investment Account at any time by
purchasing Class A (if (s)he is an eligible Class A investor as described in
the Prospectus) or Class B, Class C or Class D shares at the applicable public
offering price either through the shareholder's securities dealer or by mail
directly to the transfer agent, acting as agent for such securities dealer.
Voluntary accumulation also can be made through a service known as the Fund's
Automatic Investment Plan whereby the Fund is authorized through pre-authorized
checks or automated clearing house debits of $50 or more to charge the regular
bank account of the shareholder on a regular basis to provide systematic
additions to the Investment Account of such shareholder. An investor whose
shares of the Fund are held within a CMA(R) or CBA(R) account may arrange to
have periodic investments made in the Fund in amounts of $100 or more ($1 for
retirement accounts) through the CMA(R)/CBA(R) Automated Investment Program.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions to the contrary are given as to the method of
payment of dividends and capital gains distributions, dividends and
distributions will be reinvested automatically in additional shares of the
Fund. Such reinvestment will be at the net asset value of shares of the Fund as
of the close of business on the ex-dividend date of the dividend or
distribution. Shareholders may elect in writing to receive either their
dividends or capital gains distributions, or both, in cash, in which event
payment will be mailed or direct deposited on or about the payment date.
Shareholders may, at any time, notify the transfer agent in writing or by
telephone (1-800-MER-FUND) that they no longer wish to have their dividends
and/or distributions reinvested in shares of the Fund or vice versa, and
commencing ten days after receipt by the transfer agent of such notice, those
instructions will be effected.
SYSTEMATIC WITHDRAWAL PLANS--CLASS A AND CLASS D SHARES
A Class A or Class D shareholder may elect to make withdrawals from an
Investment Account on either a monthly or quarterly basis as provided below.
Quarterly withdrawals are available for shareholders who have acquired Class A
or Class D shares of the Fund having a value, based on cost or the current
offering price, of $5,000 or more and monthly withdrawals are available for
shareholders with Class A or Class D shares with such a value of $10,000 or
more.
At the time of each withdrawal payment, sufficient Class A or Class D shares
are redeemed from those on deposit in the shareholder's account to provide the
withdrawal payment specified by the shareholder. The shareholder may specify
either a dollar amount or a percentage of the value of his Class A or Class D
shares.
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<PAGE>
Redemptions will be made at net asset value as determined as of 15 minutes
after the close of business of the New York Stock Exchange (generally, 4:00
p.m. New York time) on the 24th day of each month or the 24th day of the last
month of each quarter, whichever is applicable. If the Exchange is not open
for business on such date, the Class A or Class D shares will be redeemed at
the close of business on the following business day. The check for the
withdrawal payment will be mailed, or the direct deposit of the withdrawal
payment will be made, on the next business day following redemption. When a
shareholder is making systematic withdrawals, dividends and distributions on
all Class A or Class D shares in the Investment Account are reinvested
automatically in Fund Class A or Class D shares of the Fund, respectively. A
shareholder's Systematic Withdrawal Plan may be terminated at any time,
without charge or penalty, by the shareholder, the Fund, the transfer agent or
the Distributor.
Withdrawal payments should not be considered as dividends, yield or income.
Each withdrawal is a taxable event. If periodic withdrawals continuously
exceed reinvested dividends, the shareholder's original investment may be
reduced correspondingly. Purchases of additional Class A or Class D shares
concurrent with withdrawals are ordinarily disadvantageous to the shareholder
because of sales charges and tax liabilities. The Fund will not knowingly
accept purchase orders for Class A or Class D shares of the Fund from
investors who maintain a Systematic Withdrawal Plan unless such purchase is
equal to at least one year's scheduled withdrawals or $1,200, whichever is
greater. Periodic investments may not be made into an Investment Account in
which the shareholder has elected to make systematic withdrawals.
Alternatively, a Class A or Class D shareholder whose shares are held within
a CMA(R), CBA(R) or Retirement Account may elect to have shares redeemed on a
monthly, bimonthly, quarterly, semiannual or annual basis through the
CMA(R)/CBA(R) Systematic Redemption Program. The minimum fixed dollar amount
redeemable is $25. The proceeds of systematic redemptions will be posted to
the shareholder's account five business days after the date the shares are
redeemed. Monthly systematic redemptions will be made at net asset value on
the first Monday of each month, bimonthly systematic redemptions will be made
at net asset value on the first Monday of every other month, and quarterly,
semiannual or annual redemptions are made at net asset value on the first
Monday of months selected at the shareholder's option. If the first Monday of
the month is a holiday, the redemption will be processed at net asset value on
the next business day. The Systematic Redemption Program is not available if
Fund shares are being purchased within the account pursuant to the Automatic
Investment Program. For more information on the CMA(R)/CBA(R) Systematic
Redemption Program, eligible shareholders should contact their Financial
Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Fund have an exchange privilege
with certain other MLAM-advised mutual funds listed below. Under the Merrill
Lynch Select Pricing SM System, Class A shareholders may exchange Class A
shares of the Fund for Class A shares of a second MLAM-advised mutual fund if
the shareholder holds any Class A shares of the second fund in his account in
which the exchange is made at the time of the exchange or is otherwise
eligible to purchase Class A shares of the second fund. If the Class A
shareholder wants to exchange Class A shares for shares of a second MLAM-
advised mutual fund but does not hold Class A shares of the second fund in his
account at the time of the exchange and is not otherwise eligible to acquire
Class A shares of the second fund, the shareholder will receive Class D shares
of the second fund as a result of the exchange. Class D shares also may be
exchanged for Class A shares of a second
29
<PAGE>
MLAM-advised mutual fund at any time as long as, at the time of the exchange,
the shareholder holds Class A shares of the second fund in the account in which
the exchange is made or is otherwise eligible to purchase Class A shares of the
second fund. Class B, Class C and Class D shares are exchangeable with shares
of the same class of other MLAM-advised mutual funds. For purposes of computing
the CDSC that may be payable upon a disposition of the shares acquired in the
exchange, the holding period for the previously owned shares of the Fund is
"tacked" to the holding period of the newly acquired shares of the other Fund
as more fully described below. Class A, Class B, Class C and Class D shares are
also exchangeable for shares of certain MLAM-advised money market funds
specifically designated below as available for exchange by holders of Class A,
Class B, Class C or Class D shares. Shares with a net asset value of at least
$100 are required to qualify for the exchange privilege, and any shares
utilized in an exchange must have been held by the shareholder for at least 15
days. It is contemplated that the exchange privilege may be applicable to other
new mutual funds whose shares may be distributed by the Distributor.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another MLAM-advised mutual
fund ("new Class A or Class D shares") are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the outstanding Class A or Class D shares and the sales charge payable at the
time of the exchange on the new Class A or Class D shares. With respect to
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the "sales charge previously paid" shall include the aggregate of the
sales charge paid with respect to such Class A or Class D shares in the initial
purchase and any subsequent exchange. Class A or Class D shares issued pursuant
to dividend reinvestment are sold on a no-load basis in each of the funds
offering Class A or Class D shares. For purposes of the exchange privilege,
Class A and Class D shares acquired through dividend reinvestment shall be
deemed to have been sold with a sales charge equal to the sales charge
previously paid on the Class A or Class D shares on which the dividend was
paid. Based on this formula, Class A and Class D shares of the Fund generally
may be exchanged into the Class A or Class D shares of the other funds or into
shares of the Class A or Class D money market funds with a reduced or without a
sales charge.
In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, ("new Class B or
Class C shares") of another MLAM-advised mutual fund on the basis of relative
net asset value per Class B or Class C share, without the payment of any CDSC
that might otherwise be due on redemption of the outstanding shares. Class B
shareholders of the Fund exercising the exchange privilege will continue to be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the new Class B shares acquired through use of the
exchange privilege. In addition, Class B shares of the Fund acquired through
use of the exchange privilege will be subject to the Fund's CDSC schedule if
such schedule is higher than the CDSC schedule relating to the Class B shares
of the fund from which the exchange has been made. For purposes of computing
the sales charge that may be payable on a disposition of the new Class B or
Class C shares, the holding period for the outstanding Class B or Class C
shares is "tacked" to the holding period of the new Class B or Class C shares.
For example, an investor may exchange Class B shares of the Fund for those of
Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") after having held
the Fund Class B shares for two and a half years. The 2% CDSC that generally
would apply to a redemption would not apply to the exchange. Three years later
the investor may decide to redeem the Class B shares of Special Value Fund and
receive cash. There will be no CDSC due on this redemption, since by
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<PAGE>
"tacking" the two and a half year holding period of Fund Class B shares to the
three year holding period for the Special Value Fund Class B shares, the
investor will be deemed to have held the new Class B shares for more than five
years.
Shareholders also may exchange shares of the Fund into shares of a money
market fund advised by the Manager or its affiliates, but the period of time
that Class B or Class C shares are held in a money market fund will not count
towards satisfaction of the holding period requirement for purposes of reducing
the CDSC or with respect to Class B shares, towards satisfaction of the
conversion period. However, shares of a money market fund which were acquired
as a result of an exchange for Class B or Class C shares of the Fund may, in
turn, be exchanged back into Class B or Class C shares, respectively, of any
fund offering such shares, in which event the holding period for Class B or
Class C shares of the Fund will be aggregated with previous holding periods for
purposes of reducing the CDSC. Thus, for example, an investor may exchange
Class B shares of the Fund for shares of Merrill Lynch Institutional Fund
("Institutional Fund") after having held the Fund Class B shares for two and a
half years and three years later decide to redeem the shares of Institutional
Fund for cash. At the time of this redemption, the 2% CDSC that would have been
due had the Class B shares of the Fund been redeemed for cash rather than
exchanged for shares of Institutional Fund will be payable. If instead of such
redemption the shareholder exchanged such shares for Class B shares of a fund
which the shareholder continued to hold for an additional two and a half years,
any subsequent redemption will not incur a CDSC.
Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:
Funds issuing Class A, Class B, Class C and Class D Shares:
Merrill Lynch Adjustable Rate
Securities Fund, Inc. ............
High current income consistent with a
policy of limiting the degree of fluctu-
ation in net asset value by investing
primarily in a portfolio of adjustable
rate securities, consisting principally
of mortgage-backed and asset-backed
securities.
Merrill Lynch Americas Income
Fund, Inc. .......................
A high level of current income, consis-
tent with prudent investment risk, by
investing primarily in debt securities
denominated in a currency of a country
located in the Western Hemisphere (i.e.,
North and South America and the sur-
rounding waters).
Merrill Lynch Arizona Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and Arizona income taxes as
is consistent with prudent investment
management through investment in a port-
folio primarily of intermediate-term in-
vestment grade Arizona Municipal Bonds.
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<PAGE>
Merrill Lynch Arizona Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Arizona income taxes as is consistent
with prudent investment management.
Merrill Lynch Arkansas
MunicipalBond Fund................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Arkansas income taxes as is consistent
with prudent investment management.
Merrill Lynch Asset Growth Fund,
Inc. .............................
High total investment return, consistent
with prudent risk, from investment in
United States and foreign equity, debt
and money market securities, the combi-
nation of which will be varied both with
respect to types of securities and mar-
kets in response to changing market and
economic trends.
Merrill Lynch Asset Income Fund,
Inc. .............................
A high level of current income through
investment primarily in United States
fixed income securities.
Merrill Lynch Balanced Fund for
Investment and Retirement, Inc. ..
As high a level of total investment re-
turn as is consistent with reasonable
risk by investing in common stocks and
other types of securities, including
fixed income securities and convertible
securities.
Merrill Lynch Basic Value Fund, Capital appreciation and, secondarily,
Inc. ............................. income through investment in securities,
primarily equities, that are undervalued
and therefore represent basic investment
value.
Merrill Lynch California Insured
Municipal Bond Fund...............
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
California income taxes as is consistent
with prudent investment management
through investment in a portfolio con-
sisting primarily of insured California
Municipal Bonds.
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<PAGE>
Merrill Lynch California Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and California income taxes
as is consistent with prudent investment
management through investment in a port-
folio primarily of intermediate-term in-
vestment grade California Municipal
Bonds.
Merrill Lynch California Municipal
Bond Fund.........................
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
California income taxes as is consistent
with prudent investment management.
Merrill Lynch Capital Fund, Inc. .. The highest total investment return con-
sistent with prudent risk through a
fully managed investment policy utiliz-
ing equity, debt and convertible securi-
ties.
Merrill Lynch Colorado Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Colorado income taxes as is consistent
with prudent investment management.
Merrill Lynch Connecticut
Municipal Bond Fund...............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Connecticut income taxes as is consis-
tent with prudent investment management.
Merrill Lynch Corporate Bond Fund,
Inc. .............................
Current income from three separate diver-
sified portfolios of fixed income secu-
rities.
Merrill Lynch Developing Capital
Markets Fund, Inc. ...............
Long-term capital appreciation through
investment in securities, principally
equities, of issuers in countries having
smaller capital markets.
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<PAGE>
Merrill Lynch Dragon Fund, Inc. ... Capital appreciation primarily through
investment in equity and debt securities
of issuers domiciled in developing coun-
tries located in Asia and the Pacific
Basin, other than Japan, Australia and
New Zealand.
Merrill Lynch EuroFund............. Capital appreciation primarily through
investment in equity securities of cor-
porations domiciled in Europe.
Merrill Lynch Federal Securities
Trust.............................
High current return through investments
in U.S. Government and Government agency
securities, including GNMA mortgage-
backed certificates and other mortgage-
backed Government securities.
Merrill Lynch Florida Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal income taxes as is consis-
tent with prudent in-
vestment management while serving to of-
fer shareholders the opportunity to own
securities exempt from Florida intangi-
ble personal property taxes through in-
vestment in a portfolio primarily of in-
termediate-term investment grade Florida
Municipal Bonds.
Merrill Lynch Florida Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal in-
come taxes as is consistent with prudent
investment management, while seeking to
offer shareholders the opportunity to
own securities exempt from Florida in-
tangible personal property taxes.
Merrill Lynch Fund For Tomorrow,
Inc. .............................
Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially po-
sitioned to benefit from demographic and
cultural changes as they affect consumer
markets.
Merrill Lynch Fundamental Growth
Fund, Inc. .......................
Long-term growth through investment in a
diversified portfolio of equity securi-
ties placing particular emphasis on com-
panies that have exhibited an above-av-
erage growth rate in earnings.
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<PAGE>
Merrill Lynch Fundamental
ValuePortfolio.... (available only
for exchanges by certain A portfolio of Merrill Lynch Retirement
individual retirement accounts Asset Builder Program, Inc., a series
for which Merrill Lynch acts fund, whose objective is to provide cap-
as custodian) ital appreciation and income by invest-
ing in securities, with at least 65% of
the portfolio's assets being invested in
equities.
Merrill Lynch Global Allocation
Fund, Inc.........................
High total return, consistent with pru-
dent risk, through a fully managed in-
vestment policy utilizing United States
and foreign equity, debt and money mar-
ket securities, the combination of which
will be varied from time to time both
with respect to the types of securities
and markets in response to changing mar-
ket and economic trends.
Merrill Lynch Global Bond Fund for
Investment and Retirement.........
High total investment return from invest-
ment in a global portfolio of debt in-
struments denominated in various curren-
cies and multinational currency units.
Merrill Lynch Global Convertible
Fund, Inc.........................
High total return from investment primar-
ily in an internationally diversified
portfolio of convertible debt securi-
ties, convertible preferred stock and
"synthetic" convertible securities con-
sisting of a combination of debt securi-
ties or preferred stock and warrants or
options.
Merrill Lynch Global Holdings,
Inc. (residents of Arizona must
meet investor suitability
standards)........................
The highest total investment return con-
sistent with prudent risk through world-
wide investment in an internationally
diversified portfolio of securities.
Merrill Lynch Global Opportunity
Portfolio..... (available only for
exchanges by certain individual A portfolio of Merrill Lynch Retirement
retirement accounts for which Asset Builder Program, Inc., a series
Merrill Lynch acts as custodian) fund, whose objective is to provide a
high total investment return through an
investment policy utilizing United
States and foreign equity, debt and
money market securities, the combination
of which will vary depending upon chang-
ing market and economic trends.
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<PAGE>
Merrill Lynch Global Resources
Trust.............................
Long-term growth and protection of capi-
tal from investment in securities of do-
mestic and foreign companies that pos-
sess substantial natural resource as-
sets.
Merrill Lynch Global SmallCap
Fund, Inc....................
Long-term growth of capital by investing
primarily in equity securities of compa-
nies with relatively small market capi-
talizations located in various foreign
countries and in the United States.
Merrill Lynch Global Utility Fund,
Inc...............................
Capital appreciation and current income
through investment of at least 65% of
its total assets in equity and debt se-
curities issued by domestic and foreign
companies which are primarily engaged in
the ownership or operation of facilities
used to generate, transmit or distribute
electricity, telecommunications, gas or
water.
Merrill Lynch Growth Fund for
Investment and Retirement.........
Growth of capital and, secondarily, in-
come from investment in a diversified
portfolio of equity securities placing
principal emphasis on those securities
which management of the fund believes to
be undervalued.
Merrill Lynch Healthcare Fund,
Inc.(residents of Wisconsin must
meet investor suitability
standards)........................
Capital appreciation through worldwide
investment in equity securities of com-
panies that derive or are expected to
derive a substantial portion of their
sales from products and services in
healthcare.
Merrill Lynch International Equity
Fund..............................
Capital appreciation and, secondarily,
income by investing in a diversified
portfolio of equity securities of is-
suers located in countries other than
the United States.
Merrill Lynch Maryland Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Maryland income taxes as is consistent
with prudent investment management.
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Merrill Lynch Massachusetts
Limited Maturity Municipal Bond
Fund.............................. A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and Massachusetts income
taxes as is consistent with prudent in-
vestment management through investment
in a portfolio primarily of intermedi-
ate-term investment grade Massachusetts
Municipal Bonds.
Merrill Lynch Massachusetts
Municipal Bond Fund...............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Massachusetts income taxes as is consis-
tent with prudent investment management.
Merrill Lynch Michigan Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and Michigan income taxes
as is consistent with prudent investment
management through investment in a port-
folio primarily of intermediate-term in-
vestment grade Michigan Municipal Bonds.
Merrill Lynch Michigan Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Michigan income taxes as is consistent
with prudent investment management.
Merrill Lynch Minnesota Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Minnesota personal income taxes as is
consistent with prudent investment man-
agement.
Merrill Lynch Municipal Bond Fund,
Inc. .............................
Tax-exempt income from three separate di-
versified portfolios of municipal bonds.
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<PAGE>
Merrill Lynch Municipal
Intermediate Term Fund............
Currently the only portfolio of Merrill
Lynch Municipal Series Trust, a series
fund, whose objective is to provide as
high a level as possible of income ex-
empt from Federal income taxes by in-
vesting in investment grade obligations
with a dollar weighted average maturity
of five to twelve years.
Merrill Lynch New Jersey Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and New Jersey income taxes
as is consistent with prudent investment
management through a portfolio primarily
of intermediate-term investment grade
New Jersey Municipal Bonds.
Merrill Lynch New Jersey Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
New Jersey income taxes as is consistent
with prudent investment management.
Merrill Lynch New Mexico Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is as high a level of
income exempt from Federal and New Mex-
ico income taxes as is consistent with
prudent investment management.
Merrill Lynch New York Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal, New York State and New
York City income taxes as is consistent
with prudent investment management
through investment in a portfolio pri-
marily of intermediate-term investment
grade New York Municipal Bonds.
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<PAGE>
Merrill Lynch New York Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal, New
York State and New York City income
taxes as is consistent with prudent in-
vestment management.
Merrill Lynch North Carolina
Municipal Bond Fund...............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
North Carolina income taxes as is con-
sistent with prudent investment manage-
ment.
Merrill Lynch Ohio Municipal Bond
Fund..............................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Ohio income taxes as is consistent with
prudent investment management.
Merrill Lynch Oregon Municipal
Bond Fund.........................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Oregon income taxes as is consistent
with prudent investment management.
Merrill Lynch Pacific Fund, Inc. .. Capital appreciation by investing in eq-
uity securities of corporations domi-
ciled in Far Eastern and Western Pacific
countries, including Japan, Australia,
Hong Kong and Singapore.
Merrill Lynch Pennsylvania Limited
Maturity Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income exempt
from Federal and Pennsylvania income
taxes as is consistent with prudent in-
vestment management through investment
in a portfolio of intermediate-term in-
vestment grade Pennsylvania Municipal
Bonds.
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<PAGE>
Merrill Lynch Pennsylvania
Municipal Bond Fund...............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Pennsylvania income taxes as is consis-
tent with prudent investment management.
Merrill Lynch Phoenix Fund, Inc. .. Long-term growth of capital by investing
in equity and fixed income securities,
including tax-exempt securities, of is-
suers in weak financial condition or ex-
periencing poor operating results be-
lieved to be undervalued relative to the
current or prospective condition of such
issuer.
Merrill Lynch Quality Bond A portfolio of Merrill Lynch Retirement
Portfolio..... (available only for Asset Builder Program, Inc., a series
exchanges by certain individual fund, whose objective is to provide a
retirement accounts for which high level of current income through in-
Merrill Lynch acts as custodian) vestment in a diversified portfolio of
debt obligations, such as corporate
bonds and notes, convertible securities,
preferred stocks and governmental obli-
gations.
Merrill Lynch Short-Term Global
Income Fund, Inc. ................
As high a level of current income as is
consistent with prudent investment man-
agement from a global portfolio of high
quality debt securities denominated in
various currencies and multinational
currency units and having remaining ma-
turities not exceeding three years.
Merrill Lynch Special Value Fund,
Inc. .............................
Long-term growth of capital from invest-
ments in securities, primarily common
stocks, of relatively small companies
believed to have special investment
value and emerging growth companies re-
gardless of size.
Merrill Lynch Strategic Dividend
Fund..............................
Long-term total return from investment in
dividend paying common stocks which
yield more than Standard & Poor's 500
Composite Stock Price Index.
Merrill Lynch Technology Fund, Capital appreciation through worldwide
Inc. ............................. investment in equity securities of com-
panies that derive or are expected to
derive a substantial portion of their
sales from products and services in
technology.
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Merrill Lynch Texas Municipal Bond
Fund..............................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal in-
come taxes as is consistent with prudent
investment management by investing pri-
marily in a portfolio of long-term, in-
vestment grade obligations issued by the
State of Texas, its political subdivi-
sions, agencies and instrumentalities.
Merrill Lynch U.S. Government
Securities Portfolio... (available
only for exchanges by certain A portfolio of Merrill Lynch Retirement
individual retirement accounts Asset Builder Program, Inc., a series
for which Merrill Lynch acts fund, whose objective is to provide a
as custodian) high current return through investments
in U.S. Government and government agency
securities, including GNMA mortgage-
backed certificates and other mortgage-
backed government securities.
Merrill Lynch Utility Income Fund,
Inc. .............................
High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in
the ownership or operation of facilities
used to generate, transmit or distribute
electricity, telecommunications, gas or
water.
Merrill Lynch World Income Fund,
Inc. .............................
High current income by investing in a
global portfolio of fixed income securi-
ties denominated in various currencies,
including multinational currencies.
Class A Share Money Market Funds:
Merrill Lynch Ready Assets Trust..........
Preservation of capital, liquidity and
the highest possible current income con-
sistent with the foregoing objectives
from the short-term money market securi-
ties in which the Trust invests.
Merrill Lynch Retirement Reserves
Money Fund (available only for
exchanges within certain
retirement plans).................
Currently the only portfolio of Merrill
Lynch Retirement Series Trust, a series
fund, whose objectives are current in-
come, preservation of capital and li-
quidity available from investing in a
diversified portfolio of short-term
money market securities.
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<PAGE>
Merrill Lynch U.S.A. Government
Reserves..........................
Preservation of capital, current income
and liquidity available from investing
in direct obligations of the U.S. Gov-
ernment and repurchase agreements relat-
ing to such securities.
Merrill Lynch U.S. Treasury Money
Fund..............................
Preservation of capital, liquidity and
current income through investment exclu-
sively in a diversified portfolio of
short-term marketable securities which
are direct obligations of the U.S. Trea-
sury.
Class B, Class C and Class D Share Money Market Funds:
Merrill Lynch Government Fund...... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and se-
curity of principal from investment in
securities issued or guaranteed by the
U.S. Government, its agencies and in-
strumentalities and in repurchase agree-
ments secured by such obligations.
Merrill Lynch Institutional Fund... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide maximum
current income consistent with liquidity
and the maintenance of a high-quality
portfolio of money market securities.
Merrill Lynch InstitutionalTax-
Exempt Fund.......................
A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide current
income exempt from Federal income taxes,
preservation of capital and liquidity
available from investing in a diversi-
fied portfolio of short-term, high qual-
ity municipal bonds.
Merrill Lynch Treasury Fund........ A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and se-
curity of principal from investment in
direct obligations of the U.S. Treasury
and up to 10% of its total assets in re-
purchase agreements secured by such ob-
ligations.
Before effecting an exchange, shareholders of the Fund should obtain a
currently effective prospectus of the fund into which the exchange is to be
made.
To exercise the exchange privilege, shareholders should contact their Merrill
Lynch financial consultant who will advise the Fund of the exchange.
Shareholders of the Fund, and shareholders of the other funds
42
<PAGE>
described above, with shares for which certificates have not been issued may
exercise the exchange privilege by wire through their securities dealers. The
Fund reserves the right to require a properly completed Exchange Application.
This exchange privilege may be modified or terminated in accordance with the
rules of the Securities and Exchange Commission. The Fund reserves the right to
limit the number of times an investor may exercise the exchange privilege.
Certain funds may suspend the continuous offering of their shares at any time
and may thereafter resume such offering from time to time. The exchange
privilege is available only to U.S. shareholders in states where the exchange
legally may be made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute all of its net investment income, if
any. Dividends from such net investment income are paid at least annually. All
net realized long- or short-term capital gains, if any, are distributed to the
Fund's shareholders at least annually. Premiums from expired options written by
the Fund and net gains from closing purchase transactions are treated as short-
term capital gains for Federal income tax purposes. See "Shareholder Services--
Automatic Reinvestment of Dividends and Distributions" in the Prospectus for
information concerning the manner in which dividends and distributions may be
reinvested automatically in shares of the Fund. Dividends and distributions are
taxable to shareholders as described below whether they are invested in shares
of the Fund or received in cash. The per share dividends and distributions on
Class B and Class C shares will be lower than the per share dividends and
distributions on Class A and Class D shares as a result of the account
maintenance, distribution and higher transfer agency fees applicable with
respect to the Class B and Class C shares; similarly, the per share dividends
and distributions on Class D shares will be lower than the per share dividends
and distributions on Class A shares as a result of the account maintenance fees
applicable with respect to the Class D shares. See "Determination of Net Asset
Value".
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not
its shareholders) will not be subject to Federal income tax on the part of its
net ordinary income and net realized capital gains which it distributes to
Class A, Class B, Class C and Class D shareholders (together, the
"shareholders"). The Fund intends to distribute substantially all of such
income.
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures and options)
("capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Any loss upon the sale or exchange of Fund shares held for six months or less,
however, will be treated as long-term capital loss to the extent of any capital
gain dividends received by the shareholder. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and,
43
<PAGE>
after such adjusted tax basis is reduced to zero, will constitute capital
gains to such holder (assuming the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
which was declared in the previous October, November or December to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and
received by its shareholders on December 31 of the year in which such dividend
was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders
are urged to consult their own tax advisers concerning the applicability of
the U.S. withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no taxpayer identification number is
on file with the Fund or who, to the Fund's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalty of perjury that such number is correct and that such investor is not
otherwise subject to backup withholding.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will
be required to include their proportionate shares of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate shares
as taxes paid by them, and deduct such proportionate shares in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation
may be subject to U.S. withholding tax on the income resulting from the Fund's
election described in this paragraph but may not be able to claim a credit or
deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. The Fund will report annually to its shareholders
the amount per share of such withholding taxes. For this purpose, the Fund
will allocate foreign taxes and foreign source income among the Class A, Class
B, Class C and Class D shareholders according to a method (which it believes
is consistent with the Securities and Exchange Commission exemptive order
permitting the issuance and sale of multiple classes of stock) that is based
on the gross income allocable to Class A, Class B, Class C and Class D
shareholders during the taxable year, or such other method as the Internal
Revenue Service may prescribe.
44
<PAGE>
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares into Class D shares. A shareholder's basis in the
Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D
shares will include the holding period of the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of acquiring
such shares, then the loss the shareholder can recognize on the exchange will
be reduced (or the gain increased) to the extent any sales charge paid to the
Fund on the exchanged shares reduces any sales charge the shareholder would
have owed upon the purchase of the new shares in the absence of the exchange
privilege. Instead, such sales charge will be treated as an amount paid for
the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income
and capital gains in the manner necessary to avoid imposition of the 4% excise
tax, there can be no assurance that sufficient amounts of the Fund's taxable
income and capital gains will be distributed to avoid entirely the imposition
of the tax. In such event, the Fund will be liable for the tax only on the
amount by which it does not meet the foregoing distribution requirements.
The Fund may invest in securities rated in the medium to lower rating
categories of nationally recognized rating organizations and in unrated
securities ("high yield/high risk securities"), as described in the
Prospectus. Some of these high yield securities may be purchased at a discount
and may therefore cause the Fund to accrue income before amounts due under the
obligations are paid. In addition, a portion of the interest payments on such
high yield securities may be treated as dividends for Federal income tax
purposes and may be eligible for the dividends received deduction allowed to
domestic corporations under the Code.
Due to investment laws in certain Latin American countries, it is
anticipated that the Fund's investments in equity securities in such countries
will consist primarily of shares of investment companies (or similar
investment entities) organized under foreign law or of ownership interests in
special accounts, trusts or partnerships. The Fund may invest up to 10% of its
total assets in securities of other investment companies. If the Fund
purchases shares of an investment company (or similar investment entity)
organized under foreign law, the Fund will be treated as owning shares in a
passive foreign investment company ("PFIC") for U.S. Federal income tax
purposes. The Fund may be subject to U.S. Federal income tax, and an
additional tax in the nature of interest (the "interest charge"), on a portion
of distributions from such a company and on gain from the disposition of the
shares of such a company (collectively referred to as "excess distributions"),
even if such excess distributions are paid by the Fund as a dividend to its
shareholders. The Fund may be eligible to make an election with respect to
certain PFICs in which it owns shares that will allow it to avoid the taxes on
excess distributions. However, such election may cause the Fund to recognize
income in a particular year in excess of the distributions received from such
PFICs. Alternatively, under proposed regulations the Fund would be able to
elect to "mark to market" at the end of each taxable year all shares that it
holds in PFICs. If it made this election, the Fund would recognize as ordinary
income any increase in the value of such shares.
45
<PAGE>
Unrealized losses, however, would not be recognized. By making the mark-to-
market election, the Fund could avoid imposition of the interest charge with
respect to its distributions from PFICs, but in any particular year might be
required to recognize income in excess of the distributions it received from
PFICs and its proceeds from dispositions of PFIC stock.
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures and forward foreign
exchange contracts. Options and futures contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the
end of each taxable year, i.e., each such option or futures contract will be
treated as sold for its fair market value on the last day of the taxable year.
Unless such contract is a forward foreign exchange contract, or is a non-equity
option or a regulated futures contract for a non-U.S. currency for which the
Fund elects to have gain or loss treated as ordinary gain or loss under Code
Section 988 (as described below), gain or loss from Section 1256 contracts will
be 60% long-term and 40% short-term capital gain or loss. The mark-to-market
rules outlined above, however, will not apply to certain transactions entered
into by the Fund solely to reduce the risk of changes in price or interest or
currency exchange rates with respect to its investments.
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. The
Fund may, nonetheless, elect to treat the gain or loss from certain forward
foreign exchange contracts as capital. In this case, gain or loss realized in
connection with a forward foreign exchange contract that is a Section 1256
contract will be characterized as 60% long-term and 40% short-term capital gain
or loss.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's transactions in options, futures and forward foreign
exchange contracts. Under Section 1092, the Fund may be required to postpone
recognition for tax purposes of losses incurred in certain closing transactions
in options, futures and forward foreign exchange contracts.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting closing transactions within three months
after entering into an option or futures contract.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from "foreign currencies" and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stocks, securities or foreign currencies will be qualifying income for purposes
of determining whether the Fund qualifies as a RIC. It is currently unclear,
however, who will be treated as the issuer of a foreign currency instrument or
how foreign currency options, foreign currency futures and forward foreign
exchange contracts will be valued for purposes of the RIC diversification
requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain debt instruments, from
certain forward contracts, from futures contracts that are not "regulated
futures contracts" and from unlisted options will be treated as
46
<PAGE>
ordinary income or loss under Code Section 988. In certain circumstances, the
Fund may elect capital gain or loss treatment for such transactions. Regulated
futures contracts, as described above, will be taxed under Code Section 1256
unless application of Section 988 is elected by the Fund. In general, however,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income. Additionally, if Code Section 988 losses
exceed other investment company taxable income during a taxable year, the Fund
would not be able to make any ordinary income dividend distributions, and any
distributions made before the losses were realized but in the same taxable year
would be recharacterized as a return of capital to shareholders, thereby
reducing the basis of each shareholder's Fund shares and resulting in a capital
gain for any shareholder who received a distribution greater than the
shareholder's tax basis in Fund shares (assuming the shares were held as a
capital asset). These rules and the mark to market rules described above,
however, will not apply to certain transactions entered into by the Fund solely
to reduce the risk of currency fluctuations with respect to its investments.
The Treasury Department has authority to issue regulations concerning the
recharacterization of principal and interest payments with respect to debt
obligations issued in hyperinflationary currencies, which may include the
currencies of certain Latin American countries in which the Fund intends to
invest. No such regulations have been issued.
----------------
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs which
are derived from interest on U.S. Government obligations. State law varies as
to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present
or prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return data are determined separately for Class A, Class
B, Class C and Class D shares in accordance with a formula specified by the
Commission.
Average annual total return quotations for the specified periods are computed
by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital
47
<PAGE>
gains or losses on portfolio investments over such periods) that would equate
the initial amount invested to the redeemable value of such investment at the
end of each period. Average annual total return is computed assuming all
dividends and distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses, including the maximum sales
charge in the case of Class A and Class D shares and the CDSC that would be
applicable to a complete redemption of the investment at the end of the
specified period in the case of Class B and Class C shares.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that, (i) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted,
and (ii) the maximum applicable sales charges will not be included. Actual
annual or annualized total return data generally will be lower than average
annual total return data since the average rates of return reflect compounding
of return; aggregate total return data generally will be higher than average
annual total return data since the aggregate rates of return reflect
compounding over longer periods of time.
Set forth in the tables below is total return information for the Class A,
Class B, Class C and Class D shares of the Fund for the periods indicated. As
a result of the implementation of the Merrill Lynch Select Pricing SM System,
Class A shares of the Fund outstanding prior to October 21, 1994, were
redesignated Class D shares, and historical performance data pertaining to
such shares are provided below under the caption "Class D Shares".
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- --------------------------
REDEEMABLE REDEEMABLE
EXPRESSED AS VALUE OF A EXPRESSED AS VALUE OF A
A PERCENTAGE HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
BASED ON A $1,000 BASED ON A $1,000
HYPOTHETICAL INVESTMENT HYPOTHETICAL INVESTMENT
$1,000 AT THE END OF $1,000 AT THE END OF
PERIOD INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ------------ ------------- ------------ -------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -60.47% $903.30
One Year Ended November
30, 1994............... 16.19% $1,161.90
Inception (September 27,
1991) to November 30,
1994................... 19.84% $1,777.30
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -4.67% $953.30
One Year Ended November
30, 1994............... 20.19% $1,201.90
One Year Ended November
30, 1993............... 49.80% $1,498.00
One Year Ended November
30, 1992............... 1.30% $1,013.00
Inception (September 27,
1991) to November 30,
1991................... -2.00% $ 980.00
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -9.67% $903.30
Inception (September 27,
1991) to November 30,
1994................... 77.73% $1,777.30
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS D
-------------------------- --------------------------
REDEEMABLE REDEEMABLE
EXPRESSED AS VALUE OF A EXPRESSED AS VALUE OF A
A PERCENTAGE HYPOTHETICAL A PERCENTAGE HYPOTHETICAL
BASED ON A $1,000 BASED ON A $1,000
HYPOTHETICAL INVESTMENT HYPOTHETICAL INVESTMENT
$1,000 AT THE END OF $1,000 AT THE END OF
PERIOD INVESTMENT THE PERIOD INVESTMENT THE PERIOD
------ ------------ ------------- ------------ -------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -41.49% $943.00
One Year Ended November
30, 1994............... 14.71% $1,147.10
Inception (September 27,
1991) to November 30,
1994................... 18.93% $1,734.90
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -4.75% $952.50
One Year Ended November
30, 1994............... 21.07% $1,210.70
One Year Ended November
30, 1993............... 50.86% $1,508.60
One Year Ended November
30, 1992............... 2.19% $1,021.90
Inception (September 27,
1991) to November 30,
1991................... -1.90% $ 981.00
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994) to November 30,
1994................... -5.70% $943.00
Inception (September 27,
1991) to November 30,
1994................... 73.49% $1,734.90
</TABLE>
In order to reflect the reduced sales charges in the case of Class A or Class
D shares, or the waiver of the CDSC in the case of Class B or Class C shares
applicable to certain investors, as described under "Purchase of Shares" and
"Redemption of Shares", respectively, the total return data quoted by the Fund
in advertisements directed to such investors may take into account the reduced,
and not the maximum, sales charges, or may not take into account the CDSC and
therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses is deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund was incorporated under Maryland law on July 1, 1991. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and
Class D Common Stock, each of which consists of 100,000,000 shares. Class A,
Class B, Class C and Class D Common Stock represent an interest in the same
assets of the Fund and are identical in all respects except that the Class B,
Class C and Class D shares bear certain expenses related to the account
maintenance and/or distribution fees, and have exclusive voting rights with
respect to matters relating to such account maintenance and/or distribution
expenditures. The Fund has received an order from the Commission permitting the
issuance and sale of multiple classes of Common Stock. The Board of Directors
of the Fund may classify and reclassify the shares of the Fund into additional
classes of Common Stock at a future date.
Shareholders 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 shareholder vote. The Fund
49
<PAGE>
does not intend to hold meetings of shareholders in any year in which the
Investment Company Act does not require shareholders to act upon any of the
following matters: (i) election of Directors; (ii) approval of a management
agreement; (iii) approval of a distribution agreement; and (iv) ratification
of selection of independent accountants. Also, the by-laws of the Fund require
that a special meeting of stockholders be held upon the written request of at
least 10% of the outstanding shares of the Fund entitled to vote at such
meeting. Voting rights for Directors are not cumulative. Shares issued are
fully paid and non-assessable and have no preemptive rights. Redemption and
conversion rights are discussed elsewhere herein and in the Prospectus. Each
share is entitled to participate equally in dividends and distributions
declared by the Fund and in the net assets of the Fund upon liquidation or
dissolution after satisfaction of outstanding liabilities, except that
expenses related to the distribution of the shares of a class will be borne
solely by such class. Stock certificates are issued by the transfer agent only
on specific request. Certificates for fractional shares are not issued in any
case.
The Manager provided the initial capital for the Fund by purchasing 5,000
Class A shares of Common Stock and 5,000 Class B shares of Common Stock for an
aggregate of $100,000. Such shares were acquired for investment and can only
be disposed of by redemption. The organizational expenses of the Fund
(estimated at approximately $125,909) will be paid by the Fund and amortized
over a period not exceeding five years. The proceeds realized by the Manager
upon redemption of any of such shares will be reduced by the proportionate
amount of the unamortized organizational expenses which the number of shares
redeemed bears to the number of shares initially purchased.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class A, Class
B, Class C and Class D shares of the Fund based on the value of the Fund's net
assets on November 30, 1994, and its shares outstanding on that date is set
forth below. The offering price for Class B and Class C shares of the Fund is
the net asset value of Class B and Class C shares, respectively.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Assets.................... $10,350,102 $937,220,632 $5,068,944 $204,907,088
=========== ============ ========== ============
Number of Shares Outstanding.. 595,793 54,377,561 294,107 11,797,523
=========== ============ ========== ============
Net Asset Value Per Share (net
assets divided by number of
shares outstanding).......... $ 17.37 $ 17.24 $ 17.24 $ 17.37
Sales Charge (for Class A and
Class D shares: 5.25% of
offering price (5.54% of net
amount invested))*........... 0.96 ** ** 0.96
----------- ------------ ---------- ------------
Offering Price................ $ 18.33 $ 17.24 $ 17.24 $ 18.33
=========== ============ ========== ============
</TABLE>
--------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
** Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemptions of shares. See "Purchase of
Shares--Deferred Sales Charge Alternatives--Class B and Class C Shares" in
the Prospectus and "Redemption of Shares--Deferred Sales Charges--Class B
and Class C Shares" herein.
50
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the Fund's shareholders. The
independent auditors are responsible for auditing the annual consolidated
financial statements of the Fund.
CUSTODIAN
The Chase Manhattan Bank, N.A., Global Securities Services, 4 Chase Metrotech
Center, 18th Floor, Brooklyn, New York 11245, acts as the custodian of the
Fund's assets (the "Custodian"). Under its contract with the Fund, the
Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by the Fund to be held in its offices
outside the U.S. and with certain foreign banks and securities depositories.
The Custodian is responsible for safeguarding and controlling the Fund's cash
and securities, handling the receipt and delivery of securities and collecting
interest and dividends on the Fund's investments.
TRANSFER AGENT
Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Fund's
transfer agent (the "Transfer Agent"). The Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening, maintenance
and servicing of shareholder accounts. See "Management of the Fund--Transfer
Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on November 30 of each year. The Fund sends
to its shareholders at least semi-annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements
audited by independent auditors, is sent to shareholders each year. After the
end of each year, shareholders will receive Federal income tax information
regarding dividends and capital gains distributions.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto, which the Company has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act and the Investment
Company Act, to which reference is hereby made.
Under a separate agreement, Merrill Lynch has granted the Fund the right to
use the "Merrill Lynch" name and has reserved the right to withdraw its consent
to the use of such name by the Fund at any time or to grant the use of such
name to any other company, and the Fund has granted Merrill Lynch, under
certain conditions, the use of any other name it might assume in the future,
with respect to any corporation organized by Merrill Lynch.
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on February 28, 1995.
51
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Merrill Lynch Latin America Fund,
Inc.:
We have audited the accompanying consolidated statement of assets and
liabilities, including the consolidated schedule of investments, of Merrill
Lynch Latin America Fund, Inc. and its subsidiary as of November 30, 1994, the
related consolidated statements of operations for the year then ended and
consolidated changes in net assets for each of the years in the two-year period
then ended, and the consolidated financial highlights for the three-year period
then ended and the period September 27, 1991 (commencement of operations) to
November 30, 1991. These consolidated financial statements and the consolidated
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the consolidated financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. Our procedures included confirmation of securities owned
at November 30, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements and consolidated
financial highlights present fairly, in all material respects, the financial
position of Merrill Lynch Latin America Fund, Inc. and its subsidiary as of
November 30, 1994, the results of their operations, the changes in their net
assets, and the consolidated financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 18, 1995
52
<PAGE>
[This page is intentionally left blank.]
53
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Automotive 1,180,882 Compania Interamericana de
Automoviles S.A. $ 16,206,638 $ 13,116,972 1.1%
Banking 600,099 Banco de Galicia y Buenos
Aires S.A. (ADR) (2) 3,250,066 3,543,064 0.3
59,512 Banco de Galicia y Buenos Aires S.A.
(Preferred) (ADR) (2) 1,049,513 1,361,349 0.1
185,000 Banco del Sud S.A. 3,224,461 2,017,912 0.2
658,180 Banco Frances del Rio de la Plata
S.A. 3,854,286 5,730,177 0.5
-------------- -------------- ------
11,378,326 12,652,502 1.1
Beverages 1,746 Buenos Aires Embotelladora S.A.
(BAESA) 1,759,894 3,407,085 0.3
91,000 Buenos Aires Embotelladora S.A.
(BAESA) (ADR) (2) 2,575,194 3,526,250 0.3
-------------- -------------- ------
4,335,088 6,933,335 0.6
Food 156,103 ++Quilmes Industrial S.A. 1,684,480 4,128,925 0.4
Oil & Related 4,790,880 Astra Compania Argentina de
Petroleo S.A. 11,024,264 9,300,818 0.8
1,968,621 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A. 11,151,188 9,554,500 0.8
519,700 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR) (2) 13,162,011 11,758,211 1.0
-------------- -------------- ------
35,337,463 30,613,529 2.6
Real Estate 1,203,565 Inversiones y Representaciones
S.A. (IRSA) 3,138,864 3,565,048 0.3
Retail 132,744 Grimoldi S.A. (Class B) 1,197,811 1,062,696 0.1
Telecommunications 866,000 Telecom Argentina Stet--France
Telecom S.A. 5,307,028 4,852,997 0.4
</TABLE>
54
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
270,580 ++Telecom Argentina Stet--France
Telecom S.A. (ADR) (2) 15,682,783 14,949,545 1.3
525,000 Telefonica de Argentina S.A. 3,009,246 2,968,328 0.3
70,276 Telefonica de Argentina S.A.
(ADR) (2) 2,132,935 3,909,101 0.3
-------------- -------------- ------
26,131,992 26,679,971 2.3
Tobacco 49,980 Massalin Particulares S.A. 508,374 575,173 0.1
Utilities 9,500 ++Central Costanera S.A. (Class B) 228,000 292,125 0.0
1,049,000 ++Transportadora de Gas del Sur S.A.
(ADR) (2) 13,793,192 11,670,125 1.0
-------------- -------------- ------
14,021,192 11,962,250 1.0
Total Long-Term Investments in
Argentina 113,940,228 111,290,401 9.6
Brazil Appliances & 29,375,500 Brasmotor Group S.A. (Preferred) 8,255,333 12,515,006 1.1
Household 1,026,160 Multibras S.A. (Preferred) 527,444 1,700,147 0.1
Durables 1,024,800,000 Refrigeracao Parana S.A.
(Preferred) 3,336,860 3,638,343 0.3
-------------- -------------- ------
12,119,637 17,853,496 1.5
Automotive 802,300 CAPCO Automotive Products Corp.
S.A. (ADR) (2) 9,471,368 10,429,900 0.9
1,062,000 Confab Industrial S.A. 1,909,375 2,199,408 0.2
-------------- -------------- ------
11,380,743 12,629,308 1.1
Banking 1,886,253,276 Banco Bradesco S.A. (Preferred) 14,882,870 15,402,540 1.3
15,500,400 Banco Itau S.A. (Preferred) 2,460,710 4,402,480 0.4
380,329,908 Banco Nacional S.A. PN 10,068,684 10,127,128 0.9
17,237,154 Uniao de Bancos Brasileiros
S.A. (UNIBANCO) 397,694 467,138 0.0
-------------- -------------- ------
27,809,958 30,399,286 2.6
Beverages 18,467,072 Companhia Cervejaria Brahma
S.A. (Preferred) 3,657,137 6,490,793 0.6
1,880,905 +++Companhia Cervejaria Brahma S.A.
(Warrants) (a) 48,935 2,696 0.0
-------------- -------------- ------
3,706,072 6,493,489 0.6
Building & 547,000 Companhia Cimento Portland
Construction Itau S.A. PN 134,354 233,041 0.0
Electrical & 719,202 Companhia Energetica de Sao Paulo
Electronics S.A. (CESP) (Preferred) (ADR) (2) 482,578 1,131,764 0.1
43,052,000 Light-Servicios de Electricidade
S.A. 15,464,872 17,832,699 1.5
-------------- -------------- ------
15,947,450 18,964,463 1.6
Energy 271,000,000 +++Companhia Brasil Petro Ipiranga
S.A. (Preferred) 4,473,022 5,269,266 0.5
Food 70,800,000 Ceval Alimentos S.A. 1,075,155 1,214,911 0.1
12,275,410 Sadia Concordia S.A. Industria e
Comercio (Preferred) 10,627,282 18,376,797 1.6
-------------- -------------- ------
11,702,437 19,591,708 1.7
Forest Products 364,851 Aracruz Celulose S.A. (Preferred) 647,358 969,338 0.1
& Papers 19,626 Bardella Industrial S.A.
(Preferred) 4,974,191 4,645,207 0.4
519,000 Industrias Klabin de Papel e
Celulose S.A. (Preferred) 746,632 909,018 0.1
16,802,000 MelPaper S.A. (Preferred) 10,233,320 11,331,905 1.0
-------------- -------------- ------
16,601,501 17,855,468 1.6
Machinery 8,709,000 Iochpe-Maxion S.A. (Ordinary) 3,583,312 5,204,787 0.4
33,699,765 Iochpe-Maxion S.A. (Preferred) 13,685,869 24,527,048 2.1
6,273,000 +++Weg Exportadora S.A. (Preferred) 3,432,249 4,298,304 0.4
-------------- -------------- ------
20,701,430 34,030,139 2.9
Metals & Steel 312,000 ++Companhia Siderurgica de Tubarao
S.A. (CST) 9,862,065 11,388,000 1.0
</TABLE>
55
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Mining 88,191,200 Companhia Vale do Rio Doce S.A. $ 10,390,543 $ 16,907,661 1.5%
(concluded)
Oil & Related 55,520,000 Petroleo Brasileiro S.A. 7,056,177 8,081,610 0.7
Retail 4,188,934 Casa Anglo Brasileira S.A. 865,347 1,140,183 0.1
118,564,600 Lojas Americanas S.A. 2,125,943 4,209,394 0.4
13,896,600 Mesbla S.A. 3,127,325 2,713,538 0.2
-------------- -------------- ------
6,118,615 8,063,115 0.7
Steel 3,192,700 Acos Industria Villares S.A. 714,377 812,344 0.1
272,560,000 Companhia Metalurgica Barbara S.A. 267,267 387,068 0.0
191,318,000 Companhia Siderurgica Nacional
S.A.--CSN 6,838,186 8,603,649 0.7
12,844,682,013 Usinas Siderurgicas de Minas
Gerais-Usiminas S.A. (Preferred) 7,655,752 20,369,084 1.8
-------------- -------------- ------
15,475,582 30,172,145 2.6
Tele- 260,267 ++Telecomunicacoes Brasileiras
communications S.A.--Telebras (ADR) (2) 12,136,746 12,232,549 1.1
33,197,615 Telecomunicacoes Brasileiras
S.A.--Telebras (Ordinary) 1,178,023 1,273,295 0.1
266,134,366 Telecomunicacoes Brasileiras
S.A.--Telebras(Preferred) 11,845,357 12,755,553 1.1
60,723,102 Telecomunicacoes de Minejeros
S.A.--TELEMIG (Ordinary) 2,682,475 3,233,775 0.3
5,641,975 Telecomunicacoes de Minejeros
S.A.--TELEMIG (Preferred) 290,003 263,069 0.0
44,862,077 Telecomunicacoes de Sao Paulo
S.A.--TELESP (Preferred) 14,927,430 19,909,206 1.7
4,430,936 Telecomunicacoes Parana
S.A.-TELEPAR (Preferred) 754,996 1,651,769 0.1
-------------- -------------- ------
43,815,030 51,319,216 4.4
Textiles 873,000 Brasperola Industria e
Comercio S.A. 931,692 1,157,113 0.1
3,697,363 Companhia de Tecidos Norte de
Minas S.A. 895,127 1,378,306 0.1
-------------- -------------- ------
1,826,819 2,535,419 0.2
Transportation 165,000 Marcopolo S.A. Carrocerias E Onibus
'B' (Preferred) 25,066 42,178 0.0
Utilities 17,940,467 Centrais Eletricas Brasileiras S.A.
--Eletrobras 'B' (Preferred) 4,664,934 6,220,777 0.5
4,387,500 Centrais Eletricas da Santa Catarina
S.A (CELESC) 'B' (Preferred) 764,541 4,460,193 0.4
34,321,009 Companhia Energetica de Minas Gerais
S.A. (CEMIG) 1,625,256 3,553,950 0.3
30,000 Companhia Energetica de Minas Gerais
S.A. (CEMIG) (ADR) (2) 638,750 787,500 0.1
203,820,000 Companhia Paulista de Forca e
Luz S.A. 11,896,752 18,572,947 1.6
-------------- -------------- ------
19,590,233 33,595,367 2.9
Total Long-Term Investments
in Brazil 238,736,734 325,424,375 28.1
Chile Apparel 1,206,231 Bata Chile S.A. 340,424 270,725 0.0
</TABLE>
56
<PAGE>
<TABLE>
<S> <S> <C> <S> <C> <C> <C>
Banking 202,900 Banco O'Higgins S.A. (ADR) (2) 3,101,779 3,804,375 0.3
Beverages 35,891 Embotelladora Andina S.A. 134,130 161,107 0.0
384,000 Vina Concha y Toro S.A. (ADR) (2) 7,296,950 6,912,000 0.6
4,084,632 Vina Concha y Toro S.A. 1,694,797 1,558,475 0.1
-------------- -------------- ------
9,125,877 8,631,582 0.7
Building & 338,225 Empresas Pizarreno S.A. 644,310 683,197 0.1
Construction 426,700 Maderas y Sinteticos S.A. (MASISA)
(Foreign) (ADR) (2) 10,835,658 12,000,938 1.0
128,445 Maderas y Sinteticos S.A.
(MASISA) (Ordinary) 57,151 123,320 0.0
-------------- -------------- ------
11,537,119 12,807,455 1.1
Chemicals 417,300 Sociedad Quimica y Minera de Chile
S.A. (ADR) (2) 13,363,054 11,684,400 1.0
Closed-End Funds 67,984 The Chile Fund, Inc. 1,993,436 3,178,252 0.3
Food & Household 138,650 Cristalerias de Chile S.A. (ADR) (2) 3,035,094 2,582,356 0.2
Products
Multi-Industry 170,000 Antofagasta Holdings PLC 933,338 891,666 0.1
509,056 +++Forestal Terranova S.A. 874,786 952,100 0.1
-------------- -------------- ------
1,808,124 1,843,766 0.2
Pharmaceutical 2,838,804 Laboratorio Chile S.A. (LABCHILE) 2,115,737 3,150,294 0.3
Publishing 2,509,443 Editorial Lord Cochrane S.A. 1,438,815 1,439,332 0.1
Retail Sales 400,000 Santa Isabel S.A. 281,952 349,127 0.0
Steel 509,056 Compania de Acero del Pacifico S.A.
de Inv. (CAP) 1,641,453 2,570,669 0.2
509,056 +++Invercap S.A. 363,675 685,512 0.1
-------------- -------------- ------
2,005,128 3,256,181 0.3
Tele- 307,225 Compania de Telefonos de Chile S.A.
communications (ADR) (2) 33,202,226 26,421,350 2.3
213,118 Empresa Nacional de Telecomunica-
ciones S.A. (Entel) 1,449,275 1,931,880 0.2
51,300 Empresas Telex-Chile S.A. 963,927 647,662 0.1
-------------- -------------- ------
35,615,428 29,000,892 2.6
Utilities 5,670,011 Empresa Nacional de Electricidad
S.A.--ENDESA 2,358,605 5,344,798 0.5
34,000 Enersis S.A. (ADR) (2) 618,250 1,015,750 0.1
-------------- -------------- ------
2,976,855 6,360,548 0.6
Total Long-Term Investments
in Chile 88,738,822 88,359,285 7.7
Colombia Banking 402,160 Banco de Bogota S.A. 1,449,888 2,182,226 0.2
10,357,000,000 Banco de Colombia S.A. 974,828 549,511 0.1
-------------- -------------- ------
2,424,716 2,731,737 0.3
Beverages & 587,154 La Compania Cervecera Bavaria S.A. 3,401,356 2,088,634 0.2
Tobacco
Building Products 90,000 Cementos Diamante S.A. 590,537 548,053 0.1
227,500 ++Cementos Diamante S.A. (ADR) (2) 3,785,350 5,175,625 0.4
155,000 +++Cementos Paz Del Rio S.A. (ADR) (2) 3,795,375 3,332,500 0.3
250,137 ++/+++Cementos Paz Del Rio S.A. 373,681 361,949 0.0
-------------- -------------- ------
8,544,943 9,418,127 0.8
Forest Products 550,000 Papeles Nacionales S.A. 9,900,000 8,456,250 0.7
&Paper
Merchandising 258,171 Carulla y CIA S.A. 3,218,691 3,113,120 0.3
367,850 ++Carulla y CIA S.A. (ADR) (2) 4,597,371 6,069,525 0.5
-------------- -------------- ------
7,816,062 9,182,645 0.8
</TABLE>
57
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Columbia Retail 1,428,814 Gran Cadena de Almacenes
(concluded) Colombianos S.A. (CADENALCO) $ 4,043,018 $ 2,588,681 0.2%
Tobacco 69,200 La Compania Colombiano de Tabaco
S.A. (COLTABACO) 356,988 233,643 0.0
Total Long-Term Investments
in Colombia 36,487,083 34,699,717 3.0
Ecuador Building Materials 40,000 ++La Cemento Nacional C.A. 7,915,328 15,000,000 1.3
Total Long-Term Investments
in Ecuador 7,915,328 15,000,000 1.3
Mexico Banking US$ 10,000,000 Bonos de la Tesoreria de la
Federacion, 8.135% due 8/10/1995 9,470,863 9,450,099 0.8
950,000 Grupo Financiero Asemex Banpais
S.A. de C.V. 9,500,000 6,768,750 0.6
1,918,500 Grupo Financiero Banamex-Accival,
S.A. de C.V. 18,565,861 13,506,240 1.1
144,800 ++Grupo Financiero Bancomer, S.A.
de C.V. (ADR) (2) 4,418,248 3,402,800 0.3
758,080 Grupo Financiero Probursa, S.A.
de C.V. 'C' 806,262 562,358 0.1
-------------- -------------- ------
42,761,234 33,690,247 2.9
Beverages & 89,000 ++Fomento Economico Mexicano, S.A.
Tobacco de C.V. (Femsa) (ADR) (2) 551,177 373,800 0.0
228,250 ++Grupo Embotellador de Mexico,
S.A. de C.V. (GGEMEX) (ADR) (2) 4,779,776 5,449,469 0.5
180,000 Grupo Embotellador de Mexico, S.A.
de C.V. (GGEMEX) (Ordinary) 3,310,000 2,144,291 0.2
-------------- -------------- ------
8,640,953 7,967,560 0.7
Broadcasting & 2,320,000 Grupo Fernandez Editores,
Publishing S.A. de C.V. 3,378,804 3,846,982 0.3
Building & 877,000 Apasco, S.A. de C.V. 'A' 3,697,786 8,329,906 0.7
Construction 67,500 Bufete Industrial, S.A.
de C.V. (ADR) (2) 1,552,500 2,607,188 0.2
332,000 ++Corporacion Geo S.A. de C.V.
(PYP) (ADR) (2) 9,485,500 8,964,000 0.8
660,087 Grupo Tribasa, S.A. de C.V.
(ADR) (2) 17,292,131 21,700,360 1.9
1,971,500 Tolmex, S.A. de C.V. 'B' 21,710,606 28,733,717 2.5
-------------- -------------- ------
53,738,523 70,335,171 6.1
Building Materials 162,000 ++Cementos Mexicanos, S.A. de C.V.
(Class B) (Cemex) (ADR) (2) 2,912,366 3,118,500 0.3
2,618,999 Cementos Mexicanos, S.A. de C.V.
Nom 'B' (Cemex) 20,270,004 25,142,390 2.2
-------------- -------------- ------
23,182,370 28,260,890 2.5
Chemicals 972,300 Grupo Cydsa, S.A. de C.V. 3,467,300 4,491,672 0.4
Construction & 433,000 Empresas Ica Sociedad S.A. de C.V. 13,569,243 13,368,875 1.2
Housing
Engineering & 108,641 Grupo Mexicano de Desarrollo,
Construction S.A. de C.V. (Class B) 1,917,096 2,009,859 0.2
146,051 Grupo Mexicano de Desarrollo,
S.A. de C.V. (Class L) (ADR) (2) 2,589,809 3,030,558 0.3
378,000 +++Grupo Profesional Planeacion y
Proyectos S.A. de C.V. (PYP)
(Class B) 5,457,192 5,091,316 0.4
-------------- -------------- ------
9,964,097 10,131,733 0.9
</TABLE>
58
<PAGE>
<TABLE>
<S> <S> <C> <S> <C> <C> <C>
Financial Services 380,000 Grupo Financiero (GBM) Atlantico,
S.A. de C.V. 2,270,875 1,824,000 0.2
220,000 Grupo Financiero (GBM) Atlantico,
S.A. de C.V. 'L' 4,742,022 4,015,000 0.3
US$ 8,500,000 ++Grupo Financiero InverMexico,
S.A. de C.V., 7.50% due 6/16/2001 8,500,000 6,205,000 0.5
598,900 Servicios Financieros Quadrum,
S.A. de C.V. (ADR) (2) 10,631,217 8,160,012 0.7
-------------- -------------- ------
26,144,114 20,204,012 1.7
Food & Household 3,253,846 Grupo Herdez, S.A. de C.V. 'A' 3,295,834 2,792,391 0.2
Products 5,012,461 Grupo Herdez, S.A. de C.V. 'B' 6,285,722 4,301,603 0.4
3,544,189 Grupo Industrial Maseca,
S.A. de C.V. 'B2' 5,064,889 5,464,495 0.5
372,518 +++Sigma Alimentos S.A. de C.V. 6,625,947 6,231,210 0.5
-------------- -------------- ------
21,272,392 18,789,699 1.6
Foreign Government Mexican Cetes (Certificados de la
Obligations Tesoreria de la Federacion):
US$ 35,338,660 4.68% due 1/12/1995 10,186,286 10,105,315 0.9
36,551,400 0.29% due 4/12/1995 10,190,584 10,092,482 0.8
35,919,832 Nafinsa, 15.25% due 12/29/1994 10,441,987 10,291,703 0.9
-------------- -------------- ------
30,818,857 30,489,500 2.6
Glass 1,525,938 Vitro, S.A. de C.V. 10,964,952 10,831,385 0.9
Manufacturing 546,205 Vitro, S.A. de C.V. (ADR) (2) 11,442,063 11,470,305 1.0
-------------- -------------- ------
22,407,015 22,301,690 1.9
Health & 1,422,250 Kimberly-Clark de Mexico,
Personal Care S.A. de C.V. 'A' 19,522,564 27,720,945 2.4
940,500 Nacional de Drogos, S.A. de C.V.
(Nadro) 'L' 3,973,720 6,976,800 0.6
-------------- -------------- ------
23,496,284 34,697,745 3.0
Leisure 1,882,500 Grupo Posadas, S.A. de C.V. 'A' 1,819,673 1,916,727 0.2
434,300 ++Grupo Posadas, S.A. de C.V.
(ADR) (2) 6,723,293 8,794,575 0.8
542,000 Grupo Situr, S.A. de C.V. 1,866,098 1,731,247 0.1
547,040 ++Grupo Situr, S.A. de C.V.
(ADR) (2) 7,514,491 16,342,820 1.4
-------------- -------------- ------
17,923,555 28,785,369 2.5
Merchandising 134,500 Controladora de Farmacias,
S.A. de C.V. (COFAR) 199,610 117,382 0.0
626,000 Farmacias Benavides, S.A. de C.V. 2,807,047 2,203,520 0.2
1,418,000 Grupo Empresarial Fenix,
S.A. de C.V. Elektra 'L' Shares 13,024,645 15,469,091 1.3
-------------- -------------- ------
16,031,302 17,789,993 1.5
Metals & Steel 250,000 Grupo Sidek, S.A. de C.V. 'B' 1,110,815 1,069,091 0.1
284,600 Grupo Simec, S.A. de C.V. (ADR) (2) 7,794,957 6,545,800 0.5
1,830,000 Grupo Simec, S.A. de C.V.
(Ordinary) 1,645,949 2,182,691 0.2
337,500 Hylsamex S.A. de C.V. 7,792,694 8,015,625 0.7
402,000 Tubos de Acero de Mexico,
S.A. de C.V. (Tamsa) 3,433,417 1,988,073 0.2
-------------- -------------- ------
21,777,832 19,801,280 1.7
Multi-Industry 607,400 Desc Sociedad de Fomento Industrial
S.A. de C.V. (Class B) 5,072,389 4,770,851 0.4
1,167,000 Desc Sociedad de Fomento Industrial,
S.A. de C.V. 8,735,843 8,657,018 0.7
83,000 ++Grupo Carso, S.A. de C.V. 'A' 1,620,823 1,867,500 0.2
3,888,500 Grupo Carso, S.A. de C.V. (ADR) (2) 37,222,784 43,777,440 3.8
-------------- -------------- ------
52,651,839 59,072,809 5.1
</TABLE>
59
<PAGE>
<TABLE>
CONSOLIDATED SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico Retail 5,571,000 Cifra, S.A. de C.V. 'C' $ 11,683,065 $ 15,136,913 1.3%
(concluded) 860,000 Controladora Comercial Mexicana,
S.A. de C.V. (COMERCI) 1,414,574 1,506,094 0.1
2,490,000 El Puerto de Liverpool, S.A. de C.V.
(Non-Voting) (Series C1) 3,335,548 3,694,255 0.3
7,420,000 Grupo Gigante, S.A. de C.V. 5,559,608 3,885,382 0.3
287,500 Sears Roebuck de Mexico, S.A.
de C.V. 'B' 3,194,381 2,994,182 0.3
547,500 ++Sears Roebuck de Mexico, S.A.
de C.V. 'B' (ADR) (2) 14,403,127 11,223,750 1.0
-------------- -------------- ------
39,590,303 38,440,576 3.3
Transportation 107,000 Transportacion Maritima Mexicana,
S.A. de C.V. 'L' (TMM) 1,192,663 815,534 0.1
Tele- 701,400 Telefonos de Mexico,
communications S.A. de C.V. (ADR) (2) 43,706,765 37,174,200 3.2
Total Long-Term Investments
in Mexico 475,715,445 500,455,537 43.2
Panama Banking 80,000 Banco Latinoamericano de
Exportaciones, S.A. ('BLADEX')
'E' 1,992,245 2,500,000 0.2
Beverages & Tobacco 232,860 Panamerican Beverages Inc.
(Class A) 7,228,155 8,150,100 0.7
Total Long-Term Investments
in Panama 9,220,400 10,650,100 0.9
Peru Banking 2,441,382 Banco de Credito de Peru S.A. 2,685,608 5,374,076 0.4
2,189,407 Banco Wiese Limitado S.A. 8,225,925 11,292,359 1.0
-------------- -------------- ------
10,911,533 16,666,435 1.4
Beverages 61,231 Cerveceria Backus and Johnston S.A. 111,704 137,040 0.0
Building Materials 610,744 Cementos Lima S.A. 607,035 1,355,647 0.1
Food & Household
Products 2,652,078 La Fabril S.A. 5,840,045 4,470,000 0.4
Mining 2,211,480 Southern Peru Copper Corp. S.A. 7,823,850 13,646,711 1.2
Total Long-Term Investments in Peru 25,294,167 36,275,833 3.1
Uruguay Banking 59,500 +++Banco Commercial S.A. 1,145,375 1,100,750 0.1
Total Long-Term Investment
in Uruguay 1,145,375 1,100,750 0.1
Venezuela Building & 937,173 Corporacion Ceramica Carabobo
Construction S.A. 'B' 2,294,951 1,105,352 0.1
941,015 Corporacion Ceramica Carabobo
S.A. C.A. 2,606,928 879,583 0.1
-------------- -------------- ------
4,901,879 1,984,935 0.2
Building Materials 445,899 Venezolana de Cementos S.A.C.A.
(Vencemos) 616,435 670,545 0.1
Food & Household 10,052,924 Mavesa S.A. 2,587,935 2,608,531 0.2
Products 366,666 ++Mavesa S.A. (ADR) (2) 4,010,625 1,695,830 0.1
380,000 Mavesa S.A. (ADR) (2) 3,519,375 1,757,500 0.2
-------------- -------------- ------
10,117,935 6,061,861 0.5
Foreign US$ 5,750,000 Republic of Venezuela,
Government Floating Rate Notes,
Obligations 5.75% due 12/18/2007 (1) 4,300,625 2,702,500 0.2
Multi-Industry 1,837,882 Venaseta S.A. 482,719 186,964 0.0
</TABLE>
60
<PAGE>
<TABLE>
<S> <S> <C> <S> <C> <C> <C>
2,297,352 Venaseta S.A. 'B' Shares 406,659 237,092 0.0
-------------- -------------- ------
889,378 424,056 0.0
Steel 108,000 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.-S.A.C.A. 20,749 26,782 0.0
216,000 Siderurgica Venezolana SIVENSA,
S.A.I.C.A.-S.A.C.A. (ADR) (2) 1,231,384 216,000 0.0
169,940 ++Venezolana de Prerreducidos Caroni
Venprecar C.A. (GDS) (3) 1,236,470 987,776 0.1
-------------- -------------- ------
2,488,603 1,230,558 0.1
Utilities 8,634,374 C.A. La Electricidad de Caracas
S.A.I.C.A.-S.A.C.A. 19,686,959 11,102,938 1.0
Total Long-Term Investments
in Venezuela 43,001,814 24,177,393 2.1
Total Long-Term Investments
in Latin America 1,040,195,396 1,147,433,391 99.1
Short-Term Investments
United Commercial Paper* US$ 7,224,000 General Electric Capital Corp.,
States 5.70% due 12/01/1994 7,224,000 7,224,000 0.6
Total Short-Term Investments 7,224,000 7,224,000 0.6
Total Investments $1,047,419,396 1,154,657,391 99.7
-------------- -------------- ------
Other Assets Less Liabilities 2,889,375 0.3
-------------- ------
Net Assets $1,157,546,766 100.0%
============== ======
<FN>
(1)The interest rate is subject to change periodically
based on the change in the LIBOR (London
Interbank Offered Rate). The interest rate shown
is the rate in effect as of November 30, 1994.
(2)American Depositary Receipt (ADR).
(3)Global Depositary Shares (GDS).
*Commercial Paper is traded on a discount basis;
the interest rates shown are the discount rates
paid at the time of purchase by the Fund.
(a)Warrants entitle the Fund to purchase a predeter-
mined number of shares of Common Stock. The
purchase price and number of shares are subject
to adjustment under certain conditions until the
expiration date.
+++Non-income producing security.
++Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately
$149,694,000, representing 12.9% of net assets.
<CAPTION>
Issue Acquisition Value
Date Cost (Note 1a)
<S> <C> <C> <C>
Carulla S.A. (ADR) 6/23/1994 $ 4,597,371 $ 6,069,525
Cementos Diamante S.A. 5/17/1994 3,785,350 5,175,625
Cementos Paz Del Rio S.A. 9/22/1994 373,681 361,949
Cementos Mexicanos, S.A. de C.V. (Class B) (Cemex) (ADR) 1/24/1994 2,912,366 3,118,500
Central Costanera S.A. (Class B) 12/17/1993 228,000 292,125
Companhia Siderurgica de Tubarao S.A. (CST) 7/20/1994 9,862,065 11,388,000
Corporacion Geo S.A. de C.V. (PYP) (ADR) 9/28/1994 9,485,500 8,964,000
Fomento Economico Mexicano, S.A. de C.V. (Femsa) (ADR) 11/18/1993 551,177 373,800
Grupo Carso, S.A. de C.V. 'A' 5/13/1994 1,620,823 1,867,500
Grupo Embotellador de Mexico, S.A. de C.V. (GGEMEX) (ADR) 6/14/1994 4,779,776 5,449,469
Grupo Financiero Bancomer, S.A. de C.V. (ADR) 3/16/1992 4,418,248 3,402,800
Grupo Financiero InverMexico S.A. de C.V., 7.50% due 6/16/2001 6/09/1994 8,500,000 6,205,000
Grupo Posadas, S.A. de C.V. (ADR) 3/23/1992 6,723,293 8,794,575
Grupo Situr, S.A. de C.V. (ADR) 12/03/1991 7,514,491 16,342,820
La Cemento Nacional C.A. 6/22/1992 7,915,328 15,000,000
Mavesa S.A. (ADR) 10/13/1993 4,010,625 1,695,830
Quilmes Industrial S.A. 6/17/1992 1,684,480 4,128,925
Sears Roebuck de Mexico, S.A. de C.V. 'B' (ADR) 8/09/1994 14,403,127 11,223,750
Telecom Argentina Stet--France Telecom S.A. (ADR) 11/18/1993 15,682,783 14,949,545
Telecommunicacoes Brasileiras S.A.--Telebras (ADR) 12/29/1993 12,136,746 12,232,549
Transportadora de Gas del Sur S.A. (ADR) 5/17/1994 13,793,192 11,670,125
Venezolana de Prerreducidos Caroni Venprecar C.A. (GDS) 2/13/1992 1,236,470 987,776
------------ ------------
Total $136,214,892 $149,694,188
============ ============
See Notes to Financial Statements.
</TABLE>
61
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of November 30, 1994
<S> <S> <C>
Assets: Investments, at value (identified cost--$1,047,419,396) (Note 1a) $1,154,657,391
Foreign cash 4,155,651
Receivables:
Securities sold $ 6,387,148
Capital shares sold 4,104,517
Dividends 951,028
Interest 446,367 11,889,060
-----------
Deferred organization expenses (Note 1g) 42,657
Prepaid registration fees and other assets (Note 1g) 83,159
--------------
Total assets 1,170,827,918
--------------
Liabilities: Payables:
Securities purchased 3,134,761
Capital shares redeemed 3,093,315
Investment adviser (Note 2) 960,844
Distributor (Note 2) 826,037 8,014,957
-----------
Accrued expenses and other liabilities 5,266,195
--------------
Total liabilities 13,281,152
--------------
Net Assets: Net assets $1,157,546,766
==============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 59,580
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 5,437,756
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized 29,411
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized 1,179,752
Paid-in capital in excess of par 1,009,731,134
Undistributed realized capital gains on investments and foreign
currency transactions--net 33,740,505
Unrealized appreciation on investments and foreign currency transactions--net 107,368,628
--------------
Net assets $1,157,546,766
==============
Net Asset Class A--Based on net assets of $10,350,102 and 595,793 shares outstanding $ 17.37
Value: ==============
Class B--Based on net assets of $937,220,632 and 54,377,561 shares outstanding $ 17.24
==============
Class C--Based on net assets of $5,068,944 and 294,107 shares outstanding $ 17.24
==============
Class D--Based on net assets of $204,907,088 and 11,797,523 shares outstanding $ 17.37
==============
See Notes to Financial Statements.
</TABLE>
62
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended November 30, 1994
<S> <S> <C> <C>
Investment Dividends (net of $829,480 foreign withholding tax) $ 11,264,193
Income Interest and discount earned 7,027,116
(Notes 1e & --------------
1f): Total income 18,291,309
--------------
Expenses: Investment advisory fees (Note 2) 9,298,782
Distribution fees--Class B (Note 2) 7,506,994
Custodian fees 1,345,975
Transfer agent fees--Class B (Note 2) 1,119,403
Foreign tax expense (Note 1e) 700,108
Registration fees (Note 1g) 505,698
Account maintenance fees--Class D (Note 2) 444,282
Printing and shareholder reports 379,670
Transfer agent fees--Class D (Note 2) 231,889
Accounting services (Note 2) 211,687
Professional fees 102,873
Directors' fees and expenses 35,456
Amortization of organization expenses (Note 1g) 23,267
Pricing fees 6,400
Distribution fees--Class C (Note 2) 3,895
Transfer agent fees--Class A (Note 2) 2,491
Transfer agent fees--Class C (Note 2) 1,025
Other 19,620
--------------
Total expenses 21,939,515
--------------
Investment loss--net (3,648,206)
--------------
Realized & Realized gain (loss) from:
Unrealized Investments--net $40,600,153
Gain (Loss) Foreign currency transactions--net (413,009) 40,187,144
on Invest- -----------
ments & Change in unrealized appreciation/depreciation on:
Foreign Investments--net 29,447,600
Currency Foreign currency transactions--net 148,276 29,595,876
Transactions-- ----------- --------------
Net (Notes Net realized and unrealized gain on investments and
1c, 1f & 3): foreign currency transactions 69,783,020
--------------
Net Increase in Net Assets Resulting from Operations $ 66,134,814
==============
See Notes to Financial Statements.
</TABLE>
63
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES OF NET ASSETS
<CAPTION>
For the Year Ended
November 30,
1994 1993
Increase (Decrease) in Net Assets:
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ (3,648,206) $ 2,584,432
Realized gain on investments and foreign currency transactions--net 40,187,144 3,297,579
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net 29,595,876 88,016,931
-------------- ------------
Net increase in net assets resulting from operations 66,134,814 93,898,942
Dividends & Investment income--net:
Distributions Class B (1,113,310) (1,699,059)
to Share- Class D (624,870) (714,383)
holders Realized gain on investments--net:
(Note 1h): Class B -- (1,200,960)
Class D -- (289,614)
-------------- ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,738,180) (3,904,016)
-------------- ------------
Capital Share Net increase in net assets derived from capital share transactions 712,764,490 133,361,981
Transactions -------------- ------------
(Note 4):
Net Assets: Total increase in net assets 777,161,124 223,356,907
Beginning of year 380,385,642 157,028,735
-------------- ------------
End of year* $1,157,546,766 $380,385,642
============== ============
<FN>
*Undistributed (accumulated) investment income--net $ (3,535,328) $ 1,851,058
============== ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
For the For the
Period Period
The following per share data and ratios have been derived Oct. 21, Sept. 27,
from information provided in the financial statements. 1994++ to For the Year Ended 1991++ to
Nov. 30, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994+++++ 1994+++++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 18.22 $ 14.39 $ 9.83 $ 9.80 $ 10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income (loss)--net -- (.09) .10 .08 .04
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.85) 2.99 4.68 .05 (.24)
--------- --------- --------- --------- ---------
Total from investment operations (.85) 2.90 4.78 .13 (.20)
--------- --------- --------- --------- ---------
Less dividends and distributions:
</TABLE>
64
<PAGE>
<TABLE>
<S> <S> <C> <C> <C> <C> <C>
Investment income--net -- (.05) (.13) (.10) --
Realized gain on investments--net -- -- (.09) --++++ --
--------- --------- --------- --------- ---------
Total dividends and distributions -- (.05) (.22) (.10) --
--------- --------- --------- --------- ---------
Net asset value, end of period $ 17.37 $ 17.24 $ 14.39 $ 9.83 $ 9.80
========= ========= ========= ========= =========
Total Based on net asset value per share (4.67%)+++ 20.19% 49.80% 1.30% ( 2.00%)+++
Investment ========= ========= ========= ========= =========
Return:**
Ratios to Expenses, excluding account maintenance
Average and distribution fees 1.85%* 1.51% 1.59% 1.65% 1.73%*
Net Assets: ========= ========= ========= ========= =========
Expenses 1.85%* 2.51% 2.59% 2.65% 2.73%*
========= ========= ========= ========= =========
Investment income--net (.16%)* (.53%) 1.09% 1.30% 3.28%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 10,350 $ 937,221 $ 305,301 $ 126,344 $ 63,012
Data: ========= ========= ========= ========= =========
Portfolio turnover 30.15% 30.15% 24.74% 36.50% --
========= ========= ========= ========= =========
<CAPTION>
Class C Class D
For the For the
Period Period
Oct. 21, Sept. 27,
The following per share data and ratios have been derived 1994++ to For the Year Ended 1991++ to
from information provided in the financial statements. Nov. 30, November 30, Nov. 30,
Increase (Decrease) in Net Asset Value: 1994+++++ 1994+++++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 18.10 $ 14.45 $ 9.90 $ 9.81 $ 10.00
Operating --------- --------- --------- --------- ---------
Performance: Investment income (loss)--net (.02) .03 .18 .15 .06
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.84) 3.00 4.69 .06 (.25)
--------- --------- --------- --------- ---------
Total from investment operations (.86) 3.03 4.87 .21 (.19)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net -- (.11) (.23) (.12) --
Realized gain on investments--net -- -- (.09) --++++ --
--------- --------- --------- --------- ---------
Total dividends and distributions -- (.11) (.32) (.12) --
--------- --------- --------- --------- ---------
Net asset value, end of period $ 17.24 $ 17.37 $ 14.45 $ 9.90 $ 9.81
========= ========= ========= ========= =========
Total Based on net asset value per share (4.75%)+++ 21.07% 50.86% 2.19% (1.90%)+++
Investment ========= ========= ========= ========= =========
Return:**
Ratios to Expenses, excluding account
Average maintenance and distribution fees 1.93%* 1.48% 1.58% 1.64% 1.72%*
Net Assets: ========= ========= ========= ========= =========
Expenses 2.93%* 1.73% 1.83% 1.89% 1.97%*
========= ========= ========= ========= =========
Investment income-net (1.16%)* .23% 1.83% 2.18% 4.05%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 5,069 $ 204,907 $ 75,085 $ 30,685 $ 18,074
Data: ========= ========= ========= ========= =========
Portfolio turnover 30.15% 30.15% 24.74% 36.50% --
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Based on average shares outstanding during the period.
++Commencement of Operations.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
65
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Latin America Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. The Fund offers
four classes of shares under the Merrill Lynch Select Pricing SM
System. Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the principal
market on which such securities are traded as of the close of business
on the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-counter
market are valued at the last available bid prices obtained from one
or more dealers in the over-the-counter market prior to the time of
valuation. Portfolio securities which are traded on more than one
exchange are valued on the exchange designated by or under the
authority of the Board of Directors as the primary market. Short-term
securities with a remaining maturity of sixty days or less are valued
at amortized cost, which approximates market value. Options written
by the Fund are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the over-the-
counter market, the last asked price. Options purchased by the Fund
are valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter
market, the last bid price. Other investments, including futures
contracts and related options, are stated at market value. Securities
and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to
market such securities and, if necessary, receives additions to such
securities daily to ensure that the contract is fully collateralized.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the period.
Foreign currency transactions are the result of settling (realized)
or valuing (unrealized) assets and liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
The Fund may also purchase or sell listed over-the-counter foreign
currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated
securities owned by the Fund, sold by the Fund but not yet delivered,
or committed or anticipated to be purchased by the Fund.
(d) Options--The Fund is authorized to purchase and write call
and put options. When the Fund sells an option, an amount equal to
the premium received by the Fund is reflected as an asset and
an equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current value of the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the closing
transaction exceeds the premium paid or received).
Written and purchased options are non-income producing
investments.
(e) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
66
<PAGE>
(f) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Dividend income is recorded on the ex-dividend
dates except that if the ex-dividend date has passed, certain divi-
dends from foreign securities are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income (including amor-
tization of discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(g) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(h) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
(i) Basis of consolidation--The accompanying consolidated financial
statements include the accounts of ML Latin America Fund Chile
Ltd., a wholly-owned subsidiary, which primarily invests in Chilean
securities. Intercompany accounts and transactions have been
eliminated.
(j) Reclassification--Accumulated investment loss-net, in the
amount of $3,535,328 has been reclassified to undistributed realized
gains-net.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). Effective January 1,
1994, the investment advisory business of MLAM was reorganized
from a corporation to a limited partnership. Both prior to and after
the reorganization, ultimate control of MLAM was vested with
Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of MLAM
is Princeton Services, Inc. ("PSI"), an indirect wholly-owned sub-
sidiary of ML & Co. The limited partners are ML & Co. and Merrill
Lynch Investment Management, Inc. ("MLIM"), which is also an
indirect wholly-owned subsidiary of ML & Co. The Fund has entered
into a Distribution Agreement and a Distribution Plan with Merrill
Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-
owned subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund. For
such services, the Fund pays a monthly fee of 1.0%, on an annual
basis, of the average daily value of the Fund's net assets. Certain of
the states in which the shares of the Fund are qualified for sale
impose limitations on the expenses of the Fund. The most restrictive
annual expense limitation requires that the Investment Adviser
reimburse the Fund to the extent the Fund's expenses (excluding
interest, taxes, distribution fees, brokerage fees and commissions,
and extraordinary items) exceed 2.5% of the Fund's first $30 million
of average daily net assets, 2.0% of the next $70 million of average
daily net assets, and 1.5% of the average daily net assets in excess
thereof. MLAM's obligation to reimburse the Fund is limited to
the amount of the management fee. No fee payment will be made
to MLAM during any fiscal year which will cause such expenses
to exceed the most restrictive expense limitation at the time of
such payment.
Pursuant to the distribution plans ("the Distribution Plans") adopted
by the Fund in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor ongoing account
maintenance and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net
assets of the shares as follows:
Account
Maintenance Fee Distribution Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor of MLPF&S for providing account maintenance services
to Class B, Class C and Class D shareholders. The ongoing distribu-
tion fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the year ended November 30, 1994, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the Fund's
Class D Shares as follows:
MLFD MLPF&S
Class D $225,515 $2,917,858
67
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded)
MLPF&S received contingent deferred sales charges of $1,483,069
relating to transactions in Class B Shares of beneficial interest,
$11 relating to transactions in Class C Shares of beneficial interest,
and $111,787 in commissions on the execution of portfolio security
transactions for the Fund for the year ended November 30, 1994.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and directors
of MLAM, MLIM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended November 30, 1994 were $977,932,768 and
$246,554,242, respectively.
Net realized and unrealized gains as of November 30, 1994 were
as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 40,599,651 $107,237,995
Short-term investments 502 --
Foreign currency transactions (413,009) 130,633
------------ ------------
Total $ 40,187,144 $107,368,628
============ ============
As of November 30, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $107,237,995, of which $192,811,424
related to appreciated securities and $185,573,429 related to depreci-
ated securities. At November 30, 1994, the aggregate cost of invest-
ments for Federal income tax purposes was $1,047,414,396.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $712,764,490 and $133,361,981 for the years ended November 30,
1994 and November 30, 1993, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Period Dollar
October 21, 1994++ to November 30, 1994 Shares Amount
Shares sold 753,289 $ 13,593,383
Shares redeemed (157,496) (2,773,649)
------------ ------------
Net increase 595,793 $ 10,819,734
============ ============
++ Commencement of Operations.
Class B Shares for the Year Ended Dollar
November 30, 1994 Shares Amount
Shares sold 45,078,402 $784,209,065
Shares issued to shareholders in
reinvestment of dividends 65,453 987,681
------------ ------------
Total issued 45,143,855 785,196,746
Shares redeemed (11,980,794) (204,167,756)
------------ ------------
Net increase 33,163,061 $581,028,990
============ ============
68
<PAGE>
Class B Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 10,861,570 $136,390,183
Shares issued to shareholders in
reinvestment of dividends &
distributions 253,359 2,472,784
------------ ------------
Total issued 11,114,929 138,862,967
Shares redeemed (2,748,458) (31,777,805)
------------ ------------
Net increase 8,366,471 $107,085,162
============ ============
Class C Shares for the Period Dollar
October 21, 1994++ to November 30, 1994 Shares Amount
Shares sold 301,172 $ 5,323,437
Shares redeemed (7,065) (123,893)
------------ ------------
Net increase 294,107 $ 5,199,544
============ ============
++ Commencement of Operations.
Class D Shares for the Year Ended Dollar
November 30, 1994 Shares Amount
Shares sold 12,305,213 $213,150,837
Shares issued to shareholders in
reinvestment of dividends 36,001 543,613
------------ ------------
Total issued 12,341,214 213,694,450
Shares redeemed (5,740,580) (97,978,228)
------------ ------------
Net increase 6,600,634 $115,716,222
============ ============
Class D Shares for the Year Ended Dollar
November 30, 1993 Shares Amount
Shares sold 2,937,106 $ 36,285,613
Shares issued to shareholders in
reinvestment of dividends &
distributions 91,657 890,902
------------ ------------
Total issued 3,028,763 37,176,515
Shares redeemed (932,700) (10,899,696)
------------ ------------
Net increase 2,096,063 $ 26,276,819
============ ============
As a result of the implementation of the Merrill Lynch Select Pricing SM
System, Class A Shares of the Fund outstanding prior to October 21,
1994 have been redesignated Class D Shares. There were 12,538,430
shares redesignated amounting to $188,179,623.
5. Commitments:
At November 30, 1994, the Fund had entered into forward foreign
exchange contracts under which it agreed to purchase various
foreign currency with an approximate values of $167,000.
6. Subsequent Event:
On December 14, 1994, the Board of Directors of the Fund declared an
ordinary income dividend in the amount of $0.118230 per Class A
Share, Class B Share, Class C Share and Class D Share, and a long-
term capital gains distribution of $0.395934 per Class A Share,
Class B Share, Class C Share and Class D Share, payable on Decem-
ber 21, 1994 to shareholders of record as of December 14, 1994.
69
<PAGE>
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70
<PAGE>
[This page is intentionally left blank.]
71
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies......................................... 2
Portfolio Strategies Involving Options and Futures....................... 2
Other Investment Policies and Practices.................................. 7
Investment Restrictions.................................................. 9
Management of the Fund.................................................... 13
Directors and Officers................................................... 13
Compensation of Directors................................................ 14
Management and Advisory Arrangements..................................... 15
Purchase of Shares........................................................ 16
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................. 17
Reduced Initial Sales Charges............................................ 18
Distribution Plans....................................................... 21
Limitations on the Payment of Deferred Sales Charges..................... 22
Redemption of Shares...................................................... 23
Deferred Sales Charges--
Class B and Class C Shares............................................. 23
Portfolio Transactions and Brokerage...................................... 24
Determination of Net Asset Value.......................................... 26
Shareholder Services...................................................... 27
Investment Account....................................................... 27
Automatic Investment Plans............................................... 28
Automatic Reinvestment of Dividends and Capital Gains Distributions...... 28
Systematic Withdrawal Plans--
Class A and Class D Shares............................................. 28
Exchange Privilege....................................................... 29
Dividends, Distributions and Taxes........................................ 43
Dividends and Distributions.............................................. 43
Taxes.................................................................... 43
Tax Treatment of Options, Futures and Forward Foreign Exchange
Transactions........................................................... 46
Performance Data.......................................................... 47
General Information....................................................... 49
Description of Shares.................................................... 49
Computation of Offering Price Per Share.................................. 50
Independent Auditors..................................................... 51
Custodian................................................................ 51
Transfer Agent........................................................... 51
Legal Counsel............................................................ 51
Reports to Shareholders.................................................. 51
Additional Information................................................... 51
Independent Auditors' Report.............................................. 52
Consolidated Financial Statements......................................... 54
</TABLE>
Code #13991-0395
LOGO MERRILL LYNCH
Merrill Lynch
Latin America Fund, Inc.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
March 27, 1995
Distributor:
Merrill Lynch
Funds Distributors, Inc.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A)FINANCIAL STATEMENTS
Contained in Part A:
Consolidated Financial Highlights for the fiscal years ended November
30, 1994, 1993 and 1992 and the fiscal period September 27, 1991
(commencement of operations) to November 30, 1991.
Contained in Part B:
Consolidated Schedule of Investments as of November 30, 1994.
Consolidated Statement of Assets and Liabilities as of November 30,
1994.
Consolidated Statement of Operations for the fiscal year ended
November 30, 1994.
Consolidated Statements of Changes of Net Assets for each of the years
in the two-year period ended November 30, 1994.
Consolidated Financial Highlights for the fiscal years ended November
30, 1994, 1993 and 1992 and the fiscal period September 27, 1991
(commencement of operations) to November 30, 1991.
(B)EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
1(a) --Articles of Incorporation of Registrant.(c)
(b) --None
(c) --Articles of Amendment to the Articles of Incorporation dated October
19, 1994.
(d) --Articles Supplementary to the Articles of Incorporation dated
October 21, 1994.
2 --By-Laws of Registrant.(c)
3 --None.
4 --Copies of instruments defining the rights of shareholders, including
the relevant portions of the Articles of Incorporation, as amended,
and By-Laws of Registrant.(a)
5 --Management Agreement between Registrant and Merrill Lynch Asset
Management, Inc.(c)
6(a) --Class A Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(c)
(b) --Class B Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(c)
(c) --Letter Agreement between the Registrant and Merrill Lynch Funds
Distributor, Inc. with respect to the Merrill Lynch Mutual Fund
Adviser Program.(b)
(d) --Class C Shares Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.(c)
(e) --Class D Shares Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.(c)
7 --None.
8 --Custody Agreement between Registrant and The Chase Manhattan Bank,
N.A.(c)
9 --Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Financial Data
Services, Inc.(c)
10 --None.
11 --Consent of Deloitte & Touche LLP, independent auditors for
Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management, Inc.(c)
14 --None.
15(a) --Class B Shares Distribution Plan and Class B Shares Distribution
Plan Sub-Agreement.(b)
(b) --Class C Shares Distribution Plan and Class C Shares Distribution
Plan Sub-Agreement.(c)
(c) --Class D Shares Distribution Plan and Class D Shares Distribution
Plan Sub-Agreement.(c)
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
16(a) --Schedule for computation of each performance quotation for Class D
shares provided in the Registration Statement in response to Item
22.(c)
(b) --Schedule of computation of each performance quotation for Class B
shares provided in the Registration Statement in response to Item
22.(c)
(c) --Schedule of computation of each performance quotation for Class C
shares provided in the Registration Statement in response to Item 22.
(d) --Schedule of computation of each performance quotation for Class A
shares provided in the Registration Statement in response to Item 22.
17(a) --Financial Data Schedule for Class A Shares for the Year Ended
November 30, 1994.
(b) --Financial Data Schedule for Class B Shares for the Year Ended
November 30, 1994.
(c) --Financial Data Schedule for Class C Shares for the Year Ended
November 30, 1994.
(d) --Financial Data Schedule for Class D Shares for the Year Ended
November 30, 1994.
18 --Power of Attorney for Edward D. Zinbarg.
</TABLE>
--------
(a) Reference is made to Article III (Sections 3 and 4), Article V, Article VI
(Sections 2, 3, 4, 5 and 6), Article VII, Article VIII and Article X of the
Registrant's Articles of Incorporation, filed as Exhibit 1(a) to the
Registration Statement; the Articles Supplementary (increasing the
authorized share capital) filed as Exhibit 1(b) to the Registration
Statement; the Articles of Amendment to the Articles of Incorporation filed
as Exhibit 1(c) to the Registration Statement; the Articles Supplementary
to the Articles of Incorporation filed as Exhibit 1(d) to the Registration
Statement; and Article II, Article III (Sections 1, 2, 3, 5, 6 and 17),
Article V (Section 7), Article VI, Article VII, Article XII, Article XIII,
and Article XIV of the Registrant's By-Laws filed as Exhibit 2 to the
Registration Statement.
(b) Filed as an Exhibit to Post-Effective Amendment No. 3 to the Registration
Statement.
(c) Refiled pursuant to the Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) phase-in requirements.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any other
person. The Registrant owns all of the stock of ML Latin America Fund Chile
Ltd., a corporation formed under the laws of Delaware specifically to
facilitate investment in accordance with restrictions limiting investment in
Chile. Such subsidiary is included in the Registrant's consolidated financial
statements.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS AT
TITLE OF CLASS FEBRUARY 28, 1995
-------------- -----------------
<S> <C>
Class A Shares of Common Stock, par value $0.10 per
share................................................ 14
Class B Shares of Common Stock, par value $0.10 per
share................................................ 1,479
Class C Shares of Common Stock, par value $0.10 per
share................................................ 14
Class D Shares of Common Stock, par value $0.10 per
share................................................ 317
</TABLE>
ITEM 27. 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 and Class B Distribution
Agreements.
Insofar as the conditional advancing of indemnification moneys for actions
based on the Investment Company Act of 1940 may be concerned, Article VI of the
Registrant's By-Laws provides that such payments will be made only on the
following conditions: (i) the advances must be limited to amounts used, or to
be used, for the preparation or presentation of a defense to the action,
including costs connected with the
C-2
<PAGE>
preparation of a settlement; (ii) advances may be made only on receipt of a
written promise by, or on behalf of, the recipient to repay that amount of the
advance which exceeds the amount to which it is ultimately determined that he
is entitled to receive from the Registrant by reason of indemnification; and
(iii) (a) such promise must be secured by a surety bond, other suitable
insurance or an equivalent form of security which assures that any repayments
may be obtained by the Registrant without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient of the
advance (b) a majority of a quorum of the Registrant's disinterested non-party
Directors, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient
of the advance ultimately will be found entitled to indemnification.
In Section 9 of the Distribution Agreements relating to the securities being
offered hereby, the Registrant agrees to indemnify the Distributor and each
person, if any, who controls the Distributor within the meaning of the
Securities Act of 1933 (the "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 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 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 Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF MANAGER.
Merrill Lynch Asset Management, L.P. doing business as Merrill Lynch Asset
Management ("MLAM" or the "Manager"), acts as investment adviser for the
following registered investment companies: Convertible Holdings, Inc., Merrill
Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income
Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income
Fund, Inc., Merrill Lynch Balanced Fund for Investment and Retirement, Merrill
Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets Fund, Inc.,
Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Fund For Tomorrow, Inc., Merrill
Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Convertible Fund, Inc., Merrill
Lynch Global Holdings, Merrill Lynch Global Resources Trust, Merrill Lynch
Global Utility Fund, Inc., Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund,
Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Institutional Intermediate Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa Fund,
Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Asset Builder
Program, Inc., Merrill Lynch Retirement Series Trust, Merrill Lynch Senior
Floating Rate Fund, Inc., Merrill Lynch Series Fund, Inc., Merrill Lynch Short-
Term Global Income Fund, Inc., Merrill Lynch Strategic Dividend Fund, Merrill
Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill
Lynch U.S.A. Government Reserves, Merrill Lynch Utility Income Fund, Inc., and
Merrill Lynch Variable Series Funds, Inc. Fund Asset Management, L.P. ("FAM"),
an affiliate of the Manager, acts as the investment adviser for the following
registered investment companies: Apex Municipal Fund, Inc., CBA Money Fund, CMA
Government Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series
Trust, CMA Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc.,
C-3
<PAGE>
Emerging Tigers Fund, Inc., Financial Institutions Series Trust, Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill
Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities
Trust, Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State
Municipal Series Trust, Merrill Lynch Multi-State Limited Maturity Municipal
Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix
Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income
Fund, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal
Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund,
Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured
Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc.,
MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund,
MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund,
Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc.,
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio
II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings,
Inc., Taurus MuniNew York Holdings, Inc. and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011, Princeton,
New Jersey 08543-9011, except that the address of Merrill Lynch Funds for
Institutions Series and Merrill Lynch Institutional Intermediate Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
the Manager and FAM is also P.O. Box 9011, Princeton, New Jersey 08543-9011.
The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
December 1, 1992, for his or its own account or in the capacity of director,
officer, partner or trustee. In addition, Mr. Zeikel is President, Mr. Richard
is Treasurer and Mr. Glenn is Executive Vice President of substantially all of
the investment companies described in the preceding paragraph, and Messrs.
Durnin, Giordano, Harvey, Kirstein, Monagle and Ms. Griffin are directors,
trustees or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION(S) WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------ ----------------------------------
<C> <C> <S>
ML & Co. ............... Limited Partner Financial Services Holding
Company
Princeton Services, Inc.
("Princeton Services"). General Partner General Partner of FAM
Arthur Zeikel........... President President of FAM; President and
Director of Princeton Services;
Director of Merrill Lynch Funds
Distributor, Inc. ("MLFD");
Executive Vice President of ML
& Co.; Executive Vice President
of Merrill Lynch
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and
Director of Princeton Services;
President and Director of MLFD;
Director of Financial Data
Services, Inc. ("FDS");
President of Princeton
Administrators, L.P.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
NAME POSITION(S) WITH MANAGER PROFESSION, VOCATION OR EMPLOYMENT
---- ------------------------ ----------------------------------
<C> <C> <S>
Bernard J. Durnin....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General
President, General Counsel and Secretary of FAM;
Counsel and Senior Vice President, General
Secretary Counsel, Director and
Secretary of Princeton
Services; Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and
and Controller Controller of FAM; Senior Vice
President and Controller of
Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of
Princeton Administrators, L.P.
Joseph T. Monagle, Jr. . Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Gerald M. Richard....... Senior Vice President Senior Vice President and
and Treasurer Treasurer of FAM; Senior Vice
President and Treasurer of
Princeton Services; Vice
President of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of
Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each of
the open-end investment companies referred to in the first paragraph of Item 28
except Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities
Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt
Fund, CMA Treasury Fund, Convertible Holdings, Inc., The Corporate Fund
Accumulation Program, Inc., Corporate High Yield Fund, Inc., Corporate High
Yield Fund II, Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund
1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets Fund, Inc.,
MuniBond Income Fund, Inc., The Municipal Fund Accumulation Program, Inc.,
MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest
Fund II, Inc., MuniVest California Insured Fund, Inc., MuniVest Florida Fund,
MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest
New York Insured Fund, Inc., MuniVest Pennsylvania Fund, MuniYield Arizona
Fund, MuniYield Arizona Fund II, Inc., MuniYield California Fund, Inc.,
MuniYield California Insured Fund, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc.,
MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund
C-5
<PAGE>
III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield
Quality Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income
Portfolio II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia
Holdings, Inc., Taurus MuniNew York Holdings, Inc. and Worldwide DollarVest
Fund, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook,
Aldrich, Breen, Graczyk, Fatseas, and Wasel is One Financial Center, Boston,
Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
---- ------------------------- -------------------------
<S> <C> <C>
Terry K. Glenn.......... President and Director Executive Vice President
Arthur Zeikel........... Director President and Director
Philip L. Kirstein...... Director None
William E. Aldrich...... Senior Vice President None
Robert W. Crook......... Senior Vice President None
Kevin P. Boman.......... Vice President None
Michael J. Brady........ Vice President None
William M. Breen........ Vice President None
Sharon Creveling........ Vice President and Assistant None
Treasurer
Mark A. DeSario......... Vice President None
James T. Fatseas........ Vice President None
Stanley Graczyk......... Vice President None
Michelle T. Lau......... Vice President None
Debra W. Landsman-Yaros. Vice President None
Gerald M. Richard....... Vice President and Treasurer Treasurer
Salvatore Venezia....... Vice President None
William Wasel........... Vice President None
Robert Harris........... Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant, 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and Financial Data Services, Inc., 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Fund--Management
and Advisory Arrangements" in the Prospectus constituting Part A of the
Registration Statement and under "Management of the Fund--Management and
Advisory Arrangements" in the Statement of Additional Information constituting
Part B of the Registration Statement, Registrant is not a party to any
management-related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Township of
Plainsboro, and the State of New Jersey, on the 24th day of March 1995.
Merrill Lynch Latin America Fund,
Inc.
(Registrant)
/s/ Arthur Zeikel
By: _________________________________
(ARTHUR ZEIKEL, PRESIDENT)
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to Registrant's Registration Statement has been signed
below by the following persons in the capacities and on the date(s) indicated.
SIGNATURES TITLE
DATE(S)
President and
Director
(Principal Executive Officer)
/s/ Arthur Zeikel March 24, 1995
-------------------------------------
(ARTHUR ZEIKEL)
Treasurer (Principal Financial
and Accounting
Officer)
/s/ Gerald M. Richard March 24, 1995
-------------------------------------
(GERALD M. RICHARD)
Donald Cecil* Director
------------------------------------- March 24, 1995
(DONALD CECIL)
Edward H. Meyer* Director
------------------------------------- March 24, 1995
(EDWARD H. MEYER)
Charles C. Reilly* Director
------------------------------------- March 24, 1995
(CHARLES C. REILLY)
Richard R. West* Director
------------------------------------- March 24, 1995
(RICHARD R. WEST)
Edward D. Zinbarg* Director March 24, 1995
-------------------------------------
(EDWARD D. ZINBARG)
/s/ Arthur Zeikel
*By: ________________________________
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT)
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1(a) --Articles of Incorporation of Registrant(c)...................
(b) --None.........................................................
--Articles of Amendment to the Articles of Incorporation dated
(c) October 19, 1994..............................................
--Articles Supplementary to the Articles of Incorporation dated
(d) October 21, 1994..............................................
2 --By-Laws of Registrant(c).....................................
3 --None.........................................................
4 --Copies of instruments defining the rights of shareholders,
including the relevant portions of the Articles of
Incorporation, as amended, and By-Laws of Registrant(a).......
5 --Management Agreement between Registrant and Merrill Lynch
Asset Management, Inc(c)......................................
6(a) --Class A Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc(c)...............................
(b) --Class B Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc(c)...............................
(c) --Letter Agreement between the Registrant and Merrill Lynch
Funds Distributor, Inc. with respect to the Merrill Lynch
Mutual Fund Adviser Program(b)................................
(d) --Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc(c).......................
(e) --Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc(c).......................
7 --None.........................................................
--Custody Agreement between Registrant and The Chase Manhattan
8 Bank, N.A(c)..................................................
9 --Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Financial
Data Services, Inc(c).........................................
10 --None.........................................................
11 --Consent of Deloitte & Touche LLP, independent auditors for
Registrant.....................................................
12 --None.........................................................
13 --Certificate of Merrill Lynch Asset Management, Inc. (c)......
14 --None.........................................................
15(a) --Class B Shares Distribution Plan and Class B Shares
Distribution Plan Sub-Agreement(b)............................
(b) --Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement(c)............................
(c) --Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement(c)............................
16(a) --Schedule for computation of each performance quotation for
Class D shares provided in the Registration Statement in
response to Item 22(c)........................................
(b) --Schedule of computation of each performance quotation for
Class B shares provided in the Registration Statement in
response to Item 22(c)........................................
(c) --Schedule of computation of each performance quotation for
Class C shares provided in the Registration Statement in
response to Item 22 ..........................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
(d) --Schedule of computation of each performance quotation for
Class A shares provided in the Registration Statement in
response to Item 22 ..........................................
17(a) --Financial Data Schedule for Class A Shares for the Year Ended
November 30, 1994..............................................
(b) --Financial Data Schedule for Class B Shares for the Year Ended
November 30, 1994..............................................
(c) --Financial Data Schedule for Class C Shares for the Year Ended
November 30, 1994..............................................
(d) --Financial Data Schedule for Class D Shares for the Year Ended
November 30, 1994..............................................
18 --Power of Attorney for Edward D. Zinbarg......................
</TABLE>
--------
(a) Reference is made to Article III (Sections 3 and 4), Article V, Article VI
(Sections 2, 3, 4, 5 and 6), Article VII, Article VIII and Article X of the
Registrant's Articles of Incorporation, filed as Exhibit 1(a) to the
Registration Statement; the Articles Supplementary (increasing the
authorized share capital) filed as Exhibit 1(b) to the Registration
Statement; the Articles of Amendment to the Articles of Incorporation filed
as Exhibit 1(c) to the Registration Statement; the Articles Supplementary
to the Articles of Incorporation filed as Exhibit 1(d) to the Registration
Statement; and Article II, Article III (Sections 1, 2, 3, 5, 6 and 17),
Article V (Section 7), Article VI, Article VII, Article XII, Article XIII,
and Article XIV of the Registrant's By-Laws filed as Exhibit 2 to the
Registration Statement.
(b) Filed as an Exhibit to Post-Effective Amendment No. 3 to the Registration
Statement.
(c) Refiled pursuant to the Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) phase-in requirements.
2
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material omitted
from this EDGAR Submission file due to ASCII-incompatibility and cross-
references this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<PAGE>
EXHIBIT 99.1(a)
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH LATIN AMERICA FUND, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, THOMAS C. MANDIA, whose post-office address is One World
Trade Center, New York, New York 10048, being at-least eighteen years of age,
does hereby act as an incorporator, under and by virtue of the General Laws of
the State of Maryland authorizing the formation of corporations and with the
intention of forming a corporation.
ARTICLE II
NAME
----
The name of the corporation is MERRILL LYNCH LATIN AMERICA FUND, INC.
ARTICLE III
PURPOSES AND POWERS
-------------------
The purpose or purposes for which the corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
(1) To conduct and carry on the business of an investment company of the
management type.
<PAGE>
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts and
on-such terms and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
(4) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desir-able for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
2
<PAGE>
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed-to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post-office address of the principal office of the Cor-poration in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
this State is The Corporation Trust Incorporated, a corporation of this State,
and the post-office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
CAPITAL STOCK
-------------
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Two Hundred Million (200,000,000) shares, of
the par value of Ten Cents ($.10) per share and of the aggregate par value of
Twenty Million Dollars ($20, 000, 000)
(2) The Board of Directors may classify and reclassify any unissued shares
of capital stock into one or more additional or
3
<PAGE>
other classes or series as may be established from time to time by setting or
changing in any one or more respects the designations, preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions bf redemption of such shares of stock and
pursuant to such classification or reclassification to increase or decrease the
number of authorized shares of any existing class or series.
(3) The Board of Directors may redesignate a class or series of shares of
capital stock whether or not shares of such class or series are issued and
outstanding, provided that such redesignation does not affect the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of such shares of
capital stock.
(4) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, the holders of each class or series of capital stock shall be entitled to
dividends and distributions in such amounts and at such times as may be deter-
mined by the Board of Directors, and the dividends and distri-butions paid with
respect to the various classes or series of capital stock may vary among such
classes and series. Expenses related to the distribution of, and other
identified expenses that should properly be allocated to, the shares of a
particular
4
<PAGE>
class or series of capital stock may be charged to and borne solely by such
class or series and the bearing of expenses solely by a class or series of
capital stock may be appropriately reflected (in a manner determined by the
Board of Directors) and cause differences in the net asset value attributable
to, and the dividend, redemption and liquidation rights of, the shares of each
class or series of capital stock.
(5) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, on each matter submitted to a vote of stockholders, each holder of a
share of capital stock of the Corporation shall be entitled to one vote for each
share standing in such holder's name on the books of the Corppration,
irrespective of the class or series thereof, and all shares of all classes and
series shall vote together as a single class; provided, however, that (a) as to
any matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended, and in effect from
time to time, or any rules, regulations or orders issued thereunder, or by the
Maryland General Corporation Law, such requirement as to a separate vote by
that class or series shall apply in lieu of a general vote of all classes and
series as described above, (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more classes or series,
then, subject to paragraph (c) below, the shares of
5
<PAGE>
all other classes and series not entitled to a separate class vote shall vote as
a single class, and (c) as to any matter which does not affect the interest of a
particular class or series" such class or series shall not be entitled to any
vote and only the holders of shares of the one or more affected classes and
series shall be entitled to vote.
(6) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of capital stock of the Corpo-ration (or of any class or series entitled
to vote thereon as a separate class or series) to take or authorize any action,
the corporation is hereby authorized (subject to the requirements of the
Investment Company Act of 1940, as amended, and in effect from time to time, and
any rules, regulations and orders issued thereunder) to take such action upon
the concurrence of a majority of the aggregate number of shares of capital stock
of the Corporation entitled to vote thereon (or a majority of the aggregate
number of shares of a class or series entitled to vote thereon as a separate
class or series).
(7) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, in the event of any liqui-dation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of all classes and
series of capital stock of the Corporation shall be entitled, after
6
<PAGE>
payment or provision for payment of the debts and other liabili ties of the
Corporation, to share ratably in the remaining net assets of the Corporation.
(8) Any fractional shares shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(9) All persons who shall acquire stock in the corporation shall acquire
the same subject to the provisions of the charter and By-Laws of the
Corporation. As used in the charter of the Corporation, the terms "charter" and
"Articles of Incorporation" shall mean and include the Articles of Incorporation
of the Corporation as amended, supplemented and restated from time to time by
Articles of Amendment, Articles Supplementary, Articles of Restatement or
otherwise.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS
AND STOCKHOLDERS
-------------------------------------
(1) The number of directors of the Corporation shall be three (3), which
number may be increased pursuant to the By-Laws of the Corporation but shall
never be less than three (3). The names of the directors who shall act until the
first annual
7
<PAGE>
meeting or until their successors are duly elected and qualify are:
Philip L. Kirstein
Mark B. Goldfus
Robert Harris
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of Directors may
deem advisable, sub-ject to such limitations as may be set forth in these
Articles of Incorporation or in the By-Laws of the Corporation or in the General
Laws of the State of Maryland.
(3) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine .
(4) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland, subject to the re-quirements of the Investment Company Act of 1940,
as amended. No amendment of these Articles of Incorporation or repeal of any
8
<PAGE>
provision hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940, as
amended, no director or officer of the Corporation shall be personally liable to
the Corporation or its security holders for money damages. No amendment of these
Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.
(6) The Board of Directors of the Corporation may make, alter or repeal
from time to time any of the By-Laws of the Corporation except any particular
By-Law which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the Investment Company Act of 1940,
as amended.
ARTICLE VII
REDEMPTION
----------
Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and
9
<PAGE>
all shares of capital stock issued by the Corporation shall be subject to
redemption by the Corporation, at the redemption price of such shares as in
effect from time to time as may be determined by the Board of Directors of the
Corporation in accordance with the provisions hereof, subject to the right of
the Board of Directors of the Corporation to suspend the right of redemption of
shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall be
made in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.
ARTICLE VIII
DETERMINATION BINDING
---------------------
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of
10
<PAGE>
the Corporation, as to the amount of net income of the Corpo ration from
dividends and interest for any period or amounts at any time legally available
for the payment of dividends, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for creating reserves or
as to the use, alteration or cancellation of any reserves or charges (whether or
not any obligation or liability for which such reserves or charges shall have
been created, shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the price of any security owned by the
Corporation or as to any other matters relating to the issuance, sale,
redemption or other acquisition or disposition of securities or shares of
capital stock of the Corporation, and any reasonable determination made in good
faith joy the Board of Directors as to whether any transaction constitutes a
purchase of securities on "margin," a sale of securities "short," or an
underwriting or the sale of, or a participation in any underwrit-ing or selling
group in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all holders
of its capital stock, past, present and future, and shares of the capital stock
of the Corporation are issued and sold on the condition and understanding,
evidenced by the purchase of shares of capital stock or acceptance of share
certificates, that any and all such determinations shall be binding as
aforesaid. No provision of
11
<PAGE>
these Articles of Incorporation shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, or of any valid rule, regulation or
order of the Securi-ties and Exchange Commission thereunder or (b) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties in-volved in the conduct of his office.
ARTICLE IX
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
ARTICLE X
AMENDMENT
---------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in any manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholder's rights, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of MERRILL LYNCH LATIN
AMERICA FUND, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act, and further acknowledges that, to the best
of his knowledge, the matters and facts set forth therein are true in all
material respects under the penalties of perjury.
Dated the 28th day of June, 1991.
/s/ Thomas C. Mandia
-----------------------
Thomas C. Mandia
13
<PAGE>
EXHIBIT 99.1(c)
MERRILL LYNCH LATIN AMERICA-FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH LATIN AMERICA FUND, INC., a Maryland corporation having its
principal Maryland office c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article V:
(10) The Board of Directors may classify and reclassify any issued shares
of capital stock into one or more additional or other classes or series as may
be established from time to time by setting or changing in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that any
such classification or reclassification shall not substantially adversely affect
the rights of holders of such issued shares. The Board's authority pursuant to
this paragraph shall include, but not be limited to, the power to vary among all
the holders of a particular class or series (a) the length of time shares must
be held prior to reclassification to shares of another class or series (the
"Holding Period(s)"), (b) the manner in which the time for such Holding
Period(s) is determined and (c) the class or series into which the particular
class or series is being reclassified; provided, however, that, subject to the
first sentence of this section, with respect to holders of the Corporation's
shares issued on or after the date of the Corporation's first effective
prospectus which sets forth Holding Period(s) (the "First Holding Period
Prospectus"), the Holding Period(s), the manner in which the time for such
Holding Period(s) is determined and the class or series into which the
particular class or series is being reclassified shall be disclosed in the
Corporation's prospectus or statement of additional information in effect at the
time such shares, which are the subject of the reclassification, were issued;
and provided, further, that, subject to the first sentence of this section, with
respect to holders of the Corporation's Class B shares issued prior to the date
of the
<PAGE>
Corporation's First Holding Period Prospectus, the Holding Period shall be ten
(10) years for retirement plan (as recognized by the Internal Revenue Code of
1986, as amended from time to time) holders of issued Class B shares purchased
without a contingent deferred sales charge (a "CDSC-Waived Retirement Plan") and
shall be the Holding Period set forth in the Corporation's First Holding Period
Prospectus, for all other holders of issued Class B shares; Class B shares held
by a CDSC-Waived Retirement Plan shall be reclassified to Class D shares in the
month following the month in which the first Class B share of any mutual fund
advised by Merrill Lynch Asset Management, L.P., Fund Asset Management, L.P., or
their affiliates or successors, held by such CDSC-Waived Retirement Plan has
been held for the ten (10) year Holding Period established by the Corporation's
Board of Directors for such CDSC-Waived Retirement Plan Class B shareholder; and
the Class B shares of every shareholder other than CDSC-Waived Retirement Plans
shall be reclassified to Class D shares in the month following the month in
which such shares have been held for the Holding Period established by the
Corporation's Board of Directors for shareholders other than CDSC-Waived
Retirement Plans in the Corporation's First Holding Period Prospectus.
SECOND: The foregoing amendment has been effected in the manner and by the
vote required by the Corporation's charter and the laws of the State of
Maryland. Pursuant to Section 2-604 of the Maryland Corporations and
Associations Code, the amendment was advised by the Board of Directors of the
Corporation and approved by the stockholders.
THIRD: The charter of the Corporation is hereby amended by substituting
the words "Class DI' in each place where the words "Class All appear.
FOURTH: The foregoing amendment has been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment is limited to a change expressly permitted by section 2-
605(a)(4) of the Maryland Corporations and Associations Code to be made without
action by the stockholders and was approved by a majority of the entire Board of
Directors of the corporation. The Corporation is registered as an open-end
company under the Investment Company Act of 1940, as amended.
FIFTH: Except as amended hereby, the Corporation's charter shall remain
in full force and effect.
SIXTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
2
<PAGE>
SEVENTH: These Articles of Amendment shall be effective at the very
---------
beginning of the day on October 21, 1994.
-----------------
The President acknowledges these Articles of Amendment to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief, the matters set forth in these Articles of Amendment with respect to
the authorization and approval of the amendment of the Corporation's charter are
true in all material respects, and that this statement is made under the
penalties for perjury.
3
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH LATIN AMERICA FUND, INC. has caused these
Articles of Amendment to be signed in its name and on its behalf by its
President, a duly authorized officer of the Corporation, and attested by its
Secretary as of the 17th day of October, 1994.
----
MERRILL LYNCH LATIN AMERICA FUND, INC.
/s/ Arthur Zeikel
_______________________________________
Arthur Zeikel
President
Attest:
/s/ Mark B.Goldfus
_________________________
Mark B.Goldfus, Secretary
4
<PAGE>
EXHIBIT 99.1(d)
MERRILL LYNCH LATIN AMERICA FUND, INC.
ARTICLES SUPPLEMENTARY TO ARTICLES OF INCORPORATION
INCREASING THE AUTHORIZED CAPITAL STOCK OF THE
CORPORATION AND CREATING TWO ADDITIONAL CLASSES
OF COMMON STOCK
MERRILL LYNCH LATIN AMERICA FUND, INC., a Maryland corporation having its
principal Maryland office c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation, that:
FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940, as amended, with authority to issue TWO HUNDRED
MILLION (200,000,000) shares of capital stock. The Corporation has two classes
of capital stock consisting of ONE HUNDRED MILLION (100,000,000) shares of Class
D Common Stock and ONE HUNDRED MILLION (100,000,000) shares of Class B Common
Stock. All shares of all classes and series of the Corporation's capital stock
have a par value of Ten Cents ($.l0) per share and an aggregate par value of
TWENTY MILLION Dollars ($20,000,000).
SECOND: The Board of Directors of the Corporation, acting in accordance
with Section 2-105(c) of the Maryland Corporations and Associations Code, hereby
increases the total number of authorized shares of Class B Common Stock of the
Corporation by TWO HUNDRED MILLION (200,000,000) shares.
THIRD: After this increase in the number of authorized shares of capital
stock of the Corporation, the Corporation will have authority to issue FOUR
HUNDRED MILLION (400,000,000) shares of capital stock and the capital stock will
consist of ONE HUNDRED MILLION (100,000,000) shares of Class D Common Stock and
THREE HUNDRED MILLION (300,000,000) shares of Class B Common Stock.
FOURTH: After this increase in the number of authorized shares of capital
stock of the Corporation, all shares of all classes and series of the
Corporation's capital stock will have a par value of Ten Cents ($.10) per share
and an aggregate par value of FORTY MILLION Dollars ($40,000,000).
FIFTH: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by its charter, the Board of Directors has reclassified ONE
HUNDRED MILLION (100,000,000) authorized and unissued shares of the Class B
Common Stock of the Corporation as Class C Common Stock of par value of Ten
Cents
<PAGE>
($.10) per share and of the aggregate par value of TEN MILLION Dollars
($10,000,000).
SIXTH: The preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of Class C Common Stock are as follows:
The Class C Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class B
Common Stock as of the date of these Articles Supplementary, except as otherwise
set forth in the Corporation's charter and further except that:
(i) Expenses related to the distribution of the Class C Common Stock
shall be borne solely by such class and such class shall have exclusive voting
rights with respect to matters relating to the expenses being borne solely by
such class;
(ii) Such distribution expenses borne solely by Class C Common Stock
shall be appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and liquidation
rights of the shares of such class; and
(iii) Class C Common Stock shall not be reclassified into Class D shares.
SEVENTH: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by its charter, the Board of Directors has
reclassified ONE HUNDRED MILLION (100,000,000) authorized and unissued shares of
the Class B Common Stock of the Corporation as Class A Common Stock of par value
of Ten Cents ($.lo) per share and of the aggregate par value of TEN MILLION
Dollars ($10,000,000).
EIGHTH: The preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of Class A Common Stock are as follows:
The Class A Common Stock of the Corporation shall represent the same
interest in the Corporation and have identical preferences, designations,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption as the Class B
Common Stock as of the date of these Articles Supplementary,
2
<PAGE>
except as otherwise set forth in the Corporation's charter and further except
that:
(i) Expenses related to the distribution of the Class A Common Stock
shall be borne solely by such class and such class shall have exclusive voting
rights with respect to matters relating to the expenses being borne solely by
such class;
(ii) Such distribution expenses borne solely by Class A Common Stock
shall be appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and liquidation
rights of the shares of such class; and
(iii) Class A Common Stock shall not be reclassified into Class D shares.
3
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH LATIN AMERICA FUND, INC. has caused these
Articles Supplementary to be signed in its name and on its behalf by its
President and attested by its Secretary on October l7th, 1994.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By /s/ Arthur Zeikel
____________________________________
Arthur Zeikel
President
Attest:
/s/ Mark B. Goldfus
--------------------------
Mark B. Goldfus, Secretary
THE UNDERSIGNED, President of MERRILL LYNCH LATIN AMERICA FUND, INC., who
executed on behalf of said Corporation the foregoing Articles Supplementary, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles Supplementary to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects, that this statement is made under the penalties for perjury
/s/ Arthur Zeikel
--------------------------------------
Arthur Zeikel
President
4
<PAGE>
EXHIBIT 99.2
BY-LAWS
OF
MERRILL LYNCH LATIN-AMERICA FUND, INC.
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of the Corporation shall
----------------
be in the City of Baltimore, State of Maryland.
Section 2. Principal Executive Office. The principal executive office of
--------------------------
the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.
Section 3. Other Offices. The Corporation may have such other offices in
-------------
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The Corporation shall not be required to hold
--------------
an annual meeting of its stockholders in any year in which none of the following
is required to be acted on by the holders of the capital stock under the
Investment Company Act of 1940, as amended: (a) election of directors, (b)
approval of the Corporation's investment advisory agreement; (c) ratification of
the selection of independent public accountants; and (d) approval of the
Corporation's distribution agreement. In the
<PAGE>
event that the Corporation shall be required to hold an annual meeting of
stockholders by the Investment Company Act of 1940, as amended, such meeting
shall be held: (a) at a date and time set by the Board of Directors in
accordance with the Investment Company Act of 1940, as amended, if the purpose
of the meeting is to elect directors or to approve an investment advisory
agreement or distribution agreement; and (b) on a date fixed by the board of
directors during the month of October (i) in the fiscal year immediately
following the fiscal year in which independent accountants were appointed if the
purpose of the meeting is to ratify the selection of such independent
accountants, or (ii) in any fiscal year if an annual meeting is to be held for
any reason other than as specified in the foregoing. Any stockholders' meeting
held in accordance with the preceding sentence shall for all purposes constitute
the annual meeting of stockholders for the fiscal year of the Corporation in
which the meeting is held. At any such meeting, the stockholders shall elect
directors to hold the offices of any directors who have held office for more
than one year or who have been elected by the board of directors to fill
vacancies which result from any cause.
Section 2. Special Meetings. Special meetings of the stockholders, unless
----------------
otherwise provided by law or by the Articles of Incorporation, may be called for
any purpose or purposes by a majority of the Board of Directors, the President,
or on the written request of the holders of at least lot of the outstanding
2
<PAGE>
shares of capital stock of the Corporation entitled to vote at such meeting.
Section 3. Place of Meetings. Meetings of the stockholders shall be held
-----------------
at such place within the United States as the Board of Directors may from time
to time determine.
Section 4. Notice of Meetings: Waiver of Notice. Notice of the place, date
------------------
and time of the holding of each stockholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the special meeting, shall be given
personally or by mail, not less than ten nor more than ninety days before the
date of such meeting, to each stockholder entitled to vote at such meeting and
to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given
3
<PAGE>
if the time and place to which the meeting shall be adjourned were announced at
the meeting at which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of a
------
majority of the shares of stock of the Corpo-ration entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Articles of Incorporation. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares of stock present
in person or by proxy and entitled to vote may adjourn the meeting from time to
time, without notice other than announcement thereat except as otherwise
required by these By-Laws, until the holders of the requisite amount of shares
of stock shall be so present. At any such adjourned meeting at which a quorum
may be present any business may be transacted which might have been transacted
at the meeting as originally called. The absence from any meeting, in person or
by proxy, of holders of the number of shares of stock of the Corporation in
excess of a majority thereof which may be required by the laws of the State of
Maryland, the Investment Company Act of 1940, as amended, or other applicable
statute, the Articles of Incorporation, or these By-Laws, for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the
4
<PAGE>
number of shares of stock of the Corporation required for action in respect of
such other matter or matters.
Section 6. Organization. At each meeting of the stock-holders, the
------------
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall act
as chairman of the meeting. The Secretary, or in his absence or inability to
act, any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
Section 7. Order of Business. The order of business at all meetings of the
-----------------
stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles
------
of Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for every share of such stock standing in his name on the record of
stockholders of the Corporation as of the record date determined pursuant to
Section 9 of this Article or if such record date shall not have been so fixed,
then at the later of (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth day before the meeting. Each stockholder
entitled to vote at any meeting of stockholders may authorize another person or
persons to act for
5
<PAGE>
him by a proxy signed by such stockholder or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where such proxy
states that it is irrevocable and where an irrevocable proxy is permitted by
law. Except as otherwise provided by statute, the Articles of Incorporation or
these By-Laws, any corporate action to be taken by vote of the stockholders
shall be authorized by a majority of the total votes cast at a meeting of
stockholders by the holders of shares present in person or represented by proxy
and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a record
---------------------
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date, which may not be prior to the close of
business on the day the record date is fixed, shall be not more than ninety nor
less than ten days before the date of the meeting of the stockholders.
6
<PAGE>
All persons who were holders of record of shares at such time, and not others,
shall be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
----------
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting powers of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. on request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate
7
<PAGE>
for the office of director shall act as inspector of an election of directors.
Inspectors need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as
------------------------------------------
otherwise provided by statute or the Articles of Incorporation, any action
required to be taken at any meeting of stockholders, or any action which may be
taken at any meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of stockholders meetings: (i) a unanimous written consent which sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the Articles of
--------------
Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation may
be exercised by or under authority of the Board of Directors-except as conferred
on or reserved to the stockholders by law or by the Articles of Incorporation or
these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
-------------------
from time to time by resolution of the Board of
8
<PAGE>
Directors adopted by a majority of the Directors then in office; provided,
however, that the number of directors shall in no event be less than three nor
more than fifteen except that the Corporation may have two directors if there
is no stock outstanding, or so long as there are less than three stockholders.
Any vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article III. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless such director is specifically removed pursuant to Section 5 of
this Article III at the time of such decrease. Directors need not be
stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
------------------------------
annually, by written ballot at a meeting of stockholders held for that purpose;
provided, however, that if no meeting of the stockholders of the Corporation is
required to be held in a particular year pursuant to Section l(a) of Article II
of these By-Laws, directors shall be elected at the next meeting held pursuant
to such section. The term of office of each director shall be from the time of
his election and qualification until the election of directors next succeeding
his election and until his successor shall have been elected and shall have
qualified, or until his death, or until he shall have resigned, or have been
removed as hereinafter provided in these By-Laws, or as otherwise provided by
statute or the Articles of Incorporation.
9
<PAGE>
Section 4. Resignation. A director of the Corporation may resign at any
-----------
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
--------------------
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. Any vacancies in the Board, whether arising from
---------
death, resignation, removal, an increase in the number of directors or any other
cause, shall be filled by a vote of the majority of the Board of Directors then
in office even though such majority is less than a quorum, provided that no
vacancies shall be filled by action of the remaining directors, if after the
filling of said vacancy or vacancies, less than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation.
In the event that at any time there is a vacancy in any office of a director
which vacancy may not be filled by the remaining directors, a special meeting of
the stockholders shall be held as promptly as possible and in any event within
sixty days, for the purpose of
10
<PAGE>
filling said vacancy or vacancies. Any directors elected or appointed to fill a
vacancy shall hold office only until the next meeting of stockholders of the
Corporation and until a successor shall have been chosen and qualifies or until
his earlier resignation or removal.
Section 7. Place of Meetings. Meetings of the Board may be held at such
-----------------
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular meeting. Regular meetings of the Board may be held
---------------
without notice at such time and place as may be determined by the Board of
Directors.
Section 9. Special Meetings. Special meetings of the Board may be called
----------------
by two or more directors of the Corporation or by the Chairman of the Board or
the President.
Section 10. Telephone Meetings. Members of the Board of Directors or of
------------------
any committee thereof may participate in a meeting by means of a conference
telephone or similar communica-tions equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.
Section 11. Notice of-Special Meetings. Notice of each special meeting of
--------------------------
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time
11
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and place of the meeting. Notice of each such meeting shall be delivered to each
director, either personally or by telephone or any standard form of
telecommunication, at least twenty-four hours before the time at which such
meeting is to be held, or by first-class mail, postage prepaid, addressed to him
at his residence or usual place of business, at least three days before the day
on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting
----------------------------
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who shall attend such meeting. Except as otherwise specifically required by
these By-Laws, a notice or waiver or notice of any meeting need not state the
purposes of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the
-----------------
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another
12
<PAGE>
time and place until a quorum shall be present thereat. Notice of the time and
place of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless such time and place were
announced at the meeting at which the adjournment was taken, to the other direc-
tors. At any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a
------------
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President or, in his absence
of inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to
-------------------------------------------------
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in
13
<PAGE>
writing, and the writings or writing are filed with the minutes of the
proceedings of the Board or committee.
Section 16. Compensation. Directors may receive compensation for services
------------
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the Board of
-------------------
Directors to direct that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as recited in the
Prospectus of the Corporation included in the Registration Statement of the
Corporation relating to the initial public offering of its capital stock, as
recited in the current Prospectus and Statement of Additional Information of the
Corporation, as filed from time to time with the Securities and Exchange
Commission and as required by the Investment Company Act of 1940, as amended.
The Board however, may delegate the duty of management of the assets and the
administration of its day to day operations to an individual or corporate
management company and/or investment adviser pursuant to a written contract or
contracts which have obtained the requisite approvals, including the requisite
approvals of renewals thereof, of the Board of Directors and/or the stockholders
of the Corporation in accor-
14
<PAGE>
dance with the provisions of the Investment Company Act of 1940, as amended.
ARTICLE IV
Committees
----------
Section 1. Executive Committee. The Board may, by resolution adopted by a
-------------------
majority of the entire board, designate an Executive Committee consisting of two
or more of the directors of the corporation, which committee shall have and may
exercise all the powers and authority of the Board with respect to all matters
other than:
(a) the submission to stockholders of any action requiring authorization of
stockholders pursuant to statute or the Articles of Incorporation;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the directors for serving on the Board or
on the Board or on any committee of the Board, including the Excutive Committee;
(d) the approval or termination of any contract with an investment adviser
or principal underwriter, as such terms are defined in the Investment Company
Act of 1940, as amended, or the taking of any other action required to be taken
by the Board of Directors by the Investment Company Act of 1940, as amended;
(e) the amendment or repeal of these By-Laws or the adoption of new By-
Laws;
15
<PAGE>
(f) the amendment or repeal of any resolution of the Board which by its
terms may be amended or repealed only by the Board;
(g) the declaration of dividends and the issuance of capital stock of the
Corporation; and
(h) the approval of any merger or share exchange which does not require
stockholder approval.
The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board. All such proceedings shall be subject to
revision or alteration by the Board; provided, however, that third parties shall
not be prejudiced by such revision or alteration.
Section 2. Other Committees of the Board. The Board of Directors may from
-----------------------------
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of
two or more directors and to have such powers and duties as the Board of
Directors may, by resolution, prescribe.
Section 3. General. One-third, but not less than two, of the members of
-------
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
may designate a chairman of any committee and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the
16
<PAGE>
absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time to
change the membership of any committee, to fill all vacancies, to designate
alternate members to replace any absent or disqualified member, or to dissolve
any such committee. Nothing herein shall be deemed to prevent the Board from
appointing one or more committees consisting in whole or in part of persons who
are not directors of the Corporation; provided, however, that no such committee
shall have or may exercise any authority or power of the Board in the management
of the business or affairs of the Corporation.
ARTICLE V
Officers. Agents and Employees
-------------------------------
Section 1. Number of Qualifications. The officers of the Corporation
------------------------
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may be
held by the same person, except the offices of
17
<PAGE>
President and Vice President, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity. Such officers shall be elected
by the Board of Directors each year at a meeting of the Board of Directors, each
to hold office for the ensuing year and until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall have
resigned, or have been removed, as hereinafter provided in these By-Laws. The
Board may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice Presidents, one or
more Assistant Treasurers and one or more Assistant Secretaries) and such
agents, as may be necessary or desirable for the busi-ness of the Corporation.
Such officers and agents shall have such duties and shall hold their offices for
such terms as may be prescribed by the Board or by the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any
------------
time by giving written notice of resignation to the Board, the Chairman of the
Board, President or the Secretary. Any such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall be necessary to make
it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
-------------------------------------
employee of the Corporation may be removed by
18
<PAGE>
the Board of Directors with or without cause at any time, and the Board may
delegate such power of removal as to agents and employees not elected or
appointed by the Board of Directors. Such removal shall be without prejudice to
such person's contract rights, if any, but the appointment of any person as an
officer, agent or employee of the Corporation shall not of itself create
contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
---------
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 5. Compensation. The compensation of the officers of the
------------
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any
-----------------------
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer
---------
of the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board
Directors. He
19
<PAGE>
shall have, subject to the control of the Board of Directors, general charge of
the business and affairs of the Corporation. He may employ and discharge
employees and agents of the Corporation, except such as shall be appointed by
the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers and
--------------
perform such duties as the Board of Directors or the President may from time to
time prescribe.
Section 9. Treasurer. The Treasurer shall
---------
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934, as
amended) pursuant to a written agreement designating such bank or trust company
or member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit of
the Corporation;
(d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;
20
<PAGE>
(e) disburse the funds of the Corporation and supervise the investment of
its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
or the President.
Section 10. Secretary. The Secretary shall
---------
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or the President.
21
<PAGE>
Section 11. Delegation of Duties. In case of the absence of any officer of
--------------------
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
---------------
Each officer and director of the Corporation shall be indemnified by the
Corporation 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 Corporation 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 Corporation to indemnify such person
must be based upon the reasonable determination of independent legal counsel or
the vote of a majority of a quorum of the directors who are neither "interested
persons," as defined in Section 2(a)(19) of the Investment Company Act of 1940,
as amended, nor parties to the
22
<PAGE>
proceeding ("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 Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation 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 Corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation 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
Corporation for his undertaking; (b) the Corporation 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 Corporation at
the time the advance is proposed to be made, that there is reason to
23
<PAGE>
believe that the person seeking indemnification will ultimately be found to be
entitled to indemnification.
The Corporation 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 activities as officer or
director of the Corporation. The Corporation, however, may not purchase
insurance on behalf of any officer or director of the Corporation that protects
or purports to protect such person from liability to the Corporation 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 office.
The Corporation may indemnify, make advances or purchase insurance to the
extent provided in this Article VI on behalf of an employee or agent who is not
an officer or director of the corporation.
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. Each holder of stock of the Corporation
------------------
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional
24
<PAGE>
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or, the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of issue.
Section 2. Books of Account and Record of Stockholders. There shall be
-------------------------------------------
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of stock
issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
-------------------
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his
25
<PAGE>
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary or with a transfer agent or transfer clerk, and on surrender of
the certificate or certificates, if issued, for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the payment of all taxes
thereon. Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions, and to vote as such owner, and the Corporation shall not be
bound to recognize any equitable or legal claim to or interest in any such share
or shares on the part of any other person.
Section 4. Regulations. The Board may make such additional rules and
-----------
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
-----------------------------------------
certificates representing shares of stock of the
26
<PAGE>
Corporation shall immediately notify the Corporation of any loss, destruction or
mutilation of such certificate, and the Corporation may issue a new certificate
of stock in the place of any certificate theretofore issued by it which the
owner thereof shall allege to have been lost or destroyed or which shall have
been mutilated, and the Board may, in its discretion, require such owner or his
legal representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
-------------------------------------------------------
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution,
27
<PAGE>
allotment, rights or interests, and in such case only the stockholders of record
at the time so fixed shall be entitled to receive such dividend, distribution,
allotment, rights or interests.
Section 7. Information to Stockholders and Others. Any stockholder of the
--------------------------------------
Corporation or his agent may inspect and copy during usual business hours the
Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its affairs, and voting trust agreements on file at its principal
office.
ARTICLE VIII
Seal
----
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
-----------
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 30th day of November.
28
<PAGE>
ARTICLE X
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be deposited
------------
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
----------
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XI
Execution of Instruments
------------------------
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances,
--------------------------
bills of exchange and other orders or obligations for the payment of money shall
be signed by such officer or officers or person or persons as the Board of
Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or
------------------------------
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold,
29
<PAGE>
transferred or otherwise disposed of subject to any limits imposed by these By-
Laws and pursuant to authorization by the Board and, when so authorized to be
held on behalf of the Corporation or sold, transferred or otherwise disposed of,
may be transferred from the name of the Corporation by the signature of the
President or a Vice President or the Treasurer or pursuant to any procedure
approved by the Board of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
------------------------------
The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall be selected annually by the Board of Directors and, if
required by the provisions of the Investment Company Act of 1940, as amended,
ratified by the stockholders.
ARTICLE XIII
Annual Statement
----------------
The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board. A report to the
stockholders based upon each such examination shall be mailed to each
stockholder of
30
<PAGE>
the Corporation of record on such date with respect to each report as may be
determined by the Board, at his address as the same appears on the books of the
Corporation. Such annual statement shall also be available at the annual meeting
of stockholders, if any, and, within 20 days after the meeting (or, in the
absence of an annual meeting, within 20 days after the end of the month of
December following the end of the fiscal year), be placed on file at the
Corporation's principal office. Each such report shall show the assets and
liabilities of the Corporation as of the close of the Annual or quarterly period
covered by the report and the securities in which the funds of the Corporation
were then invested. Such report shall also show the Corporation's income and
expenses for the period from the end of the Corporation's preceding fiscal year
to the close of the annual or quarterly period covered by the report and any
other information required by the Investment Company Act of 1940, as amended,
and shall set forth such other matters as the Board or such firm of independent
public accountants shall determine.
ARTICLE XIV
Amendments
----------
These By-Laws or any of them may be amended, altered or repealed at any
regular meeting of the stockholders or at any special meeting of the
stockholders, at which a quorum is present or represented, provided that notice
of the proposed amendment,
31
<PAGE>
alteration or repeal be contained in the notice of such special meeting. These
By-Laws may also be amended, altered or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, except any particular By-Law which is specified as not
subject to alteration or repeal by the Board of Directors, subject to the
requirements of the Investment Company Act of 1940, as amended.
32
<PAGE>
EXHIBIT 99.5
MANAGEMENT AGREEMENT
AGREEMENT made this 15th day of August, 1991, by and between ILL LYNCH
LATIN AMERICA FUND, INC., a Maryland corporation (hereinafter referred to as the
"Fund") , and MERRILL LYNCH ASSET MANAGEMENT, INC., a Delaware corporation
(hereinafter referred to as the "Manager") .
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is engaged in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act") ; and WHEREAS,
the Manager is engaged principally in rendering management and investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Manager to render
management and investment advisory services to the Fund in the manner and on the
terms hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and
investment advisory services to the Fund on the terms and conditions hereinafter
set forth;
<PAGE>
NOW, THEREFORE, in consideration of the promises and the
covenants hereinafter contained, the Fund and the Manager hereby agree as
follows:
ARTICLE I
---------
Duties of the Manager
---------------------
The Fund hereby employs the Manager to act as an investment
manager and investment adviser of the Fund and to furnish or arrange for
affiliates to furnish the management and investment advisory services described
below, subject to policies of review by and overall control of the Board of
Directors of the Fund (the "Directors"), for the period and on the terms and
conditions set forth in this Agreement. The Manager hereby accepts such
employment and agrees during such period, at its own expense, to render, or
arrange for the rendering of, such services and to assume the obligations herein
set forth for the compensation provided for herein. The Manager and its
affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
(a) Management Services. The Manager shall perform (or
arrange for the performance by affiliates of) the management and administrative
services necessary for the operation of the Fund including administering
shareholder accounts and handling shareholder relations. The Manager shall
provide the Fund with
2
<PAGE>
office space, equipment and facilities and such other services as the Manager,
subject to review by the Directors, shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement. The Manager
shall also, on behalf of the Fund, conduct relations with custodians,
depositories, transfer agents, dividend disbursing agents, other shareholder
service agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such other
capacity deemed to be necessary or desirable. The Manager shall generally
monitor the Fund's compliance with investment policies and restrictions as set
forth in the currently effective prospectus and statement of additional
information relating to the shares of the Fund under the Securities Act of 1933,
as amended (the "Prospectus" and "Statement of Additional Information",
respectively). The Manager shall make reports to the Directors of its
performance of obligations hereunder and furnish advice and recommendations with
respect to such other aspects of the business and affairs of the Fund as it
shall determine to be desirable.
(b) Investment Advisory Services. The Manager shall
----------------------------
provide (or arrange for affiliates to provide) the Fund with such investment
research, advice and supervision as the latter may .from time to time consider
necessary for the proper supervision Of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time-to
3
<PAGE>
time Which securities shall be purchased, sold or exchanged and what portion of
the assets of the Fund shall be held in the various securities in which the Fund
invests, options, futures, options on futures or cash, subject always to the
restrictions set forth in the Articles of Incorporation and By-Laws of the Fund,
as amended from time to time, the provisions of the Investment Company Act and
the statements relating to the Fund's investment objective, investment policies
and investment restrictions as the same are set forth in the Prospectus and
Statement of Additional Information. The Manager shall also make decisions for
the Fund as to the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the Fund's portfolio securities shall
be exercised. Should the Directors at any time, however, make any definite
determination as to investment policy and notify the Manager thereof in writing,
the Manager shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination has
been revoked. The Manager shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment Policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end, the Manager is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries
4
<PAGE>
of securities and payments of cash for the account of the Fund. in connection
with the selection of such brokers or dealers and the placing of such orders
with respect to assets of the Fund, the Manager is directed at all times to seek
to obtain execution and price within the policy guidelines determined by the
Directors as set forth in the Prospectus and Statement of Additional
Information. Subject to this requirement and the provisions of the Investment
Company Act, the Securities Exchange Act of 1934, as amended, and other
applicable provisions of law, the Manager may select brokers or dealers with
which it or the Fund is affiliated.
ARTICLE 11
----------
Allocation of Charges and Expenses
----------------------------------
(a) The Manager. The Manager assumes and shall pay for
----------
maintaining the staff and personnel necessary to perform its obligations under
this Agreement, and shall at its own expense. provide the office space,
equipment and facilities which it is Obligated to provide under Article I
hereof, and shall pay all compensation of officers of the Fund and all Directors
who are affiliated persons of the Manager.
(b) The Fund. The Fund assumes and shall pay or cause to
--------
be paid all other expenses of the Fund (except for the expenses paid by the
Distributor), including, without limitation: redemption expenses, expenses of
portfolio transactions, expenses Of registering shares under federal and state
securities laws,
5
<PAGE>
pricing costs (including the daily calculation of net asset value), expenses of
printing shareholder reports, stock certificates,, prospectuses and statements
of additional information, Securities and Exchange Commission fees, interest,
taxes, custodian and transfer agency fees, fees and actual out-of-pocket
expenses of Directors who are not affiliated persons of the Manager, fees for
legal and auditing services, litigation expenses, costs of printing proxies and
other expenses related to shareholder meetings, and other expenses properly
payable by the Fund. It is also understood that the Fund will reimburse the
Manager for its costs in providing accounting services to the Fund. The
Distributor will pay certain of the expenses of the Fund incurred in connection
with the continuous offering of Fund shares.
ARTICLE III
-----------
Compensation of the Manager
---------------------------
(a) Investment Management Fee. For the services rendered,
-------------------------
the facilities furnished and expenses assumed by the Manager, the Fund shall pay
to the Manager at the end of each calendar month a fee based upon the average
daily value of the net assets of the Fund, as determined and computed in
accordance with the descrip-tion of the determination of net asset value
contained in the Prospectus and Statement of Additional Information, at the
annual rate of 1.00% of the average daily net assets of the Fund, Commencing on
the day following effectiveness hereof. If this
6
<PAGE>
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calcula-tion of the fee as set forth above. Subject to the provisions of
subsection (b) hereof, payment of the Manager's compensation for the preceding
month shall be made as promptly as possible after completion of the computations
contemplated by subsection (b) hereof. During any period when the determination
of net asset value is suspended by the Directors, the net asset value of a share
as of the last business day prior to such suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding business day
until it is again determined.
(b) Expense Limitations. In the event the operating
-------------------
expenses of the Fund, including amounts payable to the Manager pursuant to
subsection (a) hereof, for any fiscal year ending on a date on which this
Agreement is in effect exceed the expense limitations applicable to the Fund
imposed by applicable state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Manager shall reduce
its management fee by the extent of such excess and, if required pursuant to any
such laws or regulations, will reimburse the Fund in the amount of such excess;
provided, however, to the extent permitted by law, there shall be excluded from
such expenses the amount of any interest, taxes, brokerage
7
<PAGE>
commissions, distribution and account maintenance fees and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by the
Fund. Whenever the expenses of the Fund exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the management fee due to the Manager. Should two or more such
expense limitations be applicable as at the end of the last business day of the
month, that expense limitation which results in the largest reduction in the
Manager's fee shall be applicable.
ARTICLE IV
----------
Limitation of Liability of the Manager
--------------------------------------
The Manager shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV,, the term "Manager" shall include any affiliates of the Manager
performing services for the Fund contemplated hereby and directors, officers and
employees of the Manager and such affiliates.
8
<PAGE>
ARTICLE V
---------
Activities of the Manager
-------------------------
The services of the Manager to the Fund are not to be deemed
to be exclusive, and the Manager and any person controlled by or under common
control with the Manager (for purposes of this Article V referred to as
"affiliates") is free to render services to others. It is understood that
Directors, officers, employees and shareholders of the Fund are or may become
interested in the Manager and its affiliates, as directors, officers, employees
and shareholders or otherwise and that directors, officers, employees and
shareholders of the Manager and its affiliates are or may become similarly
interested in the Fund, and that the Manager and directors, officers, employees,
partners and shareholders of its affiliates may become interested in the Fund as
shareholder or otherwise.
ARTICLE VI
----------
Duration and Termination of this Contract
-----------------------------------------
This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force until July 31,
1993 and thereafter, but only so long as such continuance is specifically
approved at least annually by (i) the Directors, or by the vote of a majority of
the outstanding voting securities of the Fund, and (ii) a majority of those
Directors Who are not parties to this Agreement or interested persons of
9
<PAGE>
any such party cast in person at a meeting called for the purpose
of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Directors or by the vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
ARTICLE VII
-----------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the vote of a majority of outstanding
voting securities of the Fund, and (ii) a majority of those Directors who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
ARTICLE VIII
------------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting
securities",, "assignment", "affiliated person" and "interested person$', when
used in this Agreement, shall have the respective meanings specified in the
Investment Company Act and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under the Investment Company Act.
10
<PAGE>
ARTICLE IX
----------
Governing Law
-------------
This Agreement shall be construed in accordance with laws of
the State of New York and the applicable provisions of the investment Company
Act. To the extent that the applicable laws of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By____________________________________
MERRILL LYNCH ASSET MANAGEMENT, INC.
By____________________________________
11
<PAGE>
EXHIBIT 99.6(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between MERRILL LYNCH
LATIN AMERICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class A shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
class A shares of common stock in the Fund (sometimes herein referred to as
"Class A shares") to eligible investors (as defined below) and hereby agrees
during
<PAGE>
the term of this Agreement to sell Class A shares of the Fund to the Distributor
upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class A shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all
(or substantially all) the assets or the outstanding Class A shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2
<PAGE>
(d) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class A shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class A shares from the Fund.
----------------------------------------
(a) The Distributor shall have the right to buy from the Fund the Class A
shares needed, but not more than the Class A shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class A shares of the
Fund placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class A shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of additional
information", respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such Class A shares (,,eligible investors"). The
price which the Distributor shall pay for the Class A shares so purchased from
the Fund shall be the net asset value, determined as set forth in Section 3(d)
hereof, used in determining the public offering price on which such orders were
based.
(b) The Class A shares are to be resold by the Distributor to eligible
investors at the public offering price, as set forth in Section 3(c) hereof, or
to securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
3
<PAGE>
(c) The public offering price(s) of the Class A shares, i.e., the price
- -
per share at which the Distributor or selected may sell Class A shares to
eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class A shares, plus a sales charge not to exceed 5.25% of the
public offering price (5.54% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain Directors, officers
and employees of the Fund, directors and employees of Merrill Lynch & Co., Inc.
and its subsidiaries, and to certain other persons described in the prospectus
and statement of additional information, without a sales charge or at a reduced
sales charge, upon terms and conditions set forth in the prospectus and
statement of additional information. If the public offering price does not equal
an even cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
(d) The net asset value of Class A shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
4
<PAGE>
(e) The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class A shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class A shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares from eligible investors. The
Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class A shares by the Fund.
------------------------------------------------------
5
<PAGE>
(a) Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class A
shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class A shares purchased by or through the
Distri-butor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class A
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class A shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice
6
<PAGE>
of redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits. Section 5. Duties of
the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of addi-ional information as the
Distributor shall reasonably request.
7
<PAGE>
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class A shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to register the
same under the Securi-ties Act, to the end that there will be available for sale
such number of Class A shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
8
<PAGE>
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund but shall not be obligated to sell any
specific number of Class A shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other in-
vestment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class A shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to eligible investors and
selected dealers, the collection of amounts payable by eligible investors and
selected dealers on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the National
9
<PAGE>
Association of Securities Dealers, Inc. (the "NASD"), as such requirements may
from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class A shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class A shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the continuous offering of the Class A shares is attached hereto as
Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class A
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
10
<PAGE>
materials to Class A shareholders (including but not limited to the expense of
setting in type any such registration statements, prospectuses, statements of
additional information, annual or interim reports or proxy materials)
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to eligible investors and any
expenses of advertising incurred by the Distributor in connection with such
offering.
(c) The Fund shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5 (c) hereof and the cost
and expenses payable to each such state for continuing
11
<PAGE>
qualification therein until the Fund decides to discontinue such qualification
pursuant to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class A shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of
12
<PAGE>
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of the reckless disregard of their obligations and duties
under this Agreement; or (ii) is the Fund to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses of any
13
<PAGE>
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class A shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class A shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
14
<PAGE>
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first above written and
shall remain in force until October 21, 1995 and thereafter, but only for so
long as such continuance is specifically approved at least annually by (i) the
Directors or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors who are not
patties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
15
<PAGE>
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 14. This Agreement supersedes the prior Distribution Agreement
entered into by the parties hereto with respect to the Class A shares of the
Fund.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By /s/ Arthur Zeikel
____________________________________
Title: President
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
_____________________________________
Title: President
17
<PAGE>
EXHIBIT A
MERRILL LYNCH LATIN AMERICA FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class A
shares of common stock, par value $0.10 per share (herein referred to as "Class
A shares"), of the Fund and as such has the right to distribute Class A shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class A shares are
registered under the Securities Act of 1933, as amended. You have received a
copy of the Class A shares Distribution Agreement (the "Distribution Agreement")
between ourself and the Fund and reference is made herein to certain provisions
of such Distribution Agreement. The terms "Prospectus" and "Statement of
Additional Information" used herein refer to the prospectus and statement of
additional information, respectively, on file with the Securities and Exchange
Commission which is part of the most recent effective registration statement
pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as
a member of the Selected Dealers Group, Class A shares of the Fund for resale to
investors identified in the Prospectus and Statement of Additional Information
as eligible to purchase Class A shares ("eligible investors") upon the following
terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling
1
<PAGE>
of orders shall be subject to Section 5 hereof and instructions which we or the
Fund shall forward from time to time to you. All orders are subject to
acceptance or rejection by the Distributor or the Fund in the sole discretion of
either. The minimum initial and subsequent purchase requirements are as set
forth in the current Prospectus and Statement of Additional Information of the
Fund.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
------------------ -------------- ----------- -----------
<S> <C> <C> <C>
Less than $25,000....... 5.25% 5.54% 5.00%
$25,000 but less
than $50,000........... 4.75% 4.99% 4.50%
$50,000 but less
than $100,000.......... 4.00% 4.17% 3.75%
$100,000 but less
than $250,000.......... 3.00% 3.09% 2.75%
$250,000 but less
than $1,000,000........ 2.00% 2.04% 1.80%
$1,000,000 and over**... 0. 00% 0.00% 0.00%
</TABLE>
__________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges may be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as set
forth in the current Prospectus and Statement of Additional Information.
2
<PAGE>
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Fund or Class A shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class A shares
of the Fund at the offering price applicable to the total of (a) the public
offering price of the shares then being purchased plus (b) an amount equal to
the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares of
the Fund and of any other investment company with an initial sales charge for
which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant
3
<PAGE>
to the right of accumulation or a Letter of Intention is set forth in the
Prospectus and Statement of Additional Information.
4. You shall not place orders for any of the Class A shares unless you
have already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.q., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class A shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's
4
<PAGE>
Prospectus, Statement of Additional Information, periodic reports and proxy
solicitation material is our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class A shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be, sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
5
<PAGE>
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Fund will represent your acceptance of this Agreement.
16. This Agreement supersedes any prior Selected Dealers Agreement entered
into by the parties hereto with respect to the Class A shares of the Fund.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
___________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
----------------------------------------------------
By: /s/ David Conine
------------------------------------------
Address: 800 Scudders Mill Road
--------------------------------------
Plainsboro, New Jersey 08536
----------------------------------------------
Date: October 21, 1994
-----------------------------------------
6
<PAGE>
EXHIBIT 99.6(b)
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 15th day of August, 1991, between MERRILL LYNCH
LATIN AMERICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H
-------------------
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company and
it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class B shares
in order to promote the growth of the Fund and facilitate the distribution of
its Class B shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
Class B shares of common stock of the Fund (sometimes herein referred to as
"Class B shares") to
<PAGE>
the public and hereby agrees during the term of this Agreement to sell shares of
the Fund to the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class B shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class B shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class B shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase Class B
shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class B
shares of any such company by the Fund.
2
<PAGE>
(c) Such exclusive rights also shall not apply to Class B shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
Section 3. Purchase of Class B Shares from the Fund.
----------------------------------------
(a) Prior to the continuous offering of the Class B shares, commencing on
a date agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for Class B shares during a subscription
period which shall last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within five business days after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class B shares and thereafter the Distributor shall have the
right to buy from the Fund the Class B shares needed, but not more than the
Class B shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class B shares of the Fund placed with the Distributor
by investors or securities dealers. The price which the Distributor shall pay
for the Class B shares so purchased from the Fund shall be the net asset value,
determined as set forth in Section 3(d) hereof.
(c) The Class B shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(d) hereof, or to securities dealers
having agreements with the Dis-
3
<PAGE>
tributor upon the terms and conditions set forth in Section 7 hereof.
(d) The net asset value of Class B shares of the Fund shall be determined
by the Fund or any agent of the Fund in accordance with the method set forth in
the currently effective prospectus and statement of additional information of
the Fund (the "prospectus" and "statement of additional information,"
respectively) under the Securities Act of 1933, as amended (the "Securities
Act"), and guidelines established by the Board of Directors.
(e) The Fund shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class B shares if trading on the Hew York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class B shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class B shares. The Fund
4
<PAGE>
(or its agent) will confirm orders upon their receipt, will make appropriate
book entries and, upon receipt by the Fund (or its agent) of payment therefor,
will deliver deposit receipts or certificates for such Class B shares pursuant
to the instructions of the Distributor. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class B shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class B shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information of the Fund. The price to be paid to redeem or repurchase
the Class B shares shall be equal to the net asset value calculated in
accordance with the provisions of Section 3(d) hereof, less the redemption fee
or other charge, if any, set forth in the prospectus and statement of additional
information of the Fund. All payments by the Fund hereunder shall be made in the
manner set forth below.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of
5
<PAGE>
the Distributon on or before the seventh business day subsequent to its having
received the notice of redemption in proper form. The proceeds of any redemption
of shares shall be paid by the Fund as follows: (i) any applicable contingent
deferred sales charge shall be paid to the Distributor, (ii) any applicable
redemption fee shall be paid to the Fund and (iii) the balance shall be paid to
or for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class B shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
closed, when trading on said Exchange is restricted, when an emergency exists as
a result of which disposal by tte Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class B shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
6
<PAGE>
accountants. The Fund shall make available to the Distributor such number of
copies of its prospectus and statement of addi-tional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the securities Act to the end that there will be available for sale such number
of Class B shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class B shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund, but shall not be
7
<PAGE>
obligated to sell any specific number of shares. The services Of the Distributor
to the Fund hereunder are not to be deemed exclusive and nothing herein
contained shall prevent the Distributor from entering into like arrangements
with other investment companies so long as the performance of its obligations
hereunder is not impaired thereby.
(b) In selling the Class B shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
--------------------------
8
<PAGE>
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class B shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(d) hereof. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell Class B
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class B
shareholders (including but not limited to the expense of setting in type any
such registration statements,
9
<PAGE>
prospectuses, statements of additional information, annual or interim reports or
proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class B shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class B shares for sale to the public and any expenses of advertising
incurred by the Distributor in connection with such offering. It is understood
and agreed that, so long as the Fund's Class B Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor here-under may be paid from amounts recovered by it
from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualifi-cation of the
Class B shares for sale pursuant to this Agreement, and, if necessary or
advisable in connection therewith, of quali-
10
<PAGE>
fying the Fund as a broker or dealer, in such states of the United States or
other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class B shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class B
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i)
11
<PAGE>
is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be
12
<PAGE>
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the event
the Fund elects to assume the defense of any such suit and retain such counsel,
the Distributor or such controlling person or persons, defendant or defendants
in the suit, shall bear the fees and expenses, as incurred, of any additional
counsel retained by them, but, in case the Fund does not elect to assume the
defense of any such suit, it will reimburse the Distributor or such controlling
person or persons, defendant or defendants in the suit, for the reasonable fees
and expenses, as incurred, of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class B shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the
13
<PAGE>
annual or interim reports to shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distri-butor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until July 31, 1993 and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the
Directors, or by the vote of a majority of the outstanding voting securities of
the Fund, and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities',"
"assignment," "affiliated person" and "interested
14
<PAGE>
person," when used in this Agreement, sha11 have the respective meanings
specified in the Investment Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors, or by the vote of a majority of the outstanding Class B voting
securities of the Fund, and (ii) by the vote of a majority of those Directors of
the Fund who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
Section 12. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By___________________________________________
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________________
16
<PAGE>
EXHIBIT A
MERRILL LYNCH LATIN AMERICA FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
-----------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class B
shares of common stock, par value $0.10 per share (herein referred to as "Class
B shares"), of the Fund, and as such has the right to distribute Class B shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class B shares
being offered to the public are registered under the Securities Act of 1933, as
amended. Such Class B shares and certain of the terms on which they are being
offered are more fully described in the enclosed Prospectus and Statement of
Additional Information. You have received a copy of the Class B shares
Distribution Agreement (the "Distribution Agreement") between ourself and the
Fund and reference is made herein to certain provisions of such Distribution
Agreement. This Agreement relates solely to the subscription period described
in section 3(a) of such Distribution Agreement. Subject to the foregoing, as
principal, we offer to sell to you, as a member of the Selected Dealers Group,
Class B shares of the Fund upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the Distribution
Agreement will continue through September 20, 1991. The subscription period may
be extended upon agreement between the Fund and the Distributor. Subject to the
provisions of such Section and the conditions contained herein, we will sell to
you on the fifth business day following the termination of the subscription
period, or such other date as we may advise (the "Closing Date"), such number of
Class B shares as to which you have placed orders with us not later than 5:00
P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class B shares to the public you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group.
1
<PAGE>
3. You shall not place orders for any of the Class B shares unless you
have already received purchase orders for such Class B shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. All orders are subject to acceptance by the Distributor or the Fund
in the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the Prospectus, as amended from time to time.
You agree that you will not offer or sell any of the Class B shares except under
circumstances that will result in compliance with the applicable Federal and
state securities laws and that in connection with sales and offers to sell Class
B shares you will furnish to each person to whom any such sale or offer is made
a copy of the Prospectus and, if requested, the Statement of Additional
Information (as then amended or supplemented) and will not furnish to any person
any information relating to the Class B shares of the Fund which is incon-
sistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the Fund.
4. Payment for Class B shares purchased by you is to be made by certified
or official bank check at the office of Merrill Lynch Funds Distributor, Inc.,
Box 9011, Princeton, New Jersey 08543-9011, on such date as we may adviser in
New York Clearing House funds payable to the order of Merrill Lynch Funds
Distributor, Inc. against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Merrill Lynch Financial Data Service, Inc., as
shareholder servicing agent, acknowledging the deposit with it of the Class B
shares so purchased by you. You agree that as promptly as practicable after the
delivery of such Class B shares you will issue appropriate written transfer
instructions to the Fund or to the shareholder servicing agent as to the
purchasers to whom you sold the Class B shares.
5. No person is authorized to make any representations concerning Class B
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing class B shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus and Statement of Additional Information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall
2
<PAGE>
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.
6. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
7. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class B shares entirely. Each party hereto has
the right to cancel this Agreement upon notice to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
9. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
10. Upon application to us, we will inform you as to the states in which
we believe the Class B shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class B shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or tele-graphed to you at the
address specified by you below.
3
<PAGE>
12. You agree that you will not sell any Class B shares of the Fund to any
account over which you exercise discretionary authority.
13. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: _____________________________________________________
By: ____________________________________________________________
Address: _______________________________________________________
________________________________________________________________
Date: __________________________________________________________
4
<PAGE>
EXHIBIT B
MERRILL LYNCH LATIN AMERICA FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class B
shares of common stock, par value $0.10 per share (herein referred to as the
"Class B shares"), of the Fund, and as such has the right to distribute Class B
shares of the Fund for resale. The Fund is an open-end investment company
registered under the Investment Company Act of 1940, as amended, and its Class B
shares being offered to the public are registered under the Securities Act of
1933, as amended. You have received a copy of the Class B shares Distribution
Agreement (the "Distribution Agreement") between ourself and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms "Prospectus" and "Statement of Additional Information" as used herein
refer to the prospectus and statement of additional information, respectively,
on file with the Securities and Exchange Commission which is part of the most
recent effective registration statement pursuant to the Securities Act of 1933,
as amended. As principal, we offer to sell to you, as a member of the Selected
Dealers Group, Class B shares of the Fund upon the following terms and
conditions:
1. In all sales of these Class B shares to the public you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Fund.
1
<PAGE>
3. You shall not place orders for any of the Class B shares unless you
have already received purchase orders for such Class B shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class B shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class B shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of Addi-
tional Information (as then amended or supplemented) and will not furnish to any
person any information relating to the Class B shares of the Fund, which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class B shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement, and (ii) to tender
Class B shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such with-holding: e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class B
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class B shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if
2
<PAGE>
requested, the Statement of Additional Information at or prior to the time of
offering or sale and you agree thereafter to deliver to such purchasers copies
of the annual and interim reports and proxy solicitation materials of the Fund.
You further agree to endeavor to obtain proxies from such purchasers. Additional
copies of the Prospectus and Statement of Additional Information, annual or
interim reports and proxy solicitation materials of the Fund will be supplied to
you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class B shares entirely. Each party hereto has
the right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which
we believe the Class B shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class B shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
3
<PAGE>
13. Your first order placed pursuant to this Agreement for the purchase of
Class B shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: _________________________________________________________
By: ________________________________________________________________
Address: ___________________________________________________________
____________________________________________________________________
Date: ______________________________________________________________
4
<PAGE>
EXHIBIT 99.6(d)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994, between MERRILL LYNCH
LATIN AMERICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the in-terest of the Fund to offer its shares for
sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either direct-ly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class C shares
in order to promote the growth of the Fund and facilitate the distribution of
its Class C shares. NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
Class C shares of common stock in the Fund (sometimes herein referred to as
"Class C shares") to the public and hereby agrees during the term of this
Agreement to
<PAGE>
sell shares of the Fund to the Distributor upon the terms and conditions
herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as prin-cipal underwriter and
distributor of the Class C shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or conso-lidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class C
shares of any such company by the Fund.
2
<PAGE>
(c) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class C shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund. (a) It is
----------------------------------------
contemplated that the Fund will commence an offering of its Class C shares, and
thereafter the Distributor shall have the right to buy from the Fund the Class C
shares needed, but not more than the Class C shares needed (except for clerical
errors in transmission) to fill unconditional orders for Class C shares of the
Fund placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class C shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of additional
information", respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such Class C shares. The price which the
Distributor shall pay for the Class C shares so purchased from the Fund shall be
the net asset value, determined as set forth in Section 3(c) hereof.
3
<PAGE>
(b) The Class C shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Dis-tributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class C shares of the Fund shall be determined
by the Fund or any agent of the Fund in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Board of Directors.
(d) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class C shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it imprac-ticable or inadvisable to sell the
Class C shares.
(e) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class C shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund
4
<PAGE>
(or its agent) will confirm orders upon their receipt, will make appropriate
book entries and, upon receipt by the Fund (or its agent) of-payment therefor,
will deliver deposit receipts or certificates for such Class C shares pursuant
to the instructions of the Distributor. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class C shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information of the Fund. The price to be paid to redeem or repurchase
the Class C shares shall be equal to the net asset value calculated in
accordance with the provisions of Section 3(c) hereof, less any contingent
deferred sales charge ("CDSC") , redemption fee or other charge (s) , if any,
set forth in the prospectus and statement of additional information of the Fund.
All payments by the Fund hereunder shall be made in the manner set forth below.
5
<PAGE>
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be sus-pended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class C shares of the
Fund, and this shall in-clude, upon request by the Distributor, one certified
copy of all
6
<PAGE>
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
prospectus and statement of addi-tional information as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act to the end that there will be available for sale such number
of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
7
<PAGE>
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund hereunder
are not to be deemed exclu-sive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment com-
panies so long as the performance of its obligations hereunder is not impaired
thereby.
(b) In selling the Class C shares of the Fund, the Distri-butor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any se-lected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be neces-sary
to comply with the requirements of the National Association
8
<PAGE>
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements,
9
<PAGE>
prospectuses, statements of additional information, annual or interim reports or
proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial con-sultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class C shares for sale to the public and any expenses of advertising
incurred by the Dis-tributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class C Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor here-under may be paid from amounts recovered by it
from the Fund under such Plan.
(c) The Fund shall bear the cost-and expenses of qualifi-cation of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of quali-
10
<PAGE>
fying the Fund as a broker or dealer in such states of the United States or
other jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Fund decides to discontinue
such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distri-butor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class C
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, in-formation
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i)
<PAGE>
is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be
12
<PAGE>
conducted by counsel chosen by it and satisfactory to the Distributor or such
controlling person or persons, defendant or defendants in the suit. In the event
the Fund elects to assume the defense of any such suit and retain such counsel,
the Distributor or such controlling person or persons, defendant or defendants
in the suit shall bear the fees and expenses, as incurred, of any additional
counsel retained by them, but in case the Fund does not elect to assume the
defense of any such suit, it will reimburse the Distributor or such controlling
person or persons, defendant or defendants in the suit, for the reasonable fees
and expenses, as incurred, of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commence-ment of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indem-nity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the
13
<PAGE>
annual or interim reports to shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distri-butor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
the terms as to the offering price of shares, the proceeds to be paid to the
Fund, the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement.
------------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until October 21, 1995 and thereafter, but only for so
long as such continuance is specifically approved at least annually by (i) the
Directors or by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of
14
<PAGE>
any such party cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended by
----------------------------
the parties only if such amendment is specifi-cally approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agree-ment shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any
15
<PAGE>
of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By /s/ Arthur Zeikel
_______________________________________
Title: President
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
_______________________________________
Title: President
16
<PAGE>
EXHIBIT A
MERRILL LYNCH LATIN AMERICA FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the "Fund")
, pursuant to which it acts as the distributor for the sale of Class C shares of
common stock, par value $0.10 per share (herein referred to as the "Class C
shares"), of the Fund and as such has the right to distribute Class C shares of
the Fund for resale. The Fund is an open-end investment company registered under
the Investment Company Act of 1940, as amended, and its Class C shares being
offered to the public are registered under the Securities Act of 1933, as
amended. You have received a copy of the Class C Shares Distribution Agreement
(the "Distribution Agreement") between ourself and the Fund and reference is
made herein to certain provisions of such Distribution Agreement. The terms
"Prospec-tus" and "Statement of Additional Information" as used herein refer to
the prospectus and statement of additional information, respectively, on file
with the Securities and Exchange Commission which is part of the most recent
effective registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class C shares of the Fund upon the following terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,.
to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum ini-
1
<PAGE>
tial and subsequent purchase requirements are as set forth in the current
Prospectus and Statement of Additional Information of the Fund.
3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of Addi-
tional Information (as then amended or supplemented) and will not furnish to any
person any information relating to the Class C shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Addi-tional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Sec-tion 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such with-holding: e.g., by a change in the
"net asset value,, from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class C
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Informa-tion and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospec-tus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall
2
<PAGE>
have no liability or responsibility to you in these respects unless expressly
assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon re-quest.
8. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class C shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which
we believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Departnient of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or tele-graphed to you at the
address specified by you below.
3
<PAGE>
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
____________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Inc.
------------------------------------------
By /s/ David Conine
---------------------------------------------------
Address: 800 Scudders Mill Road
---------------------------------------------
Plainsboro, New Jersey 08536
------------------------------------------------------
Date: October 21, 1994
-----------------------------------------------------
4
<PAGE>
EXHIBIT 99.6(e)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between MERRILL LYNCH
LATIN AMERICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL LYNCH
FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Fund to sell
Class D shares of common stock in the Fund (sometimes herein referred to as
"Class D shares") to the public and hereby agrees during the term of this
Agreement to
<PAGE>
sell Class D shares of the Fund to the Distributor upon the terms and conditions
herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and dis-tributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to pur-chase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2
<PAGE>
(d) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares fro the Fund.
---------------------------------------
(a) It is contemplated that the Fund will commence an offering of its
Class D shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class D shares needed, but not more than the Class D shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class D shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class D shares shall be those
persons so identified in the currently effective prospectus and statement of
additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class D shares. The price which
the Distributor shall pay for the Class D shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(c) hereof, or to
securities dealers having agreements
3
<PAGE>
with the Distributor upon the terms and conditions set forth in
Section 7 hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 5.25% of the public offering price
(5.54% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Directors, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
(d) The net asset value of Class D shares shall be deter-mined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional
4
<PAGE>
information of the Fund and guidelines established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts or certificates for such Class D shares pursuant to the instructions of
the Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
5
<PAGE>
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class D
shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distri-butor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for redemption or repur-chase within seven business days
after the date of the confirma-tion of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class D shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of
6
<PAGE>
the Distributor in New York Clearing House funds on or before the seventh
business day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of shares shall be paid by the Fund
as follows: (i) any applicable CDSC shall be paid to the Distributor, and (ii)
the balance shall be paid to or for the account of the shareholder, in each case
in accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class D shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall in-clude, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor
7
<PAGE>
such number of copies of the prospectus and statement of additional information
as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securi-ties Act, to the end that there will be available for sale
such number of Class D shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The
8
<PAGE>
services of the Distributor to the Fund hereunder are not to be deemed exclusive
and nothing herein contained shall prevent the Distributor from entering into
like arrangements with other in-vestment companies so long as the performance of
its obligations hereunder is not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice
<PAGE>
("selected dealers") for the sale of Class D shares and fix therein the portion
of the sales charge which may be allocated to the selected dealers; provided
that the Fund shall approve the forms of agreements with dealers and the dealer
compensation set forth therein. Class D shares sold to selected dealers shall
before resale by such dealers only at the public offering price(s) set forth in
the prospectus and statement of additional information. The form of agreement
with selected dealers to be used during the continuous offering of the Class D
shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class D
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto,
and, preparing and mailing annual and interim reports and proxy materials to
Class D shareholders (including but not limited to the expense of setting in
type any such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
10
<PAGE>
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this-Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers inconnection with the offering of
the Class D shares for sale to the public and any expenses of advertising
incurred by the Distributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class D Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor hereunder in connection with account maintenance
activities may be paid from amounts recovered by it from the Fund under such
plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund
11
<PAGE>
and the Distributor pursuant to Section 5(c) hereof and the cost and expenses
payable to each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the
12
<PAGE>
Fund or its security holders to which the Distributor or any such controlling
persons would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of their duties or by reason of the
reckless disregard of their obligations and duties under this Agreement; or (ii)
is the Fund to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or such controlling persons, as the
case may be, shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Distributor or such controlling
persons (or after the Distributor or such controlling persons shall have
received notice of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve it from any liability which it may
have to the person against whom such action is brought otherwise than on account
of its indemnity agreement contained in this paragraph. The Fund will be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, but if
the Fund elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor or such controlling
person or persons, defendant or defendants in the suit. In the event the Fund
elects to assume the defense of any such suit and retain such counsel, the
13
<PAGE>
Distributor or such controlling person or persons, defendant or defendants in
the suit shall bear the fees and expenses of any additional counsel retained by
them, but in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund shall promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or Directors in connection with the issuance or sale of any of the
Class D shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class D shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified
14
<PAGE>
shall have the rights and duties given to the Distributor by the provisions of
subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Proqram. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith. Incorporated, are authorized
to offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until October 21, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Trustees or by
the vote of a majority of the outstanding voting securities of the Fund and (ii)
by the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Dis-tributor, on sixty days' written notice to
the other party. This
15
<PAGE>
Agreement shall automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended by
----------------------------
the parties only if such amendment is specifi-cally approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By /s/ Arthur Zeikel
________________________________________
Title: President
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
________________________________________
Title: President
17
<PAGE>
EXHIBIT A
MERRILL LYNCH LATIN AMERICA FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class D
shares of common stock, par value $0.10 per share (herein referred to as "Class
D shares"), of the Fund and as such has the right to distribute Class D shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class D shares
being offered to the public are registered under the Securities Act of 1933, as
amended. You have received a copy of the Class D Shares Distribution Agreement
(the "Distribution Agreement") between ourself and the Fund and reference is
made herein to certain provisions of such Distribution Agreement. The terms
"Prospectus" and "Statement of Additional Information" used herein refer to the
prospectus and statement of additional information, respectively, on file with
the Securities and Exchange Commission which is part of the most recent
effective registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class D shares of the Fund upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 5 hereof and
instructions which we or the Fund shall forward from time to time to you. All
1
<PAGE>
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the current Prospectus and Statement of
Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages of
the public offering price and the amount invested, and the related discount to
Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount offering
Amount of Purchase Offering Price Invested Price
------------------ -------------- ---------- -----------
<S> <C> <C> <C>
Less than $25,000..... 5.25% 5.54% 5.00%
$25,000 but less
than $50,000......... 4.7S% 4.99% 4.50%
$50,000 but less
than $100,000........ 4.00% 4.17% 3.75%
$100,000 but less
than $250,000........ 3.00% 3.09% 2.75%
$250,000 but less
than $1,000,000...... 2.00% 2.04% 1.80%
$1,000,000 and over**. 0.00% 0.00% 0.00%
</TABLE>
__________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as set
forth in the current Prospectus and Statement of Additional Information.
2
<PAGE>
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class D shares of the Fund or Class D shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which eligible investors are permitted to purchase Class D shares of the
Fund at the offering price applicable to the total of (a) the public offering
price of the shares then being purchased plus (b) an amount equal to the then
current net asset value or cost, whichever is higher, of the purchaser's
combined holdings of Class A, Class B, Class C and Class D shares of the Fund
and of any other investment company with an initial sales charge for which the
Distributor acts as the distributor. For any such right of accumulation to be
made available, the Distributor must be provided at the time of purchase, by the
purchaser or you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to the public qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the
3
<PAGE>
right of accumulation or a Letter of Intention is set forth in the Prospectus
and Statement of Additional Information.
4. You shall not place orders for any of the Class D shares unless you
have already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class D shares.
8. No-person is authorized to make any-representations concerning Class D
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D shares
through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's
4
<PAGE>
Prospectus, Statement of Additional Information, periodic reports and proxy
solicitation material is our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class D shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
5
<PAGE>
15. Your first order placed pursuant to this Agreement for the Purchase
of Class D shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry Glenn
___________________________________
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: Merrill Lynch, Pirce, Fenner & Smith Inc.
------------------------------------------
By: /s/ David Conine
-------------------------------------------------
Address: 800 Scudders Mill Road
--------------------------------------
Plainsboro, New Jersey 08536
----------------------------------------------
Date: October 21, 1994
----------------------------------------------
6
<PAGE>
EXHIBIT 99.8
This AGREEMENT is effective AUGUST 19, 1991 and is between THE CHASE MANHATTAN
---------- ----
BANK, N.A. (the "Bank") and MERRILL LYNCH LATIN AMERICA FUND, INC.(the
--------------------------------------
"Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
('Accounts'):
(a) a custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, billion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer (Securities'): and
(b) a deposit account in the name of Ihe Customer ("Deposit Account') for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
('Assets') received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts, The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, here such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians). The Customer authorizes the Bank to hold Assets in
the accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the
Customer
(b) A Subcustodian will hold Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
<PAGE>
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act, for the Customer upon
Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTION
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in, which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within a
reasonable period, determined by the Bank in its discretion, after the
contractual settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits
and debits of the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank will
perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from rom the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
<PAGE>
All collections of funds or other properly paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
B. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions'), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, as defined in Section 10, but if Instructions
are not received in time for the Bank to take timely action. or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
<PAGE>
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be
liable to the Customer for any loss which shall occur as the result of
the failure of a Subcustodian to exercise reasonable care with respect
to the safekeeping of such Assets to the same extent that the Bank
would be liable to the Customer if the Bank were holding such Assets
in New York. In the event of any loss to the Customer by reason of the
failure of the Bank or its Subcustodian to utilize reasonable care,
the Bank shall be liable to the Customer only to the extent of the
Customer's direct damages, to be determined based on the market value
of the property which is the subject of the loss at the date of
discovery of such loss and without reference to any special conditions
or circumstances.
(ii) The Bank will not be responsible for any act, omission, default
or for the solvency of any broker or agent which it or a Subcustodian
appoints unless such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant
to Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith, without negligence. In
performing its obligations under this Agreement, the Bank may rely on
the genuineness of any document which it believes in good faith to
have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of
any taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the advice of
counsel (who may be counsel for the Customer) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice
(vi) The Bank need not maintain any insurance for the benefit of the
Customer
(vii) Without limiting the foregoing,the Bank shall not be liable for
any loss which results from: 1)the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations: and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or
work stoppages,acts of war or terrorism, insurrection,revolution,
nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker agent or other party
to which Securities are delivered or payments are made pursuant to
this Agreement; or
(v) review or reconcile trade confirmations received from
brokers.The Customer or its Authorized Persons issuing instructions
shall bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material Interest in the issue of Securities, or earn profits from any of
the activities listed herein.
<PAGE>
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) Certification of Residency etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customers books and records.
(d) Governing law; Successors and Assigns.This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (check one):
-------- employee benefit plan or other assets subject to the Employee
Retirement income Security Act of l974 ,as amended ("ERISA:);
X
-------- mutual fund assets subject to Securities and Exchange Commission
("SEC') rules and regulations
________ neither of the above.
This Agreement consists exclusively of this document together with Schedule
A, Exhibits I - _________ and the following rider(s) [check applicable
rider(s)]:
________ ERISA
X MUTUAL FUND
--------
________ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
<PAGE>
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right, No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties a, the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, NY 10036
Attention: Global Custody Division
Customer: Merrill Lynch Asset Management, Inc
------------------------------------------------------------
800 Scudders Mill Road
------------------------------------------------------------
Plainsboro, New Jersey 08536
------------------------------------------------------------
Attn: Treasury Department
------------------------------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice,
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case the Bank will deliver the Assets
to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. It within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By Mark Desario
-------------------------------------
Vice President
-------------------------------------
Title
THE CHASE MANHATTAN BANK N.A.
BY Michael Ravensbergen
-------------------------------------
Vice President
-------------------------------------
Title
<PAGE>
STATE OF New Jersey )
: Ss.
COUNTY OF Middlesex )
On this________day of________ 19_____, before me personally came
_________________ to me known, who being by me duly sworn, did depose and say
that he/she resides in _______________; that he/she is ______________ of
______________ ("Customer'), the Customer which executed the foregoing
Agreement; that he knows the seal of the Customer; that the seal affixed to the
Agreement is such seal; that it was affixed by order of the Customer, and that
he/she signed his/her name thereto by like order.
___________________________________
Sworn to before me this _________
day of _________, 19______
_________________________________
Notary
STATE OF New York )
: Ss.
COUNTY OF New York )
On this________day of________ 19_____, before me personally came
_________________ to me known, who being by me duly sworn, did depose and say
that he/she resides in _______________ at _______________; that he is a Vice
President of THE CHASE MANHATTAN BANK, N.A. ("Bank'), the Bank which executed
the foregoing Agreement; that he knows the seal of the Bank; that the seal
affixed to the Agreement is such corporate seal; that it was so affixed by order
of the Board of Directors of the Bank, and that he/ signed his name thereto by
like order
___________________________________
Sworn to before me this _________
day of _________, 19______
_________________________________
Notary
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Merrill Lynch Latin America Fund Inc. ,
-----------------------------------------
effective __________
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act'), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
Section 3. Subcustodians and Securities Depositories.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Act;
(b) "eligible foreign custodian"shall mean(i)a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholder's equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof, (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholder's equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank or (iv) any other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent book-
entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits 1 of Schedule A, and further represents that its Board has
determined that the use of each Subcustodian and the terms of each subcustody
agreement are consistent with the best interests of the Customer's fund(s) and
its (their) shareholders. The Bank will supply the Customer with any amendment
to Schedule A for approval. The Customer has supplied or will supply the Bank
with certified copies of its Board of Directors resolution(s) with respect to
the foregoing prior to placing Assets with any Subcustodian so approved,
Section 11. Instructions.
Add the following language to the end of Section 11:
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
<PAGE>
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities a lone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of Interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a pledge
of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customers transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act') and a member of the National
Association of Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer
(o) Upon the termination of this Agreement as set forth in Section 14(i).
Section 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(d) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customers Securities pursuant
to this Agreement afford protection for such Securities at least equal to that
afforded by the Banks established procedures with respect to similar securities
held by the Bank and its securities depositories in New York.
Section 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c)
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customers assets
<PAGE>
EXHIBIT 99.9
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 15th day of August, 1991 by and between
Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the "Fund") and
Financial Data Services, Inc. ("FDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Fund wishes to appoint FDS to be the Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to,
the terms and provisions of this Agreement, and FDS is desirous of accepting
such appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this
Agreement, the Fund and FDS agree as follows:
1. Appointment of FDS as Transfer Agent, Dividend Disbursing Agent
---------------------------------------------------------------
and Shareholder Servicing Agent.
--------------------------------
(a) The Fund hereby appoints FDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject
to, the terms and provisions of this Agreement.
(b) FDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to act
as such upon, and subject to, the terms and provisions of this Agreement.
2. Definitions.
(a) In this Agreement:
(i) The term "Act" means the Investment Company Act of 1.940 as
amended from time to time and any rule or regulation thereunder;
(ii) The term "Account" means any account of a Shareholder, or, if
the shares are held in an account in the name of MLPF&S for benefit of an
identified customer, such account, including a Plan Account, any account under a
plan (by whatever name referred to in the Prospectus) pursuant to the Self-
Employed Individuals Retirement Act of 1962 ("Keogh Act Plan") and any plan (by
whatever name referred to in the Prospectus) in conjunction with Section 401 of
the Internal Revenue Code ("Corporation Master Plan");
<PAGE>
(iii) The term "application" means an application made by a
Shareholder or prospective Shareholder respecting the opening of an Account;
(iv) The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a
Delaware corporation;
(v) The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation;
(vi) The term "Officer's Instruction" means an instruction in writing
given on behalf of the Fund to FDS, and signed on behalf of the Fund by the
President, any Vice President, the Secretary or the Treasurer of the Fund;
(vii) The term "Prospectus" means the Prospectus and the Statement of
Additional Information of the Fund as from time to time in effect;
(viii) The term "Shares" means shares of stock or beneficial
interest, as the case may be, of the Fund, irrespective of class or series;
(ix) The term "Shareholder" means the holder of record of Shares;
(x) The term "Plan Account" means an account opened by a Shareholder
or prospective Shareholder in respect to an open account, monthly payment or
withdrawal plan (in each case by whatever name referred to in the Prospectus),
and may also ,include an account relating to any other plan if and when
provision is made for such plan in the Prospectus.
3. Duties of FDS as Transfer Agent, Dividend Disbursing Agent and
--------------------------------------------------------------
Shareholder Servicing Agent.
----------------------------
(a) Subject to the succeeding provisions of the Agreement, FDS hereby
agrees to perform the following functions as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent for the Fund;
(i) Issuing, transferring and redeeming Shares;
(ii) opening, maintaining, servicing and closing Accounts;
(iii) Acting as agent for the Fund Shareholders and/or customers of
MLPF&S in connection with Plan Accounts, upon the terms and subject to the
conditions contained in the Prospectus and application relating to the specific
Plan Account;
2
<PAGE>
(iv) Acting as agent of the Fund and/or MLPF&S, maintaining such
records as may permit the imposition of such contingent deferred sales charges
as may be described in the prospectus, including such reports as may be
reasonably requested by the Fund with respect to such Shares as may be subject
to a contingent deferred sales charge;
(v) Upon the redemption of Shares subject to such a contingent
deferred sales charge, calculating and deducting from the redemption proceeds
thereof the amount of such charge in the manner set forth in the Prospectus. FDS
shall pay, on behalf of MLFD, to MLPF&S such deducted contingent deferred sales
charges imposed upon all Shares maintained in the name of MLPF&S, or maintained
in the name of an account identified as a customer account of MLPF&S. Sales
charges imposed upon any other Shares shall be paid by FDS to MLFD.
(vi) Exchanging the investment of an investor into, or from the
shares of other open-end investment companies or other series portfolios of the
Fund, if any, if and to the extent permitted by the Prospectus at the direction
of such investor.
(vii) Processing redemptions;
(viii) Examining and approving legal transfers;
(ix) Replacing lost, stolen or destroyed certificates representing
Shares, in accordance with, and subject to, procedures and conditions adopted by
the Fund;
(x) Furnishing such confirmations of transactions relating to their
Shares as required by applicable law;
(xi) Acting as agent for the Fund and/or MLPF&S, furnishing such
appropriate periodic statements relating to Accounts, together with additional
enclosures, including appropriate income tax information and income tax forms
duly completed, as required by applicable law;
(xii) Acting as agent for the Fund and/or MLPF&S, mailing annual,
semi-annual and quarterly reports prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to Shareholders as required by
applicable law;
(xiii) Furnishing such periodic statements of transactions effected
by FDS, reconciliations, balances and summaries as the Fund may reasonably
request;
(xiv) Maintaining such books and records relating to transactions
effected by FDS as are required by the Act, or by any other applicable provision
of law, rule or regulation, to be maintained by the Fund or its transfer agent
with respect to such
3
<PAGE>
transactions, and preserving, or causing to be preserved any such books and
records for such periods as may be required by any such law, rule or regulation
and as may be agreed upon from time to time between FDS and the Fund. In
addition, FDS agrees to maintain and preserve master files and historical
computer tapes on a daily basis in multiple separate locations a sufficient
distance apart to insure preservation of at least one copy of such information;
(xv) Withholding taxes on non-resident alien Accounts, preparing and
filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(xvi) Reinvesting dividends for full and fractional shares and
disbursing cash dividends, as applicable.
(b) FDS agrees to act as proxy agent in connection with the holding
of annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Fund the results of such tabulation accompanied by
appropriate certifications, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, in such form and containing such
information as may be required by the Fund.
(c) FDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of FDS under this
Agreement with respect to Accounts.
(d) FDS agrees to furnish to the Fund such information and at such
intervals as is necessary for the Fund to comply with the registration and/or
the reporting requirements (including applicable escheat laws) of the Securities
and Exchange Commission, Blue Sky authorities or other governmental authorities.
(e) FDS agrees to provide to the Fund such information as may
reasonably be required to enable the Fund to reconcile the number of outstanding
Shares between FDS's records and the account books of the Fund.
(f) Notwithstanding anything in the foregoing provisions of this
paragraph, FDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular
class-of cases) as may from time to time be contained in an Officer's
Instruction.
4
<PAGE>
4. Compensation.
------------
The charges for services described in this Agreement, including "out-
of-pocket" expenses, will be set forth in the schedule of Fees attached hereto.
5. Right of Inspection.
-------------------
FDS agrees that it will in a timely manner make available to, and
permit, any officer, accountant, attorney or authorized agent of the Fund to
examine and make transcripts and copies (including photocopies and computer or
other electronical information storage media and print-outs) of any and all of
its books and records which relate to any transaction or function performed by
FDS under or pursuant to this Agreement.
6. Confidential Relationship.
-------------------------
FDS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Fund, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Fund by way of
an Officer's Instruction.
7. Indemnification.
---------------
The Fund shall indemnify and hold FDS harmless from any loss, costs,
damage and reasonable expenses, including reasonable attorney's fees (provided
that such attorney is appointed with the Fund's consent, which consent shall not
be unreasonably withheld), incurred by it resulting from any claim, demand,
action, or suit in connection with the performance of its duties hereunder,
provided that this indemnification shall not apply to actions or omissions of
FDS in cases of willful misconduct, failure to act in good faith or negligence
by FDS, its officers, employees or agents, and further provided, that prior to
confessing any claim against it which may be subject to this indemnification,
FDS shall give the Fund reasonable opportunity to defend against said claim in
its own name or in the name of FDS. An action taken by FDS upon any Officer's
Instruction reasonably believed by it to have been properly executed shall not
constitute willful misconduct, failure to act in good faith or negligence under
this Agreement.
5
<PAGE>
8. Regarding FDS.
-------------
(a) FDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and capabilities
as may be reasonably determined by the Fund to be necessary for the satisfactory
performance of the duties and responsibilities of FDS. FDS warrants and
represents that its officers and supervisory personnel charged with carrying out
its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent for the Fund possess the special skill and technical knowledge
appropriate for that purpose. FDS shall at all times exercise due care and
diligence in the performance of its functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund. FDS agrees that,
in determining whether it has exercised due care and diligence, its conduct
shall be measured by the standard applicable to persons possessing such special
skill and technical knowledge.
(b) FDS warrants and represents that is duly authorized and permitted to
act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent
under all applicable laws and that it will immediately notify the Fund of any
revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
9. Termination.
-----------
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or FDS (without penalty to the Fund or FDS) provided that
the terminating party gives the other party written notice of such termination
at least sixty (60) days in advance, except that the Fund may terminate this
Agreement immediately upon written notice to FDS if the authority or permission
of FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent has been revoked or if any proceeding or other action which the
Fund reasonably believes will lead to such revocation has been commenced.
(b) Upon termination of this Agreement, FDS shall deliver all unissued
and cancelled stock certificates representing Shares remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments and
other documents (including computerized or other electronically stored inf
ormation) made or accumulated in the performance of its duties as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund
along with a certified locator document clearly indicating the complete contents
therein, to such successor as may be specified in a notice of termination or
officer's Instruction;
6
<PAGE>
and the Fund assumes all responsibility for failure thereafter to produce any
paper, record or documents so delivered and identified in the locator document,
if and when required to be produced.
10. Amendment.
---------
Except to the extent that the performance by FDS or its functions
under this Agreement may from time to time be modified by an Officer's
Instruction, this Agreement may be amended or modified only by further written
Agreement between the parties.
11. Governing Law.
-------------
This Agreement shall be governed by the laws of the State of New
Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective duly authorized officers and their respective
corporate seals hereunto duly affixed and attested, as of the day and year above
written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By: /s/ Gerald M. Richard
----------------------------------
Title: TREASURER
--------------------------------
FINANCIAL DATA SERVICES, INC.
By:___________________________________
Title:________________________________
7
<PAGE>
EXHIBIT 99.13
CERTIFICATE OF SOLE STOCKHOLDER
Merrill Lynch Asset Management, Inc. ("MLAM"), the holder of 5,000 Class A
shares of common stock, par value $0.10 per-share, and 5,000 Class B shares of
common stock, par value $0.10 per share, of Merrill Lynch Latin America Fund,
Inc., a Maryland corporation (the "Fund"),, does hereby confirm to the Fund its
representation that it purchased such shares for investment purposes, with no
present intention of redeeming or reselling any portion thereof, and does
further agree that if it redeems any portion of such shares prior to the
amortization of the Fund's organizational expenses, the proceeds thereof will be
reduced by the proportionate amount of the unamortized organizational expenses
whidh the number of shares being redeemed bears to the number of shares
initially purchased and outstanding at the time of redemption. MLAM-further
agrees that in the event such shares are sold or otherwise transferred to any
other party, that prior to such sale or transfer MLAM will obtain on behalf of
the Fund an agreement from such other party to comply with the foregoing as to
the reduction of redemption proceeds and to obtain a similar agreement from any
transferee of such party.
MERRILL LYNCH ASSET MANAGEMENT, INC.
By /s/ Terry K. Glenn
________________________________________
Executive Vice President
Dated: August 15, 1991
<PAGE>
EXHIBIT 99.15(b)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH LATIN AMERICA FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between
Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the "Fund"), and
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act") ; and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class C shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the, annual rate of 0.25% of average daily net assets
of the Fund relating to Class C shares to compensate MLFD and securities firms
with which MLFD enters
<PAGE>
into related agreements pursuant to Paragraph 3 hereof ("Sub-Agreements") for
providing account maintenance activities with respect to Class C shareholders of
the Fund. Expenditures under the Plan may consist of payments to financial
consultants for maintaining accounts in connection with Class C shares of the
Fund and payment of expenses incurred in connection with such account
maintenance activities including the costs of making services available to
shareholders including assistance in connection with inquiries related to
shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.75% of average daily net assets of the Fund
relating to Class C shares to compensate MLFD and securities firms with which
MLFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares of the Fund. Such expenditures may
consist of sales commissions to financial consultants for selling Class C shares
of the Fund, compensation, sales incentives and payments to sales and marketing
personnel, and the payment of expenses incurred in its sales and promotional
activities, including advertising expenditures related to the Fund and the costs
of preparing and distributing promotional materials. The distribution fee may
also be used to pay the financing costs of carrying the unreimbursed
expenditures described in this Paragraph 2. Payment of the distribution fee
described in this Paragraph 2 shall be subject to any limitations set forth in
any applicable regulation of the National Association of Securities Dealers,
Inc.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
2
<PAGE>
5. This Plan shall not take effect until it has been approved by a vote
of at least a majority, as defined in the Investment Company Act, of the
outstanding-Class C voting securi-ties of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting
securities of the Fund.
9. The Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class C
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomina-tion of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Fund shall be committed to the discretion of the Directors who are
not interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By /s/ Terry Glenn
______________________________________
Title: President
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ David Conine
______________________________________
Title: President
4
<PAGE>
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc., a Delaware corpo-ration ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Latin
America Fund, Inc., a Maryland corporation (the "Fund") , pursuant to which it
acts as the exclusive distributor for the sale of Class C shares of common
stock, par value $0.10 per share (the "Class C shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act") pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares for account maintenance activities
related to Class C shares of the Fund and a distribution fee from the Fund at
the annual rate of 0.75% of average daily net assets of the Fund relating to
Class C shares for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class C shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class C shares of the Fund and incur expenditures
in connection with such activities and services of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class C shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
<PAGE>
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not " interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Arthur Zeikel
______________________________________
TITLE: President
MERRILL LYNCH, PIERCE, FENNER SMITH
INCORPORATED
By /s/ Terry K. Glenn
______________________________________
Title: President
2
<PAGE>
EXHIBIT 99.15(c)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH LATIN AMERICA FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994, by and between
Merrill Lynch Latin America Fund, Inc., a Maryland corporation (the "Fund"), and
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
--------------------
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class D
shares of common stock, par value $0.10 per share (the "Class D shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account main-tenance fee to MLFD with respect to the
Fund's Class D shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class D shares to compensate MLFD and securities firms with
which MLFD enters
<PAGE>
into related agreements ("Sub-Agreements") pursuant to Paragraph 2 hereof for
providing account maintenance activities with respect to Class D shareholders of
the Fund. Expenditures under the Plan may consist of payments to financial
consultants for maintaining accounts in connection with Class D shares of the
Fund and payment of expenses incurred in connection with such account
maintenance activities including the costs of making services available to
shareholders including assistance in connection with inquiries related to
shareholder accounts.
2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as is
reasonably necessary to permit MLFD to comply with the reporting requirements
set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund.
5. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
6. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
7. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting
securities of the Fund.
2
<PAGE>
8. The Plan may not be amended to increase materially the rate of payments
provided for in Paragraph 1 hereof unless such amendment is approved by at least
a majority, as defined in the Investment Company Act, of the outstanding Class D
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 5 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
10. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH LATIN AMERICA FUND, INC.
By Arthur Zeikel
-------------------------------------
Title: President
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
---------------------------------------
Title: President
4
<PAGE>
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and between Merrill
Lynch Funds Distributor, Inc. a Delaware corpo-ration ("MLFD") , and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Latin
America Fund, Inc., a Maryland corporation (the "Fund") , pursuant to which it
acts as the exclusive distributor for the sale of Class D shares of common
stock, par value $0.10 per share (the "Class D shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act") , pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares for providing account maintenance
activities and services with respect to Class D shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Fund's Class D shareholders
and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class D shares of the Fund and incur expenditures
in connection with such activities and services, of the types referred to in
Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD
shall pay the Securities Firm a fee at the end of each calendar month in an
amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonable requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule
<PAGE>
12b-1 regarding the disbursement of the fee during such period referred to in
Paragraph 3 of the Plan.
4. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/ Terry K. Glenn
________________________________________
Title: President
MERRILL LYNCH PIERCE, FENNER & SMITH
By /s/ David Conine
________________________________________
Title: Vice President
2
<PAGE>
EXHIBIT 99.16(a)
LATIN AMERICA FUND
Class A
Period from
09-27-91 Annual
(inception) Total
to 11-30-91 Return*
----------- ----------
Initial Investment $ 1,000.00 $ 1,000.00
Divided by
Maximum Offering Price 10.42
----------
Divided by Net Asset Value 10.00
----------
Equals Shares Purchased 95.97 100.00
Plus Shares Acquired through
Dividend Reinvestment 0.00 0.00
---------- ----------
Equals Shares Held
at 11/30/91 95.97 100.00
Multiplied by Net Asset
Value at 11/30/91 9.81 9.81
---------- ----------
941.46 981.00
Less 2% Redemption Fee 18.83 19.62
Equals Ending Redeemable Value at ---------- ----------
$1,000 Investment (ERV) at 11/30/91 $922.60 $961.38
Divided by $1,000 (P) 0.9226 0.9614
Subtract 1 -0.0774 -0.0386
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) 7.74%
==========
Expressed as a percentage
equals the Aggregate Total
Return for the Period -3.86%
==========
ERV divided by P 0.9226
Raise to the power of 5.700139175
Equals 0.6318
Subtract 1 -0.3682
Expressed as a percentage
equals the Average
Annual Total Return -36.82%
==========
* Does not include sales charge for the period.
<PAGE>
EXHIBIT 99.16(b)
LATIN AMERICA FUND
Class B
Period from
09-27-91 Annual
(inception) Total
to 11-30-91 Return*
----------- ----------
Initial Investment $ 1,000.00 $ 1,000.00
Divided by
Maximum Offering Price 10.00
----------
Divided by Net Asset Value 10.00
----------
Equals Shares Purchased 100.00 100.00
Plus Shares Acquired through
Dividend Reinvestment 0.00 0.00
---------- ----------
Equals Shares Held
at 11/30/91 100.00 100.00
Multiplied by Net Asset
Value at 11/30/91 9.80 9.80
---------- ----------
980.00 980.00
Less deferred sales charge 39.20 0.00
Less 2% Redemption Fee 18.80 19.60
Equals Ending Redeemable Value at ---------- ----------
$1,000 Investment (ERV) at 11/30/91 $922.00 $960.40
Divided by $1,000 (P) 0.9220 0.9604
Subtract 1 -0.0780 -0.0396
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) 7.80%
==========
Expressed as a percentage
equals the Aggregate Total
Return for the Period -3.96%
==========
ERV divided by P 0.9220
Raise to the power of 5.70450656
Equals 0.6292
Subtract 1 -0.3708
Expressed as a percentage
equals the Average
Annual Total Return -37.08%
==========
* Does not include sales charge for the period.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MERRILL LYNCH LATIN AMERICA FUND, INC. - CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 1047419396
<INVESTMENTS-AT-VALUE> 1154657391
<RECEIVABLES> 11889060
<ASSETS-OTHER> 4281467
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1170827918
<PAYABLE-FOR-SECURITIES> 3134761
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10146391
<TOTAL-LIABILITIES> 13281152
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1016437633
<SHARES-COMMON-STOCK> 595793
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33740505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107368628
<NET-ASSETS> 10350102
<DIVIDEND-INCOME> 11264193
<INTEREST-INCOME> 7027116
<OTHER-INCOME> 0
<EXPENSES-NET> 21939515
<NET-INVESTMENT-INCOME> (3648206)
<REALIZED-GAINS-CURRENT> 40187144
<APPREC-INCREASE-CURRENT> 29595876
<NET-CHANGE-FROM-OPS> 66134814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 753289
<NUMBER-OF-SHARES-REDEEMED> 157496
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 777161124
<ACCUMULATED-NII-PRIOR> 1851058
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2911311
<GROSS-ADVISORY-FEES> 9298782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21939515
<AVERAGE-NET-ASSETS> 9823647
<PER-SHARE-NAV-BEGIN> 18.22
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.85)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.37
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MERRILL LYNCH LATIN AMERICA FUND, INC. - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 1047419396
<INVESTMENTS-AT-VALUE> 1154657391
<RECEIVABLES> 11889060
<ASSETS-OTHER> 4281467
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1170827918
<PAYABLE-FOR-SECURITIES> 3134761
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101463991
<TOTAL-LIABILITIES> 13281152
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1016437633
<SHARES-COMMON-STOCK> 54377561
<SHARES-COMMON-PRIOR> 21214500
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33740505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107368628
<NET-ASSETS> 937220632
<DIVIDEND-INCOME> 11264193
<INTEREST-INCOME> 7027116
<OTHER-INCOME> 0
<EXPENSES-NET> 21939515
<NET-INVESTMENT-INCOME> (3648206)
<REALIZED-GAINS-CURRENT> 40187144
<APPREC-INCREASE-CURRENT> 29595876
<NET-CHANGE-FROM-OPS> 66134814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1113310
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45078402
<NUMBER-OF-SHARES-REDEEMED> 11980794
<SHARES-REINVESTED> 65453
<NET-CHANGE-IN-ASSETS> 777161124
<ACCUMULATED-NII-PRIOR> 1851058
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2911311
<GROSS-ADVISORY-FEES> 9298782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21939515
<AVERAGE-NET-ASSETS> 750699456
<PER-SHARE-NAV-BEGIN> 14.39
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 2.99
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.24
<EXPENSE-RATIO> 2.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MERRILL LYNCH LATIN AMERICA FUND, INC. - CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> OCT-21-1994
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 1047419396
<INVESTMENTS-AT-VALUE> 1154657391
<RECEIVABLES> 11889060
<ASSETS-OTHER> 4281467
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1170827918
<PAYABLE-FOR-SECURITIES> 3134761
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101463991
<TOTAL-LIABILITIES> 13281152
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1016437633
<SHARES-COMMON-STOCK> 294107
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33740505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107368628
<NET-ASSETS> 5068944
<DIVIDEND-INCOME> 11264193
<INTEREST-INCOME> 7027116
<OTHER-INCOME> 0
<EXPENSES-NET> 21939515
<NET-INVESTMENT-INCOME> (3648206)
<REALIZED-GAINS-CURRENT> 40187144
<APPREC-INCREASE-CURRENT> 29595876
<NET-CHANGE-FROM-OPS> 66134814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 301172
<NUMBER-OF-SHARES-REDEEMED> 7065
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 777161124
<ACCUMULATED-NII-PRIOR> 1851058
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2911311
<GROSS-ADVISORY-FEES> 9298782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21939515
<AVERAGE-NET-ASSETS> 3554578
<PER-SHARE-NAV-BEGIN> 18.10
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.84)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.24
<EXPENSE-RATIO> 2.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MERRILL LYNCH LATIN AMERICA FUND, INC. - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-01-1993
<PERIOD-END> NOV-30-1994
<INVESTMENTS-AT-COST> 1047419396
<INVESTMENTS-AT-VALUE> 1154657391
<RECEIVABLES> 11889060
<ASSETS-OTHER> 4281467
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1170827918
<PAYABLE-FOR-SECURITIES> 3134761
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101463991
<TOTAL-LIABILITIES> 13281152
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1016437633
<SHARES-COMMON-STOCK> 11797523
<SHARES-COMMON-PRIOR> 5196890
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 33740505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 107368628
<NET-ASSETS> 204907088
<DIVIDEND-INCOME> 11264193
<INTEREST-INCOME> 7027116
<OTHER-INCOME> 0
<EXPENSES-NET> 21939515
<NET-INVESTMENT-INCOME> (3648206)
<REALIZED-GAINS-CURRENT> 40187144
<APPREC-INCREASE-CURRENT> 29595876
<NET-CHANGE-FROM-OPS> 66134814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 624870
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12305213
<NUMBER-OF-SHARES-REDEEMED> 5740580
<SHARES-REINVESTED> 36001
<NET-CHANGE-IN-ASSETS> 777161124
<ACCUMULATED-NII-PRIOR> 1851058
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2911311
<GROSS-ADVISORY-FEES> 9298782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21939515
<AVERAGE-NET-ASSETS> 177712658
<PER-SHARE-NAV-BEGIN> 14.45
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 3.00
<PER-SHARE-DIVIDEND> .11
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.37
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' REPORT
Merrill Lynch Latin America Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 5 to Registration
Statement No. 33-41622 of our report dated January 18, 1995 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Consolidated Financial
Highlights" appearing in the Prospectus, which also is a part of such
Registration Statement.
Deloitte & Touche LLP
Princeton, New Jersey
March 24, 1995
<PAGE>
EXHIBIT 99.16(c)
Latin America Fund - Class C
10/21/94 - 11/30/94
Since Since
Inception Inception
Avg Annual Total
Return Return*
----------- ----------
Initial Investment $ 1,000.00 $ 1,000.00
Divided by Net Asset Value 18.10 18.10
---------- ----------
Equals Shares Purchased 55.249 55.249
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
---------- ----------
Equals Shares Held at 11/30/94 55.249 55.249
Multiplied by Net Asset
Value at 11/30/94 17.24 17.24
---------- ----------
Equals Ending Value before deduction
for contingent deferred sales charge 952.49 952.49
Less deferred sales charge (9.52) (0.00)
---------- ----------
Equals ending Redeemable Value at
$1,000 Investment (ERV) at 11/30/94 942.96 952.49
Divided by $1,000 (P) 0.9430 0.9525
Subtract 1 -0.0570 -0.0475
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) -5.70%
==========
Expressed as a percentage
equals the Aggregate Total
Return for the Period -4.75%
==========
ERV divided by P 0.9430
Raise to the power of 9.1250
Equals 0.5851
Subtract 1 -0.4149
Expressed as a percentage
equals the Average
Annual Total Return -41.49%
==========
* Does not include sales charge for the period.
<PAGE>
EXHIBIT 99.16(d)
Latin America Fund - Class D
10/21/94 - 11/30/94
Since Since
Inception Inception
Avg Annual Total
Return Return*
----------- ----------
Initial Investment $ 1,000.00 $ 1,000.00
Divided by Initial
Maximum Offering Price 19.23
----------
Divided by Net Asset Value 18.22
----------
Equals Shares Purchased 52.003 54.885
Plus Shares Acquired through
Dividend Reinvestment 0.000 0.000
---------- ----------
Equals Shares Held
at 11/30/94 52.003 54.885
Multiplied by Net Asset
Value at 11/30/94 17.37 17.37
---------- ----------
Equals Ending Redeemable Value at
$1,000 Investment (ERV) at 11/30/94 $903.30 $953.35
Divided by $1,000 (P) 0.9033 0.9533
Subtract 1 -0.0967 -0.0467
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) -9.67%
==========
Expressed as a percentage
equals the Aggregate Total
Return for the Period -4.67%
==========
ERV divided by P 0.9033
Raise to the power of 9.1250
Equals 0.3953
Subtract 1 -0.6047
Expressed as a percentage
equals the Average
Annual Total Return -60.47%
==========
* Does not include sales charge for the period.
<PAGE>
EXHIBIT 99.18
POWER OF ATTORNEY
I, Edward D. Zinbarg, hereby authorize Arthur Zeikel, Terry K. Glenn,
Gerald M. Richard, Mark B. Goldfus, Robert Harris or Michael J. Hennewinkel, or
any of them, as attorney-in-fact, to sign on my behalf any amendments to the
Registration Statement for each of the following registered investment companies
and to file the same, with all exhibits thereto, with the Securities and
Exchange Commission: Emerging Tigers Fund, Inc.; Merrill Lynch Americas Income
Fund, Inc.; Merrill Lynch Developing Capital Markets Fund, Inc.; Merrill Lynch
Dragon Fund, Inc.; Merrill Lynch EuroFund; Merrill Lynch Global Allocation Fund,
Inc.; Merrill Lynch Global Bond Fund for Investment and Retirement; Merrill
Lynch Global Holdings, Inc.; Merrill Lynch Global SmallCap Fund, Inc.; Merrill
Lynch Healthcare Fund, Inc.; Merrill Lynch International Equity Fund; Merrill
Lynch Latin America Fund, Inc.; Merrill Lynch Middle East/Africa Fund, Inc.;
Merrill Lynch Pacific Fund, Inc.; Merrill Lynch Short-Term Global Income Fund,
Inc.; Merrill Lynch Technology Fund, Inc.; and Worldwide DollarVest Fund, Inc.
Dated: February 21, 1995 /s/ Edward D. Zinbarg
-------------------------------------
Edward D. Zinbarg
(Director of each above referenced
Maryland corporation and Trustee
of each above referenced
Massachusetts business trust)
