<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1995
SECURITIES ACT FILE NO. 33-42639
INVESTMENT COMPANY ACT FILE NO. 811-6407
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 6 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH TECHNOLOGY FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH TECHNOLOGY 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 COMPANY: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET
ONE WORLD TRADE CENTER MANAGEMENT
NEW YORK, N.Y. 10048-0557 P.O. BOX 9011
ATTENTION: THOMAS R. SMITH, JR., ESQ. PRINCETON, N.J. 08543-9011
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) (1)
[_] on (date) pursuant to paragraph (a) (1)
[_] 75 days after filing pursuant to paragraph (a) (2)
[_] on (date) pursuant to paragraph (a) (2) 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 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 MAY 30, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH TECHNOLOGY FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
----------------
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. LOCATION
-------- --------
<C> <C> <S>
PART A
Item 1. Cover Page.......................... Cover Page
Synopsis............................ Fee Table; Alternative Sales
Item 2. Arrangements
Item 3. Condensed Financial Information..... Financial Highlights
Item 4. General Description of Registrant... Risk Factors and Special
Considerations; Investment
Objective and Policies;
Additional Information
Item 5. Management of the Fund.............. Fee Table; Management of the
Company; Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance........................ Not Applicable
Capital Stock and Other Securities.. Cover Page; Additional
Item 6. Information
Item 7. Purchase of Securities Being
Offered............................ Cover Page; Fee Table; Merrill
Lynch Select Pricing SM System;
Purchase of Shares; Shareholder
Services; Additional
Information; Inside Back Cover
Page
Item 8. Redemption or Repurchase............ Fee Table; Merrill Lynch Select
Pricingsm System; Shareholder
Services; Purchase of Shares;
Redemption of Shares
Item 9. Pending Legal Proceedings........... Not Applicable
PART B
Item 10. Cover Page.......................... Cover Page
Item 11. Table of Contents................... Back Cover Page
Item 12. General Information and History..... General Information
Investment Objectives and Policies.. Investment Objective and
Item 13. Policies
Item 14. Management of the Fund.............. Management of the Company
Item 15. Control Persons and Principal
Holders of Securities.............. Management of the Company
Item 16. Investment Advisory and Other
Services........................... Management of the Company;
Purchase of Shares; General
Information
Brokerage Allocation................ Portfolio Transactions and
Item 17. Brokerage
Item 18. Capital Stock and Other Securities.. General Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered........... Purchase of Shares; Redemption
of Shares; Determination of Net
Asset Value; Shareholder
Services; General Information
Tax Status.......................... Dividends and Distributions;
Item 20. Taxes
Item 21. Underwriters........................ Purchase of Shares
Item 22. Calculation of Performance Data..... Performance Data
Item 23. Financial Statements................ 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
JULY 27, 1995
MERRILL LYNCH TECHNOLOGY FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Technology Fund, Inc. (the "Company") is a non-diversified,
open-end investment company seeking long-term capital appreciation through
worldwide investment in equity securities of companies that, in the opinion of
management, derive or are expected to derive a substantial portion of their
sales from products and services in technology. While the Company will not
concentrate its investments in any one industry, it is contemplated that
substantial investments will be made in companies involved in such technology
related areas as communications, computers (including software and hardware),
electronics, and factory and office automation. The Company will pursue its
investment objective by investing in a global portfolio of securities of
companies in various stages of development. It is presently contemplated that
the Company's assets will be primarily invested in the United States, Japan
and in Western Europe. However, at times the Company may invest substantially
all of its assets in the United States. For more information on the Fund's
investment objective and policies, please see "Investment Objective and
Policies" on page 10.
Pursuant to the Merrill Lynch Select Pricing SM System, the Company offers
four classes of shares, each with a different combination of sales charges,
ongoing fees and other features. The Merrill Lynch Select Pricing SM System
permits an investor to choose the method of purchasing shares that the
investor believes is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other relevant
circumstances. See "Merrill Lynch Select Pricing SM System" on page 3.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), P.O. Box 9011, Princeton, New Jersey 08543-9011 [(609)
282-2800], or from securities dealers which have entered into dealer
agreements with the Distributor, including Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"). The minimum initial purchase is $1,000,
and the minimum subsequent purchase is $50, except that for retirement plans
the minimum initial purchase is $100, and the minimum subsequent purchase is
$1. Merrill Lynch may charge its customers a processing fee (presently $4.85)
for confirming purchases and repurchases. Purchases and redemptions directly
through the Company'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 Company that
is relevant to making an investment in the Company. This Prospectus should be
retained for future reference. A statement containing additional information
about the Company, dated July 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 Company at the
above telephone number or address. The Statement of Additional Information is
hereby incorporated by reference into this Prospectus.
----------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Company follows:
<TABLE>
<CAPTION>
CLASS A(a) CLASS B(b) CLASS C CLASS D
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)...... 5.25%(c) None None 5.25%(c)
Sales Charge Imposed
on Dividend
Reinvestments........ None None None None
Deferred Sales Charge
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is lower)............ None(d) 4.0% during the 1.0% for None(d)
first year, decreasing one year
1.0% annually
thereafter to 0.0%
after the fourth year
Exchange Fee.......... None None None None
ANNUAL COMPANY OPERATING
EXPENSES (AS A
PERCENTAGE OF AVERAGE
NET ASSETS)(E)
Investment Advisory
Fees(f).............. 1.00% 1.00% 1.00% 1.00%
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)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Other Expenses:
Custodial Fees..................... .01% .01% .01% .01%
Shareholder Servicing Costs (h).... .19% .24% .24% .19%
Other.............................. .13% .13% .13% .13%
---- ---- ---- ----
Total Other Expenses............. .33% .38% .38% .33%
---- ---- ---- ----
Total Company Operating Expenses..... 1.33% 2.38% 2.38% 1.58%
==== ==== ==== ====
</TABLE>
- --------
(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders, certain retirement plans and certain investment
programs. See "Purchase of Shares--Initial Sales Charge Alternatives--
Class A and Class D Shares"--page 23.
(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 24.
(c) Reduced for purchases of $25,000 and over, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. 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 23.
(d) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that certain 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 after purchase.
(e) Information for Class A and Class B shares is stated for the fiscal year
ended March 31, 1995. Information under "Other Expenses" for Class C and
Class D shares is estimated for the fiscal year ending March 31, 1996.
(f) See "Management of the Company--Advisory and Management Arrangements"--
page 19.
(g) See "Purchase of Shares--Distribution Plans" page 28.
(h) See "Management of the Company--Transfer Agency Services"--page 20.
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 Company 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..................................... $65 $ 92 $122 $204
Class B..................................... $64 $ 94 $127 $253*
Class C..................................... $34 $ 74 $127 $272
Class D..................................... $68 $100 $134 $230
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Class A..................................... $65 $ 92 $122 $204
Class B..................................... $24 $ 74 $127 $253*
Class C..................................... $24 $ 74 $127 $272
Class D..................................... $68 $100 $134 $230
</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 Company 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 ("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. (the "NASD"). Merrill Lynch
may charge its customers a processing fee (presently $4.85) for confirming
purchases and redemptions. Purchases and redemptions directly through the
Company's transfer agent are not subject to the processing fee. See "Purchase
of Shares" and "Redemption of Shares".
MERRILL LYNCH SELECT PRICING SM SYSTEM
The Company offers four classes of shares under the Merrill Lynch Select
Pricing SM System. The shares of each class may be purchased at a price equal
to the next determined net asset value per share subject to the sales charges
and ongoing fee arrangements described below. Shares of Class A and Class D
are sold to investors choosing the initial sales charge alternatives, and
shares of Class B and Class C are sold to investors choosing the deferred
sales charge alternatives. The Merrill Lynch Select Pricing SM System is used
by more than 50 mutual funds advised by Merrill Lynch Asset Management, L.P.
("MLAM" or the "Investment Adviser") or an
3
<PAGE>
affiliate of MLAM, Fund Asset Management, L.P. ("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 Company represents an
identical interest in the investment portfolio of the Company and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, are imposed directly against those classes and not
against all assets of the Company 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 Company 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 Company. 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
CLASS SALES CHARGE(1) FEE FEE CONVERSION 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 0.25% 0.75% B Shares convert to D
years, at a rate shares automatically after
of 4.0% during the first approximately
year, decreasing 1.0% eight years(4)
annually to 0.0%
- -------------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- -------------------------------------------------------------------------------------------
D Maximum 5.25% initial sales 0.25% No No
charge(3)
</TABLE>
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. Contingent deferred sales charges ("CDSCs") are
imposed if the redemption occurs within the applicable CDSC time period.
The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares--Initial Sales
Alternatives--Class A and Class D Shares--Eligible Class A Investors".
(continued on next page)
4
<PAGE>
(3) Reduced for purchases of $25,000 or more, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. Class A and Class D share purchases of $1,000,000 or
more may not be subject to an initial sales charge but instead will 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 Company are exchanged for
Class B shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
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 Company 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 in that account. Other eligible investors include certain
retirement plans and participants in certain investment programs. In
addition, Class A shares will be offered to Merrill Lynch & Co., Inc.
("ML & Co.") and its subsidiaries (the term "subsidiaries" when used
herein with respect to ML & Co., includes MLAM, FAM and certain other
entities directly or indirectly wholly-owned and controlled by ML &
Co.) and their directors and employees and to members of the Boards
of MLAM-advised mutual funds. The maximum initial sales charge is
5.25%, which is reduced for purchases of $25,000 and over, and waived
for purchases by certain retirement plans in connection with certain
investment programs. 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. 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 Company'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 Company, 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 Company are exchanged for Class B shares of another
MLAM-advised mutual fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding
period for the shares exchanged will be tacked onto the holding
period for the shares acquired. 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
the conversion and holding periods 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".
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 Company's
5
<PAGE>
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 Company'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
Company'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, except that there is no waiver
for purchases by retirement plans in connection with certain
investment programs. Class D shares also will be issued upon
conversion of Class B shares as described above under "Class B". See
"Purchase of Shares--Initial Sales Charge Alternatives--Class A and
Class D Shares".
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing SM System that the investor believes is most beneficial under his
particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class
A shares rather than Class D shares because there is an account maintenance
fee imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative
particularly attractive because similar sales charge reductions are not
available with respect to the deferred sales charges imposed in connection
with purchases of Class B or Class C shares. Investors not qualifying for
reduced initial sales charges who expect to maintain their investment for an
extended period of time also may elect to purchase Class A or Class D shares,
because over time the accumulated ongoing account maintenance and distribution
fees on Class B or Class C shares may exceed the initial sales charge and, in
the case of Class D shares, the account maintenance fee. Although some
investors that previously purchased Class A shares may no longer be eligible
to purchase Class A shares of other MLAM-advised mutual funds, those
previously purchased Class A shares, together with Class B, Class C and Class
D share holdings, will count toward a right of accumulation which may qualify
the investor for reduced initial sales charges on new initial sales charge
purchases. In addition, the ongoing Class B and Class C account maintenance
and distribution fees will cause Class B and Class C shares to have higher
expense ratios, pay lower dividends and have lower total returns than the
initial sales charge shares. The ongoing Class D account maintenance fees will
cause Class D shares to have a higher expense ratio, pay lower dividends and
have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the
benefit of putting all of the investor's dollars to work from the time the
investment is made. The deferred sales charge alternatives may be particularly
appealing to investors who do not qualify for a reduction in initial sales
charges. Both Class B and Class C shares are subject to ongoing account
maintenance fees and distribution fees; however, the ongoing account
maintenance and distribution fees potentially may be offset to the extent any
return is realized on the additional funds initially invested in Class B
6
<PAGE>
or Class C shares. In addition, Class B shares will be converted into Class D
shares of the Company 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 forego 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".
7
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in conjunction
with the annual audits of the financial statements of the Company by Deloitte
& Touche LLP, independent auditors. Financial statements for the fiscal year
ended March 31, 1995, and the independent auditors' report thereon are
included in the Statement of Additional Information. Further information about
the performance of the Company is contained in the Company's most recent
annual report to shareholders which may be obtained, without charge, by
calling or by writing the Company at the telephone number or address on the
front cover of this Prospectus.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------------- --------------------------------------- -----------------
FOR THE FOR THE FOR THE PERIOD FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD
YEAR ENDED YEAR ENDED APRIL 27, 1992+ YEAR ENDED YEAR ENDED APRIL 27, 1992+ OCTOBER 21, 1994+
MARCH 31, MARCH 31, TO MARCH 31, MARCH 31, MARCH 31, TO MARCH 31, TO MARCH 31,
1995* 1994* 1993* 1995* 1994* 1993* 1995*
---------- ---------- --------------- ---------- ---------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 5.17 $ 5.08 $ 3.83 $ 5.08 $ 5.03 $ 3.83 $ 5.75
-------- -------- -------- -------- -------- ------- -------
Investment in-
come (loss)
net............ .05 (.01) -- (.01) (.05) (.04) --
Realized and
unrealized gain
(loss) on
investments and
foreign
currency
transactions--
net............ .11 1.51 1.59 .11 1.48 1.58 (.62)
-------- -------- -------- -------- -------- ------- -------
Total from in-
vestment opera-
tions........... .16 1.50 1.59 .10 1.43 1.54 (.62)
-------- -------- -------- -------- -------- ------- -------
Less dividends
and distribu-
tions:
Investment in-
come--net....... (.02) -- -- -- ++ -- -- (.02)
In excess of
investment
income--net..... (.01) -- -- -- ++ -- -- (.01)
Realized gain on
investments--
net............. (.05) (1.41) (.34) (.05) (1.38) (.34) (.04)
In excess of
realized gain on
investments--
net............. (.36) -- -- (.35) -- -- (.30)
-------- -------- -------- -------- -------- ------- -------
Total dividends
and distribu-
tions........... (.44) (1.41) (.34) (.40) (1.38) (.34) (.37)
-------- -------- -------- -------- -------- ------- -------
Net asset value,
end of period... $ 4.89 $ 5.17 $ 5.08 $ 4.78 $ 5.08 $5.03 $ 4.76
======== ======== ======== ======== ======== ======= =======
TOTAL INVESTMENT
RETURN:***
Based on net
asset value per
share........... 2.86% 35.68% 42.09%# 1.78% 34.22% 40.77%# (11.11)%#
======== ======== ======== ======== ======== ======= =======
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
account
maintenance and
distribution
fees............ 1.33% 1.35% 1.59%** 1.38% 1.36% 1.53%** 1.59%**
======== ======== ======== ======== ======== ======= =======
Expenses......... 1.33% 1.35% 1.59%** 2.38% 2.36% 2.53%** 2.59%**
======== ======== ======== ======== ======== ======= =======
Investment income
(loss)--net..... .87% (.11)% .40%** (.10)% (1.08)% .93%** (.02)%**
======== ======== ======== ======== ======== ======= =======
SUPPLEMENTAL DA-
TA:
Net assets, end
of period (in
thousands)...... $254,188 $174,809 $100,830 $614,935 $224,330 $57,592 $23,259
======== ======== ======== ======== ======== ======= =======
Portfolio turn-
over............ 175.57% 350.64% 482.79% 175.57% 350.64% 482.79% 175.57%
======== ======== ======== ======== ======== ======= =======
<CAPTION>
CLASS D
-----------------
FOR THE PERIOD
OCTOBER 21, 1994+
TO MARCH 31,
1995*
-----------------
<S> <C>
INCREASE
(DECREASE) IN
NET ASSET VALUE:
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 5.88
-----------------
Investment in-
come (loss)
net............ (.02)
Realized and
unrealized gain
(loss) on
investments and
foreign
currency
transactions--
net............ (.60)
-----------------
Total from in-
vestment opera-
tions........... (.62)
-----------------
Less dividends
and distribu-
tions:
Investment in-
come--net....... (.02)
In excess of
investment
income--net..... (.01)
Realized gain on
investments--
net............. (.04)
In excess of
realized gain on
investments--
net............. (.30)
-----------------
Total dividends
and distribu-
tions........... (.37)
-----------------
Net asset value,
end of period... $ 4.89
=================
TOTAL INVESTMENT
RETURN:***
Based on net
asset value per
share........... (10.76)%#
=================
RATIOS TO AVERAGE
NET ASSETS:
Expenses,
excluding
account
maintenance and
distribution
fees............ 1.55%**
=================
Expenses......... 1.80%**
=================
Investment income
(loss)--net..... (.81)%**
=================
SUPPLEMENTAL DA-
TA:
Net assets, end
of period (in
thousands)...... $32.646
=================
Portfolio turn-
over............ 175.57%
=================
</TABLE>
- -------
*Based on average shares outstanding during the period.
**Annualized.
***Total investment returns exclude the effects of sales loads.
+Commencement of Operations.
++Amount is less than $.01 per share.
#Aggregate total investment return.
8
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
International Investments. Investments on an international basis involve
certain risks not typically 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 applicable to such investments. Securities
prices in different countries are subject to different economic, financial,
political and social factors. Since the Company may invest heavily in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may affect the value of securities
in the portfolio and the unrealized appreciation or depreciation of investments
so far as U.S. investors are concerned. Changes in foreign currency exchange
rates relative to the U.S. dollar will affect the U.S. dollar value of the
Company's assets denominated in those currencies and the Company's yield on
such assets. The rates of exchange between the dollar and other currencies are
determined by forces of supply and demand in the foreign exchange markets.
These forces are, in turn, affected by the international balance of payments,
the level of interest and inflation rates and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. Also, many of the securities held by the Company will not be
registered with the Commission nor will the issuers thereof be subject to the
reporting requirements of such agency.
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.
There may be less publicly available information about foreign companies than
about U.S. companies, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
of U.S. companies. In addition, certain foreign investments may be subject to
foreign withholding taxes. See "Additional Information--Taxes".
Foreign financial markets, while generally growing in trading volume,
typically have substantially less volume than U.S. markets, and securities of
many foreign companies are less liquid and their prices more volatile than
securities of comparable domestic companies. The foreign markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the
Company are uninvested and no return is earned thereon. The inability of the
Company to make intended security purchases due to settlement problems could
cause the Company to miss attractive investment opportunities. Inability to
dispose of a portfolio security due to settlement problems either could result
in losses to the Company due to subsequent declines in value of the portfolio
security or, if the Company 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 are generally higher
than in the United States. There is generally less governmental supervision and
regulation of exchanges, brokers and issuers in foreign countries than there is
in the United States.
Investments in Technology. Technology oriented investment companies such as
the Company, as with other sector funds, may be subject to rapidly changing
asset inflows and outflows. Moreover, the Company's investments in securities
of technology related companies present certain risks that may not exist to the
same degree as in other types of investments. Technology stocks, in general,
tend to be relatively volatile as compared
9
<PAGE>
to other types of investments. Any such volatility will be reflected in changes
in the Company's net asset value. While volatility may create investment
opportunities, it does entail risk. In addition, since the Company is a non-
diversified investment company, it may at times concentrate its investments in
a limited number of companies, primarily in the semiconductor, communications
and software industries, which may also increase risk. See "Investment
Objective and Policies" below.
While the Company will invest in the securities of entities in several
different industries considered by management of the Company to be technology
related, many of those entities share common characteristics which may affect
an investment in the Company. For example, industries throughout the technology
field include many smaller and less seasoned companies. These types of
companies may present greater opportunities for capital appreciation, but may
also involve greater risks. Such companies may have limited product lines,
markets, or financial resources, or may depend on a limited management group.
In addition, the securities of smaller companies may be subject to more
volatile market movements than the securities of larger, more established
companies. The companies in which the Company invests are also strongly
affected by worldwide scientific or technological developments, and their
products may rapidly fall into obsolescence. Certain of such companies also
offer products or services that are subject to governmental regulation and may,
therefore, be affected adversely by governmental policies.
Other Considerations. The operating expense ratio of the Company can be
expected to be higher than that of an investment company investing exclusively
in U.S. securities since the expenses of the Company, such as custodial costs
and advisory fees, are higher. Other special considerations are that the
Company may invest up to 15% (10% to the extent required by certain state laws)
of its total assets in illiquid securities (including venture capital
investments), that certain foreign investments may be subject to foreign
withholding taxes, and that the Company may invest more than 5% of its assets
in securities issued or guaranteed by certain foreign governments.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Company is to seek long-term capital
appreciation through worldwide investment in equity securities of companies
that, in the opinion of management, derive or are expected to derive a
substantial portion of their sales from products and services in technology.
The Company will pursue this objective by investing in a global portfolio of
securities of companies in various stages of development. The Company may,
however, for defensive purposes, invest in non-convertible fixed income
securities, including money market securities. Current income from dividends
and interest will not be an important consideration in selecting portfolio
securities. There can be no assurance that the investment objective of the
Company will be realized. The investment objective of the Company described in
the first sentence of this paragraph is a fundamental policy of the Company and
may not be changed without the approval of the holders of a majority of the
Company's outstanding voting securities.
The investment objective of the Company is based upon the belief that
advances in technology are providing companies throughout the world with
opportunities to develop innovative products and services and that investment
in such companies offers significant long-term growth possibilities. While the
Company will seek investments that have a technological orientation, it will
maintain a flexible approach as to the types of industries in which it will
invest, and it will not invest more than 25% of its total assets in any one
industry. Thus, the
10
<PAGE>
Company will invest in companies offering products and services within the
various industries in such areas as computers (including software and
hardware), communications, consumer electronics, electronic components and
instruments, factory automation, office automation, and in other companies
substantially involved in the more general field of technology. The Company
also expects to make investments in energy conservation and development, new
materials, specialty chemicals, aerospace and military technology. The Company
may invest up to 15% (10% to the extent required by certain state laws) of its
total assets (together with all other illiquid investments) in venture capital
investments in new and early stage companies whose securities are illiquid.
The Company will not, however, invest in securities of issuers having a
record, together with predecessors, of less than three years of continuous
operation if more than 5% of the Company's total assets, taken at market
value, would be invested in such securities.
The Company will invest in an international portfolio of securities of
companies located throughout the world. While there are no prescribed limits
on geographic asset distribution, based upon the public market values in the
world equity markets and anticipated technological innovations, it is
presently contemplated that a majority of the Company's assets will be
invested at all times in the securities of issuers domiciled in the United
States, Japan and Western Europe. Western European countries include, among
others, the United Kingdom, Germany, The Netherlands, Switzerland, Sweden,
France, Italy, Belgium, Norway, Denmark, Finland, Portugal, Austria and Spain.
The Company may restrict the securities markets in which its assets will be
invested and may increase the proportion of assets invested in the U.S.
securities markets. As a result, when the Investment Adviser believes it is in
the best interests of the shareholders of the Company, the Company may have
few or no investments outside the United States.
The Company's current investment strategy differs from that of many other
mutual funds. In managing the Company's portfolio, the Investment Adviser
attempts to generate positive returns for shareholders instead of
outperforming a particular stock market index. In seeking to optimize returns
the Investment Adviser may concentrate investments in a limited number of
companies or industries. There is no assurance that the Investment Adviser
will be able to generate positive returns for the Company, especially in light
of the inherently volatile nature of the stock sector in which its assets are
invested. While volatility may create investment opportunities, it does entail
risk.
Investment emphasis will be on equities, primarily common stocks and, to a
lesser extent, securities convertible into common stocks and rights to
subscribe for common stock. The Company anticipates that under normal
conditions at least 65% of its total assets will be invested in technology
companies. The Company reserves the right, as a temporary defensive measure
and to provide for redemptions, to hold cash or cash equivalents (in U.S.
dollars or foreign currencies) and other types of securities, the issuers of
which may not be involved in technology, including non-convertible preferred
stocks and investment grade debt securities and government and money market
securities, in such proportions as, in the opinion of the Investment Adviser,
prevailing market or economic conditions warrant. Because of the inherently
volatile nature of stocks in the technology sector, the Investment Adviser may
be more likely to sell particular stocks and hold a large cash position than
would the manager of a mutual fund that invests in stocks of companies in a
variety of other industries.
The Company also may invest in securities subject to repurchase agreements
with banks or securities firms if the underlying securities are those which
otherwise qualify for investment by the Company and if, as a result thereof,
not more than 15% (10% to the extent required by certain state laws) of its
total assets would be invested in illiquid securities, including repurchase
agreements maturing in more than seven days. The Company may
11
<PAGE>
invest in the securities of foreign issuers in the form of American Depositary
Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary
Receipts (GDRs) or other securities convertible into securities of foreign
issuers. The Company may invest in unsponsored ADRs. The issuers of
unsponsored ADRs are not obligated to disclose material information in the
United States, and therefore, there may not be a correlation between such
information and the market value of such ADRs.
HEDGING TECHNIQUES
The Company may engage in various portfolio strategies to hedge its
portfolio against investment, interest rate and currency risks. These
strategies include the use of options on portfolio securities, stock index
options, stock index futures, financial futures, currency futures, options on
such futures and forward foreign exchange transactions. The Company may enter
into such transactions only in connection with its hedging strategies. While
the net asset value of the Company's shares will fluctuate and no assurance
can be given that the Company's hedging transactions will be effective, the
Investment Adviser believes that the ability of the Company to engage in these
hedging transactions would enhance the Company's ability to reduce the
volatility of the net asset value of its shares. Furthermore, the Company will
only engage in hedging activities from time to time and may not necessarily be
engaging in hedging activities when movements in the equity markets, interest
rates or currency exchange rates occur. Reference is made to the Statement of
Additional Information for further information concerning these strategies.
Although certain risks are involved in options and futures transactions (as
discussed below in "Risk Factors in Options, Futures and Currency
Transactions"), the Investment Adviser believes that, because the Company will
only engage in these transactions for hedging purposes, the options and
futures portfolio strategies of the Company will not subject the Company to
the risks frequently associated with the speculative use of options and
futures transactions. Tax requirements may limit the Company's ability to
engage in the hedging transactions and strategies described below.
Set forth below is a description of the hedging instruments that the Company
may utilize with respect to investment, interest rate and currency risks.
Writing Covered Call Options. The Company is authorized to purchase and
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 Company, in
return for a premium, gives another party a right to buy specified securities
owned by the Company at a specified future date and price set at the time of
the contract. By writing covered call options, the Company 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 Company's ability to sell the underlying security will be
limited while the option is in effect unless the Company effects a closing
purchase transaction. A closing purchase transaction cancels out the Company'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.
Purchasing Put Options. The Company is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option the Company has a right to sell the underlying security at the stated
exercise price, thus limiting the Company's risk of loss through a decline in
the market value of the
12
<PAGE>
security until the put 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 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 Company'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. The Company will not
purchase put 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 Company would exceed 5% of the market value
of the Company's total assets.
Stock Index Options and Futures and Financial Futures. The Company is
authorized to engage in transactions in stock index options and futures and
financial futures, and related options on such futures. The Company 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
Company 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
Company may invest in stock index options based on a broad market index, e.g.,
the S&P 500 Index, or on a narrow index representing an industry or market
segment, e.g., the AMEX Oil & Gas Index.
The Company 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 Company 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 Company in stock index futures and financial
futures are subject to limitations as described below under "Restrictions on
the Use of Futures Transactions".
The Company is authorized to sell futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of
the Company's securities portfolio that might otherwise result. When the
Company is not fully invested in the securities markets and anticipates a
significant market advance, it would be able to purchase futures in order to
gain rapid market exposure that may in part or entirely offset increases in
the cost of securities that the Company intends to purchase. As such purchases
are made, an equivalent amount of futures contracts will be terminated by
offsetting sales. The Company 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 Company 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 Company experiences a significant
amount of redemptions), a long futures position may be terminated without the
corresponding purchase of securities.
The Company also is authorized to purchase and write call and put options on
futures contracts and stock indices in connection with its hedging activities.
Generally, these strategies would be utilized under the same market and market
sector conditions (i.e., conditions relating to specific types of investments)
in which the
13
<PAGE>
Company enters into futures transactions. The Company 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 Company can 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
Company intends to purchase.
The Company is also authorized to engage in options and futures transactions
on U.S. and foreign exchanges and in options in the over-the-counter markets
("OTC options"). In general, exchange traded contracts are third-party
contracts (i.e., performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) with standardized strike prices and
expiration dates. 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.
The Company is 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 could be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Company, sold by
the Company but not yet delivered, or committed or anticipated to be purchased
by the Company. As an illustration, the Company may use such techniques to
hedge the stated value in U.S. dollars of an investment in a yen denominated
security. In such circumstances, for example, the Company can purchase a
foreign currency put option enabling it to sell a specified amount of yen for
dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in the value of the yen 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 Company may also sell
a call option which, if exercised, requires it to sell a specified amount of
yen for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such a call option in this illustration, the Company
gives up the opportunity to profit without limit from increases in the
relative value of the yen to the dollar. The Investment Adviser believes that
"straddles" of the type which may be utilized by the Company 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 Company will not speculate in foreign currency options,
futures or related options. Accordingly, the Company will not hedge a currency
substantially in excess of the market value 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 Company but not yet
delivered, the proceeds thereof in its denominated currency. The Company will
not incur potential net liabilities of more than 20% of its total assets from
foreign currency options, futures or related options.
Forward Foreign Exchange Transactions. The Company has authority to deal in
forward foreign exchange between currencies of the different countries in
which it will invest and multinational currency units as a hedge against
possible variations in the foreign exchange rates between these currencies.
This is accomplished through contractual agreements to purchase or sell a
specified currency at a specified future date (up to one year) and price set
at the time of the contract. The Company'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
14
<PAGE>
of forward foreign currency with respect to specific receivables or payables
of the Company accruing in connection with the purchase and sale of its
portfolio securities, the sale and redemption of shares of the Company or the
payment of dividends and distributions by the Company. Position hedging is the
sale of forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. The Company will not attempt
to hedge all of its foreign portfolio positions. The Company may not commit
more than 15% of its assets, taken at market value, to position hedging. If
the Company enters into a position hedging transaction, its custodian bank
will place cash or liquid debt securities in a separate account of the Company
in an amount equal to the value of the Company'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
Company's commitment with respect to such contracts.
Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission applicable to the Company provide that
the futures trading activities described herein will not result in the Company
being deemed a "commodity pool" as defined under such regulations if the
Company adheres to certain restrictions. In particular, the Company 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 Company's
portfolio, after taking into account unrealized profits and unrealized losses
on any such contracts and options.
When the Company 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 Company'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 Company 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 which have capital of
at least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.
The staff of 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 Company 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 Company, the
market value of the underlying securities covered by OTC call options
currently outstanding which were sold by the Company and margin deposits on
the Company's existing OTC options on futures contracts exceeds 15% (10% to
the extent required by certain state laws) of the total assets of the Company,
taken at market value, together with all other assets of the Company which are
illiquid or are not otherwise readily marketable. However, if the OTC option
is sold by the Company to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and if the Company has the
unconditional contractual right to repurchase such OTC option from the dealer
at a predetermined price, then the Company 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).
15
<PAGE>
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 Company and may be amended by the
Board of Directors of the Company without the approval of the Company's
shareholders. However, the Company will not change or modify this policy prior
to the change or modification by the Commission staff of its position.
Risk Factors in Options, Futures and Currency Transactions. Utilization of
options and futures transactions to hedge the portfolio involves the risk of
imperfect correlation in movements in the price of options and futures and
movements in the price of the securities 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 Company 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 Investment Adviser's ability to predict correctly price
movements in the market involved in a particular options or futures
transaction. To compensate for imperfect correlations, the Company may
purchase or sell stock index options or futures contracts in a greater dollar
amount than the hedged securities if the volatility of the hedged securities
is historically greater than the volatility of the stock index options or
futures contracts. Conversely, the Company may purchase or sell fewer stock
index options or futures contracts if the volatility of the price of the
hedged securities is historically less than that of the stock index options or
futures contracts. The risk of imperfect correlation generally tends to
diminish as the maturity date of the stock index option or futures contract
approaches.
The Company intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, 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 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 Company's ability to hedge effectively its portfolio. There is
also the risk of loss by the Company of margin deposits or collateral in the
event of bankruptcy of a broker with whom the Company has an open position in
an option, a futures contract or related option.
The exchanges on which options on portfolio securities and currency options
are traded have generally 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 in one or more accounts
or through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts which any person may trade on a particular trading day.
The Investment Adviser does not believe that these trading and position limits
will have any adverse impact on the portfolio strategies for hedging the
Company's portfolio.
Because the Company will engage in the options and futures transactions
described above solely in connection with its hedging activities, the
Investment Adviser does not believe that such options and futures transactions
necessarily will have any significant effect on the Company's portfolio
turnover.
OTHER INVESTMENT PRACTICES
Non-Diversified Status. The Company is classified as non-diversified within
the meaning of the Investment Company Act, which means that the Company is not
limited by such Act in the proportion of its assets that it may invest in the
securities of a single issuer. The Company's investments will be limited,
however, in order to qualify for the special tax treatment afforded a
regulated investment company under the Internal Revenue Code
16
<PAGE>
of 1986, as amended (the "Code"). See "Additional Information--Taxes". To
qualify, the Company 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 Company'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 Company 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 Company assumes large positions in the securities of a
small number of issuers, the Company'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
Company may be more susceptible to any single economic, political or
regulatory occurrence than a diversified company.
Portfolio Transactions. In executing portfolio transactions, the Investment
Adviser seeks to obtain the best net results for the Company, 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. While the Investment Adviser generally seeks reasonably
competitive commission rates, the Company does not necessarily pay the lowest
commission or spread available. The Company has no obligation to deal with any
broker or group of brokers in execution of transactions in portfolio
securities. Brokerage commissions and other transaction costs on foreign stock
exchange transactions are generally higher than in the United States, although
the Company will endeavor to achieve the best net results in effecting its
portfolio transactions.
Portfolio Turnover. The Company may dispose of securities without regard to
the time they have been held when such actions, for defensive or other
reasons, appear advisable to the Investment Adviser. While it is not possible
to predict portfolio turnover rates with any certainty, at present it is
anticipated that the Company's annual portfolio turnover rate, under normal
circumstances, may be in excess of 300%. This rate of portfolio turnover may
be higher than that of most investment companies. The high rate of portfolio
turnover is in large measure a function of the traditional volatility of
technology stocks, which as a whole is considerably greater than that of
stocks generally. The Company's portfolio turnover rate for the fiscal period
April 27, 1992 (commencement of operations) to March 31, 1993, and for the
fiscal years ended March 31, 1994 and 1995, was 482.79%, 350.64% and 175.57%,
respectively. (The portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
period or year by the monthly average of the value of the portfolio securities
owned by the Company during the particular fiscal year.) High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads and brokerage commissions, which are borne directly by the
Company.
Lending of Portfolio Securities. The Company may from time to time lend
securities from its portfolio, with a value not exceeding 10% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government
which 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 Company receives the income on both the loaned securities and the
collateral and thereby increases its yield.
17
<PAGE>
INVESTMENT RESTRICTIONS
The Company has adopted the following restrictions and policies relating to
the investment of its assets and its activities, which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Company's outstanding voting securities as defined in the
Investment Company Act. Among the more significant restrictions, the Company
may not invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers in any particular
industry. In addition, the Company has adopted non-fundamental restrictions
which may be changed by the Board of Directors. Among its non-fundamental
policies, the Company may not:
--Invest in securities which cannot be readily resold because of legal or
contractual restrictions or which cannot otherwise be marketed, redeemed or
put to the issuer or a third party, if at the time of acquisition more than
15% of its total assets would be invested in such securities. This
restriction shall not apply to securities which mature within seven days or
securities which the Board of Directors of the Company has otherwise
determined to be liquid pursuant to applicable law. As explained further in
the Statement of Additional Information, under certain state laws the
Company is presently limited with respect to investment in certain illiquid
securities to 10% of its total assets.
--Notwithstanding the less restrictive fundamental investment restriction
recited in the Statement of Additional Information, borrow amounts in
excess of 10% of its total assets, taken at market value (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 Company will not purchase securities
while borrowings are outstanding except to exercise prior commitments and
to exercise subscription rights.
The purchase of securities while borrowings are outstanding will have the
effect of leveraging the Company. Such leveraging or borrowing increases the
Company's exposure to capital risk, and borrowed funds are subject to interest
costs which will reduce net income.
While the Company will not purchase illiquid securities in an amount
exceeding 15% (10% to the extent required by certain state laws) of its total
assets, the Company 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 Company'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 has determined to treat as liquid Rule 144A securities which are
freely tradeable in their primary markets offshore. The Board of Directors may
adopt guidelines and delegate to the Investment Adviser the daily functions of
determining and monitoring liquidity of other 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 Company'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 Company to the extent
that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities.
Nothing in the foregoing investment restrictions shall be deemed to prohibit
the Company from purchasing the securities of any issuer pursuant to the
exercise of subscription rights distributed to the Company by the
18
<PAGE>
issuer, except that no such purchase may be made if as a result the Company
will fail to meet the diversification requirements of the Code.
MANAGEMENT OF THE COMPANY
BOARD OF DIRECTORS
The Board of Directors of the Company consists of six individuals, five of
whom are not "interested persons" of the Company as defined in the Investment
Company Act. The Board of Directors of the Company is responsible for the
overall supervision of the operations of the Company and performs the various
duties imposed on the directors of investment companies by the Investment
Company Act.
The Directors of the Company are:
Arthur Zeikel*--President of the Investment Adviser 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.
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 Company.
ADVISORY AND MANAGEMENT ARRANGEMENTS
MLAM acts as the investment adviser for the Company and provides the Company
with management and business advisory services. The Investment Adviser is
owned and controlled by ML & Co., a financial services holding company and the
parent of Merrill Lynch. The Investment Adviser or an affiliate, FAM, acts as
the investment adviser to more than 130 other registered investment companies
and provides investment advisory services to individual and institutional
accounts. As of June 30, 1995, the Investment Adviser and FAM had a total of
approximately $180.4 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of the Investment
Adviser.
As compensation for its services to the Company, the Investment Adviser
receives monthly compensation at the annual rate of 1.00% of the average daily
net assets of the Company. For the fiscal year ended March 31, 1995, the fee
paid by the Company to the Investment Adviser was $7,146,254 (based on average
net assets of approximately $733.2 million). At June 30, 1995, the net assets
of the Company aggregated approximately
19
<PAGE>
$990.2 million. At this asset level, the annual investment advisory fee would
aggregate approximately $9.9 million. This fee is higher than those of most
other mutual funds but the Company believes it is justified by the specialized
investment focus of the Company.
Subject to the direction of the Directors, the Investment Adviser is
responsible for the actual management of the Company's portfolio and
constantly reviews the Company'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 Investment
Adviser. The Investment Adviser performs certain of the other administrative
services and provides all the office space, equipment and necessary personnel
for management of the Company.
James K. Renck, Vice President of the Company, is the Company's Portfolio
Manager. Mr. Renck has been a Vice President and Portfolio Manager of the
Investment Adviser and its predecessors since 1986. Mr. Renck has been
primarily responsible for the management of the Company's portfolio since its
inception.
The Company pays certain expenses incurred in its operations, including,
among other things, taxes, expenses for legal and auditing services, costs of
printing proxies, stock certificates, shareholder reports, prospectuses and
statements of additional information. Also, accounting services are provided
to the Company by the Investment Adviser, and the Company reimburses the
Investment Adviser for its costs in connection with such services on a semi-
annual basis. For the fiscal year ended March 31, 1995, the Company reimbursed
the Investment Adviser $78,659 for accounting services. For the same period,
the ratio of total expenses to average net assets was 1.33% for Class A shares
and 2.38% for Class B shares. For Class C and Class D shares, for the period
October 21, 1994 (commencement of operations) to March 31, 1995, the ratio of
total expenses to average net assets was 2.59% for Class C shares and 1.80%
for Class D shares.
CODE OF ETHICS
The Board of Directors of the Company has adopted a Code of Ethics under
Rule 17j-1 of the Investment Company Act which incorporates the Code of Ethics
of the Investment Adviser (together, the "Codes"). The Codes significantly
restrict the personal investing activities of all employees of the Investment
Adviser and, as described below, impose additional, more onerous, restrictions
on fund investment personnel.
The Codes require that all employees of the Investment Adviser preclear any
personal securities investment (with limited exceptions, such as government
securities). The preclearance requirement and associated procedures are
designed to identify any substantive prohibition or limitation applicable to
the proposed investment. The substantive restrictions applicable to all
employees of the Investment Adviser include a ban on acquiring any securities
in a "hot" initial public offering and a prohibition from profiting on short-
term trading in securities. In addition, no employee may purchase or sell any
security which at the time is being purchased or sold (as the case may be), or
to the knowledge of the employee is being considered for purchase or sale, by
any fund advised by the Investment Adviser. Furthermore, the Codes provide for
trading "blackout periods" which prohibit trading by investment personnel of
the Company within periods of trading by the Company in the same (or
equivalent) security (15 or 30 days depending upon the transaction).
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. (formerly Financial Data
Services, Inc.) (the "Transfer Agent"), which is a wholly-owned subsidiary of
ML&Co., acts as the Company'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
20
<PAGE>
issuance, transfer and redemption of shares and the opening and maintenance of
shareholder accounts. Pursuant to the Transfer Agency Agreement, the Transfer
Agent receives a 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 March 31, 1995, the Company paid the Transfer Agent
$1,634,566 pursuant to the Transfer Agency Agreement. At May 31, 1995, the
Company had 42,205 Class A shareholder accounts, 82,695 Class B shareholder
accounts (including certain subaccounts on which the standard annual transfer
agency fees are assessed), 5,074 Class C shareholder accounts and 5,513 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 Investment Adviser and Merrill Lynch, acts as the distributor of the
shares of the Company. Shares of the Company are offered continuously for sale
by the Distributor and other eligible securities dealers (including Merrill
Lynch). Shares of the Company may be purchased from securities dealers or by
mailing a purchase order directly to the Transfer Agent. The minimum initial
purchase is $1,000, and the minimum subsequent purchase is $50, except that
for retirement plans, the minimum initial purchase is $100, and the minimum
subsequent purchase is $1.
The Company 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 investors 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 Company
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 by
the Distributor 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 Company or the Distributor may suspend the continuous offering of the
Company'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 Company.
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 Company 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 Company with the
investment thereafter being subject to a contingent deferred sales charge and
ongoing distribution fees. A discussion of the factors that
21
<PAGE>
investors should consider in determining the method of purchasing shares under
the Merrill Lynch Select Pricing SM System is set forth under "Merrill Lynch
Select Pricing SM System" on page 3.
Each Class A, Class B, Class C and Class D share of the Company represents
identical interests in the investment portfolio of the Company 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 charge 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 Company 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 Company 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 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 Company. 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 PricingSM System.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(1) FEE FEE CONVERSION 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 0.25% 0.75% B shares converted to D
years, at a rate of 4.0% shares
during the first year, automatically after
decreasing 1.0% annually approximately
to 0.0% eight years(4)
- ---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ---------------------------------------------------------------------------------------
D Maximum 5.25% initial sales 0.25% No No
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 the redemption or 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, and waived for purchases of
Class A shares by certain retirement plans in connection with certain
investment programs. Class A and Class D share purchases of $1,000,000 or
more may not be subject to an initial sales charge but instead will be
subject to a 1.0% CDSC for one year.
(continued on next page)
22
<PAGE>
(4) The conversion price 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 Company are exchanged for
Class B shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
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 DISCOUNT TO
SALES LOAD AS PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING 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, and on Class A
purchases by certain retirement plan investors in connection with certain
investment programs. If the sales charge is waived, in connection with a
purchase of $1,000,000 or more, 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
million or more of Class A or Class D shares by certain 401(k) 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 Company will receive a concession equal to most of the
sales charge, they may be deemed to be underwriters under the Securities Act.
During the fiscal year ended March 31, 1995, the Company sold 31,862,508 Class
A shares for aggregate net proceeds of $174,435,046. The gross sales charges
for the sale of Class A shares of the Company for that year were $1,567,969,
of which $93,391 and $1,474,578 were received by the Distributor and Merrill
Lynch, respectively. For the fiscal year ended March 31, 1995, the Distributor
received no CDSCs with respect to redemption within one year after purchase of
Class A shares purchased subject to front-end sales charge waivers. During the
period October 21, 1994 (commencement of operations), to March 31, 1995 the
Company sold 8,332,225 Class D shares for aggregate net proceeds of
$43,660,136. The gross sales charges for the sale of Class D shares of the
Company for that period were $647,654, of which $41,924 and $605,730 were
received by the Distributor and Merrill Lynch, respectively. For that period,
the Distributor received no CDSCs with respect to redemption within one year
after purchase of Class D shares purchased subject to front-end sales charge
waivers.
23
<PAGE>
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 that currently own Class A shares of the
Company in a shareholder account, including participants in the Merrill Lynch
Blueprint SM Program, are entitled to purchase additional Class A shares of
the Company 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 TMASM Managed Trusts to which Merrill Lynch
Trust Company provides discretionary trustee services and certain purchases
made in connection with the Merrill Lynch Mutual Fund Adviser program. In
addition, Class A shares are offered at net asset value to ML & Co. and its
subsidiaries and their directors and employees and to members of the Boards of
MLAM-advised investment companies, including the Company. 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 Company also may purchase Class A shares of the Company if
certain conditions set forth in the Statement of Additional Information are
met. For example, Class A shares of the Company and certain other MLAM-advised
mutual funds are offered at net asset value to shareholders of Merrill Lynch
Senior Floating Rate Fund, Inc. who wish to reinvest the net proceeds from a
sale of certain of their shares of common stock of Merrill Lynch Senior
Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges
also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A
investors as set forth above under "Eligible Class A Investors".
Class D shares are offered at net asset value without sales charge to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met. Class D shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies.
Class D shares are offered with reduced sales charges and, in certain
circumstances, at net asset value, to participants in the Merrill Lynch
Blueprint SM Program.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement
or Savings Plans, is set forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
24
<PAGE>
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 Company
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".
Class B and Class C shares are sold without an initial sales charge so that
the Company 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 Company 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 Company
to sell the Class B and Class C shares without a sales charge being deducted
at the time of purchase. The proceeds from the account maintenance fees are
used to compensate Merrill Lynch for providing continuing account maintenance
activities. Approximately eight years after issuance, Class B shares will
convert automatically into Class D shares of the Company, 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 Company are exchanged for Class B shares of another MLAM-advised mutual
fund, the conversion period applicable to the Class B shares acquired in the
exchange will apply, and the holding period for the shares exchanged will be
tacked onto the holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C
shares is limited by the NASD asset-based sales charge rule. See "Limitations
on the Payment of Deferred Sales Charges" below. The proceeds from the ongoing
account maintenance fee are used to compensate Merrill Lynch for providing
continuing account maintenance activities. Class B shareholders of the Company
exercising the exchange privilege described under "Shareholder Services--
Exchange Privilege" will continue to be subject to the Company's CDSC schedule
if such schedule is higher than the CDSC schedule relating to the Class B
shares acquired as a result of the exchange.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which are
redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of the proceeds
of redemption 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.
25
<PAGE>
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 SUBJECT TO
PAYMENT MADE 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 March 31, 1995, the Distributor received CDSCs of
$1,118,846 with respect to redemptions of Class B shares, all of which were
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 the 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).
In the event that Class B shares are exchanged by certain retirement plans
for Class A shares in connection with a transfer to the Merrill Lynch Mutual
Fund Adviser ("MFA") program, the time period that such Class A shares are
held in the MFA program will be included in determining the holding period of
Class B shares reacquired upon termination of participation in the MFA program
(see "Shareholder Services--Exchange Privilege").
The Class B CDSC is waived on redemptions of shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
("IRA") or other retirement plan or following the death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a shareholder.
The Class B CDSC also is waived on redemptions of shares by certain eligible
401(a) and eligible 401(k) plans and in connection with certain group plans
placing orders through the Merrill Lynch Blueprint SM Program. The CDSC also
is waived for any Class B shares which are purchased by eligible 401(k) or
eligible 401(a) plans which are rolled over into a Merrill Lynch or Merrill
Lynch Trust Company custodied IRA and held in such account at the time of
redemption. The Class B CDSC also is waived for any Class B shares which are
purchased by a Merrill Lynch rollover IRA that was funded by a rollover from a
terminated 401(k) plan managed by the MLAM Private
26
<PAGE>
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. For the fiscal period October 21,
1994 (commencement of operations) to March 31, 1995, the Distributor received
CDSCs of $4,037 with respect to redemptions of Class C shares, all of which
were paid to Merrill Lynch.
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 Company. Class D shares are subject
to an ongoing account maintenance fee of 0.25% of the 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 Company 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
Company held in the account on the Conversion Date will be converted to Class
D shares of the Company.
Share certificates for Class B shares of the Company 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 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.
27
<PAGE>
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.
The Conversion Period also is modified for retirement plan investors which
participate in the MFA program. While participating in the MFA program, such
investors will hold Class A shares. If these Class A shares were acquired
through exchange of Class B shares (see "Shareholder Services--Exchange
Privilege"), then the holding period for such Class A shares will be "tacked"
to the holding period of the Class B shares originally held for purposes of
calculating the Conversion Period on Class B shares acquired upon termination
of participation in the MFA program.
DISTRIBUTION PLANS
The Company 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 Company 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 Company 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 Company
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
Company 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 Company 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 Company including payments to financial consultants for selling Class B
and Class C shares of the Company. 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 Company in that the deferred sales charges
provide for the financing of the distribution of the Company's Class B and
Class C shares.
Prior to July 7, 1993, the Company paid the Distributor an ongoing
distribution fee, accrued daily and paid monthly, at the annual rate of 1.00%
of average daily net assets of the Class B shares of the Company under a
distribution plan previously adopted by the Company (the "Prior Plan") to
compensate the Distributor and Merrill Lynch for providing account maintenance
and distribution-related activities and services to Class B shareholders. The
fee rate payable and the services provided under the Prior Plan are identical
to the aggregate
28
<PAGE>
fee rate payable and the services provided under the Class B Distribution
Plan, the difference being that the account maintenance and distribution
services have been unbundled.
For the fiscal year ended March 31, 1995, the Company paid the Distributor
$4,635,444 pursuant to the Prior Plan and the Class B Distribution Plan (based
on average net assets subject to the Prior Plan and the Distribution Plan of
approximately $463.5 million), all of which was paid to Merrill Lynch for
providing account maintenance and distribution-related activities and services
in connection with Class B shares. During the fiscal period October 21, 1994
(commencement of operations) to March 31, 1995, the Company paid the
Distributor $61,520 pursuant to the Distribution Plan relating to the Class C
shares (based on average net assets subject to such Distribution Plan of
approximately $13.9 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. During the fiscal period October 21, 1994
(commencement of operations) to March 31, 1995, the Company paid the
Distributor $21,277 pursuant to the Distribution Plan relating to the Class D
shares (based on average net assets subject to such Distribution Plan of
approximately $19.3 million) all of which was paid to Merrill Lynch for
providing account maintenance services in connection with such shares. At June
30, 1995, the net assets of the Company subject to the Class B Distribution
Plan aggregated approximately $652.7 million. At this asset level, the annual
fees payable pursuant to the Class B Distribution Plan would aggregate
approximately $6.5 million. At June 30, 1995, the net assets of the Company
subject to the Class C Distribution Plan aggregated approximately $28.4
million. At this asset level, the annual fee payable pursuant to the Class C
Distribution Plan would aggregate approximately $284,308. At June 30, 1995,
the net assets of the Company subject to the Class D Distribution Plan
aggregated approximately $39.8 million. At this asset level, the annual fee
payable pursuant to the Class D Distribution Plan would aggregate
approximately $99,470.
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, 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 May 31, 1995, with respect to Class B shares, direct cash revenues for
the period since inception exceeded direct cash expenses by $329,838 (0.05% of
Class B net assets at that date). For Class C shares, direct cash expenses for
the period October 21, 1994 (commencement of operations) to May 31, 1995
exceeded direct cash revenues by $31,649 (0.12% of Class C net assets at that
date). As of December 31, 1994, with respect to Class B shares, the fully
allocated accrual expenses incurred by the Distributor and Merrill Lynch for
the period since commencement of operations exceeded fully allocated accrual
revenues for such period by approximately $12,273,000 (2.00% of Class B net
assets at that date). Fully allocated accrual data is not yet available for
Class C shares.
The Company 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 Company will approve the continuance of the
Distribution Plans from
29
<PAGE>
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 in
connection with the account maintenance and/or distribution of each class of
shares separately. The initial sales charges, the account maintenance fee, the
distribution fee and/or the CDSCs received with respect to one class will not
be used to subsidize the sale of shares of another class. Payments of the
distribution fee on Class B shares will terminate upon conversion of those
Class B shares into Class D shares as set forth under "Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares to
Class D Shares".
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the NASD
imposes a limitation on certain asset-based sales charges such as the
distribution fee and the CDSC borne by the Class B and Class C shares but not
the account maintenance fee. The maximum sales charge rule is applied
separately to each class. As applicable to the Company, the maximum sales
charge rule limits the aggregate of distribution fee payments and CDSCs
payable by the Company 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 Company will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Company rather than to the Distributor; however, the Company 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 Company is required to redeem for cash all shares of the Company on
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 Company at
such time.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by tendering
the shares directly to the Transfer Agent, Merrill Lynch Financial Data
Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289. Redemption
requests delivered other than by mail should be delivered to Merrill Lynch
Financial Data Services, Inc., 4800 Deer Lake Drive East, 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
30
<PAGE>
written letter as noted above accompanied by certificates for the shares to be
redeemed. The notice in either event requires the signatures of all persons in
whose names the shares are registered, signed exactly as their names appear on
the Transfer Agent's register or on the certificate, as the case may be. The
signatures on the notice must be guaranteed by an "eligible guarantor
institution" (including, for example, Merrill Lynch branch offices and certain
other financial institutions) as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, the existence and validity of
which may be verified by the Transfer Agent through the use of industry
publications. Notarized signatures are not sufficient. In certain instances,
the Transfer Agent may require additional documents, such as, but not limited
to, trust instruments, death certificates, appointments as executor or
administrator, or certificates of corporate authority. For shareholders
redeeming directly with the Transfer Agent, payment will be mailed within seven
days of receipt of a proper notice of redemption.
At various times the Company may be requested to redeem shares for which it
has not yet received good payment. The Company may delay or cause to be delayed
the mailing of a redemption check until such time as good payment (e.g., cash
or certified check drawn on a U.S. bank) has been collected for the purchase of
such shares. Normally, this delay will not exceed 10 days.
REPURCHASE
The Company also will repurchase shares through a shareholder's listed
securities dealer. The Company 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 (generally, 4:00 p.m., New York time) on the day
received and such request is received by the Company from such dealer not later
than 30 minutes after the close of business on the New York Stock Exchange on
the same day. Dealers have the responsibility of submitting such repurchase
requests to the Company 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 Company (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 Company. Merrill Lynch may charge
its customers a processing fee (presently $4.85) to confirm a repurchase of
shares to such customers. Redemptions directly through the Transfer Agent are
not subject to the processing fee. The Company reserves the right to reject any
order for repurchase, which right of rejection might adversely affect
shareholders seeking redemption through the repurchase procedure. A shareholder
whose order for repurchase is rejected by the Company may redeem shares as set
forth above.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES
Shareholders who have redeemed their Class A or Class D shares have a one-
time privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, of the Company 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.
31
<PAGE>
SHAREHOLDER SERVICES
The Company offers a number of shareholder services and investment plans
described below which are designed to facilitate investment in shares of the
Company. Certain of such services are not available to investors who place
purchase orders for the Company's shares through the Merrill Lynch
Blueprint SM Program. Full details as to each of such services, copies of the
various plans described below and instructions as to how to participate in the
various services or plans, or to change options with respect thereto, can be
obtained from the Company, 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. A shareholder may make additions to his
Investment Account at any time by mailing a check directly to the Transfer
Agent. Shareholders also may maintain their accounts through Merrill Lynch.
Upon the transfer of shares out of a Merrill Lynch brokerage account, an
Investment Account in the transferring shareholder's name will be opened
automatically, without 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 Company, 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 Company, a shareholder must either
redeem the shares (paying any applicable CDSC) so that the cash proceeds can
be transferred to the account at the new firm, or such shareholder must
continue to maintain a retirement account at Merrill Lynch for those shares.
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 Systematic Redemption Program, subject
to certain conditions.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C
or 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) accounts may arrange to have periodic investments made in the
Company in their CMA(R) account or in certain related accounts in amounts of
$100 or more through the CMA(R) Automated Investment Program.
32
<PAGE>
Automatic Reinvestment of Dividends and Distributions. All dividends and
capital gains distributions are automatically reinvested in full and
fractional shares of the Company, without sales charge, at the net asset value
per share next determined after the close of the New York Stock Exchange on
the payable date of such dividend or distribution. A shareholder may at any
time, by written notification to Merrill Lynch if the shareholder's account is
maintained with Merrill Lynch or by written notification or 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 dividends, or both dividends
and capital gains distributions, 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.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Company have an exchange
privilege with certain other MLAM-advised mutual funds. There is currently no
limitation on the number of times a shareholder may exercise the exchange
privilege. The exchange privilege may be modified or terminated in accordance
with the rules of the Commission.
Under the Merrill Lynch Select Pricing SM System, Class A shareholders may
exchange Class A shares of the Company 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 Company 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 Company. 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 Company is "tacked" to the holding period of the newly acquired
shares of the other Company.
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
33
<PAGE>
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 Company exercising the exchange privilege will
continue to be subject to the Company'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 Company acquired through use of the exchange privilege
will be subject to the Company'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 exchange privilege is modified with respect to certain retirement plans
which participate in the MFA program. Such retirement plans may exchange Class
B, Class C or Class D shares that have been held for at least one year for
Class A shares of the same fund on the basis of relative net asset values in
connection with the commencement of participation in the MFA program, i.e., no
CDSC will apply. The one year holding period does not apply to shares acquired
through reinvestment of dividends. Upon termination of participation in the
MFA program, Class A shares will be reexchanged for the class of shares
originally held. For purposes of computing any CDSC that may be payable upon
redemption of Class B or Class C shares so reacquired, or the Conversion
Period for Class B shares so reacquired, the holding period for the Class A
shares will be "tacked" to the holding period for the Class B or Class C
shares originally held. The Company's exchange privilege is also modified with
respect to purchases of Class A and Class D shares by non-retirement plan
investors under the 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 Company 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 Company being acquired in the exchange under the MFA
program.
PERFORMANCE DATA
From time to time the Company may include its average annual total return
for various specified time periods in advertisements or information furnished
to present or prospective shareholders. Average annual total return is
computed separately for Class A, Class B, Class C and Class D shares in
accordance with a formula specified by the Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on
net investment income and any 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 Company with respect to all shares,
to the extent any dividends are paid, will be calculated in the same manner at
the same time on the same day and will be in the same amount, except that
account maintenance and distribution fees and any incremental transfer agency
costs relating to each class
34
<PAGE>
of shares will be borne exclusively by that class. The Company will include
performance data for all classes of shares of the Company in any advertisement
or information including performance data of the Company.
The Company 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 reduced sales charges in the case of
Class A and Class D shares or waiver of the CDSC in the case of Class B and
Class C shares (such as investors in certain retirement plans), performance
data may take into account the reduced, and not the maximum, sales charge or
may not take into account the CDSC and therefore may reflect greater total
return since, due to the reduced sales charges or waiver of the CDSC, a lower
amount of expenses may be deducted. See "Purchase of Shares". The Company'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 Company at the beginning of each specified period.
Total return figures are based on the Company's historical performance and
are not intended to indicate future performance. The Company's total return
will vary depending on market conditions, the securities comprising the
Company's portfolio, the Company'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 Company will fluctuate, and an investor's
shares, when redeemed, may be worth more or less than their original cost.
On occasion, the Company 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 Company may include
the Company's risk-adjusted performance ratings assigned by Morningstar
Publications, Inc. in advertising or supplemental sales literature. As with
other performance data, performance comparisons should not be considered
indicative of the Company's relative performance for any future period.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Company's intention to distribute all its net investment income,
if any. Dividends from such net investment income will be paid at least
annually. All net realized long- or short-term capital gains, if any, will be
distributed to the Company's shareholders at least annually. 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 "Additional Information--Determination of Net
Asset Value". Dividends and distributions may be reinvested automatically in
shares of the Company at net asset value without a sales charge. Shareholders
may elect in writing to receive any such dividends or distributions, or both,
in cash. Dividends and
35
<PAGE>
distributions are taxable to shareholders as discussed below whether they are
reinvested in shares of the Company or received in cash.
Certain gains or losses attributable to foreign currency gains or losses
from certain forward contracts may increase or decrease the amount of the
Company's income available for distribution to shareholders. If such losses
exceed other income during a taxable year, (a) the Company would not be able
to make any ordinary dividend distributions, and (b) distributions made before
the losses were realized but in the same taxable year would be recharacterized
as a return of capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's tax basis in Company shares for Federal income tax
purposes. See "Additional Information--Taxes".
TAXES
The Company 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 Company (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 Company intends to distribute substantially all of such
income.
Dividends paid by the Company from its ordinary income and distributions of
the Company'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 Company'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
Company shares. Distributions in excess of the Company'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 Company. Not later than 60 days after the close of
its taxable year, the Company will provide its shareholders with a written
notice designating the amounts of any ordinary income dividends or capital
gain dividends. A portion of the Company's ordinary income dividends may be
eligible for the dividends received deduction allowed to corporations under
the Code, if certain requirements are met. If the Company 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 Company and
received by its shareholders on December 31 of the year in which such dividend
was declared.
Ordinary income dividends paid by the Company 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 Company 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
36
<PAGE>
tax credits on investments in foreign securities held in the Company. If more
than 50% in value of the Company's total assets at the close of its taxable
year consists of securities of foreign corporations, the Company will be
eligible, and intends, to file an election with the Internal Revenue Service
pursuant to which shareholders of the Company 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 Company'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 Company will report annually to its shareholders the amount
per share of such withholding taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Company or who, to the Company's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are
not "regulated futures contracts" and from unlisted options will generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the Company'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 Company would not be able to make
any ordinary 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 Company shares, and resulting in a capital gain for any
shareholder who received a distribution greater than such shareholder's basis
in Company 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
Company 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 Company will be
disallowed if other Company 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
37
<PAGE>
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 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 Company.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for all classes of the Company 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 value of the securities held
by the Company 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 fees payable to the Investment Adviser and any account
maintenance and/or distribution fees payable to the Distributor, are accrued
daily. The per share net asset value of Class A shares generally will 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; in addition, the per share net
asset value of 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 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
the time of valuation. Portfolio securities which are traded both in the over-
the-counter market and on a stock exchange are valued according to the
broadest and most representative market. When the Company writes an option,
the amount of the premium received is recorded on the books of the Company 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 Company 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 Company.
38
<PAGE>
ORGANIZATION OF THE COMPANY
The Company was incorporated in connection with a reorganization (the
"Reorganization") of Sci/Tech Holdings, Inc. ("Sci/Tech"), a Merrill Lynch-
sponsored diversified, open-end investment company. Sci/Tech invested primarily
in the equity securities of companies engaged in science and technology.
Pursuant to the Reorganization, which occurred on April 27, 1992, Sci/Tech
transferred all of its technology oriented securities and certain other assets
(net of liabilities) to the Company in exchange for all of the stock of the
Company (other than seed capital), which Sci/Tech then distributed pro rata to
its stockholders. Thus, the Company's initial portfolio of technology oriented
securities consisted of securities received from Sci/Tech. Sci/Tech retained
its healthcare related investments, changed its name, and now operates as
Merrill Lynch Healthcare Fund, Inc.
The Company was incorporated under Maryland law on August 27, 1991. At the
date of this Prospectus, the Company has an authorized capital of 800,000,000
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. Class A and
Class C each consists of 100,000,000 shares and Class B and Class D each
consists of 300,000,000 shares. Shares of Class A, Class B, Class C and Class D
Common Stock represent interests in the same assets of the Company and are
identical in all respects except that 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 account maintenance and distribution
expenditures, as applicable. See "Purchase of Shares". The Company has received
an order from the Commission permitting the issuance and sale of multiple
classes of Common Stock. The Directors of the Company may classify and
reclassify the shares of the Company into additional classes of Common Stock at
a future date.
Shareholders are entitled to one vote for each full 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 Company does not intend
to hold meetings of shareholders in any year in which the Investment Company
Act does not require shareholders to act on 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 auditors. 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 Company and in the net assets of the Company upon liquidation
or dissolution after satisfaction of outstanding liabilities, except that, as
noted above, the Class B, Class C and Class D shares bear certain additional
expenses.
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:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any
39
<PAGE>
questions regarding this, please call your Merrill Lynch financial consultant
or Merrill Lynch Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Company at the address or
telephone number set forth on the cover page of this Prospectus.
40
<PAGE>
MERRILL LYNCH TECHNOLOGY FUND, INC.--AUTHORIZATION FORM (PART 1)
- -------------------------------------------------------------------------------
NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH
BLUEPRINT SM PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINT SM
PROGRAM APPLICATION BY CALLING (800) 637-3766.
- -------------------------------------------------------------------------------
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 Technology 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 Merrill Lynch 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-owner, 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
Select [_] Reinvest Select [_] Reinvest
One: [_] Cash One: [_] 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 Technology 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 Merrill Lynch 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.
- -------------------------------------------------------------------------------
41
<PAGE>
MERRILL LYNCH TECHNOLOGY 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 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)
Dear Sir/Madam:
..................., 19......
Date of Initial Purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Technology 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 Fund's 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 Technology 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.
.....................................
- - - Dealer Name and Address
This form when completed should be By ..................................
mailed to: Authorized Signature of Dealer
Merrill Lynch Technology Fund, [ ][ ][ ] [ ][ ][ ][ ]
Inc. Branch-Code F/C No.
.....................
c/o Merrill Lynch Financial Data Services, F/C Last Name
Inc.
[ ][ ][ ] [ ][ ][ ][ ]
P.O. Box 45289 Dealer's Customer A/C No.
Jacksonville, FL 32232-5289
42
<PAGE>
MERRILL LYNCH TECHNOLOGY 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
Name of Owner......................
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security No. or
Name of Co-Owner (if any).......... Taxpayer Identification
Number
Address............................ Account Number ....................
(if existing account)
...................................
- -------------------------------------------------------------------------------
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 Technology
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 . . . . . . . . . .(month) or as soon as possible
thereafter.
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 MY 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 MERRILL LYNCH 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.
43
<PAGE>
- -------------------------------------------------------------------------------
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Merrill Lynch Financial Data Services, Inc. draw an
automated clearing house ("ACH") debit on my checking account described below
each month to purchase: (choose one)
[_] Class A shares [_] Class B shares
[_] Class C shares [_] Class D shares
of Merrill Lynch Technology 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.
MERRILL LYNCH FINANCIAL DATA AUTHORIZATION TO HONOR ACH DEBITS
SERVICES, INC. DRAWN BY MERRILL LYNCH FINANCIAL
DATA SERVICES, INC.
You are hereby authorized to draw
checks or an ACH debit each month on
my bank account for investment in
Merrill Lynch Technology Fund, Inc. To...............................Bank
as indicated below: (Investor's Bank)
Amount of each ACH debit $........ Bank Address.........................
Account Number ................... City...... State...... Zip Code......
Please date and invest ACH debits on As a convenience to me, I hereby
the 20th of each month beginning request and authorize you to pay and
charge to my account ACH debits
..................................... drawn on my account by and payable
to Merrill Lynch Financial Data
................(month) Services, Inc., I agree that your
rights in respect to each such debit
or as soon thereafter as possible. shall be the same as if it were a
check drawn on you and signed
I agree that you are drawing these personally by me. This authority is
ACH debits voluntarily at my request to remain in effect until revoked by
and that you shall not be liable for me in writing. Until you receive
any loss arising from any delay in such notice, you shall be fully
preparing or failure to prepare any protected in honoring any such
such debit. If I change banks or debit. I further agree that if any
desire to terminate or suspend this such debit be dishonored, whether
program, I agree to notify you with or without cause and whether
promptly in writing. I hereby intentionally or inadvertently, you
authorize you to take any action to shall be under no liability.
correct erroneous ACH debits of my
bank account or purchases of fund
shares including liquidating shares ............ .....................
of the Fund and crediting my bank Date Signature of
account. I further agree that if a Depositor
debit is not honored upon
presentation, Merrill Lynch Financial ............ .....................
Data Services, Inc. is authorized to Bank Signature of Depositor
discontinue immediately the Automatic Account (If joint account,
Investment Plan and to liquidate Number both must sign)
sufficient shares held in my account
to offset the purchase made with the
returned dishonored debit.
............ .....................
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.
44
<PAGE>
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45
<PAGE>
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46
<PAGE>
INVESTMENT ADVISER
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
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
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 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
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 REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAV-
ING BEEN AUTHORIZED BY THE COMPANY, THE INVESTMENT ADVISER OR THE DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OF-
FERING MAY NOT LAWFULLY BE MADE.
--------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................. 2
Merrill Lynch Select PricingSM System...................................... 3
Financial Highlights....................................................... 8
Risk Factors and Special Considerations.................................... 9
Investment Objective and Policies.......................................... 10
Hedging Techniques........................................................ 12
Other Investment Practices................................................ 16
Investment Restrictions................................................... 18
Management of the Company.................................................. 19
Board of Directors........................................................ 19
Advisory and Management Arrangements...................................... 19
Code of Ethics............................................................ 20
Transfer Agency Services.................................................. 20
Purchase of Shares......................................................... 21
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................. 23
Deferred Sales Charge Alternatives--
Class B and Class C Shares............................................. 24
Distribution Plans........................................................ 28
Limitations on the Payment of Deferred Sales Charges...................... 30
Redemption of Shares....................................................... 30
Shareholder Services....................................................... 32
Performance Data........................................................... 34
Additional Information..................................................... 35
Dividends and Distributions............................................... 35
Taxes..................................................................... 36
Determination of Net Asset Value.......................................... 38
Organization of the Company............................................... 39
Shareholder Reports....................................................... 39
Shareholder Inquiries..................................................... 40
Authorization Form......................................................... 41
</TABLE>
Code #16089-0795
LOGO MERRILL LYNCH
Merrill Lynch
Technology Fund, Inc.
[ART]
PROSPECTUS
July 27, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH TECHNOLOGY FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
----------------
Merrill Lynch Technology Fund, Inc. (the "Company") is a non-diversified,
open-end investment company seeking long-term capital appreciation through
worldwide investment in equity securities of companies that, in the opinion of
management, derive or are expected to derive a substantial portion of their
sales from products and services in technology. While the Company will not
concentrate its investments in any one industry, it is contemplated that
substantial investments will be made in companies involved in such technology-
related areas as communications, computers (including software and hardware),
electronics, and factory and office automation. The Company will pursue its
investment objective by investing in a global portfolio of securities of
companies in various stages of development. It is presently contemplated that
the Company's assets will be invested primarily in the United States, Japan
and Western Europe. However, at times the Company may invest substantially all
of its assets in the United States.
Pursuant to the Merrill Lynch Select PricingSM System, the Company 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.
----------------
The Statement of Additional Information of the Company is not a prospectus
and should be read in conjunction with the Prospectus of the Company, dated
July 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 Company at the above telephone number or address. This Statement
of Additional Information has been incorporated by reference into the
Prospectus.
----------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
----------------
The date of this Statement of Additional Information is July 27, 1995.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Company is to seek long-term capital
appreciation through worldwide investment in equity securities of companies
that, in the opinion of management, derive or are expected to derive a
substantial portion of their sales from products and services in technology.
Reference is made to "Investment Objective and Policies" in the Prospectus for
a discussion of the investment objective and policies of the Company.
TECHNOLOGY
The Company will invest in companies offering products and services in such
areas as computers (including software and hardware), communications, consumer
electronics, electronic components and instruments, factory automation, office
automation and other companies substantially involved in the field of
technology. The Company also expects to make investments in energy
conservation and development, new materials, specialty chemicals, aerospace
and military technology. While rapid changes in technology present attractive
opportunities for investment in companies in such fields, such companies may
face special risks that their products or services may not prove to be
commercially successful or may be rendered obsolete by further scientific and
technological developments. The value of the Company's investment in a company
whose products are not commercially successful or are rendered obsolete may
decrease substantially. See "Risk Factors and Special Considerations" in the
Prospectus. Investors in the Company will receive the benefit of the
specialized research and analysis of Merrill Lynch Asset Management, L.P. (the
"Investment Adviser").
INTERNATIONAL DIVERSIFICATION
The securities markets of many countries have at times in the past moved
relatively independently of one another due to different economic, financial,
political and social factors. When such lack of correlation, or negative
correlation, in movements of these securities markets occurs, it may reduce
risk for the Company's portfolio as a whole. This negative correlation also
may offset unrealized gains the Company has derived from movements in a
particular market. To the extent the various markets move independently, total
portfolio volatility is reduced when the various markets are combined into a
single portfolio. Of course, movements in the various securities markets may
be offset by changes in foreign currency exchange rates. Exchange rates
frequently move independently of securities markets in a particular country.
As a result, gains in a particular securities market may be affected by
changes in exchange rates.
TYPES OF PORTFOLIO COMPANIES
The Company will attempt to maximize opportunity and reduce risk by
investing in a portfolio of companies in different stages of development.
Portfolio companies will range from large, well-established companies to
medium-sized companies and smaller, less seasoned companies in an earlier
stage of development.
Investments in larger companies present certain advantages attributable to
their greater financial resources: more extensive research and development,
manufacturing, marketing and service capabilities; more stability; and greater
depth of management and technical personnel. Investments in smaller, less
seasoned companies may present greater opportunities for growth but also
involve greater risks than customarily are associated with more established
companies. The securities of smaller companies may be subject to more abrupt
or erratic market movements than larger, more established companies. These
companies may have limited product lines, markets
2
<PAGE>
or financial resources, or they may be dependent upon a limited management
group. Their securities may be traded only in the over-the-counter market or
on a regional securities exchange and may not be traded every day or in the
volume typical of trading on a national securities exchange. As a result, the
disposition by the Company of portfolio securities to meet redemptions or
otherwise may require the Company to sell these securities at a discount from
market prices or during periods when such disposition is not desirable or to
make many small sales over a lengthy period of time.
The Company may invest up to 15% (10% to the extent required by certain
state laws) of its total assets (together with all other illiquid investments)
in illiquid venture capital investments in new and early-stage companies whose
securities are not publicly traded. Venture capital investments may present
significant opportunities for capital appreciation but involve a high degree
of business and financial risk that can result in substantial losses and
should be considered as speculative investments. The Company's venture capital
investments may include limited partnership interests. The disposition of U.S.
venture capital investments normally will be restricted under Federal
securities laws. Generally, restricted securities may be sold only in
privately negotiated transactions or in public offerings registered under the
Securities Act of 1933, as amended (the "Securities Act"). The Company also
may be subject to restrictions contained in the securities laws of other
countries in disposing of portfolio securities. As a result, the Company may
be unable to dispose of such investments at times when such disposition
ordinarily would be deemed appropriate due to investment or liquidity
considerations. Alternatively, the Company may be forced to dispose of such
investments at less than their fair market value. Where registration is
required, the Company may be obligated to pay part or all of the expenses of
such registration. Market quotations may not be readily available for such
securities, and for purposes of determining the offering and redemption prices
of Company shares, these investments will be valued at fair value. See
"Determination of Net Asset Value".
OTHER FACTORS
The Company may invest in securities subject to repurchase agreements with
banks or securities firms, which are instruments under which the purchaser
(i.e ., the Company) acquires a debt security, and the seller agrees, at the
time of sale, to repurchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's holding period.
The underlying securities are limited to those which otherwise qualify for
investment by the Company. In the event of default by the seller under a
repurchase agreement, the Company may suffer time delays and incur costs or
losses in connection with the disposition of the underlying securities. The
Company will not enter into a repurchase agreement if, as a result thereof,
more than 15% (10% to the extent required by certain state laws) of its total
assets would be subject to repurchase agreements maturing in more than seven
days.
The Company may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs),
Global Depositary Receipts (GDRs) or other securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. GDRs are receipts issued globally, typically by banking
institutions, and evidence a similar ownership arrangement. Generally, ADRs,
in registered form, are designed for use in the U.S. securities markets, and
EDRs, in bearer form, are designed for use in European securities markets.
GDRs are tradeable both in the U.S. and Europe and are designed for use
throughout the world. The Company may invest in unsponsored ADRs. The issuers
of unsponsored ADRs are
3
<PAGE>
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.
The Investment Adviser will effect portfolio transactions without regard to
holding period if in its judgment such transactions are advisable in light of
a change in circumstances of a particular company or within a particular
industry or in general market, economic or financial conditions. As a result
of the investment policies described in the Prospectus, the Company's
portfolio turnover may be higher than that of other investment companies;
however, it is extremely difficult to predict portfolio turnover rates with
any degree of accuracy. The portfolio turnover rate is calculated by dividing
the lesser of the Company'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 the securities in the portfolio during
the year. For the fiscal period April 27, 1992 (commencement of operations) to
March 31, 1993, and for the fiscal years ended March 31, 1994 and 1995, the
Company's portfolio turnover rate was 482.79%, 350.64% and 175.57%,
respectively. The Company is subject to the Federal income tax requirement
that less than 30% of the Company's gross income be derived from gains from
the sale or other disposition of securities held for less than three months.
See "Investment Objective and Policies--Other Investment Practices--Portfolio
Turnover" in the Prospectus.
HEDGING TECHNIQUES
Reference is made to the discussion under the caption "Investment Objective
and Policies--Hedging Techniques" in the Prospectus for information with
respect to various portfolio strategies involving options and futures. The
Company may seek to hedge its portfolio against movements in the equity
markets, interest rates and exchange rates between currencies through the use
of options and futures transactions and forward foreign exchange transactions.
The Company has authority to write (i.e., sell) covered call options on its
portfolio securities, purchase put options on securities and engage in
transactions in stock index options, stock index futures and financial
futures, and related options on such futures. The Company may also deal in
forward foreign exchange transactions and forward currency options and futures
and related options on such futures. The Company is authorized to enter into
such options and futures transactions either on exchanges or in the over-the-
counter ("OTC") markets. 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 Investment
Adviser believes that, because the Company will only engage in these
transactions for hedging purposes, the options and futures portfolio
strategies of the Company will not subject the Company to the risks frequently
associated with the speculative use of options and futures transactions. While
the Company'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 Company's
shares will fluctuate. There can be no assurance that the Company's hedging
transactions will be effective. The following is further information relating
to portfolio strategies involving options and futures the Company may utilize.
Hedging Investment and Interest Rate Risks. The Company may write (i.e.,
sell) covered call options on the equity securities in which it may invest and
may enter into closing purchase transactions with respect to certain of such
options. Covered call options serve as a partial hedge against the decline in
price of the underlying security. A covered call option is an option where the
Company, in return for a premium, gives another party a right to buy specified
securities owned by the Company at a specified future date and price set at
the time of the contract. By writing covered call options, the Company 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
4
<PAGE>
Company's ability to sell the underlying security will be limited while the
option is in effect unless the Company effects a closing purchase transaction.
A closing purchase transaction cancels out the Company'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. 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
realizes 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 realizes a gain or
loss from the sale of the underlying security.
The Company may also purchase put options to hedge against a decline in the
market value of its equity holdings. By buying a put, the Company has a right
to sell the underlying security at the exercise price, thus limiting the
Company'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, 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
cost. A closing sale transaction cancels out the Company'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.
The Company also may engage in transactions in stock index options and
futures, financial futures in U.S. and foreign agency and government securities
and corporate debt securities, and related options on such futures. 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. Futures contracts have been
designed by boards of trade which have been designated "contracts markets" by
the Commodity Futures Trading Commission ("CFTC").
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 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.
The Company has received an order from the Securities and Exchange Commission
(the "Commission") exempting it 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 Company and commodities brokers with respect to
initial and
5
<PAGE>
variation margin. Section 18(f) of the Investment Company Act prohibits an
open-end investment company such as the Company from issuing a "senior
security" other than a borrowing from a bank. The staff of the Commission has
in the past indicated that a futures contract may be a "senior security" under
the Investment Company Act.
Risk Factors in Options and Futures Transactions. Utilization of options and
futures transactions involves the risk of imperfect correlation in movements
in the prices of options and futures contracts and movements in the prices of
the securities or currencies which are the subject of the hedge. If the price
of the options and futures contract moves more or less than the prices of the
hedged securities or currencies, the Company will experience a gain or loss
which will not be completely offset by movements in the prices of the subject
of the hedge. The successful use of options and futures also depends on the
Investment Adviser's ability to predict correctly price movements in the
market involved in a particular options or futures transaction.
Prior to exercise or expiration, an exchange-traded option position can only
be terminated by entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange for call or put options of the same
series. The Company 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. In the case of a futures position or an option on a futures position
written by the Company, in the event of adverse price movements, the Company
would continue to be required to make daily cash payments of variation margin.
In such situations, if the Company 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 Company may be
required to take or make delivery of the security or currency underlying
futures contracts it holds. The inability to close options and futures
positions also could have an adverse impact on the Company's ability to
effectively hedge its portfolio. There is also the risk of loss by the Company
of margin deposits in the event of bankruptcy of a broker with whom the
Company 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 Company intends to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying 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 Investment
Adviser does not believe that these trading and position limits will have any
adverse impact on the portfolio strategies for hedging the Company's
portfolio.
Hedging Foreign Currency Risks. Generally, the foreign exchange transactions
of the Company will be conducted on a spot, i.e., cash, basis at the spot rate
then prevailing for purchasing or selling currency in the foreign exchange
market. This rate under normal market conditions differs from the prevailing
exchange rate in an amount generally less than 1/10 of 1% due to the costs of
converting from one currency to another. However, the Company has authority to
deal in forward foreign exchange between currencies of Far Eastern, European
and Western Pacific countries and the dollar as a hedge against possible
variations in the foreign exchange rates between these currencies. This is
accomplished through contractual agreements to purchase or to sell a specified
6
<PAGE>
currency at a specified future date and price set at the time of the contract.
The Company'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 Company accruing in connection with
the purchase and sale of its portfolio securities, the sale and redemption of
shares of the Company or the payment of dividends and distributions by the
Company. Position hedging is the sale of forward foreign currency with respect
to portfolio security positions denominated or quoted in such foreign
currency. The Company will not speculate in forward foreign exchange. All
dealings in forward exchange will be limited to contracts involving currencies
of Far Eastern, European and Western Pacific countries and the dollar. The
Company 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 Company enters into a
position hedging transaction, its custodian will place cash or liquid debt
securities in a separate account of the Company in an amount equal to the
value of the Company'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 Company's
commitment with respect to such contracts. The Company will not attempt to
hedge all of its portfolio positions and will enter into such transaction only
to the extent, if any, deemed appropriate by the Investment Adviser of the
Company. The Company will not enter into a position hedging commitment if, as
a result thereof, the Company would have more than 15% of the value of its
assets committed to such contracts. The Company will not enter into a forward
contract with a term of more than one year.
As discussed in the Prospectus, the Company may also purchase or sell listed
or OTC foreign currency options, foreign currency futures and related options
on foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the price 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 Company to hedge against a
devaluation that is so generally anticipated that the Company is not able to
contract to sell the currency at a price above the devaluation level it
anticipates. It is possible that, under certain circumstances, the Company may
have to limit its currency transactions to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"); in
this regard, the Company presently intends to limit its gross income from
currency hedging transactions to less than 10% of its gross income in any
taxable year until such time as the Company determines that income from the
transaction is not subject to this restriction. The cost to the Company 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.
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 Company. If such restrictions should be reinstituted it might become
necessary for the Company to invest all or substantially all of its assets in
U.S. securities. In such event, the Company would review its investment
objective and investment policies to determine whether changes are
appropriate.
The Company'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 Company are
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redeemable on a daily basis in U.S. dollars, the Company intends to manage its
portfolio so as to give a reasonable assurance that it will be able to obtain
U.S. dollars to the extent necessary to meet anticipated redemptions. Under
present conditions, it is not believed that these considerations will have any
significant effect on its portfolio strategy.
OTHER INVESTMENT POLICIES AND PRACTICES
Non-Diversified Status. The Company is classified as non-diversified within
the meaning of the Investment Company Act, which means that the Company is not
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. The Company's investments will be limited,
however, in order to qualify for the special tax treatment afforded regulated
investment companies under the Code. See "Dividends, Distributions and Taxes".
To qualify, the Company 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 Company'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 Company 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 Company assumes large positions in the securities of a small number
of issuers, the Company'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 Company may be
more susceptible to any single economic, political or regulatory occurrence
than a diversified company.
INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the Prospectus, the
Company 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 Company's outstanding voting securities
(which for this purpose and under the Investment Company Act means the lesser
of (i) 67% of the shares represented at a meeting at which more than 50% of
the outstanding shares are represented or (ii) more than 50% of the
outstanding shares).
Under the fundamental investment restrictions, the Company 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.
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Company 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 Company 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 Company's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
8
<PAGE>
5. Issue senior securities to the extent such issuance would violate
applicable law.
6. Borrow money, except that (i) the Company 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 Company may borrow
up to an additional 5% of its total assets for temporary purposes, (iii)
the Company may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the
Company may purchase securities on margin to the extent permitted by
applicable law. The Company may not pledge its assets other than to secure
such borrowings or, to the extent permitted by the Company'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 Company
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 Company may do so in accordance with applicable law and
the Company's Prospectus and Statement of Additional Information, as they
may be amended from time to time, and without registering as a commodity
pool operator under the Commodity Exchange Act.
In addition, the Company has adopted non-fundamental restrictions which may
be changed by the Board of Directors. Under the non-fundamental investment
restrictions, the Company 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 Company 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 Company 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
Company's shares are registered or qualified for sale require a lower
limitation, the Company will observe such limitation. As of the date
hereof, therefore, the Company 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 Company'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 Company
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 described in (e) below.
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 Company's net assets. Included within such limitation, but not to
exceed 2% of the Company's net assets, are warrants which are not listed on
the New York Stock
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<PAGE>
Exchange or American Stock Exchange or a major foreign exchange. For
purposes of this restriction, warrants acquired by the Company 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 Company'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 Company, the officers and general partner of
the Investment Adviser, the directors of such general partner or the
officers and directors of any subsidiary thereof each owning beneficially
more than one-half of one percent of the securities of such issuer own in
the aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs,
except that the Company may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Company's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restriction (6) above, borrow
amounts in excess of 10% of its total assets, taken at market value, and
then only from banks as a temporary measure for extraordinary or emergency
purposes such as the redemption of Company shares. In addition, the Company
will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights.
The staff of 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 Company has adopted an investment policy pursuant
to which it will not purchase or sell OTC options if, as a result of such
transactions, the sum of the market value of OTC options currently outstanding
which are held by the Company, the market value of the underlying securities
covered by OTC call options currently outstanding which were sold by the
Company and margin deposits on the Company's existing OTC options on futures
contracts exceed 10% of the net assets of the Company, taken at market value,
together with all other assets of the Company which are illiquid or are not
otherwise readily marketable. However, if an OTC option is sold by the Company
to a primary U.S. Government securities dealer recognized by the Federal
Reserve Bank of New York and if the Company has the unconditional contractual
right to repurchase such OTC option from the dealer at a predetermined price,
then the Company 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
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 Company and may be amended by the Board of Directors of the
Company without the approval of the Company's shareholders. However, the
Company will not change or modify this policy prior to the change or
modification by the Commission staff of its position.
Because of the affiliation of the Investment Adviser, the Company is
prohibited from engaging in certain transactions involving such firm or its
affiliates except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order
10
<PAGE>
under the Investment Company Act. See "Portfolio Transactions and Brokerage".
Without such an exemptive order, the Company would be prohibited from engaging
in portfolio transactions with the Investment Adviser or its affiliates acting
as principal and from purchasing securities in public offerings which are not
registered under the Securities Act in which such firm or any of its
affiliates participate as an underwriter or dealer.
The investment restrictions set forth in the Prospectus contain an exception
that permits the Company to purchase securities pursuant to the exercise of
subscription rights, subject to the condition that such purchase will not
result in the Company ceasing to be a diversified investment company under the
Code. Japanese and European corporations frequently issue additional capital
stock by means of subscription rights offerings to existing shareholders at a
price substantially below the market price of the shares. The failure to
exercise such rights would result in the Company's interest in the issuing
company being diluted. The market for such rights is not well developed, and
accordingly, the Company may not always realize full value on the sale of
rights. Therefore, the exception applies in cases where the limits set forth
in the investment restrictions in the Prospectus would otherwise be exceeded
by exercising rights or have already been exceeded as a result of fluctuations
in the market value of the Company's portfolio securities with the result that
the Company would otherwise be forced either to sell securities at a time when
it might not otherwise have done so or to forego exercising the rights.
MANAGEMENT OF THE COMPANY
DIRECTORS AND OFFICERS
The Directors and executive officers of the Company, 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
Investment Adviser (which term as used herein includes its corporate
predecessors) since 1977; President of Fund Asset Management, L.P. ("FAM")
(which term as used herein includes its corporate predecessors) since 1977;
President and Director of Princeton Services, Inc. ("Princeton Services")
since 1993; Executive Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("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,
New York 11946. Self-employed financial consultant since 1990; President and
Chief Investment Officer of Verus Capital, Inc. from
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<PAGE>
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, 1990; Adjunct Professor, Wharton School, University of
Pennsylvania, 1990; Partner, Small Cities Cablevision, Inc.
Richard R. West (57)--Director(2)--482 Tepi Drive, Southbury, Connecticut
06488. Professor of Finance since 1984, and Dean from 1984 to 1993, of New
York University Leonard N. Stern School of Business Administration; Director
of Bowne & Co., Inc. (financial printers), Vornado, Inc. (real estate holding
company), Smith-Corona Corporation (manufacturer of typewriters and word
processors) and Alexander's Inc. (real estate company).
Edward D. Zinbarg (60)--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 Investment Adviser 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 Investment Adviser and FAM since 1982; Senior Vice President of Princeton
Services since 1993.
James K. Renck (38)--Vice President(1)--Vice President of the Investment
Adviser and Portfolio Manager since 1986; Assistant Vice President of the
Investment Adviser and Associate Portfolio Manager from 1985 to 1986; Fund
Analyst for the Investment Adviser from 1983 to 1985.
Donald C. Burke (35)--Vice President(1)(2)--Vice President and Director of
Taxation of the Investment Adviser since 1990; employee of Deloitte & Touche
LLP from 1982 to 1990.
Gerald M. Richard (46)--Treasurer(1)(2)--Senior Vice President and Treasurer
of the Investment Adviser and FAM since 1984; Senior Vice President and
Treasurer of Princeton Services since 1993; Vice President of the Distributor
since 1981 and Treasurer since 1984.
Robert Harris (43)--Secretary(1)(2)--Vice President of the Investment
Adviser since 1984 and attorney associated with the Investment Adviser since
1980; Secretary of the Distributor since 1982.
- --------
(1) Interested person, as defined in the Investment Company Act, of the
Company.
(2) Such Director or officer is a director, trustee or officer of one or more
additional investment companies for which the Investment Adviser or its
affiliate, FAM, acts as investment adviser.
At June 30, 1995, the Directors and officers of the Company as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of the
Company. At such date, Mr. Zeikel, a Director and officer of the Company, and
the other officers of the Company owned less than 1% of the outstanding shares
of common stock of ML & Co.
COMPENSATION OF DIRECTORS
The Company pays each Director not affiliated with the Investment Adviser a
fee of $1,750 per year plus $250 per meeting attended, together with such
Directors' actual out-of-pocket expenses relating to attendance at
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meetings. The Company also compensates members of its Audit and Nominating
Committee (the "Committee"), which consists of all the non-affiliated
Directors, at a rate of $250 per meeting attended. The Chairman of the
Committee receives an additional fee of $125 per meeting attended. For the
fiscal year ended March 31, 1995, fees and expenses paid to unaffiliated
Directors aggregated $19,176.
The following table sets forth for the fiscal year ended March 31, 1995,
compensation paid by the Company to the non-interested Directors and for the
calendar year ended December 31, 1994 the aggregate compensation paid by all
investment companies advised by the Investment Adviser and its affiliate, FAM
("MLAM/FAM Advised Funds") to the non-interested Directors.
<TABLE>
<CAPTION>
PENSION OR AGGREGATE
RETIREMENT COMPENSATION
BENEFITS FROM COMPANY AND
ACCRUED AS OTHER MLAM/FAM
COMPENSATION PART OF COMPANY'S ADVISED FUNDS PAID
NAME OF DIRECTOR FROM COMPANY EXPENSES TO DIRECTORS(1)
- ---------------- ------------ ----------------- ------------------
<S> <C> <C> <C>
Donald Cecil.................. $4,250 None $276,350
Edward H. Meyer............... $3,750 None $251,600
Charles C. Reilly............. $3,750 None $276,900
Richard R. West............... $3,750 None $300,900
Edward D. Zinbarg............. $1,229 None $125,500*
</TABLE>
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* Mr. Zinbarg was elected a Director in 1994. This represents the amount Mr.
Zinbarg would have received if he had served as a Director for the entire
calendar year ended December 31, 1994.
(1) In addition to the Company, the Directors serve on the boards of other
MLAM/FAM Advised Funds as follows: Mr. Cecil (34 funds); Mr. Meyer (34
funds); Mr. Reilly (53 funds); Mr. West (53 funds) and Mr. Zinbarg (16
funds).
ADVISORY AND MANAGEMENT ARRANGEMENTS
Reference is made to "Management of the Company--Advisory and Management
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Company.
Securities held by the Company also may be held by other funds or investment
advisory clients for which the Investment Adviser or its affiliates act as an
adviser. Securities may be held by, or be appropriate investments for, the
Company as well as other clients of the Investment Adviser or its affiliates.
Because of different objectives or other factors, a particular security may be
bought for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities by the Investment Adviser for
the Company or other funds for which it acts as investment adviser or for its
other advisory clients arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of the Investment
Adviser or its affiliates during the same period may increase the demand for
securities being purchased or supply of securities being sold, there may be an
adverse effect on price.
As discussed in the Prospectus, the Company has entered into an Investment
Advisory Agreement between the Company and the Investment Adviser, pursuant to
which the Company will pay the Investment Adviser a fee for its services at
the annual rate of 1.0% of the Company's average daily net assets. For the
fiscal period April 27, 1992 (commencement of operations) to March 31, 1993,
and for the fiscal years ended March 31, 1994 and
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<PAGE>
1995, the investment advisory fees paid by the Company to the Investment
Adviser aggregated $1,013,212, $2,476,639 and $7,146,254, respectively.
California imposes limitations on the expenses of the Company. These expense
limitations require that the Investment Adviser reimburse the Company in an
amount necessary to prevent the ordinary operating expenses of the Company
(excluding interest, taxes, distribution fees, brokerage fees and commissions
and extraordinary charges such as litigation costs) from exceeding 2.5% of the
Company'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 remaining average daily
net assets. The Investment Adviser's obligation to reimburse the Company is
limited to the amount of the investment advisory fee. No fee payment will be
made to the Investment Adviser during any fiscal year which will cause such
expenses to exceed the most restrictive expense limitation applicable at the
time of such payment. For the fiscal period April 27, 1992 (commencement of
operations) to March 31, 1993, and for the fiscal years ended March 31, 1994
and 1995, no reimbursement of expenses was required pursuant to the applicable
expense limitations.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and
furnish space for officers and employees of the Company connected with
investment and economic research, trading and investment management of the
Company, as well as the fees of all Directors of the Company who are
affiliated persons of the Investment Adviser or any of its affiliates. The
Company 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, shareholders' 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; Commission fees; expenses of 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 Company. Accounting services are provided to the Company by the
Investment Adviser, and the Company reimburses the Investment Adviser for its
costs in connection with such services on a semiannual basis. For the fiscal
years ended March 31, 1994 and 1995, the amount of such reimbursement was
$41,958 and $78,659, respectively. As required by the Company's distribution
agreements, its underwriters will pay the promotional expenses of the Company
incurred in connection with the offering of its shares. Certain expenses in
connection with the distribution of Class B, Class C and Class D shares will
be financed by the Company pursuant to distribution plans in compliance with
Rule 12b-1 under the Investment Company Act. See "Purchase of Shares--
Distribution Plans".
The Investment Adviser is a limited partnership, the partners of which are
ML & Co. and Princeton Services. ML & Co. and Princeton Services are
"controlling persons" of the Investment Adviser as defined under the
Investment Company Act because of their ownership of its voting securities or
their power to exercise a controlling influence over its management or
policies.
Duration and Termination. Unless earlier terminated as described herein, the
Investment Advisory Agreement will remain in effect from year to year if
approved annually (a) by the Board of Directors of the Company or by a
majority of the outstanding shares of the Company 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
Company.
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<PAGE>
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Company shares.
The Company 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 Company represents
identical interests in the investment portfolio of the Company 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 Investment Adviser or its affiliate, FAM. Funds advised
by the Investment Adviser or FAM are referred to herein as "MLAM-advised
mutual funds".
The Company has entered into separate distribution agreements with the
Distributor in connection with the continuous offering of each class of shares
of the Company (the "Distribution Agreements"). The Distribution Agreements
obligate the Distributor to pay certain expenses in connection with the
offering of each class of shares of the Company. After the prospectuses,
statements of additional information and periodic reports have been prepared,
set in type and mailed to shareholders, the Distributor pays for the printing
and distribution of copies thereof used in connection with the offering to
dealers and investors. The Distributor also pays for other supplementary sales
literature and advertising costs. The Distribution Agreements are subject to
the same renewal requirements and termination provisions as the Investment
Advisory Agreement described above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
The Company sells its Class A and Class D shares through the Distributor and
Merrill Lynch, as dealers. During the fiscal period April 27, 1992
(commencement of operations) to March 31, 1993, the Company sold 5,334,065
Class A shares for aggregate net proceeds to the Company of $29,685,648. The
gross sales charges for the sale of Class A shares for that period were
$333,650, of which $319,730 was received by Merrill Lynch and $13,920 was
received by the Distributor. During the fiscal year ended March 31, 1994, the
Company sold 12,878,911 Class A shares for aggregate net proceeds to the
Company of $66,764,420. The gross sales charges for the sale of Class A shares
of the Company for that year were $735,190, of which $690,731 was received by
Merrill Lynch and $44,459 was received by the Distributor. During the fiscal
year ended March 31, 1995, the Company sold 31,862,508 Class A shares for
aggregate net proceeds to the Company of $174,435,046. The gross sales charges
for the sale of Class A shares of the Company for that year were $1,567,969,
of which $1,474,578 was received by Merrill Lynch and $93,391 was received by
the Distributor. During the fiscal period October 21, 1994 (commencement of
operations) to March 31, 1995, the Company sold 8,332,225 Class D shares for
aggregate net proceeds to the Company of $43,660,136. The gross sales charges
for the sale of Class D shares of the Company for that period were $647,654,
of which $605,730 was received by Merrill Lynch and $41,924 was received by
the Distributor.
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<PAGE>
The term "purchase" as used in the Prospectus and this Statement of
Additional Information refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Code) although more than one beneficiary is involved. The
term "purchase" also includes purchases by any "company", as that term is
defined in the Investment Company Act, but does not include purchases by any
such company which has not been in existence for at least six months or which
has no purpose other than the purchase of shares of the Company or shares of
other registered investment companies at a discount. The term "purchaser"
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
Company. Purchases by such a company or non-qualified employee benefit plan
will qualify for the quantity discounts discussed above only if the Company
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
Company's Prospectus available to individual investors or employees and
forwarding investments by such persons to the Company 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 Company 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 its
affiliate, FAM, 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 Company 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 Company are offered at net asset value to shareholders
of Merrill Lynch Senior Floating Rate Fund, Inc. (formerly known as Merrill
Lynch Prime 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 the Company. In order to exercise this investment
option, Merrill Lynch Senior Floating Rate Fund, Inc. shareholders must sell
their Merrill Lynch Senior Floating Rate Fund, Inc. shares to the Merrill
Lynch Senior Floating Rate Fund, Inc. in connection with a tender offer
conducted by the Merrill Lynch Senior Floating Rate Fund, Inc. and reinvest
the proceeds immediately in the Company. This investment option is available
only with respect to the proceeds of Merrill Lynch Senior Floating Rate Fund,
Inc. shares as to which no Early Withdrawal Charge (as defined in the Merrill
Lynch Senior Floating Rate Fund, Inc. prospectus) is applicable.
16
<PAGE>
Purchase orders from Merrill Lynch Senior Floating Rate Fund, Inc.
shareholders wishing to exercise this investment option will be accepted only
on the day that the related Merrill Lynch Senior Floating Rate Fund, Inc.
tender offer terminates and will be effected at the net asset value of the
Company at such day.
REDUCED INITIAL SALES CHARGES--CLASS A AND CLASS D SHARES
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 Company 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 Company 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 a purchase
aggregating $25,000 or more of Class A or Class D shares of the Company or any
other MLAM-advised mutual funds made within a thirteen-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 Company'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,
but 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
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 Company 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 13-month period (while
remaining registered in the name of the purchaser) for this purpose. The first
purchase under the Letter of Intention must be at least five percent of the
dollar amount of such Letter. If a 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 shares
then being purchased under such Letter, but there will be no retroactive
reduction of the sales charges on any previous purchase.
Merrill Lynch Blueprint SM Program. Class D shares of the Company are
offered to participants in the Merrill Lynch Blueprint SM Program
("Blueprint"). In addition, participants in Blueprint who own Class A shares
of the Company may purchase additional Class A shares of the Company through
Blueprint. Blueprint is directed to small investors, group IRAs and
participants in certain affinity groups such as credit unions, trade
associations
17
<PAGE>
and benefit plans. Investors placing orders to purchase Class A or Class D
shares of the Company through Blueprint will acquire the Class A or Class D
shares at net asset value plus a sales charge calculated in accordance with
the Blueprint sales charge schedule (i.e., up to $300 at 4.25%, $300.01 up to
$5,000 at 3.25% plus $3, and $5,000.01 or more at the standard sales charge
rates disclosed in the Prospectus). In addition, Class A or Class D shares of
the Company are offered at net asset value plus a sales charge of 1/2 of 1%
for corporate or group IRA programs placing orders to purchase their Class A
or Class D shares through Blueprint. Services, including the exchange
privilege, available to Class A and Class D investors through Blueprint,
however, may differ from those available to other Class A or Class D share
investors.
Class A and Class D shares are offered at net asset value to participants in
Blueprint through the Merrill Lynch Directed IRA Rollover Program ("IRA
Rollover Program") available from Merrill Lynch Business Financial Services, a
business unit of Merrill Lynch. The IRA Rollover Program is available to
custodian rollover assets from Employer Sponsored Retirement and Savings Plans
(see definition below) whose Trustee and/or Plan Sponsor has entered into a
Merrill Lynch Directed IRA Rollover Program Service Agreement.
Orders for purchases and redemptions of Class A or Class D shares of the
Company may be grouped for execution purposes which, in some circumstances,
may involve the execution of such orders two business days following the day
such orders are placed. The minimum initial purchase price is $100, with a $50
minimum for subsequent purchases through Blueprint. There are no minimum
initial or subsequent purchase requirements for participants who are part of
an automatic investment plan. Additional information concerning purchases
through Blueprint, including any annual fees and transaction charges, is
available from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The
Blueprint SM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
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.
Employer Sponsored Retirement and Savings Plans. Class A and Class D shares
are offered at net asset value to employer sponsored retirement or savings
plans, such as tax qualified retirement plans within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), deferred
compensation plans within the meaning of Section 403(b) and 457 of the Code,
other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system,
herein referred to as "Employer Sponsored Retirement or Savings Plans",
provided the plan has accumulated $20 million or more in MLAM-advised mutual
funds (in the case of Class A shares) or $5 million or more in MLAM-advised
mutual funds (in the case of Class D shares). Class D shares may be offered at
net asset value to new Employer Sponsored Retirement or Savings Plans,
provided the plan has $3 million or more initially invested in MLAM-advised
mutual funds. Assets of Employer Sponsored Retirement or Savings Plans
sponsored by the same sponsor or an affiliated sponsor may be aggregated.
Class A shares and Class D shares also are offered at net asset value to
Employer Sponsored Retirement or Savings Plans that have at least 1,000
employees eligible to participate in the plan (in the case of Class A shares)
or between 500 and 999 employees eligible to participate in the plan (in the
case of Class D shares). Employees eligible to participate in 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) or 403(b) 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
18
<PAGE>
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 shares at net asset value has the
option of (i) purchasing Class A shares at the initial sales charge schedule
and possible CDSC schedule disclosed in the Prospectus if it is otherwise
eligible to purchase Class A shares, (ii) purchasing Class D shares at the
initial sales charge and possible CDSC schedule disclosed in the Prospectus,
(iii) 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 (iv) if the Employer Sponsored Retirement or Savings Plan does
not qualify to purchase Class B shares with a waiver of the CDSC upon
redemption, purchasing Class C shares at the CDSC schedule disclosed in the
Prospectus. 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 Company, members of
the Boards of other MLAM-advised investment companies, directors and employees
of ML & Co. and its subsidiaries (the term "subsidiaries", when used herein
with respect to ML & Co., includes MLAM, FAM and certain other entities
directly or indirectly wholly-owned and controlled by ML & Co.) and any trust,
pension, profit-sharing or other benefit plan for such persons may purchase
Class A shares of the Company at net asset value.
Class D shares of the Company are offered at net asset value, without sales
charge, to an investor who has a business relationship with a financial
consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchase by such investor if the following
conditions are satisfied: first, the investor must advise Merrill Lynch that
it will purchase Class D shares of the Company 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; and second, the investor also must establish that such
redemption had been made within 60 days prior to the investment in the
Company, and the proceeds from the redemption had been maintained in the
interim in cash or a money market fund.
Class D shares of the Company 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"), if the following conditions are
satisfied: first, the investor must purchase Class D shares of the Company
with proceeds from a redemption of shares of such other mutual fund and such
fund was subject to a sales charge either at the time of purchase or on a
deferred basis; and, second such purchase of Class D shares must be made
within 90 days after such notice.
Class D shares of the Company will be 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 Company with proceeds from the redemption of
such shares of the other mutual fund and that such shares have been
outstanding for a period of no less than six months; and second, such purchase
of Class D shares must be made within 60 days after the redemption and the
proceeds from the redemption must be maintained in the interim in cash or a
money market fund.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or
19
<PAGE>
consolidation with a public or private investment company. The value of the
assets or company acquired in a tax-free transaction may in appropriate cases
be adjusted to reduce possible adverse tax consequences to the Company 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 Company. 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
Company; (ii) are acquired for investment and not for resale (subject to the
understanding that the disposition of the Company'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 Company may
acquire through such transactions restricted or illiquid securities to the
extent the Company 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 Company 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 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 Company and to its related class of
shareholders. Each Distribution Plan further provides that, so long as the
Distribution Plan remains in effect, the selection and nomination of Directors
who are not "interested persons" of the Company, 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 reasonable likelihood that such Distribution Plan will
benefit the Company 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 Company. A
Distribution Plan cannot be amended to increase materially the amount to be
spent by the Company without the approval of the related class of
shareholders, 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 Company 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
20
<PAGE>
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 Company, the maximum sales charge rule limits the
aggregate of distribution fee payments and CDSCs payable by the Company 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 Company will not
make further payments of the distribution fee with respect to Class B shares,
and any CDSCs will be paid to the Company rather than to the Distributor;
however, the Company 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 March 31, 1995
with respect to the Class B and Class C shares of the Company 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.
<TABLE>
<CAPTION>
DATA CALCULATED AS OF MARCH 31, 1995
----------------------------------------------------------------------------
ANNUAL
DISTRIBUTION
ALLOWABLE AMOUNTS FEE AT
ELIGIBLE AGGREGATE INTEREST ON MAXIMUM PREVIOUSLY AGGREGATE CURRENT
GROSS SALES UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE LEVEL(4)
-------- --------- ----------- ------- -------------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Class B Shares (for the
fiscal period April 27,
1992 (commencement of
operations) to March
31, 1995):
Under NASD Rule As
Adopted............... $559,455 $34,966 $2,313 $37,279 $6,119 $31,160 $4,612
-------- ------- ------ ------- ------ ------- ------
Under Distributor's
Voluntary Waiver...... $559,455 $34,966 $2,313 $37,279 $6,119 $31,160 $4,612
-------- ------- ------ ------- ------ ------- ------
Class C Shares (for the
fiscal period October
21, 1994 (commencement
of operations) to March
31, 1995):
Under NASD Rule As
Adopted............... $ 25,419 $ 1,589 $ 36 $ 1,625 $ 50 $ 1,575 $ 174
-------- ------- ------ ------- ------ ------- ------
</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. See
"Purchase of Shares--Distribution Plans" in the Prospectus.
(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.
21
<PAGE>
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Company shares.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended for more than seven days only for periods during
which trading on the New York Stock Exchange is restricted, as determined by
the 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 Company is not reasonably
practicable, and for such other periods as the Commission may by order permit
for the protection of shareholders of the Company.
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 Company at such time.
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 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
period April 27, 1992 (commencement of operations) to March 31, 1993, and for
the fiscal years ended March 31, 1994 and 1995, the Distributor received CDSCs
of $59,092, $315,184 and $1,118,846, respectively, with respect to the
redemption of Class B shares, all of which was paid to Merrill Lynch.
Similarly, for the fiscal period October 21, 1994 (commencement of operations)
to March 31, 1995, the Distributor received CDSCs of $4,037 with respect to
redemption of Class C shares, all of which was paid to Merrill Lynch.
Merrill Lynch Blueprint SM Program. Class B shares are offered to certain
participants in Blueprint. Blueprint is directed to small investors, group
IRAs and participants in certain affinity groups such as trade associations
and credit unions. Class B shares of the Company are offered through Blueprint
only to members of certain affinity groups. The CDSC is waived in connection
with purchase orders placed through Blueprint. Services, including the
exchange privilege, available to Class B investors through Blueprint, however,
may differ from those available to other investors in Class B shares. Orders
for purchases and redemptions of Class B shares of the Company will be grouped
for execution purposes which, in some circumstances, may involve the execution
of such orders two business days following the day such orders are placed. The
minimum initial purchase price is $100, with a $50 minimum for subsequent
purchases through Blueprint. There is no minimum initial or subsequent
purchase requirement for investors who are part of the Blueprint automatic
investment plan. Additional information concerning these Blueprint programs,
including any annual fees or transaction charges, is
22
<PAGE>
available from Merrill Lynch, Pierce, Fenner & Smith Incorporated, The
BlueprintSM Program, P.O. Box 30441, New Brunswick, New Jersey 08989-0441.
Retirement Plans. Any Retirement Plan which does not meet the qualifications
to purchase Class A or Class D shares at net asset value has the option of
purchasing Class A or Class D shares at the sales charge schedule disclosed in
the Prospectus, or if the Retirement Plan meets the following requirements,
then it may purchase Class B shares with a waiver of the CDSC upon redemption.
The CDSC is waived for any Eligible 401(k) Plan redeeming Class B shares.
"Eligible 401(k) Plan" is defined as a retirement plan qualified under Section
401(k) of the Code with 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 Section
401(a) or 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 is also waived for any Class B shares which are purchased by an
Eligible 401(k) Plan or Eligible 401(a) Plan and are rolled over into a
Merrill Lynch or Merrill Lynch Trust Company custodied Individual Retirement
Account 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
Practices" in the Prospectus.
Subject to policies established by the Board of Directors of the Company,
the Investment Adviser is primarily responsible for the execution of the
Company's portfolio transactions and the allocation of the brokerage. In
executing such transactions, the Investment Adviser seeks to obtain the best
net results for the Company, 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. While the Investment
Adviser generally seeks reasonably competitive commission rates, the Company
does not necessarily pay the lowest commission or spread available. The
Company has no obligation to deal with any broker or group of brokers in the
execution of transactions in portfolio securities. Subject to obtaining the
best price and execution, brokers who provide supplemental investment research
to the Investment Adviser may receive orders for transactions by the Company.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Investment Adviser under the Investment
Advisory Agreement, and the expenses of the Investment Adviser will not
necessarily be reduced as a result of the receipt of such supplemental
information. It is possible that certain of the supplementary investment
research so received will primarily benefit one or more other investment
companies or other accounts for which investment discretion is exercised.
Conversely, the Company may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such
other accounts or investment companies. In addition, consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and
policies established by the Directors of the Company, the Investment Adviser
may consider sales of shares of the Company as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Company.
23
<PAGE>
The Company anticipates that its brokerage transactions involving securities
of companies domiciled in countries other than the U.S. 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 Company will
endeavor to achieve the best net results in effecting its portfolio
transactions. There is generally less government supervision and regulation of
foreign stock exchanges and brokers than in the United States.
Foreign equity securities may be held by the Company in the form of ADRs,
EDRs, GDRs or securities convertible into foreign equity securities. ADRs,
EDRs and GDRs may be listed on stock exchanges or traded in over-the-counter
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the U.S., as well as GDRs traded in the United States,
will be subject to negotiated commission rates.
The Company may invest in securities traded in the over-the-counter markets
and intends to deal directly with the dealers who make markets in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Under the Investment Company Act, persons
affiliated with the Company and persons who are affiliated with such
affiliated persons are prohibited from dealing with the Company 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 account, the Company will not deal with affiliated
persons, including Merrill Lynch and its affiliates, in connection with such
transactions. However, affiliated persons of the Company 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.
See "Investment Objective and Policies--Current Investment Restrictions".
The Board of Directors has considered the possibility of seeking to
recapture for the benefit of the Company 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 Company. After considering all factors deemed relevant, the Board of
Directors made a determination not to seek such recapture. The Board will
reconsider this matter from time to time.
Section 11(a) of the Securities Exchange Act of 1934, as amended, generally
prohibits members of the U.S. national securities exchanges from executing
exchange transactions for their affiliates and institutional accounts which
they manage unless the member (i) has obtained prior express authorization
from the account to effect such transactions, (ii) at least annually furnishes
the account with a statement disclosing the aggregate compensation received by
the member in effecting such transactions, and (iii) complies with any rules
the Commission has prescribed with respect to the requirements of clauses (i)
and (ii). To the extent Section 11(a) would apply to Merrill Lynch acting as a
broker for the Company 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 Company, and annual statements as to aggregate
compensation will be provided to the Company.
For the fiscal period April 27, 1992 (commencement of operations) to March
31, 1993, the Company paid total brokerage commissions of $609,621, none of
which was paid to Merrill Lynch. For the fiscal year ended March 31, 1994, the
Company paid total brokerage commissions of $976,986, none of which was paid
to Merrill Lynch. For the fiscal year ended March 31, 1995, the Company paid
total brokerage commissions of $1,224,398, of which $9,753 or 0.8% was paid to
Merrill Lynch for effecting 0.7% of the aggregate dollar amount of
transactions on which the Company paid brokerage commissions.
24
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Company is determined once daily
Monday through Friday as of 15 minutes after the close of business on the New
York Stock Exchange (generally, 4:00 p.m., New York time), on each day during
which the New York Stock Exchange is open for trading. The New York Stock
Exchange is not open on New Year's Day, President's 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 Company 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 fee payable to the Investment Adviser 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 its Class D shares reflecting the daily expense accruals of the
distribution fees and higher transfer agency fees applicable with respect to
the 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.
Portfolio securities, including ADRs, EDRs or GDRs, 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 the time of valuation. Portfolio
securities which are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market.
When the Company writes an option, the amount of the premium received is
recorded on the books of the Company 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 Company 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 Company.
Securities and assets for which market quotations are not readily available
(including venture capital investments, which are subject to limitations as to
their sale) are valued at fair value as determined in good faith by or under
the direction of the Board of Directors of the Company. Such valuations and
procedures will be reviewed periodically by the Board of Directors. The fair
market value for venture capital investments for which no market exists cannot
be precisely determined. There is a range of values which is reasonable for
such investments at any particular time. In the early stages of development,
venture capital investments will typically be valued based upon their original
cost to the Company (the "cost method"). The cost method will be utilized
until significant developments affecting the portfolio company provide a basis
for use of an appraisal valuation
25
<PAGE>
(the "appraisal method"). The appraisal method will be based upon such factors
affecting the portfolio company as earnings and net worth, the market prices
for similar securities of comparable companies and an assessment of the
company's future prospects. In the case of unsuccessful operations, the
appraisal may be based upon liquidation value. Valuations based on the
appraisal method are necessarily subjective. The Company will also use third
party transactions (actual or proposed) in the portfolio company's securities
as the basis of valuation (the "private market method"). The private market
method will only be used with respect to actual transactions or actual firm
offers by sophisticated, independent investors.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Company's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Company's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
the Directors.
SHAREHOLDER SERVICES
The Company offers a number of shareholder services described below which
are designed to facilitate investment in its shares. Certain of such services
are not available to investors who place orders for the Company's shares
through the Merrill Lynch Blueprint SM Program. Full details as to each of
such services, copies of the various plans described below and instructions as
to how to participate in the various services or plans, or how to change
options with respect thereto, can be obtained from the Company, the
Distributor or Merrill Lynch.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the transfer agent has an
Investment Account and will receive statements, at least quarterly, from the
transfer agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of ordinary income
dividends and long-term capital gain distributions. The statements will also
show any other activity in the account since the preceding statement.
Shareholders will receive separate transaction confirmations for each purchase
or sale transaction other than automatic investment purchases and the
reinvestment of ordinary income dividends and long-term capital gain
distributions.
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 Company, 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
26
<PAGE>
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 U.S. shareholder may make additions to an Investment Account at any time
by purchasing Class A shares (if he or she is an eligible Class A investor as
described in the Prospectus) or Class B, Class C or Class D shares at the
applicable public offering price, either through the shareholder's securities
dealer or by mail directly to the transfer agent, acting as agent for such
securities dealer. Voluntary accumulation also can be made through a service
known as the Automatic Investment Plan whereby the Company is authorized
through preauthorized 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 Company are held within a CMA (R) or CBA (R)
account may arrange to have periodic investments made in the Company 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 automatically be reinvested in additional shares of the
Company. Such reinvestment will be at the net asset value of the shares of the
Company as of the close of business on the ex-dividend date of the dividend or
distribution. Shareholders may elect to receive their income 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 Company 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 systematic 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 shares of the Company having a value, based upon cost or the current
offering price, of $5,000 or more, and monthly withdrawals are available for
shareholders with Class A or Class D shares with such a value of $10,000 or
more.
At the time of each withdrawal payment, sufficient Class A or Class D shares
are redeemed from those on deposit in the shareholder's account to provide the
withdrawal payment specified by the shareholder. The shareholder may specify
either a dollar amount or a percentage of the value of his Class A or Class D
shares. Redemptions will be made at net asset value as determined as of 15
minutes after the close of business on the New York Stock Exchange (generally
4:00 p.m., New York time) on the 24th day of each month or the 24th day of the
last month of each quarter, whichever is applicable. If the 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 preceding business day. The check for the
withdrawal payment will be mailed, or the direct deposit of the withdrawal
payment will be made,
27
<PAGE>
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 Class A or
Class D shares of the Company, respectively. A shareholder's Systematic
Withdrawal Plan may be terminated at any time, without charge or penalty, by
the shareholder, the Company, the Company's transfer agent or the Distributor.
Withdrawal payments should not be considered as dividends, yield or income.
Each withdrawal is a taxable event. If periodic withdrawals continuously
exceed reinvested dividends, the shareholder's original investment may be
correspondingly reduced. Purchase 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 Company will not knowingly
accept purchase orders for Class A or Class D shares of the Company 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.
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 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 Company shares are being
purchased with the account pursuant to the Automatic Investment Program. For
more information on the Systematic Redemption Program, eligible shareholders
should contact their Financial Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Company 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 Company for Class A shares of a second MLAM-advised
mutual fund if the shareholder holds any Class A shares of the second fund in
his account in which the exchange is made at the time of the exchange or is
otherwise eligible to purchase Class A shares of the second fund. If the Class
A shareholder wants to exchange Class A shares for shares of a second MLAM-
advised mutual fund, but does not hold Class A shares of the second fund in
his account at the time of the exchange and is not otherwise eligible to
acquire Class A shares of the second fund, the shareholder will receive Class
D shares of the second fund as a result of the exchange. Class D shares also
may be exchanged for Class A shares of a second MLAM-advised mutual fund at
any time as long as, at the time of the exchange, the shareholder holds Class
A shares of the second fund in the account in which the exchange is made or is
otherwise eligible to purchase Class A shares of the second fund. Class B,
Class C and Class D shares are exchangeable with the 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 Company 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
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<PAGE>
the exchange privilege, and any shares utilized in an exchange must have been
held by the shareholder for 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 charges 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 Company
generally may be exchanged into the Class A or Class D shares of the other
funds or into shares of the Class A and Class D money market funds with a
reduced or without a sales charge.
In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, of another MLAM-
advised mutual fund ("new Class B or Class C shares") on the basis of relative
net asset value per Class B or Class C share, without the payment of any CDSC
that might otherwise be due on redemption of the outstanding shares. Class B
shareholders of the Company exercising the exchange privilege will continue to
be subject to the Company'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 Company acquired
through use of the exchange privilege will be subject to the Company'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 Company
for those of Merrill Lynch Special Value Fund, Inc. ("Special Value Fund")
after having held the Company Class B shares for two and a half years. The 2%
CDSC that generally would apply to a redemption would not apply to the
exchange. Three years later the investor may decide to redeem the Class B
shares of Special Value Fund and receive cash. There will be no CDSC due on
this redemption, since by "tacking" the two and a half year holding period of
Company 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.
The exchange privilege is modified with respect to certain retirement plans
which participate in the Merrill Lynch Mutual Fund Adviser ("MFA") program.
Such retirement plans may exchange Class B, Class C or Class D shares that
have been held for at least one year for Class A shares of the same fund on
the basis of relative net asset values in connection with the commencement of
participation in the MFA program, i.e., no CDSC will apply. The one year
holding period does not apply to shares acquired through reinvestment of
dividends. Upon termination of participation in the MFA program, Class A
shares will be reexchanged for the class of shares originally held. For
purposes of computing any CDSC that may be payable upon redemption of Class B
or Class C shares so reacquired, or the Conversion Period for Class B shares
so reacquired, the holding period for the Class A shares will be "tacked" to
the holding period for the Class B or Class C shares originally held.
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<PAGE>
Shareholders also may exchange shares of the Company into shares of a money
market fund advised by the Investment Adviser or its affiliates, but the
period of time that Class B or Class C shares are held in a money market fund
will not count towards satisfaction of the holding period requirement for
purposes of reducing the CDSC or with respect to Class B shares, towards
satisfaction of the conversion period. However, shares of a money market fund
which were acquired as a result of an exchange for Class B or Class C shares
of the Company 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 Company 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 Company for shares of Merrill
Lynch Institutional Fund ("Institutional Fund") after having held the Company
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 Company 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 pol-
icy of limiting the degree of fluctuation
in net asset value by investing primarily
in a portfolio of adjustable rate securi-
ties, consisting principally of mortgage-
backed and asset-backed securities.
Merrill Lynch Americas Income
Fund, Inc.......................
A high level of current income, consistent
with prudent investment risk, by investing
primarily in debt securities denominated
in a currency of a country located in the
Western Hemisphere (i.e., North and South
America and the surrounding waters).
Merrill Lynch Arizona Limited
Maturity Municipal Bond Fund....
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from Fed-
eral and Arizona income taxes as is con-
sistent with prudent investment management
through investment in a portfolio primar-
ily of intermediate-term investment grade
Arizona Municipal Bonds.
Merrill Lynch Arizona Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide investors
with as high a level of income exempt from
Federal and Arizona income taxes as is
consistent with prudent investment manage-
ment.
30
<PAGE>
Merrill Lynch Arkansas Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Arkansas income taxes as is consistent
with prudent investment management.
Merrill Lynch Asset Growth Fund, High total investment return, consistent
Inc. ........................... with prudent risk, from investment in
United States and foreign equity, debt and
money market securities the combination of
which will be varied both with respect to
types of securities and markets in re-
sponse to changing market and economic
trends.
Merrill Lynch Asset Income Fund, A high level of current income through in-
Inc. ........................... vestment primarily in United States fixed
income securities.
Merrill Lynch Balanced Fund For
Investment And Retirement, As high a level of total investment return
Inc. ...................... as is consistent with reasonable risk by
investing in common stock and other types
of securities, including fixed income se-
curities and convertible securities.
Merrill Lynch Basic Value Fund,
Inc. ...........................
Capital appreciation and, secondarily, in-
come 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 Mu-
nicipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management through investment
in a portfolio consisting primarily of in-
sured California Municipal Bonds.
Merrill Lynch California Limited
Maturity Municipal Bond Fund....
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from Fed-
eral and California income taxes as is
consistent with prudent investment manage-
ment through investment in a portfolio
primarily of intermediate-term investment
grade California Municipal Bonds.
Merrill Lynch California
Municipal Bond Fund.............
A portfolio of Merrill Lynch California Mu-
nicipal Series Trust, a series fund, whose
objective is to provide investors with as
high a level of income exempt from Federal
and California income taxes as is consis-
tent with prudent investment management.
31
<PAGE>
Merrill Lynch Capital Fund, The highest total investment return consis-
Inc. ........................... tent with prudent risk through a fully
managed investment policy utilizing equi-
ty, debt and convertible securities.
Merrill Lynch Colorado Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Colorado income taxes as is consistent
with prudent investment management.
Merrill Lynch Connecticut
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Connecticut income taxes as is consistent
with prudent investment management.
Merrill Lynch Corporate Bond
Fund, Inc.......................
Current income from three separate diversi-
fied portfolios of fixed income securi-
ties.
Merrill Lynch Developing Capital
Markets Fund, Inc...............
Long-term appreciation through investments
in securities, principally equities, of
issuers in countries having smaller capi-
tal markets.
Merrill Lynch Dragon Fund, Inc... Capital appreciation primarily through in-
vestment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin,
other than Japan, Australia and New Zea-
land.
Merrill Lynch EuroFund........... Capital appreciation primarily through in-
vestment in equity securities of corpora-
tions domiciled in Europe.
Merrill Lynch Federal Securities
Trust...........................
High current return through investments in
U.S. Government and Government agency se-
curities, 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 Fed-
eral income taxes as is consistent with
prudent investment management while serv-
ing to offer shareholders the opportunity
to own securities exempt from Florida in-
tangible personal property taxes through
investment in a portfolio primarily of in-
termediate-term investment grade Florida
Municipal Bonds.
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<PAGE>
Merrill Lynch Florida Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal income
taxes as is consistent with prudent in-
vestment management while seeking to offer
shareholders the opportunity to own secu-
rities exempt from Florida intangible per-
sonal property taxes.
Merrill Lynch Fund for Tomorrow,
Inc. ...........................
Long-term growth through investment in a
portfolio of good quality securities, pri-
marily common stock, potentially posi-
tioned 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 securities
placing particular emphasis on companies
that have exhibited above-average growth
rates in earnings.
Merrill Lynch Fundamental Value
Portfolio (available only for
exchanges by certain individual
retirement accounts for which
Merrill Lynch acts as
custodian).................
A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objec-
tive is to provide capital appreciation
and income by investing in securities,
with at least 65% of the portfolio's as-
sets being invested in equities.
Merrill Lynch Global Allocation
Fund, Inc. .....................
High total return consistent with prudent
risk, through a fully managed investment
policy utilizing U.S. and foreign equity,
debt and money market securities, the com-
bination of which will be varied from time
to time both with respect to the types of
securities and markets in response to
changing market and economic trends.
Merrill Lynch Global Bond Fund
for Investment and Retirement...
High total investment return from investing
in a global portfolio of debt instruments
denominated in various currencies and mul-
ti-national currency units.
Merrill Lynch Global Convertible
Fund, Inc. .....................
High total return from investment primarily
in an internationally diversified portfo-
lio of convertible debt securities,
convertible preferred stock and "synthet-
ic" convertible securities consisting of a
combination of debt securities or pre-
ferred stock and warrants or options.
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<PAGE>
Merrill Lynch Global Holdings,
Inc. (residents of Arizona must
meet investor suitability
standards)......................
The highest total investment return consis-
tent with prudent risk through worldwide
investment in an internationally diversi-
fied portfolio of securities.
Merrill Lynch Global Opportunity
Portfolio (available only for
exchanges by certain individual
retirement accounts for which
Merrill Lynch acts as
custodian).................
A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objec-
tive is to provide a high total investment
return through an investment policy util-
izing United States and foreign equity,
debt and money market securities, the com-
bination of which will vary depending upon
changing market and economic trends.
Merrill Lynch Global Resources Long-term growth and protection of capital
Trust........................... from investment in securities of foreign
and domestic companies that possess sub-
stantial natural resource assets.
Merrill Lynch Global SmallCap
Fund, Inc. .....................
Long-term growth of capital by investing
primarily in equity securities of compa-
nies with relatively small market capital-
izations located in various foreign coun-
tries and in the United States.
Merrill Lynch Global Utility
Fund, Inc. .....................
Capital appreciation and current income
through investment of at least 65% of its
total assets in equity and debt securities
issued by domestic and foreign companies
which are primarily engaged in the owner-
ship or operation of facilities used to
generate, transmit or distribute electric-
ity, telecommunications, gas or water.
Merrill Lynch Growth Fund for
Investment and Retirement.......
Growth of capital and, secondarily, income
from investment in a diversified portfolio
of equity securities placing principal em-
phasis on those securities which manage-
ment of the Fund believes to be underval-
ued.
Merrill Lynch Healthcare Fund,
Inc. (residents of Wisconsin
must meet investor suitability
standards)......................
Capital appreciation through world-wide in-
vestment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
34
<PAGE>
Merrill Lynch International
Equity Fund.....................
Capital appreciation and, secondarily, in-
come by investing in a diversified portfo-
lio of equity securities of issuers lo-
cated in countries other than the United
States.
Merrill Lynch Latin America
Fund, Inc.......................
Capital appreciation by investing primarily
in Latin American equity and debt securi-
ties.
Merrill Lynch Maryland Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Maryland income taxes as is consistent
with prudent investment management.
Merrill Lynch Massachusetts
Limited Maturity Municipal Bond
Fund............................ A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from Fed-
eral and Massachusetts income taxes as is
consistent with prudent investment manage-
ment through investment in a portfolio
primarily of intermediate-term investment
grade Massachusetts Municipal Bonds.
Merrill Lynch Massachusetts
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Massachusetts income taxes as is 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 Fed-
eral and Michigan income taxes as is con-
sistent with prudent investment management
through investment in a portfolio primar-
ily of intermediate-term investment 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.
35
<PAGE>
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
management.
Merrill Lynch Municipal Bond
Fund, Inc.......................
Tax-exempt income from three separate di-
versified portfolios of municipal bonds.
Merrill Lynch Municipal
Intermediate Term Fund..........
Currently the only portfolio of Merrill
Lynch Municipal Series Trust, a series
fund, whose objective is to provide as
high a level as possible of income exempt
from Federal income taxes by investing in
investment grade obligations with a dollar
weighted average maturity of five to
twelve years.
Merrill Lynch New Jersey Limited
Maturity Municipal Bond Fund....
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from Fed-
eral and New Jersey income taxes as is
consistent with prudent investment manage-
ment through a portfolio primarily of
intermediate-term investment grade New
Jersey Municipal Bonds.
Merrill Lynch New Jersey
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
New Jersey income taxes as is consistent
with prudent investment management.
Merrill Lynch New Mexico
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
New Mexico income taxes as is consistent
with prudent investment management.
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 Fed-
eral, New York State and New York City in-
come taxes as is consistent with prudent
investment management through investment
in a portfolio primarily of intermediate-
term investment grade New York Municipal
Bonds.
36
<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 investment
management.
Merrill Lynch North Carolina
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
North Carolina income taxes as is consis-
tent with prudent investment management.
Merrill Lynch Ohio Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Ohio income taxes as is consistent with
prudent investment management.
Merrill Lynch Oregon Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Oregon income taxes as is consistent with
prudent investment management.
Merrill Lynch Pacific Fund, Capital appreciation by investing in equity
Inc............................. securities of corporations domiciled in
Far Eastern and Western Pacific countries,
including Japan, Australia, Hong Kong and
Singapore.
Merrill Lynch Pennsylvania
Limited Maturity Municipal Bond
Fund............................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from Fed-
eral and Pennsylvania income taxes as is
consistent with prudent investment manage-
ment through investment in a portfolio of
intermediate-term investment grade Penn-
sylvania Municipal Bonds.
Merrill Lynch Pennsylvania
Municipal Bond Fund.............
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal and
Pennsylvania income taxes as is consistent
with prudent management.
37
<PAGE>
Merrill Lynch Phoenix Fund, Long-term growth of capital by investing in
Inc............................. equity and fixed income securities, in-
cluding tax-exempt securities, of issuers
in weak financial condition or experienc-
ing poor operating results believed to be
undervalued relative to the current or
prospective condition of such issuer.
Merrill Lynch Quality Bond
Portfolio (available only for
exchanges by certain individual
retirement accounts for which
Merrill Lynch acts as
custodian).................
A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objec-
tive is to provide a high level of current
income through investment in a diversified
portfolio of debt obligations, such as
corporate bonds and notes, convertible se-
curities, preferred stocks and governmen-
tal obligations.
Merrill Lynch Short-Term Global
Income Fund, Inc................
As high a level of current income as is
consistent with prudent investment manage-
ment from a global portfolio of high qual-
ity debt securities denominated in various
currencies and multi-national currency
units and having remaining maturities not
exceeding three years.
Merrill Lynch Special Value
Fund, Inc.......................
Long-term growth of capital from invest-
ments in securities, primarily equities,
of relatively small companies believed to
have special investment value and emerging
growth companies regardless of size.
Merrill Lynch Strategic Dividend
Fund............................
Long-term total return from investment in
dividend paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.
Merrill Lynch Texas Municipal
Bond Fund.......................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high a
level of income exempt from Federal income
taxes as is consistent with prudent in-
vestment management by investing primarily
in a portfolio of long-term, investment
grade obligations issued by the State of
Texas, its political subdivisions, agen-
cies and instrumentalities.
Merrill Lynch U.S. Government
Securities Portfolio (available
only for exchanges by certain
individual retirement accounts
for which Merrill Lynch acts as
custodian).................
A portfolio of Merrill Lynch Asset Builder
Program, Inc., a series fund, whose objec-
tive is to provide a high current return
through investments in U.S. Government and
government agency securities, including
GNMA mortgage-backed certificates and
other mortgage-backed government securi-
ties.
38
<PAGE>
Merrill Lynch Utility Income
Fund, Inc. .....................
High current income through investment in
equity and debt securities issued by com-
panies which are primarily engaged in the
ownership or operation of facilities used
to generate, transmit or distribute elec-
tricity, 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 Preservation of capital, liquidity and the
Trust........................... highest possible current income consistent
with the foregoing objectives from the
short-term money market securities in
which the Trust invests.
Merrill Lynch Retirement
Reserves Money Fund (available
only for exchanges within
certain retirement plans).......
Currently the only portfolio of Merrill
Lynch Retirement Series Trust, a series
fund, whose objectives are current income,
preservation of capital and liquidity
available from investing in a diversified
portfolio of short-term money market secu-
rities.
Merrill Lynch U.S.A. Government
Reserves........................
Preservation of capital, current income and
liquidity available from investing in di-
rect obligations of the U.S. Government
and repurchase agreements relating to such
securities.
Merrill Lynch U.S. Treasury
Money Fund......................
Preservation of capital, liquidity and cur-
rent income through investment exclusively
in a diversified portfolio of short-term
marketable securities which are direct ob-
ligations of the U.S. Treasury.
Class B, Class C and Class D Share Money Market Funds:
Merrill Lynch Government Fund.... A portfolio of Merrill Lynch Funds for In-
stitutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in securities
issued or guaranteed by the U.S. Govern-
ment, its agencies and instrumentalities
and in repurchase agreements secured by
such obligations.
39
<PAGE>
Merrill Lynch Institutional A portfolio of Merrill Lynch Funds for In-
Fund............................ stitutions Series, a series fund, whose
objective is to provide maximum current
income consistent with liquidity and the
maintenance of a high-quality portfolio of
money market securities.
Merrill Lynch Institutional Tax-
Exempt Fund.....................
A portfolio of Merrill Lynch Funds for In-
stitutions Series, a series fund, whose
objective is to provide current income ex-
empt from Federal income taxes, preserva-
tion of capital and liquidity available
from investing in a diversified portfolio
of short-term, high quality municipal
bonds.
Merrill Lynch Treasury Fund...... A portfolio of Merrill Lynch Funds for In-
stitutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in direct obli-
gations of the U.S. Treasury and up to 10%
of its total assets in repurchase agree-
ments secured by such obligations.
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their
Merrill Lynch financial consultant, who will advise the Company of the
exchange. Shareholders of the Company, and shareholders of the other funds
described above with shares for which certificates have not been issued, may
exercise the exchange privilege by wire through their securities dealers. The
Company 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 Commission. The Company reserves the right to
limit the number of times an investor may exercise the exchange privilege.
Certain funds may suspend the continuous offering of their shares at any time
and thereafter may resume such offering from time to time. The exchange
privilege is available only to U.S. shareholders in states where the exchange
legally may be made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Company 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 Company (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 Company intends to distribute substantially all of such
income.
Dividends paid by the Company from its ordinary income and distributions of
the Company'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 Company'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
Company shares. Any loss upon the sale or exchange of Company shares held for
six months or less, however,
40
<PAGE>
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
Company'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 Company will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. A portion of the Company's ordinary income dividends may be
eligible for the dividends received deduction allowed to corporations under
the Code, if certain requirements are met. For this purpose, the Company will
allocate dividends eligible for the dividends received deduction 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. If the Company 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 Company and
received by its shareholders on December 31 of the year in which such dividend
was declared.
Ordinary income dividends paid by the Company to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders
are urged to consult their own tax advisers concerning the applicability of
the U.S. withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Company or who, to the Company'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 Company 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 Company. If more than 50% in value of the Company's
total assets at the close of its taxable year consists of securities of
foreign corporations, the Company will be eligible, and intends, to file an
election with the Internal Revenue Service pursuant to which shareholders of
the Company 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 Company'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
41
<PAGE>
as having been paid by such shareholder. The Company will report annually to
its shareholders the amount per share of such withholding taxes. For this
purpose, the Company will allocate foreign taxes and foreign source income
among the Class A, Class B, Class C and Class D shareholders according to a
method similar to that described above for the allocation of dividends
eligible for the dividends received deduction.
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
Company 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 Company will be
disallowed if other Company 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 Company 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 Company's
taxable income and capital gains will be distributed to avoid entirely the
imposition of the tax. In such event, the Company will be liable for the tax
only on the amount by which it does not meet the foregoing distribution
requirements.
TAX TREATMENT OF OPTIONS TRANSACTIONS
The Company 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 Company 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 Company 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
Company 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.
42
<PAGE>
Code Section 1092, which applies to certain "straddles", may affect the
taxation of the Company's transactions in options, futures and forward foreign
exchange contracts. Under Section 1092, the Company 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 Company's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Company 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 stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the Company 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 Company.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from certain debt instruments, from
certain forward contracts, from futures contracts that are not "regulated
futures contracts" and from unlisted options will be treated as ordinary
income or loss under Code Section 988. In certain circumstances, the Company
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 Code Section 988 is elected by the Company. In general,
however, Code Section 988 gains or losses will increase or decrease the amount
of the Company'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
Company would not be able to make any ordinary 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 Company shares, and resulting in a
capital gain for any shareholder who received a distribution greater than such
shareholder's basis in Company 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 Company
solely to reduce the risk of currency fluctuations with respect to its
investments.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Ordinary income 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.
43
<PAGE>
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 Company.
PERFORMANCE DATA
From time to time the Company 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
Company's historical performance and are not intended to indicate future
performance. Average annual total return is 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 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 Company also may quote annual, average annual and annualized total
return and aggregate total return performance data, both as a percentage and
as a dollar amount based on a hypothetical $1,000 investment for various
periods other than those noted below. Such data will be computed as described
above, except that (1) as required by the periods of the quotations, actual
annual, annualized or aggregate data, rather than average annual data, may be
quoted, and (2) the maximum applicable sales charge will not be included with
respect to annual or annualized rates of return calculations. Aside from the
impact on the performance data calculations of including or excluding the
maximum applicable sales charges, actual annual or annualized total return
data generally will be lower than average annual total return data since the
average rates of return reflect compounding of return; aggregate total return
data generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over longer periods of time.
44
<PAGE>
Set forth in the tables below is total return information for the Class A,
Class B, Class C and Class D shares of the Fund for the periods indicated.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
- ------------------------ ----------------- ----------------- ----------------- -----------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
One Year Ended March 31,
1995................... (2.54)% $974.60 (1.97)% $980.30
Inception (April 27,
1992)
to March 31, 1995...... 24.05 % $1,878.90 24.60 % $1,903.00
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Year Ended March 31,
1995................... 2.86 % $1,028.60 1.78 % $1,017.80
Year Ended March 31,
1994................... 35.68 % $1,356.80 34.22 % $1,342.20
Inception (April 27,
1992)
to March 31, 1993...... 42.09 % $1,420.90 40.77 % $1,407.70
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (April 27,
1992)
to March 31, 1995...... 87.89 % $1,878.90 90.30 % $1,903.00
<CAPTION>
CLASS C SHARES CLASS D SHARES
----------------------------------- -----------------------------------
REDEEMABLE VALUE REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF ON A HYPOTHETICAL AT THE END OF
PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT THE PERIOD
- ------------------------ ----------------- ----------------- ----------------- -----------------
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994)
to March 31, 1995...... (25.04)% $880.60 (31.63)% $845.60
<CAPTION>
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994)
to March 31, 1995...... (11.11)% $888.90 (10.76)% $892.40
<CAPTION>
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
<S> <C> <C> <C> <C>
Inception (October 21,
1994)
to March 31, 1995...... (11.94)% $880.60 (15.44)% $845.60
</TABLE>
45
<PAGE>
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 Company in advertisements directed to such investors may take into
account a reduced, and not the maximum, sales charge or may not take into
account the CDSC and therefore may reflect greater total return since, due to
the reduced sales charges or the waiver of sales charges, a lower amount of
expenses may be deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Company was incorporated in connection with a reorganization (the
"Reorganization") of Sci/Tech Holdings, Inc. ("Sci/Tech"), a Merrill Lynch-
sponsored diversified, open-end investment company. Sci/Tech previously
invested primarily in the equity securities of companies engaged in science
and technology. In connection with such Reorganization, which occurred on
April 27, 1992, Sci/Tech transferred to the Company all of its technology
oriented securities and certain other assets (net of liabilities) in exchange
for all of the stock of the Company (other than seed capital), which Sci/Tech
then distributed pro rata to its stockholders.
The Company was incorporated under Maryland law on August 27, 1991. At the
date of this Statement of Additional Information, it has an authorized capital
of 800,000,000 shares of Common Stock, par value of $0.10 per share, dividend
into four classes, designated Class A, Class B, Class C and Class D Common
Stock. Class A and Class C each consists of 100,000,000 shares and Class B and
Class D each consists of 300,000,000 shares. Shares of Class A, Class B, Class
C and Class D Common Stock represent an interest in the same assets of the
Company 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 of such shares and have exclusive voting rights with respect to
matters relating to such account maintenance and/or distribution expenditures.
The Company has received an order from the Commission permitting the issuance
and sale of multiple classes of Common Stock. The Board of Directors of the
Company may classify and reclassify the shares of the Company 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 Company 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 auditors. Generally, under Maryland law, a meeting
of shareholders may be called for any purpose on the written request of the
holders of at least 10% of the outstanding shares of the Company. Voting
rights for Directors are not cumulative. Shares issued are fully paid and
nonassessable 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 Company
and in the net assets of the Company upon liquidation or dissolution after
satisfaction of outstanding liabilities. Stock certificates are issued by the
transfer agent only on specific request. Certificates for fractional shares
are not issued in any case. Shareholders may, in accordance with Maryland law,
cause a meeting of shareholders to be held for the purpose of voting on the
removal of Directors at the request of 25% of the outstanding shares of the
Company. A Director may be removed at a special meeting of shareholders by a
vote of a majority of the votes entitled to be cast for the election of
Directors.
46
<PAGE>
The Investment Adviser provided the initial capital for the Company by
purchasing 10,000 shares for $100,000. Such shares were acquired for
investment and can only be disposed of by redemption. The organizational
expenses of the Company will be paid by the Company and will be amortized over
a period not exceeding five years. The proceeds realized by the Investment
Adviser upon the redemption of any of the shares initially purchased by it
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 Company based on the current sales charge
and the value of the Company's net assets on March 31, 1995, and its shares
outstanding on that date is as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net Assets................... $254,187,902 $614,935,478 $23,259,465 $32,645,674
============ ============ =========== ===========
Number of Shares Outstanding. 51,997,403 128,601,982 4,886,402 6,679,596
============ ============ =========== ===========
Net Asset Value Per Share
(net assets divided by num-
ber of shares outstanding).. $ 4.89 $ 4.78 $ 4.76 $ 4.89
Sales Charge (for Class A and
Class D shares: 5.25% of of-
fering price (5.54% of net
amount invested))*.......... .27 ** ** .27
------------ ------------ ----------- -----------
Offering Price............... $ 5.16 $ 4.78 $ 4.76 $ 5.16
============ ============ =========== ===========
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
** Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption 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.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Company. The selection of
independent auditors is subject to ratification by the shareholders of the
Company. The independent auditors are responsible for auditing the annual
financial statements of the Company.
CUSTODIAN
The Chase Manhattan Bank, N.A., 4 Chase MetroTech Center, 18th Floor, Global
Securities Services, Brooklyn, New York 11245 (the "Custodian"), acts as the
custodian of the Company's assets. Under its contract with the Company, the
Custodian is authorized to establish separate accounts in foreign currencies
and to cause foreign securities owned by the Company 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 Company's
cash and securities, handling the receipt and delivery of securities and
collecting interest dividends on the Company's investments.
47
<PAGE>
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484, acts as the Company'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 Company--Transfer Agency Services"
in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Company.
REPORTS TO SHAREHOLDERS
The fiscal year of the Company ends on March 31 of each year. The Company
sends to its shareholders at least semi-annually reports showing the Company'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.
Categories in the Schedule of Investments contained in the financial
statements herein have been adopted by the Investment Adviser and are deemed
appropriate with respect to a specialized sector fund such as the Company.
Under a separate agreement Merrill Lynch has granted the Company 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 Company at any time or to grant the use of such
name to any other company, and the Company has granted Merrill Lynch, under
certain conditions, the use of any other name it might assume in the future,
with respect to any corporation organized by Merrill Lynch.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Company, no person or entity owned beneficially 5% or
more of the Company's common stock on June 30, 1995.
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Technology Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Merrill Lynch Technology Fund, Inc.
as of March 31, 1995, the related statements of operations for the year then
ended and changes in net assets and the financial highlights for the year then
ended and for the period April 27, 1992 (commencement of operations) to March
31, 1993. These financial statements and the financial highlights are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at March 31, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Technology Fund, Inc. as of March 31, 1995, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
April 28, 1995
49
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Value Percent of
COUNTRY Industries Shares Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Components 150,000 Koyo Seiko Co., Ltd. $ 1,473,132 $ 1,289,897 0.2%
2,020,000 Nippondenso Co., Ltd. 41,882,433 39,194,030 4.2
2,300,000 Omron Corp. 41,590,378 45,154,994 4.9
200,000 SMK Corp. 1,432,563 1,320,322 0.1
489,000 Tamura Corp. 3,759,508 3,542,583 0.4
200,000 Tokin Corp. 2,834,543 2,296,211 0.3
------------ ------------ ------
92,972,557 92,798,037 10.1
Computer Peripherals 3,378,000 Ricoh Co., Ltd. 32,707,737 31,569,369 3.4
Consumer Electronics 1,345,000 Kenwood Corp. 11,727,737 10,052,755 1.1
Machinery 2,016,000 Daifuku Co., Ltd. 32,140,494 26,849,139 2.9
1,921,000 NSK Ltd. 14,648,691 13,630,057 1.5
1,384,000 NTN Corp. 10,118,145 8,739,380 0.9
3,419,000 Ushio Inc. 37,465,179 34,307,761 3.7
------------ ------------ ------
94,372,509 83,526,337 9.0
Total Investments in Japanese
Stocks 231,780,540 217,946,498 23.6
Singapore Microcomputer Software 727,150 ++Creative Technology Ltd. ++++ 9,807,063 9,070,050 1.0
Total Investments in Singaporean
Stocks 9,807,063 9,070,050 1.0
United States Application Development 2,047,500 ++Informix Corp. 69,553,267 69,870,938 7.5
Software 101,000 ++Tivoli Systems, Inc. 3,654,750 3,737,000 0.4
------------ ------------ ------
73,208,017 73,607,938 7.9
Application Specific 912,800 ++LSI Logic Corp. 43,257,670 47,922,000 5.1
Integrated Circuits 155,600 ++Peoplesoft Inc. 6,052,916 6,768,600 0.7
Communications
Educational/Entertainment 5,875,000 ++Acclaim Entertainment, Inc. ++++ 93,834,640 102,078,125 11.0
Software 1,458,000 ++Electronic Arts, Inc. 28,949,158 32,805,000 3.6
------------ ------------ ------
122,783,798 134,883,125 14.6
Internetworking 1,150,000 ++3Com Corporation 57,354,512 64,831,250 7.0
330,000 ++Qualcomm, Inc. 10,612,818 10,807,500 1.2
------------ ------------ ------
67,967,330 75,638,750 8.2
Liquid Crystal Display 85,000 ++MRS Technology Inc. 1,126,251 552,500 0.1
Capital Equipment
Microcomputer 250,000 Adobe Systems Inc. 8,914,880 12,375,000 1.3
Software 7,831,200 ++Creative Technology Ltd. ++++ 110,137,963 95,932,200 10.4
------------ ------------ ------
119,052,843 108,307,200 11.7
Semiconductors- 500,000 ++INTEL Corporation 39,995,452 42,375,000 4.6
Microprocessors
Total Investments in United
States Stocks 473,444,277 490,055,113 52.9
</TABLE>
50
<PAGE>
<TABLE>
<S> <S> <C> <S> <C> <C> <C>
Total Investments in Stocks 715,031,880 717,071,661 77.5
SHORT-TERM
SECURITIES Face Amount Commercial Paper*
$18,675,000 Associates Corp. of North
America, 6.35% due 4/03/1995 18,668,412 18,668,412 2.0
40,000,000 du Pont (E.I.) de Nemours &
Co., 5.96% due 5/09/1995 39,748,356 39,748,356 4.3
50,000,000 IBM Credit Corp., 5.96% due
4/28/1995 49,776,500 49,776,500 5.4
10,000,000 Matterhorn Capital Corp., 5.95%
due 4/12/1995 9,981,819 9,981,819 1.1
40,000,000 National Australia Funding
(Delaware), Inc., 5.92% due
4/11/1995 39,934,222 39,934,222 4.3
------------ ------------ ------
158,109,309 158,109,309 17.1
US Government & Agency Obligations*
40,000,000 Federal Home Loan Mortgage
Corp., 5.91% due 4/13/1995 39,921,200 39,921,200 4.3
40,000,000 Federal National Mortgage
Association, 5.90% due 4/24/1995 39,849,222 39,849,222 4.3
------------ ------------ ------
79,770,422 79,770,422 8.6
Total Investments in Short-Term
Securities 237,879,731 237,879,731 25.7
Total Investments $952,911,611 954,951,392 103.2
============
Unrealized Depreciation on Forward Foreign Exchange Contracts** (7,669,463) (0.8)
Liabilities in Excess of Other Assets (22,253,410) (2.4)
------------ ------
Net Assets $925,028,519 100.0%
============ ======
<FN>
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Company.
**Forward foreign exchange contracts as of March 31, 1995 are as
follows:
<CAPTION>
Unrealized
Expiration Depreciation
Foreign Currency Sold Date (Note 1c)
<S> <S> <C>
YEN 3,872,000,000 April 1995 $ (1,884,739)
YEN 17,567,017,517 May 1995 (5,784,724)
Total Unrealized Depreciation on
Forward Foreign Exchange Contracts
(US Commitment--$239,321,252) $ (7,669,463)
=============
++Non-income producing security.
++++Investment in companies 5% or more of whose outstanding
securities are held by the Company (such companies are defined as
'Affiliated Companies' in Section 2 (a)(3) of the Investment Company
Act of 1940) is as follows:
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <C>
Educational/ Acclaim
Entertainment Entertainment,
Software Inc. 5,235,000 $ 79,309,946 --
Microcomputer Creative
Software Technology Ltd. 7,023,350 72,865,316 --
Total $152,175,262
============
Realized loss from affiliated transactions--$337,226
See Notes to Financial Statements.
</TABLE>
51
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of March 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$952,911,611)(Note 1a) $ 954,951,392
Receivables:
Capital shares sold $ 5,555,490
Dividends 1,148,962 6,704,452
-------------
Deferred organization expenses (Note 1f) 52,762
Prepaid registration fees and other assets (Note 1f) 40,380
--------------
Total assets 961,748,986
--------------
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1b) 7,669,463
Payables:
Forward foreign exchange contracts (Note 1b) 13,777,116
Securities purchased 8,209,190
Capital shares redeemed 4,053,377
Investment adviser (Note 2) 780,310
Distributor (Note 2) 545,300 27,365,293
-------------
Accrued expenses and other liabilities 1,685,711
--------------
Total liabilities 36,720,467
--------------
Net Assets: Net assets $ 925,028,519
==============
Net Assets: Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 5,199,740
Class B Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 12,860,198
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 488,640
Class D Shares of Common Stock, $0.10 par value, 300,000,000
shares authorized 667,959
Paid-in capital in excess of par 964,719,060
Distributions in excess of realized capital gains on
investments and foreign currency transactions--net (53,313,062)
Unrealized depreciation on investments and foreign
currency transactions--net (5,594,016)
--------------
Net assets $ 925,028,519
==============
Net Asset Class A--Based on net assets of $254,187,902 and
Value: 51,997,403 shares outstanding $ 4.89
==============
Class B--Based on net assets of $614,935,478 and
128,601,982 shares outstanding $ 4.78
==============
Class C--Based on net assets of $23,259,465 and
4,886,402 shares outstanding $ 4.76
==============
Class D--Based on net assets of $32,645,674 and
6,679,596 shares outstanding $ 4.89
==============
See Notes to Financial Statements.
</TABLE>
52
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the Year Ended March 31, 1995
<S> <S> <C>
Investment Interest and discount earned $ 14,555,332
Income Dividends (net of $202,813 foreign withholding tax) 1,608,114
(Notes 1d --------------
& 1e): Total income 16,163,446
--------------
Expenses: Investment advisory fees (Note 2) 7,146,254
Distribution fees--Class B (Note 2) 4,635,444
Transfer agent fees--Class B (Note 2) 1,121,442
Transfer agent fees--Class A (Note 2) 462,063
Registration fees (Note 1f) 353,620
Printing and shareholder reports 326,003
Professional fees 113,859
Accounting services (Note 2) 78,659
Custodian fees 76,012
Distribution fees--Class C (Note 2) 61,520
Transfer agent fees--Class D (Note 2) 28,225
Amortization of organization expenses (Note 1f) 25,326
Transfer agent fees--Class C (Note 2) 22,836
Account maintenance fees--Class D (Note 2) 21,277
Directors' fees and expenses 19,176
Other 10,298
--------------
Total expenses 14,502,014
--------------
Investment income--net 1,661,432
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 26,054,248
(Loss) on Foreign currency transactions--net (25,183,420) 870,828
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions Investments--net (21,988,952)
- --Net Foreign currency transactions--net (7,634,014) (29,622,966)
(Notes 1b, 1c, ------------- --------------
1e & 3): Net realized and unrealized loss on investments and
foreign currency transactions (28,752,138)
--------------
Net Decrease in Net Assets Resulting from Operations $ (27,090,706)
==============
See Notes to Financial Statements.
</TABLE>
53
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ 1,661,432 $ (1,418,482)
Realized gain on investments and foreign currency
transactions--net 870,828 46,626,886
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (29,622,966) 22,856,050
-------------- --------------
Net increase (decrease) in net assets resulting from
operations (27,090,706) 68,064,454
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (1,262,702) --
Shareholders Class B (287,745) --
(Note 1g): Class C (41,855) --
Class D (69,130) --
In excess of investment income--net:
Class A (280,276) --
Class B (63,869) --
Class C (9,290) --
Class D (15,345) --
Realized gain on investments--net:
Class A (2,232,025) (32,432,279)
Class B (4,866,620) (28,396,274)
Class C (81,670) --
Class D (110,609) --
In excess of realized gain on investments--net:
Class A (16,321,125) --
Class B (35,585,943) --
Class C (597,190) --
Class D (808,804) --
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (62,634,198) (60,828,553)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 615,613,902 233,481,245
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 525,888,998 240,717,146
Beginning of year 399,139,521 158,422,375
-------------- --------------
End of year $ 925,028,519 $ 399,139,521
============== ==============
See Notes to Financial Statements.
</TABLE>
54
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
For the For the
The following per share data and ratios Period Period
have been derived from information April 27, April 27,
provided in the financial statements. For the Year 1992++ to For the Year 1992++ to
Ended March 31, March 31, Ended March 31, March 31,
Increase (Decrease) in Net Asset Value: 1995** 1994** 1993** 1995** 1994** 1993**
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 5.17 $ 5.08 $ 3.83 $ 5.08 $ 5.03 $ 3.83
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .05 (.01) -- (.01) (.05) (.04)
Realized and unrealized gain on
investments and foreign currency
transactions--net .11 1.51 1.59 .11 1.48 1.58
-------- -------- -------- -------- -------- --------
Total from investment operations .16 1.50 1.59 .10 1.43 1.54
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.02) -- -- --++++ -- --
In excess of investment
Income--net (.01) -- -- --++++ -- --
Realized gain on investments--net (.05) (1.41) (.34) (.05) (1.38) (.34)
In excess of realized gain on
investments--net (.36) -- -- (.35) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.44) (1.41) (.34) (.40) (1.38) (.34)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 4.89 $ 5.17 $ 5.08 $ 4.78 $ 5.08 $ 5.03
======== ======== ======== ========= ======== ========
Total Investment Based on net asset value per share 2.86% 35.68% 42.09%+++ 1.78% 34.22% 40.77%+++
Return:*** ======== ======== ======== ========= ======== ========
Ratios to Expenses, excluding distribution
Average fees 1.33% 1.35% 1.59%* 1.38% 1.36% 1.53%*
Net Assets: ======== ======== ======== ========= ======== ========
Expenses 1.33% 1.35% 1.59%* 2.38% 2.36% 2.53%*
======== ======== ======== ========= ======== ========
Investment income (loss)--net .87% (.11%) .04%* (.10%) (1.08%) .93%*
======== ======== ======== ========= ======== ========
Supplemental Net assets, end of period (in
Data: thousands) $254,188 $174,809 $100,830 $614,935 $224,330 $ 57,592
======== ======== ======== ========= ======== ========
Portfolio turnover 175.57% 350.64% 482.79% 175.57% 350.64% 482.79%
======== ======== ======== ========= ======== ========
<FN>
*Annualized.
**Based on average shares outstanding during the period.
***Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
55
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
March 31, 1995**
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 5.75 $ 5.88
Operating --------- ---------
Performance: Investment income (loss)--net -- (.02)
Realized and unrealized loss on investments and foreign
currency transactions--net (.62) (.60)
--------- ---------
Total from investment operations (.62) (.62)
--------- ---------
Less dividends and distributions:
Investment income--net (.02) (.02)
In excess of investment income--net (.01) (.01)
Realized gain on investments--net (.04) (.04)
In excess of realized gain on investments--net (.30) (.30)
--------- ---------
Total dividends and distributions (.37) (.37)
--------- ---------
Net asset value, end of period $ 4.76 $ 4.89
========= =========
Total Investment Based on net asset value per share (11.11%)+++ (10.76%)+++
Return:*** ========= =========
Ratios to Expenses, excluding account maintenance and distribution
Average fees 1.59%* 1.55%*
Net Assets: ========= =========
Expenses 2.59%* 1.80%*
========= =========
Investment loss--net (.02%)* (.81%)*
========= =========
Supplemental Net assets, end of period (in thousands) $ 23,259 $ 32,646
Data: ========= =========
Portfolio turnover 175.57% 175.57%
========= =========
<FN>
++Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Based on average shares outstanding during the period.
***Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Technology Fund, Inc. (the "Company") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. The Company offers four classes
of shares under the Merrill Lynch Select PricingSM 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 mainte-
nance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Company.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on exchanges 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 price prior to the time
of valuation. 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 which are traded both in the over-the-counter market and
on a stock exchange are valued according to the broadest and most
representative market. Options written 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 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 bid price. Short-term securities
are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market value
quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Company's
Board of Directors.
(b) Derivative financial instruments--The Company may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Company may purchase or sell
futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Company
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Company agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as variation
marginand are recorded by the Company as unrealized gains or losses.
When the contract is closed, the Company records a realized gain or
loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
* Options--The Company is authorized to write and purchase call and
put options. When the Company writes an option, an amount
equal to the premium received by the Company is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Company enters into a closing
transaction), the Company realized 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.
* Forward foreign exchange contracts--The Company is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Company's records. However, the effect on
operations is recorded from the date the Company enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Foreign currency options and futures--The Company may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Company,
sold by the Company but not yet delivered, or committed or
anticipated to be purchase by the Company.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Company'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.
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend date, except if the ex-dividend has passed, certain
dividends from foreign securities are recorded as soon as the
Company is informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(f) 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.
(g) Dividends and distributions to shareholders--Dividends and
distributions paid by the Company are recorded on the ex-dividend
dates. Distributions in excess of net investment income and realized
capital gains are due primarily to differing tax treatments for
futures transactions and post-October losses.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Company has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Company has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Company's portfolio
and provides the administrative services necessary for the operation
of the Company. As compensation for its services to the Company, the
Investment Adviser receives monthly compensation at the annual rate
of 1.0% of the average daily net assets of the Company. Certain
states in which shares of the Company are qualified for sale impose
limitations on the expenses of the Company. The most restrictive
annual expense limitation requires that the Investment Adviser
reimburse the Company to the extent that expenses (excluding
interest, taxes, distribution fees, brokerage fees and commissions,
and extraordinary items) exceed 2.5% of the Company's first $30
million of average daily net assets, 2.0% of the Company's 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
Company is limited to the amount of the Investment Advisory 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 applicable at the time of such payment.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Company, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, the Company pays the Distributor an ongoing
account maintenance fee 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 Distribution
Maintenance Fee 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
Company. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended March 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $93,391 $1,474,578
Class D $41,924 $ 605,730
For the year ended March 31, 1995, MLPF&S received contingent
deferred sales charges of $1,118,846 and $4,037 relating to
transactions in Class B and C Shares, respectively. In addition,
MLPF&S received $9,753 in commissions on the execution of portfolio
security transactions for the Company for the year ended March 31,
1995.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Company's transfer agent.
Accounting services are provided to the Company by MLAM at cost.
Certain officers and/or directors of the Company are officers and/or
directors of MLAM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
58
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended March 31, 1995 were $1,231,456,326 and
$763,001,917, respectively.
Net realized and unrealized gains (losses) as of March 31, 1995 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $26,049,976 $ 2,039,781
Short-term investments 4,272 --
Forward foreign exchange
contracts (25,016,767) (7,669,463)
Foreign currency transactions (166,653) 35,666
----------- ------------
Total $ 870,828 $ (5,594,016)
=========== ============
As of March 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $2,039,781, of which $34,954,966 related to
appreciated securities and $32,915,185 related to depreciated
securities. The aggregate cost of investments at March 31, 1995 for
Federal income tax purposes was $952,911,611.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $615,613,902 and $233,481,245 for the years ended March 31, 1995
and March 31, 1994, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended March 31, 1995 Shares Amount
Shares sold 31,862,508 $174,435,046
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,494,000 17,829,324
----------- ------------
Total issued 35,356,508 192,264,370
Shares redeemed (17,158,170) (92,814,537)
----------- ------------
Net increase 18,198,338 $ 99,449,833
=========== ============
Class A Shares for the Year Dollar
Ended March 31, 1994 Shares Amount
Shares sold 12,878,911 $ 66,764,420
Shares issued to shareholders
in reinvestment of distributions 6,189,048 28,065,518
----------- ------------
Total issued 19,067,959 94,829,938
Shares redeemed (5,113,371) (26,393,833)
----------- ------------
Net increase 13,954,588 $ 68,436,105
=========== ============
Class B Shares for the Year Dollar
Ended March 31, 1995 Shares Amount
Shares sold 110,181,775 $589,755,859
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,328,692 36,567,423
Total issued 117,510,467 626,323,282
Shares redeemed (31,692,920) (163,195,508)
Automatic conversion of shares (1,346,902) (7,153,389)
----------- ------------
Net increase 84,470,645 $455,974,385
=========== ============
Class B Shares for the Year Dollar
Ended March 31, 1994 Shares Amount
Shares sold 35,463,009 $182,856,653
Shares issued to shareholders
in reinvestment of distributions 5,684,052 25,162,897
----------- ------------
Total issued 41,147,061 208,019,550
Shares redeemed (8,465,704) (42,974,410)
----------- ------------
Net increase 32,681,357 $165,045,140
=========== ============
Class C Shares for the Period Dollar
October 21, 1994++ to March 31, 1995 Shares Amount
Shares sold 5,309,942 $ 27,166,187
Shares issued to shareholders
in reinvestment of dividends and
distributions 128,715 635,854
----------- ------------
Total issued 5,438,657 27,802,041
Shares redeemed (552,255) (2,727,441)
----------- ------------
Net increase 4,886,402 $ 25,074,600
=========== ============
++Commencement of Operations.
Class D Shares for the Period Dollar
October 21, 1994++ to March 31, 1995 Shares Amount
Shares sold 8,332,225 $ 43,660,136
Automatic conversion of shares 1,316,991 7,153,389
Shares issued to shareholders
in reinvestment of dividends and
distributions 174,684 883,900
----------- ------------
Total issued 9,823,900 51,697,425
Shares redeemed (3,144,304) (16,582,341)
----------- ------------
Net increase 6,679,596 $ 35,115,084
=========== ============
++Commencement of Operations.
59
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 2
Technology................................................................ 2
International Diversification............................................. 2
Types of Portfolio Companies.............................................. 2
Other Factors............................................................. 3
Hedging Techniques........................................................ 4
Other Investment Policies and Practices................................... 8
Investment Restrictions................................................... 8
Management of the Company.................................................. 11
Directors and Officers.................................................... 11
Compensation of Directors................................................. 12
Advisory and Management Arrangements...................................... 13
Purchase of Shares......................................................... 15
Redemption of Shares....................................................... 22
Portfolio Transactions and Brokerage....................................... 23
Determination of Net Asset Value........................................... 25
Shareholder Services....................................................... 26
Dividends, Distributions and Taxes......................................... 40
Performance Data........................................................... 44
General Information........................................................ 46
Description of Shares..................................................... 46
Computation of Offering Price Per Share................................... 47
Independent Auditors...................................................... 47
Custodian................................................................. 47
Transfer Agent............................................................ 48
Legal Counsel............................................................. 48
Reports to Shareholders................................................... 48
Additional Information.................................................... 48
Security Ownership of Certain Beneficial Owners........................... 48
Independent Auditors' Report............................................... 49
Financial Statements....................................................... 50
</TABLE>
Code #16090-0795
LOGO MERRILL LYNCH
Merrill Lynch
Technology Fund, Inc.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
July 27, 1995
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for the period April 27, 1992 (commencement of
operations) to March 31, 1993 and the years ended March 31, 1994 and
1995.
Contained in Part B:
Financial Statements:
Schedule of Investments as of March 31, 1995.
Statement of Assets and Liabilities as of March 31, 1995.
Statement of Operations for the year ended March 31, 1995.
Statements of Changes in Net Assets for the years ended March 31,
1995 and 1994.
Financial Highlights for the period April 27, 1992 (commencement of
operations) to March 31, 1993 and the years ended March 31, 1994 and
1995.
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1(a) --Articles of Incorporation of Registrant. (a)
(b) --Articles of Amendment to the Articles of Incorporation.
(c) --Articles Supplementary to the Articles of Incorporation.
2 --By-Laws of Registrant. (a)
3 --None.
4 --Portions of the Articles of Incorporation and By-Laws of the
Registrant defining the rights of holders of shares of the
Registrant. (b)
5(a) --Investment Advisory Agreement between Registrant and Merrill Lynch
Asset Management, Inc. (a)
(b) --Supplement to Investment Advisory Agreement between Registrant and
Merrill Lynch Asset Management, L.P., dated January 3, 1994. (c)
6(a) --New Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (d)
(b) --Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (a)
(c) --Letter Agreement between the Registrant and Merrill Lynch Funds
Distributor, Inc. with respect to the Merrill Lynch Mutual Fund
Advisor Program. (c)
(d) --Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (d)
(e) --Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (d)
7 --None.
8 --Custody Agreement between Registrant and The Chase Manhattan Bank,
N.A. (a)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Financial Data
Services, Inc. (a)
(b) --Form of Agreement between Merrill Lynch & Co., Inc. and the
Registrant relating to use by Registrant of Merrill Lynch name. (a)
10 --None.
11 --Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management, Inc. (a)
14 --None.
15(a) --Class B Shares Distribution Plan and Class B Shares Distribution
Plan Sub-Agreement of the Registrant. (e)
(b) --Form of Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement of the Registrant. (d)
(c) --Form of Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement of the Registrant. (d)
16(a) --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22 relating to Class
A shares. (a)
(b) --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22 relating to Class
B shares. (a)
(c) --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22 relating to Class
C shares.
(d) --Schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 22 relating to Class
D shares.
17(a) --Financial Data Schedule for Class A Shares.
(b) --Financial Data Schedule for Class B Shares.
(c) --Financial Data Schedule for Class C Shares.
(d) --Financial Data Schedule for Class D Shares.
18 --Power of Attorney for Edward D. Zinbarg.
</TABLE>
- --------
(a) Refiled herewith pursuant to the Electronic Data Gathering, Analysis and
Retrieval System (EDGAR) phase-in requirements.
(b) Reference is made to Article V, Article VI (sections 3 and 6), Article
VII, Article VIII and Article X of the Registrant's Articles of
Incorporation, as amended, filed as Exhibits 1(a), 1(b) and 1(c) to the
Registration Statement; and to Article II, Article III (section 1, 3, 5, 6
and 17), 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.
(c) Filed on July 27, 1994, in connection with Post-Effective Amendment No. 3
to Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933.
(d) Filed on October 11, 1994, in connection with Post-Effective Amendment No.
4 to the Registrant's Registration Statement on Form N-1A under the
Securities Act of 1933.
(e) Filed on July 28, 1993, in connection with Post-Effective Amendment No. 2
to Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any other
person.
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<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD HOLDERS AT
TITLE OF CLASS MAY 31, 1995
- -------------- -----------------
<S> <C>
Class A Common Stock, par value $0.10 per share............... 4,958
Class B Common Stock, par value $0.10 per share............... 1,186
Class C Common Stock, par value $0.10 per share............... 55
Class D Common Stock, par value $0.10 per share............... 67
</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 Distribution Agreements.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or
any stockholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith or reckless disregard of the duties
involved in the conduct of his office. Absent a court determination that an
officer or director seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office, the decision by
the Registrant to indemnify such person must be based upon the reasonable
determination of independent counsel or non-party independent directors, after
review of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Each officer and director of the Registrant claiming indemnification within
the scope of Article VI of the By-Laws shall be entitled to advances from the
Registrant for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the
full extent permitted under the General Laws of the State of Maryland;
provided, however, that the person seeking indemnification shall provide to
the Registrant a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Registrant has been
met and a written undertaking to repay any such advance, if it should
ultimately be determined that the standard of conduct has not been met, and
provided further that at least one of the following additional conditions is
met: (a) the person seeking indemnification shall provide a security in form
and amount acceptable to the Registrant for his undertaking; (b) the
Registrant is insured against losses arising by reason of the advance; or (c)
a majority of a quorum of non-party independent directors, or independent
legal counsel in a written opinion, shall determine, based on a review of
facts readily available to the Registrant at the time the advance is proposed
to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability, arising from his activities as officer
or director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The Registrant may indemnify, make advances or purchase insurance to the
extent provided in Article VI of the By-Laws on behalf of an employee or agent
who is not an officer or director of the Registrant.
C-3
<PAGE>
In Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the
Distributor within the meaning of the Securities Act of 1933 (the "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 INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P. ("MLAM" or the "Investment Adviser"),
acts as investment adviser for the following open-end investment companies:
Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas
Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch
Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch
Balanced Fund for Investment and Retirement, Inc., 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
Allocation Fund, Inc., Merrill Lynch Global Bond Fund for Investment and
Retirement, Merrill Lynch Global Convertible Fund, Inc., Merrill Lynch Global
Holdings, Inc., Merrill Lynch Global Resources Trust, Merrill Lynch Global
SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill Lynch
Growth Fund for Investment and Retirement, Merrill Lynch Healthcare 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 Series Trust, 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. and for the following
closed-end investment companies: Convertible Holdings, Inc., Merrill Lynch
High Income Municipal Bond Fund, Inc. and Merrill Lynch Senior Floating Rate
Fund, Inc.
Fund Asset Management, L.P. ("FAM"), an affiliate of MLAM, acts as the
investment adviser for the following open-end investment companies: 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., Financial Institutions Series Trust, 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
Limited Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal
Series Trust, Merrill Lynch Municipal Bond Fund,
C-4
<PAGE>
Inc., Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund,
Inc., Merrill Lynch World Income Fund, Inc., and The Municipal Fund
Accumulation Program, Inc.; and for the following closed-end investment
companies: Apex Municipal Fund, 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., 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 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 Investment Adviser, FAM, Merrill Lynch Funds Distributor,
Inc. ("MLFD"), Princeton Services, Inc. ("Princeton Services") and Princeton
Administrators L.P. 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. The address of
Merrill Lynch Financial Data Services, Inc. ("FDS") is 4800 Deer Lake Drive
East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or
employment of a substantial nature in which each such person or entity has
been engaged since April 1, 1993, 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
paragraphs, and Messrs. Giordano, Harvey, Kirstein and Monagle are directors,
trustees or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION
NAME INVESTMENT ADVISER OR EMPLOYMENT
---- ------------------ ---------------------------
<S> <C> <C>
ML & Co.................. Limited Partner Financial Services Holding
Company; Limited Partner of FAM
Princeton Services ...... General Partner General Partner of FAM
Arthur Zeikel............ President President of FAM; President and
Director of Princeton Services;
Director of MLFD; Executive Vice
President of ML&Co., Executive
Vice President of Merrill Lynch
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION WITH PROFESSION, VOCATION
NAME INVESTMENT ADVISER OR EMPLOYMENT
---- ------------------ ---------------------------
<S> <C> <C>
Terry K. Glenn.......... Executive Vice President Executive Vice President of FAM;
Executive Vice President and
Director of Princeton Services;
President and Director of MLFD;
Director of FDS; President of
Princeton Administrators, L.P.
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
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Philip L. Kirstein...... Senior Vice President, Senior Vice President, General
General Counsel and Counsel and Secretary of FAM;
Secretary Senior Vice President, General
Counsel, Director and Secretary
of Princeton Services; Director
of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and
and Controller Controller of FAM; Senior Vice
President and Controller of
Princeton Services
Stephen M.M. Miller..... Senior Vice President 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
Richard L. Reller....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services, Inc.
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 and Treasurer of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of
Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the open-end investment companies referred to in the first two paragraphs
of Item 28 except CBA Money Fund, CMA Government
C-6
<PAGE>
Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program,
Inc. and The Municipal Fund Accumulation Program, Inc.; and MLFD also acts as
the principal underwriter for the following closed-end investment companies:
Merrill Lynch High Income Municipal Bond Program, Inc. and Merrill Lynch
Senior Floating Rate 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, Fatseas, Graczyk, and Wasel is One Financial Center, Boston,
Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
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 Treasurer None
Mark A. DeSario......... Vice President None
James T. Fatseas........ Vice President None
Stanley Graczyk......... Vice President None
Michelle T. Lau......... Vice President None
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 Secretary
</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 Merrill Lynch 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 Company--
Advisory and Management Arrangements" in the Prospectus constituting Part A of
the Registration Statement and under "Management of the Company--Advisory and
Management 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.
C-7
<PAGE>
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered a copy of the Registrant's lastest annual report to shareholders,
upon request and without charge.
C-8
<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 27TH DAY OF JULY
1995.
Merrill Lynch Technology Fund, Inc.
(REGISTRANT)
/s/ Gerald M. Richard
By___________________________________
(GERALD M. RICHARD, TREASURER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO ITS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATE(S) INDICATED.
SIGNATURE TITLE DATE(S)
President and
Arthur Zeikel* Director (Principal
- ------------------------------------- Executive Officer)
(ARTHUR ZEIKEL)
Treasurer (Principal
/s/ Gerald M. Richard Financial and July 27, 1995
- ------------------------------------- Accounting Officer)
(GERALD M. RICHARD)
Donald Cecil* Director
- -------------------------------------
(DONALD CECIL)
Edward H. Meyer* Director
- -------------------------------------
(EDWARD H. MEYER)
Charles C. Reilly* Director
- -------------------------------------
(CHARLES C. REILLY)
Richard R. West* Director
- -------------------------------------
(RICHARD R. WEST)
Edward D. Zinbarg* Director
- -------------------------------------
(EDWARD D. ZINBARG)
/s/ Gerald M. Richard July 27, 1995
*By _________________________________
(GERALD M. RICHARD, ATTORNEY-IN-
FACT)
C-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1(a) --Articles of Incorporation of Registrant. (a)
(b) --Articles of Amendment to the Articles of
Incorporation.
(c) --Articles Supplementary to the Articles of
Incorporation.
2 --By-Laws of Registrant. (a)
5(a) --Investment Advisory Agreement between Registrant and
Merrill Lynch Asset Management, Inc. (a)
6(b) --Class B Shares Distribution Agreement between
Registrant and Merrill Lynch Funds Distributor, Inc. (a)
8 --Custody Agreement between Registrant and The Chase
Manhattan Bank, N.A. (a)
9(a) --Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement between
Registrant and Financial Data Services, Inc. (a)
(b) --Form of Agreement between Merrill Lynch & Co., Inc.
and the Registrant relating to use by Registrant of
Merrill Lynch name. (a)
11 --Consent of Deloitte & Touche LLP, independent auditors
for the Registrant.
13 --Certificate of Merrill Lynch Asset Management, Inc. (a)
16(a) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 relating to Class A shares. (a)
(b) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 relating to Class B shares. (a)
(c) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 relating to Class C shares.
(d) --Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 relating to Class D shares.
17(a) --Financial Data Schedule for Class A Shares.
(b) --Financial Data Schedule for Class B Shares.
(c) --Financial Data Schedule for Class C Shares.
(d) --Financial Data Schedule for Class D Shares.
18 --Power of Attorney for Edward D. Zinbarg.
</TABLE>
- --------
(a) Refiled herewith pursuant to the Electronic Data Gathering, Analysis and
Retrieval System (EDGAR) phase-in requirements.
<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 the 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 TECHNOLOGY FUND, INC.
ARTICLE I
THE UNDERSIGNED, BRIAN M. KAPLOWITZ, whose post-office
address is One World Trade Center, Now York, New York 10048,
being at least eighteen years of age, does hereby act as an in-
corporator, 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 TECHNOLOGY
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 managenent type.
(2) To hold, invest and reinvest its assets in securities,
and in connection therewith to hold part or all of its assets in
cash.
<PAGE>
(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.
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
2
<PAGE>
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). The capital stock initially is classified into two
classes, consisting of One Hundred Million (100,000,000) shares
of Class A Common Stock and One Hundred Million (100,000,000)
shares of Class B Common Stock.
(2) The Board of Directors may classify and reclassify any
unissued 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 designa-
3
<PAGE>
tions, 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.
(3) The Board of Directors may redesignate a class of
shares of capital stock whether or not shares of such class 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 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
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 re-
flected (in a manner determined by the Board of Directors) and
4
<PAGE>
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 Corporation,
irrespective of the class or series thereof, and all shares of
a11 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 there-
under, or by the Maryland General Corporation Law, such require-
ment 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 re-
ferred to in (a) above apply with respect to one or more classes
or series, then, subject to paragraph (c) below, the shares of
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 net affect the interest of a particular class or series,
such class or series shall not be entitled to any vote and only
5
<PAGE>
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
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
6
<PAGE>
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 Cor-
poration 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
meeting or until their successors are duly elected and qualify
are:
Philip L. Kirstein
Robert Harris
Jerry Weiss
(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
7
<PAGE>
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 deter-
mine.
(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
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 Invest-
ment Company Act of 1940, as amended, no director or officer of
the Corporation shall be personally liable to the Corporation or
8
<PAGE>
its security holders for money damages. No amendment of these
Articles of Incorporation or repeal of any provision hereof &hall
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 Cor-
poration except any particular By-Law which is specified an not
subject to alteration or repeal by the Board of Directors, sub-
ject 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
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 deter-
mined 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 pro-
visions of applicable law. The redemption price of shares of
9
<PAGE>
capital stock of the Corporation shall be the net asset value
thereof as determined by the Board of Directors of the Corpo-
ration 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 Direc-
tors, as to the amount of assets, obligations or liabilities of
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 re-
serves 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
10
<PAGE>
Corporation or as to any other matters relating to the issuance,
sale, redemption or other acquisition or disposition of securi-
ties or shares of capital stock of the Corporation, and any rea-
sonable determination made in good faith by the Board of Direc-
tors 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
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.
11
<PAGE>
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 Incorpora-
tion, in any manner now or hereafter prescribed by statute, in-
cluding any amendment which alters the contract rights, as ex-
pressly 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.
IN WITNESS WHEREOF, the undersigned incorporator of MERRILL
LYNCH TECHNOLOGY FUND, INC. hereby executes the foregoing
Articles of Incorporation and acknowledges the same to be his
act.
Dated the 23rd day of August, 1991.
/s/ Brian M.Kaplowitz
---------------------
Brian M.Kaplowitz
12
<PAGE>
EXHIBIT 99.1(b)
MERRILL LYNCH TECHNOLOGY FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH TECHNOLOGY 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 IV:
(11) 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
Corporation's First Holding Period Prospectus, the Holding Period
<PAGE>
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 Articles of Amendment have 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: Except as amended hereby, the Corporation's charter
shall remain in full force and effect.
FOURTH: The authorized capital stock of the Corporation has
not been increased by these Articles of Amendment.
FIFTH: 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.
2
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH TECHNOLOGY 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 TECHNOLOGY FUND, INC.
By: /s/ Arthur Zeikel
---------------------------
Arthur Zeikel
President
Attest:
/s/ Robert Harris
--------------------------
Robert Harris, Secretary
3
<PAGE>
EXHIBIT 99.1(c)
MERRILL LYNCH TECHNOLOGY 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 TECHNOLOGY 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 A
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
($.10) per share and an aggregate par value of TWENTY MILLION
Dollars ($20,000,000).
SECOND: The Board of Directors of the Corporation, acting
in accordance with Section 2-105(c) of the Maryland Corporations
and Associations Code, hereby increases the total number of
authorized shares of Class B Common Stock of the Corporation by
TWO HUNDRED MILLION (200,000,000) shares.
THIRD: After this increase in the number of authorized
shares of capital stock of the Corporation, the Corporation will
have authority to issue FOUR HUNDRED MILLION (400,000,000) shares
of capital stock and the capital stock will consist of ONE
HUNDRED MILLION (100,000,000) shares of Class A Common Stock and
THREE HUNDRED MILLION (300,000,000) shares of Class B Common
Stock.
FOURTH: After this increase in the number of authorized
shares of capital stock of the Corporation, all shares of all
classes and series of the Corporation's capital stock will have a
par value of Ten Cents ($.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 ($10,000,000).
SIXTH: The preferences, designations, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of Class C
Common Stock are as follows:
The Class C Common Stock of the Corporation shall represent
the same interest in the Corporation and have identical
preferences, designations, conversion or other rights, voting
powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption as the Class
B Common Stock as of the date of these Articles Supplementary,
except as otherwise set forth in the Corporation's charter and
further except that:
(i) Expenses related to the distribution of the Class C
Common Stock shall be borne solely by such class and such class
shall have exclusive voting rights with respect to matters
relating to the expenses being borne solely by such class;
(ii) Such distribution expenses borne solely by Class C
Common Stock shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value,
dividends, distribution and liquidation rights of the shares of
such class; and
(iii) Class C Common Stock shall not be reclassified into
Class D shares.
SEVENTH: Pursuant to authority expressly vested in the
Board of Directors of the Corporation by its charter, the Board
of Directors has reclassified ONE HUNDRED MILLION (100,000,000)
authorized and unissued shares of the Class B Common Stock of the
Corporation as Class D Common Stock of par value of Ten Cents
($.10) 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 D
Common Stock are as follows:
The Class D 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 D
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; and
(ii) Such distribution expenses borne solely by Class D
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.
3
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH TECHNOLOGY 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 17th, 1994.
MERRILL LYNCH TECHNOLOGY FUND, INC.
By /s/ Arthur Zeikel
---------------------------------
Arthur Zeikel
President
Attest:
/s/ Robert Harris
--------------------------
Robert Harris, Secretary
THE UNDERSIGNED, President of MERRILL LYNCH TECHNOLOGY 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, and 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 TECHNOLOGY FUND, INC.
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of the
----------------
Merrill Lynch Technology Fund, Inc. (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; or (d)
approval of the Corporation's distribution agreement. In the
event that the Corporation shall be required to hold an annual
<PAGE>
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 __________ (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 10% of the outstanding
shares of capital stock of the Corporation entitled to vote at
such meeting.
2
<PAGE>
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
if the time and place to which the meeting shall be adjourned
were announced at the meeting at which the adjournment is taken.
3
<PAGE>
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 busi-
ness 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 Corpo-
ration 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
number of shares of stock of the Corporation required for action
in respect of such other matter or matters.
4
<PAGE>
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
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
5
<PAGE>
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.
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.
6
<PAGE>
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
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
7
<PAGE>
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
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 Corpo-
ration may have two directors if there is no stock outstanding,
or so long as there are less than three stockholders. Any
8
<PAGE>
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 stock-
holders 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 1(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 tire 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.
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
9
<PAGE>
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
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 resig-
nation or removal.
10
<PAGE>
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
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 resi-
11
<PAGE>
dence 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
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
12
<PAGE>
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
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,
13
<PAGE>
retention and disposal of portfolio securities and the other
investment practices of the Corporation are at all times consis-
tent 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-
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
14
<PAGE>
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 any committee of the Board, including the
Executive 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;
(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
15
<PAGE>
Board; provided, however, that third parties shall not be preju-
diced 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 com-
mittees 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
absence or disqualification of any member of any committee, the
member or members thereof present at any meeting and not dis-
qualified from voting, whether or not he or they constitute a
quorum, nay 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
16
<PAGE>
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 Presi-
dents 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
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)
17
<PAGE>
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
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.
18
<PAGE>
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
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
19
<PAGE>
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;
(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
20
<PAGE>
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.
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
21
<PAGE>
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
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
22
<PAGE>
provide a security in form and amount acceptable to the Corpo-
ration 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
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.
23
<PAGE>
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
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
24
<PAGE>
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
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
25
<PAGE>
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 then.
Section 5. Lost, Destroyed or Mutilated Certificates. The
-----------------------------------------
holder of any certificates representing shares of stock of the
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
26
<PAGE>
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,
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.
27
<PAGE>
ARTICLE IX
Fiscal Year
-----------
Unless otherwise determined by the Board, the fiscal year of
the Corporation shall end on the 30th day of November.
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
28
<PAGE>
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,
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.
29
<PAGE>
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
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 ________ 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.
30
<PAGE>
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,
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.
31
<PAGE>
EXHIBIT 99.5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 8th day of October 1991, by and
between MERRILL LYNCH TECHNOLOGY FUND, INC., a Maryland
corporation (hereinafter referred to as the "Company"), and
MERRILL LYNCH ASSET MANAGEMENT, INC., a Delaware corporation
(hereinafter referred to as "MLAM").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the company is engaged in business as a non-
diversified, open-end investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred
to as the "Investment Company Act"); and
WHEREAS, MLAM is engaged principally in rendering management
and investment advisory services and is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended; and
WHEREAS, the Company desires to retain MLAM to provide
management and investment advisory services to the Company in the
manner and on the terms hereinafter set forth; and
WHEREAS, MLAM is willing to provide management and invest-
ment advisory services to the Company of the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, the Company and MLAM hereby
agree as follows:
<PAGE>
ARTICLE I
---------
Duties of MLAM
--------------
The Company hereby employs MLAM to act as manager and
investment adviser of the Company and to furnish, or arrange for
affiliates to furnish, the management and investment advisory
services described below, subject to the policies of, review by
and overall control of the Board of Directors of the Company, for
the period and on the terms and conditions set forth in this
Agreement. MLAM 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. MLAM and its
affiliates shall for all purposes herein be deemed to be
independent contractors and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent
the Company in any way or otherwise be deemed agents of the
Company.
(a) Management Services. MLAM shall perform, or arrange
-------------------
for affiliates to perform, the management and administrative
services necessary for the operation of the Company including
administering shareholder accounts and handling shareholder
relations. MLAM shall provide the Company with office space,
facilities, equipment and necessary personnel and such other
services as MLAM, subject to review by the Directors, shall from
time to time determine to be necessary or useful to perform its
2
<PAGE>
obligations under this Agreement. MLAM shall also, on behalf of
the Company, conduct relations with custodians, depositories,
transfer agents, dividend disbursing agents, other shareholder
servicing agents, accountants, attorneys, underwriters, brokers
and dealers, corporate fiduciaries, insurers, banks and such
other persons in any such other capacity deemed to be necessary
or desirable. MLAM shall generally monitor the Company's com-
pliance with investment policies and restrictions as set forth in
the currently effective prospectus and statement of additional
information relating to the shares of the Company under the
Securities Act of 1933, as amended (the "Prospectus" and "State-
ment of Additional Information," respectively). MLAM shall make
reports to the Directors of its performance of obligations here-
under and furnish advice and recommendations with respect to such
other aspects of the business and affairs of the Company as it
shall determine to be desirable.
(b) Investment Advisory Services. MLAM shall provide the
----------------------------
Company 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 Company, shall furnish
continuously an investment program for the Company and shall
determine from time to time which securities shall be purchased,
sold or exchanged and what portion of the assets of the Company
shall be held in the various securities in which the Company
invests or cash, subject always to the restrictions of the
3
<PAGE>
Articles of Incorporation and By-Laws of the Company, as amended
from time to time, the provisions of the Investment Company Act
and the statements relating to the Company's investment objec-
tives, investment policies and investment restrictions as the
same are set forth in the Prospectus and Statement of Additional
Information. MLAM shall make decisions for the Company as to
foreign currency matters and make determinations as to foreign
exchange contracts. MLAM shall make decisions for the Company as
to the manner in which voting rights, rights to consent to corpo-
rate action and any other rights pertaining to the Company's
portfolio securities shall be exercised. Should the Directors at
any time, however, make any definite determination as to invest-
ment policy and notify MLAM thereof in writing, MLAM 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. MLAM shall take, on behalf of the Company, 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 Company's account with brokers or dealers selected by it, and
to that end, MLAM is authorized as the agent of the Company to
give instructions to the Custodian of the Company as to deliv-
eries of securities and payments of cash for the account of the
Company. In connection with the selection of such brokers or
dealers and the placing of such orders with respect to assets of
4
<PAGE>
the Company, MLAM is directed at all times to seek to obtain
execution and prices within the policy guidelines determined by
the Directors and set forth in the Prospectus and Statement of
Additional Information. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange
Act of 1934, as amended, and other applicable provisions of law,
MLAM may select brokers or dealers with which it or the Company
is affiliated. Subject to the policies of, review by and overall
control of the Board of Directors, MLAM is responsible for the
allocation of the Company's assets among the various securities
markets of the world.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
(a) MLAM. MLAM assumes and shall pay for maintaining the
----
staff and personnel necessary to perform its obligations under
this Agreement, and shall at its own expense, provide the office
space, facilities, equipment and necessary personnel which it is
obligated to provide under Article I hereof, and shall pay all
compensation of officers of the Company and all Directors of the
Company who are affiliated persons of MLAM.
(b) The Company. The Company assumes and shall pay or
-----------
cause to be paid all other expenses of the Company (except for
the expenses paid by the Company's distributor (the "Distri-
butor")), including, without limitation: taxes, expenses for
legal and auditing services, costs of printing proxies, stock
certificates, shareholder reports, Prospectuses and Statements of
5
<PAGE>
Additional Information, charges of the custodian, any sub-custo-
dian and transfer agent, expenses of portfolio transactions, ex-
penses of redemption of shares, Securities and Exchange Commis-
sion fees, expenses of registering the shares under Federal,
state and foreign laws, fees and actual out-of-pocket expenses of
Directors who are not affiliated persons of MLAM,
accounting and pricing costs (including the daily calculation of
the net asset value), insurance, interest, brokerage costs,
litigation and other extraordinary or non-recurring expenses, and
other expenses properly payable by the Company. The Distributor
will pay certain of the expenses of the Company incurred in
connection with the continuous offering of shares of common stock
of the Company.
ARTICLE III
-----------
Compensation of MLAM
--------------------
(a) Management and Investment Advisory Fee. For the
--------------------------------------
services rendered, the facilities furnished and expenses assumed
by MLAM, the Company shall pay to MLAM at the end of each
calendar month a fee based on the average daily value of the net
assets of the Company, as determined and computed in accordance
with the description of the determination of net asset value
contained in the Prospectus and Statement of Additional Informa-
tion, at the annual rate of 1.0% of the average daily net assets
of the Company, commencing on the day following effectiveness
hereof. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a
6
<PAGE>
month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the cal-
culation of the fee as set forth above. Subject to the pro-
visions of subsection (b) hereof, payment of MLAM'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 deter-
mined.
(b) Expense Limitations. In the event the operating ex-
-------------------
penses of the Company, including amounts payable to MLAM 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 Company imposed by applicable state securities
laws or regulations thereunder, as such limitations may be raised
or lowered from time to time, MLAM shall reduce its management
fee by the extent of such excess and, if required pursuant to any
such laws or regulations, will reimburse the Company 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 fees and commissions, distribution
7
<PAGE>
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 Company.
Whenever the expenses of the Company exceed a pro rata portion of
the applicable annual expense limitations, the estimated amount
of reimbursement under such limitations shall be applicable as an
offset against the monthly payment of the fee due to MLAM.
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 MLAM's fee
shall be applicable.
8
<PAGE>
ARTICLE IV
----------
Limitation of Liability of MLAM
-------------------------------
MLAM shall not be liable for any error of judgment or mis-
take of law or for any loss arising out of any investment or for
any act or omission in the management of the Company, except for
willful misfeasance, bad faith or gross negligence in the per-
formance 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 MLAM performing
services for the Company contemplated hereby and directors,
officers and employees of MLAM and such affiliates.
ARTICLE V
---------
Activities of MLAM
------------------
The services of MLAM to the Company are not to be deemed to
be exclusive, MLAM and any person controlled by or under common
control with MLAM (for purposes of this Article V referred to as
"affiliates") being free to render services to others. It is
understood that Directors, officers, employees and shareholders
of the Company are or may become interested in MLAM and its
affiliates, as directors, officers, employees, partners, and
shareholders or otherwise and that directors, officers,
employees, partners, and shareholders of MLAM and its affiliates
are or may become similarly interested in the Company, and that
MLAM and directors, officers, employees, partners, and
9
<PAGE>
shareholders of its affiliates may become interested in the
Company as shareholders or otherwise.
ARTICLE VI
----------
Duration and Termination of this Agreement
------------------------------------------
This Agreement shall become effective as of the date first
above written and shall remain in force until September, 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 Com-
pany, 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.
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 Company, or by MLAM,
on sixty days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment.
10
<PAGE>
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 Company, 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
said Act.
ARTICLE IX
----------
Governing Law
-------------
This Agreement shall be construed in accordance with the
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,
11
<PAGE>
conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH TECHNOLOGY FUND, INC.
By __________________________________
MERRILL LYNCH ASSET MANAGEMENT, INC.
By __________________________________
12
<PAGE>
EXHIBIT 99.6(b)
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 8th day of October,1991, between
MERRILL LYNCH TECHNOLOGY 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 to date (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 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 Class B shares of common stock of the Fund (the "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:
<PAGE>
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 to the public and
hereby agrees during the term of this Agreement to sell Class B
shares of the Fund to the Distributor upon the terms and condi-
tions 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 its 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 shares
of the Fund issued in connection with the merger or consolidation
of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any
such company by the Fund.
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.
(d) Such exclusive rights also shall not apply to Class B
shares issued by the Fund pursuant to any reinstatement privilege
afforded redeeming shareholders.
Section 3. Purchase of Shares from the Fund.
--------------------------------
(a) 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(c) hereof.
(b) The Class B shares are to be resold by the Distributor
to investors at net asset value, as set forth in Section 3(c)
hereof, or to securities dealers having agreements with the
Distributor upon the terms and conditions set forth in Section 7
hereof.
3.
<PAGE>
(c) 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 prospectus and statement of
additional information of the Fund and guidelines established by
the Board of Directors.
(d) 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 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 B 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 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
(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
4.
<PAGE>
payment and such instructions to be delivered promptly to the
Fund (or its agent).
Section 4. Repurchase or Redemption of 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(c) 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
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 Class B shares shall be paid by
the Fund as follows: (i) any applicable contingent deferred
sales charge shall be paid to the Distributor and (ii) the
5.
<PAGE>
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 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 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 accountants. The Fund shall make available to the
Distributor such number of copies of its prospectus and statement
of additional information as the Distributor shall reasonably
request.
6.
<PAGE>
(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 Class B shares and such steps as
may be necessary to register the same under the Securities Act of
1933, as amended (the "Securities Act"), to the end that there
will be available for sale such number of 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 obligated to sell any specific number of Class B shares.
The services of the Distributor to the Fund hereunder are not to
7.
<PAGE>
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 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
of Securities Dealers, Inc. (the "NASD"), as such requirements
may from time to time exist.
8.
<PAGE>
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 B shares; provided,
that the Fund shall approve the forms of agreements with dealers.
Shares sold to selected dealers shall be for resale by such
dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers
to be used in the offering of the Class B shares is attached
hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class B 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 audi-
tors, in connection with the preparation and filing of any re-
quired 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 mate-
rials to shareholders (including but not limited to the expense
of setting in type any such registration statements, prospec-
tuses, statements of additional information, annual or interim
reports or proxy materials).
9.
<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 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 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 Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor hereunder may be paid
from amounts recovered by it from the 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
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
10.
<PAGE>
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) 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 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 connec-
tion 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 per-
sons thereof against any liability to the Fund or its security
11.
<PAGE>
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
12.
<PAGE>
such counsel, the Distributor or such controlling person or
persons, defendant or defendants in the suit, shall bear the fees
and expenses of any additional counsel retained by them, but, in
case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling
person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them.
The Fund shall promptly notify the Distributor of the 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 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 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 regis-
tration statement or related prospectus and statement of addi-
tional information, as from time to time amended, or the 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 Distributor, the
Distributor shall have the rights and duties given to the Fund,
13.
<PAGE>
and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of sub-
section (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 September, 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 Class B 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 Class B 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.
14.
<PAGE>
Section 11. 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 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 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
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 TECHNOLOGY FUND, INC.
By _________________________________
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By _________________________________
16.
<PAGE>
EXHIBIT A
MERRILL LYNCH TECHNOLOGY 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 TECHNOLOGY 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, of the Fund (the "Class B shares"),
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 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 ini-
tial and subsequent purchase requirements are as set forth in the
current Prospectus and Statement of Additional Information of the
Fund.
<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
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 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
withholding: e.g., by a change in the "net asset value" from
that used in determining the offering price to your customers.
6. No person is authorized to make any representations
concerning 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.
2.
<PAGE>
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 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 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 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>
Ex-99.8
This AGREEMENT is effective __________, 19__, and is between THE CHASE MANHATTAN
BANK, N.A. (the "Bank") and MERRILL LYNCH TECHNOLOGY 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, bullion, 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 the 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, where 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 noninterest
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 Subcustodian 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 subcustodian
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 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. It 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
the 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 Transactions.
(a) Securities shall 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 secret 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 it 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) It 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
Account. 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 transfer of
Assets to or from 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 property paid or distributed in respect of
Securities in the Custody Account shall be made 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.
8. 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 Customers
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 Customer's 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 1974, 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 at 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 TECHNOLOGY FUND, INC.
---------------------------------------------------------------
800 SCUDDERS MILL ROAD
---------------------------------------------------------------
PLAINSBORO, NEW JERSEY 08536
---------------------------------------------------------------
ATTN: TREASURY DEPT.
---------------------------------------------------------------
(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. If 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: /S/ Gerald M. Richard
------------------------------
TREASURER
------------------------------
Title
THE CHASE MANHATTAN BANK, N.A.
BY /S/ Michael Ravansbergen
------------------------------
VICE PRESIDENT
------------------------------
Title
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this 30th day of October, 1991, before me personally came Gerald M.
Richard, to me known, who being by me duly sworn, did depose and say that he
resides in Belle Mead, NJ at 6 Fawn Dr.; that he is Treasurer of MERRILL LYNCH
TECHNOLOGY FUND, INC. ("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 signed his 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 4th day of October, 1991, before me personally came Michael
Ravensbergen, to me known, who being by me duly sworn, did depose and say that
he resides in Hackensack, NJ 07601 at 14 Brook Street; 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 4th
day of October, 1991.
/s/ Joan M. Cole
- ------------------------------
Notary
JOAN M. COLE
Notary Public, State of New York
No. 01CO4827034
Qualified in Richmond County
Certificate Filed in New York County
Commission Expires 11-97
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
Merrill Lynch Technology 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 shareholders' 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 shareholders 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 I through _____ 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 alone 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 Customer's 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 Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's 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 Customer's assets.
<PAGE>
EXHIBIT 99.9(a)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 8th day of October, 1991
by and between Merrill Lynch Technology 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
1940 as amended from time to time and any rule or regulation
thereunder;
(ii) The term "Account" means any account of a
Shareholder, or, if the shares are held in an account in the name
of MLPF&S for benefit of an identified customer, such account,
including a Plan Account, any account under a plan (by whatever
name referred to in the Prospectus) pursuant to the Self-Employed
Individuals Retirement Act of 1962 ("Keogh Act Plan") and any
plan (by whatever name referred to in the Prospectus) in
conjunction with Section 401 of the Internal Revenue Code
("Corporation Master Plan");
<PAGE>
(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
(xvii) 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 it 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 canceled stock certificates representing Shares
remaining in its possession, and all Shareholder records, books,
stock ledgers, instruments and other documents (including
computerized or other electronically stored information) made or
accumulated in the performance of its duties as Transfer Agent,
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 TECHNOLOGY FUND,, INC.
By: _____________________________________
Title: __________________________________
FINANCIAL DATA SERVICES, INC.
By: _____________________________________
Title: __________________________________
7
<PAGE>
Schedule of Fees
----------------
The Fund will pay to FDS an annual fee of $11.00 per Class A
and Class D Shareholder Account and $14.00 per Class B and Class
C Shareholder Account in addition to reimbursement for the out-
of pocket expenses incurred by FDS pursuant to this Agreement.
8
<PAGE>
EXHIBIT 99.9(b)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the 8th day of October, 1991, between
MERRILL LYNCH CO., INC. ("ML&Co.") a Delaware corporation and
MERRILL LYNCH TECHNOLOGY FUND, INC., a Maryland corporation (the
"Corporation");
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, ML&CO. was incorporated under the laws of the State
of Delaware on March 27, 1973 under the corporate name "Merrill
Lynch & Co., Inc." and has used such name at all times
thereafter;
WHEREAS, ML&Co. was duly qualified as a foreign corporation
under the laws of the State of New York on April 25, 1973 and has
remained so qualified at all times thereafter;
WHEREAS, the Fund filed its Articles of Incorporation under
the laws of the State of Maryland on August 27, 1991; and
WHEREAS, the Fund desires to qualify as a foreign
association under the laws of the State of New York and has
requested ML&CO. to give its consent to the use of the name
"Merrill Lynch" in the Fund's name.
NOW, THEREFORE, in consideration of the promises and of the
covenants hereinafter contained, ML&CO. and the Fund hereby agree
as follows:
(i) ML&CO. hereby grants the Fund a non-exclusive license
to use the words "Merrill Lynch" in its name.
(ii) ML&CO. hereby consents to the qualification of the
Fund as a foreign association under the laws of the State of New
<PAGE>
York with the words "Merrill Lynch" in its name and agrees to
execute such formal consents as may be necessary in connection
with such filing.
(iii) The non-exclusive license hereinabove referred to has
been given and is given by ML&CO. on the condition that it may at
any time, in its sole and absolute discretion, withdraw the non-
exclusive license to the use of the words "Merrill Lynch" in the
name of the Fund; and, as soon as practicable after receipt by
the Fund of written notice of the withdrawal of such non-exclu-
sive license, and in no event later than ninety days thereafter,
the Fund will change its name so that such name will not
thereafter include the words "Merrill Lynch" or any variation
thereof.
(iv) ML&CO. reserves and shall have the right to grant to
any other company, including without limitation, any other
investment company, the right to use the words "Merrill Lynch" or
variations thereof in its name and no consent or permission of
the Fund shall be necessary; but, if required by an applicable
law of any state, the Fund will forthwith grant all requisite
consents.
(v) The Fund will not grant to any other company the right
to use a name similar to that of the Fund or ML&CO. without the
written consent of ML&CO.
(vi) Regardless of whether the Fund should hereafter change
their names and eliminate the words "Merrill Lynch" or any
variation thereof from such names, the Fund hereby grants to
2
<PAGE>
ML&CO. the right to cause the incorporation of other corporations
or the organization of voluntary associations which may have
names similar to that of the Fund or to that to which the Fund
may change its names and to own all or any portion of the shares
of such other corporations or associations and to enter into
contractual relationships with such other corporations or
associations, subject to any requisite approval of a majority of
the Fund's shareholders and the Securities and Exchange
Commission and subject to the payment of a reasonable amount to
be determined at the time of use, and the Fund agrees to give and
execute any such formal consents or agreements as may be
necessary in connection therewith.
(vii) This Agreement may be amended at any time by a
writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MERRILL LYNCH & CO., INC.
BY ________________________________
Vice President
MERRILL LYNCH TECHNOLOGY FUND, INC.
By ________________________________
President
3
<PAGE>
Ex-99.13
CERTIFICATE OF SOLE SHAREHOLDER
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 Technology Fund, Inc. (the "Fund"), a
Maryland corporation, 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 unamortized organizational expenses
which 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, 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/ Robert Harris
------------------------------
Dated: October 31, 1991
<PAGE>
Ex-99.16(a)
EXHIBIT 16
Technology Fund - Class A (4/27/92 - 9/30/92)
AVERAGE ANNUAL AND TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE SINCE
INCEPTION INCEPTION
AVG ANNUAL TOTAL
RETURN RETURN*
---------- ---------
<S> <C> <C>
Initial investment $1,000.00 $1,000.00
Divided by Max. Offer. Price 4.10
----------
Divided by Net Asset Value 3.83
----------
Equals Shares Purchased 244.12 261.09
Plus Shares Acquired through
Dividend Reinvestment 0.00 0.00
---------- ----------
Equals Shares Held
at 9/30/92 244.12 261.09
Multiplied by Net Asset
Value at 9/30/92 4.32 4.32
---------- ----------
Equals Ending Redeemable
Value at $1,000
Investment (ERV) at 9/30/92 $1,054.60 $1,127.90
Divided by $1,000 (P) 1.0546 1.1279
Subtract 1 0.0546 0.1279
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) 5.46%
==========
Expressed as a percentage
equals the Aggregate Total
Return for the Period 12.79%
==========
ERV divided by P 1.0546
Raise to the power of 2.3397
Equals 1.1325
Subtract 1 0.1325
Expressed as a percentage
equals the Average
Annualized Total Return 13.25%
==========
</TABLE>
* Does not include sales charge for the period.
<PAGE>
EX-99.16(b)
Technology Fund - Class B (4/27/92 - 9/30/92) 1)
AVERAGE ANNUAL AND TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE SINCE
INCEPTION INCEPTION
AVG ANNUAL TOTAL
RETURN RETURN*
---------- ---------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 3.83 3.83
--------- ---------
Equals Shares Purchased 261.10 261.10
Plus Shares Acquired through
Dividend Reinvestment 0.00 0.00
--------- ---------
Equals Shares Held
at 9/30/92 261.10 261.10
Multiplied by Net Asset
Value at 9/30/92 4.30 4.30
--------- ---------
Equals Ending value before
deduction for contingent
deferred sales charge 1,122.70 1,122.70
Less deferred sales charge (40.00) 0.00
--------- ---------
Equals Ending Redeemable
Value of a $1,000
Investment (ERV) $1,082.70 $1,122.70
--------- ---------
Divided by $1,000 (P) 1.0827 1.1227
Subtract 1 0.0827 0.1227
Expressed as a percentage
equals the Aggregate Total
Return for the Period (T) 8.27%
=========
Expressed as a percentage
equals the Aggregate Total
Return for the Period 12.27%
=========
ERV divided by P 1.0827
Raise to the power of 2.3397
Equals 1.2044
Subtract 1 0.2044
Expressed as a percentage
equals the Average
Annualized Total Return 20.44%
=========
</TABLE>
* Does not include sales charge for the period.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> MERRILL LYNCH TECHNOLOGY FUND, INC. - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 952911611
<INVESTMENTS-AT-VALUE> 954951392
<RECEIVABLES> 6704452
<ASSETS-OTHER> 93142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 961748986
<PAYABLE-FOR-SECURITIES> 8209190
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28511277
<TOTAL-LIABILITIES> 36720467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 983935597
<SHARES-COMMON-STOCK> 51997403
<SHARES-COMMON-PRIOR> 33799065
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53313062)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5594016)
<NET-ASSETS> 254187902
<DIVIDEND-INCOME> 1608114
<INTEREST-INCOME> 14555332
<OTHER-INCOME> 0
<EXPENSES-NET> 14502014
<NET-INVESTMENT-INCOME> 1661432
<REALIZED-GAINS-CURRENT> 870828
<APPREC-INCREASE-CURRENT> (29622966)
<NET-CHANGE-FROM-OPS> (27090706)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1542978
<DISTRIBUTIONS-OF-GAINS> 18553150
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31862508
<NUMBER-OF-SHARES-REDEEMED> (17158170)
<SHARES-REINVESTED> 3494000
<NET-CHANGE-IN-ASSETS> 525888998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6420096
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7146254
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14502014
<AVERAGE-NET-ASSETS> 236418132
<PER-SHARE-NAV-BEGIN> 5.17
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .11
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .41
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.89
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MERRILL LYNCH TECHNOLOGY FUND, INC. - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 952911611
<INVESTMENTS-AT-VALUE> 954951392
<RECEIVABLES> 6704452
<ASSETS-OTHER> 93142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 961748986
<PAYABLE-FOR-SECURITIES> 8209190
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28511277
<TOTAL-LIABILITIES> 36720467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 983935597
<SHARES-COMMON-STOCK> 128601982
<SHARES-COMMON-PRIOR> 44131337
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53313062)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5594016)
<NET-ASSETS> 614935478
<DIVIDEND-INCOME> 1608114
<INTEREST-INCOME> 14555332
<OTHER-INCOME> 0
<EXPENSES-NET> 14502014
<NET-INVESTMENT-INCOME> 1661432
<REALIZED-GAINS-CURRENT> 870828
<APPREC-INCREASE-CURRENT> (29622966)
<NET-CHANGE-FROM-OPS> (27090706)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 351614
<DISTRIBUTIONS-OF-GAINS> 40452563
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 110181775
<NUMBER-OF-SHARES-REDEEMED> (33039822)
<SHARES-REINVESTED> 7328692
<NET-CHANGE-IN-ASSETS> 525888998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6420096
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7146254
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14502014
<AVERAGE-NET-ASSETS> 463544339
<PER-SHARE-NAV-BEGIN> 5.08
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .11
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .40
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.78
<EXPENSE-RATIO> 2.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MERRILL LYNCH TECHNOLOGY FUND, INC. - CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 952911611
<INVESTMENTS-AT-VALUE> 954951392
<RECEIVABLES> 6704452
<ASSETS-OTHER> 93142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 961748986
<PAYABLE-FOR-SECURITIES> 8209190
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28511277
<TOTAL-LIABILITIES> 36720467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 983935597
<SHARES-COMMON-STOCK> 4886402
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53313062)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5594016)
<NET-ASSETS> 23259465
<DIVIDEND-INCOME> 1608114
<INTEREST-INCOME> 14555332
<OTHER-INCOME> 0
<EXPENSES-NET> 14502014
<NET-INVESTMENT-INCOME> 1661432
<REALIZED-GAINS-CURRENT> 870828
<APPREC-INCREASE-CURRENT> (29622966)
<NET-CHANGE-FROM-OPS> (27090706)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 51145
<DISTRIBUTIONS-OF-GAINS> 678860
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5309942
<NUMBER-OF-SHARES-REDEEMED> (552255)
<SHARES-REINVESTED> 128715
<NET-CHANGE-IN-ASSETS> 525888998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6420096
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7146254
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14502014
<AVERAGE-NET-ASSETS> 13947093
<PER-SHARE-NAV-BEGIN> 5.75
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.62)
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.76
<EXPENSE-RATIO> 2.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> MERRILL LYNCH TECHNOLOGY FUND, INC. - CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> OCT-21-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 952911611
<INVESTMENTS-AT-VALUE> 954951392
<RECEIVABLES> 6704452
<ASSETS-OTHER> 93142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 961748986
<PAYABLE-FOR-SECURITIES> 8209190
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28511277
<TOTAL-LIABILITIES> 36720467
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 983935597
<SHARES-COMMON-STOCK> 6679596
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53313062)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (5594016)
<NET-ASSETS> 32645674
<DIVIDEND-INCOME> 1608114
<INTEREST-INCOME> 14555332
<OTHER-INCOME> 0
<EXPENSES-NET> 14502014
<NET-INVESTMENT-INCOME> 1661432
<REALIZED-GAINS-CURRENT> 870828
<APPREC-INCREASE-CURRENT> (29622966)
<NET-CHANGE-FROM-OPS> (27090706)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 84475
<DISTRIBUTIONS-OF-GAINS> 919413
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9649216
<NUMBER-OF-SHARES-REDEEMED> (3144304)
<SHARES-REINVESTED> 174684
<NET-CHANGE-IN-ASSETS> 525888998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6420096
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7146254
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14502014
<AVERAGE-NET-ASSETS> 19294848
<PER-SHARE-NAV-BEGIN> 5.88
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.60)
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .34
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.89
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Technology Fund, Inc.
We consent to the use in Post-Effective Amendment No. 5 to Registration
Statement No. 33-42639 of our report dated April 28, 1995 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
Deloitte & Touche LLP
Princeton, New Jersey
July 27, 1995
<PAGE>
EXHIBIT 99.16(c)
<TABLE>
<CAPTION>
Technology Fund - Class C
10/21/94 - 3/31/95 Since Since
Inception Inception
Average Annual Total
Total Return Return*
------------ ---------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Net Asset Value 5.75 5.75
--------- ---------
Equals Shares Purchased 173.913 173.913
Plus Shares Acquired through
Dividend Reinvestment 12.827 12.827
--------- ---------
Equals Shares Held at 3/31/95 186.740 186.740
Multiplied by Net Asset Value at 3/31/95 4.76 4.76
--------- ---------
Equals Ending Value before deduction for 888.88 888.88
contingent deferred sales charge
Less deferred sales charge (8.30) 0.00
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 3/31/95 880.58 888.88
--------- ---------
Divided by $1,000 (P) 0.8806 0.8889
Subtract 1 -0.1194 -0.1111
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -11.94%
=========
Expressed as a percentage equals the
Aggregate Total Return for the Period -11.11%
=========
ERV divided by P 0.8806
Raise to the power of 2.2665
Equals 0.7496
Subtract 1 -0.2504
Expressed as a percentage equals the
Average Annualized Total Return -25.04%
=========
*Does not include sale charge for the period.
</TABLE>
<PAGE>
EXHIBIT 99.16(d)
<TABLE>
<CAPTION>
Technology Fund - Class D
10/21/94 - 3/31/95 Since Since
Inception Inception
Average Annual Total
Total Return Return*
------------ ---------
<S> <C> <C>
Initial Investment $1,000.00 $1,000.00
Divided by Initial Maximum Offering Price 6.21
---------
Divided by Net Asset Value 5.88
---------
Equals Shares Purchased 161.139 170.068
Plus Shares Acquired through
Dividend Reinvestment 11.781 12.434
--------- ---------
Equals Shares Held at 3/31/95 172.920 182.502
Multiplied by Net Asset Value at 3/31/95 4.89 4.89
--------- ---------
Equals Ending Redeemable Value at
$1000 Investment (ERV) at 3/31/95 845.58 892.44
Divided by $1,000 (P) 0.8456 0.8924
Subtract 1 -0.1544 -0.1076
Expressed as a percentage equals the
Aggregate Total Return for the Period (T) -15.44%
Expressed as a percentage equals the
Aggregate Total Return for the Period -10.76%
=========
ERV divided by P 0.8456
Raise to the power of 2.2671
Equals 0.6837
Subtract 1 -0.3163
Expressed as a percentage equals the
Average Annualized Total Return -31.63%
=========
* Does not include sales charge for the period.
</TABLE>
<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)
