<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1996
SECURITIES ACT FILE NO. 33-49354
INVESTMENT COMPANY ACT FILE NO. 811-6725
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 4 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6 /X/
(Check appropriate box or boxes)
------------------------
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
(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 CONSULTS INTERNATIONAL PORTFOLIO
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
COUNSEL FOR THE COMPANY:
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
ATTENTION: JOEL H. GOLDBERG, ESQ.
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
/X/ IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF
RULE 485, OR
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A) OF RULE
485, OR
/ / ON (DATE) PURSUANT TO PARAGRAPH (B) OF RULE 485, OR
/ / ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II)
/ / ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW
EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE
AMENDMENT.
------------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF
BENEFICIAL INTEREST UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2
UNDER THE INVESTMENT COMPANY ACT OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR
THE REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON DECEMBER 27, 1995.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT OF SHARES OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED BEING REGISTERED PER UNIT OFFERING PRICE* REGISTRATION FEE
<S> <C> <C> <C> <C>
Shares of Beneficial Interest (par value
$.10 per share)....................... 5,717,130 $12.27 $289,989.14 $100
</TABLE>
*(1) The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940 and was based upon an
offering price of $12.27 per share, equal to the net asset value as of the
close of business on February 21, 1996.
(2) The total amount of securities redeemed or repurchased during Registrant's
previous fiscal year was 7,550,747 Shares of Beneficial Interest.
(3) 1,857,251 of the Shares described in (2) above have been used for reduction
pursuant to Rule 24e-2(a) or Rule 24f-2(c) under the Investment Company Act
of 1940 in previous filings during Registrant's current fiscal year.
(4) 5,693,496 of the Shares redeemed during Registrant's previous fiscal year
are being used for the reduction of the registration fee in this amendment
to the Registration Statement.
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<PAGE>
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ---------------------------------------------------------------- -----------------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page...................................... Cover Page
Item 2. Synopsis........................................ Fee Table
Item 3. Condensed Financial Information................. Financial Highlights
Item 4. General Description of Registrant............... Investment Objective and Policies; Additional
Information
Item 5. Management of the Fund.......................... Fee Table; Investment Objective and Policies;
Portfolio Transactions; Management of the
Fund; Inside Back Cover Page
Item 5A. Management's Discussion of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other Securities.............. Cover Page; Additional Information
Item 7. Purchase of Securities Being Offered............ Cover Page; Fee Table; Purchase of Shares;
Shareholder Services; Additional Information;
Inside Back Cover Page
Item 8. Redemption or Repurchase........................ Fee Table; Shareholder Services; Purchase of
Shares; Redemption of Shares
Item 9. Pending Legal Proceeding........................ Not Applicable
PART B
Item 10. Cover Page...................................... Cover Page
Item 11. Table of Contents............................... Back Cover Page
Item 12. General Information and History................. Not Applicable
Item 13. Investment Objectives and Policies.............. Investment Objective and Policies
Item 14. Management of the Fund.......................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities.................................... Management of the Fund
Item 16. Investment Advisory and Other Services.......... Management of the Fund; Purchase of Shares;
General Information
Item 17. Brokerage Allocation and Other Practices........ Portfolio Transactions and 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
Item 20. Tax Status...................................... Dividends and Distributions; Taxes
Item 21. Underwriters.................................... Purchase of Shares
Item 22. Calculation of Performance Data................. Performance Data
Item 23. Financial Statements............................ Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C
to this Post-Effective Amendment to the Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
FEBRUARY 28, 1996
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 PHONE NO. (609) 282-2800
------------------------
Merrill Lynch Consults International Portfolio, a Massachusetts business
trust (the 'Fund'), is a diversified, open-end management investment company
seeking the highest total investment return consistent with prudent risk through
investment in a diversified international portfolio of equity securities,
other than United States equity securities. Total investment return is the
aggregate of income and capital value changes. Distribution of shares of the
Fund is limited to current clients of the Merrill Lynch Consults(Registered)
Service and of the Merrill Lynch Strategic Portfolio Advisor(Service Mark)
Service. The Fund is designed for Merrill Lynch Consults(Registered) Service and
Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service clients who seek
to internationally diversify a portion of their investment portfolio. For more
information on the Fund's investment objective and policies, please see
'Investment Objective and Policies' on page 5.
The Fund offers shares (the 'shares') which may be purchased at a price
equal to the next determined net asset value per share. Shares of the Fund are
not subject to any sales charge, but are subject to an ongoing account
maintenance fee at an annual rate of 0.25% of average daily net assets and an
ongoing distribution fee at an annual rate of 0.75% of average daily net assets.
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the 'Distributor'), P.O. Box 9081, Princeton, New Jersey 08543-9081 ((609)
282-2800), which has entered into a dealer agreement with Merrill Lynch, Pierce,
Fenner & Smith Incorporated ('Merrill Lynch'). Shareholders may redeem their
shares at any time at the next determined net asset value. The minimum initial
purchase is $5,000, and the minimum subsequent purchase is $1,000. Merrill Lynch
may charge its customers a processing fee (presently $4.85) for confirming
purchases and repurchases. Such fee is presently waived for clients of the
Merrill Lynch Consults(Registered) Service and of the Merrill Lynch Strategic
Portfolio Advisor(Service Mark) Service. Redemptions directly through the
Fund's transfer agent are not subject to processing fees. See 'Purchase of
Shares' and 'Redemption of Shares.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus is a concise statement of information about the Fund that
is relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated February 28, 1996 (the 'Statement of Additional
Information'), has been filed with the Securities and Exchange Commission and is
available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
------------------------
MERRILL LYNCH (SUISSE) INVESTMENT MANAGEMENT S.A.--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
The following table illustrates expenses and fees that you would incur as a
shareholder of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Sales Load Imposed on Purchases............................................................... None
Sales Load Imposed on Dividend Reinvestments.................................................. None
Redemption Fees............................................................................... None
Exchange Fees................................................................................. Not Applicable
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) FOR THE YEAR ENDED
OCTOBER 31, 1995:
Investment Adviser Fees....................................................................... 0.75%
Administrative Fees(a)........................................................................ 0.25%
12b-1 Fees(b)
Account Maintenance Fees................................................................... 0.25%
Distribution Fees.......................................................................... 0.75%
OTHER EXPENSES:
Custodian Fees................................................................................ 0.10%
Shareholder Servicing Costs(c)................................................................ 0.03%
Other(d)...................................................................................... 0.22%
--------------
Total Other Expenses.......................................................................... 0.35%
--------------
TOTAL FUND OPERATING EXPENSES................................................................... 2.35%
--------------
--------------
</TABLE>
- ---------------
(a) See 'Management of the Fund--Administrator'--page 13.
(b) See 'Purchase of Shares--Distribution Plan'--page 15.
(c) See 'Management of the Fund--Transfer Agency Services'--page 14.
(d) Each client of the Merrill Lynch Consults(Registered) Service and of the
Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service is charged
an annual fee of up to 3% (charged on a quarterly basis) of the value of
such client's portfolio. However, no such fee is imposed on the portion of
the client's assets maintained in the Fund. An investment made directly in
the Fund will not be subject to the 3% charge at any time while the assets
remain in the Fund.
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE
PERIOD OF:
----------------------------------------
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, whether or not the investor redeems his investment at the
end of the period, assuming (1) an operating expense ratio of 2.35%
and (2) a 5% annual return throughout the periods: $ 24 $73 $ 125 $269
</TABLE>
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATE OF RETURN,
AND ACTUAL EXPENSES OR ANNUAL RATE OF RETURN MAY BE MORE OR LESS THAN THOSE
ASSUMED FOR PURPOSES OF THE EXAMPLE. Shareholders who own their shares for an
extended period of time may pay more in account maintenance and distribution
fees than the economic equivalent of the maximum front-end sales charge
permitted under the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. Merrill Lynch may charge its customers a processing fee
(presently $4.85) for confirming purchases and repurchases. Such fee is
presently waived for clients of the Merrill Lynch Consults(Registered) Service
and of the Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service.
Redemptions directly through the Transfer Agent are not subject to the
processing fee. See 'Purchase of Shares' and 'Redemption of Shares.'
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below has been audited in
conjunction with the audits of the financial statements of the Fund by Ernst &
Young LLP, independent auditors. Financial statements for the year ended October
31, 1995 and the independent auditors' report thereon, are included in the
Statement of Additional Information. Further information about the performance
of the Fund is contained in the Fund's most recent annual report to shareholders
which may be obtained, without charge, by calling or writing the Fund at the
telephone number or address on the front cover of this Prospectus.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPT. 14,
FOR THE YEAR ENDED OCTOBER 31, 1992+ TO
-------------------------------- OCT. 31,
INCREASE (DECREASE) IN NET ASSET VALUE: 1995++ 1994++ 1993++ 1992++
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................... $ 12.83 $ 11.74 $ 9.60 $ 10.00
-------- -------- -------- --------------
Investment loss--net.................................. (.05) (.12) (.08) (.02)
Realized and unrealized gain (loss) on
investments--net................................... (.18) 1.26 2.22 (.38)
-------- -------- -------- --------------
Total from investment operations........................ (.23) 1.14 2.14 (.40)
-------- -------- -------- --------------
Less distributions from realized gain on
investments--net...................................... (.32) (.05) -- --
-------- -------- -------- --------------
Net asset value, end of period.......................... $ 12.28 $ 12.83 $ 11.74 $ 9.60
-------- -------- -------- --------------
-------- -------- -------- --------------
TOTAL INVESTMENT RETURN:
Based on net asset value per share...................... (1.68%) 9.74% 22.29% (4.00%)#
-------- -------- -------- --------------
-------- -------- -------- --------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, net of reimbursement and excluding account
maintenance and distribution fees..................... 1.35% 1.27% 1.76% 2.50%*
-------- -------- -------- --------------
-------- -------- -------- --------------
Expenses, net of reimbursement.......................... 2.35% 2.27% 2.76% 3.50%*
-------- -------- -------- --------------
-------- -------- -------- --------------
Expenses................................................ 2.35% 2.27% 2.76% 4.45%*
-------- -------- -------- --------------
-------- -------- -------- --------------
Investment loss--net.................................... (.41%) (.56%) (.86%) (2.77%)*
-------- -------- -------- --------------
-------- -------- -------- --------------
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)................ $197,077 $272,487 $175,756 $ 16,636
-------- -------- -------- --------------
-------- -------- -------- --------------
Portfolio turnover...................................... 17.31% 24.64% 32.54% 0.00%
-------- -------- -------- --------------
-------- -------- -------- --------------
</TABLE>
- ---------------
* Annualized.
+ Commencement of Operations.
++ Based on average number of shares outstanding during the period.
# Aggregate total investment return.
See Notes to Financial Statements.
3
<PAGE>
RISKS AND SPECIAL CONSIDERATIONS
Distribution of shares of the Fund is limited to clients of the Merrill
Lynch Consults(Registered) Service and of the Merrill Lynch Strategic Portfolio
Advisor(Service Mark) Service, customized full service approaches to investment
management. Pursuant to the Merrill Lynch Consults(Registered) Service Merrill
Lynch offers to assist clients in selecting and retaining, from a roster of
managers, one or more professional portfolio managers generally emphasizing
investment in United States securities. Merrill Lynch Strategic Portfolio
Advisor(Service Mark) Service is a service designed by Merrill Lynch to provide
business and individual clients with a comprehensive package of consulting,
investment and account services. Each client of Merrill Lynch
Consults(Registered) Service and Merrill Lynch Strategic Portfolio
Advisor(Service Mark) Service is charged an annual fee based upon the value of
such client's portfolio. The portion of a client's assets that is maintained in
the Fund is not subject to such a fee; however, investors in the Fund incur
various charges related to the Fund as described in this Prospectus. The Fund is
intended to complement the Merrill Lynch Consults(Registered) Service and the
Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service, by permitting
clients of the services to invest, by investing in shares of the Fund, in a
diversified international portfolio of equity securities, other than U.S.
equity securities. The Fund's investment objective is based on the
investment philosophy that an internationally diversified portfolio may offer
the possibility of a higher expected return than a portfolio comprised of
securities from one securities market. Historically, the securities markets of
many countries generally have moved relatively independently of one another due
to different economic, financial, political and social factors. When markets
which are moving in different directions are combined into a single portfolio,
there is an offsetting effect which may reduce total portfolio volatility (i.e.,
risk) without reducing the total portfolio's expected rate of return over time.
However, there can be no assurance that, over any time period, non-United States
markets will provide higher investment returns, considering relative currency
fluctuations, than investment in United States markets or that an
internationally diversified portfolio will provide greater returns than a
non-diversified portfolio which invests in only certain securities markets.
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 or U.S. 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 Fund will invest heavily in securities denominated or quoted in currencies
other than the United States dollar, changes in foreign currency exchange rates
will affect the value of securities in the portfolio and the unrealized
appreciation or depreciation of investments so far as United States investors
are concerned. Currencies of certain foreign countries may be volatile and
therefore may affect the value of securities denominated in such currencies.
Changes in foreign currency exchange rates relative to the United States dollar
will affect the United States dollar value of the Fund's assets denominated in
that currency and the Fund's return on such assets. The rate of exchange between
the dollar and other currencies is 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 United States economy in such respects as growth of
gross domestic product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Also, it is anticipated that
most of the securities held by the Fund will not be registered with the
Securities and Exchange Commission nor will the issuers thereof be subject to
the reporting requirements of such agency.
4
<PAGE>
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 a foreign company than
about a United States company, and foreign companies and companies in smaller,
emerging capital markets in particular, may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to those
of United States companies. As a result, traditional investment measurements,
such as price/earnings ratios, as used in the United States, may not be
applicable to certain smaller, emerging foreign capital markets. In addition,
certain foreign investments may be subject to foreign withholding taxes. These
risks often are heightened for investments in smaller, emerging capital markets.
See 'Additional Information--Taxes.'
Foreign financial markets, while growing in volume, have, for the most
part, substantially less volume than United States 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 periods when assets of the Fund are temporarily
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems or the risk of
intermediary counter party failures could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security due to
settlement problems either could result in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to a
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. For example,
there may be no comparable provisions under certain foreign laws to insider
trading and similar investor protection securities laws that apply with respect
to securities transactions consummated in the United States.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in United States securities
since the expenses of the Fund, such as custodial costs, are higher.
Transactions effected on behalf of the Fund by Merrill Lynch (Suisse) Investment
Management S.A. (the 'Investment Adviser') may be subject to Swiss transactional
taxes. Certain foreign investments may be subject to foreign withholding taxes.
Shareholders of the Fund do not have an exchange privilege with any other
investment company.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek the highest total
investment return consistent with prudent risk through investment in a
diversified international portfolio of equity securities, other than United
States equity securities. Total investment return is the aggregate of
income and capital value changes. The investment objective of the Fund described
in this paragraph is a fundamental policy which may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities. There can be no assurance that the Fund will achieve its investment
objective.
In pursuing the Fund's investment objective, its management will utilize a
fully-managed investment policy which permits the Fund to take a flexible
approach and vary its policies as to geographic and industry
5
<PAGE>
diversification based upon its evaluation of international economic and market
trends. This evaluation could include such factors as the condition and growth
potential of various economies and securities markets, currency and taxation
considerations, and other pertinent financial, social, national, and political
considerations.
Under normal circumstances, the Fund will invest in issuers domiciled in at
least three countries. It is expected that more than 50% of the Fund's assets
will be invested in equity securities of companies located in Western Europe and
the Far East, although the Fund may also invest in capital markets throughout
the world. For purposes of the Fund's objective, equity securities includes
securities convertible into equity securities and securities the values of which
are indexed to the market values of equity securities or indices of equity
securities. A United States closed-end investment company will be considered to
be a non-United States investment if it, in turn, primarily invests in
non-United States securities. The Fund may invest in foreign securities in the
form of depository receipts, including American Depository Receipts (ADRs) and
European Depository Receipts (EDRs), or other securities convertible into
securities of foreign issuers. The Fund reserves the right, as a temporary
defensive measure and to provide for redemptions, to hold cash or cash
equivalents (in United States dollars or foreign currencies) and short-term
securities, including money market securities. Transactions effected by the Fund
may be subject to Swiss federal transactional taxes of 0.15%. The Investment
Adviser believes that such transactional taxes will not materially affect the
performance of the Fund.
The Fund may purchase securities that are not registered under the
Securities Act of 1933, as amended (the 'Securities Act'), but can be offered
and sold to 'qualified institutional buyers,' such as the Fund, under Rule 144A
under that Act ('Rule 144A securities'). The Fund's Board of Trustees has
determined to treat as liquid investments any foreign Rule 144A securities that
can be freely traded in a meaningful foreign securities market, if the facts and
circumstances support such determination. The Board has delegated to the
Investment Adviser the daily functionings of determining and monitoring the
liquidity of foreign Rule 144A securities, but retains oversight and is
ultimately responsible for such determinations.
As part of the Merrill Lynch Consults(Registered) Service, Merrill Lynch
may provide information to its clients regarding the possible change in risk
posture of a client's domestic Merrill Lynch Consults(Registered) Service
account due to an investment in the Fund. Risk classes are assigned to each
domestic Merrill Lynch Consults(Registered) Service investment manager based
upon an approximation of its 10 year standard deviation (which is used as a
measure of volatility) as calculated by Merrill Lynch Consults(Registered)
Service according to information provided by the manager. A risk class is
assigned to the Fund based upon an approximation of the 10 year standard
deviation of the Morgan Stanley Europe, Asia, Far East Index ('EAFE Index'), a
market weighted unmanaged index, as a general proxy for non-domestic equity
investments. Any change in risk will be estimated only as it relates to the
client's domestic Merrill Lynch Consults(Registered) Service account and the
Fund shares held for that account, and not for assets held in other domestic
Merrill Lynch Consults(Registered) Service accounts or outside of the Merrill
Lynch Consults(Registered) Service. The Fund, which commenced operations in
1992, does not allocate its assets proportionately to the weighting of the EAFE
Index and may invest in countries which are not included in the EAFE Index. As a
consequence, the Fund's performance may not correlate completely to the EAFE
Index. Projections of risk posture based on a measurement of past performance of
an investment manager or of an index may not accurately predict future risk
posture or performance.
6
<PAGE>
HEDGING TECHNIQUES
The Fund may engage in various portfolio strategies to hedge its portfolio
against movements in the equity markets, interest rates and exchange rates
between currencies. 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 and securities the values of which are indexed to the market values
of equity securities, indices of equity securities, currencies or currency
units. The Fund may enter into such transactions only in connection with its
hedging strategies. While the Fund's net asset value will continue to fluctuate
and no assurance can be given that the Fund's hedging transactions will be
effective, the Investment Adviser believes that the ability of the Fund to
engage in these hedging transactions may enhance the Fund's ability to reduce
the volatility of the net asset value of Fund shares. Furthermore, the Fund 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 Fund will
engage in these transactions only for hedging purposes, the options and futures
portfolio strategies of the Fund will not subject the Fund to the risks
frequently associated with the speculative use of options and futures
transactions. Because of the nature of options and futures transactions, there
are certain risks involved. These risks are described below under 'Risk Factors
in Options, Futures and Currency Transactions.'
Set forth below is a description of the hedging instruments the Fund may
utilize with respect to investment and currency risks.
Writing Covered Call Options. The Fund is authorized to write (i.e., sell)
covered call options on the securities in which it may invest and to enter into
closing purchase transactions with respect to certain of such options. A covered
call option is an option where the Fund in return for a premium gives another
party a right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. By writing covered call
options, the Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. In addition, the Fund's ability to sell the underlying security
will be limited while the option is in effect unless the Fund effects a closing
purchase transaction. A closing purchase transaction cancels out the Fund's
position as the writer of an option by means of an offsetting purchase of an
identical option prior to the expiration of the option it has written. Covered
call options serve as a partial hedge against the price of the underlying
security declining.
Purchasing Put Options. The Fund is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option the Fund has a right to sell the underlying security at the exercise
price, thus limiting the Fund's risk of loss through a decline in the market
value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
costs. Prior to its expiration, a put option may be sold in a closing sale
transaction and profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out the Fund's
position as the purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased.
Stock Index Options and Futures and Financial Futures. The Fund is
authorized to engage in transactions in stock index options and futures and
financial futures and related options on such futures. The Fund may
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purchase or write put and call options on stock indices to hedge against the
risks of market-wide stock price movements in the securities in which the Fund
invests. Options on indices are similar to options on securities except that on
exercise or assignment, the parties to the contract pay or receive an amount of
cash equal to the difference between the closing value of the index and the
exercise price of the option times a specified multiple. The Fund may invest in
stock index options based on a broad market index, e.g., the Nikkei Index, or on
a narrow index representing an industry or market segment.
The Fund may also purchase and sell stock index futures contracts and
financial futures contracts ('futures contracts') as a hedge against adverse
changes in the market value of its portfolio securities as described below. A
futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract to
sell a particular commodity, which may be 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 a commodity, in this case securities, but
results in cash settlement based upon the difference in value of the stock index
between the time the contract was entered into and the time of its settlement.
The Fund may effect transactions in stock index futures contracts in connection
with equity securities in which it invests. Transactions by the Fund in stock
index futures and financial futures are subject to limitations as described
below under 'Restrictions on the Use of Futures Transactions.'
The Fund 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
Fund's portfolio that might otherwise result. When the Fund is not fully
invested in the securities markets and anticipates a significant market advance,
it will 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 Fund
intends to purchase. As such purchases are made, an equivalent amount of futures
contracts will be terminated by offsetting sales. The Fund does not consider
purchases of futures contracts to be a speculative practice under these
circumstances. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase such securities upon termination of the
long futures position, whether the long position is the purchase of a futures
contract or the purchase of a call option or the writing of a put option on a
future, but under unusual circumstances (e.g., if the Fund experiences a
significant amount of redemptions), a long futures position may be terminated
without the corresponding purchase of securities.
The Fund is also 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 Fund enters into futures transactions. The Fund may purchase put
options or write call options on futures contracts and stock indices rather than
selling the underlying futures contract in anticipation of a decrease in the
market value of its securities. Similarly, the Fund 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 Fund intends to
purchase.
The Fund is also authorized to engage in options and futures transactions
on United States 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 price 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 Fund 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
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<PAGE>
variations in foreign exchange rates. Such transactions could be effected with
respect to hedges on non-United States dollar denominated securities owned by
the Fund, sold by the Fund but not yet delivered, or committed or anticipated to
be purchased by the Fund. As an illustration, the Fund may use such techniques
to hedge the stated value in United States dollars of an investment in a yen
denominated security. In such circumstances, for example, the Fund 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 Fund 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 call option in this illustration, the Fund 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 Fund constitute hedging transactions and are
consistent with the policies described above.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the rights to
buy or sell a currency at a fixed price on a future date. A futures contract on
a foreign currency is an agreement between two parties to buy and sell a
specified amount of a currency for a set price on a future date. Futures
contracts and options on futures contracts are traded on boards of trade or
futures exchanges. The Fund will not speculate in foreign currency options,
futures or related options. Accordingly, the Fund will not hedge a currency
substantially in excess of the market value of securities which it has committed
or anticipates to purchase which are denominated in such currency and, in the
case of securities which have been sold by the Fund but not yet delivered, the
proceeds thereof in its denominated currency.
Forward Foreign Exchange Transactions. The Fund has authority to deal in
forward foreign exchange between currencies of the different countries in which
it will invest as a hedge against possible variations in the foreign exchange
rate 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 Fund's dealings
in forward foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities, the sale and redemption of shares of the Fund or the payment of
dividends and distributions by the Fund. Position hedging is the sale of forward
foreign currency with respect to portfolio security positions denominated or
quoted in such foreign currency. The Fund will not speculate in forward foreign
exchange. The Fund will not attempt to hedge all of its foreign portfolio
positions.
Restrictions on the Use of Futures Transactions. Under regulations of the
Commodity Futures Trading Commission ('CFTC'), the futures trading activities
described herein will not result in the Fund being deemed to be a 'commodity
pool,' as defined under such regulations, provided that the Fund adheres to
certain restrictions. In particular, the Fund may (i) purchase and sell futures
contracts and options thereon for bona fide hedging purposes, as defined under
CFTC regulations, without regard to the percentage of the Fund's assets
committed to margin and option premiums, and (ii) the Fund may enter into
non-hedging transactions, provided that the Fund not enter into such
transactions for yield enhancement or risk management purposes if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
existing futures positions and option premiums would exceed 5% of the market
value of its liquidating value, after taking into account unrealized profits and
unrealized losses on any such transactions.
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When the Fund purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
ensuring that the use of such futures is unleveraged.
Restrictions on OTC Options. The Fund will engage in OTC options,
including over-the-counter stock index options, over-the-counter foreign
currency options and options on foreign currency futures, only with financial
institutions or entities 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 Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Fund has adopted an investment policy
pursuant to which it will not purchase or sell OTC options (including OTC
options on futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
Fund, the market value of the underlying securities covered by OTC call options
currently outstanding which were sold by the Fund and margin deposits on the
Fund's existing OTC options on futures contracts exceed 15% (10% to the extent
required by certain state laws) of the net assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Fund to
a primary United States Government securities dealer recognized by the Federal
Reserve Bank of New York and the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is equal
to the repurchase price less the amount by which the option is 'in-the-money'
(i.e., current market value of the underlying security minus the option's strike
price). The repurchase price with primary dealers is typically a formula price
which is generally based on a multiple of the premium received for the option,
plus the amount by which the option is 'in-the-money.' This policy as to OTC
options is not a fundamental policy of the Fund and may be amended by the Board
of Trustees of the Fund without the approval of the Fund's shareholders.
However, the Fund will not change or modify this policy prior to change or
modification by the Securities and Exchange 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 hedged securities or currencies, the Fund will experience a gain or
loss which will not be completely offset by movements in the price of the
subject of the hedge. The successful use of options and futures also depends on
the 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 Fund 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 Fund 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 Fund 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 or, in the case of over-the-counter
transactions, the Investment Adviser believes the Fund can receive on each
business day a bid or offer. However, there can be no assurance that a liquid
secondary market will exist at any specific time. Thus, it
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<PAGE>
may not be possible to close an options or futures position. The inability to
close options and futures positions also could have an adverse impact on the
Fund's ability to hedge effectively its portfolio. There is also the risk of
loss by the Fund of margin deposits or collateral in the event of bankruptcy of
a futures commission merchant with whom the Fund 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 Fund's
portfolio.
Because the Fund 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 Fund's portfolio turnover.
OTHER INVESTMENT PRACTICES
Portfolio Transactions. In executing portfolio transactions, the
Investment Adviser seeks to obtain the best net results for the Fund, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning a
block of securities. While the Investment Adviser generally seeks reasonably
competitive commission rates, the Fund does not necessarily pay the lowest
commission or spread available. The Fund has no obligation to deal with any
broker or group of brokers in the execution of transactions in portfolio
securities. Under the Investment Company Act of 1940, as amended (the
'Investment Company Act'), persons affiliated with the Fund and persons who are
affiliated with such affiliated persons, including Merrill Lynch, are prohibited
from dealing with the Fund as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the
Securities and Exchange Commission. Such persons may serve as the Fund's broker
in transactions conducted on an exchange and in over-the-counter transactions
conducted on an agency basis and may receive brokerage commissions from the
Fund. In addition, consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., the Fund may consider sales of shares
of the Fund as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund. It is expected that the majority of the
shares of the Fund will be sold by Merrill Lynch. Brokerage commissions and
other transaction costs on foreign stock exchange transactions are generally
higher than in the United States, although the Fund will endeavor to achieve the
best net results in effecting its portfolio transactions.
Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. Under a repurchase agreement, the bank or primary dealer
or an affiliate thereof agrees, upon entering into the contract, to repurchase
the security at a mutually agreed upon time and price in a specified currency,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period
although it may be affected by currency fluctuations. If the bank or dealer were
to default on its obligation under a repurchase agreement, the Fund may
experience delay or difficulty in exercising its rights to realize upon the
security and might incur a loss if the value of the security has declined. The
Fund might also incur disposition costs in liquidating the security. The Fund
may not invest more than 15% (or 10% to the extent
11
<PAGE>
required by state law) of its net assets in repurchase agreements maturing in
more than seven days, together with all other illiquid securities. In all
instances, the Fund takes possession of the underlying securities when investing
in repurchase agreements.
Illiquid Securities. The Fund may not invest in securities which cannot be
readily resold because of legal or contractual restrictions or which are
otherwise not readily marketable, including repurchase agreements and purchase
and sale contracts maturing in more than seven days, if at the time of
acquisition more than 15% of its net assets (or 10% to the extent required by
state law) would be invested in such securities. Securities which the Fund has
the right to put to the issuer or a standby bank or broker and receive the
principal amount of redemption price thereof less transaction costs, on no more
than seven days' notice or when the Fund has the right to convert such
securities into a readily marketable security in which it could otherwise invest
upon not less than seven days' notice, are not subject to this restriction. The
Fund may purchase, without regard to the foregoing limitation, securities which
are not registered under the Securities Act of 1933, as amended (the 'Securities
Act'), but can be offered and sold to 'qualified institutional buyers' as
defined under Rule 144A under the Securities Act ('Rule 144A Securities'),
provided that the Fund's Board of Trustees determines that such securities are
liquid.
Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the United States
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
this loan, the Fund receives the income on both the loaned securities and the
collateral and thereby increases its yield. In the event that the borrower
defaults on its obligation to return borrowed securities because of insolvency
or otherwise, the Fund could experience delays and costs in gaining access to
the collateral and could suffer a loss to the extent the value of the collateral
falls below the market value of the borrowed securities.
INVESTMENT RESTRICTIONS
The Fund has adopted a number of restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act.
Among the more significant restrictions, the Fund may not:
--Invest in the securities of any one issuer if, immediately after and
as a result of such investment the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the Fund's total assets, taken at
market value, except that such restriction shall not apply to securities
issued or guaranteed by the United States Government or any of its agencies
or instrumentalities.
--Invest in the securities of any single issuer if, immediately after
and as a result of such investment, the Fund owns more than 10% of the
outstanding voting securities of such issuer.
--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.
Nothing in the foregoing investment restrictions shall be deemed to
prohibit the Fund from purchasing the securities of any issuer pursuant to the
exercise of subscription rights distributed to the Fund by the issuer, except
that no such purchase may be made if as a result the Fund will no longer be a
diversified investment company as defined in the Investment Company Act or fail
to meet the diversification requirements of the Internal Revenue Code of 1986,
as amended.
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Trustees of the Fund consist of six individuals, five of whom are not
'interested persons' of the Fund as defined in the Investment Company Act. The
Trustees are responsible for the overall supervision of the operations of the
Fund and perform the various duties imposed on the directors of investment
companies by the Investment Company Act.
The Trustees are:
ARTHUR ZEIKEL*--President of Merrill Lynch Asset Management, L.P., ('MLAM')
and its affiliate, Fund Asset Management, L.P. ('FAM'); President and
Director of Princeton Services, Inc.; Executive Vice President of
Merrill Lynch; Executive Vice President of Merrill Lynch & Co., Inc.
('ML & Co.'); Director of Merrill Lynch Funds Distributor, Inc.
JAMES H. BODURTHA--Chairman and CEO, China Enterprise Management
Corporation.
HERBERT I. LONDON--John M. Olin Professor of Humanities, Gallatin Division
of New York University.
ROBERT R. MARTIN--Director, WTC Industries, Inc.
JOSEPH L. MAY--Attorney in private practice.
ANDRE F. PEROLD--Professor, Harvard Business School.
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* Interested person, as defined by the Investment Company Act, of the Fund.
INVESTMENT ADVISER
The Fund's investment adviser is Merrill Lynch (Suisse) Investment
Management S.A. The Investment Adviser, located at 18 Rue De Contamines, 1211
Geneva 3, Switzerland, is a subsidiary of Merrill Lynch Bank (Suisse), S.A.
which is, in turn, an indirect subsidiary of ML & Co., a financial services
holding company. Affiliates of the Investment Adviser serve as investment
adviser or investment manager to over 130 registered investment companies with
an aggregate of over $196.4 billion in assets as of January 31, 1996. As
compensation for its services to the Fund, the Investment Adviser receives
monthly compensation at the annual rate of 0.75% of the average daily net assets
of the Fund. For the fiscal year ended October 31, 1995, the fee paid by the
Fund to the Investment Adviser was $1,644,757 (based upon average net assets of
approximately $219.3 million and the effective rate was 0.75%). At January 31,
1996, the net assets of the Fund aggregated approximately $207.9 million. At
this asset level, the annual management fee would aggregate approximately $1.6
million at an effective annual rate of 0.75%.
FAM and Merrill Lynch Asset Management U.K. Limited ('MLAM U.K.') have been
retained as sub-advisers (the 'Sub-Advisers') to the Fund. Pursuant to separate
sub-advisory agreements with the Investment Adviser (the 'Sub-Advisory
Agreements'), the Sub-Advisers provide investment advisory services with respect
to the management of the Fund's cash position. The Fund does not pay any
incremental fee for this service. For the fiscal year ended October 31, 1995,
the Investment Adviser did not pay any fees to MLAM U.K. and FAM for investment
advisory services provided to the Fund. FAM is located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and MLAM U.K. is located at Ropemaker Place,
25 Ropemaker Street, London, England. FAM is a wholly-owned subsidiary of ML &
Co. ML & Co. and Princeton Services, Inc. are 'controlling
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<PAGE>
persons' of FAM as defined under the Investment Company Act because of their
power to exercise a controlling influence over its management policies. MLAM
U.K. is an indirect subsidiary of ML & Co.
Juerg Boller is primarily responsible for the day-to-day management of the
Fund's portfolio and has served in that capacity since inception of the Fund.
Mr. Boller has served as Director of the Investment Adviser and Deputy General
Manager of Merrill Lynch Bank (Suisse) S.A. since 1992. From 1988 to 1992, he
was Manager of Merrill Lynch Bank (Suisse) S.A. Mr. Boller has also been
responsible for the management and oversight of each of the Sub-Advisers since
inception of the Fund.
The Fund pays certain expenses incurred in its operations, including, among
other things, the investment advisory fees, legal and audit fees, unaffiliated
trustees' fees and expenses, registration fees, custodian and transfer agency
fees, accounting and pricing costs, and certain of the costs of printing
proxies, shareholder reports, prospectuses and statements of additional
information. For the fiscal year ended October 31, 1995, the ratio of total
expenses, excluding account maintenance and distribution fees, to average net
assets was 1.35% for the shares.
ADMINISTRATOR
Princeton Administrators, LP (the 'Administrator'), an indirect subsidiary
of ML & Co., acts as the Fund's administrator under the terms of the
administration agreement between the Administrator and the Fund (the
'Administration Agreement'). The Administrator performs or arranges for the
performance of certain administrative services (i.e., services other than
investment advice and related portfolio activities) necessary for the operation
of the Fund, including maintaining the books and records of the Fund, preparing
reports and other documents required by United States federal, state and other
applicable laws and regulations to maintain the registration of the Fund and its
shares and providing the Fund with administrative office facilities. For the
services rendered to the Fund and the facilities furnished, the Fund pays the
Administrator a monthly fee equal to 0.25% of the Fund's average daily net
assets. Also, accounting services are provided to the Fund by the Administrator,
and the Fund reimburses the Administrator for its costs in connection with such
services on a semi-annual basis. For the fiscal year ended October 31, 1995, the
total fee paid by the Fund to the Administrator was $548,251.
The principal address of the Administrator is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. (the 'Transfer Agent'), which
is an indirect subsidiary of ML & Co., acts as the Fund's transfer agent
pursuant to a Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement (the 'Transfer Agency Agreement'). Pursuant to the
Transfer Agency Agreement, the Transfer Agent is responsible for the issuance,
transfer and redemption of shares and the opening and maintenance of shareholder
accounts. Pursuant to the Transfer Agency Agreement, the Transfer Agent receives
a fee of $11.00 per shareholder account and is entitled to reimbursement for
out-of-pocket expenses incurred by it under the Transfer Agency Agreement. For
the fiscal year ended October 31, 1995, the total fee paid by the Fund to the
Transfer Agent was $65,263. At January 31, 1996, the Fund had 4,069 shareholder
accounts. At this level of accounts, the annual fee payable to the Transfer
Agent would aggregate $44,759, plus miscellaneous and out-of-pocket expenses.
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CODE OF ETHICS
The Board of Trustees of the Fund has adopted a Code of Ethics under Rule
17j-1 of the 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 Fund within
periods of trading by the Fund in the same (or equivalent) security (15 or 30
days depending upon the transaction).
PURCHASE OF SHARES
Shares of the Fund are offered continuously for sale to clients of the
Merrill Lynch Consults(Registered) Service by Merrill Lynch Funds Distributor,
Inc., an indirect subsidiary of ML & Co. (the 'Distributor') and Merrill Lynch.
The minimum initial purchase is $5,000, and the minimum subsequent purchase is
$1,000. Shares of the Fund are offered to clients of Merrill Lynch Strategic
Portfolio Advisor(Service Mark) Service on the same terms as offered to clients
of Merrill Lynch Consults(Registered) Service. Merrill Lynch Strategic Portfolio
Advisor(Service Mark) Service is a service designed by Merrill Lynch to provide
business and individual clients with a comprehensive package of consulting,
investment and account services.
The Fund offers its shares at a public offering price equal to the next
determined net asset value per share. As to purchase orders received by
securities dealers, 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 (generally, 4:00 P.M., New York time), on the day the orders are
placed with the Distributor, provided the orders are received by the Distributor
prior to 12:00 P.M., New York time, on that day. The applicable offering price
for purchase orders is based upon the net asset value of the Fund next
determined after receipt of the purchase order by the Distributor. If the
purchase orders are not received by the Distributor prior to 12:00 P.M., New
York time, such orders shall be deemed received on the next business day. Any
order may be rejected by the Distributor or the Fund. The Fund or the
Distributor may suspend the continuous offering of the Fund's shares to the
general public at any time in response to conditions in the securities markets
or otherwise and may thereafter resume such offering from time to time. Merrill
Lynch may charge its customers a processing fee (presently $4.85) to confirm a
sale of shares to such customers. Such fee is presently waived for clients of
the Merrill Lynch Consults(Registered) Service and of the Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service.
DISTRIBUTION PLAN
Pursuant to a distribution plan adopted by the Fund pursuant to Rule 12b-1
under the Investment Company Act (the 'Distribution Plan'), the Fund pays the
Distributor ongoing distribution and account maintenance fees, which are accrued
daily and paid monthly, at the annual rates of 0.75% and 0.25%, respectively, of
the average daily net assets of the Fund. Pursuant to a sub-agreement with the
Distributor, Merrill Lynch also provides account maintenance activities and
distribution services to the Fund. The ongoing account maintenance fee
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<PAGE>
compensates the Distributor and Merrill Lynch for providing account
maintenance activities to the Fund's shareholders. The ongoing distribution
fee compensates the Distributor and Merrill Lynch for providing shareholder
and distribution services and bearing distribution related expenses of the
Fund, including payments to financial consultants for selling shares of the
Fund. For the fiscal year ended October 31, 1995, the Fund paid the
Distributor $2,193,008 pursuant to the Distribution Plan, of which $1,644,757
was paid to Merrill Lynch for providing distribution-related services and
$548,251 was paid to Merrill Lynch for providing account maintenance services
to the Fund. At January 31, 1996, the net assets of the Fund subject to the
Distribution Plan aggregated approximately $207.9 million. At this asset
level, the annual fee payable pursuant to the Distribution Plan would
aggregate approximately $2.1 million.
The payments under the Distribution Plan are based upon a percentage of
average daily net assets regardless of the amount of expenses incurred and,
accordingly, distribution-related revenues may be more or less than
distribution-related expenses. Information with respect to the
distribution-related revenues and expenses is presented to the Trustees for
their consideration in connection with their deliberations as to the continuance
of the Distribution Plan. This information is presented annually as of December
31 of each year on a 'fully allocated accrual' basis and quarterly on a 'direct
expense and revenue/cash' basis. On the fully allocated accrual basis, revenues
consist of the distribution fees and expenses consist of financial consultant
compensation, branch office and regional operation center selling and
transaction processing expenses, advertising, sales promotion and marketing
expenses, corporate overhead and interest expense. On the direct expense and
revenue/cash basis, revenues consist of the distribution fees and the expenses
consist of financial consultant compensation. As of December 31, 1994, the last
date at which such fully allocated accrual data is available, the fully
allocated accrual expenses incurred by the Distributor and Merrill Lynch since
the Fund commenced operations on September 14, 1992 exceeded revenues for such
period by approximately $340,000 (0.14% of net assets at that date). As of
October 31, 1995, direct cash revenues for the period since commencement of
operations exceeded direct cash expenses by approximately $3,298,822 (1.67% of
net assets at that date).
The Fund has no obligation with respect to distribution-related expenses
incurred by the Distributor and Merrill Lynch and there is no assurance that the
Board of Trustees of the Fund will approve the continuance of the Distribution
Plan from year to year. However, the Distributor intends to seek annual
continuation of the Distribution Plan. In their review of the Distribution Plan,
the Trustees will not be asked to take into consideration expenses incurred in
connection with the distribution of shares of other funds for which the
Distributor acts as distributor.
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 but not the account
maintenance fee. As applicable to the Fund, the maximum sales charge rule limits
the aggregate distribution fee payments payable by the Fund to (1) 6 1/4% of the
eligible gross sales of shares of the Fund (defined to exclude shares issued
pursuant to dividend reinvestments) plus (2) interest on the unpaid balance at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from payment of the distribution fee). To the extent
payments would exceed the maximum permitted by the NASD, the Fund will not make
further payments of the distribution fee; however, the Fund will continue to
make payments of the account maintenance fee. In certain circumstances, the
amount payable pursuant to the voluntary maximum may exceed the amount payable
under the NASD formula. In such circumstances payment in excess of the amount
payable under the NASD formula will not be made.
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REDEMPTION OF SHARES
The Fund is required to redeem for cash all full and fractional shares of
the Fund 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. There will be no charge for redemption if the
redemption request is sent directly to the Transfer Agent. Shareholders
liquidating their holdings will receive upon redemption all dividends reinvested
through the date of redemption. The value of shares at the time of redemption
may be more or less than the shareholder's cost, depending on the market value
of the securities held by the Fund at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so 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 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' as such 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. 'Eligible guarantor institution(s)' include
certain banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations. Notarized signatures
are not sufficient. In certain instances, the Transfer Agent may require
additional documents, such as, but not limited to, trust instruments, death
certificates, appointments as executor or administrator, or certificates of
corporate authority. For shareholders redeeming directly with the Transfer
Agent, payment will be mailed within seven days of receipt of a proper notice of
redemption.
At various times the Fund may be requested to redeem shares for which it
has not yet received good payment. The Fund 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 United States bank) has been collected for the
purchase of such shares, which will not exceed 10 days.
REPURCHASE
The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request for
repurchase is received by the dealer prior to the close of business on the New
York Stock Exchange on the day received and such request is received by the Fund
from such dealer not later than 30 minutes after the close of business on the
New York Stock Exchange (generally, 4:00 P.M., New York time), on the same day.
Dealers have the responsibility to submit such repurchase requests to the Fund
not later than 30 minutes after the close of business on the New York Stock
Exchange in order to obtain that day's closing price.
17
<PAGE>
The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund. Securities firms which do
not have selected dealer agreements with the Distributor, however, may impose a
transaction charge on the shareholder for transmitting the notice of repurchase
to the Fund. Merrill Lynch may charge its customers a processing fee (presently
$4.85) to confirm a repurchase of shares to such customers. Such fee is
presently waived for clients of the Merrill Lynch Consults(Registered) Service
and of Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service.
Redemptions directly through the Fund's Transfer Agent are not subject to a
processing fee. The Fund 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 Fund may redeem shares as set forth above.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
designed to facilitate investment in its shares. 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 Fund, the Distributor or Merrill
Lynch.
Investment Account. Distribution of shares of the Fund (other than
reinvestment of dividends and capital gains distributions of the Fund) is
limited to current clients of the Merrill Lynch Consults(Registered) Service and
of Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service. If a client
terminates the Merrill Lynch Consults(Registered) Service or the Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service, the client's shares may be
retained in the client's Merrill Lynch brokerage account, subject to the consent
of 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
interested in transferring their shares from Merrill Lynch to another brokerage
firm 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.
If the new brokerage firm is willing to accommodate the shareholder in this
manner, the shareholder must request that the shareholder 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. Shareholders considering
transferring a tax-deferred retirement account such as an individual retirement
account from Merrill Lynch to another brokerage firm or financial institution
should be aware that, if the firm to which the retirement account is to be
transferred will not take delivery of shares of the Fund, a shareholder must
either redeem the shares 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.
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.
Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions are automatically reinvested in full
and fractional shares of the Fund at the net asset value per share next
determined on the ex-dividend date of such dividend or distribution. A
shareholder may at any time, by telephone (1-800-MER-FUND) or by written
notification to Merrill Lynch if the shareholder's account is maintained with
Merrill Lynch, or 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.
18
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Merrill Lynch Asset Information and Measurement(Registered) Service.
Clients of the Merrill Lynch Consults(Registered) Service and the Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service are currently provided,
without incremental charge, the Merrill Lynch Asset Information and
Measurement(Registered) Service ('AIM(Registered)'). AIM(Registered) currently
provides, through quarterly reports, the ability to monitor and evaluate
performance of a Merrill Lynch Consults(Registered) Service or Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service account, including any shares
of the Fund held in the account, and analyzes the risk taken to achieve the
return. Shares of the Fund must be held in the account for a full quarterly
period to be subject to such evaluation.
PERFORMANCE DATA
From time to time the Fund 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 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.
The Fund may also quote total return and aggregate total return performance
data for various specified time periods. Such data will be calculated
substantially as described above, except that the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return. 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 a longer period of time. The Fund's total return may be
expressed either as a percentage or as a dollar amount in order to illustrate
the effect of such total return on a hypothetical $1,000 investment in the Fund
at the beginning of each specified period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, the Morgan
Stanley Europe, Australia, Far East Index or performance data published by
Lipper Analytical Services, Inc., Money Magazine, U.S. News & World Report,
Business Week, Morningstar Publications, Inc., CDA Investment Technology, Inc.,
Ibbotson Associates, Forbes Magazine and Fortune Magazine or other industry
publications. From time to time, the Fund may include the Fund's Morningstar
risk-adjusted performance rating in advertisements or supplemental sales
literature. As with other performance data, performance comparisons should not
be considered indicative of the Fund's relative performance for any future
period.
19
<PAGE>
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Fund'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 Fund's shareholders at least annually. Dividends will be reduced by
account maintenance, distribution and transfer agency fees payable by
shareholders of the Fund. See 'Additional Information--Determination of Net
Asset Value.' Dividends and distributions may be reinvested automatically in
shares of the Fund at net asset value. Shareholders may elect in writing to
receive any such dividends or distributions, or both, in cash. Dividends and
distributions are taxable to shareholders as discussed below whether they are
reinvested in shares of the Fund or received in cash. See 'Shareholder
Services--Automatic Reinvestment of Dividends and Capital Gains Distributions'
for information as to how to elect either dividend reinvestment or cash
payments.
Certain gains or losses attributable to foreign currency gains or losses
from certain forward contracts may increase or decrease the amount of the Fund's
income available for distribution to shareholders. If such losses exceed other
income during a taxable year, (a) the Fund would not be able to make any
ordinary dividend distributions, and (b) distributions made before the losses
were realized would be recharacterized as a return of capital to shareholders,
rather than as an ordinary dividend, reducing each shareholder's tax basis in
his Fund shares for Federal income tax purposes. See 'Additional
Information--Taxes.'
TAXES
The Fund has qualified and intends to continue to qualify for the special
tax treatment afforded regulated investment companies ('RICs') under the
Internal Revenue Code of 1986, as amended (the 'Code'). If it so qualifies, the
Fund (but not its shareholders) will not be subject to Federal income tax on the
part of its net ordinary income and net realized capital gains which it
distributes to shareholders. The Fund intends to distribute substantially all of
such income.
Dividends paid by the Fund from its ordinary income and distributions of
the Fund's net realized short-term capital gains (together referred to hereafter
as 'ordinary income dividends') are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains are
taxable to a shareholder as long-term capital gains, regardless of the length of
time the shareholder has owned Fund shares.
Dividends and distributions are taxable to shareholders even though they
are reinvested in additional shares of the Fund. Not later than 60 days after
the close of its taxable year, the Fund will provide its shareholders with a
written notice designating the amounts of any dividends or capital gains
distributions. If the Fund pays a dividend in January which was declared in the
previous October, November or December to shareholders of record in such a
month, then such dividend or distribution will be treated for tax purposes as
being paid by the RIC and received by its shareholders on December 31 of the
year in which the dividend was declared.
Ordinary income dividends paid by the Fund to shareholders who are
non-resident aliens will be subject to a 30% United States 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. Non-resident shareholders are urged to consult
their own tax advisers concerning the applicability of the United States
withholding tax.
20
<PAGE>
Investment income received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Certain
shareholders may be able to claim United States foreign tax credits with respect
to such taxes, subject to certain provisions and limitations contained in the
Code. If more than 50% in value of the Fund's total assets at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their proportionate share
of such taxes in their United States income tax returns as gross income, treat
such proportionate share as taxes paid by them, and deduct such proportionate
share in computing their taxable incomes or, alternatively, subject to certain
limitations, use them as foreign tax credits against their United States income
taxes. No deductions for foreign taxes, however, may be claimed by noncorporate
shareholders who do not itemize deductions. Foreign tax credits cannot be
claimed by certain retirement accounts. A shareholder that is a non-resident
alien individual or a foreign corporation may be subject to United States
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
United States tax for the foreign taxes treated as having been paid by such
shareholder. The Fund will report annually to its shareholders the amount per
share of such taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on reportable dividends, capital gains distributions and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
The Fund may invest in equity securities of investment companies (or
similar investment entities) organized under foreign law or of ownership
interests in special accounts, trusts or partnerships. If the Fund purchases
shares of an investment company (or similar investment entity) organized under
foreign law, the Fund will be treated as owning shares in a passive foreign
investment company ('PFIC') for United States Federal income tax purposes. The
Fund may be subject to United States Federal income tax, and an additional tax
in the nature of interest, on a portion of distributions from such company and
on gain from the disposition of such shares (collectively referred to as 'excess
distributions'), even if such excess distributions are paid by the Fund as a
dividend to its shareholders. The Fund may be eligible to make an election with
respect to certain PFICs in which it owns shares that will allow it to avoid the
taxes on excess distributions. However, such election may cause the Fund to
recognize income in a particular year in excess of the distributions received
from such PFICs.
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 United States
dollar). In general, foreign currency gains or losses from 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 Fund may elect capital gain or loss treatment
for such transactions. In general, however, Code Section 988 gains or losses
will increase or decrease the amount of the Fund's investment company taxable
income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Fund would not be able to make any ordinary
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 each shareholder's basis in his Fund
shares.
21
<PAGE>
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.
Shareholders are urged to consult their tax advisers as to whether any
portion of the dividends they receive from the Fund is exempt from state income
tax and as to any other specific questions as to Federal, foreign, state or
local taxes. Foreign investors should consider applicable foreign taxes in their
evaluation of an investment in the Fund.
DETERMINATION OF NET ASSET VALUE
Net asset value per share is determined once daily 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 net asset value is computed by dividing the market value of the securities
held by the Fund plus any cash or other assets (including interest and dividends
accrued but not yet received) minus all liabilities (including accrued expenses)
by the total number of shares outstanding at such time. Expenses, including the
fees payable to the Investment Adviser and the Administrator and the account
maintenance fee and distribution fee payable to the Distributor, are accrued
daily.
Portfolio securities, which are traded on the 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 Trustees 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. Securities which are traded both in the OTC market and on a stock
exchange will be 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. Securities
and assets for which market quotations are not readily available are valued at
fair market value as determined in good faith by or under the direction of the
Board of Trustees of the Fund.
ORGANIZATION OF THE FUND
The Fund is an unincorporated business trust organized on June 26, 1992
under the laws of Massachusetts. It is a diversified, open-end management
investment company comprised of separate classes. The Trustees are authorized to
issue an unlimited number of full and fractional shares of beneficial interest
of $.10 par value of different classes. Shareholder approval is not required for
the authorization of additional classes of shares of the Fund. The Fund has
received an order from the Securities and Exchange Commission permitting the
issuance and sale of multiple classes of shares.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Trustees and
any other matter submitted to a shareholder vote. The Fund does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
does not require shareholders to act upon any of the following matters: (i)
election of Trustees; (ii) approval of an investment
22
<PAGE>
advisory agreement; (iii) approval of a distribution agreement; and (iv)
ratification of selection of independent auditors. Voting rights for Trustees
are not cumulative. Shares issued are fully paid and non-assessable and have no
preemptive or conversion rights. Each share is entitled to participate equally
in dividends and distributions declared by the Fund and in the net assets of the
Fund upon liquidation or dissolution after satisfaction of outstanding
liabilities. Shareholders may cause a meeting of shareholders to be held for the
purpose of voting on the removal of Trustees at the request of 10% of the
outstanding shares of the Fund. A Trustee 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 Trustees.
The Declaration of Trust of the Fund contemplates that the Fund may be
terminated, solely upon a vote of the Board of Trustees of the Fund, and without
a vote of shareholders, within five years after it commences operations if the
Fund does not have net assets in excess of $100 million. Shareholders should be
aware that their investment in the Fund may be liquidated in such event. Among
other consequences, this could result in a taxable event for shareholders.
The Declaration of Trust establishing the Fund dated June 26, 1992 and
amended July 31, 1992, a copy of which, together with all amendments thereto
(the 'Declaration'), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name 'Merrill Lynch Consults
International Portfolio' refers to the Trustees under the Declaration
collectively as trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of the Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of said Fund but the 'Trust Property'
only shall be liable.
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, Florida 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this, please call your Merrill Lynch financial
consultant or Merrill Lynch Financial Data Services, Inc. at 800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
23
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24
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25
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26
<PAGE>
ADVISER
Merrill Lynch (Suisse) Investment Management S.A.
18 Rue De Contamines
1211 Geneva 3, Switzerland
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
P.O. Box 9081
Princeton, New Jersey 08543-9081
ADMINISTRATOR
Princeton Administrators, LP
800 Scudders Mill Road
Plainsboro, New Jersey
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
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Ernst & Young LLP
202 Carnegie Center
Princeton, New Jersey 08543-5321
COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND, THE INVESTMENT ADVISER, THE ADMINISTRATOR OR
THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table...................................... 2
Financial Highlights........................... 3
Risks and Special Considerations............... 4
Investment Objective and Policies.............. 5
Management of the Fund......................... 13
Board of Trustees............................ 13
Investment Adviser........................... 13
Administrator................................ 14
Transfer Agency Services..................... 14
Code of Ethics............................... 15
Purchase of Shares............................. 15
Distribution Plan............................ 15
Redemption of Shares........................... 17
Shareholder Services........................... 18
Performance Data............................... 19
Additional Information......................... 20
Dividends and Distributions.................. 20
Taxes........................................ 20
Determination of Net Asset Value............. 22
Organization of the Fund..................... 22
Shareholder Reports.......................... 23
Shareholder Inquiries........................ 23
</TABLE>
Code # 16458-0296
Prospectus
[LOGO]
- ------------------------------------------------------
MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
INVESTMENT ADVISER:
MERRILL LYNCH (SUISSE) INVESTMENT MANAGEMENT S.A.
February 28, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This Prospectus should be
retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 o PHONE NO. (609) 282-2800
------------------------
Merrill Lynch Consults International Portfolio, a Massachusetts business
trust (the 'Fund'), is a diversified, open-end management investment company,
seeking the highest total investment return consistent with prudent risk through
investment in a diversified international portfolio of equity securities,
other than United States securities. Total investment return is the
aggregate of income and capital value changes. Distribution of shares of the
Fund is limited to current clients of the Merrill Lynch Consults(Registered)
Service and of the Merrill Lynch Strategic Portfolio Advisor(Service Mark)
Service. The Fund is designed for Merrill Lynch Consults(Registered) Service and
Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service clients who seek
to internationally diversify a portion of their investment portfolio.
The Fund offers shares which may be purchased at a price equal to the next
determined net asset value per share. Shares of the Fund are not subject to any
sales charge, but are subject to an ongoing account maintenance fee at an annual
rate of 0.25% of average daily net assets and an ongoing distribution fee at an
annual rate of 0.75% of average daily net assets.
------------------------
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the Prospectus of the Fund, dated
February 28, 1996 (the 'Prospectus'), which has been filed with the Securities
and Exchange Commission and can be obtained, without charge, by calling or
writing the Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
------------------------
MERRILL LYNCH (SUISSE) INVESTMENT MANAGEMENT S.A.--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
------------------------
The date of this Statement of Additional Information is February 28, 1996.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek the highest total
investment return consistent with prudent risk through investment in a
diversified international portfolio of equity securities, other than United
States securities. Reference is made to 'Investment Objective and Policies'
in the Prospectus for a discussion of the investment objective and policies
of the Fund.
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 Fund's portfolio as a whole. This negative correlation also may offset
unrealized gains the Fund has derived from movements in a particular market. To
the extent the various markets move independently, total portfolio volatility
may be 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.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, Merrill Lynch (Suisse) Investment Management S.A. (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, including changes in asset
allocation under certain market conditions, the Fund's portfolio turnover may be
higher than that of other investment companies. Accordingly, while the Fund
anticipates that its annual turnover rate should not exceed 100% under normal
conditions, it is impossible to predict portfolio turnover rates. The portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases or sales of securities
whose maturities at the time of acquisition were one year or less) by the
monthly average value of the securities in the portfolio during the year. The
Fund is subject to the Federal income tax requirement that less than 30% of the
Fund's gross income must be derived from gains from the sale or other
disposition of securities held for less than three months.
The Fund may invest in the securities of foreign issuers in the form of
depository receipts, including American Depository Receipts (ADRs) and European
Depository Receipts (EDRs), Global Depository Receipts (GDRs), or other
securities convertible into securities of foreign issuers. Depository receipts
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. Generally, ADRs, in registered form, are designed
for use in the United States 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.
2
<PAGE>
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 Fund may seek
to hedge its portfolio against movements in the equity markets and exchange
rates between currencies through the use of options and futures transactions and
forward foreign exchange transactions. The Fund has authority to write (i.e.,
sell) covered call options on its portfolio securities, purchase put options on
securities and engage in transactions in stock index options, stock index
futures and financial futures, and related options on such futures. The Fund may
also deal in forward foreign exchange transactions and foreign currency options
and futures, including related options on such futures, and securities the
values of which are indexed to market values of equity securities, indices of
equity securities, currencies or currency units. The Fund 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 Fund will engage in these transactions only for
hedging purposes, the options and futures portfolio strategies of the Fund will
not subject the Fund to the risks frequently associated with the speculative use
of option and futures transactions. While the Fund's use of hedging strategies
is intended to reduce the volatility of the net asset value of Fund shares, the
Fund's net asset value will fluctuate. There can be no assurance that the Fund's
hedging transactions will be effective. The following is further information
relating to portfolio strategies involving options and futures the Fund may
utilize.
Hedging Investment Risks. The Fund 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 Fund, in
return for a premium, gives another party a right to buy specified securities
owned by the Fund at a specified future date and price set at the time of the
contract. By writing covered call options, the Fund gives up the opportunity,
while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect unless the Fund effects a closing purchase transaction. A closing
purchase transaction cancels out the Fund's position as the writer of an option
by means of an offsetting purchase of an identical option prior to the
expiration of the option it has written. 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 Fund may also purchase put options to hedge against a decline in the
market value of its equity holdings. By buying a put the Fund has a right to
sell the underlying security at the exercise price, thus limiting the Fund's
risk of loss through a decline in the market value of the security until the put
option expires. The amount of any appreciation in the value of the underlying
security will be offset partially by the amount of the premium paid for the put
option and any related transaction costs. Prior to its expiration, a put option
may be sold in a closing sale transaction, 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
3
<PAGE>
cancels out the Fund's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased.
The Fund also may engage in transactions in stock index options and
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 generally about 5% of the contract amount, 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 contracts fluctuates making the long and short
positions in the futures contracts 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 Fund has received an order from the Securities and Exchange 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 Fund and
commodities brokers with respect to initial and variation margin. Section 18(f)
of the Investment Company Act prohibits an open-end investment company such as
the Fund from issuing a 'senior security' other than a borrowing from a bank.
The staff of the Securities and Exchange Commission has in the past indicated
that a futures contract may be a 'senior security' under the Investment Company
Act.
Risk Factors in Options and Futures Transactions. Utilization of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts and movements in the price of the currency which is
the subject of the hedge. If the price of the futures contract moves more or
less than the price of the currency, the Fund will experience a gain or loss
which will not be completely offset by movements in the price of the currency
which is the subject of the hedge.
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 Fund will enter into an option or futures transaction on an exchange
only if there appears to be a liquid secondary market for such options or
futures. However, there can be no assurance that a liquid
4
<PAGE>
secondary market will exist for any particular call or put option or futures
contract at any specific time. Thus, it may not be possible to close an option
or futures position. The Fund will acquire only over-the-counter options for
which management believes the Fund can receive on each business day a bid or
offer. In the case of a futures position or an option on a futures position
written by the Fund, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In such
situations, if the Fund has insufficient cash, it may have to sell portfolio
securities to meet daily variation margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to take or make
delivery of the currency underlying futures contracts it holds. The inability to
close options and futures positions also could have an adverse impact on the
Fund's ability to effectively hedge its portfolio. There is also the risk of
loss by the Fund of margin deposits in the event of bankruptcy of a broker with
whom the Fund has an open position in a futures contract or related option.
The exchanges on which the Fund 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 Fund's portfolio.
Hedging Foreign Currency Risks. Generally, the foreign exchange
transactions of the Fund 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 Fund has
authority to deal in forward foreign exchange between currencies of various
countries and the dollar as a hedge against possible variations in the foreign
exchange rate between these currencies. This is accomplished through contractual
agreements to purchase or to sell a specified currency at a specified future
date and price set at the time of the contract. The Fund's dealings in forward
foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities, the sale and redemption of shares of the Fund or the payment of
dividends and distributions by the Fund. Position hedging is the sale of forward
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. The Fund will not speculate in forward foreign exchange.
The Fund may not position hedge with respect to the currency of a particular
country to an extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio denominated or quoted
in that particular foreign currency. If the Fund enters into a position hedging
transaction, its custodian bank will place cash or liquid equity or debt
securities in a separate account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of such forward contract.
If the value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Fund's commitment with respect to such
contracts. The Fund will not attempt to hedge all of its portfolio positions and
will enter into such transactions
5
<PAGE>
only to the extent, if any, deemed appropriate by the Investment Adviser of the
Fund. The Fund will not enter into a forward contract with a term of more than
one year.
As discussed in the Prospectus, the Fund 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 Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currencies involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis, no fees or commissions are involved.
The United States government has from time to time in the past imposed
restrictions, through taxation and otherwise, on foreign investments by United
States investors such as the Fund. If such restrictions should be reinstituted,
it might become necessary for the Fund to invest all or substantially all of its
assets in United States securities. In such event, the Fund would review its
investment objective and investment policies to determine whether changes are
appropriate.
The Fund's ability and decisions to purchase or sell portfolio securities
may be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a daily
basis in United States dollars, the Fund intends to manage its portfolio so as
to give reasonable assurance that it will be able to obtain United States
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.
INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the Prospectus, the
Fund 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
Fund'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). The Fund may not:
1. Make investments for the purpose of exercising control or
management. Investments by the Fund in wholly-owned investment entities
created under the laws of certain countries will not be deemed the making
of investments for the purpose of exercising control or management.
2. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or
by purchase in the open market of securities of closed-end
6
<PAGE>
investment companies where no underwriter or dealer's commission or profit,
other than customary broker's commission, is involved and only if
immediately thereafter not more than (i) 3% of the total outstanding voting
stock of such company is owned by the Fund, (ii) 5% of the Fund's total
assets, taken at market value, would be invested in any one such company,
or (iii) 10% of the Fund's total assets, taken at market value, would be
invested in such securities. Investments by the Fund in wholly-owned
investment entities created under the laws of certain countries will not be
deemed an investment in other investment companies.
3. Purchase or sell real estate (including real estate limited
partnerships), except that the Fund may invest in securities secured by
real estate or interests therein or issued by companies, including real
estate investment trusts, which invest in real estate or interests therein.
4. Purchase any securities on margin, except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities. The payment by the Fund of initial or
variation margin in connection with futures or related options
transactions, if applicable, shall not be considered the purchase of a
security on margin.
5. Make short sales of securities or maintain a short position in
securities. This restriction does not apply to hedging transactions or
positions.
6. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of deposit, bankers'
acceptances and repurchase agreements and purchase and sale contracts or
other securities shall not be deemed to be the making of a loan, and except
further that the Fund may lend its portfolio securities as set forth in (7)
below.
7. Lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value, provided that such loans may be made only in
accordance with the guidelines set forth below.
8. Issue senior securities, borrow money or pledge its assets in
excess of 20% of its total assets taken at market value (including the
amount borrowed) and then only from a bank as a temporary measure for
extraordinary or emergency purposes including to meet redemptions or to
settle securities transactions. Usually only 'leveraged' investment
companies may borrow in excess of 5% of their assets; however, the Fund
will not borrow to increase income but only as a temporary measure for
extraordinary or emergency purposes including to meet redemptions or to
settle securities transactions which may otherwise require untimely
dispositions of Fund securities. The Fund will not purchase securities
while borrowings exceed 5% of total assets except (a) to honor prior
commitments or (b) to exercise subscription rights where outstanding
borrowings have been obtained exclusively for settlements of other
securities transactions. For the purpose of this restriction, collateral
arrangements with respect to the writing of options, and, if applicable,
futures contracts, options on futures contracts, and collateral
arrangements with respect to initial and variation margin are not deemed to
be a pledge of assets and neither such arrangements nor the purchase or
sale of futures or related options are deemed to be the issuance of a
senior security.
9. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which are otherwise not readily
marketable, including repurchase agreements and purchase and sale contracts
maturing in more than seven days, if at the time of acquisition more than
15% of its net assets
7
<PAGE>
would be invested in such securities. Securities which the Fund has the
right to put to the issuer or a stand-by bank or broker and receive the
principal amount of redemption price thereof less transaction costs, on no
more than seven days' notice or when the Fund has the right to convert such
securities into a readily marketable security in which it could otherwise
invest upon not less than seven days' notice, are not subject to this
restriction. The Fund may purchase, without regard to the foregoing
limitation, securities which are not registered under the Securities Act of
1933, as amended (the 'Securities Act'), but can be offered and sold to
'qualified institutional buyers,' as defined under Rule 144A under the
Securities Act ('Rule 144A securities'), provided that the Fund's Board of
Trustees determines that such securities are liquid.
10. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter in selling portfolio securities.
11. Purchase or sell interests in oil, gas or other mineral
exploration or development programs, except that the Fund may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or development activities.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Trustees, provide that the Fund may not:
(i) Invest in warrants if at the time of acquisition its investments
in warrants, valued at the lower of cost or market value, would exceed 5%
of the Fund's net assets; included within such limitation, but not to
exceed 2% of the Fund's net assets, are warrants which are not listed on
the New York or American Stock Exchange. For purposes of this restriction,
warrants acquired by the Fund in units or attached to securities may be
deemed to be without value.
(ii) Purchase or sell commodities or commodity contracts, except that
the Fund may deal in forward foreign exchange between currencies of the
different countries in which it may invest or such currencies and the
United States dollar and purchase and sell stock index and currency options
and warrants, stock index futures, financial futures and currency futures
contracts and related options on such futures.
(iii) Invest in securities of corporate issuers having a record,
together with predecessors, of less than three years of continuous
operation, if more than 5% of its total assets, taken at market value,
would be invested in such securities.
(iv) Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent described in the Fund's
Prospectus or in this Statement of Additional Information, as amended from
time to time.
(v) Purchase puts, calls, straddles, spreads and any combination
thereof if its net position in such securities would exceed 5% of the
Fund's total assets.
Notwithstanding the provisions of investment restriction (9) above, the
securities laws of certain states in which the Fund's shares are registered for
sale currently limit investment in the types of securities described in such
restriction (excluding 144A securities) to 10% of the Fund's net assets. The
Fund will comply with this 10% restriction for so long as it remains applicable.
8
<PAGE>
Subject to investment restriction (7) above, the Fund may from time to time
lend securities from its portfolio to brokers, dealers and financial
institutions such as banks and trust companies and receive collateral in cash or
securities issued or guaranteed by the United States government which will be
maintained in an amount equal to at least 100% of the current market value of
the loaned securities. Such cash will be invested in short-term securities,
which will increase the current income of the Fund. Such loans will not be for
more than 30 days and will be terminable at any time. The Fund will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights, subscription rights and rights to dividends,
interest or other distributions. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans. With respect to
the lending of portfolio securities, there is the risk of failure by the
borrower to return the securities involved in such transactions.
The Board of Trustees has established the policy that the Fund will not
knowingly purchase or retain the securities of any issuer if those individual
officers and Trustees of the Fund, the Investment Adviser, or the Distributor
for the Fund each owning beneficially more than one-half of 1% of the securities
of such issuer own in the aggregate more than 5% of the securities of such
issuer.
Because of the affiliation of the Investment Adviser with the Fund, the
Fund is prohibited from engaging in certain transactions involving the 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 under the Investment Company Act. See 'Portfolio
Transactions and Brokerage.' Without such an exemptive order, the Fund would be
prohibited from engaging in portfolio transactions with 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 Fund to purchase securities pursuant to the exercise
of subscription rights, subject to the condition that such purchase will not
result in the Fund ceasing to be a diversified investment company. Far Eastern
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 Fund's interest in the issuing company being diluted. The market
for such rights is not well developed and, accordingly, the Fund 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 Fund's portfolio
securities with the result that the Fund 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.
9
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund, their ages and their
principal occupations for at least the last five years are set forth below.
Unless otherwise noted, the address of each executive officer and Trustee is
P.O. Box 9011, Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL (63)--President and Trustee (1)(2)--President of Merrill
Lynch Asset Management, L.P., doing business as Merrill Lynch Asset Management
('MLAM') (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 Senior Vice President thereof from 1985 to 1990;
Executive Vice President of Merrill Lynch & Co., Inc. ('ML & Co.') since 1990;
Director of Merrill Lynch Funds Distributor, Inc. ('MLFD' or the 'Distributor').
JAMES H. BODURTHA (51)--Trustee (2)--124 Long Pond Road, Plymouth,
Massachusetts 02360. Chairman and Chief Executive Officer, China Enterprise
Management Corporation since 1993; Chairman, Berkshire Corporation since 1980;
Partner, Squire, Sanders & Dempsey from 1980 to 1993.
HERBERT I. LONDON (56)--Trustee (2)--New York University--Gallatin
Division, 113-115 University Place, New York, New York 10003. John M. Olin
Professor of Humanities, New York University since 1993 and Professor thereof
since 1973; Dean, Gallatin Division of New York University from 1978 to 1993 and
Director from 1975 to 1976; Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corporation since 1991; Overseer,
Center for Naval Analyses.
ROBERT R. MARTIN (68)--Trustee (2)--513 Grand Hill, St. Paul, Minnesota
55102. Director, WTC Industries, Inc., since 1994; Chairman and Chief Executive
Officer, Kinnard Investments, Inc. from 1990 to 1993; Executive Vice President,
Dain Bosworth from 1974 to 1989; Director, Carnegie Capital Management from 1977
to 1985 and Chairman thereof in 1979; Director, Securities Industry Association
from 1981 to 1982 and Public Securities Association from 1979 to 1980; Trustee,
Northland College since 1992.
JOSEPH L. MAY (66)--Trustee (2)--424 Church Street, Suite 2000, Nashville,
Tennessee 37219. Attorney in private practice since 1984; President, May and
Athens Hosiery Mills Division, Wayne-Gossard Corporation from 1954 to 1983; Vice
President, Wayne-Gossard Corporation from 1972 to 1983; Chairman, The May
Corporation (personal holding company) from 1972 to 1983; Director, Signal
Apparel Company from 1972 to 1989.
ANDRE F. PEROLD (43)--Trustee (2)--Morgan Hall, Soldiers Field, Boston,
Massachusetts 02163. Professor, Harvard Business School and Associate Professor
from 1983 to 1989; Trustee, The Common Fund, since 1989; Director, Quantec
Limited since 1991 and Teknekron Software Systems since 1994.
TERRY K. GLENN (55)--Executive Vice President (1)(2)--Executive Vice
President of MLAM and FAM since 1983; Executive Vice President and Director of
Princeton Services since 1993; President of MLFD since 1986 and Director thereof
since 1991.
DONALD C. BURKE (35)--Vice President (1)(2)--Vice President and Director of
Taxation of MLAM since 1990; employee of Deloitte & Touche LLP from 1981 to
1990.
10
<PAGE>
JUERG BOLLER (41)--Vice President (1)(2)--Director of Merrill Lynch
(Suisse) Investment Management S.A.; Deputy General Manager of Merrill Lynch
Bank (Suisse) S.A. since 1992 and Manager thereof from 1988 to 1992.
GERALD M. RICHARD (46)--Treasurer (1)(2)--Senior Vice President and
Treasurer of FAM and MLAM since 1984; Senior Vice President and Treasurer of
Princeton Services since 1993; Treasurer of MLFD since 1984 and Vice President
since 1981; employee of MLFD since 1978.
MARK B. GOLDFUS (49)--Secretary (1)(2)--Vice President of MLAM since 1985.
- ------------------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Director or officer is a director, trustee or officer of other
investment companies for which MLAM or FAM acts as Investment Adviser.
As of January 31, 1996, the officers and Trustees of the Fund as a group
(11 persons) owned an aggregate of less than 1% of the outstanding shares of
common stock of ML & Co. and owned an aggregate of less than 1% of the
outstanding shares of the Fund.
The Fund pays each Trustee not affiliated with the Investment Adviser a fee
of $2,500 per year plus $250 per meeting attended, together with such Trustee's
actual out-of-pocket expenses relating to attendance at meetings. The Fund also
compensates members of its Audit Committee, which consists of all of the
non-affiliated Trustees, $500 per year plus $125 for each meeting attended. For
the fiscal year ended October 31, 1995, fees and expenses paid to the
unaffiliated Trustees aggregated $24,418.
COMPENSATION OF TRUSTEES
The following table sets forth, for the fiscal year ended October 31, 1995,
compensation paid by the Fund to the non-interested Trustees, and, for the
calendar year ended December 31, 1995, the aggregate compensation paid by all
investment companies advised by FAM and its affiliate, MLAM ('FAM/MLAM Advised
Funds') to the non-interested Trustees.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS FAM/MLAM ADVISED
NAME OF COMPENSATION ACCRUED AS PART OF FUNDS PAID TO
TRUSTEE FROM FUND FUND EXPENSES TRUSTEES(1)
- --------------------------------------------------------- ------------ -------------------- ----------------
<S> <C> <C> <C>
James H. Bodurtha 1,625 None 157,500*
Herbert I. London 4,500 None 157,500
Robert R. Martin 4,500 None 157,500
Joseph L. May 4,500 None 157,500
Andre F. Perold 4,500 None 157,500
</TABLE>
- ------------------
<TABLE>
<S> <C>
(1) In addition to the Fund, the Trustees serve on the boards of other FAM/MLAM Advised Funds as follows: Mr.
Bodurtha (46 funds); Mr. London (46 funds); Mr. Martin (46 funds); Mr. May (46 funds); and Mr. Perold (46
funds).
* $157,500 represents the amount Mr. Bodurtha would have received if he had been a Trustee for the entire
calendar year ended December 31, 1995. Mr. Bodurtha was elected to the Fund's Board of Trustees effective June
23, 1995.
</TABLE>
11
<PAGE>
INVESTMENT ADVISER
Reference is made to 'Management of the Fund--Investment Adviser' in the
Prospectus for certain information concerning the management and advisory
arrangements of the Fund.
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or investment advisory clients for which the
Investment Adviser or its affiliates act as an adviser. Because of different
objectives or other factors, a particular security may be bought for one or more
clients when one or more clients are selling the same security. If purchases or
sales of securities by the Investment Adviser or an affiliate for the Fund or
other funds for which it may act as investment adviser or for its advisory
clients arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective funds and
clients in a manner deemed equitable to all. To the extent that transactions on
behalf of more than one client of the Investment Adviser or its affiliates
during the same period may increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price.
The Fund has entered into a management agreement with the Investment
Adviser (the 'Investment Advisory Agreement'). As discussed in the Prospectus,
the Investment Adviser receives for its services to the Fund monthly
compensation at the annual rate of 0.75% of average daily net assets of the
Fund. For the fiscal years ended October 31, 1993, 1994 and 1995, the total
management fees paid by the Fund to the Investment Adviser were $384,718,
$1,770,022 and $1,644,757, respectively. At January 31, 1996, the net assets of
the Fund aggregated approximately $207.9 million. At this asset level, the
annual management fee would aggregate approximately $1.6 million at an effective
annual rate of 0.75%.
FAM and Merrill Lynch Asset Management U.K. Limited ('MLAM U.K.') have been
retained as sub-advisers (the 'Sub-Advisers') to the Fund. Pursuant to separate
sub-advisory agreements with the Investment Adviser (each, a 'Sub-Advisory
Agreement' and collectively, the 'Sub-Advisory Agreements'), the Sub-Advisers
provide investment advisory services to the Fund with respect to the management
of the Fund's cash position. For the fiscal year ended October 31, 1995, the
Investment Adviser did not pay any fees to MLAM U.K. and FAM for investment
advisory services provided to the Fund. FAM is located at 800 Scudders Mill
Road, Plainsboro, N.J. 08536. MLAM U.K. is located at Ropemaker Place, 25
Ropemaker Street, London, England. FAM is a wholly-owned subsidiary of ML & Co.,
a financial services holding company. ML & Co. and Princeton Services, Inc. are
'controlling persons' of FAM as defined under the Investment Company Act because
of their power to exercise a controlling influence over its management policies.
MLAM U.K. is an indirect subsidiary of ML & Co.
California imposes limitations on the expenses of the Fund. These expense
limitations require that the Investment Adviser reimburse the Fund in an amount
necessary to prevent the ordinary operating expenses of the Fund (excluding
interest, taxes, account maintenance and distribution fees, brokerage fees and
commissions and extraordinary charges such as litigation costs) from exceeding
2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the
next $70 million of average daily net assets and 1.5% of the remaining average
daily net assets. The Investment Adviser's obligation to reimburse the Fund is
limited to the amount of the investment advisory fee. To date, such
reimbursement has not been required. 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.
12
<PAGE>
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and furnish
office space for officers and employees of the Fund connected with investment
and economic research, trading and investment management of the Fund, as well as
the fees of all Trustees of the Fund who are affiliated persons of the
Investment Adviser. The Fund pays all other expenses incurred in the operation
of the Fund, including, among other things, taxes, expenses for legal and
auditing services, costs of printing proxies, share certificates, shareholder
reports and prospectuses and statements of additional information (except to the
extent paid by the Fund's underwriters), charges of the custodian, any
sub-custodian and transfer agent, fees of Princeton Administrators, L.P. (the
'Administrator'), expenses of redemption of shares, Securities and Exchange
Commission fees, expenses of registering the shares under Federal, state or
foreign laws, fees and expenses of unaffiliated Trustees, accounting and pricing
costs (including the daily calculation of net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non-recurring expenses,
and other expenses properly payable by the Fund. As required by the Fund's
distribution agreement, its underwriters will pay certain of the promotional
expenses of the Fund incurred in connection with the offering of shares of the
Fund. See 'Purchase of Shares.'
Duration and Termination. Unless earlier terminated as described below,
the Investment Advisory Agreement and each Sub-Advisory Agreement will remain in
effect for two years from the date of its adoption. Thereafter each such
agreement will remain in effect from year to year if approved annually (a) by
the Board of Trustees of the Fund or by a majority of the outstanding shares of
the Fund and (b) by a majority of the Trustees who are not parties to such
contract or interested persons (as defined in the Investment Company Act) of any
such party. The Investment Advisory Agreement 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 a majority of the outstanding voting securities
of the Fund. Each Sub-Advisory Agreement also provides that it will terminate in
the event of its assignment or upon the termination of the Investment Advisory
Agreement, and further provides that such agreement may be terminated on 60
days' written notice by the Investment Adviser, the respective Sub-Adviser or by
vote of the majority of the outstanding voting securities of the Fund.
PURCHASE OF SHARES
Reference is made to 'Purchase of Shares' in the Prospectus for certain
information as to the purchase of shares of the Fund (the 'shares').
The Fund has entered into a distribution agreement with Merrill Lynch Funds
Distributor, Inc. (the 'Distributor') in connection with the continuous offering
of shares of the Fund (the 'Distribution Agreement'). The Distribution Agreement
obligates the Distributor to pay certain expenses in connection with the
offering of the shares of the Fund. After the prospectuses, statements of
additional information and periodic reports have been prepared, set in type and
mailed to shareholders, the Distributor pays for the printing and distribution
of copies thereof used in connection with the offering to dealers and investors.
The Distributor also pays for other supplementary sales literature and
advertising costs. The Distribution Agreement is subject to the same renewal
requirements and termination provisions as the Investment Advisory Agreement
described under 'Management of the Fund--Advisory and Management Arrangements.'
13
<PAGE>
DISTRIBUTION PLAN
Reference is made to 'Purchase of Shares--Distribution Plan' in the
Prospectus for certain information with respect to the distribution plan of the
Fund (the 'Distribution Plan').
The payment of the distribution fee and account maintenance fee is subject
to the provisions of Rule 12b-1 under the Investment Company Act. Among other
things, the Distribution Plan provides that the Distributor shall provide and
the Trustees shall review quarterly reports of the disbursement of the account
maintenance fees and distribution fees paid to the Distributor. In their
consideration of the Distribution Plan, the Trustees must consider all factors
they deem relevant, including information as to the benefits of the Distribution
Plan to the Fund and its shareholders. The Distribution Plan further provides
that, so long as the Distribution Plan remains in effect, the selection and
nomination of Trustees who are not 'interested persons' of the Fund, as defined
in the Investment Company Act (the 'Independent Trustees'), shall be committed
to the discretion of the Independent Trustees then in office. In approving the
Distribution Plan in accordance with Rule 12b-1, the Independent Trustees
concluded that there is a reasonable likelihood that the Distribution Plan will
benefit the Fund and its shareholders. The Distribution Plan can be terminated
at any time, without penalty, by the vote of a majority of the Independent
Trustees or by the vote of the holders of a majority of the outstanding voting
securities of the Fund. The Distribution Plan cannot be amended to increase
materially the amount to be spent by the Fund without shareholder approval, and
all material amendments are required to be approved by the vote of Trustees,
including a majority of the Independent Trustees who have no direct or indirect
financial interest in the Distribution Plan, cast in person at a meeting called
for that purpose. Rule 12b-1 further requires that the Fund preserve copies of
the Distribution Plan and any report made pursuant to such plan for a period of
not less than six years from the date of the Distribution Plan or such report,
the first two years in an easily accessible place. For the fiscal year ended
October 31, 1995, the Fund paid the Distributor $2,193,008 pursuant to the
Distribution Plan, of which $548,251 was paid to Merrill Lynch for providing
account maintenance services and $1,644,757 was paid to Merrill Lynch for
providing distribution-related services to the Fund.
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 but not the account
maintenance fee. As applicable to the Fund, the maximum sales charge rule limits
the aggregate distribution fee payments payable by the Fund to (1) 6 1/4% of the
eligible gross sales of shares of the Fund (defined to exclude shares issued
pursuant to dividend reinvestments) plus (2) interest on the unpaid balance at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from payment of the distribution fee). To the extent
payments would exceed the maximum permitted by the NASD, the Fund will not make
further payments of the distribution fee; however, the Fund will continue to
make payments of the account maintenance fee. In certain circumstances, the
amount payable pursuant to the voluntary maximum may exceed the amount payable
under the NASD formula. In such circumstances payment in excess of the amount
payable under the NASD formula will not be made.
The following table sets forth comparative information as of October 31,
1995 with respect to the shares of the Fund indicating the maximum allowable
payments that can be made under the NASD maximum sales charge rule and the
Distributor's voluntary maximum for the period September 14, 1992 (commencement
of operations of the Fund) to October 31, 1995.
14
<PAGE>
DATA CALCULATED AS OF OCTOBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANNUAL
ALLOWABLE ALLOWABLE AMOUNTS DISTRIBUTION
ELIGIBLE AGGREGATE INTEREST ON MAXIMUM PREVIOUSLY AGGREGATE FEE AT CURRENT
GROSS SALES UNPAID AMOUNT PAID TO UNPAID NET ASSET
SALES(1) CHARGES BALANCE(2) PAYABLE DISTRIBUTOR(3) BALANCE LEVEL(4)
-------- --------- ----------- ------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Under NASD Rule
As Adopted....................... $313,042 $19,565 $ 3,097 $22,662 $3,816 $18,847 $1,478
Under Distributor's
Voluntary
Waiver........................... $313,042 $19,565 $ 1,565 $21,130 $3,816 $17,315 $1,478
</TABLE>
- ---------------
(1) Purchase price of all eligible shares sold since September 14, 1992
(commencement of operations of the Fund) other than shares acquired through
dividend reinvestment.
(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 distribution fee payments and accruals.
(4) Provided to illustrate the extent to which the current level of distribution
fee payments is amortizing the unpaid balance. No assurance can be given
that payments of the distribution fee will reach either the voluntary
maximum or the NASD maximum.
REDEMPTION OF SHARES
Reference is made to 'Redemption of Shares' in the Prospectus for certain
information as to the redemption and repurchase of Fund shares.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended for more than seven days only for periods during
which trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists, as defined by the Securities and Exchange Commission, as a
result of which disposal of portfolio securities or determination of the net
asset value of the Fund is not reasonably practicable, and for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of shareholders of the Fund.
The value of shares at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Fund at such time.
Portfolio Turnover. The Fund has not placed any limit on its rate of
portfolio turnover and securities may be sold without regard to the time they
have been held when, in the opinion of the Investment Adviser, investment
considerations warrant such action. As a result, portfolio turnover rate may
vary greatly from year to year or during periods within a year. Also, the use of
covered call options at times when the underlying securities are appreciating in
value may result in higher portfolio turnover than would otherwise be the case.
The Fund pays brokerage commissions in connection with writing call options and
effecting closing purchase transactions, as well as in connection with purchases
and sales of portfolio securities. A high rate of portfolio turnover would
result in correspondingly greater brokerage commission expenses. Portfolio
turnover rate is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases and sales of
Government securities and of all other securities, including options, whose
maturity or expiration dates at the time of acquisition were one year or less)
by the monthly average value of the securities in the Fund during
15
<PAGE>
the fiscal year. For the fiscal years ended October 31, 1995, 1994 and 1993, the
rates of portfolio turnover were 17.31%, 24.64% and 32.54%, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Fund, the
Investment Adviser is primarily responsible for the execution of the Fund'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 Fund, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution
and operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While the Investment Adviser generally seeks
reasonably competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available. The Fund has no obligation to deal with
any broker or group of brokers in 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 Fund. 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 Fund may be the primary beneficiary of the research
or services received as a result of portfolio transactions effected for such
other accounts or investment companies. In addition, consistent with the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and
policies established by the Board of Trustees of the Fund, the Investment
Adviser may consider sales of shares of the Fund as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund.
The Fund anticipates that its brokerage transactions involving securities
of companies domiciled in countries other than the United States will be
conducted primarily on the principal stock exchanges of such countries.
Brokerage commissions and other transaction costs on foreign stock exchange
transactions are generally higher than in the United States, although the Fund
will endeavor to achieve the best net results in effecting its portfolio
transactions. There is generally less government supervision and regulation of
foreign stock exchanges and brokers than in the United States.
Foreign equity securities may be held by the Fund in the form of depository
receipts, including ADRs or EDRs, or securities convertible into foreign equity
securities. Depository receipts may be listed on stock exchanges or traded in
over-the-counter markets in the United States or Europe or other countries, as
the case may be. ADRs, like other securities traded in the United States, will
be subject to negotiated commission rates.
The Fund 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 Fund and persons who are affiliated with such affiliated persons are
prohibited from dealing with the Fund as principal in the purchase and sale of
securities unless a permissive order allowing such transactions is obtained from
the Securities and Exchange Commission. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own account, the Fund will not deal with affiliated persons,
including Merrill Lynch and its affiliates, in connection with such
transactions. However, affiliated persons of the Fund may serve as its broker in
over-the-counter transactions conducted on an agency basis provided that, among
16
<PAGE>
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--Investment Restrictions.'
The Board of Trustees will consider the possibilities of seeking to
recapture for the benefit of the Fund brokerage commissions and other expenses
of possible portfolio transactions by conducting portfolio transactions through
affiliated entities. For example, brokerage commissions received by affiliated
brokers could be offset against the advisory fee paid by the Fund. The Board
will reconsider this matter from time to time.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, Merrill Lynch may execute transactions for the Fund on the floor of any
national securities exchange provided that prior authorization of such
transactions is obtained and Merrill Lynch furnishes a statement to the Fund at
least annually setting forth the compensation it has received in connection with
such transactions. For the fiscal year ended October 31, 1995, the Fund paid
total brokerage of $471,006, of which $72,382, or approximately 15.5%, was paid
to Merrill Lynch for effecting transactions involving 15.1% of the aggregate
amount of transactions in which the Fund paid brokerage commissions. For the
fiscal year ended October 31, 1994, the Fund paid total brokerage of $687,783,
of which $41,123, or approximately 6.0%, was paid to Merrill Lynch for effecting
transactions involving 5.5% of the aggregate amount of transactions in which the
Fund paid brokerage commissions. For the fiscal year ended October 31, 1993, the
Fund paid total brokerage of $790,205, of which $154,632 or approximately 20.0%
was paid to Merrill Lynch for effecting transactions involving 18.9% of the
aggregate amount of transactions in which the Fund paid brokerage commissions.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily
Monday through Friday as of 15 minutes after the close of business on the New
York Stock Exchange (generally, 4:00 P.M., New York time) on each day during
which the New York Stock Exchange is open for trading. The New York Stock
Exchange is not open on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Fund
also will determine its net asset value on any day in which there is sufficient
trading in its portfolio securities that the net asset value might be affected
materially, but only if on any such day the Fund is required to sell or redeem
shares. The net asset value is computed by dividing the value of the securities
held by the Fund plus any cash or other assets (including interest and dividends
accrued but not yet received) minus all liabilities (including accrued expenses)
by the total number of shares outstanding at such time. Expenses, including the
fees payable to the Investment Adviser and to the Administrator and the account
maintenance fee and distribution fee payable to the Distributor, are accrued
daily.
Portfolio securities, including depository receipts, which are traded on
the 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 Trustees 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. Securities which are
traded both in the OTC market and on a stock exchange will be 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
17
<PAGE>
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.
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 Trustees of the Fund. Such valuations and procedures will be
reviewed periodically by the Board of Trustees.
Generally, trading in foreign securities, United States 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 Fund'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 Fund'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 or under the direction of the Board of Trustees.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services described below which are
designed to facilitate investment in its shares. Full details as to each of such
services and copies of the various plans described below can be obtained from
the Fund, the Distributor or Merrill Lynch. Certain of these services are
available only to United States investors.
INVESTMENT ACCOUNT
Distribution of shares of the Fund (other than reinvestment of dividends
and capital gains distributions of the Fund) is limited to current clients of
the Merrill Lynch Consults(Registered) Service and of the Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service. Shareholders will receive
statements of dividends and capital gains 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 Merrill Lynch Financial Data Services, Inc. (the
'Transfer Agent').
If a client terminates the Merrill Lynch Consults(Registered) Service or
the Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service, the
client's shares may be retained in the client's Merrill Lynch brokerage account,
subject to the consent of 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 interested in transferring their shares from
Merrill Lynch 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. 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 REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions are given as to the method of payment of
dividends and capital gains distributions, dividends and distributions will be
reinvested automatically in additional shares of the Fund. Such reinvestment
will be at the net asset value of shares of the Fund, as of the close of
business on the ex-dividend
18
<PAGE>
date of the dividend or distribution. Shareholders may elect in writing or by
telephone (1-800-MER-FUND) to receive either their dividends or capital gains
distributions, or both, in cash, in which event payment will be mailed on or
about the payment date.
Shareholders may, at any time, notify the Transfer Agent in writing that
they no longer wish to have their dividends and/or distributions reinvested in
shares of the Fund or vice versa and, commencing ten days after receipt by the
Transfer Agent of such notice, those instructions will be effected.
MERRILL LYNCH ASSET INFORMATION AND MEASUREMENT(REGISTERED) SERVICE
Clients of the Merrill Lynch Consults(Registered) Service and of the
Merrill Lynch Strategic Portfolio Advisor(Service Mark) Service are currently
provided, without incremental charge, the Merrill Lynch Asset Information and
Measurement(Registered) Service ('AIM(Registered)'). AIM(Registered) currently
provides, through quarterly reports, the ability to monitor and evaluate
performance of their Merrill Lynch Consults(Registered) Service or Merrill Lynch
Strategic Portfolio Advisor(Service Mark) Service account, including shares of
the Fund held in the account, and analyzes the risk taken to achieve the return.
Shares of the Fund must be held in the account for a full quarterly period to be
subject to such evaluation.
TAXES
The Fund has qualified and intends to remain qualified for the special tax
treatment afforded regulated investment companies ('RICs') under the Internal
Revenue Code of 1986, as amended (the 'Code'). If it so qualifies, the Fund (but
not its shareholders) will not be subject to Federal income tax on the part of
its net ordinary income and net realized capital gains which it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of
the Fund's net realized short-term capital gains (together referred to hereafter
as 'ordinary income dividends') are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains are
taxable to a shareholder as long-term capital gains, regardless of the length of
time the shareholder has owned Fund shares. A capital gains distribution with
respect to shares held for six months or less, however, will cause any loss on a
subsequent sale or exchange of such shares to be treated as long-term capital
loss to the extent of such long-term capital gains distribution.
Not later than 60 days after the close of its taxable year, the Fund will
provide its shareholders with a written notice designating the amounts of any
dividends or capital gains distributions. It is not expected that any portion of
the dividends paid by the Fund will be eligible for the corporate dividends
received deduction. If the Fund pays a dividend that was declared in the
previous October, November or December to shareholders of record in such a
month, then such dividend or distribution will be treated for tax purposes as
being paid by the RIC and received by its shareholders on December 31 of the
year in which the dividend was declared.
Ordinary income dividends paid by the Fund to shareholders who are
non-resident aliens generally will be subject to a 30% United States 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. Non-resident shareholders are urged to
consult their own tax advisers concerning the applicability of the United States
withholding tax.
Investment income received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
19
<PAGE>
Certain shareholders may be able to claim United States foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. If more than 50% in value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible to file an election with the Internal Revenue Service pursuant
to which shareholders of the Fund will be required to include their
proportionate share of such taxes in their United States income tax returns as
gross income, treat such proportionate share as taxes paid by them and deduct
such proportionate share in computing their taxable incomes or, alternatively,
subject to certain restrictions, use them as foreign tax credits against their
United States income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. Foreign tax
credits cannot be claimed by certain retirement accounts. A shareholder that is
a nonresident alien individual or a foreign corporation may be subject to United
States withholding tax on the income resulting from the Fund's election
described in this paragraph but may not be able to claim a credit or deduction
against such United States tax for the foreign taxes treated as having been paid
by such shareholder. The Fund will report annually to its shareholders the
amount per share of such withholding taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on reportable dividends, capital gains distributions and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
When you sell shares in the Fund, you may realize a gain or loss. A loss
realized on a sale of shares of the Fund will be disallowed if other Fund shares
are acquired (whether through the automatic reinvestment of dividends or
otherwise) within a 61-day period beginning 30 days before and ending 30 days
after the date that the shares are disposed of. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss.
The Fund may invest in equity securities of investment companies (or
similar investment entities) organized under foreign law or of ownership
interests in special accounts, trusts or partnerships. If the Fund purchases
shares of an investment company (or similar investment entity) organized under
foreign law, the Fund will be treated as owning shares in a passive foreign
investment company ('PFIC') for United States Federal income tax purposes. The
Fund may be subject to United States Federal income tax, and an additional tax
in the nature of interest, on a portion of distributions from such company and
on gain from the disposition of such shares (collectively referred to as 'excess
distributions'), even if such excess distributions are paid by the Fund as a
dividend to its shareholders. The Fund may be eligible to make an election with
respect to certain PFICs in which it owns shares that will allow it to avoid the
taxes on excess distributions. However, such election may cause the Fund to
recognize income in a particular year in excess of the distributions received
from such PFICs.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, an amount equal to at
least 98% of its ordinary income, determined on a calendar year basis, and 98%
of its capital gains, determined, in general, on an October 31 year end, plus
certain undistributed amounts from previous years. While the Fund intends to
distribute its income and capital gains in the manner necessary to avoid
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Fund's taxable income and capital gains will be distributed to
avoid entirely the imposition of the tax. In such event, the Fund will be liable
for the tax only on the amount by which it does not meet the foregoing
distribution requirements.
20
<PAGE>
TAX TREATMENT OF FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures or forward foreign
exchange contracts. Unless the Fund is eligible to make and makes a special
election, such options, futures or forward foreign exchange 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 option, futures or forward
foreign exchange contract will be treated as sold for its fair market value on
the last day of the taxable year. In general, unless the special election
referred to in the previous sentence is made, gain or loss from transactions in
options, futures or forward foreign exchange contracts will be 60% long-term and
40% short-term capital gain or loss.
Code Section 1092, which applies to certain 'straddles,' may affect the
taxation of the Fund's transactions in options, futures or forward foreign
exchange contracts. Under Section 1092, the Fund may be required to postpone
recognition for tax purposes of losses incurred in certain closing transactions
in forward foreign exchange contracts. Similarly, Code Section 1091, which deals
with 'wash sales,' may cause the Fund to postpone recognition of certain losses
for tax purposes.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income may be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the Fund
may be restricted in effecting closing transactions within three months after
entering into an option, futures or forward foreign exchange contract.
SPECIAL RULES FOR OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
In general, gains from 'foreign currencies' and from forward foreign
exchange contracts relating to investments in stock, securities or foreign
currencies will be qualifying income for purposes of determining whether the
Fund qualifies as a RIC. It is currently unclear, however, who will be treated
as the issuer of a foreign currency instrument or how forward foreign exchange
contracts will be valued for purposes of the RIC diversification requirements
applicable to the Fund. The Fund may request a private letter ruling from the
Internal Revenue Service on some or all of these issues.
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 United States
dollar). In general, foreign currency gains or losses from forward contracts
will be treated as ordinary income or loss under Code Section 988. In certain
circumstances, the Fund may elect capital gain or loss treatment for such
transactions. In general, however, Code Section 988 gains or losses will
increase or decrease the amount of the Fund's investment company taxable income
available to be distributed to shareholders as ordinary income. Additionally, if
Code Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to make any ordinary 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 each shareholder's basis in his Fund shares.
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.
Dividends and capital gains distributions may also be subject to state and
local taxes.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, state, local or foreign taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
21
<PAGE>
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present or
prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return 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.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that (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 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
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer period of time.
Set forth is total return information for shares of the Fund for the period
indicated.
<TABLE>
<CAPTION>
REDEEMABLE VALUE
EXPRESSED AS A OF A HYPOTHETICAL
PERCENTAGE BASED $1,000 INVESTMENT
ON A HYPOTHETICAL AT THE END OF
PERIOD $1,000 INVESTMENT THE PERIOD
- ---------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
One Year Ended October 31, 1995....................................... (1.68)% $ 983.20
Inception (September 14, 1992) to October 31, 1995.................... 7.85% $ 1,266.60
<CAPTION>
FOR YEAR ENDED OCTOBER 31, ANNUAL TOTAL RETURN
- ----------------------------------------------------------------------
<S> <C> <C>
1995.................................................................. (1.68)% $ 983.20
1994.................................................................. 9.74% $ 1,097.40
1993.................................................................. 22.29% $ 1,222.90
Inception (September 14, 1992) to October 31, 1992.................... (4.00)% $ 960.00
AGGREGATE TOTAL RETURN
Inception (September 14, 1992) to October 31, 1995.................... 26.66% $ 1,266.60
</TABLE>
22
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund is an unincorporated business trust organized on June 26, 1992
under the laws of Massachusetts. It is a diversified, open-end management
investment company comprised of separate classes. The Trustees are authorized to
issue an unlimited number of full and fractional shares of beneficial interest
of $.10 par value of different classes. Shareholder approval is not required for
the authorization of additional classes of shares of the Trust. The Trust has
received an order from the Commission permitting the issuance and sale of two
classes of shares.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Trustees and
any other matter submitted to a shareholder vote. The Fund does not intend to
hold meetings of shareholders in any year in which the Investment Company Act
does not require shareholders to act upon any of the following matters: (i)
election of Trustees; (ii) approval of an investment advisory agreement; (iii)
approval of a distribution agreement; and (iv) ratification of selection of
independent auditors. Voting rights for Trustees are not cumulative. Shares
issued are fully paid and non-assessable and have no preemptive or conversion
rights. Redemption rights are discussed elsewhere herein and in the Prospectus.
Each share is entitled to participate equally in dividends and distributions
declared by the Fund and in the net assets of the Fund upon liquidation or
dissolution after satisfaction of outstanding liabilities. Share certificates
are issued by the Transfer Agent only on specific request. Certificates for
fractional shares are not issued in any case. Shareholders may cause a meeting
of shareholders to be held for the purpose of voting on the removal of Trustees
at the request of 10% of the outstanding shares of the Fund. A Trustee 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 Trustees.
The Declaration of Trust of the Fund contemplates that the Fund may be
terminated, solely upon a vote of the Board of Trustees of the Fund, and without
a vote of shareholders, within five years after it commences operations if the
Fund does not have net assets in excess of $100 million. Shareholders should be
aware that their investment in the Fund may be liquidated in such event. Among
other consequences, this could result in a taxable event for shareholders.
The Declaration of Trust establishing the Fund, dated June 26, 1992 and
amended on July 31, 1992, a copy of which, together with all amendments thereto
(the 'Declaration'), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name 'Merrill Lynch Consults
International Portfolio' refers to the Trustees under the Declaration
collectively as trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of the Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim of said Fund but the 'Trust Property'
only shall be liable.
23
<PAGE>
COMPUTATION OF OFFERING PRICE PER SHARE
The offering price for shares of the Fund, based on the value of the Fund's
net assets as of October 31, 1995, is calculated as follows:
<TABLE>
<S> <C>
Net Assets.................................................................... $197,077,135
------------
------------
Number of Shares Outstanding.................................................. 16,050,472
------------
------------
Net Asset Value Per Share (net assets divided by number of shares
outstanding)................................................................ $ 12.28
Sales Charge.................................................................. none
------------
Offering Price................................................................ $ 12.28
------------
------------
</TABLE>
INDEPENDENT AUDITORS
Ernst & Young LLP, 202 Carnegie Center, Princeton, New Jersey 08543-5321,
has been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the shareholders of the Fund.
The independent auditors are responsible for auditing the annual financial
statements of the Fund.
CUSTODIAN
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, acts as the Custodian of the Fund's assets. Under its contract with the
Fund, the Custodian is authorized to establish separate accounts in foreign
currencies and to cause foreign securities owned by the Fund to be held in its
offices outside the United States and with certain foreign banks and securities
depositories. The Custodian is responsible for safeguarding and controlling the
Fund's cash and securities, handling the receipt and delivery of securities and
collecting interest and dividends on the Fund's investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32232-5289, acts as the Fund's transfer agent. The
Transfer Agent is responsible for the issuance, transfer and redemption of
shares and the opening, maintenance and servicing of shareholder accounts. See
'Management of the Fund--Transfer Agency Services' in the Prospectus.
ADMINISTRATOR
Princeton Administrators, LP, 800 Scudders Mill Road, Plainsboro, New
Jersey 08536, acts as the Fund's administrator. See 'Management of the
Fund--Administrator' in the Prospectus.
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New
York 10022, is counsel for the Fund.
24
<PAGE>
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on October 31 of each year. The Fund sends
to its shareholders at least semi-annually reports showing the Fund's portfolio
and other information. An annual report, containing financial statements audited
by independent auditors, is sent to shareholders each year.
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 Fund 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.
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's shares on February 1, 1996.
------------------------
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees,
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Consults International Portfolio, including the schedule of investments,
as of October 31, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and 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 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 as of
October 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Consults International Portfolio at October 31, 1995, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and financial highlights for each
of the indicated periods, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Princeton, New Jersey
December 1, 1995
26
Merrill Lynch Consults International Portfolio, October 31, 1995
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
LATIN Shares Value Percent of
AMERICA Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C>
Argentina Banking 124,027 Banco de Galicia y Buenos Aires
S.A. (ADR)* $ 2,750,621 $ 2,356,513 1.2%
Oil & Related 127,000 YPF S.A. (ADR)* 2,978,847 2,174,875 1.1
Total Investments in Argentine
Stocks 5,729,468 4,531,388 2.3
Chile Glass Packaging 50,000 Cristalerias de Chile S.A. (ADR)* 1,024,719 1,212,500 0.6
Total Investments in Chilean Stocks 1,024,719 1,212,500 0.6
Mexico Beverage 29,200 Panamerican Beverages Inc. 844,752 799,350 0.4
Building & 175,000 Empresas ICA Sociedad Controladora,
Construction S.A. de C.V. (ADR)* 2,646,374 1,662,500 0.8
Telecommunications 55,000 Telefonos de Mexico, S.A. de C.V.
(ADR)* 2,896,991 1,512,500 0.8
Total Investments in Mexican
Stocks 6,388,117 3,974,350 2.0
Total Investments in Latin
America 13,142,304 9,718,238 4.9
NORTH
AMERICA
Canada Metals 132,700 Noranda, Inc. 2,176,720 2,658,451 1.4
Total Investments in North America 2,176,720 2,658,451 1.4
PACIFIC
BASIN
Australia Metals 277,200 Broken Hill Proprietary, Ltd. 2,767,090 3,752,648 1.9
Publishing 560,000 News Corporation, Ltd. (Ordinary) 2,410,336 2,822,662 1.4
Total Investments in Australian
Stocks 5,177,426 6,575,310 3.3
Hong Kong Multi-Industry 500,000 Hutchison Whampoa, Ltd. 2,336,145 2,755,142 1.4
560,000 Swire Pacific Ltd. (Class A) 4,361,458 4,201,268 2.1
Total Investments in Hong Kong
Stocks 6,697,603 6,956,410 3.5
Indonesia Telecommuni- 52,000 P.T. Indonesian Satellite (ADR)* 1,942,400 1,722,500 0.9
cations
Total Investments in Indonesian
Stocks 1,942,400 1,722,500 0.9
Japan Apparel 270,000 Tokyo Style Co., Ltd. 4,641,901 4,102,941 2.1
500,000 Toray Industries, Inc. 3,864,992 3,132,353 1.6
------------ ------------ ------
8,506,893 7,235,294 3.7
Automobile & 502,000 Yamaha Motors Co., Ltd. 4,309,498 3,937,255 2.0
Equipment
Building & 40,000 Daiwa House Industry Co., Ltd. 583,662 600,000 0.3
Construction 245,000 Okumura Corp. 2,020,587 2,147,353 1.1
------------ ------------ ------
</TABLE>
27
<TABLE>
<S> <S> <C> <S> <C> <C>
2,604,249 2,747,353 1.4
Chemicals 410,000 Mitsui Petrochemical Industries,
Ltd. 2,463,356 3,259,902 1.7
310,000 Sekisui Chemical Co., Ltd. 2,983,828 4,042,157 2.0
------------ ------------ ------
5,447,184 7,302,059 3.7
Electric 111,100 Kansai Electric Power Co., Inc. 3,037,494 2,614,118 1.3
Utilities
Electrical 435,000 Hitachi, Ltd. 3,600,724 4,477,941 2.3
Equipment
Electronic 500,000 Hitachi Cable, Ltd. 3,871,452 3,593,137 1.8
Components
Electronics 257,000 Matsushita Electric Industrial
Co., Ltd. 3,522,654 3,653,431 1.9
Financial 213,000 Nomura Securities Co., Ltd. 4,746,603 3,905,000 2.0
Services
Food Processing 200,000 Nippon Meat Packers, Inc. 2,679,349 2,725,490 1.4
Household 310,000 Kao Corp. 3,553,422 3,768,627 1.9
Products
Insurance 572,000 Nippon Fire & Marine Insurance
Co., Ltd. 4,139,949 3,084,314 1.6
International 440,000 Sumitomo Corp. 3,919,593 4,011,765 2.0
Trade
Machinery 520,000 Mitsubishi Heavy Industries, Ltd. 3,349,314 4,022,353 2.0
Merchandising 71,000 Ito-Yokado Co., Ltd. 3,371,372 3,891,078 2.0
Metals 1,400,000 ++Sumitomo Metal Industries, Ltd. 4,064,328 3,801,961 1.9
Office Equipment 226,000 Canon, Inc. 3,202,973 3,877,451 2.0
Pharmaceuticals 145,000 Yamanouchi Pharmaceutical Co.,
Ltd. 2,961,571 3,241,176 1.6
Printing 200,000 Dai Nippon Printing, Ltd. 3,371,268 3,196,078 1.6
Transportation 430,000 Kamigumi Co., Ltd. 4,915,841 3,899,510 2.0
Total Investments in Japanese
Stocks 79,175,731 78,985,391 40.1
Malaysia Conglomerates 1,200,000 Sime Darby BHD 2,737,495 2,998,819 1.5
Total Investments in Malaysian
Stocks 2,737,495 2,998,819 1.5
Singapore Shipbuilding 550,000 Jurong Shipyard, Ltd. 4,403,226 3,658,364 1.9
Total Investments in Singaporean
Stocks 4,403,226 3,658,364 1.9
Thailand Agriculture 333,000 Charoen Pokphand Feedmill Co., Ltd. 1,608,648 1,694,118 0.9
Banking 120,000 Bangkok Bank Co., Ltd. 1,380,245 1,240,064 0.6
Real Estate 197,300 MDX Co., Ltd. - Foreign 1,295,549 358,763 0.2
Total Investments in Thai Stocks 4,284,442 3,292,945 1.7
Total Investments in the Pacific
Basin 104,418,323 104,189,739 52.9
</TABLE>
28
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
WESTERN Shares Value Percent of
EUROPE Industries Held Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C>
France Advertising 52,000 Havas S.A. $ 4,140,514 $ 3,608,967 1.8%
Oil & Related 54,000 Societe Nationale Elf Aquitaine
(Ordinary) 4,038,687 3,681,441 1.9
Total Investments in French Stocks 8,179,201 7,290,408 3.7
Germany Utility 103,000 Veba AG 3,114,393 4,237,165 2.1
Total Investments in German Stocks 3,114,393 4,237,165 2.1
Italy Building 230,000 Italcementi S.p.A. 1,496,298 1,423,679 0.7
Materials
Financial 240,000 ++Istituto Mobiliare Italiano S.p.A.
Services (Ordinary) 1,503,756 1,313,643 0.7
Telecommunications 1,580,000 Societa Finanziara Telefonica
S.p.A. (STET) 4,198,505 4,482,939 2.3
Total Investments in Italian Stocks 7,198,559 7,220,261 3.7
Netherlands Food 22,500 Unilever N.V. 2,439,371 2,942,484 1.5
Publishing 20,000 Verenigde Nederlandse Uitgevbedri
Verigd Bezit N V. (Ordinary) 2,359,724 2,808,532 1.4
Total Investments in Netherlands
Stocks 4,799,095 5,751,016 2.9
Norway Pharmaceuticals 60,000 Hafslund Nycomed 'B' Fria 1,070,293 1,679,537 0.9
Shipbuilding 105,000 Kvaerner A.S. 'B' Shares 5,085,432 4,189,189 2.1
Total Investments in Norwegian
Stocks 6,155,725 5,868,726 3.0
Spain Oil & Related 100,000 Repsol S.A. 3,109,463 2,988,930 1.5
Utility 41,000 Empresa Nacional de Electricidad S.A. 1,716,082 2,040,754 1.0
Total Investments in Spanish Stocks 4,825,545 5,029,684 2.5
Switzerland Machinery 2,100 Sulzer Gebruder AG (Registered) 1,544,641 1,343,303 0.7
Pharmaceuticals 7,200 Ciba-Geigy AG (Registered) 3,769,874 6,244,574 3.2
Total Investments in Swiss Stocks 5,314,515 7,587,877 3.9
United Beverage 410,000 Grand Metropolitan PLC (Ordinary) 2,663,875 2,840,058 1.4
Kingdom
Conglomerates 750,000 BTR PLC (Ordinary) 4,302,732 3,985,380 2.0
Machinery 280,000 Siebe PLC (Ordinary) 2,276,580 3,332,221 1.7
Natural Gas Utilities 390,000 British Gas PLC (Ordinary) 1,848,274 1,486,452 0.8
Publishing 175,000 Reed International PLC (Ordinary) 1,773,302 2,662,455 1.3
Retail 400,000 Boots Company PLC 3,588,607 3,539,397 1.8
Telecommunications 550,000 British Telecommunications PLC 3,513,618 3,274,891 1.7
Total Investments in United
Kingdom Stocks 19,966,988 21,120,854 10.7
Total Investments in Western
Europe 59,554,021 64,105,991 32.5
</TABLE>
29
<TABLE>
<CAPTION>
Face
Amount Short-Term Securities
<S> <S> <C> <S> <C> <C>
United Commercial $ 5,104,000 Ford Motor Credit Co., 5.87%
States Paper** due 11/01/1995 5,104,000 5,104,000 2.6
Total Investments in Short-Term
Securities 5,104,000 5,104,000 2.6
Total Investments $184,395,368 185,776,419 94.3
============
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 12,452,034 6.3
Liabilities in Excess of Other Assets (1,151,318) (0.6)
------------ ------
Net Assets $197,077,135 100.0%
============ ======
<FN>
++Non-income producing security.
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the
Portfolio.
***Forward foreign exchange contracts as of October 31, 1995 were as
follows:
Foreign Unrealized
Currency Expiration Appreciation
Sold Date (Note 1c)
YEN 6,920,000,000 January 1996 $12,452,034
Total (US$ Commitment--$81,125,440) $12,452,034
===========
See Notes to Financial Statements.
</TABLE>
30
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$184,395,368)
(Note 1a) $185,776,419
Unrealized appreciation on forward foreign exchange
contracts (Note 1c) 12,452,034
Cash 833,930
Foreign cash (Note 1b) 823,871
Receivables:
Securities sold $ 1,362,737
Beneficial interest sold 605,236
Dividends 533,674 2,501,647
------------
Deferred organization expenses (Note 1f) 49,367
Prepaid registration fees and other assets (Note 1f) 19,964
------------
Total assets 202,457,232
------------
Liabilities: Payables:
Securities purchased 4,161,757
Beneficial interest redeemed 707,308
Distributor (Note 2) 174,003
Investment adviser (Note 2) 130,502
Administration fee (Note 2) 43,501
Commissions 28,833 5,245,904
------------
Accrued expenses and other liabilities 134,193
------------
Total liabilities 5,380,097
------------
Net Assets: Net assets $197,077,135
============
Net Assets Common shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 1,605,047
Paid-in capital in excess of par 182,434,994
Accumulated investment loss--net (897,752)
Undistributed realized capital gains on investments and
foreign currency transactions--net 84,978
Unrealized appreciation on investments and foreign currency
transactions--net 13,849,868
------------
Net assets--Equivalent to $12.28 per share based on 16,050,472
shares of beneficial interest outstanding $197,077,135
============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1995
<S> <S> <C> <C>
Investment Dividends (net of $579,725 foreign withholding tax) $ 3,928,148
Income Interest and discount earned 322,487
(Notes 1d & 1e): ------------
Total income 4,250,635
------------
</TABLE>
31
<TABLE>
<S> <C> <C> <C>
Expenses: Distribution fees (Note 2) $ 1,644,757
Investment advisory fees (Note 2) 1,644,757
Account maintenance fees (Note 2) 548,251
Administration fees (Note 2) 548,251
Custodian fees 223,064
Professional fees 68,863
Transfer agent fees (Note 2) 65,263
Registration fees (Note 1f) 47,553
Printing and shareholder reports 41,256
Amortization of organization expenses (Note 1f) 26,607
Trustees' fees 24,418
Pricing fees 9,746
Other 255,601
------------
Total expenses 5,148,387
------------
Investment loss--net (897,752)
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 7,293,932
(Loss) on Foreign currency transactions--net (7,191,339) 102,593
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (20,825,013)
(Notes 1b, 1c, Foreign currency transactions--net 12,649,522 (8,175,491)
1e & 3): ------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (8,072,898)
------------
Net Decrease in Net Assets Resulting from Operations $ (8,970,650)
============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment loss--net $ (897,752) $ (1,326,690)
Realized gain on investments and foreign currency
transactions--net 102,593 7,972,536
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (8,175,491) 13,095,611
------------ ------------
Net increase (decrease) in net assets resulting from
operations (8,970,650) 19,741,457
------------ ------------
Distributions to Realized gain on investments--net (6,621,521) (834,656)
Shareholders ------------ ------------
(Note 1g): Net decrease in net assets resulting from distributions
to shareholders (6,621,521) (834,656)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest transactions (59,817,607) 77,824,155
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (75,409,778) 96,730,956
Beginning of year 272,486,913 175,755,957
------------ ------------
End of year $197,077,135 $272,486,913
============ ============
See Notes to Financial Statements.
</TABLE>
32
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the
The following per share data and ratios have Period
been derived from information provided in the Sept 14,
financial statements. 1992++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995++++ 1994++++ 1993++++ 1992++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.83 $ 11.74 $ 9.60 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment loss--net (.05) (.12) (.08) (.02)
Realized and unrealized gain (loss) on
investments--net (.18) 1.26 2.22 (.38)
-------- -------- -------- --------
Total from investment operations (.23) 1.14 2.14 (.40)
-------- -------- -------- --------
Less distributions from realized gain on
investments--net (.32) (.05) -- --
-------- -------- -------- --------
Net asset value, end of period $ 12.28 $ 12.83 $ 11.74 $ 9.60
======== ======== ======== ========
Total Investment Based on net asset value per share (1.68%) 9.74% 22.29% (4.00%)+++
Return: ======== ======== ======== ========
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement 1.35% 1.27% 1.76% 2.50%*
Net Assets: ======== ======== ======== ========
Expenses, net of reimbursement 2.35% 2.27% 2.76% 3.50%*
======== ======== ======== ========
Expenses 2.35% 2.27% 2.76% 4.45%*
======== ======== ======== ========
Investment loss--net (.41%) (.56%) (.86%) (2.77%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $197,077 $272,487 $175,756 $ 16,636
Data: ======== ======== ======== ========
Portfolio turnover 17.31% 24.64% 32.54% --%
======== ======== ======== ========
<FN>
*Annualized.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
33
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Consults International Portfolio (the "Fund") is
registered under the Investment Company Act of 1940 as a
diversified, open-end investment company. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the 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. 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 Trustees 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 quotations are not available
are valued at their fair value as determined in good faith by or
under the direction of the Fund's Board of Trustees.
(b) 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. Realized
and unrealized gains/losses on 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.
(c) Derivative financial instruments--The Fund 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.
* Forward foreign exchange contracts--The Fund 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 Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contract.
* Foreign currency options and futures--The Fund may 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 Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Financial futures contracts--The Fund may purchase or sell
interest rate 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 Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund 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 margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund 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 Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current 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 Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(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 dates, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund 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--
Costs related to the organization of the Fund are charged to expense
over a five-year period. Prepaid registration fees are charged to
expense as the related shares are issued.
34
NOTES TO FINANCIAL STATEMENTS (concluded)
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend date.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch (Suisse) Investment Management S.A. (the "Investment
Adviser"). The Investment Adviser is a subsidiary of Merrill Lynch
Bank (Suisse) S.A. which is, in turn, an indirect subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."). Fund Asset Management, L.P.
("FAM") and Merrill Lynch Asset Management U.K. Limited ("MLAM
U.K.") have been retained as sub-advisers (the "Sub-Advisers") to
the Fund. Pursuant to sub-advisory agreements, the Sub-Advisers will
provide investment advisory services with respect to the management
of the Fund's cash position.
As compensation for its services to the Fund, the Investment Adviser
receives monthly compensation at the annual rate of 0.75% of the
average daily net assets of the Fund. The Fund will not pay any
incremental fee to the Sub-Advisers for their services.
Certain states in which shares of the Fund qualify for sale impose
limitations on the expenses of the Fund. The most restrictive annual
expense limitation requires that the Investment Adviser reimburse
the Fund to the extent that expenses (excluding interest, taxes,
distribution fees, brokerage fees and commissions, and extraordinary
items) exceed 2.5% of the Fund's first $30 million of average daily
net assets, 2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
The Investment Adviser's obligation to reimburse the Fund 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.
The Fund has an Administrative Agreement with Princeton
Administrators, Inc. (the "Administrator"), an indirect subsidiary
of ML & Co. The Administrator performs or arranges for the
performance of certain administrative services (i.e., services other
than investment advice and related portfolio activities) necessary
for the operation of the Fund, including maintaining the books and
records of the Fund, preparing reports and other documents required
by United States Federal, state and other applicable laws and
regulations to maintain the registration of the Fund and its shares
and providing the Fund with administrative office facilities. For
the services rendered to the Fund and the facilities furnished, the
Fund pays the Administrator a monthly fee equal to 0.25% of the
Fund's average daily net assets. Also, accounting services are
provided to the Fund by the Administrator, and the Fund reimburses
the Administrator for its costs in connection with such services on
a semi-annual basis.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940 pursuant to
which Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), which is an indirect subsidiary of ML & Co.,
receives ongoing distribution and account maintenance fees, which
are accrued daily and paid monthly at the annual rates of 0.75% and
0.25%, respectively, of the average daily net assets of the Fund.
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 activities and distribution
services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account
maintenance activities to the Fund's shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for
providing shareholder and distribution services and bearing
distribution-related expenses of the Fund, including payments to
financial consultants for selling shares of the Fund.
35
As authorized by the Plan, the Distributor has entered into an
agreement with MLPF&S, an affiliate of the Investment Adviser, which
provides for the compensation of MLPF&S for providing account
maintenance and distribution-related services to the Fund. For the
year ended October 31, 1995, MLFD earned $2,193,008 under the Plan,
all of which was paid to MLPF&S pursuant to the agreement.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., acts as the Fund's transfer agent.
In addition, MLPF&S received $60,793 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
October 31, 1995.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, the Investment Adviser (including their affiliated
companies), MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $37,171,265 and
$107,675,309, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995,
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 7,293,932 $ 1,381,051
Foreign currency transactions (39,222) 16,783
Forward foreign exchange contracts (7,152,117) 12,452,034
----------- -----------
Total $ 102,593 $13,849,868
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $1,369,488, of which $16,216,662
related to appreciated securities and $14,847,174 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $184,406,931.
4. Beneficial Interest Transactions:
Transactions in shares of beneficial interest were as follows:
For the Year Ended Dollar
October 31, 1995 Shares Amount
Shares sold 1,857,251 $ 21,980,972
Shares issued to shareholders in
reinvestments of distributions 501,369 5,855,982
------------ ------------
Total issued 2,358,620 27,836,954
Shares redeemed (7,550,747) (87,654,561)
------------ ------------
Net decrease (5,192,127) $(59,817,607)
============ ============
For the Year Ended Dollar
October 31, 1994 Shares Amount
Shares sold 10,276,710 $128,040,343
Shares issued to shareholders in
reinvestments of distributions 56,819 680,122
------------ ------------
Total issued 10,333,529 128,720,465
Shares redeemed (4,065,998) (50,896,310)
------------ ------------
Net increase 6,267,531 $ 77,824,155
============ ============
5. Commitments:
At October 31, 1995, the Fund had foreign exchange contracts, in
addition to the contracts listed on the Schedule of Investments,
under which it had agreed to purchase and sell various foreign
currencies with approximate values of $3,336,000 and $1,358,000,
respectively.
36
<PAGE>
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37
<PAGE>
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38
<PAGE>
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39
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.............. 2
Hedging Techniques........................... 3
Investment Restrictions...................... 6
Management of the Fund......................... 10
Trustees and Officers........................ 10
Compensation of Trustees..................... 11
Investment Adviser........................... 12
Purchase of Shares............................. 13
Redemption of Shares........................... 15
Portfolio Transactions and Brokerage........... 16
Determination of Net Asset Value............... 17
Shareholder Services........................... 18
Taxes.......................................... 19
Performance Data............................... 22
General Information............................ 23
Description of Shares........................ 23
Computation of Offering Price
Per Share................................. 24
Independent Auditors......................... 24
Custodian.................................... 24
Transfer Agent............................... 24
Administrator................................ 24
Legal Counsel................................ 24
Reports to Shareholders...................... 25
Additional Information....................... 25
Report of Independent Auditors................. 26
Financial Statements........................... 27
</TABLE>
Code #16459-0296
Statement of
Additional Information
(Art Work)
- ------------------------------------------------------
MERRILL LYNCH
CONSULTS
INTERNATIONAL
PORTFOLIO
Investment Adviser:
Merrill Lynch (Suisse) Investment Management S.A.
February 28, 1996
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Contained in Part A, the Prospectus:
Financial Highlights (selected per share data and ratios) for the years
ended October 31, 1995, 1994 and 1993 and the period September 14, 1992
(commencement of operations) to October 31, 1992.
Contained in Part B, the Statement of Additional Information:
Report of Independent Auditors, dated December 1, 1995.
Schedule of Investments as of October 31, 1995.
Statement of Assets and Liabilities as of October 31, 1995.
Statement of Operations for the year ended October 31, 1995.
Statements of Changes in Net Assets for the years ended October 31, 1995
and 1994.
Financial Highlights for the years ended October 31, 1995, 1994 and 1993 and
the period September 14, 1992 (commencement of operations) to October 31,
1992.
Notes to Financial Statements.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C> <C>
1 -- Amended and Restated Declaration of Trust of Registrant.*
2 -- By-Laws of Registrant.**
3 -- None.
4 -- Instruments Defining Rights of Shareholderso
5 (a) -- Investment Advisory Agreement between Registrant and Merrill Lynch (Suisse) Investment Management
S.A.***
5 (b) -- Sub-Advisory Agreement between Merrill Lynch (Suisse) Investment Management S.A., Registrant and Fund
Asset Management, Inc.***
5 (c) -- Sub-Advisory Agreement between Merrill Lynch (Suisse) Investment Management S.A., Registrant and
Merrill Lynch Asset Management U.K. Limited.***
6 -- Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc.***
7 -- None.
8 -- Form of Custody Agreement between Registrant and Brown Brothers Harriman & Co.***
9 (a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing Agency Agreement between
Registrant and Financial Data Services, Inc.***
9 (b) -- Administration Agreement between Registrant and Princeton Administrators, Inc.***
9 (c) -- License Agreement Relating to Use of Name between Merrill Lynch & Co., Inc. and the Registrant.***
10 -- Opinion and Consent of Shereff, Friedman, Hoffman & Goodman, LLP, counsel for Registrant.
11 -- Consent of Ernst & Young LLP, independent auditors for the Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch (Suisse) Investment Management S.A.***
14 -- Not applicable.
15 -- Distribution Plan of Registrant.***
16 -- Schedule for computation of each performance quotation provided in the Registration Statement in
response to Item 22oo
17 (a) -- Financial Data Schedule.
17 (b) -- Other Exhibits.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C> <C>
-- Powers of Attorney for Officers and Trustees.
Arthur Zeikel***
Herbert I. London***
Joseph L. May***
Andre F. Perold+++
Gerald M. Richard+++
Robert R. Martin.oo
17 (c) -- Power of Attorney for James H. Bodurtha
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Filed electronically herewith. Initially filed as Exhibit 1 to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (File No. 33-49354).
** Filed electronically herewith. Initially filed as Exhibit 2 to Registrant's initial Registration Statement on
Form N-1A (File No. 33-49354).
*** Filed electronically herewith. Initially filed as same numbered exhibit to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 33-49354).
+ Filed electronically herewith. Initially filed as Exhibit 14 to Pre-Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933 on Form N-1 (File No. 2-74584) of Merrill Lynch
Retirement Series Trust, filed on January 26, 1982.
++ Filed electronically herewith. Initially filed as Exhibit 14 to Post-Effective Amendment No. 3 to the
Registration Statement under the Securities Act of 1933 on Form N-1A (File No. 2-74584) of Merrill Lynch
Retirement Series Trust, filed December 29, 1983.
+++ Filed electronically herewith. Initially filed as Exhibit 17 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 33-49354).
o Incorporated by reference to Exhibit 4(b) to Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A (File No. 33-49354).
oo Incorporated by reference to same numbered exhibit to Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A (File No. 33-49354).
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
HOLDERS AT
TITLE OF CLASS JANUARY 31, 1996
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
Shares of beneficial interest, par value $0.10 per share.............................. 4,069
</TABLE>
Note: The number of holders shown above includes holders of record plus
beneficial owners, whose shares are held of record by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
ITEM 27. INDEMNIFICATION.
Reference is made to Article V and Article XI of Registrant's Declaration
of Trust, Section 9 of the Distribution Agreement, Article IV of the Investment
Advisory Agreement and Article IV of the Sub-Advisory Agreements.
C-2
<PAGE>
(a) Declaration of Trust
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder
shall be subject to any personal liability whatsoever to any Person in
connection with Trust Property or the acts, obligations or affairs of the Trust.
No Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from his bad faith, willful misfeasance, gross negligence
or reckless disregard of his duty to such Person; and all such Persons shall
look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is made a party to
any suit or proceeding to enforce any such liability, he shall not on account
thereof, be held to any personal liability. The Trust shall indemnify and hold
each Shareholder harmless from and against all claims and liabilities, to which
such Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
5.2 Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, will misfeasance, gross negligence or reckless disregard of his
duties.
5.3 Mandatory Indemnification. The Trust shall indemnify each of its
Trustees, officers, employees and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees) reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a Trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of good faith and reasonable belief as to the best interests of the
Trust, has been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided that the indemnified person shall have given a written undertaking
to reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
5.4 No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or surety or other security for the performance of any of his
duties hereunder.
5.5 No Duty or Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the
C-3
<PAGE>
order of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees under this Declaration or
in their capacity as officers, employees or agents of the Trust. Every written
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees or by any officers,
employees or agents of the Trust, in their capacity as such, shall contain an
appropriate recital to the effect that the Shareholders, Trustees, officers,
employees and agents of the Trust shall not personally be bound by or liable
thereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder, and appropriate references
shall be made herein to the Declaration, and may contain any further recital
which they may deem appropriate, but the omission of such recital shall not
operate to impose personal liability on any of the Trustees, Shareholders,
officers, employees or agents of the Trust. The Trustees may maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
5.6 Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books or account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any investment adviser, distributor, selected
dealers, accountants, appraisers or other experts or consultants elected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or expert may also be a Trustee.
ARTICLE XI
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
11.3. AMENDMENT PROCEDURE.
(a) This Declaration may be amended by the affirmative vote of the holders
of not less than a majority of the Shares at any meeting of Shareholders or by
an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of such
Shares. The Trustees may also amend this Declaration without the vote or consent
of Shareholders if they deem it necessary to conform this Declaration to the
requirements of applicable federal laws or regulations or the requirements of
the regulated investment company provisions of the Internal Revenue Code, but
the Trustees shall not be liable for failing so to do.
(b) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessment upon Shareholders.
(b) Distribution Agreement
In Section 9 of the Distribution Agreement 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.
(c) Investment Advisory Agreement; Sub-Advisory Agreements
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties.
Article IV of the Investment Advisory Agreement between Registrant and
Merrill Lynch (Suisse) Investment Management S.A. (the 'Investment Adviser')
(Exhibit 5(a) to Registrant's Registration Statement on Form N-1A) limits the
liability of the Investment Adviser to liabilities arising from willful
misfeasance, bad
C-4
<PAGE>
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its duties under the Investment Advisory Agreement.
Article IV of the Subadvisory Agreements between the Investment Adviser,
Registrant, and Fund Asset Management Inc. (now called Fund Asset Management,
L.P.) ('FAM') and between the Investment Adviser, Registrant, and Merrill Lynch
Asset Management U.K. Limited ('MLAM U.K.') (Exhibits 5(b) and 5(c),
respectively, to Registrant's Registration Statement on Form N-1A) limits the
liability of FAM and MLAM U.K. to liabilities arising from willful misfeasance,
bad faith or gross negligence in the performance of their respective duties, or
by reason of reckless disregard of their respective obligations and duties under
the Subadvisory Agreements.
Insofar as indemnification for liabilities arising under the Act may be
permitted to Trustees, 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 Trustee, 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 Trustee, 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.
The Investment Adviser does not act as investment adviser for any other
investment companies registered under the Investment Company Act. The address of
the Investment Adviser and Merrill Lynch Bank (Suisse) S.A. is 7 Rue
Munier-Romilly, 1206 Geneva, Switzerland. For information as to the Investment
Adviser's business, profession, vocation or employment of a substantial nature,
reference is made to the Form ADV, as amended to date, filed by the Investment
Adviser (File No. 801-42073) pursuant to the Investment Advisers Act of 1940, as
amended (the 'Advisers Act').
Merrill Lynch Asset Management, L.P. ('MLAM') also acts as investment
adviser for the following open-end investment companies: Merrill Lynch
Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund, Inc.,
Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc.,
Merrill Lynch Balanced Fund for Investment and Retirement, Inc., 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, 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 Midde East/Africa Fund,
Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Asset Builder
Program, Inc., Merrill Lynch Retirement Series Trust, Merrill Lynch 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.A.
Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch
Utility Income Fund, Inc. and Merrill Lynch Variable Series Funds, Inc.; and 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-
C-5
<PAGE>
State Municipal Series Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill
Lynch Phoenix Fund, Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch
World Income Fund, Inc. and The Municipal Fund Accumulation Program, Inc.; and
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., MuniAsset Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured
Fund, Inc., MuniVest Fund, 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
Dollar Vest Fund, Inc. The address of each of these investment companies is P.O.
Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill
Lynch Funds for Institutions Series and Merrill Lynch Institutional Intermediate
Fund is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The
address of the Manager, FAM, Princeton Services, Inc. ('Princeton Services') and
Princeton Administrators, L.P. ('Princeton Administrators') is also P.O. Box
9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds
Distributor, Inc. ('MLFD') is P.O. Box 9081, Princeton, New Jersey 08543-9081.
The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ('Merrill
Lynch') and Merrill Lynch & Co., Inc. ('ML & Co.') is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281. The address of Merrill
Lynch Financial Data Services ('FDS') is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and director of FAM
indicating each business, profession, vocation or employment of a substantial
nature in which each such person has been engaged since January 1, 1994 for his
own account or in the capacity of director, officer, partner or trustee.
<TABLE>
<CAPTION>
POSITIONS WITH OTHER SUBSTANTIAL BUSINESS PROFESSION,
NAME FAM VOCATION OR EMPLOYMENT
- ---------------------------------- --------------------- ---------------------------------------------------
<S> <C> <C>
ML & Co........................... Limited Partner Financial Services Holding Company
Fund Asset Management, Inc........ Limited Partner Investment Advisory Services
Princeton Services, Inc.
('Princeton Services').......... General Partner General Partner of MLAM
Arthur Zeikel..................... President President of MLAM; President and Director of
Princeton Services; Director of Merrill Lynch
Funds Distributor, Inc. ('MLFD'); Executive Vice
President of Merrill Lynch & Co., Inc.; Executive
Vice President of Merrill Lynch
Terry K. Glenn.................... Executive Vice Executive Vice President of MLAM; Executive Vice
President President and Director of Princeton Services;
President and Director of MLFD; President of
Princeton Administrators
Vincent R. Giordano............... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Elizabeth Griffin................. Senior Vice President Senior Vice President of MLAM
Norman R. Harvey.................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
N. John Hewitt.................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH OTHER SUBSTANTIAL BUSINESS PROFESSION,
NAME FAM VOCATION OR EMPLOYMENT
- ---------------------------------- --------------------- ---------------------------------------------------
<S> <C> <C>
Philip L. Kirstein................ Senior Vice Senior Vice President, General Counsel, Secretary
President, General and Director of MLAM; Senior Vice President,
Counsel and General Counsel, Director and Secretary of
Secretary Princeton Services; Director of MLFD
Ronald M. Kloss................... Senior Vice President Senior Vice President and Controller of MLAM;
and Controller 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 MLAM; Senior Vice
President of Princeton Services
Richard L. Reller................. Senior Vice President Senior Vice President and Treasurer of FAM; Senior
Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD
Gerald M. Richard................. Senior Vice President Senior Vice President and Treasurer of MLAM; Senior
and Treasurer Vice President and Treasurer of Princeton
Services; Vice President and Treasurer of MLFD
Ronald L. Welburn................. Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
Anthony Wiseman................... Senior Vice President Senior Vice President of MLAM; Senior Vice
President of Princeton Services
</TABLE>
MLAM U.K. serves as sub-adviser for Merrill Lynch Eurofund. For information
as to MLAM U.K.'s business, profession, vocation or employment of a substantial
nature, reference is made to the Form ADV, as amended to date, filed by MLAM
U.K. (File No. 801-31780) pursuant to the Advisers Act.
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 second paragraph of Item
28 except 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., The Municipal Fund Accumulation
Program, Inc., and also acts as principal underwriter for the following
closed-end funds: Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill
Lynch Senior Floating Rate Fund, Inc. and Merrill Lynch Municipal Strategy 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 officers Crook,
Aldrich, Brady, Breen, Fatseas 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 Trustee
Philip L. Kirstein................................ Director None
William E. Aldrich................................ Senior Vice President None
Robert W. Crook................................... Senior Vice President None
Kevin T. Boman.................................... Vice President None
Michael J. Brady.................................. Vice President None
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH MLFD WITH REGISTRANT
---- ----------------------------- -------------------------
<S> <C> <C>
William M. Breen.................................. Vice President None
Sharon Creveling.................................. Vice President and Assistant None
Treasurer
Mark A. DeSario................................... Vice President None
James T. Fatseas.................................. Vice President None
Debra W. Landsman-Yaros........................... Vice President None
Michelle T. Lau................................... Vice President None
Gerald M. Richard................................. Vice President and Treasurer Treasurer
Salvatore Venezia................................. Vice President None
William Wasel..................................... Vice President None
Robert Harris..................................... Secretary None
</TABLE>
- ---------------
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of the Registrant, 800 Scudders Mill Road,
Plainsboro, New Jersey 08543-9011, Merrill Lynch Financial Data Services, Inc.,
4800 Deer Lake Drive East, Jacksonville, Florida and Brown Brothers Harriman &
Co., 40 Water Street, Boston, Massachusetts 02109.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management of the Fund' in the
Prospectus constituting Part A of the Registration Statement and under
'Management of the Fund' in the Statement of Additional Information constituting
Part B of the Registration Statement, Registrant is not a party to any
management related service contract.
ITEM 32. UNDERTAKINGS.
a. If requested to do so by the holders of at least 10% of the Fund's
outstanding shares, the Fund will call a meeting of shareholders for the purpose
of voting upon the removal of a trustee or trustees and the Fund will assist
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
b. The Registrant will furnish each person to whom a Prospectus is
delivered with a copy of Registrant's latest 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 Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and that it has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Plainsboro, and State
of New Jersey, on the 28th day of February 1996.
MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO
(REGISTRANT)
By: /s/ Arthur Zeikel
__________________________________
(Arthur Zeikel, President)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE(S)
- ------------------------------------------ ---------------------------------------------- -------------------
<S> <C> <C>
/s/ Arthur Zeikel President and Trustee (Principal February 28, 1996
- ------------------------------------------ Executive Officer)
(Arthur Zeikel)
* Treasurer (Principal Financial and Accounting
- ------------------------------------------ Officer)
(Gerald M. Richard)
* Trustee
- ------------------------------------------
(James H. Bodurtha)
* Trustee
- ------------------------------------------
(Herbert I. London)
* Trustee
- ------------------------------------------
(Robert R. Martin)
* Trustee
- ------------------------------------------
(Joseph L. May)
* Trustee
- ------------------------------------------
(Andre F. Perold)
*By /s/ Arthur Zeikel February 28, 1996
- ------------------------------------------
(Arthur Zeikel, Attorney-in-Fact)
</TABLE>
C-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------------------------------------------------------
<S> <C>
10 --Opinion and consent of Shereff, Friedman, Hoffman & Goodman, LLP, counsel for Registrant.
11 --Consent of Ernst & Young LLP, independent auditors for the Registrant.
17(a) --Financial Data Schedule.
17(c) --Power of Attorney for James H. Bodurtha.
</TABLE>
Ex-99.1
AMENDED AND RESTATED DECLARATION OF TRUST
OF
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
THE DECLARATION OF TRUST of Merrill Lynch Consults International Portfolio
made the 26th day of June 1992 is amended and restated the 31st day of July,
1992, by the parties signatory hereto, as trustees (such persons, so long as
they shall continue in office in accordance with the terms of this Declaration
of Trust, and all other persons who at the time in question have been duly
elected or appointed as trustees in accordance with the provisions of the
Declaration of Trust and are then in office, being hereinafter called the
"Trustees").
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the law of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and,
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust") shall be
"Merrill Lynch Consults international Portfolio," and so far as may be
practicable the Trustees shall conduct the Trust's activities, execute all
documents and sue or be sued under that name, which name (and the word "Trust"
wherever hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. However, should the Trustees determine that the use
of such name is not advisable, they may select such other name for the Trust as
they deem proper and the Trust may hold its property and conduct its activities
under such other name. Any name change shall become effective upon the execution
by a majority of the then Trustees of an instrument setting forth the new name.
Any such instrument shall have the status of an amendment to this Declaration.
1.2. Definitions. As used in this Declaration, the following terms shall
have the following meanings:
The terms "Affiliated Person," "Assignment," "Commission,of "Interested
Person," "Majority Shareholder Vote" (the 67% or more than 50% requirement of
the third sentence of Section 2(a) (42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them in
the 1940 Act, as amended from time to time.
"Declaration" shall mean this Declaration as amended from time to time.
References in this Declaration to "Declaration," "hereof," "herein" and
"hereunder" shall be deemed to refer to the Declaration rather than the article
or section in which such words appear.
"Fundamental Policies" shall mean the investment restrictions set forth in
the Prospectus and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective Prospectus of the Trust
under the Securities Act of 1933, as amended, including, the Statement of
Aditional Information incorporated by reference therein.
"Shareholders" shall mean as of any particular time all holders of record
of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
"Trustees" shall mean the signatories to this Declaration, so long as they
shall continue in office in accordance with the terms hereof, other persons who
at the time in question have been duly elected or appointed and have qualified
as trustees in acccdance with the provisions hereof and are then in office, are
herein referred to as the "Trustees", and reference in this Declaration to a
Trustee or Trustees shall refer to such person or persons in their capacity as
trustees hereunder.
"Trust Property" shall mean as of any particular time any and real or
personal, tangible or intangible, which at such time is owned or held by or for
the account of the Trust or the Trustees.
The "1940 Act" refers to the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be fixed from,
time to time by written instrument signed by a majority of the Trustees then in
office, provided, however, that the number of Trustees shall in no event be less
than three or more than fifteen (except prior to the first public offering of
Shares). Any vacancy created by an increase in Trustees may, to the extent
permitted by the 1940 Act, be filled by the appointment of an having the
qualifications described in this Article made by a written instrument signed by
a majority of the Trustees then in office. Any such appointment shall not
become effective, however, until the individual named in the written instrument
of appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the
number of Trustees shall have the effect of any Trustee from office prior to the
expiration of his term. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled as provided in Section 2.4 hereof, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration. A Trustee shall be an individual at least 21 years
of age who is not under legal disability. Trustees need not own Shares.
2.2 Term Of Office. Each Trustee shall (except in the event of resignations
or removals or vacancies pursuant to Sections 2.3 or 2.4 hereof) hold office
until his successor has been elected and is qualified to serve as Trustee.
2.3. Resignation and Removal. Any Trustee may resign his trust (without
need for prior or subsequent accounting) by an instrument in writting signed by
him and delivered or mailed to the Chairman, if any, the President or the
Secretary and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument. Any of the Trustees may be
removed (provided the aggregate number of Trustees after such removal shall not
be less than the number required by Section 2.2 hereof) with cause, by the
action of two-thirds of the remaining Trustees. Any Trustee may be removed at
any special meeting of the Shareholders by a vote of two-thirds of the
outstanding Shares. Upon the resignation or removal of a Trustee, or his
otherwise ceasing to be a Trustee, he shall execute and deliver such, documents
as the remaining Trustees shall require for the purpose of conveying to the
Trust or the remaining Trustees any Trust Property held in the name of the
resigning or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, bankruptcy,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, the Shareholders, acting as. any
meeting of Shareholders held in accordance with Section 10.2 hereof, or, to the
extent permitted by the 1940 Act, a majority of the Trustees continuing in
office acting by written instrument or instruments, may fill such vacancy, and
any Trustee so elected by the Trustees shall hold office as provided in this
Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary or any two
Trustees. Regular meetings of the Trustees may be held without calll or notice
at a time and place fixed by the By-Laws or by resolution of the Trustees.
Notice any other meeting shall be mailed or otherwise given not less than 48
hours before the meeting but may be waived in writing Trustee either before or
after such meeting. The attendance of a Trustee at a meeting shall consititute a
waiver of notice of such Trustee at a meeting shall constitute a waiver of
notice of such meemting except where a Trustee attends a meeting for the express
purpose of objecting to the transaction of any busniess on the ground that the
meeting has not been lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be a majority
of the Trustees. Unless provided otherwise in this Declaration, any action of
the Trustees may be taked at a meeting by vote of a majority of the Trustees
present (a quorum being present) or without a meeting by written consents of a
majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all neetings of any section
committee shall be a majority of the members hereof unless provided otherwise in
this Declaration, any action of any such committee may be taken at a meeting by
vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust within the
meaning of Section 1.2 hereof or otherwise interested in any action to be taken
may be counted for quorum purposes under this Section and shall be entitled to
vote to the extent pemitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to such
communications systems shall constitute presence in person at such meeting.
2.6. Officers. The Trustees shall annually elect a President, a Secretary
and a Treasurer and may elect a Chairman. The Trustees may elect or appoint or
authorize the Chairman, if any, or President to appoint such other officers or
agents with such powers as the Trustees may deem to be advisable. The Chairman
and President shall be and the Secretary and Treasurer may but need not, be a
Trustee.
2.7 By-Laws. The Trustees may adopt and from time to time amend or repeal
the By-Laws for the conduct of the busness of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delecation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have power, subject to the Fundamental
Policies, to:
(a) conduct, operate and carry or, the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise deal in or dispose of negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, options, futures contracts, options, onf futures contracts and
other investments, including, without limitation, those issued, guarenteed
or sponsored by any state terrotory or possession of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government or its agencies or
instrumentalities, or international instrumentalities, or by any banking
institution, corporation or other business entity organized under the laws
of the United States and, to the extent provided in the Prospectus and not
prohibited by the Fundamental Policies, organized under foreign laws; and
to exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all investments of envery kind and
description, including, without limitation, the right to consent and
otherwise act respect thereto, wit), power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional securities in ehich the Trust may invest should the
investment policies set forth in the Prospectus or the Fundamental Policies
be amended.
The Trustees shall not be limited to investing in obligations Maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title. Legal Title to all the Trust Property shall be vested in
the Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each person who may hereafter become a Trustee upon his
due election and qualification. Upon removal or death of a Trustee he shall
automatic ically cease to have any right, title or interest in any of the in the
Trust and the right title and interest of such trustee in the Trust property
shall vest automatically in the remaining trustees. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Issuance and Repurchase of Securities. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in shares, including shares in
fractional denominations, and, subject to the more detailed provisions set forth
in Articles VIII and IX, to apply to any such repurchase redemption, retirement,
cancellation or acquisision of Shares any funds or property of the Trust whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
3.5. Borrow Money. Subject to the Fundamental Policies, the Trustees have
power to borrow money or otherwise obtain credit and to secure the sane by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust, including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of any
other person, firm, association or corporation.
3.6. Delegation; Committees. The Trustees shall have power, consistent with
their continuing exclusive authority over the management of the Trust and the
Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to the same extent
as such delegation is permitted to directors of a Massachusetts business
corporation and is permitted by the 1940 Act.
3.7. Collection and Payment. The Trustees shall have power to collect all
property due to the Trust; to pay all claims including taxes, against the Trust
Property; to prosecute, defend, compromise or abandon any claim relating to the
Trust Property; to foreclose any security interest securing any obligations, by
virtue of which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
3.8. Expenses. The Trustees shall have power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental to carry out
any of the purposes of this Declaration, to pay reasonable compensation from the
funds of the trust to themselves as Trustees. The Trustees shall fix the
compensation of all officers, employees and Trustees. The may pay themselves
such compensation for special services, including legal, underwiting,
syndicating and brokerage services, as they in good faith may deem reasonable
and reimbursements for expenses reasonable incurred by themselves on behalf of
the Trust.
3.9 Miscellaneous Powers. The Trustees shall have the to: (a) employ or
contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers, distributors, selected dealers or
independent contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negliqence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, reliigious, educational, scientific, civic or similar
purposes; (f) to the extent permitted by law, indemnify any advisor,
administrator, manager, distributor and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtenesss or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
in which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
3.10. Further Powers. The Trustees shall have power to conduct the business
of the Trust and carry on its operations in any and all of its branches and
maintain offices both within and without the Commonwealth of Massachusetts, in
any and all states of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
intertsts of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the of the
Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees will not be required to obtain any court order to deal
with the Trust Property.
ARTICLE IV
Management and Distribution Arrangements
4.1. Management Arrangements. Subject to a Majority Shareholder Vote, as
required by the 1940 Act, the Trustees may in their discretion from, time to
time enter into advisory or management contracts whereby the other party to such
contract shall undertake to furnish the Trustees such advisory and management
services as the Trustees shall from time to time consider desirable and all upon
such terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of Declaration, the Trustees may authorize any
advisor or manager (subject to such general or specific as the Trustees may from
time to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities of the Trust on behalf of the Trustees or may authorize any officer,
employee or Trustee to effect such purchases, sales, loans or exchanges pursuant
to recommendations of any such advisor or manager (and all without further
action by the Trustees). Any such purchases,sales, loans and exchanges shall be
deemed to have been by all of the Trustees.
4.2. Distribution Arrangements. The Trustees may in their discretion from
time to time enter into a contract, providing for the sale of the Shares of the
Trust to net the Trust not less than the par value per share, whereby the Trust
may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article IV or
the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
4.3. Parties to Contract. Any contract of the character described in
Section 4.1 and 4.2 of this Article IV or in Article VII hereof may be entered
into with any corporation, firm, trust, or associate or more of the Trustees or
officers of the Trustee, director, Trustee, shareholder, or member of such other
party other contract, and no such contract shall be invalidated or rendered
voidable by reason of the existence of any such relationship, nor shall any
person holding such relationship be liable merely by reason of such relationship
for any less expense to the Trust under or by reason of said contract or
accountabe for any profit realized directly or indurectly therefrom, provided
that the contract when entered into was reasonable and fair and not inconsistend
wtih the provisions of this Article IV or the By-Laws. The same person
(including a firm, corporation, trust, or association) may be the other party to
contracts entered into pursuant to Sections 4.2 and 4.2 above or Article VII,
and any individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this Section
4.3.
4.4. Provisions and Amendments. Any contract entered into pursuant to
Section 4.1 and 4.2 of this Article IV shall be consistent with and subject to
the requirements of Section 15 of the 1940 Act with respect to its continuance
in effect, its termination and the method of authorization and approval of such
contract or renewal thereof, and no amendment to any contract, entered into
pursuant to Section 4.1 shall be effective unless assented to by a Mandatory
Shareholder Vote.
ARTICLE V
Limitations of Liability of Shareholders, Trustees and Others
5.1. No Personal Liability of Shareholders, Trustees, etc. No Shareholder
shall be subject to any personal liability whatsoever to any person in
connection with Trust Property or the acts, obligations or affairs of the Trust.
No Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from his bad faith, willful misfeasance, gross negligence
or reckless disregard of his duty to Such Person; and all such Persons shall
look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee, or agent, as such, of the Trust, is a party to any
such or proceeding to enforce any such he shall not on account thereof, be held
to any personal liability. The Trust shall indemnify and hold each Shareholder
harmless from and against all claims and liabilities, to which such Shareholder
may become subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other expenses reasonably
incurred by him in connection with any such claim or liability. The rights
accruing to a Shareholder under this Section 5.1 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
of Trust shall be liable to the Trust, its Shareholders, or to any Shareholder,
Trustee, officer, employee, or agent thereof for any action or failure to act
(including without limitation the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties.
5.3. Mandatory Indemnification. The Trust shall indemnify each of its
Trustees, officers, employees, and agents (including persons who serve at its
request as directors, officers or trustees of another organization in which it
has any interest, as a shareholder, creditor or otherwise) against all
liabilities and expenses (including amounts paid in satisfaction of judgments,
in compromise, as fines and penalties, and as counsel fees), reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
being or having been such a Trustee, officer, employee or agent, except with
respect to any matter as to which he shall have been adjudicated to have acted
in bad faith, willful misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification, either for said payment or for any other expenses shall be
provided unless the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of duty, or the
matter of good faith and reasonable befief as to the best interests of the
Trust, had been adjudicated, it would have been adjudicated in favor of such
person. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled; provided that no
Person may satisfy any right of indemnity or reimbursement granted herein or in
Section 5.1 or to which he may be otherwise entitled except out of the property
of the Trust, and no Shareholder shall be personally liable to any person with
respect to any claim for indemnity or reimbursement or otherwise. The Trustees
may make advance payments in connection with indemnification under this Section
5.3, provided the indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
5.4. No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or surety or other security, for the performance of any of his
duties hereunder.
5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to hvae been executed or done by the executors thereof only
in their cpacity as Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking
made or issued by the Trustees or by any officers, employees or
agents of the Trust, in their capacity as such, shall contain an appropriate
recital to the effect that the Shareholders, Trustees, officers, employees and
agents of the Trust shall not personally be bound by or liable thereunder, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim thereunder, and appropriate references shall be made herein
to the Declaration, and may contain any further recital which they may deem
appropriate bu the ommission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers, employees or
agents of the Trust. The Trustees may maintain insurance for the protection of
the Trust Property, its Shareholders, Trustees, officers, employees and agents
in such amount as the Turstees shall deem adequate to cover possible tort
liability, and such rhte insurance as the Trustees in their sole judgment shall
deem advisable.
5.6. Reliance on Experts, etc. Each Trustee and officer or employee of the
trust shall, in the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of its
officers or employees or by any investment adviser, distributor, selected
dealers, accountants, appraisers or other experts or consultants elected with
reasonable care by the Trustees, officers or employees of the Trust, regardless
of whether such counsel or experts may also be a Trustee.
ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest. The interest of the beneficiaries hereunder shall
be divided into transferable shares of beneficial interest, par value $0.10 per
share. The number of such shres of beneficial interest authorized hereunder is
unlimited. The Trustees, in their discretion without a vote of the Shareholders,
say divide the shares of beneficial nto classes. The initial class of shares
shall be designated as shares interest. If however. the Trustees, in their
discretion, determine to issue an additional lass or classes of shares. the
initial class of shares shall automatically and without aquiring any action on
the part of the Trustees, be redesignated as Class C shares of beneficial
interest. If the Trustees determine to issue an additional class or classes of
hares of beneficial interest, eac class shall represent interests in the Trust
property and gave identical voting, dividend, liquidation and other rights and
the same terms And conditions except that expenses related directly or
indirectly to the distribution of the hares of a class may be borne solely by
such class (as shall be determined by the Trustees) and, as provided in Section
10.1, a class may have exclusive voting rights with respect to the matters
relating to the expenses being borne solely by such class. The bearing of such
expenses solely by a class of Shares shall be appropriately reflected (in the
manner determined by the Trustees) in the net asset value, dividend and
liquidation rights of the shares of such class . The division of the Shares into
classes and the terms and conditions pursuant to which the Shares of the classes
will be issued must be made in compliance with the 1940 Act. So division of
Shares into classes shall result in the creation of a class of hares having a
preference as to dividends or distributions or a preference in the event of any
liquidation, termination or winding up of the Trust. All Shares issued hereunder
including, without limitation, Shares issued in collection with a dividend in
Shares or a split of Shares, shall be fully paid and nonassessable.
6.2. Right of Shareholders. The ownership of the Trust Property of very
description and the right to conduct any business hereinbefore described are
vested exclusively in the trustees, and the Shareholders shall have no interest
therein otber than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Trust nor can they be called upon to share
or as assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in this Declaration specifically set forth. The Shares
shall not entitle the holder to reference, preemptive, appraisal, conversion or
exchange rights (except for rights of appraisal specified in Section 11.4).
6.3. Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
6.4. Issuance of Shares. The Trustees, in their discretion, may from time
to time without a vote of the Shareholders issue Shares, in addition to the then
issued and outstanding Shares and Shares held in the treasury. to such party or
parties and for such amount not less than par value and type of consideration,
including cash or property, at such time or times, and on such terms as the
Trustees may deem best, and may in such manner acquire other assets (including
the acquisition of assets subject to. and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares. The Trustees may from time to time divide
or combine the Shares into a greater or lesser number without thereby, changing
the Proportionate beneficial interests in the Trust. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000ths of a Share or multiples thereof.
6.5. Register of Shares. A register shall be kept at the Trust or a
transfer agent duly appointed by the Trustees under the descretion of the
Trustees which shall contain the names and addresses of the Shareholders said
the number of Shares hold by then respectively and a record of all transfers
thereof. Such register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or distributions or
otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall
be entitled to receive payment of any, dividend or distribution, nor to have
notice given to him as herein until he has given his address to a transfer agent
or such other officer or agent of the Trustees as shall keep the said register
for entry thereon. It is not contemplated that certificates will be issued for
the Shares; however, the Trustees, discretion may authorize the issuance of
share certificates appropriate rules and regulations as to their use.
6.6. Transfer Aqent and Registrar. The Trustee shall have power to employ a
transger agent or transfer agents, and a registrar or registrantts. The Transger
agent or transfer agents may keep the said register and record therein the
original issues agent and registrars shall perform the duties usually performed
by transfer agents and registrars of certificates of stock in a except as
modified by the Trustees.
6.7. Transfer of Shares. Shares shall be transferable on the records of the
Trust only by the record holder thereof or by his agent thereto duly authorized
in writing, upon delivery to the Trustees cor a transfer agent of the Trust of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares inconsequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereof and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
6.8. Notices. Any and all notices to which any Shareholder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
ARTICLE VII
Custodian
7.1. Appointment and Duties. The Trustees shall at all times employ one or
more custodians, meeting the qualifications for custodians for portfolio
securities of investment Companies contained in the 1940 Act, as custodian with
authority as its agent, but subject to such restrictions, limitations and other
if any, as may be contained in the By-Laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver the same upon
written order;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers
(4) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute , the net income of
the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder vote, the custodain
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
subcustodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian shall meet the qualifications for case such
sub-custodian shall meet the qualifications for custodians contained in the 1940
Act.
7.2. Central Certificate System. Subject to such rules, regulations and
ofders as the commission may adopt, the trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system ;re treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
ARTICLE VIII
Redemption
8.1 Redemption. All outstanding shares may be redeemed at the option of the
holders thereof, upon and subject to the terms and conditions provided in this
Article VIII. The Trust shall upon application of any Shareholder or pursuant
to authorization from any Shareholder, redeem or repurchase from such
Shareholder outstanding Shares for an amount per share determined by the
application of a formula adopted for such purpose by resolution of the Trustees
(which formula shall be consistent with the 1940 Act); provided that (a) such
amount per share shall not exceed the cash equivalent of the proportionate
interest of each share in the assets of the Trust at the time of the purchase or
redemption and (b) if so authorized by the Trustees, the Trust may, at any time
and from time to time, charge fees for effecting such redemption, at such rates
as the Trustees may establish, as and to the extent permitted under the 1940
Act, and may, at any time and from time to time, pursuant to such Act, suspend
such right of redemption. The procedures for effecting redemption shall be as
set forth in the Prospectus from time to time.
8.2 Redemption of Shares; Disclosure of Holding. If the Trustees shall, at
any time and in good faiths be of the opinion that direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
person to an extent which would disqualify the Trust as a regulated investment
company under the Internal Revenue Code, then the Trustees shall have the power
by lot or other means deemed equitable by them (i) to call for redemption a
number, or principal amount, of Shares or other securities of the Trust
sufficient, in the opinion of the Trustees, to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any Person whose acquisition of
the Shares or other securities of the Trust in question would in the opinion of
the Trustees result in such disqualification. The redemption shall be effected
at a redemption price determined in accordance with Section 8.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
8.3. Redemption of Accounts of Less than $1,000. Due to the relatively high
cost of maintaining investment accounts Of less than $2,000, the Trustees shall
have the power to redeem shares at a redemption price determined in accordance
with Section 6.2 if at any time the total investment in such account does not
have a value of at least $1,000; provided, however, that the Trustees may not
exercise such power if the Prospectus does not described such power. In the
event the Trustees determine to exercise thee power to redeem Shares provided in
this Section 6.3, Shareholders shall be notified that the value of their
account. is less than, $2,000 and allowed 60 days to make an additional
investment before redemption is processed.
ARTICLE IX
Determination of Net Asset Value, Net Income and Distributions
9.1 get Asset Value. The net asset value of each outstanding Share of the
Trust shall be determined at such time or times on such days as the Trustees may
determine, in accordance with the 1940 Act. The method of determination of net
asset value of Shares of each class shall be determined by the Trustees and
shall be as &at forth in the Prospectus with any expenses being borne solely by
a class of Shares being reflected in the net asset value of such Shares. The
power and duty to make the daily calculations may be delegated by the Trustees
to the adviser, administrator, manager, custodian, transfer agent or such other
person as the Trustees may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
9.2 Distributions to Shareholders. The Trustees shall frorm time to time
distribute ratably among the Shareholders such proportion of the net profits,
surplus (including paid-in-surplus), capital, or assets held by the Trustees as
they deem proper with any expenses being borne solely by a class of Shares being
reflected in the net profits or other assets being distributed to such class.
Such distribution may be made in cash or property (including without limitation
any type of obligations of the Trust or any assets thereof), and the Trustees
may distribute ratably among the Shareholders additional Shares issuable
hereunder in such Banner, at such tires, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of record at the
time of declaring a distribution or among the Shareholders of record at such
later date as the Trustees shall determine. The Trustees may always retain from
the net profits such amount as they may deem necessary to pay the debts or
expenses of the Trust or to meet obligations of the Trust, or as they deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation on the books, the above provisions shall
be interpreted to give the Trustees the power in their discretion to distribute
for any fiscal year as ordinary dividends and as capital gains distributions,
respectively, additional amounts sufficient to enable the Trust to avoid or
reduce liability for taxes.
9.3. Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the per share
net asset value of the Trust's Shares or net income, or the declaration and
payment of dividends and distributions as they deem necessary or desirable or to
enable the Trust to comply with any provision of the 1940 Act, including any
rule or regulation adopted pursuant to Section 22 of the 1940 Act by, 23 the
Commission or any securities association registered under the Securities
Exchange Act of 1934, all as in effect now or hereafter amended or modified.
ARTICLE X
Shareholders
10.1. Voting Powers. The Shareholders shall have the power to vote (i) for
the removal of Trustees as provided in Section 2.3, (ii) with respect to any
advisory or management contract as provided in Section 4.1, (iii) with respect
to the amendment of this Declaration as may be provided in Section 11.3, (iv)
with respect to such additional matters relating to the Trust as may be required
or authorized by the 1940 Act, the laws of the Commonwealth of Massachusetts or
other applicable lav or by this Declaration or by the By-Laws of the Trust, and
(v) with respect to such additional matters relating to the Trust as may be
properly submitted for Shareholder approval. If the Shares shall be divided into
classes as provided in Article VI hereof, the Shares of each class shall have
identical voting rights except that the Trustees, in their discretion, may
provide a class with exclusive voting rights with respect to matters related to
expenses being borne solely by such class.
10.2. Meetings of Shareholders. Special meetings of the Shareholders may be
called at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Shareholders holding in the aggregate not less
than 10% of the outstanding shares having voting rights, such request specifying
the purpose or purposes for which meeting is to be called. Any such meeting
shall be held within or without the Commonwealth of Massachusetts on such day
and at such time as the Trustees shall designate. The holders of one-third of
the outstanding Shares present in person or by proxy shall constitute a quorum
for the transaction of any business, except as may otherwise be required by the
1940 Act, the laws of the Commonwealth of Massachusetts or other applicable law
or by this Declaration or the By-Laws of the Trust. If a quorum is present at
the meeting, the affirmative vote of a majority of the Shares represented at the
meeting constitutes the action of the Shareholders, unless the 1940 Act, the
laws of the Commonwealth of Massachusetts or other applicable law, the
Declaration or by the By-Laws of the Trust requires a greater number of
affirmative votes. If the Shares shall be divided into classes with a class
having exclusive voting rights with respect to certain matters, the aforesaid
quorum and voting requirements with respect to action to be taken by the
Shareholders of the class on such matters shall be applicable only to the Shares
of such class.
10.3. Notice of Meeting. Notice of all meetings of the Shareholders,
stating the time, place and purpose of the meeting, shall be given by the
Trustees by mail to each Shareholder at his registered address, mailed at least
10 days and not more than 60 days before the meeting. only the business stated
in the notice of the meeting shall be considered at such meeting. Any adjourned
meeting shall be held as adjourned without further notice.
10.4. Record Date for Meetings. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purposes of any other action, the
Trustees may from time to time close the transfer books for such period not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 60 days prior to the
date of any meeting of Shareholders or daily dividends or other action as a
record date for the determination of the Persons to be treated as Shareholders
of record for such purposes, except for dividend payments which shall be
governed by Section 9.2 hereof.
10.5. Proxies, etc. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by proxy, provided that no proxy shall be
voted at any meeting unless It shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a resoluton of a majority of the Trustees, proxies may be solicited
in the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, anv one of then may
vote at any meeting in person or by proxy respective of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners of Proxies so present disagree as to any vote to be cast, such
vote shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise. and the burdon of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or mangement of such shares of any vote
by his guardianship or such other person appointed or having such control, and
such vote may be given in person or by proxy.
10.6. Reports. The Trustees shall cause to be prepared at least annually a
report of operations containing a balance sheet and statement of income and
undistributed income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant on such
financial statements. Copies of such reports shall be mailed to all,
Shareholders of record; within the time required by the 1940 Act, and in any
event within a reasonable period preceding the annual meeting of Shareholders.
The Trustees shall, in addition, furnish to the Shareholders at least
semi-annually interim reports containing an unaudited balance sheet of the Trust
as of the end of such period and an unaudited statement of income and surplus
for the period from the beginning of the current fiscal year to the end of such
period.
10.7. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
10.8. Shareholder Action bv Written Consent. Any action which may be taken
by Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of declaration) consent to the action in
writing and the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
ARTICLE XI
Duration; Termination of Trust; Amendment; Mergers, Etc.
11.1. Duration. The Trust shall continue without limitation of time but
subject to the provisions of this Article XI.
11.2. Termination of Trust.
(a) The Trust may be terminated (i) solely upon a majority vote of the
Board of Trustees of the Trust, and without a vote of Shareholders, within five
years after the Trust commences operations if the Trust does not have net assets
in excess of $100 million or (ii) by the affirmative vote of the holders of not
less than a majority of the Shares at any meeting of Shareholders or by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than a majority of such Shares. Upon
the termination of the Trust,
(i) The Trust shall carry on no business except for the purpose of winding
up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all
of the powers of the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been would up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the remaining
Trust Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
the Trust Property shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by vote or consent of
the holders of a majority of the Shares entitled to vote.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders of each class, according to their respective rights
taking into account the proper allocation of expenses being borne solely by any
class of Shares.
(b) After termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interest of all
Shareholders shall thereupon cease.
11.3. Amendnent Procedure.
(a) This Declaration may be amended by the affirmative vote of the holders
of not less than a majority of the Shares at any meeting of Shareholders or by
an instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of such
Shares. The Trustees may also amend this Declaration without the vote or consent
of Shareholders if they deem it necessary to conform this Declaration to the
requirements of applicable federal laws or regulations or the requirements of
the regulated investment company provisions of the Internal Revenue Code, but
the Trustees shall not be liable for failing so to do.
(b) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of the Trustees
setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
Notwithstanding any other provisions hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
11.4. Merger, Consolidation and Sale of Assets. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of not less than a majority
of the Shares, or by an instrument or instruments in writing without meeting,
consented to by the holders of not less than a majority of such Shares, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. In respect of any such merger, consolidation,
sale or exchange of assets, any Shareholder shall be entitled to rights of
appraisal of his Shares to the same extent as a shareholder of a Massachusetts
business corporation in respect of a merger, consolidation, sale or exchange of
assets of a Massachusetts business corporation, and such rights shall be his
exclusive remedy in respect of his dissent from any such action.
11.5. Incorporation. With the approval of the holders of a majority of the
Shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws or any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or ctherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire shares or any other interest. The Trustees may also
cause merger or consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders. for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
ARTICLE XII
Miscellaneous
12.1. Filing. This Declaration and any amendment hereto shall be filed in
the office of the Secretary of the Commonwealth of Massachusetts and in such
other places as may be required under the laws of Massachusetts and may also be
filed or recorded in such Other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and
acknowleced by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certicifate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, containing the original
Declaration and all amendments theretofore made, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealthh of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
declaration and the various amendments thereto.
12.2. Resident Agent. The Trust shall maintain a resident agent in the
Commonwealth of Massachusetts, which agent shall initiall be of Corporation
System, 12 Oliver Street, Boston, Massachusetts the Trustees may designate a
successor resedent agent, provided however, that such appointment shall not
become effective until written notice thereof is delivered to the office of the
Secretary of the Commonwealth.
12.3. Governing Law. This Declaration is executed by the Trustees and
delivered in the Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and subject validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State and reference small be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.4. This Declaration may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5. Reliance by Third Parties. Any certificate executed by an individual
who, according to the records of the Trust, or of any recording office in which
this Declaration may be recorded.
IN WITNESS WHEREOF, the undersigned, constituting all of the Trustees of
the Trust, have caused these presents to be executed as of 31st day of July,
1992.
/s/ Philip L. Kirstein
----------------------
Philip L. Kirstein
79 West Shore Drive
Pennington, New Jersey 08534
/s/ Mark B. Goldfus
----------------------
Mark B. Goldfus
509 Bergen Street
Lawrenceville, New Jersey 08648
/s/ Jerry Weiss
----------------------
Jerry Weiss
13 Bayberry Road
Princeton, New Jersey 08540
The principal office of the Trust is: 800 Scudders Mill Road
Plainsboro, NJ 08536
BY-LAWS
OF
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
BY-LAWS
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO, dated June 26, 1992, as from time to time amended (hereinafter called
the "Declaration"). All words and terms capitalized in these By-Laws shall have
the meaning or meanings set forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1 Chairman. The Chairman, if any, shall act as chairman at all
meetings of the Shareholders; in his absence, the President shall act as
chairman; and in the absence of the Chairman and President, the Trustee or
Trustees present at each meeting may elect a temporary chairman for the meeting,
who may be one of themselves.
Section 1.2. Proxies; Voting. Shareholders may vote either in person or by
duly executed proxy and each full share represented at the meeting shall have
one vote, all as provided in Article X of the Declaration. No proxy shall be
valid after eleven (11) months from the date of its execution, unless a longer
period is expressly stated in such proxy.
Section 1.3. Closing of Transfer Books and Fixing Record Dates. For the
purpose of determining the Shareholders who are entitled to notice of or to vote
or act at any meeting, including any adjournment thereof, or who are entitled to
participate in any dividends, or for any other proper purpose, the Trustees may
from time to time close the transfer books or fix a record date in the manner
provided in Section 10.4 of the Declaration. If the Trustees do not prior to any
meeting of Shareholders so fix a record date or close the transfer books, then
the date of mailing notice of the meeting or the date upon which the dividend
resolution is adopted, as the case may be, shall be the record date.
Section 1.4. Inspectors of Election. In advance of any meeting of
Shareholders, the TRustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. The number of Inspectors shall be either one or three. If
appointed at the meeting on the request of one or more Shareholders or proxies,
a majority of Shares present shall determine whether one or three Inspectors
are to be appointed, but failure to allow such determination by the Shareholders
shall not affect the validity of the appointment of Inspectors of Election. In
case any person appointed as Inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the Trustees in advance of
the convening of the meeting or at the meeting by the person acting as chairman.
The Inspectors of Election shall determine the number of Shares outstanding, the
Shares represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents, shall
hear and determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
determine the results, and do such other acts as may be proper to conduct the
election or vote with fairness to all Shareholders. If there are three
Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On request
of the Chairman, if any, of the-meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writting of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
Section 1.5. Records at Shareholder Meetings. At each meeting of the
Shareholders there shall be open for inspection the minutes of the last previous
Shareholder Meeting of the Trust and a list. of the Shareholders of the Trust,
certified to be true and correct by the Secretary or other proper agent of the
Trust, as of the record date of the meeting or the date of closing of transfer
books, as the case may be. Such list of Shareholders shall contain the name of
each Shareholder in alphabetical order and the address and number of Shares
owned by such Shareholder. Shareholders shall have such other rights and
procedures of inspection of the books and records of the Trust as are granted to
shareholders of a Massachusetts business corporation.
ARTICLE II
Trustees
Section 2.1. Annual and Regular Meetings. The Trustees shall hold an annual
meeting for the election of officers and the transaction of other business which
may come before such meeting, on such date as shall be fixed by the Trustees
from time to time. Regular meetings of may be held without call or notice any
such place or places and times as the Trustees may by resolution provide from
time to time.
Section 2.2. Special Meetings. Special Meetings of the Trustees shall be
held the call of the Chairman, if any, the President, the Secretary or any two
Trustees, at such time, on such day, and at such place, as shall be designated
in the notice of the meeting.
Section 2.3. Notice. Notice of a meeting shall be given by mail or by
telegram (which term shall include a cablegram) or delivered personally. If
notice is given by mail, it shall be mailed not later than 48 hours preceding
the meeting and if given by telegram or personally, such telegram shall be sent
or delivery made not later than 48 hours preceding the meeting. Notice by
telephone shall constitute personal delivery for these purposes. Notice of a
meeting of Trustees may be waived before or after any meeting by signed written
waiver. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by unanimous written consent. The attendance of a Trustee at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened.
Section 2.4. Chairman: Records. The Chairman, if any, shall act as chairman
at all meetings of the Trustees; in his absence the President shall act as
chairman; and, in the absence of the Chairman and the President, the Trustee
present shall elect one of their number to act as temporary chairman. The
results of all-actions taken at a meeting of the Trustees, or by unanimous
written consent of the Trustees, shall be recorded by the Secretary.
Section 2.5. Retirement Policy. Each Trustee shall serve as a Trustee of
the Trust as provided for by the Declaration and these By-Laws, except that a
Trustee shall only serve as a Trustee of the Trust until December 31 of the year
in which he shall have reached seventy-two years of age.
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The officers of the Trust shall consist
of a Chairman, if any, a President, a Secretary, a Treasurer and such other
officers or assistant officers, including Vice-Presidents, as may be elected by
the Trustees. Any two or more of the offices may be held by the same person,
except that the same person may not be both President and Secretary. The
Trustees may designate a Vice-President as an Executive Vice-President and may
designate the order in which the other Vice-Presidents may act. The Chairman and
the President shall be Trustees, but no officer of the Trust need be a Trustee.
Section 3.2. Election and Tenure. At the initial organization meeting and
thereafter at each annual meeting of the Trustees, the Trustees shall elect the
Chairman, if any, President, Secretary, Treasurer and such other officers as the
Trustees shall deem necessary or appropriate in order to carry out the business
of the Such officers shall hold office until the next annual meeting of the
Trustees and until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officers at any
time.
Section 3.3. Removal of Officers. Any officer may be removed at any time
with or without cause, by action of a majority of the Trustees. This provision
shall not prevent the making of a contract of employment for a definite term
with any officer and shall have no effect upon any cause of action which any
officer may have as a result of removal in breach of a contract of employment.
Any officer may resign at any time by notice in writing signed by such officer
and delivered or mailed to the Chairman, if any, President, or Secretary, and
such resignation shall take effect immediately upon receipt by the Chairman, if
any, President, or Secretary, or at a later date according to the terms of such
notice in writing.
Section 3.4. Bonds and Surety. Any officer may be required by the Trustees
to be bonded for the faithful performance of his duties in such amount and with
such sureties as the Trustees may determine.
Section 3.5. Chairman, President, and Vice-Presidents. The Chairman, if
any, shall, if present, preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustees to the Chairman, if any, the
President shall be the chief executive officer of the Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and of its employees and shall exercise such
general powers of management as are usually vested in the office of President of
a corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Shareholders and of the Trustees. The President
shall be, ex-officer, a member of all standing committees, except as otherwise
provided in the resolutions or instruments creating any such committees. Subject
to direction of the Trustees, the Chairman, if any, and the President shall each
have power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages, and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the Chairman, if any, and the President
shall each have full authority and power, on behalf of all of the Trustees, to
attend and to act and to vote, on behalf of the Trustees, any meetings of
business organizations in which the Trust holds any interest, or to confer such
powers upon any other persons, by executing any proxies duly authorizing such
persons. The Chairman, if any, and the President shall have such further
authorities and duties as the Trustees shall from time to determine in the
absence or disability of the President, the Vice-Presidents in order of their
rank as fixed by the Trustees or, if more than one and not ranked, the Vice-
President designated by the Trustees, shall perform all of the duties of the
President, and when so acting shall have all the powers of and be subject to all
of the restrictions upon the President. Subject to the direction of the
Trustees, and of the President, each Vice-President shall have the power in the
name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing, and,
in addition, shall have such other duties and powers as shall be designated from
time to time by the Trustees or by the President.
Section 3.6. Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Shareholders, Trustees and the Executive
Committee, if any. He shall be custodian of the seal of the Trust, if any, and
he (and any other person so authorized by the Trustees) shall affix the seal or,
if permitted, a facsimile thereof, to any instrument executed by the Trust which
would be sealed by a Massachusetts corporation execution the same or a similar
instrument and shall attest the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Massachusetts business corporation, and shall, time to time determine.
Section 3.7. Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, fund securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to his office. He may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or to
its order. He shall deposit all funds of the Trust in such depositories as the
Trustees shall designate. He shall be responsible for such disbursement of the
funds of the Trust as may be ordered by the Trustees or the President. He shall
keep accurate account of the books of the Trust's transactions which shall be
the property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial office of the Trust. He shall have such other duties
and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer acent to maintain bank
accounts and deposit and disburse fund.
Section 3.8. Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Miscellaneous
Section 4.1. Custodians. In accordance with Section 7.1 of the Declaration,
the funds of the Trust shall be deposited with such custodian or custodians as
the Trustees shall designate and shall be drawn out on checks, drafts or other
orders signed by such officer, officers, agent or agents (including any adviser,
administrator or manager), as the Trustees may from time to time authorize.
Section 4.2. Signatures. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents, as
provided in these By-Laws or as the Trustees may from time to time by resolution
provide.
Section 4.3. Seal. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation.
ARTICLE V
Share Certificates and Share Transfers
Section 5.1. Share Certificates. Each holder of Shares of the Trust shall
be entitled upon request to have a certificate or certificates, in such form as
shall be approved by the Trustees, representing the number of Shares owned by
him, provided, however, that certificates for fractional Shares shall not be
delivered in any case. The certificates representing Shares shall be signed by
or in the name of the Trust 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 Trust. 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 Trust with the
same effect as if such officers transfer agent or registrar were in office and
date of issue.
Section 5.2. Transfer Agents, Registrars and the Like. As provided in
Section 6.6 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of the
Trust as the Trustees shall deem necessary or desirable and may require all
certificates for Shares to bear the signature or signatures of any of them. In
addition, the Trustees shall have power to employ and compensate such dividend
disbursing agents, warrant agents and agents for the reinvestment of dividends
as they shall deem necessary or desirable. Any of such agents shall have such
power and authority as is delegated to any of them by the Trustees.
Section 5.3. Transfer of Shares. The Shares of the Trust shall be
transferable on the books of the Trust only upon delivery to the Trustees or a
transfer agent of the Trust of proper documentation as provided in Section 6.7
of the Declaration, 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. The Trust, or its
transfer agents, shall be authorized to refuse any transfer unless and until
presentation of such evidence as may be reasonably required to show that the
requested transfer is proper.
Section 5.4. Registered Shareholders. The Trust may deem and treat the
holder of record of any Share as the absolute owner thereof for all purposes and
shall not be required to take any notice of any right or claim of right of any
other person.
Section 5.5. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedite
concerning the issue, transfer and registration of certificates for Shares of
the Trust.
Section 5.6. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate 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 Trustees may, in their discretion, require
such owner or his legal representatives to give the Trust a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties, as the
Trustees in their absolute discretion shall determine, to indemnify the Trust
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 the Trustees in their absolute discretion, may refuse to
issue any such new certificates, except pursuant to legal proceedings under
the laws of the Commonwealth of Massachusetts.
ARTICLE VI
Amendment of By-Laws
Section 6.1. Amendment and Repeal of By-Laws. In accordance with Section
2.7 of the Declaration, the Trustees shall have the power to alter, amend or
repeal the By-Laws or adopt new By-Laws at any time. Action by the Trustees with
respect to the By-Laws shall be taken by an affirmative vote of a majority of
the Trustees. The Trustees shall in no event adopt By-Laws which are in conflict
with the Declaration, and any apparent inconsistency shall be construed in
favor of the related provisions in the Declaration.
The Declaration establishing Merrill Lynch Consults International
Portfolio, a copy of which, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Merrill Lynch Consults International Portfolio" refers to the Trustees
under the Declaration collectively as Trustees, but not as individuals or
personally; and no Trustee, shareholder, officer, employee or agent of Merrill
Lynch Consults International Portfolio shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of said Merrill
Lynch Consults International Portfolio but the Trust Property only shall be
liable.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 31st day of August, 1992 by and between MERRILL LYNCH
CONSULTS INTERNATIONAL PORTFOLIO, a Massachusetts business trust (hereinafter
referred to as the "Fund"), and, MERRILL LYNCH (SUISSE) INVESTMENT MANAGEMENT
S.A., a Swiss corporation (hereinafter referred to as the "Investment Adviser").
WITNESSETH:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in rendering
investment advisory and management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, and
WHEREAS, the Fund's assets will be invested primarily in an international
portfolio of securities denominated in various currencies; and
WHEREAS, the Fund desires to retain the Investment Adviser to provide
investment advisory and management services to the Fund in the manner and on the
terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide investment advisory
and management services to the Fund on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Investment Adviser hereby agree as
follows:
ARTICLE I
Duties of the Investment Adviser
The Fund hereby employs the Investment Adviser to act as an investment
adviser and manager of the Fund and to furnish, or arrange for affiliates to
furnish, the investment advisory and management services described below,
subject to the policies of, review by and oveall control of the Board of
Trustees of the Fund, for the period and on the terms and conditions set forth
in this Agreement. The Investment Adviser hereby accepts such employment and
agrees during such period, at its own expense, to render, or arrange for the
rendering of, such services and to assume the obligations herein set forth for
the compensation provided for herein. The Investment Adviser 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 Fund in any way or otherwise be deemed agents of the Fund.
(a) Investment Advisory Services. The Investment Adviser shall provide (or
arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish continuously
an investment program for the Fund and shall determine from time to time which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests,
options, futures, options on futures or cash, subject always to the restrictions
of the Declaration of Trust and By-Laws of the Fund, as amended from time to
time, the provisions of the Investment Company Act and the statements relating
to the Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in the currently effective Prospectus and
Statement of Additional Information of the Fund under the Securities Act of
1933, as amended (the "Prospectus" and "Statement of Additional Information,"
respectively). The Investment Adviser shall make decisions for the Fund as to
the manner in which voting rights, rights to consent to corporate action and any
other rights petaining to the Fund's portfolio securities shall be exercised.
Should the Board of Trustees of the Trust at any time, however, make any
definite determination as to investment policy and notify the Investment Adviser
thereof in writing, the Investment Adviser shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination has been revoked. The Investment Adviser shall take, on
behalf of the Fund, all actions which it deems necessary to implement the
investment policies determined as provided above, and in particular to place all
orders for the purchase or sale of portfolio securities for the Fund's account
with brokers or dealers selected by it, and to that end, the Investment Adviser
is authorized as the agent of the Fund to give instructions to the custodian of
the Fund as to deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders with respect to assets of the Fund, the Investment
Adviser is directed at all times to seek to obtain execution and prices within
the policy guidelines determined by the Trustees 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, the Investment Adviser may
select brokers or dealers with which it or the Fund is affiliated.
(b) Management Services. The Investment Adviser shall perform (or arrange
for the performance by affiliates of) certain management services necessary for
the operation of the Fund as hereinafter provided. The Investment Adviser shall
provide the Fund with office space, facilities, equipment and necessary
personnel and such other services as the Investment Adviser, subject to review
by the Board of Trustees of the Fund, shall from time to time determine to be
necessary or useful to perform its obligations under this Agreement. The
Investment Adviser shall generally monitor the Fund's compliance with investment
policies and restrictions as set forth in the currently effective Prospectus and
Statement of Additional Information. The Investment Adviser shall make reports
to the Board of Trustees of the Fund of its performance of obligations hereunder
and furnish advice and recommendations with respect to such other aspects of the
business and affairs of the Fund as it shall determine to be desirable.
(c) Sub-Advisers. In carrying out its responsibilities hereunder, the
Investment Adviser may employ, retain or otherwise avail itself of the services
of other persons or entities including without limitation, affiliates of the
Investment Adviser, on such terms as the Investment Adviser shall determine to
be necessary, desirable or appropriate. Without limiting the generality of the
foregoing, and subject to the requirements of Section 15 of the Investment
Company Act, the Investment Adviser may retain one or more sub-advisers to
manage the cash position of the Fund, at the Investment Adviser's own cost and
expense. Retention of one or more sub-advisers, or the employment or retention
of other persons or entities to perform services, shall in no way reduce the
responsibilities or obligations of the Investment Adviser under this Agreement
and the Investment Adviser shall be responsible for all acts and omissions of
such sub-advisers, or other persons or entities, in connection with the
performance of the Investment Adviser's duties hereunder.
ARTICLE II
Allocation of Charges and Expenses
(a) The Investment Adviser. The Investment Adviser assumes and shall pay
for maintaing the staff and personnel necessary to perform its obligations under
this Agreement, and shall provide the office space, facilities and necessary
personnel which it is obligated to provide under Article I hereof, and shall pay
all compensation of Officers of the Fund and all Trustees of the Fund who are
affiliated persons of the Investment Adviser.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund (except for the expenses paid by the Distributor),
including, without limitation: taxes, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder reports, Prospectuses
and Statements of Additional Information, charges of the custodian, any
sub-custodian, transfer agent or administrator, expenses of portfolio
bwsactions, expenses of redemption of shares, Securities and Exchange Commission
fees, expenses of registering the shares under Federal, state and foreign laws,
fees and actual out-of-pocket expenses of Trustees who are not affiliated
persons of the Investment Adviser or any sub- adviser, 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 Fund. The Distributor will
pay certain of the expenses of the Fund incurred in connection with the
continuous offering of shares of beneficial interest in the Fund.
ARTICLE III
Compensation of the Investment Adviser
(a) Investment Advisory Fee. For the services rendered, the facilities
furnished and expenses assumed by the Investment Adviser, the Fund shall pay to
the Investment Adviser at the end of each calendar month a fee based upon the
average daily value of the net assets of the Fund, as determined and computed in
accordance with the description of the determination of net asset value
contained in the Prospectus and Statement of Additional Information, at the
annual rate of .75 of 1.0% (.75%) of the average daily net assets of the Fund,
commencing on the day following effecfiveness hereof If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculation of the
fee as set forth above. Subject to the provisions of subsection (b) hereof,
payment of the Investment Adviser'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 Board of Trustees of the Fund, the net
asset value of a share as of the last- business day prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of the Fund,
including amounts payable to the Investment Adviser pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Investment Adviser shall reduce
its fee by the extent of such excess and, if required pursuant to any such laws
or regulations, will reimburse the Fund in the amount of such excess; 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 fees and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Whenever the expenses of the Fund exceed a
pro rata portion of the applicable annual expense limitations, the estimated
amount of reimbursement under such limitations shall be applicable as an offset
against the monthly payment of the fee due to the Investment Adviser. Should two
or more such expenses limitations be applicable as at the end of the last
business day of the month, that expense limitation which results in the largest
reduction in the Investment Adviser's fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Investment Adviser
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article IV, the term "Investment Adviser" shall include any affiliates of the
Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and such affiliates.
ARTICLE V
Activities of the Investment Adviser
The services of the Investment Adviser to the Fund are not to be deemed to
be exclusive, and the Investment Adviser and each affiliate is free to render
services to others. It is understood that Trustees, officers, employees and
shareholders of the Fund are or may become interested in the Investment Adviser
and its affiliates, as directors, officers, employees, partners and shareholders
or otherwise, and that directors, officers, employees, partners and shareholders
of the Investment Adviser and its affiliates are or may become similarly
interested in the Fund, and that the Investment Adviser and directors, officers,
employees, partners and shareholders of its affiliates may become interested in
the Fund 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 August 31, 1994 and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Trustees, or by the vote of a majority of the outstanding voting securities
of the Fund, and (ii) a majority of those Trustees who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Trustees of the Fund, or by the vote of a
majority of outstanding voting securities of the Fund, and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
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 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 acccordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
ARTICLE X
Personal Liability
The Declaration of Trust establishing the Fund, dated June 26, 1992, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merril Lynch Consults Intemational Portfolio" refers to the
Trustees under the Declaration collectively as trustees, but not as individuals
or personally, and no Trustee, shareholder, officer, employee or agent of the
Fund shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the 'Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Merrill Lynch Consults International
Portfolio
By /s/
MERRILL Lynch (Suisse) Investment
Management S.A
By /s/
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 31st day of August, 1992 by and among Merrill
LYNCH (SUISSE INVESTMENT MANAGEMENT S.A., a corporation organized under the laws
of Switzerland (hereinafter referred to as "MLSIM"), FUND ASSET MANAGEMENT,
INC., a corporation organized under the laws of the State of Delaware
(hereinafter referred to as "FAMI"), and MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts (the 'Fund').
WITNESSETH:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (hereinafter referred to as the 'Investment Company Act'); and
WHEREAS, MLSIM and FAMI are engaged principally in rendering investment
advisory services and are registered as investment advisers under the Investment
Advisers Act of 1940; and
WHEREAS, MLSIM has entered into an investment advisory agreement with the
Fund (the 'Advisory Agreement"), dated August 31, 1992, pursuant to which MLSIM
will provide investment advisory and management services to the Fund; and
WHEREAS, FAMI is willing to provide sub-advisory services to MLSIM with
respect to the cash position of the Fund on the terms and conditions hereinafter
set forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, FAMI and MLSIM hereby agree as follows:
ARTICLE I
Duties of FAMI
MLSIM hereby employs FAMI to act as sub-adviser to MLSIM and to furnish, or
arrange for affiliates to furnish, certain investment advisory services with
respect to the cash position of the Fund, as described below, subject to the
supervision of MLSIM and the Trustees of the Fund, for the period and on the
terms and conditions set forth in this Agreement. FAMI hereby accepts such
employment and agrees during such period to render, or arrange for the rendering
of, such services and to assume the obligations herein set forth for the
compensation from MLSIM provided for herein. FAMI and its affiliates shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
FAMI shall provide MLSIM with such investment research, advice and
supervision as the latter may from time to time consider necessary for the
proper management of the portion of the cash position of the Fund for which
MLSIM determines FAMI shall serve as sub-adviser. All advice and recommendations
provided by FAMI shall be subject to the restrictions of the Declaration of
Trust and By-Laws of the Fund, as amended from time to time, the provisions of
the Investment Company Act and the statements relating to the Fund's investment
objectives, investment policies and investment restrictions as the same are set
forth in the currently effective prospectus and statement of additional
information relating to the shares of the Fund under the Securities Act of 1933,
as amended (the 'Prospectus' and 'Statement of Additional Information',
respectively).
ARTICLE II
Allocation of Charges and Expenses
FAMI assumes and shall pay for maintaing the staff and personnel necessary
to perform its obligations under this Agreement, and shall at its own expense,
provide the office space, equipment and facilities which it is obligated to
provide under Article I hereof, and shall pay all compensation of officers of
the Fund and all Trustees of the Fund who are affiliated persons of FAMI.
ARTICLE III
Compensation of FAMI
For the services rendered, the facilities furnished and expenses assumed by
FAMI, MLSIM, and not the Fund, shall pay to FAMI such compensation as MLSIM and
FAMI shall agree upon from time to time.
ARTICLE IV
Limitation of Liability of FAMI
FAMI shall not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act of omission in the
performance of sub-advisory services rendered with respect to the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article IV, FAMI shall include any affiliates of FAMI
performing services for MLSIM contemplated hereby and directors, officers and
employees of FAMI and such affiliates.
ARTICLE V
Activities of FAMI
The services of FAMI to the Fund are not to be deemed to be exclusive, and
FAMI and any person controlled by or under common control with FAMI (for
purposes of this Article V referred to as "affiliates") is free to render
services to others. It is understood that Trustees, officers, employees and
shareholders of the Fund are or may become interested in FAMI and its
affiliates, as directors, officers, employees and shareholders of FAMI and its
affiliates are or may become similarly interested in the Fund, and that FAMI and
directors, officers employees, partners and shareholders of its affiliates may
become interested in the Fund 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 August 31, 1994 and thereafter, but only so long
as such continuances is specifically approved at least annually by (i) the
Trustees of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at 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 MLSIM or by vote of a majority of the outstanding voting securities
of the Fund, or by FAMI, on sixty days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment or in the
event of the termination of the Advisory Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Trustees of the Fund, or by the vote of a
majority of outstanding voting securities of the Fund, and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
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 laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company act, the later shall control.
ARTICLE X
Personal Liability
The Declaration of Trust establishing the Fund dated June 26, 1992, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merrill Lynch Consults International Portfolio" refers to the
Trustees under the Declaration collectively as trustees, but not as individuals
or personally, and no Trustee, shareholder, officer, employee or agent of the
Fund shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
IN WITNESSS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH (SUISSE) INVESTMENT
MANAGEMENT S.A.
By: /s/
-----------------------------
FUND ASSET MANAGEMENT, INC.
By: /s/
-----------------------------
MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO
By: /s/
-----------------------------
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 31st day of August, 1992 by and among Merrill
LYNCH (SUISSE) INVESTMENT MANAGE S.A., a corporation organized under the laws of
Switzerland (hereinafter referred to as "MLSIM"), Merrill LYNCH ASSET MANAGEMENT
U.K. LTD., a corporation organized under the laws of England and Wales
(hereinafter referred to as "MLAM U.K."), and MERRILL LYNCH CONSULTS IRNATIONAL
PORTFOLIO, an unincorporated business trust under the laws of the Commonwealth
of Massachusetts (the "Fund").
WITNESSETH:
WHEREAS, the Fund is engaged in business as a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended ("hereinafter referred to as the "Investment Company Act"); and
WHEREAS, MLSIM and MLAM U.K. are engaged principally in rendering
investment advisory services and are registered as investment advisers under the
Investment Advisers Act of 1940; and
WHEREAS, MLSIM has entered into an investment advisory agreement with the
Fund (the "Advisory Agreement"), dated August 31, 1992, pursuant to which MLSIM
will provide investment advisory and management services to the Fund; and
WHEREAS, MLAM U.K. is willing to provide sub-advisory services to MLSIM
with respect to the cash position of the Fund on the terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, MLAM U.K. and MLSIM hereby agree as follows:
ARTICLE I
Duties of MLAM U.K.
MLSIM hereby employs MLAM U.K. to act as sub-adviser to MLSIM and to
furnish, or arrange for affiliates to furnish, certain investment advisory
services with respect to the cash position of the Fund, as described below,
subject to the supervision of MLSIM and the Trustees of the Fund, for the period
and on the terms and conditions set forth in this Agreement. MLAM U.K. hereby
accepts such employment and agrees during such period to render, or arrange for
the rendering of, such services and to assume the obligations herein set forth
for the compensation from MLSIM provided for herein. MLAM U.K. and its
affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
MLAM U.K. shall provide MLSIM with such investment research, advice and
supervision as the latter may from time to time consider necessary for the
proper management of the portion of the cash position of the Fund for which
MLSIM determines MLAM U.K. shall serve as sub-adviser. All advice and
recommendations provided by MLAM U.K. shall be subject to the restrictions of
the Declaration of Trust and By-Laws of the Fund, as amended from time to time,
the provisions of the Investment Company Act and the statements relating to the
Fund's investment objectives, investment policies and investment restrictions as
the same are set forth in the currently effective prospectus and statement of
additional information relating to the shares of the Fund under the Securities
Act of 1933, as amended (the "Prospectus" and "Statement of Additional
Information", respectively).
ARTICLE II
Allocation of Charges and Expenses
MLAM U.K. assumes and shall pay for maintaining the staff and personnel
necessary to perform its obligations under this Agreement, and shall at its own
expense, provide the office space, equipment and facilities which it is
obligated to provide under Article I hereof, and shall pay all compensation of
officers of the Fund and all Trustees of the Fund who are affiliated persons of
MLAM U.K.
ARTICLE III
Compensation of MLAM U.K.
For the services rendered, the facilities furnished and expenses assumed by
MLAM U.K., MLSIM, and not the Fund, shall pay to MLAM U.K. such compensation as
MLSIM and MLAM U.K. shall agree upon from time to time.
ARTICLE IV
Limitation of Liability of MLAM U.K.
MLAM U.K. shall not be liable for any errorof judgment or mistake of law or
for any loss arising out of any investment or for any act of omission in the
performance of sub-advisory services rendered with respect to the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article IV, MLAM U.K. shall include any affiliates of
MLAM U.K. performing services for MLSIM contemplated hereby and directors,
officers and employees of MLAM U.K. and such affiliates.
ARTICLE V
Activities of MLAM U.K.
The services of MLAM U.K. to the Fund are not to be deemed to be exclusive,
and MLAM U.K. and any person controlled by or under common control with MLAM
U.K. (for purposes of this Article V referred to as "affiliates") is free to
render services to others. It is, understood that Trustees, officers, employees
and shareholders of the Fund are or may become interested in MLAM U.K. and its
affiliates, as directors, officers, employees and shareholders of MLAM U.K. and
its affiliates are or may become similarly interested in the Fund, and that MLAM
U.K. and directors, officers, employees, partners and shareholders of its
affilates may become interested in the Fund 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 August 31, 1994 and thereafter, but only so long
as such continuances is specifically approved at least annually by (i) the
Trustees of the Fund, or by the vote of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at 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 MLSIM or by vote of a majority of the outstanding voting securities
of the Fund, or by MLAM U.K., on sixty days' written notice to the other party.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Advisory Agreement.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the Trustees of the Fund, or by the vote of a
majority of outstanding voting securities of the Fund, and (ii) a majority of
those Trustees who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose of voting on
such approval.
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 laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company act, the later shall control.
ARTICLE X
Personal Liability
The Declaration of Trust establishing the Fund dated June 26, 1992, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merrill Lynch Consults International Portfolio" refers to the
Trustees under the Declaration collectively as trustees, but not as individuals
or personally, and no Trustee, shareholder, officer, employee or agent of the
Fund shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH (SUISSE) INVESTMENT
MANAGEMENT S.A.
By: /s/
----------------------------
MERRILL LYNCH ASSET MANAGEMENT U.K. LTD.
By: /s/
----------------------------
MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO
By: /s/
----------------------------
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
SHARES OF BENEFICIAL INTEREST
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 31st day of August, 1992 between MERRILL LYNCH
CONSULTS INTERNATIONAL PORTFOLIO, a Massachusetts business trust (the "Fund"),
and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as a diversified open-end management
investment company and it is affirmatively in the interest of the Fund to offer
its shares for sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the shares of beneficial
interest of the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
shares of beneficial interest of the Fund (the "shares") to current clients of
Merrill Lynch Consults Service and hereby agrees during the term of this
Agreement to sell shares of the Fund to the Distributor upon the terms and
conditions herein set forth and to such other investors as to which the Fund and
Distributor shall mutually agree.
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 shares with respect
to areas other than the United States as to which the Distributor may have
expressly waived in writing its right to act as such. If such designation is
deemed exclusive, the right of the Distributor under this Agreement to sell
shares in the areas so designated shall terminate, but this Agreement shall
remain otherwise in full effect until terminated in accordance with the other
provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase shares from
the Fund shall not apply to shares issued in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund.
(c) Such exclusive rights also shall not apply to shares issued by the Fund
pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive rights also shall not apply to shares issued by the Fund
pursuant to any reinstatement privilege afforded redeeming shareholders.
Section 3. Purchase of Shares from the Fund.
(a) Prior to the continuous offering of the shares, commencing on a date
agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for shares during a subscription period
which shall last for such period as may be agreed upon by the parties hereto.
The subscriptions will be payable on the fifth business day after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an offering
of its shares and thereafter the Distributor shall have the right to buy from
the Fund the shares needed, but not more than the shares needed (except for
clerical errors in transmission) to fill unconditional orders for shares of the
Fund placed with the Distributor by investors or securities dealers. The price
which the Distributor shall pay for the shares so purchased from the Fund shall
be the net asset value, determined as set forth in Section 3(d) hereof, used in
determining the public offering price on which such orders were based.
(c) The shares are to be resold by the Distributor to investors at the net
asset value, as set forth in Section 3(d) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(d) The net asset value of shares shall be determined by the Fund or any
agent of the Fund in accordance with the method set forth in the currently
effective prospectus and statement of additional information (the "Prospectus"
and "Statement of Additional," respectively) of the Fund and guidelines
established by the Trustees.
(e) The Fund shall have the right to suspend the sale of its shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof The Fund shall also have the right to suspend the sale of
its shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by Federal 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 shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund win not arbitrarily or without reasonable cause refuse to accept or confirm
orders for the purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, 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 shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the shares so tendered in
accordance with its obligations as set forth in Article VIII of its Declaration
of Trust as amended from time to time, and in accordance with the applicable
provisions set forth in the Prospectus and Statement of Additional Information.
The price to be paid to redeem or repurchase the shares shall be equal to the
net asset value calculated in accordance with the provisions of Section 3(d)
hereof, less the redemption fee or other charge, if any, set forth in the
currently effective Prospectus and Statement of Additional Information under the
Securities Act of 1933, as amended (the "Securities Act"). 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 in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
(b) Redemption of 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 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 accountants. The Fund
shall make available to the Distributor such number of copies of the Prospectus
and Statement of Additional Information as the Distributor shall reasonably
request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available for sale such number
of shares as the Distributor may reasonably be expected to sell.
(c) The Fund shall use its best efforts to maintain the qualification of an
appropriate number of its shares for sale under the securities laws of such
states as the Distributor and the Fund may approve. Any such qualification may
be withheld, terminated or withdrawn by the Fund at any time in its discretion.
As provided in Section 8(c) hereof, the expense of qualification and maintenance
of qualification shall be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such 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 shares of the Fund, but shall not be obligated to sell any specific number of
shares. The services of the Distributor to the Fund hereunder are not to be
deemed exclusive and nothing herein contained shall prevent the Distributor from
entering into like arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
(b) In selling the shares of the Fund, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all Federal and
state laws 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
Fund's registration statement or related Prospectus and Statement of Additional
Information and any sales literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of shares and fix therein the portion of the sales charge which may be
allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers. Shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(d) hereof. The form of agreement with selected dealers to be used
during the subscription period described in Section 3 (a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell shares
only to such selected dealers as are members in good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
Prospectuses and Statements of Additional Information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such registration statements, Prospectuses, Statements of Additional
Information, annual or interim reports or proxy materials).
(b) After the Prospectuses, Statements of Additional Information and annual
and interim reports have been prepared and set in type, the Distributor shall
bear the costs and expenses of printing and distributing any copies thereof
which are to be used in connection with the offering of shares to selected
dealers or investors 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 shares for sale and any expenses of
advertising incunred 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
under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the
shares for sale pursuant to this Agreement, and, if necessary or advisable in
connection therewith, of qualifying the Fund as a broker or dealer, in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any shares, which may be based upon the Securities Act, or on any other statute
or at common law, on the ground that the Fund's registration statement or
related Prospectus and Statement of Additional Information, as from time to time
amended and supplemented, or an annual or interim report to shareholders of the
Fund, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Fund in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Fund in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of 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 indenunity 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 shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Fund will be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but if the Fund elects to assume the defense,
such defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with the
issuance or sale of any of the shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund against
any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, 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 Fund's registration statement or related
Prospectus and Statement of Additional Information, as from time to time amended
or supplemented, 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, and the Fund and
each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Duration and Termination of this Ageement. This Agreement shall
become effective as of the date first above written and shall remain in force
until August 31, 1994 and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Trustees, or by the vote of a
majority of the outstanding voting securities of the Fund, and (ii) by the vote
of a majority of those Trustees who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the othet party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 11. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees,
or by the vote of a majority of outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Trustees of the Fund who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
Section 12. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
Section 13. Personal Liability. The Declaration of Trust establishing
Merrill Lynch Consults Intemational Portfolio, dated June 26, 1992, a copy of
which, together with all amendments thereto (the "Declaration"), is on file in
the office of the Secretary of the Commonwealth of Massachusetts, provides that
the name "Merrill Lynch Consults International Portfolio" refers to the Trustees
under the Declaration collectively as trustees, but not as individuals or
personally; and no Trustee, shareholder, officer, employee or agent of the Fund
shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO
BY: /s/
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
BY: /s/
EXHIBIT A
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Consults International Portfolio, a Massachusetts business
trust (the "Fund"), pursuant to which it acts as the distributor for the sale of
shares of beneficial interest, par value $0.10 per share (herein referred to as
"shares"), of the Fund, and as such has the right to distribute shares of the
Fund for resale. The Fund is a diversified open-end management investment
company registered under the Investment Company Act of 1940, as amended, and its
shares, which are being offered exclusively to clients of the Merrill Lynch
Consults Service are registered under the Securities Act of 1933, as
amended (the "1933 Act"). Such shares and certain of the terms on which they are
being offered are more fully described in the enclosed Prospectus and Statement
of Additional Information. You have received a copy of the Distribution
Agreement relating to the shares (the "Distribution Agreement") between the
Distributor and the Fund and reference is made herein to certain provisions of
such Distribution Agreement. This Agreement relates solely to the subscription
period described in Section 3(a) of such Distribution Agreement. Subject to the
foregoing, as principal, we offer to sell to you, as a member of the Selected
Dealers Group, shares of the Fund upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the Distribution
Agreement will continue through September 4, 1992. The subscription period may
be extended for up to an additional 30 days upon agreement between the Fund and
the Distributor. Subject to the provisions of such Section and the conditions
contained herein, we will sell to you on the fifth business day following the
termination of the subscription period, or such other date as we may advise (the
"Closing Date"), such number of shares as to which you have placed orders with
us not later than 5:00 P.M. on the second full business day preceding the
Closing Date.
2. In all sales of shares 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.
3. You shall not place orders for any of the shares unless you have already
received purchase orders for such shares at the applicable public offering price
and subject to the terms hereof and of the Distribution Agreement. All orders
are subject to acceptance by the Distributor or the Fund in the sole
discrimination of either. The minimum initial and subsequent purchase
requirements are as set forth in the Prospectus, as amended from time to time.
You agree that you will not offer or sell any of the shares except under
circumstances that will result in compliance with the applicable Federal and
state securities laws and that in connection with sales and offers to sell
shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus 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 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. Payment for shares purchased by you is to be made by certified or
official bank check at the office of Merrill Lynch Funds Distributor, Inc., Box
9011, Princeton, New Jersey 08543-9011, on such date as we may advise, in New
York Clearing House funds payable to the order of Merrill Lynch Funds
Distributor, Inc. against delivery by us of non-negotiable share deposit
receipts ("Receipts") issued by Financial Data Services, Inc., as shareholder
servicing agent, acknowledging the deposit with it of the shares so purchased by
you. You agree that as promptly as practicable after the delivery of such shares
you will issue appropriate written transfer instructions to the Fund or to the
shareholder servicing agent as to the purchasers to whom you sold the shares.
5. No person is authorized to make any representations concerning 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 shares through us you shall
rely solely on the representations contained in the Prospectus and Statement of
Additional Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospectus and Statement
of Additional Information, periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
6. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Inforination at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
7. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of shares entirely. Each party hereto has the right to
cancel this Agreement upon notice to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the 1933 Act or of the rules and regulations of the Securities and Exchange
Commission issued thereunder.
9. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
10. Upon application to us, we will inform you as to the states in which we
believe the shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You agree that you will not sell any shares of the Fund to any account
over which you exercise discretionary authority.
13. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/
(Authorized Signature)
Please return one signed copy of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: /s/
Address: 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Date: August 31, 1992
EXHIBIT B
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
SHARES OF BENEFICIAL INTEREST
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Consults International Portfolio, a Massachusetts business
trust (the "Fund"), pursuant to which it acts as the distributor for the sale of
shares of beneficial interest, par value $0.10 per share, of the Fund, and as
such has the right to distribute shares of the Fund for resale. The Fund is a
diversified open-end management investment company registered under the
Investment Company Act of 1940, as amended, and its shares, which are being
offered to current clients of Merrill Lynch Consults Service (and to such
other investors as to which the Fund and Distributor shall agree), are
registered under the Securities Act of 1933, as amended (the "1933 Act"). You
have received a copy of the Distribution Agreement between the Distributor and
the Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "Prospectus" and "Statement of Additional Information" used
herein refer to the Prospectus and Statement of Additional Information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the 1933 Act. As
principal, we offer to sell to you, as a member of the Selected Dealers Group,
shares of the Fund upon the following terms and conditions:
1. In all sales of shares you shall act as dealer for your own account, and
in no transaction shall you have any authority to act as agent for the Fund, for
us or for any other member of the Selected Dealers Group.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Fund.
3. You shall not place orders for any of the shares unless you have already
received purchase orders for such shares at the applicable public offering
prices and subject to the terms hereof and of the Distribution Agreement. You
agree that you win not offer or sell any of the shares except under
circumstances that will result in compliance with the applicable Federal and
state securities laws and that in connection with sales and offers to sell
shares you will furnish to each person to whom any such sale or offer is made a
copy of the Prospectus 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 shares of the Fund, which is inconsistent in any
respect with the information contained in the Prospectus and Statement of
Additional Information (as then arnended or supplemented) or cause any
advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for shares 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 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 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 shares through us you shall
rely solely on the representations obtained in the Prospectus and Statement of
Additional Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material are our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of 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 1933 Act 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 of 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 shares have been qualified for sale under, or are exempt from the
requirements of, the respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of
shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/
(Authorized Signature)
Please return one signed copy of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: /s/
Address: 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Date: August 31, 1992
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
CUSTODIAN AGREEMENT
AGREEMENT made this 31st day of August, 1992, between MERRILL LYNCH
CONSULTS INTERNATIONAL PORTFOLIO (the "Fund") and Brown Brothers Harriman & Co.
(the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian for
the term and subject to the provisions of this Agreement. The Custodian shall
not be under any duty or obligation to require the Fund to deliver to it any
securities or funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so delivered. The Fund
will deposit with the Custodian copies of the Certificate of Incorporation and
By-Laws (or comparable documents) of the Fund and all amendments thereto, and
copies of such votes and other proceedings of the Fund as may be necessary for
or convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by subcustodians appointed pursuant
to the provisions of Section 3 hereof, the Custodian shall have and perform the
following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have been
delivered to the Custodian and from time to time to receive delivery of
securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2S).
C. Registered Name; Nominee - To hold registered securities of the Fund
(1) in the name or any nominee name of the Custodian or the Fund, or in the name
or any nominee name of any agent appointed pursuant to Section 6E, or (2) in
street certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper Instructions, as defined in Section V
on Page 14, insofar as funds are available for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being made
only upon receipt of the securities (1) by the Custodian, or (2) by a clearing
corporation of a national securities exchange of which the Custodian is a
member, or (3) by a Securities System. However, (i) in the case of repurchase
agreements entered into by the Fund, the Custodian may release funds to a
Securities System or to a Subcustodian prior to the receipt of advice from the
Securities System or Subcustodian that the securities underlying such repurchase
agreement have been transferred by book entry into the Account (as defined in
Section 2S) of the Custodian maintained with such Securities System or
Subcustodian, so long as such payment instructions to Securities System or
Subcustodian include a requirement that delivery is only against payment of
securities, and (ii) in the case of time deposits, call account deposits,
currency deposits, and other deposits, contracts or options pursuant to
Sections 2K, 2L and 2M, the Custodian may make payment therefor without
receiving an instrument evidencing said deposit so long as such payment
instructions detail specific securities to be acquired.
E. Exchanges - Upon receipt of proper instructions, to exchange securities
held by it for the account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in accordance with
the terms of any reorganization or protective plan. Without such instructions,
the Custodian may surrender securities in temporary form for definitive
securities, may surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian and further provided custodian shall at the time of
surrendering securities or instruments receive a receipt or other evidence of
ownership thereof.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct a
subcustodian appointed pursuant to Section 3 hereof (a "Subcustodian") or an
agent of the Custodian appointed pursuant to Section 6E hereof (an "Agent") to
surrender securities to the depositary used by an issuer of American Depositary
Receipts or International Depositary Receipts (hereinafter collectively referred
to as "ADRs") for such securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to the Subcustodian
or Agent that the depositary has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of the Custodian, or a nominee
of the Custodian, for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender upon receipt ADRs to the
issuer thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or an Agent.
H. Exercise of Rights; Tender Offers - Upon timely receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Borrowings - Upon receipt of proper instructions, to deliver securities
of the Fund to lenders or their agents as collateral for borrowings effected by
the Fund, provided that such borrowed money is payable to or upon the
Custodian's order as Custodian for the Fund.
K. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name of the
Custodian for account of the Fund and subject only to the Custodian's draft or
order. Such accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U. S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and neither lesser nor greater than the
Custodian's responsibility in respect of other portfolio securities of the Fund.
L. Interest Bearing Call or Time Deposits - To place interest bearing fixed
term and call deposits with such banks and in such amounts as the Fund may
authorize pursuant to proper instructions. Such deposits may be placed with the
Custodian or with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U.S. Dollars or other currencies and
need not be evidenced by the issuance or delivery of a certificate to the
Custodian, provided that the Custodian shall include in its records with respect
to the assets of the Fund, appropriate notation as to the amount and currency of
each such deposit, the accepting Banking Institution, and other appropriate
details. Such deposits, other than those placed with the Custodian, shall be
deemed portfolio securities of the Fund and the responsibilities of the
Custodian therefor shall be the same as those for demand deposit bank accounts
placed with other banks, as described in Section K of this agreement. The
responsibility of the Custodian for such deposits accepted on the Custodian's
books shall be that of a U. S. bank for a similar deposit.
M. Foreign Exchange Transactions and Futures Contracts - Pursuant to proper
instructions, to enter into foreign exchange contracts or options to purchase
and sell foreign currencies for spot and future delivery on behalf and for the
account of the Fund. Such transactions may be undertaken by the Custodian with
such Banking Institutions, including the Custodian and Subcustodian(s) as
principals, as approved and authorized by the Fund. Foreign exchange contracts
and options other than those executed with the Custodian, shall be deemed to be
portfolio securities of the Fund and the responsibilities of the Custodian
therefor shall be the same as those for demand deposit bank accounts placed with
other banks as described in Section 2-K of this agreement. Upon receipt of
proper instructions, to receive and retain confirmations evidencing the purchase
or sale of a futures contract or an option on a futures contract by the Fund; to
deposit and maintain in a segregated account, for the benefit of any futures
commission merchant or to pay to such futures commission merchant, assets
designated by the fund as initial, maintenance or variation "margin" deposits
intended to secure the Fund's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts written by the
Fund, in accordance with the provisions of any agreement or agreements among any
of the Fund, the Custodian and such futures commission merchant, designated to
comply with the rules of the Commodity Futures Trading Commission and/or any
contract market, or any similar organization or organizations, regarding such
margin deposits; and to release and/or transfer assets in such margin accounts
only in accordance with any such agreements or rules.
N. Stock Loans - Upon receipt of proper instructions, to deliver securities
of the Fund, in connection with loans of securities by the Fund, to the borrower
thereof upon the receipt of the cash collateral, if any, for such borrowing. In
the event U.S. Government securities are to be used as collateral, the Custodian
will not release the securities to be loaned until it has received confirmation
that such collateral has been delivered to the Custodian. The Custodian and Fund
understand that the timing of receipt of such confirmation will normally require
that the delivery of securities to be loaned will be made one day after receipt
of the U.S. Government collateral.
0. Collections - To collect, receive and deposit in said account or
accounts all income and other payments with respect to the securities held
hereunder, and to execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection with transfer
of securities, and pursuant to proper instructions to take such other actions
with respect to collection or receipt of funds or transfer of securities which
involve an investment decision.
P. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
Q. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
R. Bills - Upon receipt of proper instructions, to pay or cause to be paid,
insofar as funds are available for the purpose, bills, statements, or other
obligations of the Fund.
S. Deposit of Fund Assets in Securities Systems - The Custodian may deposit
and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart 0 of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart 0, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in accordance
with applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall Transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred to above, and
be provided to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the Custodian will terminate the use
of any such Securities System on behalf of the Fund as promptly as practicable.
T. Other Transfers - Upon receipt of Proper Instructions, to deliver
securities, funds and other property of the Fund to a Subcustodian or another
custodian of the Fund; and, upon receipt of proper instructions, to make such
other disposition of securities, funds or other property of the Fund in a manner
other than or for purposes other than as enumerated elsewhere in this Agreement,
provided that the instructions relating to such disposition shall include a
statement of the purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons to whom
delivery is to be made.
U. Investment Limitations - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Certificate
of Incorporation or By-Laws (or comparable documents) or votes or proceedings of
the shareholders or Directors of the Fund. The Custodian shall in no event be
liable to the Fund and shall be indemnified by the Fund for any violation which
occurs in the course of carrying out instructions given by the Fund of any
investment limitations to which the Fund is subject or other limitations with
respect to the Fund's powers to make expenditures, encumber securities, borrow
or take similar actions affecting its portfolio.
V. Proper Instructions - Proper instructions shall mean a tested telex from
the Fund or a written request, direction, instruction or certification signed or
initialled on behalf of the Fund by two or more persons as the Board of
Directors of the Fund shall have from time to time authorized, provided,
however, that no such instructions directing the delivery of securities or the
payment of funds to an authorized signatory of the Fund shall be signed by such
person. Those persons authorized to give proper instructions may be identified
by the Board of Directors by name, title or position and will include at least
one officer empowered by the Board to name other individuals who are authorized
to give proper instructions on behalf of the Fund. Telephonic or other oral
instructions given by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. Oral instructions will be confirmed by tested telex or in writing in
the manner set forth above but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to the Custodian by or on behalf of
the Fund (including any of its officers, Directors, employees or agents) and
will deliver to the Custodian a similar authorization from any investment
manager or adviser or person or entity with similar responsibilites which is
authorized to give proper instructions on behalf of the Fund to the Custodian.
Proper instructions may relate to specific transactions or to types or classes
of transactions, and may be in the form of standing instructions.
Proper instructions may include communications effected directly between
electromechanical or electronic devices or systems, in addition to tested telex,
provided that the Fund and the Custodian agree to the use of such device or
system.
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a custodian or a foreign
custodian under the Investment Company Act of 1940 and the rules and regulations
thereunder) to act as a Subcustodian for the Fund, provided that the Fund shall
have approved in writing (1) any such bank or trust company and the subcustodian
agreement to be entered into between such bank or trust company and the
Custodian, and (2) if the subcustodian is a bank organized under the laws of a
country other than the United States, the holding of securities, cash and other
property of the Fund in the country in which it is proposed to utilize the
services of such subcustodian. Upon such approval by the Fund, the Custodian is
authorized on behalf of the Fund to notify each Subcustodian of its appointment
as such. The Custodian may, at any time in its discretion, remove any bank or
trust company that has been appointed as a Subcustodian but will promptly notify
the Fund of any such action.
Those Subcustodians, their offices or branches which the Fund has approved
to date are set forth on Appendix A hereto. Such Appendix shall be amended from
time to time as Subcustodians, branches or offices are changed, added or
deleted. The Fund shall be responsible for informing the Custodian sufficiently
in advance of a proposed investment which is to be held at a location not listed
on Appendix A, in order that there shall be sufficient time for the Fund to give
the approval required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian pursuant to such
subcustodian agreement.
Although the Fund does not intend to invest in a country before the
foregoing procedures have been completed, in the event that an investment is
made prior to approval, if practical, such security shall be removed to an
approved location or if not practical such security shall be held by such agent
as the Custodian may appoint. In such event, the Custodian shall be liable to
the Fund for the actions of such agent if and only to the extent the Custodian
shall have recovered from such agent for any damages caused the Fund by such
agent and provided that the Custodian shall pursue its rights against such
agent.
With respect to the securities and funds held by a Subcustodian, either
directly or indirectly, including demand and interest bearing deposits,
currencies or other deposits and foreign exchange contracts as referred to in
Sections 2K, 2L or 2M, the Custodian shall be liable to the Fund if and only to
the extent that such Subcustodian is liable to the Custodian and the Custodian
recovers under the applicable subcustodian agreement. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of any securities or funds held by it to any such
Subcustodian.
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
At the written request of the Fund, the Custodian will terminate any
subcustodian appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the preparation of reports to Fund
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
5. The Fund hereby also appoints the Custodian as its financial agent. With
respect to the appointment as financial agent, the Custodian shall have and
perform the following powers and duties:
A. Records - To create, maintain and retain such records relating to its
activities and obligations under this Agreement as are required under the
Investment Company Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 3la-1 and 3la-2 thereunder) and under
applicable Federal and State tax laws. All such records will be the property of
the Fund and in the event of termination of this Agreement shall be delivered to
the successor custodian, and the Custodian agrees to cooperate with the Fund in
execution of documents and other action necessary or desirable in order to
substitute the successor custodian for the Custodian under this Agreement.
B. Accounts - To keep books of account and render statements, including
interim monthly and complete quarterly financial statements, or copies thereof,
from time to time as reasonably requested by proper instructions.
C. Access to Records - Subject to security requirements of the Custodian
applicable to its own employees having access to similar records within the
Custodian and such regulations as may be reasonably imposed by the Custodian,
the books and records maintained by the Custodian pursuant to Sections 5A and 5B
shall be open to inspection and audit at reasonable times by officers of,
attorneys for, and auditors employed by, the Fund.
D. Disbursements - Upon receipt of proper instructions, to pay or cause to
be paid, insofar as funds are available for the purpose, bills, statements and
other obligations of the Fund (including but not limited to interest charges,
taxes, management fees, compensation to Fund officers and employees, and other
operating expenses of the Fund).
6. A. The Custodian shall not be liable for any action taken or omitted in
reliance upon proper instructions believed by it to be genuine or upon any other
written notice, request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to give proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until receipt of a
similar certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, (but only to
the extent such expenses are reasonable) to receive and act upon advice of
counsel (who may be counsel for the Fund) on all matters, and the Custodian
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
B. With respect to the portfolio securities, cash and other property of the
Fund held by a Securities System, the Custodian shall be liable to the Fund only
for any loss or damage to the Fund resulting from use of the Securities System
if caused by any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from any failure of the
Custodian or any such agent to enforce effectively such rights as it may have
against the Securities System.
C. Except as may otherwise be set forth in this Agreement with respect to
particular matters, the Custodian shall be held only to the exercise of
reasonable care and diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any applicable law. However, nothing herein shall
exempt the Custodian from liability due to its own negligence or willful
misconduct. The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including reasonable counsel fees)
incurred or assessed against it or its nominees in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's breach of the relevant standard of conduct set forth in this
Agreement. Without limiting the foregoing indemnification obligation of the
Fund, the Fund agrees to indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee.
In order that the indemnification provisions contained in this Paragraph
6-C shall apply, however, it is understood that if in any case the Fund may be
asked to indemnify or hold the Custodian harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the Custodian will use all reasonable care to
identify and notify the Fund promptly concerning any situation which presents or
appears likely to present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend the Custodian against
any claim which may be the subject of this indemnification, and in the event
that the Fund so elects it will so notify the Custodian, and thereupon the Fund
shall take over complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it shall seek
indemnification under this Paragraph 6-C. The Custodian shall in no case confess
any claim or make any compromise in any case in which the Fund will be asked to
indemnify the Custodian except with the Fund's prior written consent.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, an agent of the Custodian or a
Subcustodian, a Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a Sovereign
Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's property; or acts of war, terrorism, insurrection or revolution; or any
other similar act or event beyond the Custodian's control.
D. The Custodian shall be entitled to receive reimbursement from the Fund
on demand, in the manner provided in Section 7, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries and usual
overhead expenses.
E. The Custodian may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the appointment of such
Agent (other than an Agent appointed pursuant to the third paragraph of Section
3) shall not relieve the Custodian of any of its responsibilities under this
agreement.
F. Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be agreed upon in writing by the Custodian and
the Fund. Such fee, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 6D, shall be billed to the Fund in such a
manner as to permit payment by a direct cash payment to the Custodian.
8. This Agreement shall continue in full force and effect until terminated
by either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect not sooner than
seventy five (75) days after the date of such delivery or mailing. In the event
of termination the Custodian shall be entitled to receive prior to delivery of
the securities, funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated by Sections 6D and 7,
upon receipt by the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed that
the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the Fund in execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
9. This Agreement constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof. No provision of this
Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
10. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
11. Notices and other writings delivered or mailed postage prepaid to the
Fund addressed to the Fund at Merrill Lynch Asset Management, Inc., 800 Scudders
Mill Road, Plainsboro, New Jersey 08536, Mailing address: Post Office Box 9011,
Princeton, New Jersey 08543, Attention: Mr. Gerald M. Richard, Senior Vice
President/Treasurer, or to such other address as the Fund may have designated to
the Custodian in writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in writing, shall be
deemed to have been properly delivered or given hereunder to the respective
addressee.
12. This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
13. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original. This Agreement shall become effective when
one or more counterparts have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO BROWN BROTHERS HARRIMAN & CO.
By: /s/ per pro
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the 31st day of August, 1992 by and between
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO (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 for the Fund 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 the 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 Shareholders, or, if the
shares are held in an account in the name MLPF&S 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");
(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 State of
Additional Information of the Fund as from time to time in effect;
(VIII) The term "Shares" means shares of stock 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;
(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 ouch 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 transactions, and preserving, or causing to be preserved any
such books and records for such periods as may be required by any such law, rule
or regulation and as may be agreed upon from time to time between FDS and the
Fund. In addition, FDS agrees to maintain and preserve master files and
historical computer tapes on a daily basis in multiple separate locations a
sufficient distance apart to insure preservation of at least one copy of such
information;
(XV) Withholding taxes on non-resident alien Accounts, preparing and filing
U.S. Treasury Department Form 1099 and other appropriate forms as required by
applicable. law with respect to dividends and distributions; and
(XVI) Reinvesting dividends for full and fractional shares and disbursing
cash dividends, as applicable.
(b) FDS agrees to act as proxy agent in connection with the holding of
annual, if any, and special meetings of Shareholders, ?nailing 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 certificates, 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 inquires 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. 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 FOS in
cases of willful misconduct, failure to act in good faith or negligence by FDS,
it's 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.
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 it 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 givew the other party written notice of such termination
at least sixty (60) days in advance, except that the Fund may terminate this
Agreement immediately upon written notice to FDS if the authority or permission
of FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent has been revoked or if any proceeding or other action which the
Fund reasonably believes will lead to such revocation has been commenced.
(b) Upon termination of this Agreement, FDS shall deliver all unissued and
cancelled share certificates representing Shares remaining in its possession,
and all Shareholder records, books, ledgers, instruments and other documents
(including computerized or other electronically stored information) made or
accumulated in the performance of its duties as Transfer Agent, 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; 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.
12. Personal Liability.
The Declaration of Trust establishing the Fund dated June 26, 1992, a copy
of which, together with all amendments thereto (the "Declaration"), is on file
in the office of the Secretary of the Commonwealth of Massachusetts, provides
that the name "Merrill Lynch Consults International Portfolio" refers to the
Trustees under the Declaration collectively as trustees, but not as individuals
or personally, and no Trustee, shareholder, officer, employee or agent of the
Fund shall be held to any personal liability, nor shall resort be had to their
private property for satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Fund, but the "Trust Property" only shall be
liable.
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 CONSULTS
INTERNATIONAL PORTFOLIO
By /s/
FINANCIAL DATA SERVICES, INC.
By /s/
ADMINISTRATION AGREEMENT
AGREEMENT made this 31st day of August, 1992 by and between LYNCH CONSULTS
INTERNATIONAL PORTFOLIO, a Massachusetts business trust (hereinafter called the
"Fund"), and PRINCETON ADMINISTRATORS, INC., a Delaware corporation (hereinafter
called the "Administrator").
WITNESSETH
WHEREAS, the Fund intends to engage in business as a open-end diversified
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and Merrill Lynch (Suisse) Investment Management S.A.
(the "Investment Adviser") are entering into an Investment Advisory Agreement
(the "Investment Advisory Agreement") pursuant which the Investment Adviser will
provide investment advice to the Fund and be responsible for the portfolio
management of the Fund; and
WHEREAS, the Fund desires to retain the Administrator to render
administrative services in the manner and on the terms and conditions hereafter
set forth; and
WHEREAS, the Administrator desires to be retained to perform services on
said terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and the Administrator agree as follows:
1. Duties of the Administrator. The Fund hereby retains the Administrator
to act as administrator of the Fund, subject to the supervision and direction of
the Board of Trustees of the Fund, as hereinafter set forth. The Administrator
shall perform or arrange for the performance of the following administrative and
clerical services: (i) maintain and keep the books and records of the Fund as
required by law or for the proper operation of the Fund; (ii) prepare and,
subject to approval by the Fund, file reports and other documents required by
U.S. Federal, state and other applicable laws and regulations, including proxy
materials and periodic reports to Fund shareholders; (iii) administer
shareholder accounts, handle shareholder relations and respond to inquiries from
Fund shareholders; (iv) calculate and publish or arrange for the calculation and
publication of, the net asset value of the Fund's shares; (v) conduct relations
with, oversee, and, as the Board may reasonably request or deem appropriate,
make reports and recommendations to the Board on, the performance of
administrative and professional services rendered to the Fund by others,
including its custodian, registrant, transfer agent, dividend disbursing agent
and dividend reinvestment plan agent, 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; (vi) provide the Fund with the services of
persons competent to perform the administrative and clerical functions described
herein; (vii) provide the Fund with administrative office and data processing
facilities; (viii) arrange for payment of the Fund's expenses; (ix) consult with
the Fund's officers, independent accountants, legal counsel, custodian,
accounting agent and transfer and dividend disbursing agent in establishing the
accounting policies of the Fund; (x) prepare such financial information and
reports as may be required by any banks from which the Fund borrows funds; (xi)
monitor the Fund's compliance with investment policies and restrictions as set
forth in the Fund's currently effective Prospectus and Statement of Additional
Information under the Securities Act of 1933, as amended; and (xii) provide such
assistance to the Investment Adviser, the custodian and the Fund's counsel and
auditors as generally may be required to carry on properly the business and
operations of the Fund. The Fund agrees to cause the Investment Adviser to
deliver, on a timely basis, such information to the Administrator as may be
necessary or appropriate for the Administrator's performance of its duties and
responsibilities hereunder, including but not limited to, records of
transactions, valuations of investments in United States dollars (which may be
based on information provided by a pricing service) and shareholders reports and
expenses borne by the Fund, and the Administrator shall be entitled to rely on
the accuracy and completeness of such information in performing its duties
hereunder.
2. Expenses of the Administrator. The Administrator 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 office space,
facilities, equipment and necessary personnel which it is obligated to provide
under paragraph I hereof, except that the Fund shall pay the expenses of legal
counsel and accountants as provided in paragraph 4(b) of this Agreement, and
will reimburse the Administrator on a semi-annual basis for its costs in
providing accounting services. The Fund and the Investment Adviser assume and
shall pay or cause to be paid all other expenses of the Fund as set forth in the
Investment Advisory Agreement.
3. Compensation of the Administrator. For the services rendered to the Fund
by the Administrator pursuant to this Agreement, the Fund shall pay to the
Administrator on the first business day of each calendar month a fee for the
previous month at an annual rate equal to .25 % of the Fund's average daily net
assets. For the purpose of determining fees payable to the Administrator, the
net assets of the Fund shall mean the average daily value of the total assets of
the Fund, minus the sum of accrued liabilities of the Fund. The value of the
Fund's net assets shall be computed at the times and in the manner specified in
the Fund's registration statement on Form N-1A, as amended from time to time
(the "Registration Statement"). Compensation by the Fund of the Administrator
shall commence on the date of the first receipt by the Fund of the proceeds of
the sale of its shares as described in the Registration Statement, and the fee
for the period from the date the Fund shall first receive the proceeds of the
sale of its shares as aforesaid to the end of the month during which such
proceeds are so received, shall be pro-rated according to the proportion that
such period bears to the full monthly period. Upon termination of this Agreement
before the end of a month, the fee for such part of that month shall be
pro-rated according to the proportion that such period bears to the full monthly
period and shall be payable within seven (7) days after the date of termination
of this Agreement.
4. Limitation of Liabiliiy of the Administrator; Indemnification.
(a) The Administrator shall not be liable to the Fund, or the Investment
Adviser for any error of judgment or mistake of law or for any loss arising out
of any act or omission by the Administrator in the performance of its duties
hereunder. Nothing herein contained shall be construed to protect the
Administrator against any liability to the Fund, its shareholders, the
Investment Adviser or any sub-adviser to which the Administrator shall otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reckless disregard of its obligations and
duties hereunder.
(b) The Administrator may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel to the Fund, at the expense of the
Fund, and with respect to the application of generally accepted accounting
principles or Federal tax accounting principles, apply for and obtain the advice
and opinion of the independent auditors of the Fund, at the expense of the Fund.
The Administrator shall be fully protected with respect to any action taken or
omitted by it in good faith in conformity with such advice or opinion.
(c) The Fund agrees to indemnify and hold harmless the Administrator from
and against all charges, claims, expenses (including legal fees) and liabilities
reasonably incurred by the Administrator in connection with the performance of
its duties hereunder, except such as may arise from the Administrator's willful
misfeasance, bad faith, gross negligence in the performance of its duties or by
reckless disregard of its obligations and duties hereunder. The Fund shall make
advance payments in connection with the expenses of defending any action with
respect to which indemnification might be sought hereunder if the Fund receives
a written affirmation of the Administrator's good faith belief that the standard
of conduct necessary for indemnification has been met and a written undertaking
to reimburse the Fund unless it is subsequently determined that the
Administrator is entitled to such indemnification and if the Trustees of the
Fund determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the Administrator shall provide a security for this undertaking,
(B) the Fund shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum consisting of Trustees of the Fund who
are neither "interested persons" of the Fund (as defined in Section 2(a)(19) of
the 1940 Act) nor parties to the proceeding or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Administrator ultimately will be found entitled to indemnification.
(d) As used in this paragraph 4, the term "Administrator" shall include any
affiliates of the Administrator performing services for the Fund contemplated
hereby and directors, officers, agents and employees of the Administrator and
such affiliates.
5. Activities of the Administrator. The services of the Administrator under
this Agreement are not to be deemed exclusive, and the Administrator and any
person controlled by or under common control with the Administrator shall be
free to render similar services to others.
6. Duration and Termination of this Agreement. This Agreement shall become
effective as of the date first above written and shall remain in force until
terminated as provided herein. This Agreement may be terminated at any time,
without the payment of any penalty, by the Fund or the Administrator, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
7. Amendments of this Agreement. This Agreement may be amended by the
parties hereto only if such amendment is specifically approved by the Board of
Trustees of the Fund and such amendment is set forth in a written instrument
executed by each of the parties hereto.
8. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 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 1940 Act, the latter shall
control.
9. Counterparts. This Agreement may be executed by the parties hereto in
counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
10. Notices. Any notice under this Agreement, shall be in writing and shall
be deemed to be received on the earlier of the date actually received or on the
fourth day after the postmark if such notice is mailed first class postage
prepaid. Notice shall be addressed: (a) if to the Administrator, to: President,
Princeton Administrators, Inc., P.O. Box 9011, Princeton, New Jersey
08543-9011; or (b) if to the Fund, to: President, Merrill Lynch Consults
International Portfolio, P.O. Box 9011, Princeton, New Jersey 08543-9011.
11. Personal Liability. The Declaration of Trust establishing the Fund,
dated June 26, 1992, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name "Merrill Lynch Consults International
Portfolio" refers to the Trustees under the Declaration collectively as
trustees, but not as individuals or personally, and no Trustee, shareholder,
officer, employee or agent of the Fund shall be held to any personal liability,
nor shall resort be had to their private property for satisfaction of any
obligation or claim or otherwise in connection with the affairs of the Fund, but
the "Trust Property" only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO
By /s/
Title: Secretary
PRINCETON ADMINISTRATORS, INC.
By /s/ Terry K Glenn
Title: President
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the 31st day of August, 1992 by and between MERRILL
LYNCH & CO., INC.("ML&Co.") a Delaware corporation, and MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO, a Massachusetts business trust (the "Fund");
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 was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust
dated June 26, 1992, a copy of which together with all amendments thereto is on
file in the office of the Secretary of the Commonwealth of Massachusetts; and
WHEREAS, the Fund desires to qualify to do business in the form of a
foreign business trust under the laws of the State of New York and has requested
ML&CO. to give its consent to the use of the words "Merrill Lynch" and "Merrill
Lynch Consults" in the Fund's name and to refer to the "Merrill Lynch Consults"
Service" in its Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, ML&CO. and the Fund hereby agree as follows:
1. ML&CO. hereby grants the Fund a non-exclusive license to use the words
"Merrill Lynch" and "Merrill Lynch Consults" in the Fund's name and to refer to
the "Merrill Lynch Consults(Service Mark) Service" in its Registration
Statement.
2. ML&CO. hereby consents to the qualification of the Fund to do business
in the form of a foreign business trust corporation under the laws of the State
of New York with the words "Merrill Lynch" and "Merrill Lynch Consults" in its
name and agrees to execute such formal consents as may be necessary in
connection with such filing.
3. 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" and "Merrill Lynch Consults" in the name of the Fund and to
refer to the "Merrill Lynch Consults(Service Mark) Service" in its Registration
Statement; and, as soon as practicable after receipt by the Fund of written
notice of the withdrawal of such non-exclusive license, and in no event later
than ninety days thereafter, the Fund will change its name so that such name
will not thereafter include the words "Merrill Lynch" and "Merrill Lynch
Consults" or any variation thereof and the Fund will remove all references to
"Merrill Lynch Consults(Service Mark) Service" in its Registration Statement.
4. 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" and "Merrill Lynch Consults" or variations thereof in its
name and to refer to the "Merrill Lynch Consults(Service Mark) Service" in its
registration statement and no consent or permission of the Fund shall be
necessary; but, if required by an applicable law of any state, the Fund will
forthwith grant all requisite consents.
5. The Fund will not grant to any other company the right to use a name
similar to that of the Fund or ML&CO. without the written consent of ML&CO.
6. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Merrill Lynch" and "Merrill Lynch Consults" or any
variation thereof from such name, the Fund hereby grants to 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 name and to own all or any portion of the shares
of such other corporations or associations and to enter into contractual
relationships with such other corporations or associations, subject to any
requisite approval of a majority of the Fund's shareholders and the Securities
and Exchange Commission and subject to the payment of a reasonable amount to be
determined at the time of use, and the Fund agrees to give and execute any such
formal consents or agreements as may be necessary in connection therewith.
7. This Agreement may be amended at any time by a writing signed by the
parties hereto. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior agreements,
arrangements and understandings, whether written or oral, with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH & CO., INC.
By: /s/
Exec. Vice President
MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO
By: /s/ ARTHUR ZEIKEL
President
CERTIFICATE OF SOLE SHAREHOLDER
Merrill Lynch (Suisse) Investment Management S.A., the holder of 10,000
shares of beneficial interest, per value $0.10 per &here, of Merrill Lynch
Consults International Portfolio, a Masachusetts business trust (the "Fund").
does hereby confirm to the Fund its representation that if purchased such shares
for Investment purposes, with no present intentlon of redeeming or reselling any
portion thereof, and does further agree that If It redeems any portion of such
shares prior to the amortization of the Fund's organizational expenses, the
proceeds thereof will be reduced by the proportionate amount of the
ununamortized organizational expenses whlch the number of shares being redeemed
bear& to the number of shares initially purchased.
MERRILL LYNCH (SUISSE) INVESTMENT
MANAGEMENT S.A.
By /s/ MARK B. GOLDFUS
Dated: August 18, 1992
DISTRIBUTION PLAN
OF
MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 31st day of August, 1992 by and between
Merrill Lynch Consults International Portfolio, a Massachusetts business trust
(the "Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund has entered into a Distribution Agreement with MLFD,
pursuant to which MLFD acts as the exclusive distributor and representative of
the Fund in the offer and sale of shares of beneficial interest, par value $0.10
per share (the "Shares"), of the Fund to the public; and
WHEREAS, the Fund desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act, pursuant to which the
Fund will pay an account maintenance fee and a distribution fee to MLFD with
respect to the Fund's Shares; and
WHEREAS, the Trustees of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders;
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at the
end of each month at the annual rate of 0.25% of average daily net assets of the
Fund to compensate MLFD and securities firms with which MLFD enters into related
agreements ("Sub-Agreements") pursuant to Paragraph 3 hereof for account
maintenance activities.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.75% of average daily net assets of the Fund
to compensate MLFD and securities firms with which MLFD enters into related
agreements ("Sub-Agreements") pursuant to Paragraph 3 hereof for providing sales
and promotional activities and services. Such activities and services will
relate to the sale, promotion and marketing of the Shares. Such expenditures may
consist of sales commissions to financial consultants for selling Shares,
compensation, sales incentives and payments to sales and marketing personnel,
and the payment of expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Fund and the costs of
preparing and distributing promotional materials. The distribution fee may also
be used to pay interest charges on the unreimbursed expenditures described in
this Paragraph 2. Payment of the distribution fee described in this Paragraph 2
shall be subject to any limitations set forth in applicable regulations of the
National Association of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into Sub- Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such Sub- Agreements shall provide that
the Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Trustees, and the
Trustees shall review, at least quarterly, a written report complying with the
requirements of Rule 12b-I regarding the disbursement of the account maintenance
fee and the distribution fee during such period.
5. The Plan shall not take effect until it has been approved, together with
any related agreements, by (a) the Trustees of the Fund and (b) those Trustees
of the Fund who are not "interested persons" of the Fund, as defined in the
Investment Company Act, and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Trustees"), cast in person at a meeting or meetings called for the purpose of
voting on the Plan and such related agreements.
6. The Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding voting securities of the Fund.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
8. The Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Trustees, or by vote of a majority of the outstanding voting securities of
the Fund.
9. The Plan may not be amended to increase materially the rate of payments
by the Fund provided for herein unless such amendment is approved in the manner
provided for initial approval in Paragraphs 5 and 6 hereof, and no material
amendment to the Plan shall be made unless approved in the manner provided for
approval and annual renewal in Paragraph 5 hereof.
10. While the Plan is in effect, the selection and nomination of Trustees
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Trustees who are not interested
persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
12. The Declaration of Trust establishing the Fund dated June 26, 1992, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Merrill Lynch Consults International Portfolio" refers
to the Trustees under the Declaration collectively as trustees, but not as
individuals or personally, and no Trustee, shareholder, officer, employee or
agent of the Fund shall be held to any personal liability, nor shall resort be
had to their private property for satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Fund, but the "Trust Property"
only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of the
date first above written.
MERRILL LYNCH CONSULTS INTERNATIONAL
PORTFOLIO
By /s/
MERRILL LYNCH FUND DISTRIBUTOR, INC.
By /s/
DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 31st day of August, 1992, by and between Merrill
Lynch Funds Distributor, Inc. ("MLFD"), and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (the "Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Consults
International Portfolio, a Massachusetts business trust (the "Fund"), pursuant
to which it acts as the exclusive distributor for the sale of shares of
beneficial interest par value $0.10 per share (the "Shares"), of the Fund; and
WHEREAS, MLFD and Fund have entered into a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act")
pursuant to which MLFD receives an account maintenance fee from the Fund at the
annual rate of 0.25% of average daily net assets of the Fund for account
maintenance activities and a distribution fee from the Fund at the annual rate
of 0.75% of average daily net assets of the Fund for providing sales and
promotional activities and services related to the distribution of the Shares;
and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities of the
types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services, and incur distribution expenditures, of the types referred to in
Paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this
Sub-Agreement, MLFD shall pay the Securities Firm an account maintenance fee and
a distribution fee at the end of each calendar month in an amount agreed upon by
the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Sub-Agreement shall not take effect until it has been approved by
vote of a majority of both (a) the Trustees of the Fund and (b) those Trustees
of the Fund who are not "interested persons" of the Fund, as defined in the Act,
and have no direct or indirect financial interest in the operation of the Plan,
this Agreement or any agreements related to the Plan or this Agreement, cast in
person at a meeting or meetings called for the purpose of voting on this
Agreement.
6. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By /s/
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/
POWER OF ATTORNEY
KNOWS ALL MEN BY THESE PRESENTS, that each person whose name appears below
hereby nominates, constitutes and appoints Arthur Zeikel and Gerald M. Richard
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his place and stead
in any and all capacities, to make execute and sign all agreements and
supplements to the Registration Statement on Form N-lA under the Securities Act
of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO (the "Fund"), and to file with the Securities and
Exchange Commission, and any other regulatory authority having jurisdiction over
the offer and sale of shares of beneficial interest, par value $.10 per share,
of the Fund, and any and all amendments and supplements to such Registration
Statement, and any and all exhibits and other documents requisite in connection
therewith, granting unto said attorneys and each of them, full power and
authority to perform each and every act and thing requisite and necessary to be
done in and about the premises as fully to all intents and purposes as the
undersigned officers and Trustees themselves might or could do.
IN WITNESS WHEREOF, the undersigned officers and Trustees have hereunto
set their hands this 21st day of August, 1992.
/s/ Kenneth S. Axelson
Kenneth S. Axelson
Trustee
/s/ Herbert I. London
Herbert I. London
Trustee
/s/ Joseph L. May
Joseph L. May
Trustee
/s/ Andre F. Perold
Andre F. Perold
Trustee
/s/ Arthur Zeikel
Arthur Zeikel
President and Trustee
/s/ Gerald M. Richard
Gerald M. Richard
Treasurer
[SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP LETTERHEAD]
February 28, 1996
Merrill Lynch Consults International Portfolio
P.O. Box 9011
Princeton, New Jersey 08543-9011
Ladies and Gentlemen:
Merrill Lynch Consults International Portfolio, a Massachusetts
business trust (the "Fund"), is filing with the Securities and Exchange
Commission Post-Effective Amendment No. 4 to its Registration Statement under
the Securities Act of 1933, as amended (the "1933 Act") and the Investment
Company Act of 1940, as amended (the "1940 Act") on Form N-1A (1933 Act File No.
33-49354, 1940 Act File No. 811-6725) relating to the registration under the
1933 Act of 5,717,130 additional shares of beneficial interest, par value $.10
per share (the "Additional Shares"), which are to be offered and sold by the
Fund in the manner and on the terms set forth in the prospectus of the Fund
current at the time of sale. 5,693,496 of the Additional Shares are
previously outstanding shares of beneficial interest of the Fund, par value
$.10 per share, which were redeemed by the Fund during its fiscal year ended
October 31, 1995. According to Post-Effective Amendment No. 4 to the Fund's
Registration Statement, none of the Additional Shares have previously been
used by the Fund for reduction pursuant to paragraph (a) of Rule 24e-2 under
the 1940 Act on previous filings of post-effective amendments to the Fund's
Registration Statement during the current fiscal year, or for reduction
pursuant to paragraph (c) of Rule 24f-2 under the 1940 Act during the Fund's
current fiscal year, of the registration fee payable by the Fund for the
registration of shares for sale under the 1933 Act.
We have, as counsel, participated in corporate and other proceedings
relating to the Fund and to the proposed issuance of the Additional Shares. We
have examined copies, either certified or otherwise proved to our satisfaction
to be genuine, of its Declaration of Trust and By-Laws, as currently in
effect, and other documents relating to its organization and operation. We have
received a certificate from the Secretary of State of the Commonwealth of
Massachusetts, dated February 20, 1996, confirming that the Fund is currently in
good standing in that state. We have also reviewed the above-mentioned
Merrill Lynch Consults International Portfolio
February 28, 1996
Page 2
Registration Statement, as amended, and the documents filed as exhibits thereto.
We are generally familiar with the affairs of the Fund.
Based upon the foregoing, it is our opinion that:
1. The Fund has been duly organized and is validly existing under the
laws of The Commonwealth of Massachusetts.
2. The Fund is authorized to issue an unlimited number of shares of
beneficial interest.
3. Subject to the effectiveness of the above-mentioned Post-Effective
Amendment No. 4 to the Fund's Registration Statement and compliance
with applicable state securities laws, upon the issuance of the
Additional Shares for a consideration not less than the par value
thereof, and not less than the net asset value thereof as required by
the 1940 Act and in accordance with the terms of the Registration
Statement, such shares will be legally issued and outstanding and
fully paid and non-assessable. However, we note that, as set forth in
the Registration Statement, shareholders of the Fund might, under
certain circumstances, be liable for transactions effected by the
Fund.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as part of the above-mentioned Post-Effective Amendment
No. 4 to the Registration statement and with any state securities commission
where such filing is required. In giving this consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the 1933 Act.
We are members of the Bar of the State of New York and do not hold
ourselves out as being conversant with the laws of any jurisdiction other than
those of the United States of America and the State of New York. We note that
we are not licensed to practice law in the Commonwealth of Massachusetts, and to
the extent that any opinion expressed herein involves the law of Massachusetts,
such opinion should be understood to be based solely upon our review of the
documents referred to above, the published statutes of the Commonwealth of
Massachusetts, and, where applicable, published cases, rules or regulations of
regulatory bodies of that Commonwealth.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
SFH&G:JHG:MKN:SSD:jlk
<PAGE>
EXHIBIT 11
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions 'Financial
Highlights' and 'General Information--Independent Auditors' and to the use of
our report dated December 1, 1995, in this Registration Statement on Form N-1A
under the Securities Act of 1933 (File No. 33-49354) and under the Investment
Company Act of 1940 (File No. 811-6725) of Merrill Lynch Consults International
Portfolio.
ERNST & YOUNG LLP
Princeton, New Jersey
February 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000889301
<NAME> MERRILL LYNCH CONSULTS INTERNATIONAL PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 184395368
<INVESTMENTS-AT-VALUE> 185776419
<RECEIVABLES> 2501647
<ASSETS-OTHER> 14179166
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 202457232
<PAYABLE-FOR-SECURITIES> 4161757
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1218340
<TOTAL-LIABILITIES> 5380097
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 184040041
<SHARES-COMMON-STOCK> 16050472
<SHARES-COMMON-PRIOR> 21242599
<ACCUMULATED-NII-CURRENT> (897752)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 84978
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13849868
<NET-ASSETS> 197077135
<DIVIDEND-INCOME> 3928148
<INTEREST-INCOME> 322487
<OTHER-INCOME> 0
<EXPENSES-NET> 5148387
<NET-INVESTMENT-INCOME> (897752)
<REALIZED-GAINS-CURRENT> 102593
<APPREC-INCREASE-CURRENT> (8175491)
<NET-CHANGE-FROM-OPS> (8970650)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 6621521
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1857251
<NUMBER-OF-SHARES-REDEEMED> 7550747
<SHARES-REINVESTED> 501369
<NET-CHANGE-IN-ASSETS> (75409778)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 6603906
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1644757
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5148387
<AVERAGE-NET-ASSETS> 219300863
<PER-SHARE-NAV-BEGIN> 12.83
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> (.18)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .32
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.28
<EXPENSE-RATIO> 2.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below
hereby nominates, constitutes and appoints Arthur Zeikel and Gerald M. Richard
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his place and stead
in any and all capacities, to make, execute and sign all amendments and
supplements to the Registration Statement on Form N-1A under the Securities Act
of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH CONSULTS
INTERNATIONAL PORTFOLIO (the "Fund"), and to file the same with the Securities
and Exchange Commission, and any other regulatory authority having jurisdiction
over the offer and sale of shares of beneficial interest, par value $0.10 per
share, of the Fund, and any and all exhibits and other documents requisite in
connection therewith, granting unto said attorneys and each of them, full power
and authority to perform each and every act and thing requisite and necessary to
be done in and about the premises as fully to all intents and purposes as the
undersigned Trustee himself might or could do.
IN WITNESS WHEREOF, the undersigned Trustee has hereunto set his hand this
19th day of January, 1996.
/s/ James Bodurtha
-----------------------
James Bodurtha
Trustee
