<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1994
SECURITIES ACT FILE NO. 33-64398
INVESTMENT COMPANY ACT FILE NO. 811-7794
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 2 /X/
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 5 /X/
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
MERRILL LYNCH
AMERICAS INCOME FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY
(ADDRESS OF PRINCIPAL EXECUTIVE 08543
OFFICES) (ZIP CODE)
</TABLE>
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800)
ARTHUR ZEIKEL
MERRILL LYNCH AMERICAS INCOME FUND, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08536-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
MARK B. GOLDFUS, ESQ. DOUGLAS A. SGARRO, ESQ.
MERRILL LYNCH ASSET MANAGEMENT BROWN & WOOD
P.O. BOX 9011 ONE WORLD TRADE CENTER
PRINCETON, NEW JERSEY 08543-9011 NEW YORK, NEW YORK 10048-0557
</TABLE>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK
APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on October 21, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
------------------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF COMMON
STOCK UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE NOTICE REQUIRED BY SUCH RULE FOR THE
REGISTRANT'S MOST RECENT FISCAL YEAR WAS FILED ON FEBRUARY 24, 1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH AMERICAS INCOME FUND, INC.
REGISTRATION STATEMENT 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; Merrill Lynch
Select Pricing(Service Mark)
System
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; Merrill
Lynch Select Pricing(Service
Mark) System; Purchase of
Shares; Shareholder
Services; Additional
Information; Inside Back
Cover Page
Item 8. Redemption or Repurchase...... Fee Table; Merrill Lynch
Select Pricing(Service Mark)
System; Shareholder
Services; Purchase of
Shares; Redemption of Shares
Item 9. Pending Legal Proceedings..... Not Applicable
PART B
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Back Cover Page
Item 12. General Information and
History..................... 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. Underwriter................... Purchase of Shares
Item 22. Calculation of Performance
Data........................ Performance Data
Item 23. Financial Statements.......... Financial Statements
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
OCTOBER 21, 1994
MERRILL LYNCH AMERICAS INCOME FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
------------------------
Merrill Lynch Americas Income Fund, Inc. (the 'Fund') is a non-diversified,
open-end management investment company seeking a high level of current income,
consistent with prudent investment risk, by investing primarily in debt
securities denominated in a currency of a country located in the Western
Hemisphere (i.e., North and South America and the surrounding waters). The Fund
may at times utilize certain investment techniques, including options and
futures, to increase investment return or to hedge all or a portion of its
portfolio against interest rate, market and currency risks. In addition, the
Fund is authorized to borrow funds and to utilize leverage in amounts not to
exceed 33 1/3% of its total assets. There can be no assurance that the Fund's
investment objective will be achieved. Investment in securities of foreign
issuers involves certain special considerations and risk factors. See
'Investment Objective and Policies--Special Considerations and Risk
Factors--Foreign Investments'.
------------------------
Pursuant to the Merrill Lynch Select Pricing(Service Mark) System, the Fund
offers four classes of shares, each with a different combination of sales
charges, ongoing fees and other features. The Merrill Lynch Select
Pricing(Service Mark) System permits an investor to choose the method of
purchasing shares that the investor believes is most beneficial given the amount
of the purchase, the length of time the investor expects to hold the shares and
other relevant circumstances. As a result of the implementation of the Merrill
Lynch Select Pricing(Service Mark) System, Class A shares of the Fund
outstanding prior to October 21, 1994, have been redesignated Class D shares.
The Class A shares offered by this Prospectus differ from the Class A shares
offered prior to October 21, 1994, in many respects, including sales charges,
exchange privilege and the classes of persons to whom such shares are offered.
See 'Merrill Lynch Select Pricing(Service Mark) System' on page 3.
------------------------
Shares may be purchased directly from Merrill Lynch Funds Distributor, Inc.
(the 'Distributor'), P.O. Box 9011, Princeton, New Jersey 08543-9011 ((609)
282-2800), or from securities dealers which have entered into selected dealers
agreements with the Distributor, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated ('Merrill Lynch'). The minimum initial purchase is $1,000, and the
minimum subsequent purchase is $50, except that for retirement plans the minimum
initial purchase is $100, and the minimum subsequent purchase is $1. Merrill
Lynch may charge its customers a processing fee (presently $4.85) for confirming
purchases and repurchases. Purchases and redemptions directly through the Fund's
transfer agent are not subject to the processing fee. See 'Purchase of Shares'
and 'Redemption of Shares'.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus is a concise statement of information about the Fund that is
relevant to making an investment in the Fund. This Prospectus should be retained
for future reference. A statement containing additional information about the
Fund, dated October 21, 1994 (the 'Statement of Additional Information'), has
been filed with the Securities and Exchange Commission and is available, without
charge, by calling or by writing the Fund at the above telephone number or
address. The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
------------------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Fund follows:
<TABLE>
<CAPTION>
CLASS A(a) CLASS B(b) CLASS C(c) CLASS D(d)
---------- -------------------- ---------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Charge
Imposed on Purchases (as
a percentage of offering
price).................. 4.00%(e) None None 4.00%(e)
Sales Charge Imposed on
Dividend
Reinvestments........... None None None None
Deferred Sales Charge (as
a percentage of original
purchase price or
redemption proceeds,
whichever is lower)..... None(f) 4.00% during the 1% for one None(f)
first year, year
decreasing 1.0%
annually thereafter
to 0.0% after the
fourth year
Exchange Fee.............. None None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)(G)
Investment Advisory
Fees(h)................. 0.60% 0.60% 0.60% 0.60%
12b-1 Fees(i):
Account Maintenance
Fees.................. None 0.25% 0.25% 0.25%
Distribution Fees....... None 0.50% 0.55% None
(Class B shares
convert to Class D
shares automatically
after approximately
ten years and cease
being subject to
distribution fees)
Other Expenses:
Custodial Fees.......... 0.19% 0.19% 0.19% 0.19%
Shareholder Servicing
Costs(j).............. 0.08% 0.08% 0.08% 0.08%
Other................... 0.91% 0.91% 0.91% 0.91%
----- ----- ----- -----
Total Other
Expenses............ 1.18% 1.18% 1.18% 1.18%
----- ----- ----- -----
Total Fund Operating
Expenses...................... 1.78% 2.53% 2.58% 2.03%
----- ----- ----- -----
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) Class A shares are sold to a limited group of investors including certain
retirement plans and investment programs. The Class A shares offered by
this Prospectus differ from the Class A shares offered prior to October 21,
1994. See 'Purchase of Shares--Initial Sales Charge Alternatives--Class A
and Class D Shares'--page 26.
(b) Class B shares convert to Class D shares automatically approximately ten
years after initial purchase. See 'Purchase of Shares-- Deferred Sales
Charge Alternatives--Class B and Class C Shares'--page 28.
(c) Prior to the date of this Prospectus, the Fund has not offered Class C
shares to the public.
(d) Class A shares of the Fund outstanding prior to October 21, 1994, have been
redesignated Class D shares.
(e) Reduced for purchases of $25,000 and over. Class A or Class D purchases of
$1,000,000 or more may not be subject to an initial sales charge. See
'Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class D
Shares'--page 26.
(f) Class A and Class D shares are not subject to a contingent deferred sales
charge ('CDSC'), except that purchases of $1,000,000 or more which may not
be subject to an initial sales charge may instead be subject to a CDSC of
1.0% of amounts redeemed within the first year of purchase.
(g) Information under 'Other Expenses' for Class A and Class C shares
is estimated for the fiscal year ending December 31, 1994. As of
December 31, 1993, the Investment Adviser was voluntarily waiving all
of its management fee and voluntarily reimbursing the Fund for a portion of
other expenses (excluding 12b-1 fees). The fee table has been restated to
assume the absence of any waiver or reimbursement because the Investment
Adviser may discontinue or reduce such waiver and assumption of expenses at
any time without notice. During the fiscal year ended December 31, 1993,
the Investment Adviser waived management fees and reimbursed expenses
totaling 1.43% for the former Class A shares (now redesignated Class D
shares) and 1.43% for Class B shares after which the Fund's total expense
ratio, net of reimbursement, was .60% for the former Class A shares and
1.10% for Class B shares. The new Class A and Class C shares were not
offered during that year.
(h) See 'Management of the Fund--Advisory and Management Arrangements'--page
22.
(i) See 'Purchase of Shares--Distribution Plans'--page 31.
(j) See 'Management of the Fund--Transfer Agency Services'--page 23.
</TABLE>
2
<PAGE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR THE
PERIOD OF:
----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
including the maximum $40 initial
sales charge (Class A and Class D
shares only) and assuming (1) the
Total Fund Operating Expenses for each
class set forth above; (2) a 5% annual
return throughout the periods and (3)
redemption at the end of the period:
Class A............................ $ 57 $ 94 $ 133 $ 241
Class B............................ $ 66 $ 99 $ 135 $ 287
Class C............................ $ 36 $ 80 $ 137 $ 291
Class D............................ $ 60 $ 101 $ 145 $ 266
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of
the period:
Class A............................ $ 57 $ 94 $ 133 $ 241
Class B............................ $ 26 $ 79 $ 135 $ 287
Class C............................ $ 26 $ 80 $ 137 $ 291
Class D............................ $ 60 $ 101 $ 145 $ 266
</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 RATES OF
RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN
THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C shareholders who
hold their shares for an extended period of time may pay more in Rule 12b-1
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted under the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. ('NASD'). Merrill Lynch may charge its customers a
processing fee (presently $4.85) for confirming purchases and redemptions.
Purchases and redemptions directly through the Fund's transfer agent are not
subject to the processing fee. See 'Purchase of Shares' and 'Redemption of
Shares'.
MERRILL LYNCH SELECT PRICING(SERVICE MARK) SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) System. The shares of each class may be purchased at a
price equal to the next determined net asset value per share subject to the
sales charges and ongoing fee arrangements described below. Shares of Class A
and Class D are sold to investors choosing the initial sales charge
alternatives, and shares of Class B and Class C are sold to investors choosing
the deferred sales charge alternatives. The Merrill Lynch Select Pricing(Service
Mark) System is used by more than 50 mutual funds advised by Merrill Lynch Asset
Management, L.P. ('MLAM' or the 'Investment Adviser') or an affiliate of MLAM,
Fund Asset Management, L.P. ('FAM'). Funds advised by MLAM or FAM are referred
to herein as 'MLAM-advised mutual funds'.
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements. The
deferred sales charges and account maintenance fees that are imposed on Class B
and Class C shares, as well as the account maintenance fees that are imposed on
the Class D shares, will be imposed directly against those classes and not
against all assets of the Fund and, accordingly, such charges will not affect
the net asset value of any other class or have any impact on investors choosing
another sales charge option. Dividends paid by the Fund for each class of shares
will be calculated in the same manner at the same time and will differ only to
the extent that account maintenanance and distribution fees and any incremental
transfer
3
<PAGE>
agency costs relating to a particular class are borne exclusively by that class.
Each class has different exchange privileges. See 'Shareholder
Services--Exchange Privilege'.
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Fund. The
distribution-related revenues paid with respect to a class will not be used to
finance the distribution expenditures of another class. Sales personnel may
receive different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select Pricing(Service Mark)
System, followed by a more detailed description of each class and a discussion
of the factors that investors should consider in determining the method of
purchasing shares under the Merrill Lynch Select Pricing(Service Mark) System
that the investor believes is the most beneficial under his particular
circumstances. More detailed information as to each class of shares is set forth
under 'Purchase of Shares'.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(1) FEE FEE CONVERSION FEATURE
A Maximum 4.00% No No No
initial sales
charge(2)(3)
B CDSC for a period of 0.25% 0.50% B shares convert
4 years, at a rate to D shares
of 4.0% during the automatically
first year, after
decreasing 1.0% approximately
annually to 0.0% ten years(4)
C 1.0% CDSC for one 0.25% 0.55% No
year
D Maximum 4.00% 0.25% No No
initial sales
charge(3)
</TABLE>
- ------------------
(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. Contingent deferred sales charges ('CDSCs') are imposed
if the redemption occurs within the applicable CDSC time period. The charge
will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See 'Purchase of Shares--Initial Sales
Charge Alternatives--Class A and Class D Shares--Eligible Class A
Investors'.
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year. See 'Class
A' and 'Class D' below.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made have an eight
year conversion period. If Class B shares of the Fund are exchanged for
Class B shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
Class A: Class A shares incur an initial sales charge when they are purchased
and bear no ongoing distribution or account maintenance fees. Class A
shares are offered to a limited group of investors and also will be
issued upon reinvestment of dividends on outstanding Class A shares.
Eligible investors include certain retirement plans and participants in
certain investment programs. In addition, Class A shares will be
offered to directors and employees of Merrill Lynch & Co., Inc. and its
subsidiaries (the term 'subsidiaries', when used herein with respect to
Merrill Lynch & Co., Inc., includes MLAM, FAM and certain other
entities directly or indirectly wholly owned and controlled by Merrill
Lynch & Co., Inc.) and to members of the Boards of MLAM-advised mutual
funds. The maximum initial sales charge is 4.00%, which is reduced for
purchases of $25,000 and over. Purchases of $1,000,000 or more may
4
<PAGE>
not be subject to an initial sales charge but, if the initial sales
charge is waived, such purchases will be subject to a CDSC of 1.0% if
the shares are redeemed within one year after purchase. Sales charges
also are reduced under a right of accumulation which takes into account
the investor's holdings of all classes of all MLAM-advised mutual
funds. See 'Purchase of Shares--Initial Sales Charge Alternatives--
Class A and Class D Shares'.
Class B: Class B shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25%, an
ongoing distribution fee of 0.50% of the Fund's average net assets
attributable to the Class B shares and a CDSC if they are redeemed
within four years of purchase. Approximately ten years after issuance,
Class B shares will convert automatically into Class D shares of the
Fund, which are subject to an account maintenance fee but no
distribution fee; Class B shares of certain other MLAM-advised mutual
funds into which exchanges may be made convert into Class D shares
automatically after approximately eight years. If Class B shares of the
Fund are exchanged for Class B shares of another MLAM-advised mutual
fund, the conversion period applicable to the Class B shares acquired
in the exchange will apply, and the holding period for the shares
exchanged will be tacked onto the holding period for the shares
acquired. Automatic conversion of Class B shares into Class D shares
will occur at least once each month on the basis of the relative net
asset values of the shares of the two classes on the conversion date,
without the imposition of any sales load, fee or other charge.
Conversion of Class B shares to Class D shares will not be deemed a
purchase or sale of the shares for Federal income tax purposes. Shares
purchased through reinvestment of dividends on Class B shares also will
convert automatically to Class D shares. The conversion period for
dividend reinvestment shares and for certain retirement plans is
modified as described under 'Purchase of Shares--Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares
to Class D Shares'.
Class C: Class C shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25% and an
ongoing distribution fee of 0.55% of the Fund's average net assets
attributable to Class C shares. Class C shares are also subject to a
CDSC if they are redeemed within one year of purchase. Although Class C
shares are subject to a 1.0% CDSC for only one year (as compared to
four years for Class B), Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject
to distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Fund's Board of
Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
Fund's average net assets attributable to Class D shares. Class D
shares are not subject to an ongoing distribution fee or any CDSC when
they are redeemed. Purchases of $1,000,000 or more may not be subject
to an initial sales charge but, if the initial sales charge is waived,
such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. The schedule of initial sales
charges and reductions for Class D shares is the same as the schedule
for Class A shares. Class D shares also will be issued upon conversion
of Class B shares as described above under 'Class B'. See 'Purchase of
Shares--Initial Sales Charge Alternatives--Class A and Class D Shares'.
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
Pricing(Service Mark) System that the investor believes is most beneficial under
his particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because of the account maintenance fee imposed
on Class D shares. Investors qualifying for significantly reduced initial sales
charges may find the initial sales charge alternative particularly attractive
because similar sales charge reductions are not available with respect to the
deferred sales charges imposed in connection with purchases of Class B or Class
C shares. Investors not qualifying for reduced initial sales charges who expect
to
5
<PAGE>
maintain their investment for an extended period of time also may elect to
purchase Class A or Class D shares, because over time the accumulated ongoing
account maintenance and distribution fees on Class B or Class C shares may
exceed the initial sales charge and, in the case of Class D shares, the account
maintenance fee. Class A, Class B, Class C and Class D share holdings will count
toward a right of accumulation which may qualify the investor for reduced
initial sales charges on new initial sales charge purchases. In addition, the
ongoing Class B and Class C account maintenance and distribution fees will cause
Class B and Class C shares to have higher expense ratios, pay lower dividends
and have lower total returns than the initial sales charge shares. The ongoing
Class D account maintenance fees will cause Class D shares to have a higher
expense ratio, pay lower dividends and have a lower total return than Class A
shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the benefit
of putting all of the investor's dollars to work from the time the investment is
made. The deferred sales charge alternatives may be particularly appealing to
investors who do not qualify for a reduction in initial sales charges. Both
Class B and Class C shares are subject to ongoing account maintenance fees and
distribution fees; however, the ongoing account maintenance and distribution
fees potentially may be offset to the extent any return is realized on the
additional funds initially invested in Class B or Class C shares. In addition,
Class B shares will be converted into Class D shares of the Fund after a
conversion period of approximately ten years, and thereafter investors will be
subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend to
hold their shares for an extended period of time. Investors in Class B shares
should take into account whether they intend to redeem their shares within the
CDSC period and, if not, whether they intend to remain invested until the end of
the conversion period and thereby take advantage of the reduction in ongoing
fees resulting from the conversion into Class D shares. Other investors,
however, may elect to purchase Class C shares if they determine that it is
advantageous to have all their assets invested initially and they are uncertain
as to the length of time they intend to hold their assets in MLAM-advised mutual
funds. Although Class C shareholders are subject to a shorter CDSC period at a
lower rate, they forego the Class B conversion feature, making their investment
subject to account maintenance and distribution fees for an indefinite period of
time. In addition, while both Class B and Class C distribution fees are subject
to the limitations on asset-based sales charges imposed by the NASD, the Class B
distribution fees are further limited under a voluntary waiver of asset-based
sales charges. See 'Purchase of Shares--Limitations on the Payment of Deferred
Sales Charges'.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial information in the table below, other than for the six months
ended June 30, 1994, which is unaudited, has been audited in conjunction with
the annual audit of the financial statements of the Fund by Deloitte & Touche
LLP, independent auditors. Financial statements and the independent auditors'
report thereon for the period August 27, 1993 (commencement of operations) to
December 31, 1993, are included in the Statement of Additional Information;
unaudited financial statements for the six months ended June 30, 1994, are also
included in the Statement of Additional Information. Class A shares of the Fund
outstanding as of October 21, 1994, were redesignated Class D shares on such
date, and the Fund has commenced offering shares of a new Class A having
different characteristics. Financial information is not presented for the new
Class A or Class C shares since no shares of those classes are publicly issued
before the date of this Prospectus. Further information about the performance of
the Fund is contained in the Fund's most recent annual report to shareholders
which may be obtained, without charge, by calling or by writing the Fund at the
telephone number or address on the front cover of this Prospectus.
The following per share data and ratios have been derived from information
provided in the financial statements.
<TABLE>
<CAPTION>
CLASS A(1) CLASS B
------------------------------------ ------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE PERIOD SIX MONTHS FOR THE PERIOD
ENDED AUGUST 27, 1993+ ENDED AUGUST 27, 1993+
JUNE 30, TO DECEMBER 31, JUNE 30, TO DECEMBER 31,
1994 1993 1994 1993
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
beginning of period.... $ 10.84 $ 10.00 $ 10.84 $ 10.00
----------- ----------------- ----------- -----------------
Investment income--net... .36 .26 .34 .24
Realized and unrealized
gain (loss) on
investments and foreign
currency
transactions--net...... (2.03) .88 (2.03) .88
----------- ----------------- ----------- -----------------
Total from investment
operations............. (1.67) 1.14 (1.69) 1.12
----------- ----------------- ----------- -----------------
Less dividends and
distributions
Investment
income--net.......... (.36) (.26) (.34) (.24)
Realized gain on
investments--net..... -- (.04) -- (.04)
----------- ----------------- ----------- -----------------
Total dividends and
distributions.......... (.36) (.30) (.34) (.28)
----------- ----------------- ----------- -----------------
Net asset value, end of
period................. $ 8.81 $ 10.84 $ 8.81 $ 10.84
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
TOTAL INVESTMENT
RETURN:**
Based on net asset
value per share........ (15.35)%++ 11.49%++ (15.54)%++ 11.30%++
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
RATIOS TO AVERAGE NET
ASSETS:
Expenses, net of
reimbursement and
excluding account
maintenance and
distribution fees...... 1.46%* .35%* 1.46%* .35%*
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
Expenses, net of
reimbursement.......... 1.71%* .60%* 2.21%* 1.10%*
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
Expenses................. 2.14%* 2.03%* 2.66%* 2.53%*
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
Investment income--net... 8.20%* 7.14%* 7.69%* 6.76%*
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)......... $ 19,166 $ 15,076 $ 112,590 $ 98,848
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
Portfolio Turnover....... 81.80% 75.18% 81.80% 75.18%
----------- ----------------- ----------- -----------------
----------- ----------------- ----------- -----------------
</TABLE>
- ------------------
<TABLE>
<S> <C>
+ Commencement of Operations.
++ Aggregate total investment return.
* Annualized.
** Total investment returns exclude the effects of sales loads.
(1) As of October 21, 1994, the Class A shares for which information is presented here were redesignated Class D
shares.
</TABLE>
7
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund is a non-diversified, open-end management investment company. The
Fund's investment objective is to seek a high level of current income,
consistent with prudent investment risk, by investing primarily in debt
securities denominated in a currency of a country located in the Western
Hemisphere (i.e., North and South America and the surrounding waters). The
foregoing is a fundamental policy of the Fund and may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act. There can be no assurance
that the Fund's investment objective will be achieved.
The Fund's investment adviser, Merrill Lynch Asset Management, L.P., doing
business as Merrill Lynch Asset Management (the 'Investment Adviser'), will
actively manage the Fund's assets in response to market, political and general
economic conditions in the Western Hemisphere and elsewhere, and will seek to
adjust the Fund's investments based on its perception of which investments would
best enable the Fund to achieve its investment objective. In its analysis, the
Investment Adviser will consider various factors, including its views regarding
interest and currency exchange rate changes and credit risks. Such professional
investment management may be attractive to investors, particularly individuals,
who lack the time, information, capability or inclination to effect such an
investment strategy directly.
The securities in which the Fund may invest include debt obligations issued
or guaranteed by the governments of countries located in the Western Hemisphere,
political subdivisions thereof (including states, provinces and municipalities)
or their agencies and instrumentalities ('governmental entities'), or issued or
guaranteed by international organizations (such as the Inter-Americas
Development Bank) designated or supported by governmental entities to promote
economic reconstruction or development ('supranational entities'), or issued by
corporations or financial institutions. Securities issued by supranational
entities may be denominated in U.S. dollars, a foreign currency or a
multi-national currency unit. Securities of corporations and financial
institutions in which the Fund may invest include corporate and commercial
obligations, such as medium-term notes and commercial paper, which may be
indexed to foreign currency exchange rates.
Indexed notes and commercial paper typically provide that the principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect fluctuations in the exchange rate between two currencies during the
period the obligation is outstanding depending on the terms of the specific
security. In selecting the two currencies, the Investment Adviser will consider
the correlation and relative yields of various currencies. The Fund will
purchase an indexed obligation using the currency in which it is denominated
and, at maturity, will receive interest and principal payments thereon in that
currency. The amount of principal payable by the issuer at maturity, however,
will vary (i.e., increase or decrease) in response to the change (if any) in the
exchange rate between the two specified currencies during the period from the
date the instrument is issued to its maturity date. The potential for realizing
gains as a result of changes in foreign currency exchange rates may enable the
Fund to hedge the currency in which the obligation is denominated (or to effect
cross-hedges against other currencies) against a decline in the U.S. dollar
value of investments denominated in foreign currencies while providing an
attractive rate of return. The Fund will purchase such indexed obligations to
generate current income or for hedging purposes and will not speculate in such
obligations. Such obligations may be deemed liquid investments if they can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's net asset value per share;
otherwise, they will be deemed illiquid investments subject to the restrictions
discussed further below under 'Investment Restrictions'.
8
<PAGE>
The Fund may invest in securities denominated in or indexed to the currency
of one country in the Western Hemisphere although issued by a governmental
entity, corporation or financial institution of another such country. For
example, the Fund may invest in a Mexican peso denominated obligation issued by
a U.S. corporation. Such investments involve credit risks associated with the
issuer and currency risks associated with the currency in which the obligation
is denominated.
The Fund also may invest in securities whose potential return is based on
the change in particular measurements of value or rate (also an 'index'). As an
illustration, the Fund may invest in a security that pays interest and returns
principal based on the change in an index of interest rates or of the value of a
precious or industrial metal. Interest and principal payable on a security may
also be based on relative changes among particular indices. In addition, the
Fund may invest in securities whose potential investment return is inversely
based on the change in particular indices. For example, the Fund may invest in
securities that pay a higher rate of interest and principal when a particular
index decreases and pay a lower rate of interest and principal when the value of
the index increases. To the extent that the Fund invests in such types of
securities, it will be subject to the risks associated with changes in the
particular indices, which may include reduced or eliminated interest payments
and losses of invested principal.
Certain indexed securities, including certain inverse securities, may have
the effect of providing a degree of investment leverage, because they may
increase or decrease in value at a rate that is a multiple of the changes in
applicable indices. As a result, the market value of such securities will
generally be more volatile than the market values of fixed-rate securities. The
Fund believes that indexed securities, including inverse securities, represent
flexible portfolio management instruments that may allow the Fund to seek
potential investment rewards, hedge other portfolio positions, or vary the
degree of portfolio leverage relatively efficiently under certain market
conditions.
The Fund also may invest in participations in, or bonds and notes backed
by, pools of mortgage, credit card, automobile or other types of receivables.
These investments are described more fully below under 'Investments in
Mortgage-Backed and Asset-Backed Securities'. Because of liquidity and valuation
concerns relating to investments in certain derivative mortgage-backed
securities, investments in such securities will be restricted as discussed below
under 'Investments in Mortgage-Backed and Asset-Backed Securities--Derivative
Mortgage-Backed Securities'.
The Fund has established no rating criteria for the debt securities in
which it may invest and such securities may not be rated at all for
creditworthiness. Investments in debt securities rated in the medium to lower
rating categories of nationally recognized statistical rating organizations such
as Standard & Poor's Corporation ('S&P') and Moody's Investors Services
('Moody's') or in unrated securities of comparable quality involve special risks
which are described more fully below under 'Special Considerations and Risk
Factors--High Yield Securities'.
Except for time deposits, certificates of deposit, and pass-through and
other asset-backed securities, the Fund currently does not intend to invest more
than 10% of its assets in the securities of issuers that are domiciled in any
one country in the Western Hemisphere other than the United States, Canada,
Mexico, Argentina, Chile, Brazil and Venezuela. In addition, the Fund may not
maintain more than a 10% net exposure to any currency other than the currency of
any such country. The Fund expects to maintain normally at least 25% of its
assets in securities denominated in the U.S. dollar.
9
<PAGE>
Under normal circumstances, the Fund will invest at least 25% of its total
assets in debt instruments issued by Western Hemisphere companies engaged in the
financial services industry, including banks, thrift institutions, insurance
companies, securities firms and holding companies of any of the foregoing. Such
investments may include certificates of deposit, time deposits, bankers'
acceptances, and other obligations issued by such entities, as well as
repurchase agreements entered into with such entities. For temporary defensive
purposes, however, the Fund may reduce its investments in the financial services
industry to less than 25% of its total assets. The Fund's policy as to
concentrating its investments in the financial services industry is fundamental
and may not be changed without the approval of a majority of the Fund's voting
securities.
The Fund's policy of concentrating its investments in the financial
services industry will cause the Fund to have greater exposure to certain risks
associated with the financial services industry. In particular, economic or
regulatory developments in or related to the financial services industry will
affect the value of an investment in the Fund's shares. For example, sustained
increases in interest rates may adversely affect the availability and cost of
funds for a bank's lending activities; deterioration in general economic
conditions may increase a bank's exposure to credit losses. Banks are also
subject to the effects of the concentration of loan portfolios in particular
businesses that may be adversely affected by economic conditions, such as real
estate, energy, agriculture or high technology-related companies. Also, the
Fund's investments in commercial banks located in several foreign countries are
subject to additional risks due to the combination in such banks of commercial
banking and diversified securities activities. Insurance companies may be
adversely affected by losses sustained by insured clients due to catastrophic or
other events. Securities firms are subject to risks associated with underwriting
activities and to fluctuations in the values of their investments that may in
turn affect their ability to comply with regulations governing capital
requirements. Insurance companies and securities firms may also be affected by a
deterioration in general economic conditions. In addition, the financial
services industry is subject to national and local regulation and competition
among different types of financial institutions.
The Fund may at times utilize certain other investment techniques to
increase investment return or to hedge all or a portion of its portfolio,
including options and futures, although suitable hedging instruments may not be
available on a timely basis and on acceptable terms with respect to specific
securities and currencies in which the Fund may invest. See 'Other Investment
Practices--Portfolio Strategies Involving Interest Rate Transactions, Options,
Futures and Currency Transactions'. In addition, the Fund is authorized to
borrow funds and utilize leverage (including by effecting reverse repurchase
agreements and dollar rolls) in amounts not exceeding 33 1/3% of its total
assets (including the amount borrowed). See 'Other Investment
Practices--Leverage and Borrowing'.
SPECIAL CONSIDERATIONS AND RISK FACTORS
Foreign Investments. Investment in securities of foreign issuers generally
involves risks not typically involved in domestic investment, 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. These
risks are often heightened for investments in smaller capital markets and Latin
American countries. The Fund is designed for long-term investors and should be
considered as a means of diversifying an investment portfolio and not in itself
a balanced investment program.
Since the Fund is authorized to invest in securities denominated or quoted
in currencies other than the U.S. dollar, changes in foreign currency exchange
rates relative to the U.S. dollar will affect the value of securities in the
portfolio and the unrealized appreciation or depreciation of investments insofar
as U.S. investors are
10
<PAGE>
concerned. Changes in foreign currency exchange rates relative to the U.S.
dollar will also affect the Fund's yield on assets denominated in currencies
other than the U.S. dollar.
As noted above, the Fund intends to invest in debt securities denominated
in the currencies of certain Latin American countries (i.e., Mexico, Argentina,
Chile, Brazil and Venezuela). Certain of these Latin American countries are
among the largest debtors to commercial banks and foreign governments. Trading
in debt obligations ('sovereign debt') issued or guaranteed by Latin American
governmental entities involves a high degree of risk. The governmental entity
that controls the repayment of sovereign debt may not be willing or able to
repay the principal and/or interest when due in accordance with the terms of
such obligations. A governmental entity's willingness or ability to repay
principal and interest due in a timely manner may be affected by, among other
factors, its cash flow situation, the relative size of the debt service burden
to the economy as a whole, the governmental entity's dependence on expected
disbursements from third parties, the governmental entity's policy toward the
International Monetary Fund and the political constraints to which a
governmental entity may be subject. As a result, governmental entities may
default on their sovereign debt. Holders of sovereign debt (including the Fund)
may be requested to participate in the rescheduling of such debt and to extend
further loans to governmental entities. There is no bankruptcy proceeding by
which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part. The sovereign debt instruments in which the Fund
may invest involve great risk and are deemed to be the equivalent in terms of
quality to high yield/high risk securities (as defined below) and are subject to
many of the same risks as such securities. Similarly, the Fund may have
difficulty disposing of certain sovereign debt obligations because there may be
a thin trading market for such securities. The Fund will not invest more than
15% of its total assets in sovereign debt which is in default.
With respect to certain foreign countries, there is the possibility of
economic, political or social instability or diplomatic developments which could
affect investment in those countries. For example, although the Mexican economy
has experienced gradual improvement in a number of areas since 1988, the Mexican
economy has experienced difficulties in the past decade, including high rates of
inflation, interest and underemployment as well as low or negative rates of
growth. These problems affected the ability of the Mexican Government to service
its sovereign debt. The economies of other Latin American countries have
experienced similar problems.
There may be less publicly available information about a foreign financial
instrument than about a U.S. instrument, and foreign issuers may not be subject
to accounting, auditing and financial reporting standards and requirements
comparable to those to which U.S. entities are subject. In addition, certain
foreign investments may be subject to foreign withholding taxes.
Foreign financial markets, while generally growing in volume, have, for the
most part, substantially less volume than U.S. markets, and securities of many
foreign companies are less liquid and their prices more volatile than securities
of comparable domestic companies. The foreign markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions making it difficult to conduct such transactions. Delays
in settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either 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 the purchaser. Costs associated with transactions in foreign
securities are generally higher than with transactions in U.S. securities.
11
<PAGE>
There is generally less government supervision and regulation of exchanges,
financial institutions and issuers in foreign countries than there is in the
United States.
High Yield Securities. The Fund has established no rating criteria for the
debt securities in which it may invest, and such securities may not be rated at
all for creditworthiness. Securities rated in the medium to lower rating
categories of nationally recognized statistical rating organizations such as S&P
and Moody's and unrated securities of comparable quality (referred to herein as
'high yield/high risk securities') are predominantly speculative with respect to
the capacity to pay interest and repay principal in accordance with the terms of
such securities and generally involve a greater volatility of price than
securities in higher rating categories. These securities are commonly referred
to as 'junk' bonds. In purchasing such securities, the Fund will rely on the
Investment Adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. The Investment Adviser will
take into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The Fund is not
authorized to purchase debt securities that are in default, except for sovereign
debt (discussed above) in which the Fund may invest no more than 15% of its
total assets while such sovereign debt securities are in default.
The market values of high yield/high risk securities tend to reflect
individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of high yield/high risk securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific issuer developments or
the issuer's inability to meet specific projected business forecasts or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of high yield/high risk
securities because such securities may be unsecured and may be subordinated to
other creditors of the issuer.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund likely would have to replace such called securities with lower yielding
securities, thus decreasing the net investment income to the Fund and dividends
to shareholders.
The Fund may have difficulty disposing of certain high yield/high risk
securities because there may be a thin trading market for such securities. To
the extent that a secondary trading market for high yield/high risk securities
does exist, it is generally not as liquid as the secondary market for higher
rated securities. Reduced secondary market liquidity may have an adverse impact
on market price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain high yield/high risk securities
also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available on many high yield/high risk securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales.
12
<PAGE>
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Fund's net asset value. In addition, the Fund may
incur additional expenses to the extent it is required to seek recovery upon a
default on a portfolio holding or to participate in the restructuring of the
obligation.
Leverage. The Fund is authorized to borrow money from banks in an amount
up to 33 1/3% of the Fund's total assets (including the amount borrowed), less
all liabilities and indebtedness other than the bank borrowing. The Fund is also
authorized to borrow an additional 5% of its total assets without regard to the
foregoing limitation for temporary purposes such as clearance of portfolio
transactions and share redemptions. The Fund may engage in reverse repurchase
agreements and dollar rolls as discussed below, and if certain conditions are
not met, such transactions will be considered borrowings subject to the
restrictions discussed in this paragraph. The utilization of leverage by the
Fund involves certain risks described below. For example, leveraging may
exaggerate changes in the net asset value of Fund shares and in the yield on the
Fund's portfolio. See 'Other Investment Practices--Leverage and Borrowing'
below.
Interest Rate Fluctuations. The value of the Fund's investments (and hence
its net asset value) will be affected by changes in the general level of
interest rates. When interest rates decline, the value of a debt security can be
expected to rise. Conversely, when interest rates rise, the value of a debt
security can be expected to decline. However, not all of the Fund's investments
in debt securities may respond to interest rate fluctuations in this manner.
Non-Diversified Status. The Fund has registered as a 'non-diversified'
investment company so that it will be able to invest more than 5% of the value
of its assets in the obligations of a single issuer subject to the
diversification requirements of subchapter M of the Internal Revenue Code of
1986, as amended, applicable to the Fund. To qualify, the Fund must comply with
certain requirements, including limiting its investments so that at the close of
each quarter of the taxable year (i) not more than 25% of the market value of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer, and the Fund will not own more than 10% of the
outstanding voting securities of a single issuer. Foreign government securities
(unlike U.S. Government securities) are not exempt from the diversification
requirements of the Code. To the extent the Fund invests a relatively high
percentage of its assets in obligations of a limited number of issuers, the Fund
may be more susceptible than a more widely diversified fund to any single
economic, political or regulatory occurrence or to changes in an issuer's
financial condition or in the market's assessment of the issuers.
INVESTMENTS IN MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Mortgage-Backed and Asset-Backed Securities. Subject to the investment
limitations described above, the Fund may invest in mortgage-backed and
asset-backed securities. Mortgage-backed securities are securities that directly
or indirectly represent an interest in, or are backed by and payable from,
mortgage loans secured by real property. Asset-backed securities generally
consist of structures similar to mortgage-backed securities, except that the
underlying asset pools are comprised of other types of financial assets such as
credit card, automobile or other types of receivables and commercial loans.
Mortgage-backed and asset-backed securities are issued in structured financings
wherein the sponsor securitizes the underlying mortgage loans or financial
assets in order to
13
<PAGE>
liquify the underlying assets or to achieve certain other financial goals. The
special considerations and risks inherent in investments in mortgage-backed and
asset-backed securities are discussed more fully below.
The mortgage-backed securities in which the Fund may invest will primarily
be guaranteed by GNMA or issued by FNMA or the Federal Home Loan Mortgage
Corporation ('FHLMC'). Certain of the asset-backed securities in which the Fund
will invest may be guaranteed by the Small Business Administration ('SBA') or
issued in programs originated by the Resolution Trust Corporation ('RTC'). GNMA,
FNMA, FHLMC and SBA are agencies or instrumentalities of the United States.
Certain of the mortgage-backed and asset-backed securities in which the
Fund may invest will be issued by private issuers. Private issuers include
originators of or investors in mortgage loans and receivables such as savings
and loan associations, mortgage bankers, commercial banks, investment banks,
finance companies and special purpose finance subsidiaries of any of the above.
Securities issued by private issuers may be subject to certain types of credit
enhancements issued in respect of those securities. Such credit enhancements may
include insurance policies, bank letters of credit, guarantees by third parties
or protections afforded by the structure of a particular transaction (e.g., the
use of reserve funds, over-collateralization or the issuance of subordinated
securities as protection for more senior securities being purchased by the
Fund). In purchasing securities for the Fund, the Investment Adviser will take
into account not only the creditworthiness of the issuer of the securities but
also the creditworthiness of the provider of any external credit enhancement of
the securities.
The Fund may invest in pass-through mortgage-backed securities that
represent ownership interests in a pool of mortgages on single-family or
multi-family residences. Such securities represent interests in pools of
residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
government, one of its agencies or instrumentalities or by private guarantors.
Such securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semiannually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that 'pass-through' the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such securities
and the servicer of the underlying mortgage loans. The Fund may also invest in
collateralized mortgage obligations ('CMOs') which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities.
The yield characteristics of mortgage-backed and asset-backed securities
differ from traditional corporate debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Fund purchases such a security at a premium, a prepayment rate
that is faster than expected will reduce yield to maturity, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. The Fund may invest a
portion of its assets in derivative mortgage-backed securities, such as stripped
mortgage-backed securities, which are highly sensitive to changes in prepayment
and interest rates. The Investment Adviser will seek to manage these risks (and
potential benefits) by investing in a variety of such securities and through
hedging techniques.
14
<PAGE>
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. Generally, however, prepayments on
fixed rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the Fund are likely to be greater during a
period of declining interest rates and, as a result, likely to be reinvested at
lower interest rates than during a period of rising interest rates. This
prepayment effect has been particularly pronounced during the past year as
borrowers have refinanced higher interest rate mortgages into lower interest
rate mortgages available in the marketplace. Although asset-backed securities
generally are less likely to experience substantial prepayments than are
mortgage-backed securities, certain of the factors that affect the rate of
prepayments on mortgage-backed securities also affect the rate of prepayments on
asset-backed securities. However, during any particular period, the predominant
factors affecting prepayment rates on mortgage-backed and asset-backed
securities may be different. Mortgage-backed and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed income securities from declining interest rates because of
the risk of prepayment.
The Fund's yield will also be affected by the yields on instruments in
which the Fund is able to reinvest the proceeds of payments and prepayments.
Accelerated prepayments on securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is repaid in full.
Derivative Mortgage-Backed Securities. The Fund may also invest in various
derivative mortgage-backed securities, which are synthetic securities designed
to be highly sensitive to certain types of interest rate and principal
prepayment scenarios. Derivative instruments primarily consist of some form of
stripped mortgage-backed securities ('SMBS') that commonly involve different
classes of securities that receive disproportionate amounts of the interest and
principal distributions on a pool of mortgage assets.
SMBSs are typically issued by the same types of issuers as are
mortgage-backed securities. The structure of SMBSs, however, is different. A
common variety of SMBS involves a class (the principal-only or 'PO' class) that
receives some of the interest and most of the principal from the underlying
assets, while the other class (the interest-only or 'IO' class) receives most of
the interest and the remainder of the principal. In the most extreme case, the
IO class receives only interest, while the PO class receives only principal. The
yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying assets, and a rapid
rate of principal payments in excess of that considered in pricing the
securities will have a material adverse effect on an IO security's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
payments of principal, the Fund may fail to recoup fully its initial investment
in IOs. In addition, there are certain types of IOs which represent the interest
portion of a particular class as opposed to the interest portion of the entire
pool. The sensitivity of these types of IOs to interest rate fluctuations may be
increased because of the characteristics of the principal portion to which they
relate. The impact of IOs on the Fund's portfolio may be offset to some degree
by investments in mortgage-backed securities and inverse floaters (floating rate
securities the interest rate of which is adjusted up or down inversely to
changes in a specified index). As interest rates fall, presenting a greater risk
of unanticipated prepayments of principal, the negative effect on the Fund
because of its holdings of IOs should be diminished somewhat because of the
increased yield on the inverse floating rate CMOs or the increased appreciation
on the fixed rate securities. Under certain interest
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rate scenarios, the Fund may decide to retain investments in IOs or inverse
floaters yielding less than prevailing interest rates in order to avoid capital
losses on the sale of such investments.
The Fund may also combine IOs and IO-related derivative mortgage products
with LIBOR-based inverse floaters (LIBOR being the London interbank offered
rate). A LIBOR-based inverse floater is a floating rate security the interest
rate of which is adjusted up or down inversely to changes in LIBOR; as LIBOR
decreases, the interest rate paid by the inverse floater would increase, and
vice versa. Depending on the amount of leverage built into the inverse floater,
the yield could vary in excess of the change in LIBOR because of the leverage
built into the inverse floater formula. The yield on an inverse floater varies
inversely with interest rates because as LIBOR decreases, the interest payable
on the inverse floater increases. The converse is true, of course, when LIBOR
increases. When an inverse floater is combined with an IO or IO-type derivative
product, the result is a synthetic security that tends to provide a somewhat
less volatile yield over a wide range of interest rate and prepayment rate
scenarios.
New types of mortgage-backed and asset-backed securities, derivative
securities and hedging instruments are developed and marketed from time to time.
Consistent with its investment objective, policies and restrictions, the Fund
may invest in such new types of securities and instruments that the Investment
Adviser believes may assist the Fund in achieving its investment objective.
The staff of the Securities and Exchange Commission (the 'Commission') has
taken the following position with respect to investments in IOs and POs. Such
position has been adopted as an investment policy of the Fund, subject to
amendment as discussed further below. The staff of the Commission has taken the
position that the determination of whether a particular U.S. Government issued
IO or PO that is backed by fixed-rate mortgages is liquid may be made by the
Investment Adviser under guidelines and standards established by the Fund's
Board of Directors. Such a security may be deemed liquid if it can be disposed
of promptly in the ordinary course of business at a value reasonably close to
that used in the calculation of the Fund's net asset value per share. The
Commission's staff also has taken the position that all other IOs and POs are
illiquid securities which are subject to the restriction limiting the Fund's
investments in illiquid securities to 15% of its total assets. (Under the laws
of certain states, the Fund presently is limited with respect to such
investments to 10% of its total assets.) This policy as to IOs and POs is not a
fundamental policy of the Fund and may be amended by the Board of Directors of
the Fund without the approval of the Fund's shareholders. However, the Fund will
not change or modify this policy prior to the change or modification by the
Commission's staff of its position.
OTHER INVESTMENT PRACTICES
Leverage and Borrowing. The Fund is authorized to borrow money from banks
(as defined in the Investment Company Act) in an amount up to 33 1/3% of the
Fund's total assets (including the amount borrowed), less all liabilities and
indebtedness other than the bank borrowing. The Fund is also authorized to
borrow an additional 5% of its total assets without regard to the foregoing
limitation for temporary purposes such as clearance of portfolio transactions
and share redemptions. The Fund may engage in reverse repurchase agreements and
dollar rolls as discussed below, and if certain conditions are not met, such
transactions will be considered borrowings subject to the restrictions discussed
in this paragraph. The Fund will only borrow when the Investment Adviser
believes that such borrowing will benefit the Fund after taking into account
considerations such as interest income and possible gains or losses upon
liquidation.
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Borrowings by the Fund create an opportunity for greater total return but,
at the same time, increase exposure to capital risk. For example, leveraging may
exaggerate changes in the net asset value of Fund shares and in the yield on the
Fund's portfolio. Although the principal of such borrowings will be fixed, the
Fund's assets may change in value during the time the borrowings are
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced. The Fund may also
borrow for emergency purposes, for the payment of dividends, for share
repurchases or for the clearance of transactions.
Because few or none of its assets will consist of margin securities, the
Fund does not expect to borrow on margin. The Fund may also leverage by entering
into reverse repurchase agreements with the same parties with whom it may enter
into repurchase agreements (as discussed below). Under a reverse repurchase
agreement, the Fund sells securities and agrees to repurchase them at a mutually
agreed date and price. The value of the securities subject to such agreements
will not exceed 125% of the proceeds of the reverse repurchase agreements. At
the time the Fund enters into a reverse repurchase agreement, it may establish
and maintain a segregated account with its custodian containing cash, cash
equivalents or liquid high grade debt securities having a value not less than
the repurchase price (including accrued interest). If the Fund establishes and
maintains such a segregated account, a reverse repurchase agreement will not be
considered a borrowing by the Fund; however, under circumstances in which the
Fund does not establish and maintain such a segregated account, the Fund will
enter into a reverse repurchase agreement only with banks (as defined in the
Investment Company Act), and such reverse repurchase agreement will be
considered a borrowing solely for the purpose of the Fund's limitation on
borrowing. Reverse repurchase agreements involve the risk that the market value
of the securities acquired, or retained in lieu of sale, by the Fund in
connection with the reverse repurchase agreement may decline below the price of
the securities the Fund has sold but is obligated to repurchase. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision. Also, the Fund would bear the risk of loss to the extent that the
proceeds of the reverse repurchase agreement are less than the value of the
securities subject to such agreement.
The Fund also may enter into 'dollar rolls'. A dollar roll is a transaction
in which the Fund sells fixed income securities for delivery in the current
month and simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date. During the
roll period, the Fund foregoes principal and interest paid on such securities.
The Fund is compensated by the difference between the current sales price and
the lower forward price for the future purchase (often referred to as the
'drop') as well as by the interest earned on the cash proceeds of the initial
sale. A 'covered roll' is a specific type of dollar roll for which there is a
segregated account with cash, cash equivalents or liquid high grade debt
securities. Covered rolls will not be considered to be borrowings for purposes
of the Fund's limitation on borrowing to the extent that they are appropriately
collateralized by high grade liquid assets of the Fund. Dollar rolls which are
not so collateralized will be entered into by the Fund only with banks (as
defined in the Investment Company Act) and will be considered borrowings for the
purpose of the Fund's limitation on borrowing.
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The Fund expects that some of its borrowings may be made on a secured
basis. In such situations, either the Fund's custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with
(i) the lender to act as a subcustodian if the lender is a bank or otherwise
qualified as a custodian of investment company assets or (ii) a suitable
subcustodian.
Certain of the Fund's borrowings may be subject to certain covenants set
forth in the governing credit agreements relating to asset coverage requirements
and portfolio composition. The Fund does not expect that observance of such
covenants would materially adversely affect the ability of the Fund to achieve
its investment objective. However, a breach of any such covenant not cured
within the specified cure period may result in acceleration of outstanding
indebtedness and require the Fund to dispose of portfolio investments at a time
when it may be disadvantageous to do so. The Fund also may be required to
maintain minimum average balances in connection with borrowings or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over a stated interest rate.
Portfolio Strategies Involving Interest Rate Transactions, Options, Futures
and Currency Transactions. The Fund may engage in various portfolio strategies
to seek to increase its return through the use of options on portfolio
securities and to hedge its portfolio against interest rate, market and currency
risks. The Fund has authority to engage in interest rate transactions in order
to hedge against interest rate movements, purchase call and put options on
securities, write (i.e., sell) covered call and put options on its portfolio
securities, and engage in hedging transactions in financial futures and related
options on such futures. The Fund may also deal in forward foreign exchange
transactions and foreign currency options and futures, and related options on
such futures.
Although certain risks are involved in interest rate, options and futures
transactions, the Investment Adviser believes that, because the Fund will (i)
write only covered options on portfolio securities and (ii) engage in other
transactions primarily for hedging purposes, these portfolio strategies will not
subject the Fund to the risks frequently associated with the speculative use of
such transactions. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund will only engage in
hedging activities from time to time and may not necessarily be engaging in
hedging activities when interest rate, market or currency movements occur.
Reference is made to the Appendix to this Prospectus and to the Statement of
Additional Information for further information concerning these strategies.
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, persons affiliated with the Fund
and persons who are affiliated with such affiliated persons, including Merrill
Lynch, are prohibited from dealing with the Fund as a principal in the purchase
and sale of securities unless a permissive order allowing such transactions is
obtained from the Securities and Exchange Commission. Affiliated persons of the
Fund, and affiliated persons of such affiliated persons, may serve as 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
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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.
Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. During the period of such a loan,
the 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.
Portfolio Turnover. 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 circumstance in general
market, economic or financial conditions. As a result of its investment
policies, the Fund may engage in a substantial number of portfolio transactions.
Accordingly, while the Fund anticipates that its annual portfolio turnover rate
should not exceed 100% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less and options, futures and currency
transactions) by the monthly average value of the securities in the portfolio
during the year.
Repurchase Agreements; Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Under a repurchase agreement, the seller agrees, upon entering into the contract
with the Fund, to repurchase a security (typically a security issued or
guaranteed by the U.S. government) at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed yield for the Fund insulated from fluctuations in the market value of
the underlying security during such period, although, to the extent the
repurchase agreement is not denominated in U.S. dollars, the Fund's return may
be affected by currency fluctuations. Repurchase agreements may be entered into
only with a member bank of the Federal Reserve System, a primary dealer in U.S.
government securities or an affiliate thereof. A purchase and sale contract is
similar to a repurchase agreement, but purchase and sale contracts, unlike
repurchase agreements, allocate interest on the underlying security to the
purchaser during the term of the agreement. In all instances, the Fund takes
possession of the underlying securities when investing in repurchase agreements
or purchase and sale contracts. Nevertheless, if the seller were to default on
its obligation to repurchase a security under a repurchase agreement or purchase
and sale contract and the market value of the underlying security at such time
was less than the Fund had paid to the seller, the Fund would realize a loss.
The Fund may not invest more than 10% of its net assets in repurchase agreements
or purchase and sale contracts maturing in more than seven days, together with
all other illiquid securities.
Short Sales. The Fund may make short sales of securities. A short sale is
a transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. The Fund expects to make
short sales both as a form of hedging to offset potential declines in long
positions in similar securities and in order to maintain portfolio flexibility.
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When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. Government
securities or other high grade liquid securities similar to those borrowed. With
respect to uncovered short positions, the Fund will also be required to deposit
similar collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the broker-dealer from which it borrowed the security
regarding payment over of any payments received by the Fund on such security,
the Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a gain.
Any gain will be decreased, and any loss increased, by the transaction costs
described above. Although the Fund's gain is limited to the price at which it
sold the security short, its potential loss is theoretically unlimited.
The Fund will not make a short sale if, after giving effect to such sale,
the market value of all securities sold short exceeds 25% of the value of its
total assets or the Fund's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Fund may
also make short sales 'against the box' without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the identical
security. (Under the laws of a certain state, the Fund is presently limited so
that the value of securities of any one issuer in which the Fund is short may
not exceed the lesser of 2.0% of the value of the Fund's net assets or 2.0% of
the securities of any class of any issuer.)
INVESTMENT RESTRICTIONS
The Fund's investment activities are subject to further restrictions that
are described in the Statement of Additional Information. Investment
restrictions and policies which are fundamental policies may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities (which for this purpose and under the Investment Company Act
means the lesser of (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).
Among its fundamental policies, the Fund may not invest in securities which
cannot be readily resold because of legal or contractual restrictions or which
are not otherwise readily marketable, including repurchase agreements and
purchase and sale contracts maturing in more than seven days, if, regarding all
such securities, more than 15% of its total assets, taken at market value, would
be invested in such securities. While the Fund does not intend to purchase
illiquid securities in an amount exceeding 15% of its total assets, the Fund may
purchase, without regard to that limitation, securities that are not registered
under the Securities Act of 1933, as amended (the 'Securities Act'), but that
can be offered and sold to 'qualified institutional buyers' under Rule 144A
under the Securities Act, provided that the Fund's Board of Directors
continuously determines, based on the trading markets for the specific Rule 144A
security, that it is liquid. (Under the laws of certain states, the
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Fund is presently limited with respect to investments in illiquid securities to
10% of its total assets.) The Board of Directors has adopted guidelines
regarding certain foreign debt securities which may be held by the Fund and
delegated to the Investment Adviser the daily function of determining and
monitoring liquidity of such securities. The Board of Directors, however, has
retained oversight and is ultimately responsible for the determinations. Since
it is not possible to predict with assurance exactly how this market for
restricted securities sold and offered under Rule 144A will develop, the Board
of Directors will carefully monitor the Fund's investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these securities.
Other fundamental policies include policies which (i) prohibit investment
of more than 25% of the Fund's total assets (taken at market value at the time
of each investment) in the securities of issuers in any particular industry
(other than debt securities issued or guaranteed by a Western Hemisphere
governmental entity), except that, under normal circumstances, the Fund will
invest more than 25% of its total assets in the securities of issuers in the
financial services industry or (ii) restrict the issuance of senior securities
and limit borrowings except that the Fund may borrow amounts up to 33 1/3% of
its total assets and up to an additional 5% of its assets for temporary
purposes.
Although the Fund has registered as a 'non-diversified' investment company
under the Investment Company Act, to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Fund will be subject to
certain diversification requirements of the Code. See 'Additional
Information--Taxes'.
The Board of Directors of the Fund, at a meeting held on August 4, 1994,
approved certain changes to the fundamental and non-fundamental investment
restrictions of the Fund. These changes were proposed in connection with the
creation of a set of standard fundamental and non-fundamental investment
restrictions that would be adopted, subject to shareholder approval, by all of
the non-money market mutual funds advised by MLAM or FAM. The proposed uniform
investment restrictions are designed to provide each of these funds, including
the Fund, with as much investment flexibility as possible under the Investment
Company Act and applicable state securities regulations, help promote
operational efficiencies and facilitate monitoring of compliance. The investment
objective and policies of the Fund will be unaffected by the adoption of the
proposed investment restrictions.
The full text of the proposed investment restrictions is set forth under
'Investment Objective and Policies-Proposed Uniform Investment Restrictions' in
the Statement of Additional Information. Shareholders of the Fund are currently
considering whether to approve the proposed revised investment restrictions. If
such shareholder approval is obtained, the Fund's current investment
restrictions will be replaced by the proposed restrictions, and the Fund's
Prospectus and Statement of Additional Information will be supplemented to
reflect such change.
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MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Board of Directors of the Fund consists of five individuals, four of
whom are not 'interested persons' of the Fund as defined in the Investment
Company Act. The Board of Directors of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies by the Investment Company Act.
The Directors of the Fund are:
ARTHUR ZEIKEL*--President and Chief Investment Officer of the Investment
Adviser; President and Director of Princeton Services, Inc.; Executive Vice
President of Merrill Lynch & Co., Inc. ('ML & Co.'); Executive Vice President of
Merrill Lynch; Director of the Distributor.
DONALD CECIL--Special Limited Partner of Cumberland Partners (an investment
partnership).
EDWARD H. MEYER--Chairman of the Board, President and Chief Executive
Officer of Grey Advertising Inc.
CHARLES C. REILLY--Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital, Inc.; former Senior Vice President of
Arnhold and S. Bleichroeder, Inc.; Adjunct Professor, Columbia University
Graduate School of Business.
RICHARD R. WEST--Professor of Finance, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration.
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* Interested person, as defined in the Investment Company Act, of the Fund.
ADVISORY AND MANAGEMENT ARRANGEMENTS
The Fund's investment adviser is Merrill Lynch Asset Management, L.P.,
which does business as Merrill Lynch Asset Management (the 'Investment
Adviser'). The Investment Adviser is owned and controlled by ML & Co., a
financial services holding company and the parent of Merrill Lynch. The
Investment Adviser, or an affiliate of the Investment Adviser, Fund Asset
Management, L.P. ('FAM'), acts as the investment adviser to more than 100 other
registered investment companies and provides investment advisory services to
individual and institutional accounts. As of August 31, 1994, the Investment
Adviser and FAM had a total of approximately $165.7 billion in investment
company and other portfolio assets under management, including accounts of
certain affiliates of the Investment Adviser.
The investment advisory agreement with the Investment Adviser (the
'Investment Advisory Agreement') provides that, subject to the direction of the
Board of Directors of the Fund, the Investment Adviser is responsible for the
actual management of the Fund's portfolio and constantly reviews the Fund's
holdings in light of its own research analysis and that from other relevant
sources. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to review by the
Board of Directors.
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The Investment Adviser provides the portfolio manager for the Fund who
considers analyses from various sources (including brokerage firms with which
the Fund does business), makes the necessary decisions, and places transactions
accordingly. The Investment Adviser is also obligated to perform certain
administrative and management services for the Fund and is obligated to provide
all of the office space, facilities, equipment and personnel necessary to
perform its duties under the Investment Advisory Agreement.
The Fund pays the Investment Adviser a monthly fee at the annual rate of
0.60% of the average daily net assets of the Fund plus the principal amount of
borrowings incurred by the Fund for leverage purposes. For the fiscal period
August 27, 1993 (commencement of operations) to December 31, 1993, the fee paid
by the Fund to the Investment Adviser was $197,936 all of which was waived
(based upon average net assets of approximately $95.5 million). At August 31,
1994, the net assets of the Fund aggregated approximately $142.8 million. At
this asset level, the annual management fee would aggregate approximately
$856,600. The Fund also pays certain expenses incurred in its operations,
including, among other things, the investment advisory fees, legal and audit
fees, unaffiliated Directors' 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. Also, accounting services are provided to the Fund by
the Investment Adviser, and the Fund reimburses the Investment Adviser for its
costs in connection with such services on a semi-annual basis. For the fiscal
period August 27, 1993 (commencement of operations) to December 31, 1993, the
Fund reimbursed the Investment Adviser $21,800 for accounting services. For the
fiscal period August 27, 1993 (commencement of operations) to December 31, 1993,
for the former Class A shares (now redesignated Class D shares) the ratio of
total expenses net of reimbursement and excluding account maintenance fees to
average net assets was 0.35% (annualized), and the ratio of total expenses net
of reimbursement and including account maintenance fees to average net assets
was 0.60% (annualized); for the Class B shares the ratio of total expenses net
of reimbursement and excluding account maintenance and distribution fees to
average net assets was 0.35% (annualized), and the ratio of total expenses net
of reimbursement and including account maintenance and distribution fees to
average net assets was 1.10% (annualized). The Investment Adviser is voluntarily
reimbursing certain expenses of the Fund, and such reimbursement may be
discontinued at any time. Absent such reimbursement, the ratio of total expenses
to average net assets would have been as follows for the same period: for the
former Class A shares (now redesignated Class D shares)--2.03% (annualized);
Class B shares--2.53% (annualized); none of the new Class A or Class C shares
had been issued during these periods.
The name of the person associated with the Investment Adviser who is
primarily responsible for the day-to-day management of the Fund's portfolio, his
title, and business experience during the past five years is as follows:
PAOLO H. VALLE--Vice President--Vice President and Senior Portfolio Manager
of the Investment Adviser since 1992; Vice President and Manager, Emerging
Markets Trading, PNC Bank, prior thereto.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the 'Transfer Agent'), which is a
wholly-owned subsidiary of ML & Co., acts as the Fund's transfer agent pursuant
to a Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement (the 'Transfer Agency Agreement'). Pursuant to the Transfer
Agency Agreement, the Transfer Agent is responsible for the issuance, transfer
and redemption of shares and the opening and maintenance of shareholder
accounts. Pursuant to the Transfer Agency Agreement, the Transfer Agent receives
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an annual fee of $11.00 per Class A or Class D shareholder account and $14.00
per Class B or Class C shareholder account, nominal miscellaneous fees (e.g.,
account closing fees) and is entitled to reimbursement for out-of-pocket
expenses incurred by it under the Transfer Agency Agreement. For the fiscal
period August 27, 1993 (commencement of operations) to December 31, 1993, the
Fund paid the Transfer Agent $26,936 pursuant to the Transfer Agency Agreement.
At August 31, 1994, the Fund had 1,636 of the former Class A shareholder
accounts (now redesignated Class D shareholder accounts), 10,805 Class B
shareholder accounts, no Class C shareholder accounts and no Class D shareholder
accounts. At this level of accounts, the annual fee payable to the Transfer
Agent would aggregate approximately $169,266 plus miscellaneous and
out-of-pocket expenses.
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the 'Distributor'), an affiliate of
both the Investment Adviser and of Merrill Lynch, acts as the distributor of the
shares of the Fund. Shares of the Fund are offered continuously for sale by the
Distributor and other eligible securities dealers (including Merrill Lynch).
Shares of the Fund may be purchased from securities dealers or by mailing a
purchase order directly to the Transfer Agent. The minimum initial purchase is
$1,000, and the minimum subsequent purchase is $50, except that for retirement
plans, the minimum initial purchase is $100, and the minimum subsequent purchase
is $1.
The Fund is offering its shares in four classes at a public offering price
equal to the next determined net asset value per share plus sales charges
imposed either at the time of purchase or on a deferred basis depending upon the
class of shares selected by the investor under the Merrill Lynch Select
Pricing(Service Mark) System, as described below. The applicable offering price
for purchase orders is based upon the net asset value of the Fund next
determined after receipt of the purchase orders by the Distributor. As to
purchase orders received by securities dealers prior to 4:15 p.m., New York
time, which includes orders received after the determination of the net asset
value on the previous day, the applicable offering price will be based on the
net asset value as of 4:15 p.m., New York time, on the day the orders are placed
with the Distributor, provided the orders are received prior to 4:30 p.m., New
York time, on that day. If the purchase orders are not received prior to 4:30
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 of any
class at any time in response to conditions in the securities markets or
otherwise and may thereafter resume such offering from time to time. Any order
may be rejected by the Distributor or the Fund. Neither the Distributor nor the
dealers are permitted to withhold placing orders to benefit themselves by a
price change. Merrill Lynch may charge its customers a processing fee (presently
$4.85) to confirm a sale of shares to such customers. Purchases directly through
the Transfer Agent are not subject to the processing fee.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) System, which permits each investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Shares of Class A and Class D shares
are sold to investors choosing the initial sales charge alternatives, and Class
B and Class C are sold to investors choosing the deferred sales charge
alternatives. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Fund with the investment
therafter being subject to a contingent deferred sales charge and ongoing
distribution fees. A discussion of the factors that investors should
24
<PAGE>
consider in determining the method of purchasing shares under the Merrill Lynch
Select Pricing(Service Mark) System is set forth under 'Merrill Lynch Select
Pricing(Service Mark) System' on page 3.
Each Class A, Class B, Class C and Class D shares of the Fund represents
identical interests in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of the
ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements. The
deferred sales charges and account maintenance fees that are imposed on Class B
and Class C shares, as well as the account maintenance fees that are imposed on
Class D shares, will be imposed directly against those classes and not against
all assets of the Fund and, accordingly, such charges will not affect the net
asset value of any other class or have any impact on investors choosing another
sales charge option. Dividends paid by the Fund for each class of shares will be
calculated in the same manner at the same time and will differ only to the
extent that account maintenance and distribution fees and any incremental
transfer agency costs relating to a particular class are borne exclusively by
that class. Class B, Class C and Class D shares each have exclusive voting
rights with respect to the Rule 12b-1 distribution plan adopted with respect to
such class pursuant to which account maintenance and/or distribution fees are
paid. See 'Distribution Plans' below. Each class has different exchange
privileges. See 'Shareholder Services--Exchange Privilege'.
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in that
the sales charges applicable to each class provide for the financing of the
distribution of the shares of the Fund. The distribution-related revenues paid
with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares. Investors are advised that
only Class A and Classs D shares may be available for purchase through
securities dealers, other than Merrill Lynch, which are eligible to sell shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select Pricing(Service Mark)
System.
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION CONVERSION
CLASS SALES CHARGE (1) FEE FEE FEATURE
- ------ ------------------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
A Maximum 4.00% initial No No No
sales charge (2)(3)
B CDSC for a period of 4 0.25% 0.50% B shares
years, at a rate of convert to D
4.0% during the first shares
year, decreasing 1.0% automatically
annually to 0.0% after
approximately
ten years (4)
C 1.0% CDSC for one year 0.25% 0.55% No
D Maximum 4.00% initial 0.25% No No
sales charge (3)
</TABLE>
(Footnotes on following page.)
25
<PAGE>
- ------------------
(1) Initial sales charges are imposed at the time of purchase as a percentage of
the offering price. CDSCs may be imposed if the redemption occurs within the
applicable CDSC time period. The charge will be assessed on an amount equal
to the lesser of the proceeds of redemption or the cost of the shares being
redeemed.
(2) Offered only to eligible investors. See 'Initial Sales Charge
Alternatives--Class A and Class D Shares--Eligible Class A Investors'.
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares and certain
retirement plans is modified. Also, Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made have an eight
year conversion period. If Class B shares of the Fund are exchanged for
Class B shares of another MLAM-advised mutual fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible
to purchase Class A shares should purchase Class A shares rather than Class D
shares because there is an account maintenance fee imposed on Class D shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
DISCOUNT
TO
SELECTED
DEALERS
SALES LOAD SALES LOAD AS
AS AS PERCENTAGE
PERCENTAGE PERCENTAGE* OF
OF OF THE NET THE
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ---------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than $25,000....................... 4.00% 4.17% 3.75%
$25,000 but less than $50,000........... 3.75 3.90 3.50
$50,000 but less than $100,000.......... 3.25 3.36 3.00
$100,000 but less than $250,000......... 2.50 2.56 2.25
$250,000 but less than $1,000,000....... 1.50 1.52 1.25
$1,000,000 and over**................... 0.00 0.00 0.00
</TABLE>
- ------------------
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more made on or after October 21, 1994. If the sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the shares are
redeemed within one year after purchase. Class A purchases made prior to
October 21, 1994, may be subject to a CDSC if the shares are redeemed within
one year of purchase at the following rates: 0.25% on purchases of $1,000,000
to $5,000,000; and 0.20% on purchases over $5,000,000 in lieu of paying an
initial sales charge. The charge will be assessed on an amount equal to the
lesser of the proceeds of redemption or the cost of the shares being
redeemed. A sales charge of 0.75% will be charged on purchases of $1,000,000
or more of Class A or Class D shares by certain 401(k) plans.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and Class
D shares of the Fund will receive a concession equal to most of the sales
charge, they may be deemed to be underwriters under the Securities Act of 1933,
as amended.
As noted above, as a result of the implementation of the Merrill Lynch
Select Pricing(Service Mark) System, Class A shares of the Fund outstanding
prior to October 21, 1994, have been redesignated Class D shares. The Class A
26
<PAGE>
shares offered by this Prospectus differ from the Class A shares offered prior
to October 21, 1994, in many respects, including sales charges, exchange
privilege and the classes of persons to whom such shares are offered. During the
fiscal period August 27, 1993 (commencement of operations) to December 31, 1993,
the Fund sold 1,903,377 of its former Class A shares (now redesignated Class D
shares) for aggregate net proceeds to the Fund of $19,440,340. The gross sales
charges for the sale of its former Class A shares for that period were $317,743,
of which $5,926 and $311,817 were received by the Distributor and Merrill Lynch,
respectively. For such period, the Distributor received CDSCs of $3,000, all of
which were paid to Merrill Lynch, with respect to redemption within one year
after purchase of Class A shares purchased subject to front-end sales charge
waivers.
Eligible Class A Investors. Class A shares are offered to a limited group
of investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares. Certain employer sponsored retirement or savings
plans, including eligible 401(k) plans, may purchase Class A shares at net asset
value provided such plans meet the required minimum number of eligible employees
or required amount of assets advised by MLAM or any of its affiliates. Class A
shares are available at net asset value to corporate warranty insurance reserve
fund programs provided that the program has $3 million or more initially
invested in MLAM-advised mutual funds. Also eligible to purchase Class A shares
at net asset value are participants in certain investment programs including
TMA(Service Mark) Managed Trusts to which Merrill Lynch Trust Company provides
discretionary trustee services and certain purchases made in connection with the
Merrill Lynch Mutual Fund Adviser program. In addition, Class A shares will be
offered at net asset value to ML & Co. and its subsidiaries and their directors
and employees and to members of the Boards of MLAM-advised investment companies,
including the Fund. Certain persons who acquired shares of certain MLAM-advised
closed-end funds who wish to reinvest the net proceeds from a sale of their
closed-end fund shares of common stock in shares of the Fund also may purchase
Class A or Class D shares of the Fund if certain conditions set forth in the
Statement of Additional Information are met. For example, Class A shares of the
Fund and certain other MLAM-advised mutual funds are offered at net asset value
to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc. who wish to
reinvest the net proceeds from a sale of certain of their shares of common stock
of Merrill Lynch Senior Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges may
also be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are also offered at net asset value to certain eligible
Class A investors as set forth above under 'Eligible Class A Investors'.
Class D shares are offered at net asset value, without sales charge, to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met. Class D shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies.
Additional information concerning these reduced initial sales charges,
including information regarding investments by Employee Sponsored Retirement or
Savings Plans, is set forth in the Statement of Additional Information.
27
<PAGE>
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net asset
value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately ten years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend reinvestment with respect to
those shares, are automatically converted into Class D shares of the Fund and
thereafter will be subject to lower continuing fees. See 'Conversion of Class B
Shares to Class D Shares' below. Both Class B and Class C shares are subject to
an account maintenance fee of 0.25% of net assets and a distribution fee, 0.50%
of Class B net assets and 0.55% of Class C net assets, as discussed below under
'Distribution Plans'. The proceeds from the account maintenance fees are used to
compensate Merrill Lynch for providing continuing account maintenance
activities.
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment.
Merrill Lynch compensates its financial consultants for selling Class B and
Class C shares at the time of purchase from its own funds. See 'Distribution
Plans' below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor
and are used in whole or in part by the Distributor to defray the expenses of
dealers (including Merrill Lynch) related to providing distribution-related
services to the Fund in connection with the sale of the Class B and Class C
shares, such as the payment of compensation to financial consultants for selling
Class B and Class C shares, from its own funds. The combination of the CDSC and
the ongoing distribution fee facilitates the ability of the Fund to sell the
Class B and Class C shares without a sales charge being deducted at the time of
purchase. Approximately ten years after issuance, Class B shares will convert
automatically into Class D shares of the Fund, which are subject to an account
maintenance fee but no distribution fee; Class B shares of certain other
MLAM-advised mutual funds into which exchanges may be made convert into Class D
shares automatically after approximately eight years. If Class B shares of the
Fund are exchanged for Class B shares of another MLAM-advised mutual fund, the
conversion period applicable to the Class B shares acquired in the exchange will
apply, and the holding period for the shares exchanged will be tacked onto the
holding period for the shares acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C
shares is limited by the NASD asset-based sales charge rule. See 'Limitations on
the Payment of Deferred Sales Charges' below. The proceeds from the ongoing
account maintenance fee are used to compensate Merrill Lynch for providing
continuing account maintenance activities. Class B shareholders of the Fund
exercising the exchange privilege described under 'Shareholder
Services--Exchange Privilege' will continue to be subject to the Fund's CDSC
schedule if such schedule is higher than the CDSC schedule relating to the Class
B shares acquired as a result of the exchange.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which
are redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no CDSC will
be imposed on increases in net
28
<PAGE>
asset value above the initial purchase price. In addition, no CDSC will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions.
The following table sets forth the rates of the Class B CDSC for shares
purchased on or after October 21, 1994:
<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE OF
DOLLAR
AMOUNT SUBJECT TO
YEAR SINCE PURCHASE PAYMENT MADE CHARGE
- -------------------------------------------------- --------------------
<S> <C>
0-1............................................... 4.00%
1-2............................................... 3.00%
2-3............................................... 2.00%
3-4............................................... 1.00%
4 and thereafter.................................. 0.00%
</TABLE>
Class B shares purchased prior to October 21, 1994, and redeemed within
three years of purchase are subject to a CDSC at the rates set forth below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE PAYMENT MADE SUBJECT TO CHARGE
- -------------------------------------------------- --------------------
<S> <C>
0-1............................................... 3.00%
1-2............................................... 2.00%
2-3............................................... 1.00%
3 and thereafter.................................. None
</TABLE>
For the fiscal period August 27, 1993 (commencement of operations) to December
31, 1993, the Distributor received CDSCs of $51,471 with respect to the
redemption of Class B shares, all of which was paid to Merrill Lynch.
In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over four years or shares acquired pursuant to reinvestment
of dividends or distributions and then of shares held longest during the
four-year period. The charge will not be applied to dollar amounts representing
an increase in the net asset value since the time of purchase. A transfer of
shares from the shareholder's account to another account will be assumed to be
made in the same order as a redemption.
To provide an example, assume an investor purchases 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 2.0% (the
applicable rate in the third year after purchase).
29
<PAGE>
The Class B CDSC is waived on redemptions of shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
('IRA') or other retirement plan or following the death or disability (as
defined in the Internal Revenue Code of 1986, as amended) of a shareholder. The
Class B CDSC also is waived on redemptions of shares by certain eligible 401(a)
and eligible 401(k) plans. The CDSC also is waived for any Class B shares which
are purchased by eligible 401(k) or eligible 401(a) plans which are rolled over
into a Merrill Lynch or Merrill Lynch Trust Company custodied IRA and held in
such account at the time of redemption. The Class B CDSC also is waived for any
Class B shares which are purchased by a Merrill Lynch rollover IRA that was
funded by a rollover from a terminated 401(k) plan managed by the MLAM Private
Portfolio Group and held in such account at the time of redemption. Additional
information concerning the waiver of the Class B CDSC is set forth in the
Statement of Additional Information.
Contingent Deferred Sales Charges--Class C Shares. Class C Shares which are
redeemed within one year of purchase may be subject to a 1.0% CDSC charged as a
percentage of the dollar amount subject thereto. The charge will be assessed on
an amount equal to the lesser of the proceeds of redemption or the cost of the
shares being redeemed. Accordingly, no Class C CDSC will be imposed on increases
in net asset value above the initial purchase price. In addition, no Class C
CDSC will be assessed on shares derived from reinvestment of dividends or capial
gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over one year or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the one-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. A transfer of shares
from a shareholder's account to another will be assumed to be made in the same
order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately ten
years (the 'Conversion Period'), Class B Shares will be converted automatically
into Class D shares of the Fund. Class D shares are subject to an ongoing
account maintenance fee of 0.25 % of net assets but are not subject to the
distribution fee that is borne by Class B shares. Automatic conversion of Class
B shares into Class D shares will occur at least once each month (on the
'Conversion Date') on the basis of the relative net asset values of the shares
of the two classes on the Conversion Date, without the imposition of any sales
load, fee or other charge. Conversion of Class B shares to Class D shares will
not be deemed a purchase or sale of the shares for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
outstanding. If at a Conversion Date the conversion of Class B shares to Class D
shares of the Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the Fund
held in the account on the Conversion Date will be converted to Class D shares
of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
30
<PAGE>
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual funds will convert approximately
ten years after initial purchase. If, during the Conversion Period, a
shareholder exchanges Class B shares with an eight-year Conversion Period for
Class B shares with a ten-year Conversion Period, or vice versa, the Conversion
Period applicable to the Class B shares acquired in the exchange will apply, and
the holding period for the shares exchanged will be tacked onto the holding
period for the shares acquired.
The Conversion Period is modified for shareholders who purchased Class B
shares through certain retirement plans which qualified for a waiver of the CDSC
normally imposed on purchases of Class B shares ('Class B Retirement Plans').
When the first share of any MLAM-advised mutual fund purchased by a Class B
Retirement Plan has been held for ten years (i.e., ten years from the date the
relationship between MLAM-advised mutual funds and the Class B Retirement Plan
was established), all Class B shares of all MLAM-advised mutual funds held in
that Class B Retirement Plan will be converted into Class D shares of the
appropriate funds. Subsequent to such conversion, that Class B Retirement Plan
will be sold Class D shares of the appropriate funds at net asset value.
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for Class B, Class C and
Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a
'Distribution Plan') with respect to the account maintenance and/or distribution
fees paid by the Fund to the Distributor with respect to such classes. The Class
B and Class C Distribution Plans provide for the payment of account maintenance
fees and distribution fees, and the Class D Distribution Plan provides for the
payment of account maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Fund pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual rate
of 0.25% of the average daily net assets of the Fund attributable to shares of
the relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) in connection with account maintenance activities.
The Distribution Plans for Class B and Class C shares each provide that the
Fund also pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rates of 0.50%,
with respect to Class B shares, and 0.55% with respect to Class C shares, of the
average daily net assets of the Fund attributable to the shares of the relevant
class in order to compensate the Distributor and Merrill Lynch (pursuant to a
sub-agreement) for providing shareholder and distribution services, and bearing
certain distribution-related expenses of the Fund, including payments to
financial consultants for selling Class B and Class C shares of the Fund. The
Distribution Plans relating to Class B and Class C shares are designed to permit
an investor to purchase Class B and Class C shares through dealers without the
assessment of an initial sales charge and at the same time permit the dealer to
compensate its financial consultants in connection with the sale of the Class B
and Class C shares. In this regard, the purpose and function of the ongoing
distribution fees and the CDSC are the same as those of the initial sales charge
with respect to the Class A and Class D shares of the Fund in that the deferred
sales charges provide for the financing of the distribution of the Fund's Class
B and Class C shares.
For the fiscal period August 27, 1993 (commencement of operations) to
December 31, 1993, the Fund paid the Distributor $206,464 pursuant to the Class
B Plan (based on average net assets subject to the Class B Plan of
31
<PAGE>
approximately $77.9 million), all of which was paid to Merrill Lynch for
providing account maintenance and distribution-related activities and services
in connection with Class B shares. For the fiscal period August 27, 1993
(commencement of operations) to December 31, 1993, the Fund paid the Distributor
$13,652 pursuant to the Distribution Plan relating to the former Class A shares
(now redesignated Class D shares) (based on average net assets subject to such
Distribution Plan of approximately $15.5 million), all of which was paid to
Merrill Lynch for providing account maintenance services in connection with the
former Class A shares. The Fund did not begin to offer Class C shares publicly
until the date of this Prospectus. Accordingly, no payments have been made
pursuant to the Class C Distribution Plan prior to the date of this Prospectus.
The payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C Distribution
Plans. This information is presented annually as of December 31 of each year on
a 'fully allocated accrual' basis and quarterly on a 'direct expense and
revenue/cash' basis. On the fully allocated accrual basis, revenues consist of
the account maintenance fees, the distribution fees, the CDSCs and certain other
related revenues, and expenses consist of financial consultant compensation,
branch office and regional operation center selling and transaction processing
expenses, advertising, sales promotion and marketing expenses, corporate
overhead and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and CDSCs
and the expenses consist of financial consultant compensation. As of December
31, 1993, direct cash expenses for the period since commencement of the offering
of Class B shares exceeded direct cash revenues by $629,612 (0.64% of Class B
net assets at that date). At such date, the fully allocated accrual expenses
incurred by the Distributor and Merrill Lynch with respect to Class B shares for
the period since commencement of operations exceeded fully allocated accrual
revenues for such period by approximately $1,642,000 (1.66% of Class B net
assets at that date).
The Fund has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with Class B, Class C and Class D shares, and there is no assurance
that the Directors of the Fund will approve the continuance of the Distribution
Plans from year to year. However, the Distributor intends to seek annual
continuation of the Distribution Plans. In their review of the Distribution
Plans, the Directors will be asked to take into consideration expenses incurred
in connection with the account maintenance and/or distribution of each class of
shares separately. The initial sales charges, the account maintenance fee, the
distribution fee and/or the CDSCs received with respect to one class will not be
used to subsidize the sale of shares of another class. Payments of the
distribution fee on Class B shares will terminate upon conversion of those Class
B shares into Class D shares as set forth under 'Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares to Class
D Shares'.
32
<PAGE>
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ('NASD') imposes a limitation on certain
asset-based sales charges such as the distribution fee and the CDSC borne by the
Class B and Class C shares but not the account maintenance fee. The maximum
sales charge rule is applied separately to each class. As applicable to the
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of
Class B shares and Class C shares, computed separately (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges) plus (2)
interest on the unpaid balance for the respective class, computed separately, at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the payment of the distribution fee and the CDSC).
In connection with the Class B shares, the Distributor has voluntarily agreed to
waive interest charges on the unpaid balance in excess of 0.50% of eligible
gross sales. Consequently, the maximum amount payable to the Distributor
(referred to as the 'voluntary maximum') in connection with the Class B shares
is 6.75% of eligible gross sales. The Distributor retains the right to stop
waiving the interest charges at any time. To the extent payments would exceed
the voluntary maximum, the Fund will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Fund rather than to the Distributor; however, the Fund will continue to make
payments of the account maintenance fees. In certain circumstances the amount
payable pursuant to the voluntary maximum may exceed the amount payable under
the NASD formula. In such circumstances payment in excess of the amount payable
under the NASD formula will not be made.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all 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. Except for any CDSC which may be applicable, there will be no charge
for redemption if the redemption request is sent directly to the Transfer Agent.
Shareholders liquidating their holdings will receive upon redemption all
dividends reinvested through the date of redemption. The value of shares at the
time of redemption may be more or less than the shareholder's cost, depending on
the market value of the securities held by the Fund at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by
tendering the shares directly to the Transfer Agent, Financial Data Services,
Inc., Transfer Agency Mutual Fund Operations, P.O. Box 45289, Jacksonville,
Florida 32232-5289. Redemption requests delivered other than by mail should be
delivered to Financial Data Services, Inc., Transfer Agency Mutual Fund
Operations, 4800 Deer Lake Drive East, 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 signature(s) on the redemption request must be guaranteed by an
'eligible guarantor institution' (including, for example, Merrill Lynch branches
and certain other financial
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institutions) 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. 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 U.S. bank) has been collected for the purchase of
such shares. Normally, this delay will not exceed 10 days.
REPURCHASE
The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request for
repurchase is received by the dealer prior to the close of business on the New
York Stock Exchange on the day received and that such request is received by the
Fund from such dealer not later than 4:30 p.m., New York time, on the same day.
Dealers have the responsibility of submitting such repurchase requests to the
Fund not later than 4:30 p.m., New York time, in order to obtain that day's
closing price.
The foregoing repurchase arrangements are for the convenience of
shareholders and do not involve a charge by the Fund (other than any applicable
CDSC). Securities firms which do not have selected dealer agreements with the
Distributor, however, may impose a transaction charge on the shareholder for
transmitting the notice of repurchase to the Fund. Merrill Lynch may charge its
customers a processing fee (presently $4.85) to confirm a repurchase of shares
to such customers. Redemptions directly through the Transfer Agent are not
subject to the processing fee. The Fund reserves the right to reject any order
for repurchase, which right of rejection might 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.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES
Shareholders who have redeemed their Class A or Class D shares have a
one-time privilege to reinstate their accounts by purchasing Class A or Class D
shares, as the case may be, of the Fund at net asset value without a sales
charge up to the dollar amount redeemed. The reinstatement privilege may be
exercised by sending a notice of exercise along with a check for the amount to
be reinstated to the Transfer Agent within 30 days after the date the request
for redemption was accepted by the Transfer Agent or the Distributor. The
reinstatement will be made at the net asset value per share next determined
after the notice of reinstatement is received and cannot exceed the amount of
the redemption proceeds. The reinstatement privilege is a one-time privilege and
may be exercised by the Class A or Class D shareholder only the first time such
shareholder makes a redemption.
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SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
designed to facilitate investment in shares of the Fund. Full details as to each
of such services, copies of the various plans described below and instructions
as to how to participate in the various services or plans, or to change options
with respect thereto, can be obtained from the Fund by calling the telephone
number on the cover page hereof or from the Distributor or Merrill Lynch.
Certain of these services are available only to U.S. investors.
Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an Investment Account and will receive statements, at least
quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of
ordinary income dividends and long-term capital gain distributions. These
statements will also show any other activity in the account since the preceding
statement. Shareholders will receive separate transaction confirmations for each
purchase or sale transaction other than automatic investment purchases and the
reinvestment of ordinary income dividends and long-term capital gains
distributions. A shareholder may make additions to his Investment Account at any
time by mailing a check directly to the Transfer Agent. Shareholders also may
maintain their accounts through Merrill Lynch. Upon the transfer of shares out
of a Merrill Lynch brokerage account, an Investment Account in the transferring
shareholder's name will be opened automatically, without charge, at the Transfer
Agent. Shareholders considering transferring their Class A or Class D shares
from Merrill Lynch to another brokerage firm or financial institution should be
aware that, if the firm to which the Class A or Class D shares are to be
transferred will not take delivery of shares of the Fund, a shareholder either
must redeem the Class A or Class D shares (paying any applicable CDSC) so that
the cash proceeds can be transferred to the account at the new firm or such
shareholder must continue to maintain an Investment Account at the Transfer
Agent for those Class A or Class D shares. Shareholders interested in
transferring their Class B or Class C shares from Merrill Lynch and who do not
wish to have an Investment Account maintained for such shares at the Transfer
Agent may request their new brokerage firm to maintain such shares in an account
registered in the name of the brokerage firm for the benefit of the shareholder
at the Transfer Agent. Shareholders considering transferring a tax-deferred
retirement account such as an IRA from Merrill Lynch to another brokerage firm
or financial institution should be aware that, if the firm to which the
retirement account is to be transferred will not take delivery of shares of the
Fund, a shareholder must either redeem the shares (paying any applicable CDSC)
so that the cash proceeds can be transferred to the account at the new firm, or
such shareholder must continue to maintain a retirement account at Merrill Lynch
for those shares.
Systematic Withdrawal Plans. A Class A or Class D shareholder may elect to
receive systematic withdrawal payments from his Investment Account in the form
of payments by check or through automatic payment by direct deposit to his bank
account on either a monthly or quarterly basis. A Class A or Class D shareholder
whose shares are held within a CMA(Registered), CBA(Registered) or Retirement
Account may elect to have shares redeemed on a monthly, bimonthly, quarterly,
semiannual or annual basis through the Systematic Redemption Program, subject to
certain conditions.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C
or Class D shares may be made to an investor's Investment Account by
pre-arranged charges of $50 or more to his regular bank account. Investors who
maintain CMA(Registered) accounts may arrange to have periodic investments made
in the Fund in their CMA(Registered) account or in certain related accounts in
amounts of $100 or more through the CMA(Registered) Automated Investment
Program.
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Automatic Reinvestment of Dividends and Distributions. All dividends and
capital gains distributions are automatically reinvested in full and fractional
shares of the Fund, without sales charge, at the net asset value per share next
determined after the close of the New York Stock Exchange on the monthly payment
date of such dividend or distribution. A shareholder may at any time, by written
notification to Merrill Lynch if the shareholder's account is maintained with
Merrill Lynch or by written notification or telephone call (1-800-MER-FUND) to
the Transfer Agent if the shareholder's account is maintained with the Transfer
Agent, elect to have subsequent dividends or capital gains distributions, or
both, paid in cash, rather than reinvested, in which event payment will be
mailed on or about the payment date. Cash payments can also be directly
deposited to the shareholder's bank account. No CDSC will be imposed on
redemptions of shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. The Automatic Investment Program is
not available to shareholders whose shares are held in a brokerage account with
Merrill Lynch other than a CMA(Registered) account.
Exchange Privilege. Shareholders of each class of shares of the Fund have
an exchange privilege with certain other MLAM-advised mutual funds. There is
currently no limitation on the number of times a shareholder may exercise the
exchange privilege. The exchange privilege may be modified or terminated in
accordance with the rules of the Securities and Exchange Commission.
Under the Merrill Lynch Select Pricing(Service Mark) System, Class A
shareholders may exchange Class A shares of the Fund for Class A shares of a
second MLAM-advised mutual fund if the shareholder holds any Class A shares of
the second fund in his acccount in which the exchange is made at the time of the
exchange or is otherwise eligible to purchase Class A shares of the second fund.
If the Class A shareholder wants to exchange Class A shares for shares of a
second MLAM-advised mutual fund, and the shareholder does not hold Class A
shares of the second fund in his account at the time of the exchange and is not
otherwise eligible to acquire Class A shares of the second fund, the shareholder
will receive Class D shares of the second fund as a result of the exchange.
Class D shares also may be exchanged for Class A shares of a second MLAM-advised
mutual fund at any time as long as, at the time of the exchange, the shareholder
holds Class A shares of the second fund in the account in which the exchange is
made or is otherwise eligible to purchase Class A shares of the second fund.
Exchanges of Class A and Class D shares are made on the basis of the
relative net asset values per Class A or Class D share, respectively, plus an
amount equal to the difference, if any, between the sales charge previously paid
on the Class A or Class D shares being exchanged and the sales charge payable at
the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchangeable with shares of the
same class of other MLAM-advised mutual funds.
Shares of the Fund which are subject to a CDSC will be exchangeable on the
basis of relative net asset value per share without the payment of any CDSC that
might otherwise be due upon redemption of the shares of the Fund. For purposes
of computing the CDSC that may be payable upon a disposition of the shares
acquired in the exchange, the holding period for the previously owned shares of
the Fund is 'tacked' to the holding period of the newly acquired shares of the
other Fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for
shares of certain MLAM-advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares are
held in a money market fund, however, will not count toward satisfaction of the
holding period requirement for reduction
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of any CDSC imposed on such shares, if any, and, with respect to Class B shares,
toward satisfaction of the Conversion Period.
Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the Fund's CDSC schedule if such schedule is higher
than the CDSC schedule relating to the new Class B shares. In addition, Class B
shares of the Fund acquired through use of the exchange privilege will be
subject to the Fund's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares of the MLAM-advised mutual fund from
which the exchange has been made.
Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes. For further information, see 'Shareholder Services--Exchange
Privilege' in the Statement of Additional Information.
The Fund's exchange privilege is modified with respect to purchases of
Class A and Class D shares under the Merrill Lynch Mutual Fund Adviser ('MFA')
program. First, the initial allocation of assets is made under the MFA program.
Then, any subsequent exchange under the MFA program of Class A or Class D shares
of a MLAM-advised mutual fund for Class A or Class D shares of the Fund will be
made solely on the basis of the relative net asset values of the shares being
exchanged. Therefore, there will not be a charge for any difference between the
sales charge previously paid on the shares of the other MLAM-advised mutual fund
and the sales charge payable on the shares of the Fund being acquired in the
exchange under the MFA program.
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 is computed
separately for Class A, Class B, Class C and Class D shares in accordance with a
formula specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any capital gains or losses on portfolio investments over
such periods) that would equate the initial amount invested to the redeemable
value of such investment at the end of each period. Average annual total return
will be computed assuming all dividends and distributions are reinvested and
taking into account all applicable recurring and nonrecurring expenses,
including the maximum sales charge in the case of Class A and Class D shares and
any CDSC that would be applicable to a complete redemption of the investment at
the end of the specified period such as in the case of Class B and Class C
shares. Dividends paid by the Fund with respect to all shares, to the extent any
dividends are paid, will be calculated in the same manner at the same time on
the same day and will be in the same amount, except that account maintenance
fees and distribution charges and any incremental transfer agency costs relating
to each class of shares will be borne exclusively by that class. The Fund will
include performance data for all classes of shares of the Fund in any
advertisement or information including performance data of the Fund.
The Fund 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 (1) the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return, and (2) the maximum applicable sales charges will not
be included with respect to annual or annualized rates of return calculations.
Aside from the impact on the performance data calculations of including or
excluding the maximum applicable sales charges, actual annual or annualized
total return data generally will be lower than
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average annual total return data since the average annual rates of return
reflect compounding; aggregate total return data generally will be higher than
average annual total return data since the aggregate rates of return reflect
compounding over longer periods of time. In advertisements directed to investors
whose purchases are subject to waiver of the CDSC in the case of Class B shares
(such as investors in certain retirement plans) or to reduced sales charges in
the case of Class A and Class D shares, performance data may take into account
the reduced, and not the maximum, sales charge or may not take into account the
CDSC and therefore may reflect greater total return since, due to the reduced
sales charges or waiver of the CDSC, a lower amount of expenses may be deducted.
See 'Purchase of Shares'. The Fund's total return may be expressed either as a
percentage or as a dollar amount in order to illustrate the effect of such total
return on a hypothetical $1,000 investment in the Fund at the beginning of each
specified period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate, and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, or to
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week, CDA
Investment Technology, Inc., Forbes Magazine, Fortune Magazine or other industry
publications. In addition, from time to time the Fund may include the Fund's
risk adjusted performance ratings assigned by Morningstar Publications, Inc. in
advertising or supplemental sales literature. As with other performance data,
performance comparisons should not be considered representative of the Fund's
relative performance for any future period.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The net investment income of the Fund is declared as dividends as of the
close of trading on the New York Stock Exchange (currently 4:15 p.m., New York
time) prior to the determination of the net asset value on that day. The net
investment income of the Fund for dividend purposes consists of interest earned
on portfolio securities, less expenses, in each case computed since the most
recent determination of the net asset value. Expenses of the Fund, including the
investment advisory fees, account maintenance fees and/or distribution fees, as
applicable, are accrued daily. Dividends of net investment income are declared
daily and reinvested monthly in the form of additional full and fractional
shares of the Fund at net asset value unless the shareholder elects to receive
such dividends in cash. Shares will accrue dividends as long as they are issued
and outstanding. Shares are issued and outstanding from the settlement date of a
purchase order to the day prior to settlement date of a redemption order.
All net realized long-or short-term capital gains, if any, are declared and
distributed to the Fund's shareholders annually. Capital gains distributions
will be reinvested automatically in shares unless the shareholder elects to
receive such distributions in cash.
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The per share dividends and distributions on each class of shares will be
reduced as a result of any account maintenance, distribution and transfer agency
fees applicable to that class. See 'Determination of Net Asset Value' below.
Certain gains or losses attributable to foreign currency 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 income 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 income dividend, reducing each
shareholder's tax basis in his Fund shares for Federal income tax purposes. See
'Additional Information--Taxes'.
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ('RICs') under the Internal Revenue Code
of 1986, as amended (the 'Code'). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the 'shareholders'). The
Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of
the Fund's net realized short-term capital gains (together referred to hereafter
as 'ordinary income dividends') are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures and options)
('capital gain dividends') are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
that was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Fund and received by its
shareholders on December 31 of the year in which such dividend was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S. withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the U.S.
withholding tax.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. If more than 50% in value of the Fund's total
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assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate shares
as taxes paid by them, and deduct such proportionate shares in computing their
taxable incomes or, alternatively, use them as foreign tax credits against their
U.S. income taxes. No deductions for foreign taxes, however, may be claimed by
noncorporate shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such shareholder.
The Fund will report annually to its shareholders the amount per share of such
withholding taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from futures contracts that are not
'regulated futures contracts' and from unlisted options will generally be
treated as ordinary income or loss. Such Code Section 988 gains or losses will
generally increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Fund would not be able to make any ordinary
income dividend distributions, and any distributions made before the losses were
realized but in the same taxable year would be recharacterized as a return of
capital to shareholders, thereby reducing the basis of each shareholder's Fund
shares, and resulting in a capital gain for any shareholder who received a
distribution greater than such shareholder's basis in Fund shares (assuming the
shares were held as a capital asset).
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding periods of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid to the Fund reduces any sales charge the shareholder would have owed upon
purchase of the new shares in the absence of the exchange privilege. Instead,
such sales charge will be treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code
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sections and the Treasury regulations promulgated thereunder. The Code and the
Treasury regulations are subject to change by legislative or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law varies
as to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of all classes of the Fund is determined
once daily as of 4:15 p.m., New York time, on each day during which the New York
Stock Exchange is open for trading. Any assets or liabilities initially
expressed in terms of non-U.S. dollar currencies are translated into U.S.
dollars at the prevailing market rates as quoted by one or more banks or dealers
on the day of valuation. The net asset value is computed by dividing the market
value of the securities held by the Fund plus any cash or other assets
(including interest and dividends accrued but not yet received) minus all
liabilities (including accrued expenses) by the total number of shares
outstanding at such time. Expenses, including the advisory fees payable to the
Investment Adviser and any account maintenance and/or distribution fees payable
to the Distributor, are accrued daily. The Fund employs Merrill Lynch Securities
Pricing Service ('MLSPS'), an affiliate of the Investment Adviser, to provide
certain securities prices for the Fund. The Fund's arrangement with MLSPS was
not effective until after the close of the Fund's most recently completed fiscal
year. The per share net asset value of Class A shares will generally be higher
than the per share net asset value of shares of the other classes, reflecting
the daily expense accruals of the account maintenance and higher transfer agency
fees applicable with respect to the Class B, Class C and Class D shares;
moreover, the per share net asset value of the Class D shares generally will be
higher than the per share net asset value of Class B and Class C shares,
reflecting the daily expense accruals of the distribution fees applicable with
respect to Class B and Class C shares. Since the distribution fees borne by the
Class C shares are higher than the distribution fees borne by the Class B
shares, the per share net asset value of the Class B shares generally will be
higher than the per share net asset value of the Class C shares. It is expected,
however, that the per share net asset value of the classes will tend to converge
immediately after the payment of dividends or distributions which will differ by
approximately the amount of the expense accrual differentials between the
classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the time
of valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last bid price.
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ORGANIZATION OF THE FUND
The Fund was incorporated under Maryland law on June 10, 1993. It has an
authorized capital of 400,000,000 shares of common stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and Class
D common stock, each of which consists of 100,000,000 shares. Shares of Class A,
Class B, Class C and Class D common stock represent an interest in the same
assets of the Fund and are identical in all respects except that Class B, Class
C and Class D shares bear certain expenses related to the account maintenance
fee relating to such shares and Class B and Class C shares bear certain expenses
related to the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to account maintenance and distribution
expenditures, as applicable. See 'Purchase of Shares'. The Fund has received an
order from the Commission permitting the issuance and sale of multiple classes
of common stock. The Directors of the Fund may classify and reclassify the
shares of the Fund into additional classes of common stock at a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter on which shareholders are entitled to vote. The Fund does not
intend to hold meetings of shareholders in any year in which the Investment
Company Act does not require shareholders to act upon any of the following
matters: (i) election of directors; (ii) approval of an investment advisory
agreement; (iii) approval of a distribution agreement; and (iv) ratification of
selection of independent accountants. Also, the by-laws of the Fund require that
a special meeting of stockholders be held upon the written request of
shareholders of the Fund as required by Maryland corporate law. Voting rights
for Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive rights. Shares have the conversion rights
described in this Prospectus. Each share of common stock is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund upon liquidation or dissolution after satisfaction of
outstanding liabilities, except that, as noted above, the Class B, Class C and
Class D shares bear certain additional expenses.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address,
tax identification number and Merrill Lynch and/or mutual fund account numbers.
If you have any questions regarding this, please call your Merrill Lynch
financial consultant or Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
------------------------
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MERRILL LYNCH AMERICAS INCOME FUND, INC.-- AUTHORIZATION FORM (PART 1)
1. SHARE PURCHASE APPLICATION
I, being of legal age, wish to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Americas Income Fund, Inc. and establish an Investment Account
as described in the Prospectus. In the event that I am not eligible to purchase
Class A shares, I understand that Class D shares will be purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data Services,
Inc., as an initial investment (minimum $1,000). I understand that this
purchase will be executed at the applicable offering price next to be
determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the right of accumulation as outlined in the Statement of
Additional Information: (Please list all funds. Use a separate sheet of paper
if necessary.)
1...................................... 4......................................
2...................................... 5......................................
3...................................... 6......................................
Name ..........................................................................
First Name Initial Last Name
Name of Co-Owner (if any) .....................................................
First Name Initial Last Name
Address ..................... Date ............................................
.............................. Name and Address of Employer ...................
(Zip Code)
Occupation .................. .................................................
............................. .................................................
Signature of Owner Signature of Co-Owner (if any)
(In the case of co-owner, a joint tenancy with right of survivorship will be
presumed unless otherwise specified.)
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2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
Ordinary Income Long-Term Capital Gains
Dividends
Select / / Reinvest Select / / Reinvest
One: / / Cash One: / / Cash
If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU: / / Check or
/ / Direct Deposit to bank account
IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:
I hereby authorize payment of dividend and capital gain distributions by direct
deposit to my bank account and, if necessary, debit entries and adjustments for
any credit entries made to my account in accordance with the terms I have
selected on the Merrill Lynch Authorization Form.
SPECIFY TYPE OF ACCOUNT (CHECK ONE) / / checking / / savings
Name on your Account ..........................................................
Bank Name .....................................................................
Bank Number ........................... Account Number ......................
Bank Address ..................................................................
I agree that this authorization will remain in effect until I provide written
notification to Financial Data Services, Inc. amending or terminating this
service.
Signature of Depositor ........................................................
Signature of Depositor ............................. Date ....................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED 'VOID' OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS
APPLICATION.
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3. SOCIAL SECURITY NUMBER OR TAXPAYER INDENTIFICATION NUMBER
/ / / / / / / / / / / /
Social Security Number or Taxpayer Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is my
correct Social Security Number or Taxpayer Identification Number and (2) that I
am not subject to backup withholding (as discussed in the Prospectus under
'Additional Information--Taxes') either because I have not been notified that I
am subject thereto as a result of a failure to report all interest or dividends,
or the Internal Revenue Service ('IRS') has notified me that I am no longer
subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING AND IF
YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS BEEN
TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS CERTIFICATION TO
OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
....................................... ......................................
Signature of Owner Signature of Co-Owner (if any)
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4. LETTER OF INTENTION--CLASS A AND D SHARES ONLY (SEE TERMS AND CONDITIONS IN
THE STATEMENT OF ADDITIONAL INFORMATION)
Dear Sir/Madam:
.............................. , 19 ......
Date of initial purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Merrill Lynch Americas Income Fund, Inc. or any other investment
company with an initial sales charge or deferred sales charge for which Merrill
Lynch Funds Distributor, Inc. acts as distributor over the next 13 month period
which will equal or exceed:
/ / $25,000 / / $50,000 / / $100,000 / / $250,000 / / $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Merrill Lynch Americas Income
Fund, Inc. Prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc., my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Americas Income Fund, Inc. held
as security.
By..................................... ......................................
Signature of Owner Signature of Co-Owner
(If registered in joint names,
both must sign)
In making purchases under this letter, the following are the related accounts
on which reduced offering prices are to apply:
(1) Name............................... (2) Name...............................
Account Number......................... Account Number.........................
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5. FOR DEALER ONLY
Branch Office, Address, Stamp.
INDICIA
This form when completed should be mailed to:
Merrill Lynch Americas Income Fund, Inc.
c/o Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
P.O. Box 45289
Jacksonville, Florida 32232-5289
We hereby authorize Merrill Lynch Funds Distributor, Inc. to act as our agent in
connection with transactions under this authorization form and agree to notify
the Distributor of any purchases made under a Letter of Intention or Systematic
Withdrawal Plan. We guarantee the Shareholder's signature.
...............................................................................
Dealer Name and Address
By .............................................................................
Authorized Signature of Dealer
/ / / / / / / / / .........................
Branch-Code F/C No. F/C Last Name
/ / / / / / / / /
Dealer's Customer Account No.
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MERRILL LYNCH AMERICAS INCOME FUND, INC. FORM (PART 2)
- --------------------------------------------------------------------------------
Note: This form is required to apply for the Systematic Withdrawal or Automatic
Investment Plans only.
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1. ACCOUNT REGISTRATION
Name of Owner ................................. / / / / / / / / / / / /
Social Security No. or
Name of Co-Owner (if any) ..................... Taxpayer Identification No.
Address .......................................
................................................ Account Number ................
(if existing account)
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2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
MINIMUM REQUIREMENTS: $10,000 for monthly disbursements, $5,000 for
quarterly, of / / Class A or / / Class D shares in Merrill Lynch Americas Income
Fund, Inc. at cost or current offering price. Withdrawals to be made either
(check one) / / Monthly on the 24th day of each month, or / / Quarterly on the
24th day of March, June, September and December. If the 24th falls on a weekend
or holiday, the next succeeding business day will be utilized. Begin systematic
withdrawal on ............. (month), or as soon as possible thereafter.
SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE):
/ / $ ......... or / / ......... % of the current value of / / Class A or
/ / Class D shares in the account.
SPECIFY WITHDRAWAL METHOD: / / check or / / direct deposit to bank account
(check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(a) I hereby authorize payment by check
/ / as indicated in Item 1.
/ / to the order of ........................................................
Mail to (check one)
/ / the address indicated in Item 1.
/ / Name (please print) ......................................................
Address .......................................................................
...........................................................................
Signature of Owner ................................ Date .....................
Signature of Co-Owner (if any) .................................................
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO MY BANK ACCOUNT AND, IF
NECESSARY, DEBIT ENTRIES AND ADJUSTMENTS FOR ANY CREDIT ENTRIES MADE TO MY
ACCOUNT. I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I PROVIDE
WRITTEN NOTIFICATION TO FINANCIAL DATA SERVICES, INC. AMENDING OR TERMINATING
THIS SERVICE.
Specify type of account (check one): / / checking / / savings
Name on your account ..........................................................
Bank Name ......................................................................
Bank Number ........................... Account Number ......................
Bank Address ..................................................................
...............................................................................
Signature of Depositor ................................ Date .................
Signature of Depositor ........................................................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED 'VOID' OR
A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHALL ACCOMPANY THIS APPLICATION.
45
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3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw an automated
clearing house ('ACH') debit on my checking account as described below each
month to purchase: (choose one)
/ / Class A shares / / Class B shares / / Class C shares / / Class D shares
of Merrill Lynch Americas Income Fund, Inc. subject to the
terms set forth below. In the event that I am not eligible to purchase Class A
shares, I understand that Class D shares will be purchased.
FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw an ACH debit each month on my bank account for
investment in Merrill Lynch Americas Income Fund, Inc. as
indicated below:
Amount of each check or ACH debit $ ...........................................
Account Number ................................................................
Please date and invest ACH debits on the 20th of each month beginning
............................................. or as soon thereafter as possible.
(month)
I agree that you are preparing these ACH debits voluntarily at my request and
that you shall not be liable for any loss arising from any delay in preparing or
failure to prepare any such debit. If I change banks or desire to terminate or
suspend this program, I agree to notify you promptly in writing. I hereby
authorize you to take any action to correct erroneous ACH debits of my bank
account or purchases of fund shares including liquidating shares of the Fund and
credit my bank account. I further agree that if a debit is not honored upon
presentation, Financial Data Services, Inc. is authorized to discontinue
immediately the Automatic Investment Plan and to liquidate sufficient shares
held in my account to offset the purchase made with the dishonored debit.
.................... ..........................................................
Date Signature of Depositor
..........................................................
Signature of Depositor
(If joint account, both must sign)
AUTHORIZATION TO
HONOR ACH DEBITS
DRAWN BY FINANCIAL DATA SERVICES, INC.
To ....................................................................... Bank
(Investor's Bank)
Bank Address ..................................................................
City .................................. State .......... Zip Code .............
As a convenience to me, I hereby request and authorize you to pay and charge to
my account ACH debits drawn on my account by and payable to Financial Data
Services, Inc., I agree that your rights in respect to each such debit shall be
the same as if it were a check drawn on you and signed personally by me. This
authority is to remain in effect until revoked by me in writing. Until you
receive such notice, you shall be fully protected in honoring any such debit. I
further agree that if any such debit be dishonored, whether with or without
cause and whether intentionally or inadvertently, you shall be under no
liability.
.................... ..........................................................
Date Signature of Depositor
.................... ..........................................................
Bank Account Number Signature of Depositor
(If joint account, both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED
'VOID' SHOULD ACCOMPANY THIS APPLICATION.
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APPENDIX
VARIOUS PORTFOLIO STRATEGIES
The Fund is authorized to engage in various portfolio hedging strategies.
These strategies are described in more detail below.
Interest Rate Transactions. In order to hedge the value of the Fund's
portfolio against interest rate fluctuations or to enhance the Fund's income,
the Fund may enter into various transactions, such as interest rate swaps and
the purchase or sale of interest rate caps and floors. The Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. The Fund
intends to use these transactions primarily as a hedge and not as a speculative
investment. However, the Fund may also invest in interest rate swaps to enhance
income or to increase the Fund's yield during periods of steep interest rate
yield curves (i.e., wide differences between short-term and long-term interest
rates).
The purchase of an interest rate cap entitles the purchaser, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor.
In an interest rate swap, the Fund exchanges with another party their
respective commitments to pay or receive interest, e.g., an exchange of fixed
rate payments for floating rate payments. For example, if the Fund holds a
mortgage-backed security with an interest rate that is reset only once each
year, it may swap the right to receive interest at this fixed rate for the right
to receive interest at a rate that is reset every week. This would enable the
Fund to offset a decline in the value of the mortgage-backed security due to
rising interest rates but would also limit its ability to benefit from falling
interest rates. Conversely, if the Fund holds a mortgage-backed security with an
interest rate that is reset every week and it would like to lock in what it
believes to be a high interest rate for one year, it may swap the right to
receive interest at this variable weekly rate for the right to receive interest
at a rate that is fixed for one year. Such a swap would protect the Fund from a
reduction in yield due to falling interest rates and may permit the Fund to
enhance its income through the positive differential between one week and one
year interest rates, but would preclude it from taking full advantage of rising
interest rates.
Typically the parties with which the Fund will enter into interest rate
transactions will be broker-dealers and other financial institutions. The Fund
will not enter into any interest rate swap, cap or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other part thereto is
rated in one of the two highest rating categories of at least one nationally
recognized statistical rating organization at the time of entering into such
transaction or whose creditworthiness is believed by the Investment Adviser to
be equivalent to such rating. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid in comparison with other similar
instruments traded in the interbank market. Caps and floors, however, are less
liquid than swaps. Certain Federal income tax requirements may limit the Fund's
ability to engage in certain interest rate transactions. Gains from
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transactions in interest rate swaps distributed to shareholders will be taxable
as ordinary income or, in certain circumstances, as long-term capital gains to
shareholders.
Call Options on Portfolio Securities. The Fund may purchase call options
on any of the types of securities in which it may invest. A purchased call
option gives the Fund the right to buy, and obligates the seller to sell, the
underlying security at the exercise price at any time during the option period.
The Fund also is authorized to write (i.e., sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option where the Fund, in return for a premium, gives another party a right
to buy specified securities owned by the Fund at a specified future date and
price set at the time of the contract. The principal reason for writing call
options is to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the securities alone. By writing covered call
options, the Fund gives up the opportunity while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. In addition, the Fund's ability to sell the underlying security
will be limited while the option is in effect unless the Fund effects a closing
purchase transaction. A closing purchase transaction cancels out the Fund's
position as the writer of an option by means of an offsetting purchase of an
identical option prior to the expiration of the option it has written. Covered
call options also serve as a partial hedge against the price of the underlying
security declining. The Fund may also purchase and sell call options on indices.
Index options are similar to options on securities except that, rather than
taking or making delivery of securities underlying the option at a specified
price upon exercise, an index option gives the holder the right to receive cash
upon exercise of the option if the level of the index upon which the option is
based is greater than the exercise price of the option. The Fund will not
purchase options on securities if as a result of such purchase, the aggregate
cost of all outstanding options on securities held by the Fund would exceed 5%
of the market value of the Fund's total assets.
Put Options on Portfolio Securities. The Fund is authorized to purchase
put options to hedge against a decline in the value of its securities. By buying
a put option, the Fund has a right to sell the underlying security at the stated
exercise price, thus limiting the Fund's risk of loss through a decline in the
market value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
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. The
Fund also has authority to write (i.e., sell) put options on the types of
securities which may be held by the Fund, provided that such put options are
covered, meaning that such options are secured by segregated, high grade liquid
debt securities. In certain circumstances, the Fund may purchase call options on
securities held in its portfolio on which it has written call options or which
it intends to purchase. The Fund will receive a premium for writing a put
option, which increases the Fund's return. The Fund will not sell puts if, as a
result, more than 50% of the Fund's assets would be required to cover its
potential obligations under its hedging and other investment transactions. The
Fund may purchase and sell put options on indices. Index options are similar to
options on securities except that, rather than taking or making delivery of
securities underlying the option at a specified price upon exercise, an index
option gives the holder the right to receive cash upon exercise of the option if
the level of the index upon which the option is based is less than the exercise
price of the option.
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Financial Futures and Options Thereon. The Fund is authorized to engage in
transactions in financial futures contracts ('futures contracts') and related
options on such futures contracts as a hedge against adverse changes in the
market value of its portfolio securities and interest rates. A futures contract
is an agreement between two parties which obligates the purchaser of the futures
contract to buy and the seller of a futures contract to sell a security for a
set price on a future date or, in the case of an index futures contract, to make
and accept a cash settlement based upon the difference in value of the index
between the time the contract was entered into and the time of its settlement. 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
'contract markets' by the Commodity Futures Trading Commission ('CFTC').
Transactions by the Fund in futures contracts and financial futures are subject
to limitations as described below under 'Restrictions on the Use of Futures
Transactions'.
The Fund may sell financial futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market values of securities which may be held by the Fund will fall,
thus reducing the net asset value of the Fund. However, as interest rates rise,
the value of the Fund's short position in the futures contract will also tend to
increase, thus offsetting all or a portion of the depreciation in the market
value of the Fund's investments which are being hedged. While the Fund will
incur commission expenses in selling and closing out futures positions, these
commissions are generally less than the transaction expenses which the Fund
would have incurred had the Fund sold portfolio securities in order to reduce
its exposure to increases in interest rates. The Fund also may purchase
financial futures contracts in anticipation of a decline in interest rates when
it is not fully invested in a particular market in which it intends to make
investments to gain market exposure that may in part or entirely offset an
increase in the cost of securities it intends to purchase. It is anticipated
that, in a substantial majority of these transactions, the Fund will purchase
securities upon termination of the futures contract.
The Fund also has the authority to purchase and write call and put options
on futures contracts in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the Fund
enters into futures transactions. The Fund may purchase put options or write
call options on futures contracts rather than selling the underlying futures
contract in anticipation of a decrease in the market value of securities or an
increase in interest rates. Similarly, the Fund may purchase call options, or
write put options on futures contracts, as a substitute for the purchase of such
futures to hedge against the increased cost resulting from an increase in the
market value or a decline in interest rates of securities which the Fund intends
to purchase.
The Fund may engage in options and futures transactions on exchanges and
options in the over-the-counter markets ('OTC options'). In general,
exchange-traded contracts are third-party contracts (i.e., performance of the
parties' obligation 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.
Foreign Currency Hedging. The Fund has authority to deal in forward
foreign exchange among currencies of the different countries in which it will
invest and multinational currency units as a hedge against possible variations
in the foreign exchange rates among these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date (up to one year) and price set at the
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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. In this situation, the Fund also may, for example, enter
into a forward contract to sell or purchase a different foreign currency for a
fixed U.S. dollar amount where it is believed that the U.S. dollar value of the
currency to be sold or bought pursuant to the forward contract will fall or
rise, as the case may be, whenever there is a decline or increase, respectively,
in the U.S. dollar value of the currency in which portfolio securities of the
Fund are denominated (this practice being referred to as a 'cross-hedge').
The Fund will not speculate in forward foreign exchange. Hedging against a
decline in the value of a currency does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for the
Fund to hedge against a devaluation that is so generally anticipated that the
Fund is not able to contract to sell the currency at a price above the
devaluation level it anticipates.
The Fund is also authorized to 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. Such transactions may be effected with respect to hedges on
non-U.S. denominated securities owned by the Fund, sold by the Fund but not yet
delivered, or committed or anticipated to be purchased by the Fund.
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 of
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.
Restrictions on the Use of Futures Transactions. Regulations of the CFTC
applicable to the Fund provide that the futures trading activities described
herein will not result in the Fund being deemed a 'commodity pool' under such
regulations if the Fund adheres to certain restrictions. In particular, the Fund
may purchase and sell futures contracts and options thereon (i) for bona fide
hedging purposes, and (ii) for non-hedging purposes, if the aggregate initial
margin and premiums required to establish positions in such contracts and
options does not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any such
contracts and options.
When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, an amount of cash equivalents will be deposited
in a segregated account with the Fund's custodian so that the amount so
segregated, plus the amount of 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.
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An order has been obtained from the Securities and Exchange Commission
which exempts the Fund from certain provisions of the Investment Company Act in
connection with transactions involving futures contracts and options thereon.
Restrictions on OTC Options. The Fund will engage in OTC options only with
member banks of the Federal Reserve System and primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an entity
having capital of at least $50 million.
Risk Factors in Interest Rate Transactions and Options, Futures and
Currency Transactions. The use of interest rate transactions is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. Interest
rate transactions involve the risk of an imperfect correlation between the index
used in the hedging transaction and that pertaining to the securities which are
the subject of such transaction. If the Investment Adviser is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used. In addition, interest
rate transactions that may be entered into by the Fund do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the
security underlying an interest rate swap is prepaid and the Fund continues to
be obligated to make payments to the other party to the swap, the Fund would
have to make such payments from another source. If the other party to an
interest rate swap defaults, the Fund's risk of loss consists of the net amount
of interest payments that the Fund contractually is entitled to receive. In the
case of a purchase by the Fund of an interest rate cap or floor, the amount of
loss is limited to the fee paid. Since interest rate transactions are
individually negotiated, the Investment Adviser expects to achieve an acceptable
degree of correlation between the Fund's rights to receive interest on
securities and its rights and obligations to receive and pay interest pursuant
to interest rate swaps. 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 prices of the securities,
interest rates or currencies which are the subject of the hedge. If the price of
the options or futures moves more or less than the price of the subject of the
hedge, 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. This risk
particularly applies to the Fund's use of futures and options thereon since it
will generally use such instruments as a so-called 'cross-hedge', which means
that the instrument that is the subject of the futures contract is different
from the instrument being hedged by the contract.
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 intends to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a liquid
secondary market for such options or futures. However, there can be no assurance
that a liquid secondary market will exist at any specific time. Thus, it may not
be possible to close an options or futures position. The inability to close
options and futures positions also could have an adverse impact on the Fund's
ability to effectively hedge its portfolio. There is also the risk of loss by
the Fund of margin deposits or collateral in the event of bankruptcy of a broker
with whom the Fund has an open position in an option, a futures contract or an
option related to a futures contract.
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INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Funds Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE INVESTMENT ADVISER 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
Merrill Lynch Select Pricing(Service Mark)
System.......................................... 3
Financial Highlights.............................. 7
Investment Objective and Policies................. 8
Special Considerations and Risk Factors......... 10
Investments in Mortgage-Backed and Asset-Backed
Securities................................... 13
Other Investment Practices...................... 16
Investment Restrictions......................... 20
Management of the Fund............................ 22
Board of Directors.............................. 22
Advisory and Management Arrangements............ 22
Transfer Agency Services........................ 23
Purchase of Shares................................ 24
Initial Sales Charge Alternatives--
Class A and Class D Shares................... 26
Deferred Sales Charge Alternatives--
Class B and Class C Shares................... 28
Distribution Plans.............................. 31
Limitations on the Payment of Deferred Sales
Charges...................................... 33
Redemption of Shares.............................. 33
Redemption...................................... 33
Repurchase...................................... 34
Reinstatement Privilege--Class A and Class D
Shares....................................... 34
Shareholder Services.............................. 35
Performance Data.................................. 37
Additional Information............................ 38
Dividends and Distributions..................... 38
Taxes........................................... 39
Determination of Net Asset Value................ 41
Organization of the Fund........................ 42
Shareholder Reports............................. 42
Shareholder Inquiries........................... 42
Authorization Form................................ 43
Appendix--Various Portfolio Strategies............ A-1
</TABLE>
Code # 16802-1094
[LOGO]
MERRILL LYNCH
AMERICAS INCOME
FUND, INC.
[ART]
Prospectus
October 21, 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH AMERICAS INCOME FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 - PHONE NO. (609) 282-2800
----------------------
Merrill Lynch Americas Income Fund, Inc. (the 'Fund') is a non-diversified,
open-end management investment company seeking a high level of current income,
consistent with prudent investment risk, by investing primarily in debt
securities denominated in a currency of a country located in the Western
Hemisphere (i.e., North and South America and the surrounding waters). The Fund
may at times utilize certain investment techniques, including options and
futures, to increase investment return or to hedge all or a portion of its
portfolio against interest rate, market and currency risks. In addition, the
Fund is authorized to borrow funds and to utilize leverage in amounts not to
exceed 33 1/3% of its total assets. There can be no assurance that the Fund's
investment objective will be achieved.
Pursuant to the Merrill Lynch Select Pricing(Service Mark) System, the Fund
offers four classes of shares each with a different combination of sales
charges, ongoing fees and other features. The Merrill Lynch Select
Pricing(Service Mark) System permits an investor to choose the method of
purchasing shares that the investor believes is most beneficial given the amount
of the purchase, the length of time the investor expects to hold the shares and
other relevant circumstances.
----------------------
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the prospectus of the Fund, dated October
21, 1994 (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 ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
----------------------
The date of this Statement of Additional Information is October 21, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek a high level of current
income, consistent with prudent investment risk, by investing primarily in debt
securities denominated in a currency of a country located in the Western
Hemisphere (i.e., North and South America and the surrounding waters). Reference
is made to 'Investment Objective and Policies' in the Prospectus for a
discussion of the investment objective and policies of the Fund.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, Merrill Lynch Asset Management, L.P., doing business as
Merrill Lynch Asset Management (the 'Investment Adviser'), will effect portfolio
transactions without regard to holding period if, in its judgment, such
transactions are advisable in light of a change in circumstances of a particular
company or within a particular industry or in general market, economic or
financial conditions. As a result of the investment policies described in the
Prospectus, the Fund's portfolio turnover rate may be higher than that of other
investment companies. Accordingly, while the Fund anticipates that its annual
portfolio turnover rate should not exceed 100% under normal conditions, it is
impossible to predict portfolio turnover rates. The portfolio turnover rate is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less and options, futures
and currency transactions) by the monthly average value of the securities in the
portfolio during the year. For the fiscal period August 27, 1993 (commencement
of operations) to December 31, 1993, the Fund's portfolio turnover rate was
75.18%. The Fund is subject to the Federal income tax requirement that less than
30% of the Fund's gross income must be derived from gains from the sale or other
disposition of securities held for less than three months.
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such as
the Fund. If such restrictions should be reinstituted, it might become necessary
for the Fund to invest all or substantially all of its assets in U.S.
securities. In such event, the Fund would review its investment objective and
investment policies to determine whether changes are appropriate. Any changes in
the investment objective or fundamental policies set forth under 'Investment
Restrictions' below would require the approval of the holders of a majority of
the Fund's outstanding voting securities.
The Fund's ability and decisions to purchase or sell portfolio securities
may be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a daily
basis on each day the Fund determines its net asset value in U.S. dollars, the
Fund intends to manage its portfolio so as to give reasonable assurance that it
will be able to obtain U.S. dollars to the extent necessary to meet anticipated
redemptions. Under present conditions, the Investment Adviser does not believe
that these considerations will have any significant effect on its portfolio
strategy, although there can be no assurance in this regard.
PORTFOLIO STRATEGIES INVOLVING INTEREST RATE TRANSACTIONS, OPTIONS AND FUTURES
Reference is made to the discussion concerning various portfolio strategies
of the Fund under the caption 'Investment Objective and Policies--Other
Investment Practices--Portfolio Strategies Involving Interest Rate Transactions,
Options, Futures and Currency Transactions' in the Prospectus and to Appendix A
thereto.
The Fund may engage in various portfolio strategies to seek to increase its
return through the use of options on portfolio securities and to hedge its
portfolio against market, interest rate and currency movements. The Fund
2
<PAGE>
has authority to engage in interest rate transactions in order to hedge against
interest rate movements, purchase call and put options on securities, write
(i.e., sell) covered call options on its portfolio securities, and engage in
hedging transactions in financial futures and related options on such futures.
The Fund may also deal in forward foreign exchange transactions and foreign
currency options and futures and related options on such futures.
Although certain risks are involved in interest rate, options and futures
transactions (as discussed below), the Investment Adviser believes that, because
the Fund will (i) write only covered options on portfolio securities and (ii)
engage in other transactions primarily for hedging purposes, the interest rate,
options and futures portfolio strategies of the Fund will not subject the Fund
to the risks frequently associated with the speculative use of such
transactions.
The following additional information relates to the instruments the Fund
may utilize with respect to its portfolio strategies involving interest rate
transactions, options and futures.
Interest Rate Hedging Transactions. The Fund usually will enter into
interest rate swap transactions on a net basis, i.e., the two payment streams
are netted out, with the Fund receiving or paying, as the case may be, only the
net amount of the two payments. Inasmuch as these transactions are entered into
for good faith hedging purposes, the Investment Adviser believes that such
obligations do not constitute senior securities and, accordingly, will not treat
them as being subject to its borrowing restrictions. The net amount of the
excess, if any, of the Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis, and an amount of cash
or high grade liquid debt securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account by
the Fund's custodian. If the interest rate swap transaction is entered into on
other than a net basis, the full amount of the Fund's obligations will be
accrued on a daily basis, and the full amount of the Fund's obligations will be
maintained in a segregated account by the Fund's custodian.
Writing Covered Options. 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.
Put Options on Portfolio Securities. The Fund writes only covered put
options which means that so long as the Fund is obligated as the writer of the
option it will, through its custodian, have deposited and maintained cash, cash
equivalents, U.S. Government securities or other high grade liquid debt with the
Fund's custodian with a value equal to or greater than the exercise price of the
underlying securities. By writing a put, the Fund will be obligated to purchase
the underlying security at a price that may be higher than the market value of
that security at the time of exercise for as long as the option is outstanding.
The Fund may engage in closing transactions in order to terminate put options
that it has written.
Option Markets. The options in which the Fund invests may be options
issued by The Options Clearing Corporation (the 'Clearing Corporation') which
are currently traded on the Chicago Board Options Exchange, American Stock
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange, New York Stock
Exchange or Midwest Stock Exchange. An option position may be closed out only on
an exchange which provides a secondary market for an option of the same series.
If a secondary market does not exist, it might not be possible to effect closing
transactions in particular options, with the result, in the case of a covered
call option, that the Fund will not be able to sell the underlying security
until the option expires or it delivers the underlying security
3
<PAGE>
upon exercise. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or the Clearing Corporation may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Clearing Corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
The Fund may also enter into OTC options, which are two-party contracts
with prices and terms negotiated between the buyer and seller. The staff of the
Securities and Exchange Commission (the 'Commission') has taken the position
that OTC options and the assets used as cover for written OTC options are
illiquid securities. However, if the OTC option is sold by the Fund to a primary
U.S. Government securities dealer recognized by the Federal Reserve Bank of New
York and the Fund has the unconditional contractual right to repurchase such OTC
option from the dealer at a predetermined price, then the Fund will treat as
illiquid such amount of the underlying securities as is equal to the repurchase
price less the amount by which the option is 'in-the-money' (i.e., current
market value of the underlying security minus the option's strike price). The
repurchase price with the primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option, plus the
amount by which the option is 'in-the-money'. This policy is not a fundamental
policy of the Fund and may be amended by the Directors of the Fund without the
approval of the Fund's shareholders. However, the Fund will not change or modify
this policy prior to the change or modification by the Commission staff of its
position.
Financial Futures and Options Thereon. 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 Commission exempting it from the
provisions of Section 17(f) of 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.
Foreign Currency Hedging. Generally, the foreign exchange transactions of
the Fund will be conducted on a spot (i.e., cash basis), at the spot rate for
purchasing or selling currency prevailing in the foreign exchange
4
<PAGE>
market. The Fund has authority to deal in forward foreign exchange among
currencies of the different countries. This is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. The Fund's dealings in forward
foreign exchange will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward foreign currency with respect to specific receivables or payables of
the Fund accruing in connection with the purchase and sale of its portfolio
securities, the sale and redemption of shares of the Fund or the payment of
dividends and distributions by the Fund. Position hedging is the sale of forward
foreign currency with respect to portfolio security positions denominated or
quoted in such foreign currency. The Fund will not speculate in forward foreign
exchange. The Fund may not position hedge with respect to the currency of a
particular country to an extent greater than the aggregate market value (at the
time of making such sale) of the securities held in its portfolio denominated or
quoted in that particular foreign currency. If the Fund enters into a position
hedging transaction, its custodian bank will place cash or liquid securities in
a separate account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of such forward contract. If the
value of the securities placed in the separate account declines, additional cash
or securities will be placed in the account so that the value of the account
will equal the amount of the Fund's commitment with respect to such contracts.
The Fund will enter into such transactions only to the extent, if any, deemed
appropriate by the Investment Adviser. The Fund will not enter into a forward
contract with a term of more than one year.
The Fund is also authorized to purchase or sell listed or over-the-counter
('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. Such transactions may be effected with respect to
hedges on non-U.S. dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased by the
Fund. As an illustration, the Fund may use such techniques to hedge the stated
value in U.S. dollars of an investment in a Canadian dollar denominated
security. In such circumstances, for example, the Fund may purchase a foreign
currency put option enabling it to sell a specified amount of Canadian dollars
for U.S. dollars at a specified price by a future date. To the extent the hedge
is successful, a loss in the value of the Canadian dollar relative to the U.S.
dollar will tend to be offset by an increase in the value of the put option. To
offset in whole or 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 Canadian dollars for U.S. 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 Canadian dollar to the U.S. 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.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. The cost to the Fund of
engaging in foreign currency transactions varies with such factors as the
currencies involved, the length of the contract period and the market conditions
then prevailing. Since transactions in foreign currency exchange usually are
conducted on a principal basis, no fees or commissions are involved.
Risk Factors in Options and Futures Transactions. 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
5
<PAGE>
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
securities 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
hedge effectively its portfolio.
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 security (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.
CURRENT 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 of 1940, as amended (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.
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 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 10% of the Fund's total assets, taken at market
value, would be invested in such securities.
3. Purchase or sell real estate; provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein.
4. Purchase or sell commodities or commodity contracts, except that
the Fund may engage in transactions involving commodities in order to hedge
against interest rate, market or currency risks or to increase investment
return provided that such transactions will not result in the Fund having
to register as a 'commodity pool' under applicable regulations of the
Commodity Futures Trading Commission.
5. Borrow money except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), and (ii) the Fund may borrow
up to an additional 5% of its total assets for temporary purposes. The Fund
may not pledge its assets other than to secure such borrowings or in
connection with hedging transactions, short sales, when-issued and forward
commitment transactions and similar investment strategies. The Fund's
obligations under interest rate swaps are not treated as senior securities.
6
<PAGE>
6. Make loans to other persons (except as provided in (7) below);
provided that for purposes of this restriction the acquisition of bonds,
debentures, or other corporate debt securities and investment in government
securities, short-term commercial paper, certificates of deposit, bankers'
acceptances and repurchase agreements shall not be deemed to be the making
of a loan.
7. Lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value.
8. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which are not otherwise readily
marketable if, regarding all such securities, more than 15% of its total
assets, taken at market value, would be invested in such securities.
9. Underwrite securities of other issuers except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended,
in selling portfolio securities.
10. Purchase or sell interests in oil, gas or other mineral
exploration or development programs.
11. Invest more than 25% of its total assets (taken at market value at
the time of each investment) in securities of issuers in a single industry
(other than debt securities issued or guaranteed by a Western Hemisphere
governmental entity), except that, under normal circumstances, the Fund
will invest more than 25% of its total assets in the securities of issuers
in the financial services industry.
The Board of Directors has established the policy that the Fund will not
purchase or retain the securities of any issuer if those individual officers and
Directors of the Fund, the officers and general partner of the Investment
Adviser, the directors of such general partner or the directors and officers of
the Distributor 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. Portfolio securities of the Fund may not be purchased from, sold or
loaned to the Investment Adviser or its affiliates or any of their directors,
general partners, officers or employees, acting as principal.
The Fund has adopted a policy pursuant to which it will not invest in
warrants if, at the time of acquisition, its investment 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 Exchanges.
For purposes of this policy, warrants acquired by the Fund in units or attached
to securities may be deemed to be without value. The Fund also has adopted a
policy pursuant to which it will not invest in real estate limited partnerships
or in oil, gas or mineral leases. In order to comply with certain state
statutes, the Fund will not, as a matter of operating policy, mortgage, pledge
or hypothecate its portfolio securities to the extent that at any time the
percentage of the value of pledged securities plus the maximum sales charge will
exceed 10% of the value of the Fund's shares at the maximum offering price. The
Fund also has adopted policies pursuant to which it will not (i) purchase
securities of any issuer if, as to 75% of the assets of the Fund at the time of
the purchase, more than 10% of the voting securities of any issuer would be held
by the Fund, (ii) invest more than 15% of the Fund's total assets in the
securities of issuers which together with any predecessors have a record of less
than three years' continuous operation, and (iii) borrow, pledge, mortgage or
hypothecate in excess of 33 1/3% of the Fund's total assets. Under the laws of
certain states, the Fund presently is limited with respect to the investments
described in investment restriction (8) above to 10% of its total assets. The
policies set forth in this paragraph may be amended without the approval of the
Fund's shareholders.
The staff of the Commission has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities. Therefore, the Fund has adopted an investment policy pursuant to
7
<PAGE>
which it will not purchase or sell OTC options if, as a result of any such
transaction, the sum of the market value of OTC options currently outstanding
which are held by the Fund, the market value of the underlying securities
covered by OTC call options currently outstanding which were sold by the Fund
and margin deposits on the Fund's existing OTC options on futures contracts
exceeds 15% of the total assets of the Fund, taken at market value, together
with all other assets of the Fund which are illiquid or are not otherwise
readily marketable. (Under the laws of certain states, the Fund presently is
limited with respect to such investments to 10% of its total assets.) However,
if the OTC option is sold by the Fund to a primary U.S. Government securities
dealer recognized by the Federal Reserve Bank of New York and if the Fund has
the unconditional 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 securities minus the option's strike price). The repurchase price
with the primary dealers is typically a formula price which is generally based
on a multiple of the premium received for the option, plus the amount by which
the option is 'in-the-money'. This policy as to OTC options is not a fundamental
policy of the Fund and may be amended by the Board of Directors of the Fund
without the approval of the Fund's shareholders. However, the Fund will not
change or modify this policy prior to the change or modification by the
Commission staff of its position.
The staff of the Commission has also taken the following position with
respect to investments in certain forms of stripped mortgage-backed securities,
namely the principal-only or PO class and the interest-only or IO class of such
derivative securities. Such position has been adopted as an investment policy of
the Fund, subject to amendment as discussed further below. The staff of the
Commission has taken the position that the determination of whether a particular
U.S. Government issued IO or PO that is backed by fixed-rate mortgages is liquid
may be made by the Investment Adviser under guidelines and standards established
by the Fund's Board of Directors. Such a security may be deemed liquid if it can
be disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's net asset value per share.
The Commission's staff also has taken the position that all other IOs and POs
are illiquid securities which are subject to the restriction limiting the Fund's
investments in illiquid securities to 15% of its total assets. (Under the laws
of certain states, the Fund presently is limited with respect to such
investments to 10% of its total assets.) This policy as to IOs and POs is not a
fundamental policy of the Fund and may be amended by the Board of Directors of
the Fund without the approval of the Fund's shareholders. However, the Fund will
not change or modify this policy prior to the change or modification by the
Commission's staff of its position.
Proposed Uniform Investment Restrictions. As discussed in the Prospectus
under 'Investment Objective and Policies--Other Investment Policies and
Practices--Investment Restrictions', the Board of Directors of the Fund has
approved the replacement of the Fund's existing investment restrictions with the
fundamental and non-fundamental investment restrictions set forth below. These
uniform investment restrictions have been proposed for adoption by all of the
non-money market mutual funds advised by the Investment Adviser or its
affiliate, Fund Asset Management, L.P. ('FAM'). The investment objective and
policies of the Fund will be unaffected by the adoption of the proposed
investment restrictions.
Shareholders of the Fund are currently considering whether to approve the
proposed revised investment restrictions. If such shareholder approval is
obatained, the Fund's current investment restrictions will be replaced by the
proposed restrictions, and the Fund's Prospectus and Statement of Additional
Information will be supplemented to reflect such change.
Under the proposed fundamental investment restrictions, the Fund may not;
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1. Invest more than 25% of its total assets (taken at market value at
the time of each investment) in securities of issuers in a single industry
(other than debt securities issued or guaranteed by a Western Hemisphere
governmental entity), except that, under normal circumstances, the Fund
will invest more than 25% of its total assets in the securities of issuers
in the financial services industry.
2. Make investments for the purpose of exercising control or
management.
3. Purchase or sell real esate, except that, to the extent permitted
by applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that the Fund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
5. Issue senior securities to the extent such issuance would violate
applicable law.
6. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the Fund
may purchase securities on margin to the extent permitted by applicable
law. The Fund may not pledge its assets other than to secure such
borrowings or, to the extent permitted by the Fund's investment policies as
set forth in its Prospectus and Statement of Additional Information, as
they may be amended from time to time, in connection with hedging
transactions, short sales, when-issued and forward commitment transactions
and similar investment strategies.
7. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the 'Securities Act'), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commidities, except to
the extent that the Fund may do so in accordance with applicable law and
the Fund's Prospectus and Statement of Additional Information, as they may
be amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
Under the proposed non-fundamental investment restrictions, the Fund
may not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position, except
to the extent permitted by applicable law.
c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions or which cannot otherwise be marketed,
redeemed or put to the issuer or a third party, if at the time of
acquisition more than 15% of its total assets would be invested in such
securities. This restriction shall not apply to securities which mature
within seven days or securities which the Board of Directors of the Fund
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<PAGE>
has otherwise determined to be liquid pursuant to applicable law.
Notwithstanding the 15% limitation herein, to the extent the laws of any
state in which the Fund's shares are registered or qualified for sale
require a lower limitation, the Fund will observe such limitation. As of
the date hereof, therefore, the Fund will not invest more than 10% of its
total assets in securities which are subject to this investment restriction
(c). Securities purchased in accordance with Rule 144A under the Securities
Act (a 'Rule 144A security') and determined to be liquid by the Fund's
Board of Directors are not subject to the limitations set forth in this
investment restriction (c). Notwithstanding the fact that the Board may
determine that a Rule 144A security is liquid and not subject to
limitations set forth in this investment restriction (c), the State of Ohio
does not recognize Rule 144A securities as securities that are free of
restrictions as to resale. To the extent required by Ohio law, the Fund
will not invest more than 5% of its total assets in securities of issuers
that are restricted as to disposition, including Rule 144A securities.
d. Invest in warrants if, at the time of acquisition, its investments
in warrants, valued at the lower of cost or market value, would exceed 5%
of the Fund's net assets; included within such limitation, but not to
exceed 2% of the Fund's net assets, are warrants which are not listed on
the New York Stock Exchange or American Stock Exchange or a major foreign
exchange. For purposes of this restriction, warrants acquired by the Fund
in units or attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities,
asset-backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securites of any issuer, if those individual
officers and directors of the Fund, the officers and general partner of the
Investment Adviser, the directors of such general partner or the officers
and directors of any subsidiary thereof each owning beneficially more than
one-half of one percent of the securities of such issuer own in the
aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs,
except that the Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restriction (6) above,
borrow money except that (i) the Fund may borrow from banks (as defined in
the Investment Company Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), and (ii) the Fund may borrow up to an
additional 5% of its total assets for temporary purposes.
------------------------
Because of the affiliation of the Investment Adviser with the Fund, the
Fund is prohibited from engaging in certain transactions involving such firm or
its affiliates except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order 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 of 1933, as amended,
in which such firms or any of their affiliates participate as an underwriter or
dealer.
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MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Director is P.O. Box
9011, Princeton, New Jersey 08543-9011.
ARTHUR ZEIKEL--President and Director(1)(2)--President of the Investment
Adviser (which term as used herein includes its corporate predecessors) since
1977 and Chief Investment Officer since 1976; FAM (which term as used herein
includes its corporate predecessors) since 1977 and Chief Investment Officer
since 1976; President and Director of Princeton Services, Inc. ('Princeton
Services') since 1993; Executive Vice President of Merrill Lynch since 1990 and
a Senior Vice President thereof from 1985 to 1990; Executive Vice President of
Merrill Lynch & Co., Inc. ('ML & Co.') since 1990; Director of the Distributor.
DONALD CECIL--Director(2)--1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland Partners (an investment
partnership) since 1982; Member of Institute of Chartered Financial Analysts;
Member and Chairman of Westchester County (N.Y.) Board of Transportation.
EDWARD H. MEYER--Director(2)--777 Third Avenue, New York, New York 10017.
President of Grey Advertising Inc. since 1968, Chief Executive Officer since
1970 and Chairman of the Board of Directors since 1972; Director of The May
Department Stores Company, Bowne & Co., Inc. (financial printers), Ethan Allen
Interiors Inc. and Harman International Industries, Inc.
CHARLES C. REILLY--Director(2)--9 Hampton Harbor Road, Hampton Bays, N.Y.
11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; former Senior Vice
President of Arnhold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business since 1990; Adjunct
Professor, Wharton School, University of Pennsylvania, 1990; Director, Harvard
Business School Alumni Association.
RICHARD R. WEST--Director(2)--482 Tepi Drive, Southbury, Connecticut 06488.
Professor of Finance since 1984, and Dean from 1984 to 1993, New York University
Leonard N. Stern School of Business Administration; Director of Re Capital Corp.
(reinsurance holding company), Bowne & Co., Inc. (financial printers), Vornado,
Inc. (real estate holding company), Smith-Corona Corporation (manufacturer of
typewriters and word processors) and Alexander's Inc. (real estate company).
TERRY K. GLENN--Executive Vice President(1)(2)--Executive Vice President of
the Investment Adviser and FAM since 1983; Executive Vice President and Director
of Princeton Services since 1993; President and Director of the Distributor
since 1986.
JOSEPH T. MONAGLE, JR.--Senior Vice President(1)(2)--Senior Vice President
of the Investment Adviser and FAM since 1990; Vice President of the Investment
Advisor from 1978 to 1990; Senior Vice President of Princeton Services since
1993.
ALEX V. BOUZAKIS--Vice President(1)(2)--Vice President and Senior Portfolio
Manager of the Investment Adviser and associated therewith since 1982.
DONALD C. BURKE--Vice President(1)(2)--Vice President and Director of
Taxation of the Investment Adviser since 1990; employee of Deloitte & Touche LLP
from 1982 to 1990.
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<PAGE>
PAOLO H. VALLE--Vice President(1)(2)--Vice President and Senior Portfolio
Manager of the Investment Adviser since 1992; Vice President and Manager,
Emerging Markets Trading, PNC Bank prior thereto.
GERALD M. RICHARD--Treasurer(1)(2)--Senior Vice President and Treasurer of
the Investment Adviser and FAM since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.
MARK B. GOLDFUS--Secretary(1)(2)--Vice President of the Investment Adviser
and FAM since 1985.
- ------------------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Director or officer is a director, trustee or officer of one or more
additional investment companies for which the Investment Adviser or FAM acts
as investment adviser.
At September 30, 1994, the officers and Directors of the Fund as a group
(12 persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund. At such date, Mr. Zeikel, a Director of the Fund, and the other officers
of the Fund, owned less than 1% of the outstanding shares of common stock of ML
& Co.
The Fund pays each Director not affiliated with the Investment Adviser an
annual retainer of $3,500 per year plus $500 per Board meeting attended,
together with such Director's actual out-of-pocket expenses relating to
attendance at meetings. The Fund also compensates members of its audit
committee, which consists of all of the non-affiliated Directors, at a rate of
$500 per committee meeting attended. The Chairman of the audit committee
receives an additional fee of $250 per meeting attended. For the fiscal period
August 27, 1993 (commencement of operations) to December 31, 1993, fees and
expenses paid to unaffiliated Directors aggregated $11,450.
ADVISORY AND MANAGEMENT ARRANGEMENTS
Reference is made to 'Management of the Fund--Advisory and Management
Arrangements' in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or 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 for the Fund or other funds for
which it acts as investment adviser or for its other advisory clients arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds and clients in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of the 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 an investment advisory agreement (the 'Investment
Advisory Agreement') with the Investment Adviser. As described in the
Prospectus, the Investment Adviser receives for its services to the Fund monthly
compensation at the rate of 0.60% of the average daily net assets of the Fund
plus the principal amount of borrowings incurred by the Fund for leverage
purposes. For the fiscal period August 27, 1993 (commencement of operations) to
December 31, 1993, the investment advisory fees paid by the Fund to the
Investment Adviser aggregated $197,936, all of which was voluntarily waived.
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
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<PAGE>
Fund (excluding interest, taxes, 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. 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 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 Directors 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, stock certificates, shareholder
reports and prospectuses and statements of additional information (except to the
extent paid by the Distributor); charges of the custodian, any sub-custodian and
transfer agent; expenses of redemption of shares; Securities and Exchange
Commission fees; expenses of registering the shares under Federal, state or
foreign laws; fees and expenses of unaffiliated Directors; accounting and
pricing costs (including the daily calculation of net asset value); insurance;
interest; brokerage costs; litigation and other extraordinary or non-recurring
expenses; and other expenses properly payable by the Fund. Accounting services
are provided to the Fund by the Investment Adviser, and the Fund reimburses the
Investment Adviser for its costs in connection with such services on a
semi-annual basis. For the fiscal period August 27, 1993 (commencement of
operations) to December 31, 1993, the amount of such reimbursement was $21,800.
The Distributor will pay certain promotional expenses of the Fund incurred in
connection with the offering of its shares. Certain expenses will be financed by
the Fund pursuant to distribution plans in compliance with Rule 12b-1 under the
Investment Company Act. See 'Purchase of Shares--Distribution Plans'.
ML & Co., Merrill Lynch Investment Management, Inc. and Princeton Services,
Inc. are 'controlling persons' of the Investment Adviser as defined under the
Investment Company Act because of their ownership of its voting securities or
their power to exercise a controlling influence over its management or policies.
Duration and Termination. Unless earlier terminated as described herein,
the Investment Advisory Agreement will continue in effect for a period of two
years from the date of its execution and will remain in effect from year to year
thereafter if approved annually (a) by the Board of Directors of the Fund or by
a majority of the outstanding shares of the Fund and (b) by a majority of the
Directors who are not parties to such contract or interested persons (as defined
in the Investment Company Act) of any such party. Such contract is not
assignable and may be terminated without penalty on 60 days' written notice at
the option of either party thereto or by the vote of a majority of the
shareholders of the Fund.
PURCHASE OF SHARES
Reference is made to 'Purchase of Shares' in the Prospectus for certain
information as to the purchase of Fund shares.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricing(Service Mark) System: shares of Class A and Class D are sold to
investors choosing the initial sales charge alternatives, and shares of Class B
and Class C are sold to investors choosing the deferred sales charge
alternatives. Each Class A, Class B, Class C and Class D
13
<PAGE>
share of the Fund represents identical interests in the investment
portfolio of the Fund and has the same rights, except that Class B, Class C and
Class D shares bear the expenses of the ongoing account maintenance fees, and
Class B and Class C shares bear the expenses of the ongoing distribution fees
and the additional incremental transfer agency costs resulting from the deferred
sales charge arrangements. Class B, Class C and Class D shares each have
exclusive voting rights with respect to the Rule 12b-1 distribution plan adopted
with respect to such class pursuant to which account maintenance and/or
distribution fees are paid. Each class has different exchange privileges. See
'Shareholder Services--Exchange Privilege'.
The Merrill Lynch Select Pricing(Service Mark) System is used by more than
50 mutual funds advised by the Investment Adviser or its affiliate, FAM. Funds
advised by the Investment Adviser or FAM are referred to herein as 'MLAM-advised
mutual funds'.
The Fund has entered into separate distribution agreements with Merrill
Lynch Funds Distributor, Inc. (the 'Distributor') in connection with the
continuous offering of each Class of shares of the Fund (the 'Distribution
Agreements'). The Distribution Agreements obligate the Distributor to pay
certain expenses in connection with the offering of each Class of shares of the
Fund. After the prospectuses, statements of additional information and periodic
reports have been prepared, set in type and mailed to shareholders, the
Distributor pays for the printing and distribution of copies thereof used in
connection with the offering to dealers and investors. The Distributor also pays
for other supplementary sales literature and advertising costs. The Distribution
Agreements are subject to the same renewal requirements and termination
provisions as the Investment Advisory Agreement described under 'Management of
the Fund--Advisory and Management Arrangements'.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
As a result of the implementation of the Merrill Lynch Select
Pricing(Service Mark) System, Class A shares of the fund outstanding prior to
October 21, 1994, have been redesignated Class D shares. The Class A shares
currently being offered differ from the Class A shares offered prior to October
21, 1994, in many respects, including sales charges, exchange privilege and the
classes of persons to whom such shares are offered. For the fiscal period August
27, 1993 (commencement of operations) to December 31, 1993, the Fund sold its
shares through the Distributor and Merrill Lynch, as a dealer. During the fiscal
period August 27, 1993 (commencement of operations) to December 31, 1993, the
Fund sold 1,903,377 of its former Class A shares (now redesignated Class D
shares) for aggregate net proceeds to the Fund of $19,440,340. The gross sales
charges for the sale of its former Class A shares for that period were $317,743,
of which $5,926 and $311,817 were received by the Distributor and Merrill Lynch,
respectively.
The term 'purchase' as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Fund refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and to single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the 'Code')) although more than
one beneficiary is involved. The term 'purchase' also includes purchases by any
'company', as that term is defined in the Investment Company Act, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of shares of
the Fund or shares of other registered investment companies at a discount. The
term 'purchase' shall not include purchases by any
14
<PAGE>
group of individuals whose sole organizational nexus is that the participants
therein are credit cardholders of a company, policyholders of an insurance
company, customers of either a bank or broker-dealer or clients of an investment
adviser. The term 'purchase' also includes purchases by employee benefit plans
not qualified under Section 401 of the Code, including purchases by employees or
by employers on behalf of employees, by means of a payroll deduction plan or
otherwise, of shares of the Fund. Purchases by such a company or non-qualified
employee benefit plan will qualify for the quantity discounts discussed above
only if the Fund and the Distributor are able to realize economies of scale in
sales effort and sales related expense by means of the company, employer or plan
making the Fund's Prospectus available to individual investors or employees and
forwarding investments by such persons to the Fund and by any such employer or
plan bearing the expense of any payroll deduction plan.
Closed-End Fund Investment Option. Class A shares of the Fund and other
MLAM-advised mutual funds ('Eligible Class A Shares') are offered at net asset
value to shareholders of certain closed-end funds advised by MLAM or the
Investment Adviser who purchased such closed-end fund shares prior to October
21, 1994, and wish to reinvest the net proceeds from a sale of their closed-end
fund shares of common stock in Eligible Class A Shares, if the conditions set
forth below are satisfied. Alternatively, closed-end fund shareholders who
purchased such shares on or after October 21, 1994, and wish to reinvest the net
proceeds from a sale of their closed-end fund shares are offered Class A shares
(if eligible to buy Class A shares) or Class D shares of the Fund and other
MLAM-advised mutual funds ('Eligible Class D Shares'), if the following
conditions are met. First, the sale of the closed-end fund shares must be made
through Merrill Lynch, and the net proceeds therefrom must be immediately
reinvested in Eligible Class A or Class D Shares. Second, the closed-end fund
shares must either have been acquired in the initial public offering or be
shares representing dividends from shares of common stock acquired in such
offering. Third, the closed-end fund shares must have been continuously
maintained in a Merrill Lynch securities account. Fourth, there must be a
minimum purchase of $250 to be eligible for the investment option. Class A
shares of the Fund are offered at net asset value to shareholders of Merrill
Lynch Senior Floating Rate Fund, Inc. ('Senior Floating Rate Fund') who wish to
reinvest the net proceeds from a sale of certain of their shares of common stock
of Senior Floating Rate Fund in shares of the Fund. In order to exercise this
investment option, Senior Floating Rate Fund shareholders must sell their Senior
Floating Rate Fund shares to the Senior Floating Rate Fund in connection with a
tender offer conducted by the Senior Floating Rate Fund and reinvest the
proceeds immediately in the Fund. This investment option is available only with
respect to the proceeds immediately in the Fund. This investment option is
available only with respect to the proceeds of Senior Floating Rate Fund shares
as to which no Early Withdrawal Charge (as defined in the Senior Floating Rate
Fund prospectus) is applicable. Purchase orders from Senior Floating Rate Fund
shareholders wishing to exercise this investment option will be accepted only on
the day that the related Senior Floating Rate Fund tender offer terminates and
will be effected at the net asset value of the Fund at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. The reduced sales charges are applicable through a
right of accumulation under which eligible investors are permitted to purchase
shares of the Fund subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of the purchaser's combined holdings of all classes
of shares of the Fund and of other MLAM-advised mutual funds. For any such right
of accumulation to be made available, the Distributor must be provided at the
time of purchase, by the purchaser or the purchaser's securities dealer, with
sufficient information to permit confirmation of qualification, and
15
<PAGE>
acceptance of the purchase order is subject to such confirmation. The right of
accumulation may be amended or terminated at any time. Shares held in the name
of a nominee or custodian under pension, profit-sharing, or other employee
benefit plans may not be combined with other shares to qualify for the right of
accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Fund or any
other MLAM-advised mutual funds made within a 13-month period starting with the
first purchase pursuant to a Letter of Intention in the form provided in the
Prospectus. The Letter of Intention is available only to investors whose
accounts are maintained at the Fund's transfer agent. The Letter of Intention is
not available to employee benefit plans for which Merrill Lynch provides
plan-participant record-keeping services. The Letter of Intention is not a
binding obligation to purchase any amount of Class A or Class D shares; however,
its execution will result in the purchaser paying a lower sales charge at the
appropriate quantity purchase level. A purchase not originally made pursuant to
a Letter of Intention may be included under a subsequent Letter of Intention
executed within 90 days of such purchase if the Distributor is informed in
writing of this intent within such 90-day period. The value of Class A and Class
D shares of the Fund and of other MLAM-advised mutual funds presently held, at
cost or maximum offering price (whichever is higher), on the date of the first
purchase under the Letter of Intention, may be included as a credit toward
completion of such Letter, but the reduced sales charge applicable to the amount
covered by such Letter will be applied only to new purchases. If the total
amount of shares does not equal the amount stated in the Letter of Intention
(minimum of $25,000), the investor will be notified and must pay, within 20 days
of the expiration of such Letter, the difference between the sales charge on the
Class A or Class D shares purchased at the reduced rate and the sales charge
applicable to the shares actually purchased through the Letter. Class A or Class
D shares equal to five percent of the intended amount will be held in escrow
during the 13-month period (while remaining registered in the name of the
purchaser) for this purpose. The first purchase under the Letter of Intention
must be at least five percent of the dollar amount of such Letter. If a purchase
during the term of such Letter would otherwise be subject to a further reduced
sales charge based on the right of accumulation, the purchaser will be entitled
on that purchase and subsequent purchases to the reduced percentage sales charge
which would be applicable to a single purchase equal to the total dollar value
of the Class A shares then being purchased under such Letter, but there will be
no retroactive reduction of the sales charges on any previous purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be deducted
from the total purchases made under such Letter. An exchange from a MLAM-advised
money market fund into the Fund that creates a sales charge will count toward
completing a new or existing Letter of Intention from the Fund.
Employer Sponsored Retirement and Savings Plans. Class A and Class D
shares are offered at net asset value to employer sponsored retirement or
savings plans, such as tax qualified retirement plans within the meaning of
Section 401(a) of the Internal Revenue Code of 1986, as amended (the 'Code'),
deferred compensation plans within the meaning of Sections 403(b) and 457 of the
Code, other deferred compensation arrangements, Voluntary Employee Benefits
Association ('VEBA') plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system, herein
referred to as 'Employer Sponsored Retirement or Savings Plans', provided the
plan has accumulated $20 million or more in MLAM-advised mutual funds (in the
case of Class A shares) or $5 million or more in MLAM-advised mutual funds (in
the case of Class D shares). Class D shares may be offered at net asset value to
new Employer Sponsored Retirement or Savings Plans, provided the plan has $3
million or more initially invested in MLAM-advised mutual funds. Assets of
Employer Sponsored Retirement or Savings Plans sponsored by the same
16
<PAGE>
sponsor or an affiliated sponsor may be aggregated. Class A shares and Class D
shares also are offered at net asset value to Employer Sponsored Retirement or
Savings Plans that have at least 1,000 employees eligible to participate in the
plan (in the case of Class A shares) or between 500 and 999 employees eligible
to participate in the plan (in the case of Class D shares). Employees eligible
to participate in Employer Sponsored Retirement or Savings Plans of the same
sponsoring employer or its affiliates may be aggregated. Tax qualified
retirement plans within the meaning of Section 401(a) of the Code meeting any of
the foregoing requirements and which are provided specialized services (e.g.,
plans whose participants may direct on a daily basis their plan allocations
among a wide range of investments including individual corporate equities and
other securities in addition to mutual fund shares) by the Merrill Lynch
Blueprint(Service Mark) Program, are offered Class A shares at a price equal to
net asset value per share plus a reduced sales charge of 0.50%. Any Employer
Sponsored Retirement or Savings Plan which does not meet the above described
qualifications to purchase Class A shares at net asset value has the option of
(i) purchasing Class A shares at the initial sales charge schedule and possible
CDSC schedule disclosed in the Prospectus, if it is otherwise eligible to
purchase Class A shares, (ii) purchasing Class D shares at the initial sales
charge and possible CDSC schedule disclosed in the Prospectus, (iii) if the
Employer Sponsored Retirement or Savings Plan meets the specified requirements,
purchasing Class B shares with a waiver of the CDSC upon redemption, or if the
Employer Sponsored Retirement or Savings Plan does not qualify to purchase Class
B shares with a waiver of the CDSC upon redemption, purchasing Class C shares at
the CDSC schedule disclosed in the Prospectus. The minimum initial and
subsequent purchase requirements are waived in connection with all the above
referenced Employer Sponsored Retirement or Savings Plans.
Purchase Privilege of Certain Persons. Directors of the Fund, members of
the Boards of other MLAM-advised investment companies, directors and employees
of ML & Co. and its subsidiaries (the term 'subsidiaries', when used herein with
respect to ML & Co., includes MLAM, FAM and certain other entities directly or
indirectly wholly owned and controlled by ML & Co.) and any trust, pension,
profit-sharing or other benefit plan for such persons may purchase Class A
shares of the Fund at net asset value.
Class D shares of the Fund will be offered at net asset value, without a
sales charge, to an investor who has a business relationship with a financial
consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchase by such investor if the following
conditions are satisfied: first, the investor must advise Merrill Lynch that it
will purchase Class D shares of the Fund with proceeds from a redemption of a
mutual fund that was sponsored by the financial consultant's previous firm and
was subject to a sales charge either at the time of purchase or on a deferred
basis. Second, the investor also must establish that such redemption had been
made within 60 days prior to the investment in the Fund, and the proceeds from
the redemption had been maintained in the interim in cash or a money market
fund.
Class D shares of the Fund are also offered at net asset value, without
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who has invested in a mutual fund sponsored by a
non-Merrill Lynch company for which Merrill Lynch has served as a selected
dealer and where Merrill Lynch has either received or given notice that such
arrangement will be terminated ('notice'), if the following conditions are
satisfied: first, the investor must purchase Class D shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and such fund was
subject to a sales charge either at the time of purchase or on a deferred basis,
and second, such purchase of Class D shares must be made within 90 days after
notice.
Class D shares of the Fund will be offered at net asset value, without a
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who has invested in a mutual fund for which
17
<PAGE>
Merrill Lynch has not served as a selected dealer if the following conditions
are satisfied: First, the investor must advise Merrill Lynch that it will
purchase Class D shares of the Fund with proceeds from the redemption of such
shares of other mutual funds and that such shares have been outstanding for a
period of no less than six months. Second, such purchase of Class D shares must
be made within 60 days after the redemption and the proceeds from the redemption
must be maintained in the interim in cash or a money market fund.
TMA(Service Mark) Managed Trusts. Class A shares offered to TMA(Service
Mark) Managed Trusts to which Merrill Lynch Trust Company provides discretionary
trustee services at net asset value.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or consolidation with
a public or private investment company. The value of the assets or company
acquired in a tax-free transaction may be adjusted in appropriate cases to
reduce possible adverse tax consequences to the Fund which might result from an
acquisition of assets having net unrealized appreciation which is
disproportionately higher at the time of acquisition than the realized or
unrealized appreciation of the Fund. The issuance of Class D shares for
consideration other than cash is limited to bona fide reorganizations, statutory
mergers or other acquisitions of portfolio securities which (i) meet the
investment objective and policies of the Fund; (ii) are acquired for investment
and not for resale (subject to the understanding that the disposition of the
Fund's portfolio securities shall at all times remain within its control); and
(iii) are liquid securities, the value of which is readily ascertainable, which
are not restricted as to transfer either by law or liquidity of market (except
that the Fund may acquire through such transactions restricted or illiquid
securities to the extent the Fund does not exceed the applicable limits on
acquisition of such securities set forth under 'Investment Objective and
Policies' herein).
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be needed
in obtaining such investments.
Reference is made to 'Purchase of Shares--Distribution Plans' in the
Prospectus for certain information with respect to the separate distribution
plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the
Investment Company Act (each a 'Distribution Plan') with respect to the account
maintenance and/or distribution fees paid by the Fund to the Distributor with
respect to such classes.
Payments of the account maintenance fees and/or distribution fees are
subject to the provisions of Rule 12b-1 under the Investment Company Act. Among
other things, each Distribution Plan provides that the Distributor shall provide
and the Directors shall review quarterly reports of the disbursement of the
account maintenance fees and/or distribution fees paid to the Distributor. In
their consideration of each Distribution Plan, the Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Fund and its related class of shareholder. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
'interested persons' of the Fund, as defined in the Investment Company Act (the
'Independent Directors'), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that such Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors or
by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to increase
materially the amount to be spent by the Fund without the approval of the
related
18
<PAGE>
class of shareholders, and all material amendments are required to be approved
by the vote of the Directors, including a majority of the Independent Directors
who have no direct or indirect financial interest in such Distribution Plan,
cast in person at a meeting called for that purpose. Rule 12b-1 further requires
that the Fund preserve copies of each Distribution Plan and any report made
pursuant to such plan for a period of not less than six years from the date of
such Distribution Plan or such report, the first two years in an easily
accessible place.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ('NASD') imoses a limitation on certain
asset-based sales charges such as the distribution fee and the CDSC borne by the
Class B and Class C shares but not the account maintenance fee. The maximum
sales charge rule is applied separately to each class. As applicable to the
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of
Class B shares and Class C shares, computed separately (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges), plus (2)
interest on the unpaid balance for the respective class, computed separately, at
the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the payment of the distribution fee and the CDSC).
In connection with the Class B shares, the Distributor has voluntarily agreed to
waive interest charges on the unpaid balance in excess of 0.50% of eligible
gross sales. Consequently, the maximum amount payable to the Distributor
(referred to as the 'voluntary maximum') in connection with the Class B shares
is 6.75% of eligible gross sales. The Distributor retains the right to stop
waiving the interest charges at any time. To the extent payments would exceed
the voluntary maximum, the Fund will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Fund rather than to the Distributor; however, the Fund will continue to make
payments of the account maintenance fee. In certain circumstances the amount
payable pursuant to the voluntary maximum may exceed the amount payable under
the NASD formula. In such circumstances payment in excess of the amount payable
under the NASD formula will not be made.
The following table sets forth comparative information as of June 30, 1994,
with respect to the Class B 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 fiscal period August 27, 1993
(commencement of operations) to June 30, 1994. Since Class C shares of the Fund
had not been publicly issued prior to the date of this Statement of Additional
Information, information concerning Class C shares is not yet provided below.
DATA CALCULATED AS OF JUNE 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTION
ALLOWABLE ALLOWABLE AMOUNTS FEE AT
ELIGIBLE AGGREGATE INTEREST ON MAXIMUM PREVIOUSLY AGGREGATE CURRENT NET
GROSS SALES UNPAID AMOUNT PAID TO UNPAID 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........................ $109,117 $ 6,820 $ 325 $7,145 $565 $ 6,580 $563
Under Distributor's Voluntary
Waiver......................... $109,117 $ 6,820 $ 545 $7,365 $565 $ 6,801 $563
</TABLE>
- ------------------
19
<PAGE>
(1) Purchase price of all eligible Class B shares sold since August 27, 1993
(commencement of operations) other than shares acquired through dividend
reinvestment and the exchange privilege.
(2) Interest is computed on a monthly basis based upon the prime rate, as
reported in The Wall Street Journal, plus 1.0% as permitted under the NASD
Rule.
(3) Consists of CDSC payments, distribution fee payments and accruals.
(4) Provided to illustrate the extent to which the current level of distribution
fee payments (not including any CDSC payments) is amortizing the unpaid
balance. No assurance can be given that payments of the distribution fee
will reach either the 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.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under 'Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares', while Class B shares redeemed
within four years of purchase are subject to a CDSC under most circumstances,
the charge is waived on redemptions of Class B shares in connection with certain
post-retirement withdrawals from an Individual Retirement Account ('IRA') or
other retirement plan or on redemptions of Class B shares following the death or
disability of a Class B shareholder. Redemptions for which the waiver applies
are: (a) any partial or complete redemption in connection with a tax-free
distribution following retirement under a tax-deferred retirement plan or
attaining age 59 1/2 in the case of an IRA or other retirement plan, or part of
a series of equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) or any redemption resulting from the tax-free
return of an excess contribution to an IRA; or (b) any partial or complete
redemption following the death or disability (as defined in the Code) of a Class
B shareholder (including one who owns the Class B shares as joint tenant with
his or her spouse), provided the redemption is requested within one year of the
death or initial determination of disability. For the fiscal period August 27,
1993 (commencement of operations) to December 31, 1993, the Distributor received
CDSCs of $51,471, all of which was paid to Merrill Lynch.
Retirement Plans. Any Retirement Plan which does not meet the
qualifications to purchase Class A or Class D shares at net asset value has the
option of purchasing Class A or Class D shares at the sales charge schedule
disclosed in the Prospectus, or if the Retirement Plan meets the following
requirements, then it may
20
<PAGE>
purchase Class B shares with a waiver of the CDSC upon redemption. The CDSC is
waived for any Eligible 401(k) Plan redeeming Class B shares. 'Eligible 401(k)
Plan' is defined as a retirement plan qualified under Section 401(k) of the Code
with a salary reduction feature offering a menu of investments to plan
participants. The CDSC is also waived for redemptions from a 401(a) plan
qualified under the Code, provided, however, that each such plan has the same or
an affiliated sponsoring employer as an Eligible 401(k) Plan purchasing Class B
shares of MLAM-advised mutual funds ('Eligible 401(a) Plan'). Other tax
qualified retirement plans within the meaning of Section 401(a) and 403(b) of
the Code which are provided specialized services (e.g., plans whose participants
may direct on a daily basis their plan allocations among a menu of investments)
by independent administration firms contracted through Merrill Lynch also may
purchase Class B shares with a waiver of the CDSC. The CDSC also is waived for
any Class B shares which are purchased by an Eligible 401(k) Plan or Eligible
401(a) Plan and are rolled over into a Merrill Lynch or Merrill Lynch Trust
Company custodied IRA and held in such account at the time of redemption. The
Class B CDSC also is waived for any Class B shares which are purchased by a
Merrill Lynch rollover IRA that was funded by a rollover from a terminated
401(k) plan managed by the MLAM Private Portfolio Group and held in such account
at the time of redemption. The minimum initial and subsequent purchase
requirements are waived in connection with all the above referenced Retirement
Plans.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is primarily responsible for the execution of the Fund's
portfolio transactions and the allocation of 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 NASD and policies established by the Board of Directors
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 Board of Directors has considered 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. After
considering all factors deemed relevant, the Board of Directors made a
determination not to seek such recapture. The Board will reconsider this matter
from time to time.
21
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily
Monday through Friday at 4:15 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. 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 investment advisory
fees and any account maintenance and/or distribution fees, are accrued daily.
The per share net asset value of the Class B, Class C and Class D shares
generally will be lower than the per share net asset value of the Class A shares
reflecting the daily expense accruals of the account maintenance, distribution
and higher transfer agency fees applicable with respect to the Class B and Class
C shares and the daily expense accruals of the account maintenance fees
applicable with respect to the Class D shares; moreover, the per share net asset
value of the Class B and Class C shares generally will be lower than the per
share net asset value of its Class D shares reflecting the daily expense
accruals of the distribution fees and higher transfer agency fees applicable
with respect to the Class B and Class C shares of the Fund. The per share net
asset value of the Class B shares generally will be higher than the per share
net asset value of the Class C shares as a result of the higher distribution
fees applicable with respect to the Class C shares. It is expected, however,
that the per share net asset value of the four classes will tend to converge
immediately after the payment of dividends or distributions, which will differ
by approximately the amount of the expense accrual differential between the
classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the time
of valuation. When the Fund writes a call option, the amount of the premium
received is recorded on the books of the Fund as an asset and an equivalent
liability. The amount of the liability is subsequently valued to reflect the
current market value of the option written, based upon the last sale price in
the case of exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased by the Fund are
valued at their last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last bid price.
Any assets or liabilities expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as obtained from one
or more dealers.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund. Such valuations and procedures will be
reviewed periodically by the Board of Directors.
Generally, trading in foreign securities, as well as U.S. Government
securities and money market instruments, is substantially completed each day at
various times prior to the close of the New York Stock Exchange. The values of
such securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of
22
<PAGE>
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 the
Directors.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services summarized below which are
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 how to change options with
respect thereto, can be obtained from the Fund, the Distributor or Merrill
Lynch. Certain of these services are available only to U.S. investors.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the transfer agent has an
Investment Account and will receive statements, at least quarterly, from the
transfer agent. These statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of ordinary income dividends
and long-term capital gain distributions. The statements will also show any
other activity in the account since the preceding statement. Shareholders will
receive separate transaction confirmations for each purchase or sale transaction
other than automatic investment purchases and the reinvestment of ordinary
income dividends and long-term capital gain distributions. A shareholder may
make additions to his Investment Account at any time by mailing a check directly
to the transfer agent.
Share certificates are issued only for full shares and only upon the
specific request of the shareholder. Issuance of certificates representing all
or only part of the full shares in an Investment Account may be requested by a
shareholder directly from the transfer agent.
Shareholders considering transferring their Class A or Class D shares from
Merrill Lynch to another brokerage firm or financial institution should be aware
that, if the firm to which the Class A or Class D shares are to be transferred
will not take delivery of shares of the Fund, a shareholder either must redeem
the Class A or Class D shares so that the cash proceeds can be transferred to
the account at the new firm or such shareholder must continue to maintain an
Investment Account at the transfer agent for those Class A or Class D shares.
Shareholders interested in transferring their Class B or Class C shares from
Merrill Lynch and who do not wish to have an Investment Account maintained for
such shares at the transfer agent may request their new brokerage firm to
maintain such shares in an account registered in the name of the brokerage firm
for the benefit of the shareholder at the transfer agent. If the new brokerage
firm is willing to accommodate the shareholder in this manner, the shareholder
must request that he be issued certificates for his shares and then must turn
the certificates over to the new firm for re-registration as described in the
preceding sentence.
AUTOMATIC INVESTMENT PLANS
A U.S. shareholder may make additions to an Investment Account at any time
by purchasing Class A shares (if (s)he is an eligible Class A investor as
described in the Prospectus) or Class B, Class C or Class D shares at the
applicable public offering price either through the shareholder's securities
dealer or by mail directly to the transfer agent, acting as agent for such
securities dealer. Voluntary accumulation also can be made through a
23
<PAGE>
service known as the Fund's Automatic Investment Plan whereby the Fund is
authorized through pre-authorized checks or automated clearing house debits of
$50 or more to charge the regular bank account of the shareholder on a regular
basis to provide systematic additions to the Investment Account of such
shareholder. An investor whose shares of the Fund are held within a
CMA(Registered) account may arrange to have periodic investments made in the
Fund in amounts of $100 or more through the CMA(Registered) Automated Investment
Program.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions to the contrary are given as to the method of
payment of dividends and capital gains distributions, dividends and
distributions will be reinvested automatically in additional shares of the Fund.
Such reinvestment will be at the net asset value of the shares of the Fund, as
of the close of business on the monthly payment date of the dividend or
distribution. Shareholders may elect in writing to receive either their
dividends or capital gains distributions, or both, in cash, in which event
payment will be mailed on or about the payment date. Cash payments can also be
directly deposited to the shareholder's bank account. No CDSC will be imposed on
redemption of shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions.
Shareholders may, at any time, notify the transfer agent in writing or by
telephone (1-800-MER-FUND) that they no longer wish to have their dividends
and/or distributions reinvested in shares of the Fund or vice versa, and
commencing ten days after receipt by the transfer agent of such notice, those
instructions will be effected.
SYSTEMATIC WITHDRAWAL PLANS--CLASS A AND CLASS D SHARES
A Class A or Class D shareholder may elect to make systematic withdrawals
from an Investment Account on either a monthly or quarterly basis as provided
below. Quarterly withdrawals are available for shareholders who have acquired
Class A or Class D shares of the Fund having a value, based upon cost or the
current offering price, of $5,000 or more, and monthly withdrawals are available
for shareholders with Class A or Class D shares with such a value of $10,000 or
more.
At the time of each withdrawal payment, sufficient Class A or Class D
shares are redeemed from those on deposit in the shareholder's account to
provide the withdrawal payment specified by the shareholder. The shareholder may
specify either a dollar amount or a percentage of the value of his Class A or
Class D shares. Redemptions will be made at net asset value as determined at the
close of business of the New York Stock Exchange on the 24th day of each month
or the 24th day of the last month of each quarter, whichever is applicable. If
the Exchange is not open for business on such date, the Class A or Class D
shares will be redeemed at the close of business on the following business day.
The check for the withdrawal payment will be mailed or the direct deposit of the
withdrawal payment will be made on the next business day following redemption.
When a shareholder is making systematic withdrawals, dividends and distributions
on all Class A or Class D shares in the Investment Account are automatically
reinvested in Class A or Class D shares of the Fund, respectively. A
shareholder's Systematic Withdrawal Plan may be terminated at any time, without
charge or penalty, by the shareholder, the Fund, the Fund's transfer agent or
the Distributor.
Withdrawal payments should not be considered as dividends, yield or income.
Each withdrawal is a taxable event. If periodic withdrawals continuously exceed
reinvested dividends, the shareholder's original investment may be
correspondingly reduced. Purchases of additional Class A or Class D shares
concurrent with withdrawals are ordinarily disadvantageous to the shareholder
because of sales charges and tax liabilities. The Fund will not knowingly accept
purchase orders for Class A or Class D shares of the Fund from investors who
maintain a
24
<PAGE>
Systematic Withdrawal Plan unless such purchase is equal to at least one year's
scheduled withdrawals or $1,200, whichever is greater. Periodic investments may
not be made into an Investment Account in which the shareholder has elected to
make systematic withdrawals.
A Class A or Class D shareholder whose shares are held within a
CMA(Registered), CBA(Registered) or Retirement Account may elect to have shares
redeemed on a monthly, bimonthly, quarterly, semiannual or annual basis through
the Systematic Redemption Program. The minimum fixed dollar amount redeemable is
$25. The proceeds of systematic redemptions will be posted to the shareholder's
account five business days after the date the shares are redeemed. Monthly
systematic redemptions will be made at net asset value on the first Monday of
each month; bimonthly systematic redemptions will be made at net asset value on
the first Monday of every other month; and quarterly, semiannual or annual
redemptions are made at net asset value on the first Monday of months selected
at the shareholder's option. If the first Monday of the month is a holiday, the
redemption will be processed at net asset value on the next business day. The
Systematic Redemption Program is not available if Fund shares are being
purchased within the account pursuant to the Automatic Investment Program. For
more information on the Systematic Redemption Program, eligible shareholders
should contact their Financial Consultant.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Fund have an exchange privilege
with certain other MLAM-advised mutual funds listed below. Under the Merrill
Lynch Select Pricing(Service Mark) System, Class A shareholders may exchange
Class A shares of the Fund for Class A shares of a second MLAM-advised mutual
fund if the shareholder holds any Class A shares of the second fund in his
account in which the exchange is made at the time of the exchange or is
otherwise eligible to purchase Class A shares of the second fund. If the Class A
shareholder wants to exchange Class A shares for shares of a second MLAM-advised
mutual fund but does not hold Class A shares of the second fund in his account
at the time of the exchange and is not otherwise eligible to acquire Class A
shares of the second fund, the shareholder will receive Class D shares of the
second fund as a result of the exchange. Class D shares also may be exchanged
for Class A shares of a second MLAM-advised mutual fund at any time as long as,
at the time of the exchange, the shareholder holds Class A shares of the second
fund in the account in which the exchange is made or is otherwise eligible to
purchase Class A shares of the second fund. Class B, Class C and Class D shares
will be exchangeable with shares of the same class of other MLAM-advised mutual
funds. For purposes of computing the CDSC that may be payable upon a disposition
of the shares acquired in the exchange, the holding period for the previously
owned shares of the Fund is 'tacked' to the holding period of the newly acquired
shares of the other Fund as more fully described below. Class A, Class B, Class
C and Class D shares also will be exchangeable for shares of certain
MLAM-advised money market funds specifically designated below as available for
exchange by holders of Class A, Class B, Class C and Class D shares. Shares with
a net asset value of at least $100 are required to qualify for the exchange
privilege, and any shares utilized in an exchange must have been held by the
shareholder for 15 days. It is contemplated that the exchange privilege may be
applicable to other new mutual funds whose shares may be distributed by the
Distributor.
Exchanges of Class A or Class D shares outstanding ('outstanding Class A or
Class D shares') for Class A or Class D shares of another MLAM-advised mutual
fund ('new Class A or Class D shares') are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount equal
to the difference, if any, between the sales charge previously paid on the
outstanding Class A or Class D shares and the sales charge payable at the time
of the exchange on the new Class A or Class D shares. With respect to
25
<PAGE>
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the 'sales charge previously paid' shall include the aggregate of the
sales charge paid with respect to such Class A or Class D shares in the initial
purchase and any subsequent exchange. Class A or Class D shares issued pursuant
to dividend reinvestment are sold on a no-load basis in each of the funds
offering Class A or Class D shares. For purposes of the exchange privilege,
Class A and Class D shares acquired through dividend reinvestment shall be
deemed to have been sold with a sales charge equal to the sales charge
previously paid on the Class A or Class D shares on which the dividend was paid.
Based on this formula, Class A and Class D shares of the Fund generally may be
exchanged into the Class A or Class D shares of the other funds or into shares
of the Class A and Class D money market funds with a reduced or without a sales
charge.
In addition, each of the funds with Class B and Class C shares outstanding
('outstanding Class B or Class C shares') offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, of another
MLAM-advised mutual fund ('new Class B or Class C shares') on the basis of
relative net asset value per Class B or Class C share, without the payment of
any CDSC that might otherwise be due on redemption of the outstanding shares.
Class B shareholders of the Fund exercising the exchange privilege will continue
to be subject to the Fund's CDSC schedule if such schedule is higher than the
CDSC schedule relating to the new Class B shares acquired through use of the
exchange privilege. In addition, Class B shares of the Fund acquired through use
of the exchange privilege will be subject to the Fund's CDSC schedule if such
schedule is higher than the CDSC schedule relating to the Class B shares of the
fund from which the exchange has been made. For purposes of computing the sales
charge that may be payable on a disposition of the new Class B or Class C
shares, the holding period for the outstanding Class B or Class C shares is
'tacked' to the holding period of the new Class B or Class C shares. For
example, an investor may exchange Class B shares of the Fund for those of
Merrill Lynch Special Value Fund, Inc. ('Special Value Fund') after having held
the Fund Class B shares for two and a half years. The 2% sales charge that
generally would apply to a redemption would not apply to the exchange. Three
years later the investor may decide to redeem the Class B shares of Special
Value Fund and receive cash. There will be no CDSC due on this redemption, since
by 'tacking' the two and a half year holding period of Fund Class B shares to
the three year holding period for the Special Value Fund Class B shares, the
investor will be deemed to have held the new Class B shares for more than five
years.
Shareholders also may exchange shares of the Fund into shares of a money
market fund advised by the Manager or its affiliates, but the period of time
that Class B or Class C shares are held in a money market fund will not count
towards satisfaction of the holding period requirement for purposes of reducing
the CDSC, or with respect to Class B shares, towards satisfaction of the
conversion period. However, shares of a money market fund which were acquired as
a result of an exchange for Class B or Class C shares of the Fund may, in turn,
be exchanged back into Class B or Class C shares, respectively, of any fund
offering such shares, in which event the holding period for Class B or Class C
shares of the fund will be aggregated with previous holding periods for purposes
of reducing the CDSC. Thus, for example, an investor may exchange Class B shares
of the Fund for shares of Merrill Lynch Institutional Fund ('Institutional
Fund') after having held the Fund Class B shares for two and a half years and
three years later decide to redeem the shares of Institutional Fund for cash. At
the time of this redemption, the 2% CDSC that would have been due had the Class
B shares of the Fund been redeemed for cash rather than exchanged for shares of
Institutional Fund will be payable. If instead of such redemption the
shareholder exchanged such shares for Class B shares of a fund which the
shareholder continued to hold for an additional two and a half years, any
subsequent redemption will not incur a CDSC.
26
<PAGE>
Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:
Funds Issuing Class A, Class B, Class C and Class D Shares:
<TABLE>
<S> <C>
MERRILL LYNCH ADJUSTABLE RATE
SECURITIES FUND, INC. ........... High current income consistent with a
policy of limiting the degree of
fluctuation in net asset value by
investing primarily in a portfolio of
adjustable rate securities, consisting
principally of mortgage-backed and
asset-backed securities.
MERRILL LYNCH ARIZONA LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal and Arizona income
taxes as is consistent with prudent
investment management through
investment in a portfolio primarily of
intermediate-term investment grade
Arizona Municipal Bonds.
MERRILL LYNCH ARIZONA MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Arizona income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH ARKANSAS MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Arkansas income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH ASSET GROWTH FUND,
INC.............................. High total investment return, consistent
with prudent risk, from investment in
United States and foreign equity, debt
and money market securities the
combination of which will be varied
both with respect to types of
securities and markets in response to
changing market and economic trends.
MERRILL LYNCH ASSET INCOME FUND,
INC.............................. A high level of current income through
investment primarily in United States
fixed income securities.
MERRILL LYNCH BALANCED FUND FOR
INVESTMENT AND RETIREMENT........ As high a level of total investment
return as is consistent with reasonable
risk by investing in common stocks and
other types of securities,
</TABLE>
27
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<TABLE>
<S> <C>
including fixed income securities and
convertible securities.
MERRILL LYNCH BASIC VALUE FUND,
INC. ............................ Capital appreciation and, secondarily,
income through investment in securities,
primarily equities, that are
undervalued and therefore represent
basic investment value.
MERRILL LYNCH CALIFORNIA INSURED
MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide
shareholders with as high a level of
income exempt from Federal and
California income taxes as is
consistent with prudent investment
management through investment in a
portfolio consisting primarily of
insured California Municipal Bonds.
MERRILL LYNCH CALIFORNIA LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal and California
income taxes as is consistent with
prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade
California Municipal Bonds.
MERRILL LYNCH CALIFORNIA MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and California income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH CAPITAL FUND,
INC. ............................ The highest total investment return
consistent with prudent risk through a
fully managed investment policy
utilizing equity, debt and convertible
securities.
MERRILL LYNCH COLORADO MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Colorado income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH CONNECTICUT MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from
</TABLE>
28
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<TABLE>
<S> <C>
Federal and Connecticut income taxes
as is consistent with prudent
investment management.
MERRILL LYNCH CORPORATE BOND FUND,
INC. ............................ Current income from three separate
diversified portfolios of fixed income
securities.
MERRILL LYNCH DEVELOPING CAPITAL
MARKETS FUND, INC. .............. Long-term appreciation through
investment in securities, principally
equities, of issuers in countries
having smaller capital markets.
MERRILL LYNCH DRAGON FUND, INC. ... Capital appreciation primarily through
investment in equity and debt securities
of issuers domiciled in developing
countries located in Asia and the
Pacific Basin, other than Japan,
Australia and New Zealand.
MERRILL LYNCH EUROFUND............. Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
MERRILL LYNCH FEDERAL SECURITIES
TRUST............................ High current return through investments
in U.S. Government and Government agency
securities, including GNMA
mortgage-backed certificates and other
mortgage-backed Government securities.
MERRILL LYNCH FLORIDA LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal income taxes as is
consistent with prudent investment
management while serving to offer
shareholders the opportunity to own
securities exempt from Florida
intangible personal property taxes
through investment in a portfolio
primarily of intermediate-term
investment grade Florida Municipal
Bonds.
MERRILL LYNCH FLORIDA MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
income taxes as is consistent with
prudent investment management while
seeking to offer shareholders the
opportunity to own securities exempt
from Florida intangible personal
property taxes.
MERRILL LYNCH FUND FOR TOMORROW,
INC. ............................ Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially
positioned to benefit from demographic
</TABLE>
29
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<TABLE>
<S> <C>
and cultural changes as they affect
consumer markets.
MERRILL LYNCH FUNDAMENTAL GROWTH
FUND, INC. ...................... Long-term growth of capital through
investment in a diversified portfolio of
equity securities placing particular
emphasis on companies that have
exhibited an above-average growth rate
in earnings.
MERRILL LYNCH GLOBAL ALLOCATION
FUND, INC. ...................... High total return consistent with
prudent risk, through a fully managed
investment policy utilizing U.S. and
foreign equity, debt and money market
securities, the combination of which
will be varied from time to time both
with respect to the types of
securities and markets in response to
changing market and economic trends.
MERRILL LYNCH GLOBAL BOND FUND FOR
INVESTMENT AND RETIREMENT........ High total investment return from
investment in a global portfolio of debt
investments denominated in various
currencies and multinational currency
units.
MERRILL LYNCH GLOBAL CONVERTIBLE
FUND, INC. ...................... High total return from investment
primarily in an internationally
diversified portfolio of convertible
debt securities, convertible preferred
stock and 'synthetic' convertible
securities consisting of a combination
of debt securities or preferred stock
and warrants or options.
MERRILL LYNCH GLOBAL HOLDINGS, INC.
(residents of Arizona must meet
investor suitability
standards)....................... The highest total investment return
consistent with prudent risk through
worldwide investment in an
internationally diversified portfolio
of securities.
MERRILL LYNCH GLOBAL RESOURCES
TRUST............................ Long-term growth and protection of
capital from investment in securities of
domestic and foreign companies that
possess substantial natural resource
assets.
MERRILL LYNCH GLOBAL SMALLCAP FUND,
INC.............................. Long-term growth of capital by investing
primarily in equity securities of
companies with relatively small market
capitalizations located in various
foreign countries and in the United
States.
MERRILL LYNCH GLOBAL UTILITY FUND,
INC. ............................ Capital appreciation and current income
through investment of at least 65% of
its total assets in equity and debt
securities issued by domestic and
foreign companies primarily engaged in
the ownership or operation of
facilities used to generate,
</TABLE>
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<TABLE>
<S> <C>
transmit or distribute electricity,
tele-communications, gas or water.
MERRILL LYNCH GROWTH FUND FOR
INVESTMENT AND RETIREMENT........ Growth of capital and, secondarily,
income from investment in a diversified
portfolio of equity securities placing
principal emphasis on those securities
which management of the fund believes
to be undervalued.
</TABLE>
<TABLE>
<S> <C>
MERRILL LYNCH HEALTHCARE FUND, INC.
(residents of Wisconsin must meet
investor suitability
standards)....................... Capital appreciation through worldwide
investment in equity securities of
companies that derive or are expected
to derive a substantial portion of
their sales from products and services
in health-care.
MERRILL LYNCH INTERNATIONAL EQUITY
FUND............................. Capital appreciation and, secondarily,
income by investing in a diversified
portfolio of equity securities of
issuers located in countries other
than the United States.
MERRILL LYNCH LATIN AMERICA FUND,
INC. ............................ Capital appreciation by investing
primarily in Latin American equity and
debt securities.
MERRILL LYNCH MARYLAND MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Maryland income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH MASSACHUSETTS LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal and Massachusetts
income taxes as is consistent with
prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade
Massachusetts Municipal Bonds.
MERRILL LYNCH MASSACHUSETTS
MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Massachusetts income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH MICHIGAN LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited
</TABLE>
31
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<TABLE>
<S> <C>
Maturity Municipal Series Trust, a
series fund, whose objective is to
provide as high a level of income
exempt from Federal and Michigan
income taxes as is consistent with
prudent investment management through
investment in a portfolio primarily of
intermediate-term investment grade
Michigan Municipal Bonds.
MERRILL LYNCH MICHIGAN MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Michigan income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH MINNESOTA MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Minnesota income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH MUNICIPAL BOND FUND,
INC. ............................ Tax-exempt income from three separate
diversified portfolios of municipal
bonds.
MERRILL LYNCH MUNICIPAL
INTERMEDIATE
TERM FUND........................ Currently the only portfolio of Merrill
Lynch Municipal Series Trust, a series
fund, whose objective is to provide as
high a level as possible of income
exempt from Federal income taxes by
investing in investment grade
obligations with a dollar weighted
average maturity of five to twelve
years.
MERRILL LYNCH NEW JERSEY LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal and New Jersey
income taxes as is consistent with
prudent investment management through
a portfolio primarily of
intermediate-term investment grade New
Jersey Municipal Bonds.
MERRILL LYNCH NEW JERSEY MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and New Jersey income taxes as is
consistent with prudent investment
management.
</TABLE>
32
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<TABLE>
<S> <C>
MERRILL LYNCH NEW MEXICO MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and New Mexico income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH NEW YORK LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management through investment in a
portfolio primarily of
intermediate-term investment grade New
York Municipal Bonds.
MERRILL LYNCH NEW YORK MUNICIPAL
BOND FUND........................ A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal,
New York State and New York City
income taxes as is consistent with
prudent investment management.
MERRILL LYNCH NORTH CAROLINA
MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and North Carolina income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH OHIO MUNICIPAL BOND
FUND............................. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Ohio income taxes as is consistent
with prudent investment management.
MERRILL LYNCH OREGON MUNICIPAL BOND
FUND............................. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Oregon income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH PACIFIC FUND,
INC. ............................ Capital appreciation by investing in
equity securities of corporations
domiciled in Far Eastern and Western
Pacific countries, including Japan,
Australia, Hong Kong and Singapore.
</TABLE>
33
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<TABLE>
<S> <C>
MERRILL LYNCH PENNSYLVANIA LIMITED
MATURITY MUNICIPAL BOND FUND..... A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust,
a series fund, whose objective is to
provide as high a level of income
exempt from Federal and Pennsylvania
income taxes as is consistent with
prudent investment management through
investment in a portfolio of
intermediate-term investment grade
Pennsylvania Municipal Bonds.
MERRILL LYNCH PENNSYLVANIA
MUNICIPAL BOND FUND.............. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
and Pennsylvania income taxes as is
consistent with prudent investment
management.
MERRILL LYNCH PHOENIX FUND,
INC. ............................ Long-term growth of capital by investing
in equity and fixed income securities,
including tax-exempt securities, of
issuers in weak financial condition or
experiencing poor operating results
believed to be undervalued relative to
the current or prospective condition
of such issuer.
MERRILL LYNCH SHORT-TERM GLOBAL
INCOME FUND, INC. ............... As high a level of current income as is
consistent with prudent investment
management from a global portfolio of
high quality debt securities
denominated in various currencies and
multinational currency units and
having remaining maturities not
exceeding three years.
MERRILL LYNCH SPECIAL VALUE FUND,
INC. ............................ Long-term growth of capital from
investments in securities, primarily
common stocks, of relatively small
companies believed to have special
investment value and emerging growth
companies regardless of size.
MERRILL LYNCH STRATEGIC DIVIDEND
FUND............................. Long-term total return from investment
in dividend paying common stocks which
yield more than Standard & Poor's 500
Composite Stock Price Index.
MERRILL LYNCH TECHNOLOGY FUND,
INC. ............................ Capital appreciation through worldwide
investment in equity securities of
companies that derive or are expected
to derive a substantial portion of
their sales from products and services
in technology.
</TABLE>
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<TABLE>
<S> <C>
MERRILL LYNCH TEXAS MUNICIPAL BOND
FUND............................. A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund,
whose objective is to provide as high
a level of income exempt from Federal
income taxes as is consistent with
prudent investment management by
investing primarily in a portfolio of
long-term, investment grade
obligations issued by the State of
Texas, its political subdivisions,
agencies and instrumentalities.
MERRILL LYNCH UTILITY INCOME FUND,
INC. ............................ High current income through investment
in equity and debt securities issued by
companies which are primarily engaged
in the ownership or operation of
facilities used to generate, transmit
or distribute electricity,
telecommunications, gas or water.
MERRILL LYNCH WORLD INCOME FUND,
INC. ............................ High current income by investing in a
global portfolio of fixed income
securities denominated in various
currencies, including multinational
currencies.
Class A Share Money Market Funds:
MERRILL LYNCH READY ASSETS TRUST... Preservation of capital, liquidity and
the highest possible current income
consistent with the foregoing
objectives from the short-term money
market securities in which the Trust
invests.
MERRILL LYNCH RETIREMENT RESERVES
MONEY FUND (available only for
exchanges within certain
retirement plans)................ Currently the only portfolio of Merrill
Lynch Retirement Series Trust, a series
fund, whose objectives are current
income, preservation of capital and
liquidity available from investing in
a diversified portfolio of short-term
money market securities.
MERRILL LYNCH U.S.A. GOVERNMENT
RESERVES......................... Preservation of capital, current income
and liquidity available from investing
in direct obligations of the U.S.
Government and repurchase agreements
relating to such securities.
MERRILL LYNCH U.S. TREASURY MONEY
FUND............................. Preservation of capital, liquidity and
current income through investment
exclusively in a diversified portfolio
of short-term marketable securities
which are direct obligations of the
U.S. Treasury.
Class B, Class C and Class D Share
Money Market Funds:
MERRILL LYNCH GOVERNMENT FUND...... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide
</TABLE>
35
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<TABLE>
<S> <C>
current income consistent with
liquidity and security of principal
from investment in securities issued
or guaranteed by the U.S. Government,
its agencies and instrumentalities and
in repurchase agreements secured by
such obligations.
MERRILL LYNCH INSTITUTIONAL FUND... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide maximum
current income consistent with
liquidity and the maintenance of a
high-quality portfolio of money market
securities.
MERRILL LYNCH INSTITUTIONAL
TAX-EXEMPT FUND.................. A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide current
income exempt from Federal income
taxes, preservation of capital and
liquidity available from investing in
a diversified portfolio of short-term,
high quality municipal bonds.
MERRILL LYNCH TREASURY FUND........ A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund,
whose objective is to provide current
income consistent with liquidity and
security of principal from investment
in direct obligations of the U.S.
Treasury and up to 10% of its total
assets in repurchase agreements
secured by such obligations.
</TABLE>
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their
Merrill Lynch financial consultant who will advise the Fund of the exchange.
Shareholders of the Fund, and shareholders of the other funds described above
with shares for which certificates have not been issued, may exercise the
exchange privilege by wire through their securities dealers. The Fund reserves
the right to require a properly completed exchange application. This exchange
privilege may be modified or terminated in accordance with the rules of the
Securities and Exchange Commission. The Fund reserves the right to limit the
number of times an investor may exercise the exchange privilege. Certain funds
may suspend the continuous offering of their shares at any time and may
thereafter resume such offering from time to time. The exchange privilege is
available only to U.S. shareholders in states where the exchange legally may be
made.
TAXES
The Fund intends to continue to qualify for the special tax treatment
afforded regulated investment companies ('RICs') under the Internal Revenue Code
of 1986, as amended (the 'Code'). If it so qualifies, the Fund (but not its
shareholders) will not be subject to Federal income tax on the part of its net
ordinary income and net realized capital gains which it distributes to Class A,
Class B, Class C and Class D shareholders (together, the 'shareholders'). The
Fund intends to distribute substantially all of such income.
36
<PAGE>
Dividends paid by the Fund from its ordinary income and distributions of
the Fund's net realized short-term capital gains (together referred to hereafter
as 'ordinary income dividends') are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures and options)
('capital gain dividends') are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Distributions in excess of the Fund's earnings and profits will first reduce the
adjusted tax basis of a holder's shares and, after such adjusted tax basis is
reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset). Any loss upon the sale or exchange of Fund
shares held for six months or less, however, will be treated as long-term
capital loss to the extent of any capital gain dividends received by the
shareholder.
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
that was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Fund and received by its
shareholders on December 31 of the year in which such dividend was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S. withholding
tax under existing provisions of the Code applicable to foreign individuals and
entities unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Nonresident shareholders are urged to
consult their own tax advisers concerning the applicability of the U.S.
withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ('backup withholding'). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
Dividends and interest received by the Fund may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate shares
as taxes paid by them and deduct such proportionate shares in computing their
taxable incomes or, alternatively, use them as foreign tax credits against their
U.S. income taxes. No deductions for foreign taxes, however, may be claimed by
noncorporate shareholders who do not itemize deductions. A shareholder that is a
nonresident alien individual or a foreign corporation may be subject to U.S.
withholding tax on the income resulting from the Fund's election described in
this paragraph but may not be able to claim a credit or deduction against such
U.S. tax for the foreign taxes treated as having been paid by such
37
<PAGE>
shareholder. The Fund will report annually to its shareholders the amount per
share of such withholding taxes. For this purpose, the Fund will allocate
foreign taxes and foreign source income among the Class A, Class B, Class C and
Class D shareholders according to a method (which it believes is consistent with
the Commission's exemptive order permitting the issuance and sale of multiple
classes of stock) that is based on the gross income allocable to Class A, Class
B, Class C and Class D shareholders during the taxable year, or such other
method as the Internal Revenue Service may prescribe.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class D shares. A shareholder's basis in
the Class D shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class D shares
will include the holding period for the converted Class B shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent the sales charge
paid to the Fund reduces any sales charge the shareholder would have owed upon
purchase of the new shares in the absence of the exchange privilege. Instead,
such sales charge will be treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Code requires the RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to distribute
its income and capital gains in the manner necessary to avoid imposition of the
4% excise tax, there can be no assurance that sufficient amounts of the Fund's
taxable income and capital gains will be distributed to avoid entirely the
imposition of the tax. In such event, the Fund will be liable for the tax only
on the amount by which it does not meet the foregoing distribution requirements.
The Treasury Department has authority to issue regulations concerning the
recharacterization of principal and interest payments with respect to debt
obligations issued in hyperinflationary currencies, which may include the
currencies of certain South American countries in which the Fund intends to
invest. No such regulations have been issued.
The Fund may invest in securities rated in the medium to lower rating
categories of nationally recognized rating organizations, and in unrated
securities ('high yield/high risk securities'), as described in the Prospectus.
Some of these high yield/high risk securities may be purchased at a discount and
may therefore cause the Fund to accrue income before amounts due under the
obligations are paid. In addition, a portion of the interest payments on such
high yield/high risk securities may be treated as dividends for Federal income
tax purposes; in such case, if the issuer of such high yield/high risk
securities is a domestic corporation, dividend payments by the Fund will be
eligible for the dividends received deduction to the extent of the deemed
dividend portion of such interest payments.
38
<PAGE>
TAX TREATMENT OF OPTIONS, FUTURES AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell options, futures and forward foreign
exchange contracts. Options and futures contracts that are 'Section 1256
contracts' will be 'marked to market' for Federal income tax purposes at the end
of each taxable year, i.e., each such option or futures contract will be treated
as sold for its fair market value on the last day of the taxable year. Unless
such contract is a non-equity option or a regulated futures contract for a
non-U.S. currency for which the Fund elects to have gain or loss treated as
ordinary gain or loss under Code Section 988 (as described below), gain or loss
from Section 1256 contracts will be 60% long-term and 40% short-term capital
gain or loss. The mark-to-market rules outlined above, however, will not apply
to certain transactions entered into by the Fund solely to reduce the risk of
changes in price or interest or currency exchange rates with respect to its
investments.
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. The Fund
may, nonetheless, elect to treat the gain or loss from certain forward foreign
exchange contracts as capital. In this case, gain or loss realized in connection
with a forward foreign exchange contract that is a Section 1256 contract will be
characterized as 60% long-term and 40% short-term capital gain or loss.
Code Section 1092, which applies to certain 'straddles', may affect the
taxation of the Fund's transactions in options, futures and forward foreign
exchange contracts and its short sales of securities. Under Section 1092, the
Fund may be required to postpone recognition for tax purposes of losses incurred
in certain closing transactions in options, futures and forward foreign exchange
contracts and its short sales of securities.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income be derived from gains from the sale or other disposition
of securities held for less than three months. Accordingly, the Fund may be
restricted in effecting certain short sales and closing transactions within
three months after entering into an option or futures contract.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS
In general, gains from 'foreign currencies' and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the Fund qualifies as a
RIC. It is currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, foreign currency
futures and forward foreign exchange contracts will be valued for purposes of
the RIC diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. dollar). In general,
foreign currency gains or losses from certain debt instruments, from certain
forward contracts, from futures contracts that are not 'regulated futures
contracts' and from unlisted options will be treated as ordinary income or loss
under Code Section 988. In certain circumstances, the Fund may elect capital
gain or loss treatment for such transactions. Regulated futures contracts, as
described above, will be taxed under Code Section 1256 unless application of
Section 988 is elected by the Fund. In general, however, Code Section 988 gains
or losses will increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as ordinary income.
Additionally, if Code Section 988 losses exceed other
39
<PAGE>
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary income dividend distributions, and any distributions
made before the losses were realized but in the same taxable year would be
recharacterized as a return of capital to shareholders, thereby reducing the
basis of each shareholder's Fund shares, and resulting in a capital gain for any
shareholder who received a distribution greater than such shareholder's basis in
Fund shares (assuming the shares were held as a capital asset). These rules and
the mark to market rules described above, however, will not apply to certain
transactions entered into by the Fund solely to reduce the risk of currency
fluctuations with respect to its investments.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action either
prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law varies
as to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
------------------------
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present or
prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return is determined separately for Class A, Class B, Class
C and Class D shares in accordance with a formula specified by the Commission.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and distributions
are reinvested and taking into account all applicable recurring and nonrecurring
expenses, including the maximum sales charge in the case of Class A and Class D
shares and the CDSC that would be applicable to a complete redemption of the
investment at the end of the specified period in the case of Class B and Class C
shares.
40
<PAGE>
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 longer periods of time.
Set forth below is total return information for the Class A and Class B
shares of the Fund for the period indicated. As a result of the implementation
of the Merrill Lynch Select Pricing(Service Mark) System, Class A shares of the
Fund outstanding prior to October 21, 1994, have been redesignated Class D
shares, and historical performance data pertaining to such shares is provided
below under the caption 'Class D Shares'. Since the new Class A and Class C
shares have not been issued prior to the date of this Statement of Additional
Information, performance information concerning the new Class A and Class C
shares is not yet provided.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS D SHARES
-------------------------------- ----------------------------------
REDEEMABLE REDEEMABLE
VALUE OF A VALUE OF A
HYPOTHETICAL HYPOTHETICAL
EXPRESSED AS A $1,000 EXPRESSED AS A $1,000
PERCENTAGE BASED INVESTMENT AT PERCENTAGE BASED INVESTMENT AT
ON A HYPOTHETICAL THE END OF ON A HYPOTHETICAL THE END OF THE
PERIOD $1,000 INVESTMENT THE PERIOD $1,000 INVESTMENT PERIOD
- --------------------------------------------------- ----------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
August 27, 1993
(commencement of operations) to
June 30, 1994.................................... (11.20)% $ 904.90 (11.07)% $ 906.10
ANNUAL TOTAL RETURN
(EXCLUDING MAXIMUM APPLICABLE SALES CHARGES)
Six months ended June 30, 1994..................... (15.35%) $ 846.50 (15.54)% $ 844.60
August 27, 1993
(commencement of operations) to
December 31, 1993................................ 11.49% $ 1,114.90 11.30% $ 1,113.00
AGGREGATE TOTAL RETURN
(INCLUDING MAXIMUM APPLICABLE SALES CHARGES)
August 27, 1993
(commencement of operations) to
June 30, 1994.................................... (9.51)% $ 904.90 (9.39)% $ 906.10
</TABLE>
In order to reflect the reduced sales charges, in the case of Class A or
Class D shares, or the waiver of the CDSC in the case of Class B shares,
applicable to certain investors, as described under 'Purchase of
41
<PAGE>
Shares' and 'Redemption of Shares', respectively, the total return data quoted
by the Fund in advertisements directed to such investors may take into account
reduced, and not the maximum, sales charge or may not take into account the CDSC
and therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses may be
deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund was incorporated under Maryland law on June 10, 1993. It has an
authorized capital of 400,000,000 shares of common stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and Class
D common stock, each of which consists of 100,000,000 shares. Class A, Class B,
Class C and Class D common stock represent an interest in the same assets of the
Fund and are identical in all respects except that the Class B, Class C and
Class D shares bear certain expenses related to the account maintenance and/or
distribution of such shares and have exclusive voting rights with respect to
matters relating to such account maintenance and/or distribution expenditures.
The Fund has received an order from the Commission permitting the issuance and
sale of multiple classes of common stock. The Board of Directors of the Fund may
classify and reclassify the shares of the Fund into additional classes of common
stock at a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors and
any other matter on which shareholders are entitled to vote. The Fund does not
intend to hold annual meetings of shareholders in any year in which the
Investment Company Act does not require shareholders to elect Directors. Also,
the by-laws of the Fund require that a special meeting of stockholders be held
upon the written request of at least 10% of the outstanding shares of the Fund
entitled to vote at such meeting, if they comply with applicable Maryland law.
Voting rights for Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive rights. Redemption and conversion rights
are discussed elsewhere herein and in the Prospectus. Each share is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund upon liquidation or dissolution after satisfaction of
outstanding liabilities, except that expenses related to the distribution of the
shares within a class will be borne solely by such class. Stock certificates are
issued by the transfer agent only on specific request. Certificates for
fractional shares are not issued in any case.
The Investment Adviser provided the initial capital for the Fund by
purchasing 5,000 Class A shares of common stock and 5,000 Class B shares of
common stock for an aggregate of $100,000. Such shares were acquired for
investment and can only be disposed of by redemption. The organizational
expenses of the Fund (estimated at approximately $97,151) will be paid by the
Fund and amortized over a period not exceeding five years. The proceeds realized
by the Investment Adviser (or any subsequent holder) upon redemption of any of
such shares will be reduced by the proportionate amount of the unamortized
organizational expenses which the number of shares redeemed bears to the number
of shares initially purchased.
42
<PAGE>
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class B and
Class D shares of the Fund based on the value of the Fund's net assets on June
30, 1994, and its shares outstanding on that date is set forth below.
Information is not provided for the new Class A or Class C shares since no new
Class A or Class C shares were publicly offered prior to the date of this
Statement of Additional Information. The offering price for Class B and Class C
shares of the Fund is the net asset value of Class B and Class C shares,
respectively.
<TABLE>
<CAPTION>
CLASS B CLASS D
--------------- ---------------
<S> <C> <C>
Net Assets.............................. $112,589,525 $19,166,303
--------------- ---------------
--------------- ---------------
Number of Shares Outstanding............ 12,784,343 2,176,424
--------------- ---------------
--------------- ---------------
Net Asset Value Per Share (net assets
divided by number of
shares outstanding)................... $8.81 $8.81
Sales Charge (for Class D shares: 4.00%
of offering price (4.17% of net amount
invested*))........................... ** 0.37
----- -----
Offering Price.......................... $8.81 $9.18
----- -----
----- -----
</TABLE>
- ------------------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge is
applicable.
** Class B and Class C shares are not subject to an initial sales charge but may
be subject to a CDSC on redemption of shares. See 'Purchase of Shares--Deferred
Sales Charge Alternatives--Class B and Class C Shares' in the Prospectus and
'Redemption of Shares-- Deferred Sales Charge--Class B Shares' herein.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Fund. The selection of
independent auditors is subject to ratification by the 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
(the 'Custodian'), 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 U.S. and with certain foreign banks and
securities depositories. The Custodian is responsible for safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
43
<PAGE>
TRANSFER AGENT
Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Fund's
transfer agent (the 'Transfer Agent'). The Transfer Agent is responsible for the
issuance, transfer and redemption of shares and the opening, maintenance and
servicing of shareholder accounts. See 'Management of the Fund--Transfer Agency
Services' in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on December 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 of 1933, as amended, and
the Investment Company Act, to which reference is hereby made.
Under a separate agreement, Merrill Lynch has granted the Fund the right to
use the 'Merrill Lynch' name and has reserved the right to withdraw its consent
to the use of such name by the Fund at any time or to grant the use of such name
to any other company, and the Fund has granted Merrill Lynch, under certain
conditions, the use of any other name it might assume in the future, with
respect to any corporation organized by Merrill Lynch.
To the knowledge of the Fund, no person or entity owned beneficially 5% or
more of the Fund's common stock on September 30, 1994.
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MERRILL LYNCH AMERICAS INCOME FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Americas Income Fund, Inc. as of
December 31, 1993, the related statements of operations, changes in net assets,
and cash flows, and the financial highlights for the period August 27, 1993
(commencement of operations) to December 31, 1993. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial highlights
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1993 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Americas Income Fund, Inc. as of December 31, 1993, the results of its
operations, the changes in its net assets, its cash flows, and the financial
highlights for the period August 27, 1993 to December 31, 1993 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 14, 1994
45
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in US dollars)
Interest Maturity Value Percent of
Face Amount Issue Rate Date (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Argentina Bonds $ 6,000,000 Banco de Credito Argentino (2) 8.50 % 10/29/1998 $ 6,015,000 5.3%
6,000,000 Banco de Galicia y Buenos Aires S.A.
--Yankee (2) 9.00 11/01/2003 6,090,000 5.4
6,000,000 Banco Frances del Rio de la Plata S.A.
--Yankee (2) 8.75 12/15/2003 6,075,000 5.3
1,000,000 Compania Naviera Perez Companc (3) 8.375 7/30/1998 1,021,250 0.9
3,000,000 Republic of Argentina--Global (1) 8.375 12/20/2003 3,041,250 2.7
3,000,000 Telecom Argentina Stet S.A. (4) 8.375 10/18/2000 3,075,000 2.7
5,000,000 Telefonica de Argentina S.A. (4) 8.375 10/01/2000 5,118,750 4.5
Brady Bonds 15,000,000 Argentina Par Series "L" (1)* 4.00 3/31/2023 10,293,750 9.0
5,000,000 Republic of Argentina FLRB (1)* 4.187 3/31/2005 4,387,500 3.9
Total Investments in Argentina
(Cost--$43,260,729) 45,117,500 39.7
Brazil Bonds 4,000,000 Banco de Estada Sao Paulo
(Banespa) (2) 9.25 10/04/1996 4,015,000 3.5
4,000,000 Banco do Estada do Parana (2) 10.00 2/27/1996 4,005,000 3.5
1,500,000 Banco Real, S.A. (2) 10.00 5/27/1995 1,526,250 1.4
</TABLE>
46
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
2,000,000 Brazil Exit Bonds(1) 6.00 9/15/2013 1,415,000 1.2
12,000,000 Republic of Brazil, IDU (1) 8.75 1/01/2001 9,975,000 8.8
3,000,000 Uniao de Bancos Brasileiros S.A.
(UNIBANCO) (2) 8.50 7/29/1996 2,996,400 2.6
Total Investments in Brazil
(Cost--$23,139,398) 23,932,650 21.0
Colombia Bonds 2,000,000 Banco de Colombia (2) 7.50 10/21/1998 1,955,000 1.7
Total Investments in Colombia
(Cost--$1,952,500) 1,955,000 1.7
Mexico Bonds 1,000,000 Banco de Atlantico, S.A. (2) 7.875 11/05/1998 1,010,000 0.9
2,000,000 Banco Nacional de Mexico, S.A. (2) 9.125 4/06/2000 2,187,500 1.9
1,000,000 Bancomer, S.A. (2) 8.00 7/07/1998 1,045,000 0.9
2,000,000 ++Grupo Simec, S.A. de C.V., guaranteed
by Grupo Sidek, S.A. (5) 8.875 12/15/1998 2,025,000 1.8
3,500,000 Grupo Situr, S.A. de C.V., guaranteed
by Grupo Sidek, S.A. (6) 8.75 9/14/1998 3,543,750 3.1
Brady Bonds 4,000,000 United Mexican States Discount "A"(1)* 4.187 12/31/2019 3,835,000 3.4
2,000,000 United Mexican States Discount "D"(1) 4.328 12/31/2019 1,917,500 1.7
5,000,000 United Mexican States Par "A"(1) 6.25 12/31/2019 4,162,500 3.6
13,000,000 United Mexican States Par "B"(1)* 6.25 12/31/2019 10,822,500 9.5
Cetes 10,814,040 Mexican Cetes (1) 12.80 10/20/1994 3,207,291 2.8
Repurchase
Agreement 5,600,000 Banco de Mexico, purchased on 12/29/93 5.25 1/03/1994 5,604,083 4.9
Total Investments in Mexico
(Cost--$37,327,692) 39,360,124 34.5
Peru Loan Agreement $ 4,000,000 Republic of Peru--Citibank (1) 5.00 11/15/2013 2,760,000 2.4
Total Investments in Peru
(Cost--$2,020,000) 2,760,000 2.4
Venezuela Bonds 1,000,000 Bariven, S.A. (8) 10.625 3/17/2002 1,051,250 0.9
750,000 ++Venezolana de Cementos S.A.C.A.
(VENCEMOS) (7) 9.25 11/22/1996 753,750 0.7
Brady Bonds 15,000,000 Republic of Venezuela Par "A"(1) 6.75 3/31/2020 11,156,250 9.8
10,000,000 Republic of Venezuela Par "B"(1) 6.75 3/31/2020 7,437,500 6.5
Total Investments in Venezuela
(Cost--$19,535,522) 20,398,750 17.9
United States Commercial Paper** 4,948,000 General Electric Capital Corp. 3.22 1/03/1994 4,948,000 4.3
Total Investments in the United States
(Cost--$4,948,000) 4,948,000 4.3
Total Investments (Cost--$132,183,841) 138,472,024 121.5
Liabilities in Excess of Other Assets (24,547,852) (21.5)
------------ ------
Net Assets $113,924,172 100.0%
============ ======
</TABLE>
++Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $2,779,000, representing 2.44% of
net assets.
Acquisition Value
Issue Date Cost (Note 1a)
Grupo Simec, S.A. de C.V., guaranteed
by Grupo Sidek, S.A. 12/02/93 $1,990,880 $2,025,000
Venezolana de Cementos S.A.C.A.
(VENCEMOS) 12/23/93 753,750 753,750
Total $2,744,630 $2,778,750
========== ==========
*Security represents collateral in connection with reverse repurchase
agreements (Note 5).
**Commercial Paper is traded on a discount basic; the interest rate shown is the
discount rate paid at the time of purchase by the Fund.
Corresponding industry groups for securities (percent of net assets):
(1) Sovereign Government Obligations--65.3%
(2) Banking--32.4%
(3) Industrial--0.9%
(4) Telecommunications--7.2%
(5) Steel--1.8%
(6) Tourism--3.1%
(7) Cement--0.7%
(8) Oil--0.9%
See Notes to Financial Statements.
47
<PAGE>
Merrill Lynch Americas Income Fund, Inc., December 31, 1993
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of December 31, 1993
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$132,183,841) (Note 1a) $138,472,024
Cash 761,259
Receivables:
Securities sold $ 2,875,000
Interest 2,489,503
Beneficial interest sold 1,094,887
Investment adviser (Note 2) 273,010 6,732,400
------------
Deferred organization expenses (Note 1f) 97,151
Prepaid registration fees and other assets (Note 1f) 27,695
------------
Total assets 146,090,529
------------
Liabilities: Payables:
Reverse repurchase agreement (Note 5) 21,546,000
Securities purchased 9,382,101
Dividends to shareholders (Note 1g) 799,284
Interest expense (Note 5) 111,492
Beneficial interest redeemed 87,238
Distributor (Note 2) 66,498 31,992,613
------------
Accrued expenses and other liabilities 173,744
------------
Total liabilities 32,166,357
------------
Net Assets: Net assets $113,924,172
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized $ 139,114
Consist of: Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 912,091
Paid-in capital in excess of par 104,942,477
Undistributed realized capital gains on investments and foreign currency
transactions--net 1,642,291
Unrealized appreciation on investments and foreign currency transactions--net 6,288,199
------------
Net assets $113,924,172
============
Net Asset Class A--Based on net assets of $15,075,848 and 1,391,143 shares outstanding $ 10.84
Value: ============
Class B--Based on net assets of $98,848,324 and 9,120,906 shares outstanding $ 10.84
============
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
August 27, 1993++ to
December 31, 1993
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $ 2,587,246
Income ------------
(Notes
1d & 1e):
Expenses: Distribution and account maintenance fees--Class B (Note 2) 206,464
Investment advisory fees (Note 2) 197,936
Interest expense (Note 5) 111,492
Registration fees (Note 1e) 110,828
Custodian fees 64,100
Transfer agent fees--Class B (Note 2) 22,682
Printing and shareholder reports 21,986
Accounting services (Note 2) 21,800
Account maintenance fee--Class A (Note 2) 13,652
Directors' fees and expenses 11,450
Professional fees 9,285
Amortization of organization expenses (Note 1e) 7,447
Transfer agent fees--Class A (Note 2) 4,254
Other 4,878
------------
Total expenses before reimbursement 808,254
Reimbursement of expenses (Note 2) (470,946)
------------
Total expenses after reimbursement 337,308
------------
Investment income--net 2,249,938
------------
Realized & Realized gain from:
Unrealized Investments--net $ 2,019,841
Gain (Loss) Foreign currency transactions 4,058 2,023,899
on Invest- ------------
ments & Unrealized appreciation on:
Foreign Investments--net 6,288,183
Currency Foreign currency transactions 16 6,288,199
Trans- ------------ ------------
actions--Net Net realized and unrealized gain on investments and foreign currency transactions 8,312,098
(Notes 1b, ------------
1d & 3): Net Increase in Net Assets Resulting from Operations $ 10,562,036
============
<FN>
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
Merrill Lynch Americas Income Fund, Inc., December 31, 1993
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
August 27, 1993++ to
December 31, 1993
Increase (Decrease) in Net Assets:
<S> <C> <C>
Operations: Investment income--net $ 2,249,938
Realized gain on investments and foreign currency transactions--net 2,023,899
Unrealized appreciation on investments and foreign currency transactions--net 6,288,199
------------
Net increase in net assets resulting from operations 10,562,036
------------
Dividends & Investment income--net:
Distribu- Class A (390,108)
tions to Class B (1,859,830)
Shareholders Realized gain on investments--net:
(Note 1g): Class A (50,931)
Class B (330,677)
------------
Net decrease in net assets resulting from dividends and distributions to shareholders (2,631,546)
------------
Capital Share Net increase in net assets derived from capital share transactions 105,893,682
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 113,824,172
Beginning of period 100,000
------------
End of period $113,924,172
============
<FN>
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
August 27, 1993++ to
December 31, 1993
<S> <C> <C>
Cash Used Net increase in net assets resulting from operations $ 10,562,036
for Operating Adjustments to reconcile net increase (decrease) in net assets resulting from operations
Activities: to net cash used for operating activities:
Increase in receivables (2,762,513)
Increase in other assets (124,846)
Increase in other liabilities 351,734
Amortization of organization expenses 7,447
Realized and unrealized gain on investments and foreign currency transactions--net (8,312,098)
------------
Net cash used for operating activities (278,240)
------------
Cash Used Proceeds from sales of long-term securities 50,369,843
for Investing Purchases of long-term securities (166,510,759)
Activities: Purchases of short-term investments (931,476,943)
Proceeds from sales and maturities of short-term investments 923,957,587
------------
Net cash used for investing activities (123,660,272)
------------
Cash Provided Cash receipts from issuance of Common Stock 116,426,916
by Financing Cash receipts from Reverse Repurchase Agreements 21,546,000
Activities: Cash payments on capital shares redeemed (12,611,006)
Dividends paid to shareholders (762,139)
------------
Net cash provided by financing activities 124,599,771
------------
Cash: Net increase (decrease) in cash 661,259
Cash at beginning of period 100,000
------------
Cash at end of period $ 761,259
============
Cash Flow Cash paid for interest $ 111,492
Information: ============
Noncash Capital shares issued in reinvestment of dividends paid to shareholders $ 1,070,123
Financing ============
Activities:
<FN>
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
Merrill Lynch Americas Income Fund, Inc., December 31, 1993
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Period
The following per share data and ratios have been derived August 27, 1993++ to
from information provided in the financial statements. December 31, 1993
Increase (Decrease) in Net Asset Value: Class A Class B
<S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00
Operating ------- -------
Performance: Investment income--net .26 .24
Realized and unrealized gain on investments
and foreign currency transactions--net .88 .88
------- -------
Total from investment operations 1.14 1.12
------- -------
Less dividends and distributions:
Investment income--net (.26) (.24)
Realized gain on investments--net (.04) (.04)
------- -------
Total dividends and distributions (.30) (.28)
------- -------
Net asset value, end of period $ 10.84 $ 10.84
======= =======
Total Based on net asset value per share 11.49%+++ 11.30%+++
Investment ======= =======
Return:**
Ratios to Expenses, net of reimbursement and excluding account
Average maintenance and distribution fees .35%* .35%*
Net Assets: ======= =======
Expenses, net of reimbursement .60%* 1.10%*
======= =======
Expenses 2.03%* 2.53%*
======= =======
Investment income--net 7.14%* 6.76%*
======= =======
Supplemental Net assets, end of period (in thousands) $15,076 $98,848
Data: ======= =======
Portfolio turnover 75.18% 75.18%
======= =======
<FN>
++Commencement of Operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Americas Income Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. Prior to commencement
of operations on August 27, 1993, the Fund had no operations other
than those relating to organizational matters and the issuance of
5,000 Class A Shares of beneficial interest and 5,000 Class B Shares
of beneficial interest of the Fund to Merrill Lynch Asset Management,
Inc. ("MLAM") for $100,000. The Fund offers both Class A and
Class B Shares. Class A Shares are sold with a front-end sales charge.
Class B Shares may be subject to a contingent deferred sales charge.
Both classes of shares have identical voting, dividend, liquidation
and other rights and the same terms and conditions, except that
Class A Shares bear the expenses of their account maintenance
fee and Class B Shares bear certain expenses related to their dis-
tribution of such shares. Each class has exclusive voting rights
with respect to matters relating to their respective distribution and
account maintenance expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of Securities--Securities traded in the over-the-
counter market are valued at the last available bid price or yield
equivalents obtained from one or more dealers in the over-the-counter
market prior to the time of valuation. Portfolio securities which are
traded on stock exchanges are valued at the last sale price on the
principal market on which such securities are traded, as of the close
of business on the day the securities are being valued or, lacking
any sales, at the last available bid price.
Options written are valued based upon the last asked price in the
case of exchange-traded options or, in the case of options traded in
the over-the-counter market, the average of the last asked price as
obtained from one or more dealers. Options purchased by the Fund
are valued at their last bid price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter
market, the average of the last bid price as obtained from two or
more dealers.
Other investments, including futures contracts and related options,
are stated at market value or at the fair value at which it
is expected they may be resold, as determined in good faith by or
under the direction of the Board of Directors of the Fund.
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 Directors of the Fund.
(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. Foreign
currency transactions are the result of settling (realized) or valuing
(unrealized) such transactions expressed in foreign currencies into
US dollars. Realized and unrealized gains or losses from investments
include the effects of foreign exchange rates on investments.
The Fund 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.
52
<PAGE>
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 contracts.
(c) 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 is less than or 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 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 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). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Deferred Organization Expenses and Prepaid Registration Fees--
Deferred organization expenses and expenses relating to the organi-
zation of the second class of shares are charged to expense over a
five-year period. Prepaid registration fees are charged to expense
as the related shares are issued.
(g) Dividends and Distributions--Dividends from net investment
income are declared daily and paid monthly. Distribution of capital
gains are recorded on the ex-dividend dates.
(h) Financial Futures Contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
as a hedge against adverse changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a
security, respectively, for a set price on a future date. 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 unreal-
ized 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.
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement
with Merrill Lynch Asset Management ("MLAM"). MLAM is the
name under which Merrill Lynch Investment Management, Inc.
("MLIM") does business. MLIM is an indirect wholly-owned sub-
sidiary of Merrill Lynch & Co., Inc. The Fund has also entered into a
Distribution Agreement and a Distribution Plan with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of MLIM.
Effective January 1, 1994, the investment advisory business of MLAM
was reorganized from a corporation to a limited partnership. The
general partner of MLAM is Princeton Services, Inc., an indirect
wholly-owned subsidiary of Merrill Lynch & Co.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operation of the Fund.
For such services, the Fund pays a monthly fee of 0.60%, on an annual
basis, of the average daily value of the Fund's net assets. The most
restrictive annual expense limitation requires that the Investment
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and com-
missions, and extraordinary items) exceed 2.5% of the Fund's first
$30 million of average daily net assets, 2.0% of the next $70 million of
average daily net assets, and 1.5% of the average daily net assets in
excess thereof. 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 at the time of such payment. For the
period August 27, 1993 to December 31, 1993, MLAM earned fees of
$197,936, all of which was voluntarily waived. In addition, MLAM
voluntarily reimbursed the Fund $273,010 for additional expenses.
The Fund has adopted Plans of Distribution (the "Distribution Plans")
pursuant to Rule 12b-1 under the Investment Company Act of 1940
pursuant to which MLFD receives a fee from the Fund at the end of
each month at the annual rate of 0.25% of average daily net assets of
the Fund attributable to Class A Shares in order to compensate the
distributor and Merrill Lynch for account maintenance activities, and
0.50% and 0.25%, respectively, of average daily net assets of the Fund
attributable to Class B Shares. This fee is to compensate the Distributor
for the services it provides and the expenses borne by the Distributor
under the Distribution Agreement. As authorized by the Plan, the
Distributor has entered into an agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S") which provides for the
compensation of MLPF&S for providing distribution-related services
to the Fund. For the period August 27, 1993 to December 31, 1993,
MLFD earned $220,116 under the Plan, all of which was paid to
MLPF&S pursuant to the agreement.
For the period August 27, 1993 to December 31, 1993, MLFD earned
underwriting discounts of $5,926, and MLPF&S earned dealer
concessions of $311,817 on sales of Class A Shares. MLPF&S also
received contingent deferred sales charges of $51,471 relating to
Class B Share transactions.
Financial Data Services, Inc. (FDS), a wholly-owned subsidiary of
Merrill Lynch & Co., Inc., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, MLPF&S, MLFD, FDS, and/or Merrill Lynch &
Co., Inc.
54
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period ended December 31, 1993 were $175,892,860 and
$54,339,234, respectively.
Realized and unrealized gains as of December 31, 1993 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $2,019,841 $6,288,183
Foreign currency transactions 4,058 16
---------- ----------
Total $2,023,899 $6,288,199
========== ==========
As of December 31, 1993, net unrealized appreciation for Federal
income tax purposes aggregated $6,288,183, of which $6,339,433
related to appreciated securities and $51,250 related to depreciated
securities. At December 31, 1993, the aggregate cost of investments,
including options purchased less premiums received for options
written, for Federal income tax purposes was $132,183,841.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest transactions
was $105,893,682 for the period December 31, 1993.
Transactions in shares of beneficial interest were as follows:
Class A Shares for the Period
Aug. 27, 1993++ Dollar
To December 31, 1993 Shares Amount
Shares sold 1,903,377 $19,440,340
Shares issued to shareholders
in reinvestment of dividends
and distributions 13,895 147,557
--------- -----------
Total issued 1,917,272 19,587,897
Shares redeemed (531,129) (5,477,202)
--------- -----------
Net increase 1,386,143 $14,110,695
========= ===========
[FN]
++ Prior to August 27, 1993 (commencement of operations), the
Fund issued 5,000 shares to MLAM for $50,000.
Class B Shares for the Period
Aug. 27, 1993++ Dollar
To December 31, 1993 Shares Amount
Shares sold 9,729,435 $98,081,463
Shares issued to shareholders
in reinvestment of dividends
and distributions 86,577 922,566
--------- -----------
Total issued 9,816,012 99,004,029
Shares redeemed (700,106) (7,221,042)
--------- -----------
Net increase 9,115,906 $91,782,987
========= ===========
[FN]
++ Prior to August 27, 1993 (commencement of operations), the
Fund issued 5,000 shares to MLAM for $50,000.
5. Reverse Repurchase Agreements:
Under a reverse repurchase agreement, the Fund sells securities
and agrees to repurchase them at a mutually agreed upon date and
price. At the time the Fund enters into a reverse repurchase agree-
ment, it may establish a segregated account with the custodian
containing cash, cash equivalents or liquid high grade debt securities
having a value at least equal to the repurchase price.
As of December 31, 1993, the Fund had entered into reverse repur-
chase agreements in the amount of $21,546,000. For the period
August 27, 1993 to December 31, 1993, the maximum amount
entered into was $21,546,000, the average amount outstanding was
$18,977,362, and the daily weighted average interest rate was 4.50%.
55
<PAGE>
THE FOLLOWING SEMI-ANNUAL FINANCIAL STATEMENTS FOR THE FUND FOR THE PERIOD ENDED
JUNE 30, 1994, ARE UNAUDITED, THESE UNAUDITED INTERIM FINANCIAL STATEMENTS
REFLECT ALL ADJUSTMENTS WHICH ARE, IN THE OPINION OF MANAGEMENT, NECESSARY TO A
FAIR STATEMENT OF THE RESULTS FOR THE INTERIM PERIOD PRESENTED. ALL SUCH
ADJUSTMENTS ARE OF A NORMAL RECURRING NATURE.
56
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in US dollars)
Interest Maturity Value Percent of
COUNTRY Face Amount Issue Rate Date (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Argentina Bonds $ 6,000,000 ++Banco de Credito Argentino (2) 8.50% 10/29/1998 $ 5,520,000 4.2%
6,000,000 Banco de Galicia y Buenos Aires S.A.
--Yankee (2) 9.00 11/01/2003 5,040,000 3.8
1,000,000 ++Banco Rio de la Plata S.A. (2) 8.50 7/15/1998 937,500 0.7
6,000,000 Banco Rio de la Plata S.A.--Yankee (2) 8.75 12/15/2003 4,950,000 3.8
4,000,000 Republic of Argentina--Global (1) 8.375 12/20/2003 3,290,000 2.5
2,000,000 Sociedad Commercial del Plata (16) 8.75 12/14/1998 1,820,000 1.4
3,000,000 Telecom Argentina Stet S.A. (4) 8.375 10/18/2000 2,685,000 2.0
5,000,000 Telefonica de Argentina S.A. (4) 8.375 10/01/2000 4,525,000 3.4
Brady Bonds 17,000,000 Argentina Par Series 'L' (1)* 4.25 3/31/2023 8,436,250 6.4
7,000,000 Republic of Argentina FLRB (1)* 5.00 3/31/2005 4,996,250 3.8
Total Investments in Argentina (Cost--$48,874,171) 42,200,000 32.0
</TABLE>
57
<PAGE>
Merrill Lynch Americas Income Fund, Inc., June 30, 1994
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Interest Maturity Value Percent of
COUNTRY Face Amount Issue Rate Date (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Brazil Bonds $ 4,000,000 Banco de Estado de Parana (2) 10.00% 2/27/1996 $ 3,820,000 2.9%
4,000,000 Banco de Estado Sao Paulo (Banespa) (2) 9.25 10/04/1996 3,960,000 3.0
1,500,000 Banco Real, S.A. (2) 10.00 5/27/1995 1,496,250 1.1
1,000,000 ++Celulose Nipo-Brasileira, S.A.
(CENIBRA) (15) 9.375 12/21/2003 900,000 0.7
1,000,000 ++Compania Brazileira de Petroleo
Ipiranga (8) 8.625 2/25/2002 905,000 0.7
1,000,000 Klabine Fabricadora Papel (12) 10.00 12/20/2001 897,500 0.7
3,000,000 Uniao de Bancos Brasileiros S.A.
(UNIBANCO) (2) 8.50 7/29/1996 2,850,000 2.2
850,000 Usinas Siderurgicas de Minas Gerais--
Usiminas S.A. (2) 10.00 1/15/1996 803,250 0.6
Brady Bonds 5,000,000 Brazil Exit Bonds (1) 6.00 9/15/2013 2,375,000 1.8
10,000,000 Republic of Brazil (1) DCB 5.25 4/15/2012 4,800,000 3.7
5,000,000 Republic of Brazil (1) New Money 5.25 4/15/2009 2,550,000 1.9
Total Investments in Brazil (Cost--$26,672,950) 25,357,000 19.3
Colombia Bonds 2,000,000 Banco de Colombia (2) 7.50 10/21/1998 1,895,000 1.4
Total Investments in Colombia (Cost--$1,952,500) 1,895,000 1.4
Ecuador Loan 3,000,000 Banco Central de Equador Consolidated
Agreement Agreement (17) 10.00 3/09/2024 1,575,000 1.2
Total Investments in Ecuador (Cost--$1,798,750) 1,575,000 1.2
Mexico Bonds 1,500,000 Banamex Eurobond, S.A. (1) 9.125 4/06/2000 1,498,125 1.1
1,000,000 ++Banco de Atlantico, S.A. (2) 7.875 11/05/1998 933,750 0.7
3,000,000 Cementos Mexicanos, S.A. de C.V.
(Cemex) (18) 10.00 11/15/1996 3,082,500 2.4
2,000,000 Fomento Economico Mexicano, S.A. de C.V.
(Femsa) (10) 9.50 7/22/1997 2,017,500 1.5
1,000,000 Grupo Financiero Bancomer, S.A. de
C.V. (2) 8.00 7/07/1998 960,000 0.7
2,000,000 ++Grupo Simec, S.A. de C.V., guaranteed
by Grupo Sidek, S.A. (5) 8.875 12/15/1998 1,885,000 1.4
3,500,000 Grupo Situr, S.A. de C.V., guaranteed
by Grupo Sidek, S.A. (6) 8.75 9/14/1998 3,298,750 2.5
Brady Bonds 14,000,000 United Mexican States Par 'A' (1) 6.25 12/31/2019 4,427,500 3.4
48,001,000 United Mexican States Par 'B' (1)* 6.25 12/31/2019 15,180,000 11.5
Cetes 10,814,040 Mexican Cetes (1) 12.80+++ 10/20/1994 3,034,384 2.3
Repurchase 5,000,000 Banco de Mexico, purchased on 6/30/94 6.25 7/05/1994 5,004,340 3.8
Agreement
Total Investments in Mexico (Cost--$45,931,235) 41,321,849 31.3
United Corporate 2,000,000 ADT Operations (3) 9.25 8/01/2003 1,865,000 1.4
States Bonds 1,000,000 Chiquita Brands International, Inc.
(10) 9.125 3/01/2004 920,000 0.7
2,000,000 Flagstar Companies, Inc. (13) 11.375 9/15/2003 1,820,000 1.4
1,000,000 Fort Howard Corporation (12) 9.00 2/01/2006 850,000 0.7
1,000,000 ++Fresh Del Monte Produce N.V. (10) 10.00 5/01/2003 910,000 0.7
1,000,000 Gulf Canada Resources, Ltd. (15) 9.25 1/15/2004 920,000 0.7
</TABLE>
58
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1,000,000 Reliance Group Holdings, Inc. (2) 9.75 11/15/2003 905,000 0.7
2,000,000 Riverwood International Corporation
(12) 11.25 6/15/2002 2,070,000 1.6
2,000,000 Sequa Corp. (9) 9.375 12/15/2003 1,960,000 1.5
500,000 Trump Plaza Funding Inc. (11) 10.875 6/15/2001 410,000 0.3
1,500,000 WestPoint Stevens, Inc. (14) 9.375 12/15/2005 1,357,500 1.0
Total Investments in the United States (Cost--$15,499,750) 13,987,500 10.7
Venezuela Bonds 1,000,000 Bariven, S.A. (8) 10.625 3/17/2002 865,000 0.7
750,000 ++Venezolana de Cementos S.A.C.A.
(VENCEMOS) (7) 9.25 11/22/1996 710,625 0.6
Brady Bonds 12,080,000 Republic of Venezuela Par 'A' (1) 6.75 3/31/2020 5,820,000 4.4
16,060,000 Republic of Venezuela Par 'B' (1) 6.75 3/31/2020 7,760,000 5.9
Total Investments in Venezuela (Cost--$18,642,054) 15,155,625 11.6
SHORT-TERM
SECURITIES
United Commercial 640,000 General Electric Capital Corp. 4.30 7/01/1994 640,000 0.4
States Paper**
Total Investments in Short-Term Securities (Cost--$640,000) 640,000 0.4
<CAPTION>
PUT OPTIONS Par Strike Expiration
PURCHASED Value Price Date
<S> <C> <C> <C> <C> <C>
$10,000,000 US Treasury Bonds $100.00 July 1994 79,688 0.0
Total Put Options Purchased (Cost--$72,600) 79,688 0.0
Total Investments (Cost--$160,084,010) 142,211,662 107.9
Liabilities in Excess of Other Assets (10,455,834) (7.9)
------------ ------
Net Assets $131,755,828 100.0%
============ ======
<FN>
++Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $12,702,000, representing 9.6% of net assets.
+++The interest rate shown represents the yield-to-maturity on this zero
coupon issue.
*Security represents collateral in connection with reverse repurchase agreements (Note 5).
**Commercial Paper is traded on a discount basis; the interest rate shown is the
discount rate paid at the time of purchase by the Fund.
Corresponding industry groups for securities (percent of net assets):
(1) Sovereign Government Obligations--48.7%
(2) Banking--25.8%
(3) Industrial--1.4%
(4) Telecommunications--5.4%
(5) Steel--1.4%
(6) Tourism--2.5%
(7) Cement--0.6%
(8) Oil--1.4%
(9) Capital Goods--1.5%
(10) Food & Beverage--2.9%
(11) Hotels & Casinos--0.3%
(12) Paper--3.0%
(13) Restaurants--1.4%
(14) Textiles--1.0%
(15) Energy--1.4%
(16) Conglomerate-Energy--1.4%
(17) Loan Agreement--1.2%
(18) Building & Construction--2.4%
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
Merrill Lynch Americas Income Fund, Inc., June 30, 1994
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of June 30, 1994
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$160,011,410)(Note 1a) $ 142,131,974
Put options purchased at value (cost--$72,600)(Notes 1a & 1c) 79,688
Cash 364
Receivables:
Securities sold $ 11,779,625
Interest 2,720,830
Beneficial interest sold 386,520 14,886,975
-------------
Deferred organization expenses (Note 1f) 97,151
Prepaid registration fees and other assets (Note 1f) 27,695
-------------
Total assets 157,223,847
-------------
Liabilities: Payables:
Reverse repurchase agreements (Note 5) 15,192,000
Securities purchased 8,863,368
Dividends to shareholders (Note 1g) 420,146
Interest expense (Note 5) 270,715
Beneficial interest redeemed 249,416
Investment adviser (Note 2) 115,040
Distributor (Note 2) 75,407
Options purchased 72,600 25,258,692
-------------
Accrued expenses and other liabilities 209,327
-------------
Total liabilities 25,468,019
-------------
Net Assets: Net assets $ 131,755,828
=============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 217,642
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 1,278,434
Paid-in capital in excess of par 148,754,907
Accumulated realized capital losses--net (621,660)
Unrealized depreciation on investments and foreign currency transactions
--net (17,873,495)
-------------
Net assets $ 131,755,828
=============
Net Asset Value: Class A--Based on net assets of $19,166,303 and 2,176,424 shares
outstanding $ 8.81
=============
Class B--Based on net assets of $112,589,525 and 12,784,343 shares
outstanding $ 8.81
=============
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1994
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $ 6,165,960
Income -------------
(Notes 1d & 1e):
Expenses: Investment advisory fees (Note 2) 407,745
Interest expense (Note 5) 403,204
Distribution and account maintenance fees--Class B (Note 2) 399,687
Custodian fees 71,379
Transfer agent fees--Class B (Note 2) 65,490
Printing and shareholder reports 61,788
Registration fees (Note 1f) 52,784
Accounting services (Note 2) 45,792
Professional fees 33,091
Account maintenance fees--Class A (Note 2) 21,894
Directors' fees and expenses 12,848
Amortization of organization expenses (Note 1f) 10,615
Transfer agent fees--Class A (Note 2) 10,172
Pricing fees 769
Other 1,318
-------------
Total expenses before reimbursement 1,598,576
Reimbursement of expenses (Note 2) (277,033)
-------------
Total expenses after reimbursement 1,321,543
-------------
Investment income--net 4,844,417
-------------
Realized & Realized loss on investments--net (2,263,951)
Unrealized Gain Change in unrealized appreciation/depreciation on:
(Loss) on Investments--net (24,160,531)
Investments & Foreign currency transactions--net (1,163) (24,161,694)
Foreign ------------- -------------
Currency Net realized and unrealized loss on investments and foreign currency
Transactions transactions (26,425,645)
- --Net -------------
(Notes 1b, 1d Net Decrease in Net Assets Resulting from Operations $ (21,581,228)
& 3): =============
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
Merrill Lynch Americas Income Fund, Inc., June 30, 1994
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the
Period
For the Six Aug. 27,
Months Ended 1993++ to
Increase (Decrease) in Net Assets: June 30, 1994 Dec. 31, 1993
<S> <C> <C> <C>
Operations: Investment income--net $ 4,844,417 $ 2,249,938
Realized gain (loss) on investments and foreign currency transactions
--net (2,263,951) 2,023,899
Unrealized appreciation/depreciation on investments and foreign currency
transactions--net (24,161,694) 6,288,199
------------- -------------
Net increase (decrease) in net assets resulting from operations (21,581,228) 10,562,036
------------- -------------
Dividends & Investment income--net:
Distributions to Class A (722,522) (390,108)
Shareholders Class B (4,121,895) (1,859,830)
(Note 1g): Realized gain on investments--net:
Class A -- (50,931)
Class B -- (330,677)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (4,844,417) (2,631,546)
------------- -------------
Capital Share Net increase in net assets derived from capital share transactions 44,257,301 105,893,682
Transactions ------------- -------------
(Note 4):
Net Assets: Total increase in net assets 17,831,656 113,824,172
Beginning of period 113,924,172 100,000
------------- -------------
End of period $ 131,755,828 $ 113,924,172
============= =============
<FN>
++Commencement of Operations.
</TABLE>
See Notes to Financial Statements.
62
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six
Months Ended
June 30, 1994
<S> <C> <C>
Cash Net decrease in net assets resulting from operations $ (21,581,228)
Provided by Adjustments to reconcile net decrease in net assets resulting from operations to
Operating net cash provided by operating activities:
Activities: Decrease in receivables 41,683
Increase in other liabilities 318,755
Realized and unrealized gain on investments and foreign currency transactions--net 26,425,645
Amortization of premium and discount 339,585
-------------
Net cash provided by operating activities 5,544,440
-------------
Cash Used for Proceeds from sales of long-term securities 100,115,638
Investing Purchases of long-term securities (144,393,148)
Activities:
Purchases of short-term investments 609,034,000
Proceeds from sales and maturities of short-term investments (604,612,116)
-------------
Net cash used for investing activities (39,855,626)
-------------
Cash Cash receipts from issuance of common stock 60,111,829
Provided by Repayments of borrowings--net (6,354,000)
Financing Cash payments on capital shares redeemed (16,942,084)
Activities: Dividends paid to shareholders (3,265,454)
-------------
Net cash provided by financing activities 33,550,291
-------------
Cash: Net decrease in cash (760,895)
Cash at beginning of period 761,259
-------------
Cash at end of period $ 364
=============
Cash Flow Cash paid for interest $ 403,204
Information: =============
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
Merrill Lynch Americas Income Fund, Inc., June 30, 1994
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A Class B
For the For the For the For the
Six Period Six Period
The following per share data and ratios have been derived Months Aug. 27, Months Aug.27,
from information provided in the financial statements. Ended 1993++ to Ended 1993++ to
June 30, Dec. 31, June 30, Dec. 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.84 $ 10.00 $ 10.84 $ 10.00
Operating --------- --------- --------- ---------
Performance: Investment income--net .36 .26 .34 .24
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net (2.03) .88 (2.03) .88
--------- --------- --------- ---------
Total from investment operations (1.67) 1.14 (1.69) 1.12
--------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.36) (.26) (.34) (.24)
Realized gain on investments--net -- (.04) -- (.04)
--------- --------- --------- ---------
Total dividends and distributions (.36) (.30) (.34) (.28)
--------- --------- --------- ---------
Net asset value, end of period $ 8.81 $ 10.84 $ 8.81 $ 10.84
========= ========= ========= =========
Total Based on net asset value per share (15.35)%+++ 11.49%+++ (15.54%)+++ 11.30%+++
Investment ========= ========= ========= =========
Return:**
Ratios to Expenses, excluding account maintenance/distribution
Average fee and net of reimbursement 1.46%* .35%* 1.46%* .35%*
Net Assets: ========= ========= ========= =========
Expenses, net of reimbursement 1.71%* .60%* 2.21%* 1.10%*
========= ========= ========= =========
Expenses 2.14%* 2.03%* 2.66%* 2.53%*
========= ========= ========= =========
Investment income--net 8.20%* 7.14%* 7.69%* 6.76%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 19,166 $ 15,076 $ 112,590 $ 98,848
Data: ========= ========= ========= =========
Portfolio turnover 81.80% 75.18% 81.80% 75.18%
========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Americas Income Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. The Fund offers both Class A and
Class B Shares. Class A Shares are sold with a front-end sales
charge. Class B Shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class A Shares bear the expenses of the ongoing account
maintenance fee with respect to the Class A Shares and Class B
Shares bear the expenses of the ongoing account maintenance and
distribution fees with respect to the Class B Shares, and each class
has exclusive voting rights with respect to matters relating to
their respective account maintenance and distribution plans. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of Securities--Securities traded in the over-the-
counter market are valued at the last available bid price or yield
equivalents obtained from one or more dealers in the over-the-
counter market prior to the time of valuation. Portfolio securities
which are traded on stock exchanges are valued at the last sale
price on the principal market on which such securities are traded,
as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price.
Options written are valued based upon the last asked price in the
case of exchange-traded options or, in the case of options traded in
the over-the-counter market, the average of the last asked price as
obtained from one or more dealers. Options purchased by the Fund are
valued at their last bid price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter
market, the average of the last bid price as obtained from two or
more dealers.
Other investments, including futures contracts and related options,
are stated at market value or otherwise at the fair value at which
it is expected they may be resold, as determined in good faith by or
under the direction of the Board of Directors of the Fund.
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 Directors of the Fund.
(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. 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.
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 contracts.
(c) 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 is less than or exceeds the premiums 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 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 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). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Deferred Organization Expenses and Prepaid Registration Fees--
Deferred organization expenses are charged to expense over
65
<PAGE>
a five-year period. Prepaid registration fees are charged to expense
as the related shares are issued.
(g) Dividends and Distributions--Dividends from net investment
income are declared daily and paid monthly. Distribution of capital
gains are recorded on the ex-dividend date.
(h) Financial Futures Contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts as
a hedge against adverse changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a
security, respectively, for a set price on a future date. 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.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc., an indirect wholly-owned
subsidiary of Merrill Lynch & Co. ("ML & Co."). The limited partners
are ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"),
which is also an indirect wholly-owned subsidiary of ML & Co. The
Fund has also entered into a Distribution Agreement and a
Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD"
or "Distributor"), a wholly-owned subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operation of the Fund. For
such services, the Fund pays a monthly fee of 0.60%, on an annual
basis, of the average daily value of the Fund's net assets plus the
principal amount of borrowings incurred by the Fund for leverage
purposes. The most restrictive annual expense limitation requires
that the Investment Adviser reimburse the Fund to the extent the
Fund's expenses (excluding interest, taxes, distribution fees,
brokerage fees and commissions, and extraordinary items) exceed 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the next $70 million of average daily net assets, and 1.5% of the
average daily net assets in excess thereof. 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 at the
time of such payment. For the six months ended June 30, 1994, MLAM
earned fees of $407,745 of which $184,959 was voluntarily waived. In
addition, MLAM voluntarily reimbursed the Fund $92,074 for
additional expenses.
The Fund has adopted separate Plans of Distribution (the
"Distribution Plans") for Class A and Class B Shares in accordance
with Rule 12b-1 under the Investment Company Act of 1940 pursuant to
which MLFD receives from the Fund at the end of each month (a) an
account maintenance fee, at an annual rate of 0.25% of the average
daily net assets of the Fund's Class A Shares in order to compensate
the Distributor in connection with account maintenance activities,
and (b) an account maintenance fee of 0.25% and a distribution fee
of 0.50% of the average daily net assets of the Fund's Class B
Shares in order to compensate the Distributor and Merrill Lynch for
providing distribution and account maintenance services to the Fund.
As authorized by the Distribution Plans, the Distributor has entered
into an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), which provides for the compensation of MLPF&S in
connection with account maintenance activities for Class A Shares
and for providing distribution-related services to the Fund for
Class B Shares. For the six months ended June 30, 1994, MLFD earned
$21,894 and $399,687 for Class A and Class B Shares, respectively,
under the Distribution Plans, all of which was paid to MLPF&S
pursuant to the agreement.
For the six months ended June 30, 1994, MLFD earned underwriting
discounts of $5,659 and MLPF&S earned dealer concessions of $52,933
on sales of Class A Shares. MLPF&S also received contingent deferred
sales charges of $109,316 relating to Class B Share transactions.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the period May 25, 1994 to June 30, 1994, the Fund paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $769
for security price quotations to compute the net asset value of the
Fund.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLIM, MLPF&S, MLFD, FDS, and/or ML & Co.
66
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for six months ended June 30, 1994 were $143,874,415 and
$109,020,263, respectively.
Realized and unrealized gains (losses) as of June 30, 1994 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $(2,353,738) $(17,879,436)
Options purchased 89,787 7,088
Foreign currency transactions -- (1,147)
----------- ------------
Total $(2,263,951) $(17,873,495)
=========== ============
As of June 30, 1994, net unrealized depreciation for Federal income
tax purposes aggregated $17,872,348, of which $7,088 related to
appreciated securities and $17,879,436 related to depreciated
securities. At June 30, 1994, the aggregate cost of investments,
including options purchased, for Federal income tax purposes was
$160,084,010.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $44,257,301 and $105,893,682 for the six months
ended June 30, 1994 and the period ended December 31, 1993,
respectively.
Transactions in shares of beneficial interest were as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 1,128,233 $ 11,228,726
Shares issued to shareholders in
reinvestment of dividends to
shareholders 33,092 313,912
----------- ------------
Total issued 1,161,325 11,542,638
Shares redeemed (376,044) (3,745,657)
----------- ------------
Net increase 785,281 $ 7,796,981
=========== ============
Class A Shares for the Period Dollar
Aug. 27, 1993++ to Dec. 31, 1993 Shares Amount
Shares sold 1,903,377 $ 19,440,340
Shares issued to shareholders in
reinvestment of dividends &
distributions to shareholders 13,895 147,557
----------- ------------
Total issued 1,917,272 19,587,897
Shares redeemed (531,129) (5,477,202)
----------- ------------
Net increase 1,386,143 $ 14,110,695
=========== ============
++Prior to August 27, 1993 (Commencement of Operations), the Fund
issued 5,000 shares to MLAM for $50,000.
Class B Shares for the Six Months Dollar
Ended June 30, 1994 Shares Amount
Shares sold 4,887,952 $ 48,174,736
Shares issued to shareholders in
reinvestment of dividends to
shareholders 172,676 1,644,189
----------- ------------
Total issued 5,060,628 49,818,925
Shares redeemed (1,397,190) (13,358,605)
----------- ------------
Net increase 3,663,438 $ 36,460,320
=========== ============
Class B Shares for the Period Dollar
Aug. 27, 1993++ to Dec. 31, 1993 Shares Amount
Shares sold 9,729,435 $ 98,081,463
Shares issued to shareholders in
reinvestment of dividends &
distributions to shareholders 86,577 922,566
----------- ------------
Total issued 9,816,012 99,004,029
Shares redeemed (700,106) (7,221,042)
----------- ------------
Net increase 9,115,906 $ 91,782,987
=========== ============
++Prior to August 27, 1993 (Commencement of Operations), the Fund
issued 5,000 shares to MLAM for $50,000.
5. Reverse Repurchase Agreements:
Under a reverse repurchase agreement, the Fund sells securities and
agrees to repurchase them at a mutually agreed upon date and price.
At the time the Fund enters into a reverse repurchase agreement, it
may establish a segregated account with the custodian containing
cash, cash equivalents or liquid high grade debt securities having a
value at least equal to the repurchase price.
As of June 30, 1994, the Fund had entered into reverse repurchase
agreements in the amount of $15,192,000. For the six months ended
June 30, 1994, the maximum amount entered into was $15,192,000, the
average amount outstanding was $14,179,200, and the daily weighted
average interest rate was 4.75%.
67
<PAGE>
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68
<PAGE>
APPENDIX
RATING OF DEBT SECURITIES
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ('MOODY'S') CORPORATE RATINGS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as 'gilt edge'. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payment and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
- ------------------
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
A-1
<PAGE>
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term 'commercial paper' as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
'commercial paper' or is exempt from registration under the Securities Act of
1933, as amended.
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. Obligations relying upon support mechanisms
such as letters-of-credit and bonds of indemnity are excluded unless explicitly
rated. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers.
Issuers rated Prime-1 (or related supporting institutions) have a superior
ability for repayment of short-term promissory obligations. Prime-1 repayment
ability will normally be evidenced by the following characteristics: leading
market positions in well established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable ability for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its Commercial Paper obligations
are supported by the credit of another entity or entities, then the name or
names of such supporting entity or entities are listed within parentheses
beneath the name of the issuer, or there is a footnote referring the reader to
another page for the name or names of the supporting entity or entities. In
assigning ratings to such issuers, Moody's evaluates the financial strength of
the indicated affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment. Moody's makes no representation and gives no opinion on the
legal validity or enforceability of any support arrangement. You are cautioned
to review with your counsel any questions regarding particular support
arrangements.
A-2
<PAGE>
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S ('STANDARD & POOR'S') CORPORATE
DEBT RATINGS
A Standard & Poor's corporate or municipal rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB -- Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BBB-
rating.
A-3
<PAGE>
B -- Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-rating.
CCC -- Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
The CCC rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-rating.
CC -- The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been
filed but debt service payments are continued.
CI -- The rating CI is reserved for income bonds on which no interest is
being paid.
D -- Debt rated D is in default. The D rating category is also used when
interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
- ------------------
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative
standing within the major ratings categories.
Provisional ratings: The letter 'p' indicates that the rating is
provisional. A provisional rating assumes the
successful completion of the project being financed by
the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent
upon the successful and timely completion of the
project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes
no comment on the likelihood or risk of default upon
failure of such completion. The investor should
exercise judgment with respect to such likelihood and
risk.
L The letter 'L' indicates that the rating pertains to
the principal amount of those bonds to the extent that
the underlying deposit collateral is federally insured
and interest is adequately collateralized.
* Continuance of the rating is contingent upon Standard &
Poor's receipt of an executed copy of the escrow
agreement or closing documentation confirming
investments and cash flows.
A-4
NR Indicates that no rating has been requested, that there
is insufficient information on which to base a rating
or that Standard & Poor's does not rate a particular
type of obligation as a matter of policy.
Debt Obligations of Issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, Bonds rated in the top
four categories ('AAA', 'AA', 'A', 'BBB', commonly known as 'investment grade'
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating or
other standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated 'A-1'.
A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B -- Issues rated 'B' are regarded as having only a speculative capacity
for timely payment.
C -- This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D -- Debt rated 'D' is in payment default. The 'D'rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on occasion,
rely on unaudited financial information. The ratings may be changed, suspended,
or withdrawn as a result of changes in, or unavailability of, such information,
or based on other circumstances.
A-5
<PAGE>
(This page is intentionally left blank.)
<PAGE>
(This page is intentionally left blank.)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies................ 2
Portfolio Strategies Involving Interest Rate
Transactions, Options and Futures........... 2
Current Investment Restrictions................ 6
Management of the Fund........................... 11
Directors and Officers......................... 11
Advisory and Management Arrangements........... 12
Purchase of Shares............................... 13
Redemption of Shares............................. 20
Portfolio Transactions and Brokerage............. 21
Determination of Net Asset Value................. 22
Shareholder Services............................. 23
Taxes............................................ 36
Performance Data................................. 40
General Information.............................. 42
Description of Shares.......................... 42
Computation of Offering Price Per Share........ 43
Independent Auditors........................... 43
Custodian...................................... 43
Transfer Agent................................. 44
Legal Counsel.................................. 44
Reports to Shareholders........................ 44
Additional Information......................... 44
Independent Auditors' Report..................... 45
Financial Statements (audited)................... 46
Financial Statements (unaudited)................. 56
Appendix......................................... A-1
</TABLE>
Code #16800-1094
Statement of
Additional Information
[INSERT ART HERE]
- ------------------------------------------------------
MERRILL LYNCH
AMERICAS INCOME
FUND, INC.
October 21, 1994
Distributor:
Merrill Lynch Funds
Distributor, Inc.
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair
and accurate narrative descriptions of graphic and image material omitted from
this EDGAR Submission File due to ASCII-incompatibility and cross-references
this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS:
Contained in Part A:
Financial Highlights for the period August 27, 1993 (commencement
of operations) to December 31, 1993 (audited) and for the six
months ended June 30, 1994 (unaudited).
Contained in Part B:
Financial Statements:
Schedules of Investments as of December 31, 1993 (audited) and June
30, 1994 (unaudited).
Statements of Assets and Liabilities as of December 31, 1993
(audited) and June 30, 1994 (unaudited).
Statements of Operations for the period August 27, 1993
(commencement of operations) to December 31, 1993 (audited) and
for the six months ended June 30, 1994 (unaudited).
Statements of Changes in Net Assets for the period August 27, 1993
(commencement of operations) to December 31, 1993 (audited) and
for the six months ended June 30, 1994 (unaudited).
Financial Highlights for the period August 27, 1993 (commencement
of operations) to December 31, 1993 (audited) and for the six
months ended June 30, 1994 (unaudited).
(B) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------
<S> <C>
1 -- Amended and Restated Articles of Incorporation.(a)
2 -- By-Laws of Registrant.(b)
3 -- None.
4 -- Copies of instruments defining the rights of shareholders, including
the relevant portions of the Articles of Incorporation, By-Laws and
Specimen Share Certificates of Registrant.(a)
5(a) -- Investment Advisory Agreement between Registrant and Merrill Lynch
Investment Management, Inc.(b)
(b) -- Supplement to Investment Advisory Agreement between Registrant and
Merrill Lynch Asset Management L.P., dated January 3, 1994.
6(a) -- Class A Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(b)
(b) -- Class B Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.(b)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds
Distributor, Inc. with respect to the Merrill Lynch Mutual Fund
Adviser Program.(b)
(d) -- Form of new Class A Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
(e) -- Form of Class C Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.
(f) -- Form of Class D Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.
7 -- None.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------
<S> <C>
8 -- Custodian Agreement between Registrant and Brown Brothers Harriman &
Co.(b)
9(a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services,
Inc.(b)
(b) -- Agreement relating to the use of the 'Merrill Lynch' name.(b)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Investment Management, Inc.(a)
14 -- None.
15(a) -- Class A Distribution Plan of Registrant.(b)
(b) -- Class B Distribution Plan of Registrant.(b)
(c) -- Form of Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement of the Registrant.
(d) -- Form of Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement of the Registrant.
16 -- Schedule of computation of each performance quotation provided in the
Registration Statement in response to Item 22.(b)
17(a) -- Financial Data Schedule for Class A Shares for the Six Months Ended
June 30, 1994.
(b) -- Financial Data Schedule for Class A Shares for the Period Ended
December 31, 1993.
(c) -- Financial Data Schedule for Class B Shares for the Six Months Ended
June 30, 1994.
(d) -- Financial Data Schedule for Class B Shares for the Period Ended
December 31, 1993.
</TABLE>
- ------------------
(a) Filed as an Exhibit to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement under the Securities Act of 1933, on Form N-1A.
(b) Filed as an Exhibit to Post-Effective Amendment No. 1 to Registrant's
Registration Statement under the Securities Act of 1933, on Form N-1A.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Registrant is not controlled by or under common control with any other
person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF
RECORD
HOLDERS AT
SEPTEMBER
TITLE OF CLASS 30, 1994
- ----------------------------------------------------------------- ------------
<S> <C>
Class A Common Stock, par value $.10 per share................... 34
Class B Common Stock, par value $.10 per share................... 111
Class C Common Stock, par value $.10 per share................... 0
Class D Common Stock, par value $.10 per share................... 0
</TABLE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article VI of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the Class A and Class B Distribution
Agreements.
Insofar as the conditional advancing of indemnification moneys for actions
based on the Investment Company Act of 1940 may be concerned, Article VI of the
Registrant's By-Laws provides that such payments will be made only on the
following conditions: (i) the advances must be limited to amounts used, or to be
used, for the preparation or presentation of a defense to the action, including
costs connected with the preparation of a
C-2
<PAGE>
settlement; (ii) advances may be made only on receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
the amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent form
of security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance and (b) a majority of a quorum
of the Registrant's disinterested non-party Directors, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
In Section 9 of the Class A and Class B Distribution Agreements relating to
the securities being offered hereby, the Registrant agrees to indemnify the
Distributor and each person, if any, who controls the Distributor within the
meaning of the Securities Act of 1933 (the 'Act'), against certain types of
civil liabilities arising in connection with the Registration Statement or
Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, officers and controlling persons of the
Registrant and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management ('MLAM' or the 'Investment Adviser'), acts as investment adviser for
the following registered investment companies: Convertible Holdings, Inc.,
Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas
Income Fund, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset
Income Fund, Inc., Merrill Lynch Balanced Fund For Investment and Retirement,
Merrill Lynch Capital Fund, Inc., Merrill Lynch Developing Capital Markets Fund,
Inc., Merrill Lynch Dragon Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Fundamental Growth Fund, Inc., Merrill Lynch Fund For Tomorrow, Inc., Merrill
Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Global Convertible Fund, Inc., Merrill
Lynch Global Holdings, Inc., Merrill Lynch Global Resources Trust, Merrill Lynch
Global SmallCap Fund, Inc., Merrill Lynch Global Utility Fund, Inc., Merrill
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund,
Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Institutional Intermediate Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Retirement Series Trust, Merrill Lynch Senior Floating Rate Fund, Inc.,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund,
Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Utility Income Fund, Inc., and Merrill Lynch Variable
Series Funds, Inc. Fund Asset Management, L.P. ('FAM'), an affiliate of the
Investment Adviser, acts as the investment adviser for the following registered
investment companies: Apex Municipal Fund, Inc., CBA Money Fund, CMA Government
Securities Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA
Tax-Exempt Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program,
Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc.,
Emerging Tigers Fund, Inc., Financial Institutions Series Trust, Income
Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill
Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust,
Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust,
Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State Municipal
Series Trust, Merrill Lynch Multi-State Limited Maturity Municipal Series Trust,
Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income
C-3
<PAGE>
Fund, Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal
Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund,
Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured
Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc.,
MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest
Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund,
MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund,
Inc., MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc., MuniYield
Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II,
Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio II, Inc.,
Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., and
Taurus MuniNew York Holdings, Inc. The address of each of these investment
companies is Box 9011, Princeton, New Jersey 08543-9011, except that the address
of Merrill Lynch Funds for Institutions Series and Merrill Lynch Institutional
Intermediate Fund is One Financial Center, 15th Floor, Boston, Massachusetts
02111-2646. The address of the Investment Adviser and FAM is also P.O. Box 9011,
Princeton, New Jersey 08543-9011. The address of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ('Merrill Lynch') and Merrill Lynch & Co., Inc. ('ML & Co.')
is World Financial Center, North Tower, 250 Vesey Street, New York, New York
10281.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since December 31, 1991 for his or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr. Zeikel is President, Mr.
Richard is Treasurer and Mr. Glenn is Executive Vice President of substantially
all of the investment companies described in the preceding paragraph, and
Messrs. Durnin, Giordano, Harvey, Kirstein, Monagle and Ms. Griffin are
directors, trustees or officers of one or more of such companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME THE INVESTMENT ADVISER EMPLOYMENT
- ------------------------- ------------------------- -------------------------
<S> <C> <C>
ML & Co.................. Limited Partner Financial Services
Holding Company
Merrill Lynch Investment
Management, Inc........ Limited Partner Investment Advisory
Services; Limited Partner
of FAM
Princeton Services, Inc. General Partner General Partner of FAM
('Princeton
Services').............
Arthur Zeikel............ President President of FAM;
President and Director of
Princeton Services;
Director of Merrill
Lynch Funds
Distributor, Inc.
('MLFD'); Executive
Vice President of ML &
Co.; Executive Vice
President of Merrill
Lynch
Terry K. Glenn........... Executive Vice President Executive Vice President
of FAM; Executive Vice
President and Director
of Princeton Services;
President and Director
of MLFD; Director of
Financial Data
Services, Inc. ('FDS');
President of Princeton
Administrators
Bernard J. Durnin........ Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
Vincent R. Giordano...... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
Elizabeth Griffin........ Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS,
POSITION WITH PROFESSION, VOCATION OR
NAME THE INVESTMENT ADVISER EMPLOYMENT
- ------------------------- ------------------------- -------------------------
Norman R. Harvey......... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
<S> <C> <C>
N. John Hewitt........... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
Philip L. Kirstein....... Senior Vice President, Senior Vice President,
General Counsel and General Counsel and
Secretary Secretary of FAM;
Senior Vice President
General Counsel,
Director and Secretary
of Princeton Services;
Director of MLFD
Ronald M. Kloss.......... Senior Vice President and Senior Vice President and
Controller Controller of FAM; Senior
Vice President and
Controller of Princeton
Services
Stephen M.M. Miller...... Senior Vice President Executive Vice President
of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr.... Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
Gerald M. Richard........ Senior Vice President and Senior Vice President and
Treasurer Treasurer of FAM; Senior
Vice President and
Treasurer of Princeton
Services; Vice
President and Treasurer
of MLFD
Richard L. Rufener....... Senior Vice President Senior Vice President of
FAM; Vice President of
MLFD; Senior Vice
President of Princeton
Services
Ronald L. Welburn........ Senior Vice President Senior Vice President of
FAM; Senior Vice
President of Princeton
Services
Anthony Wiseman.......... Senior Vice President Senior Vice President of
Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each
of the investment companies referred to in the first paragraph of Item 28 except
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona Fund
II, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund,
Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund,
Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc., MuniYield
Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield New Jersey
Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New York Insured
Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield New York Insured
Fund 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. and Taurus MuniNew York Holdings, Inc.
C-5
<PAGE>
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is Box 9011, Princeton,
New Jersey 08543-9011, except that the address of Messrs. Crook, Aldrich, Breen,
Graczyk, Fatseas and Wasel is One Financial Center, Boston, Massachusetts
02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) 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 P. Boman........... Vice President None
Michael J. Brady......... Vice President None
William M. Breen......... Vice President None
Sharon Creveling......... Vice President and None
Assistant Treasurer
Mark A. DeSario.......... Vice President None
James T. Fatseas......... Vice President None
Stanley Graczyk.......... Vice President None
Michelle T. Lau.......... Vice President None
Debra W.
Landsman-Yaros........... Vice President None
Gerald M. Richard........ Vice President and Treasurer
Treasurer
Richard L. Rufener....... Vice President None
Salvatore Venezia........ Vice President None
William Wasel............ Vice President None
Robert Harris............ Secretary None
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant, 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and Financial Data Services, Inc., 4800 Deer
Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption 'Management of the Fund--Advisory
and Management Arrangements' in the Prospectus constituting Part A of the
Registration Statement and under 'Management of the Fund--Advisory and
Management Arrangements' in the Statement of Additional Information constituting
Part B of the Registration Statement, Registrant is not a party to any
management related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the Registrant's latest annual report to shareholders, upon
request and without charge.
C-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL OF
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS POST-EFFECTIVE AMENDMENT TO ITS
REGISTRATION STATEMENT PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933
AND HAS DULY CAUSED THIS AMENDMENT TO ITS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWNSHIP OF
PLAINSBORO, AND THE STATE OF NEW JERSEY, ON THE 14TH DAY OF OCTOBER 1994.
MERRILL LYNCH AMERICAS INCOME FUND,
INC.
(Registrant)
By /s/ ARTHUR ZEIKEL
-----------------------------------
(ARTHUR ZEIKEL, PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRANT'S REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATE(S) INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- ------------------------- --------------------
<C> <S> <C>
/s/ ARTHUR ZEIKEL President and Director October 14, 1994
- ------------------------- (Principal Executive
(ARTHUR ZEIKEL) Officer)
/s/ GERALD M. RICHARD Treasurer (Principal October 14, 1994
- ------------------------- Financial and
(GERALD M. RICHARD) Accounting Officer)
DONALD CECIL* Director October 14, 1994
- -------------------------
(DONALD CECIL)
EDWARD H. MEYER* Director October 14, 1994
- -------------------------
(EDWARD H. MEYER)
CHARLES C. REILLY* Director October 14, 1994
- -------------------------
(CHARLES C. REILLY)
RICHARD R. WEST* Director October 14, 1994
- -------------------------
(RICHARD R. WEST)
*By /s/ARTHUR ZEIKEL October 14, 1994
(ARTHUR ZEIKEL,
ATTORNEY-IN-FACT)
</TABLE>
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------
<S> <C>
1 -- Amended and Restated Articles of Incorporation.(a)
2 -- By-Laws of Registrant.(b)
3 -- None.
4 -- Copies of instruments defining the rights of shareholders,
including the relevant portions of the Articles of Incorporation,
By-Laws and Specimen Share Certificates of Registrant.(a)
5(a) -- Investment Advisory Agreement between Registrant and Merrill
Lynch Investment Management, Inc.(b)
(b) -- Supplement to Investment Advisory Agreement between Registrant
and Merrill Lynch Asset Management L.P., dated January 3, 1994.
6(a) -- Class A Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.(b)
(b) -- Class B Distribution Agreement between Registrant and Merrill
Lynch Funds Distributor, Inc.(b)
(c) -- Letter Agreement between the Registrant and Merrill Lynch Funds
Distributor, Inc. with respect to the Merrill Lynch Mutual Fund
Adviser Program.(b)
(d) -- Form of new Class A Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
(e) -- Form of Class C Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
(f) -- Form of Class D Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc.
7 -- None.
8 -- Custodian Agreement between Registrant and Brown Brothers
Harriman & Co.(b)
9(a) -- Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between Registrant and Financial Data
Services, Inc.(b)
(b) -- Agreement relating to the use of the 'Merrill Lynch' name.(b)
10 -- None.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Investment Management, Inc.(a)
14 -- None.
15(a) -- Class A Distribution Plan of Registrant.(b)
(b) -- Class B Distribution Plan of Registrant.(b)
(c) -- Form of Class C Shares Distribution Plan and Class C Shares
Distribution Plan Sub-Agreement of the Registrant.
(d) -- Form of Class D Shares Distribution Plan and Class D Shares
Distribution Plan Sub-Agreement of the Registrant.
16 -- Schedule of computation of each performance quotation provided in
the Registration Statement in response to Item 22.(b)
17(a) -- Financial Data Schedule for Class A Shares for the Six Months
Ended June 30, 1994.
(b) -- Financial Data Schedule for Class A Shares for the Period Ended
December 31, 1993.
(c) -- Financial Data Schedule for Class B Shares for the Six Months
Ended June 30, 1994.
(d) -- Financial Data Schedule for Class B Shares for the Period Ended
December 31, 1993.
</TABLE>
- ------------------
(a) Filed as an Exhibit to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement under the Securities Act of 1933, on Form N-1A.
(b) Filed as an Exhibit to Post-Effective Amendment No. 1 to Registrant's
Registration Statement under the Securities Act of 1933, on Form N-1A.
SUPPLEMENT TO INVESTMENT ADVISORY AGREEMENT
WITH
MERRILL LYNCH ASSET MANAGEMENT
As of January 1, 1994 Merrill Lynch Investment Management, Inc.
d/b/a Merrill Lynch Asset Management was reorganized as a limited
partnership, formally known as Merrill Lynch Asset Management,
L.P. and continuing to do business under the name Merrill Lynch
Asset Management ("MLAM"). The general partner of MLAM is
Princeton Services, Inc. and the limited partners are Merrill
Lynch Investment Management, Inc. and Merrill Lynch & Co., Inc.
Pursuant to Rule 202(a)(1)-1 under the Investment Advisers Act of
1940 and Rule 2a-6 under the Investment Company Act of 1940 such
reorganization did not constitute an assignment of this
investment advisory agreement since it did not involve a change
of control or management of the investment adviser. Pursuant to
the requirements of Section 205 of the Investment Advisers Act of
1940, however, Merrill Lynch Asset Management hereby supplements
this investment advisory agreement by undertaking to advise you
of any change in the membership of the partnership within a
reasonable time after any such change occurs.
By /s/ Arthur Zeikel
-----------------------
Dated: January 3, 1994
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between
MERRILL LYNCH AMERICAS INCOME FUND, Inc., a Maryland corporation
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a
Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), as an
open-end investment company, and it is affirmatively in the
interest of the Fund to offer its shares for sale continuously;
and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either
directly to purchasers or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering
of the Class A shares of common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby
appoints the Distributor as the principal underwriter and
distributor of the Fund to sell Class A shares of common stock in
the Fund (sometimes herein referred to as "Class A shares") to
eligible investors (as defined below) and hereby agrees during
the term of this Agreement to sell Class A shares of the Fund to
the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor, except that:
(a) The Fund may, upon written notice to the Distributor,
from time to time designate other principal underwriters and
distributors of Class A shares with respect to areas other than
the United States as to which the Distributor may have expressly
waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall
terminate, but this Agreement shall remain otherwise in full
effect until terminated in accordance with the other provisions
hereof.
(b) The exclusive right granted to the Distributor to
purchase Class A shares from the Fund shall not apply to Class A
shares issued in connection with the merger or consolidation of
any other investment company or personal holding company with the
Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class A shares
of any such company by the Fund.
(c) Such exclusive right also shall not apply to Class A
shares issued by the Fund pursuant to reinvestment of dividends
or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A
shares issued by the Fund pursuant to any conversion, exchange or
reinstatement privilege afforded redeeming shareholders or to any
other Class A shares as shall be agreed between the Fund and the
Distributor from time to time.
Section 3. Purchase of Class A shares from the Fund.
(a) The Distributor shall have the right to buy from the
Fund the Class A shares needed, but not more than the Class A
shares needed (except for clerical errors in transmission) to
fill unconditional orders for Class A shares of the Fund placed
with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class A shares shall be those
persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus"
and "statement of additional information", respectively) under
the Securities Act of 1933, as amended (the "Securities Act"),
relating to such Class A shares ("eligible investors"). The
price which the Distributor shall pay for the Class A shares so
purchased from the Fund shall be the net asset value, determined
as set forth in Section 3(d) hereof, used in determining the
public offering price on which such orders were based.
(b) The Class A shares are to be resold by the Distributor
to eligible investors at the public offering price, as set forth
in Section 3(c) hereof, or to securities dealers having
agreements with the Distributor upon the terms and conditions set
forth in Section 7 hereof.
(c) The public offering price(s) of the Class A shares,
i.e., the price per share at which the Distributor or selected
dealers may sell Class A shares to eligible investors, shall be
the public offering price as set forth in the prospectus and
statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the
Distributor is to purchase the Class A shares, plus a sales
charge not to exceed 4.0% of the public offering price (4.17% of
the net amount invested), subject to reductions for volume
purchases. Class A shares may be sold to certain Directors,
officers and employees of the Fund, directors and employees of
Merrill Lynch & Co., Inc. and its subsidiaries, and to certain
other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced
sales charge, upon terms and conditions set forth in the
prospectus and statement of additional information. If the
public offering price does not equal an even cent, the public
offering price may be adjusted to the nearest cent. All payments
to the Fund hereunder shall be made in the manner set forth in
Section 3(f).
(d) The net asset value of Class A shares shall be
determined by the Fund or any agent of the Fund in accordance
with the method set forth in the prospectus and statement of
additional information of the Fund and guidelines established by
the Directors.
(e) The Fund shall have the right to suspend the sale of
its Class A shares at times when redemption is suspended pursuant
to the conditions set forth in Section 4(b) hereof. The Fund
shall also have the right to suspend the sale of its Class A
shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some
other event, which, in the judgment of the Fund, makes it
impracticable or inadvisable to sell the Class A shares.
(f) The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class A shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund
will not arbitrarily or without reasonable cause refuse to accept
or confirm orders for the purchase of Class A shares from
eligible investors. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds. The
Distributor agrees to cause such payment and such instructions to
be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class A shares by
the Fund.
(a) Any of the outstanding Class A shares may be tendered
for redemption at any time, and the Fund agrees to repurchase or
redeem the Class A shares so tendered in accordance with its
obligations as set forth in Article VII of its Articles of
Incorporation], as amended from time to time, and in accordance
with the applicable provisions set forth in the prospectus and
statement of additional information. The price to be paid to
redeem or repurchase the Class A shares shall be equal to the net
asset value calculated in accordance with the provisions of
Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in
the prospectus and statement of additional information of the
Fund. All payments by the Fund hereunder shall be made in the
manner set forth below. The redemption or repurchase by the Fund
of any of the Class A shares purchased by or through the
Distributor will not affect the sales charge secured by the
Distributor or any selected dealer in the course of the original
sale, except that if any Class A shares are tendered for
redemption or repurchase within seven business days after the
date of the confirmation of the original purchase, the right to
the sales charge shall be forfeited by the Distributor and the
selected dealer which sold such Class A shares.
The Fund shall pay the total amount of the redemption price
as defined in the above paragraph pursuant to the instructions of
the Distributor in New York Clearing House funds on or before the
seventh business day subsequent to its having received the notice
of redemption in proper form. The proceeds of any redemption of
shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall
be paid to or for the account of the shareholder, in each case in
accordance with the applicable provisions of the prospectus and
statement of additional information.
(b) Redemption of Class A shares or payment may be
suspended at times when the New York Stock Exchange is closed,
when trading on said Exchange is suspended, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class A shares of the Fund, and this shall
include, upon request by the Distributor, one certified copy of
all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the
Distributor such number of copies of the prospectus and statement
of additional information as the Distributor shall reasonably
request.
(b) The Fund shall take, from time to time, but subject to
any necessary approval of the Class A shareholders, all necessary
action to fix the number of authorized Class A shares and such
steps as may be necessary to register the same under the
Securities Act, to the end that there will be available for sale
such number of Class A shares as the Distributor may reasonably
be expected to sell.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its Class
A shares for sale under the securities laws of such states as the
Distributor and the Fund may approve. Any such qualification may
be withheld, terminated or withdrawn by the Fund at any time in
its discretion. As provided in Section 8(c) hereof, the expense
of qualification and maintenance of qualification shall be borne
by the Fund. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities upon
request by the Distributor, copies of annual and interim reports
of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort
to effect sales of Class A shares of the Fund but shall not be
obligated to sell any specific number of Class A shares. The
services of the Distributor to the Fund hereunder are not to be
deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling the Class A shares of the Fund, the
Distributor shall use its best efforts in all respects duly to
conform with the requirements of all Federal and state laws
relating to the sale of such securities. Neither the Distributor
nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
registration statement or related prospectus and statement of
additional information and any sales literature specifically
approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as
approved by the officers of the Fund, for the confirmation of
sales to eligible investors and selected dealers, the collection
of amounts payable by eligible investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into
selected dealers agreements with securities dealers of its choice
("selected dealers") for the sale of Class A shares and fix
therein the portion of the sales charge which may be allocated to
the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set
forth therein. Class A shares sold to selected dealers shall be
for resale by such dealers only at the public offering price(s)
set forth in the prospectus and statement of additional
information. The form of agreement with selected dealers to be
used during the continuous offering of the Class A shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class A shares only to such selected dealers as are
members in good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund,
including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required
registration statements and/or prospectuses and statements of
additional information under the Investment Company Act, the
Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to Class A shareholders (including but not limited to
the expense of setting in type any such registration statements,
prospectuses, statements of additional information, annual or
interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments
made to selected dealers as reimbursement for their expenses
associated with payments of sales commissions to financial
consultants. In addition, after the prospectuses, statements of
additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs
and expenses of printing and distributing any copies thereof
which are to be used in connection with the offering of Class A
shares to selected dealers or eligible investors pursuant to this
Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by
the Distributor or furnished by it for use by selected dealers in
connection with the offering of the Class A shares for sale to
eligible investors and any expenses of advertising incurred by
the Distributor in connection with such offering.
(c) The Fund shall bear the cost and expenses of
qualification of the Class A shares for sale pursuant to this
Agreement and, if necessary or advisable in connection therewith,
of qualifying the Fund as a broker or dealer in such states of
the United States or other jurisdictions as shall be selected by
the Fund and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing
qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5(c) hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the
Distributor and each person, if any, who controls the Distributor
against any loss, liability, claim, damage or expense (including
the reasonable cost of investigating or defending any alleged
loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by
reason of any person acquiring any Class A shares, which may be
based upon the Securities Act, or on any other statute or at
common law, on the ground that the registration statement or
related prospectus and statement of additional information, as
from time to time amended and supplemented, or an annual or
interim report to shareholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with,
information furnished to the Fund in connection therewith by or
on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of the Fund in favor of the Distributor and
any such controlling persons to be deemed to protect such
Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the
Distributor or any such controlling persons would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of the
reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity
agreement contained in this paragraph with respect to any claim
made against the Distributor or any such controlling persons,
unless the Distributor or such controlling persons, as the case
may be, shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after
the Distributor or such controlling persons shall have received
notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled
to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any
such liability, but if the Fund elects to assume the defense,
such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or
persons, defendant or defendants in the suit. In the event the
Fund elects to assume the defense of any such suit and retain
such counsel, the Distributor or such controlling person or
persons, defendant or defendants in the suit shall bear the fees
and expenses of any additional counsel retained by them, but in
case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling
person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them.
The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any
of its officers or Directors in connection with the issuance or
sale of any of the Class A shares.
(b) The Distributor shall indemnify and hold harmless the
Fund and each of its Directors and officers and each person, if
any, who controls the Fund against any loss, liability, claim,
damage or expense described in the foregoing indemnity contained
in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on
behalf of the Distributor for use in connection with the
registration statement or related prospectus and statement of
additional information, as from time to time amended, or the
annual or interim reports to Class A shareholders. In case any
action shall be brought against the Fund or any person so
indemnified, in respect of which indemnity may be sought against
the Distributor, the Distributor shall have the rights and duties
given to the Fund, and the Fund and each person so indemnified
shall have the rights and duties given to the Distributor by the
provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In
connection with the Merrill Lynch Mutual Fund Adviser Program,
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, are authorized to offer and sell shares of
the Fund, as agent for the Fund, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until August __, 1995 and
thereafter, but only for so long as such continuance is
specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors
who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose
of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Directors or by vote of a majority
of the outstanding voting securities of the Fund, or by the
Distributor, on sixty days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
The terms "vote of a majority of the outstanding voting
securities", "assignment", "affiliated person" and "interested
person", when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
Section 12. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is
specifically approved by (i) the Directors or by the vote of a
majority of outstanding voting securities of the Fund and (ii) by
the vote of a majority of those of the Fund who are not parties
to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such
approval.
Section 13. Governing Law. The provisions of this
Agreement shall be construed and interpreted in accordance with
the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the
extent that the applicable law of the State of New York, or any
of the provisions herein, conflict with the applicable provisions
of the Investment Company Act, the latter shall control.
Section 14. This Agreement supersedes the prior
Distribution Agreement entered into by the parties hereto with
respect to the Class A shares of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MERRILL LYNCH AMERICAS INCOME FUND, INC.
By
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
Title:
EXHIBIT A
MERRILL LYNCH AMERICAS INCOME FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor")
has an agreement with Merrill Lynch Americas Income Fund, Inc., a
Maryland corporation (the "Fund"), pursuant to which it acts as
the distributor for the sale of Class A shares of common stock,
par value $0.10 per share (herein referred to as "Class A
shares"), of the Fund and as such has the right to distribute
Class A shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of
1940, as amended, and its Class A shares are registered under the
Securities Act of 1933, as amended. You have received a copy of
the Class A shares Distribution Agreement (the "Distribution
Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. The
terms "Prospectus" and "Statement of Additional Information" used
herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and
Exchange Commission which is part of the most recent effective
registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected
Dealers Group, Class A shares of the Fund for resale to investors
identified in the Prospectus and Statement of Additional
Information as eligible to purchase Class A shares ("eligible
investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible
investors, you shall act as dealer for your own account and in no
transaction shall you have any authority to act as agent for the
Fund, for us or for any other member of the Selected Dealers
Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time
to time agree, in which case you shall have authority to offer
and sell shares, as agent for the Fund, to participants in such
program.
2. Orders received from you will be accepted through us
only at the public offering price applicable to each order, as
set forth in the current Prospectus and Statement of Additional
Information of the Fund. The procedure relating to the handling
of orders shall be subject to Section 5 hereof and instructions
which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either. The minimum
initial and subsequent purchase requirements are as set forth in
the current Prospectus and Statement of Additional Information of
the Fund.
3. The sales charges for sales to eligible investors,
computed as percentages of the public offering price and the
amount invested, and the related discount to Selected Dealers are
as follows:
Amount of Purchase
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ --------------- --------------- -----------
Less than $10,000. . . . 4.00% 4.17% 3.75%
$10,000 but less
than $25,000. . . . . . 4.00% 4.17% 3.75%
$25,000 but less
than $50,000. . . . . . 3.75% 3.90% 3.50%
$50,000 but less
than $100,000 . . . . . 3.25% 3.36% 3.00%
$100,000 but less
than $250,000 . . . . . 2.50% 2.56% 2.25%
$250,000 but less
than $1,000,000 . . . . 1.50% 1.52% 1.25%
$1,000,000 and over**. . 0.00% 0.50% 0.40%
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Fund or Class A shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class A shares
of the Fund at the offering price applicable to the total of (a) the public
offering price of the shares then being purchased plus (b) an amount equal to
the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares of
the Fund and of any other investment company with an initial sales charge for
which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.
The reduced sales charges are applicable to purchases aggregating $10,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any
sales made by you to eligible investors qualifying for reduced sales charges.
Further information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
4. You shall not place orders for any of the Class A shares unless you
have already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the date of the confirmation of the
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class A
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class A shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Fund will represent your acceptance of this Agreement.
16. This Agreement supersedes any prior Selected Dealers Agreement entered
into by the parties hereto with respect to the Class A shares of the Fund.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
(Authorized Signature)
Please return one signed copy
of this agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
By:
Address: [800 Scudders Mill Road]
[Plainsboro, New Jersey 08536]
Date: , 1994
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994, between
Merrill Lynch Americas Income Fund, Inc., a Maryland corporation
(the "Fund"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a
Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), as an
open-end investment company, and it is affirmatively in the
interest of the Fund to offer its shares for sale continuously;
and
WHEREAS, the Distributor is a securities firm engaged in the
business of selling shares of investment companies either
directly to purchasers or through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering
of the Fund's Class C shares in order to promote the growth of
the Fund and facilitate the distribution of its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby
appoints the Distributor as the principal underwriter and
distributor of the Fund to sell Class C shares of common stock in
the Fund (sometimes herein referred to as "Class C shares") to
the public and hereby agrees during the term of this Agreement to
sell shares of the Fund to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Class C shares,
except that:
(a) The Fund may, upon written notice to the Distributor,
from time to time designate other principal underwriters and
distributors of Class C shares with respect to areas other than
the United States as to which the Distributor may have expressly
waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall
terminate, but this Agreement shall remain otherwise in full
effect until terminated in accordance with the other provisions
hereof.
(b) The exclusive right granted to the Distributor to
purchase Class C shares from the Fund shall not apply to Class C
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding Class
C shares of any such company by the Fund.
(c) Such exclusive right also shall not apply to Class C
shares issued by the Fund pursuant to reinvestment of dividends
or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C
shares issued by the Fund pursuant to any conversion, exchange or
reinstatement privilege afforded redeeming shareholders or to any
other Class C shares as shall be agreed between the Fund and the
Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
(a) It is contemplated that the Fund will commence an
offering of its Class C shares, and thereafter the Distributor
shall have the right to buy from the Fund the Class C shares
needed, but not more than the Class C shares needed (except for
clerical errors in transmission) to fill unconditional orders for
Class C shares of the Fund placed with the Distributor by
eligible investors or securities dealers. Investors eligible to
purchase Class C shares shall be those persons so identified in
the currently effective prospectus and statement of additional
information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act
of 1933, as amended (the "Securities Act"), relating to such
Class C shares. The price which the Distributor shall pay for the
Class C shares so purchased from the Fund shall be the net asset
value, determined as set forth in Section 3(c) hereof.
(b) The Class C shares are to be resold by the Distributor
to investors at net asset value, as set forth in Section 3(c)
hereof, or to securities dealers having agreements with the
Distributor upon the terms and conditions set forth in Section 7
hereof.
(c) The net asset value of Class C shares of the Fund shall
be determined by the Fund or any agent of the Fund in accordance
with the method set forth in the prospectus and statement of
additional information and guidelines established by the Board of
Directors.
(d) The Fund shall have the right to suspend the sale of
its Class C shares at times when redemption is suspended pursuant
to the conditions set forth in Section 4(b) hereof. The Fund
shall also have the right to suspend the sale of its Class C
shares if trading on the New York Stock Exchange shall have been
suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some
other event, which, in the judgment of the Fund, makes it
impracticable or inadvisable to sell the Class C shares.
(e) The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class C shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund
will not arbitrarily or without reasonable cause refuse to accept
or confirm orders for the purchase of Class C shares. The Fund
(or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts or
certificates for such Class C shares pursuant to the instructions
of the Distributor. Payment shall be made to the Fund in New
York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the
Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by
the Fund.
(a) Any of the outstanding Class C shares may be tendered
for redemption at any time, and the Fund agrees to repurchase or
redeem the Class C shares so tendered in accordance with its
obligations as set forth in Article VII of its Articles of
Incorporation, as amended from time to time, and in accordance
with the applicable provisions set forth in the prospectus and
statement of additional information of the Fund. The price to be
paid to redeem or repurchase the Class C shares shall be equal to
the net asset value calculated in accordance with the provisions
of Section 3(c) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in
the prospectus and statement of additional information of the
Fund. All payments by the Fund hereunder shall be made in the
manner set forth below.
The Fund shall pay the total amount of the redemption price
as defined in the above paragraph pursuant to the instructions of
the Distributor on or before the seventh business day subsequent
to its having received the notice of redemption in proper form.
The proceeds of any redemption of shares shall be paid by the
Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the
account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class C shares or payment may be
suspended at times when the New York Stock Exchange is closed,
when trading on said Exchange is suspended, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class C shares of the Fund, and this shall
include, upon request by the Distributor, one certified copy of
all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the
Distributor such number of copies of its prospectus and statement
of additional information as the Distributor shall reasonably
request.
(b) The Fund shall take, from time to time, but subject to
any necessary approval of the shareholders, all necessary action
to fix the number of authorized shares and such steps as may be
necessary to register the same under the Securities Act to the
end that there will be available for sale such number of Class C
shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its Class
C shares for sale under the securities laws of such states as the
Distributor and the Fund may approve. Any such qualification may
be withheld, terminated or withdrawn by the Fund at any time in
its discretion. As provided in Section 8(c) hereof, the expense
of qualification and maintenance of qualification shall be borne
by the Fund. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities upon
request by the Distributor, copies of annual and interim reports
of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort
to effect sales of Class C shares of the Fund but shall not be
obligated to sell any specific number of shares. The services of
the Distributor to the Fund hereunder are not to be deemed
exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling the Class C shares of the Fund, the
Distributor shall use its best efforts in all respects duly to
conform with the requirements of all Federal and state laws
relating to the sale of such securities. Neither the Distributor
nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
registration statement or related prospectus and statement of
additional information and any sales literature specifically
approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as
approved by the officers of the Fund, for the confirmation of
sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales,
and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
(a) The Distributor shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") for the sale of Class C shares; provided,
that the Fund shall approve the forms of agreements with dealers.
Class C shares sold to selected dealers shall be for resale by
such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers
to be used during the continuous offering of the shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer
and sell Class C shares only to such selected dealers that are
members in good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund,
including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required
registration statements and/or prospectuses and statements of
additional information under the Investment Company Act, the
Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to Class C shareholders (including but not limited to
the expense of setting in type any such registration statements,
prospectuses, statements of additional information, annual or
interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments
made to selected dealers as reimbursement for their expenses
associated with payments of sales commissions to financial
consultants. In addition, after the prospectuses, statements of
additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs
and expenses of printing and distributing any copies thereof
which are to be used in connection with the offering of Class C
shares to selected dealers or investors pursuant to this
Agreement. The Distributor shall bear the costs and expenses of
preparing, printing and distributing any other literature used by
the Distributor or furnished by it for use by selected dealers in
connection with the offering of the Class C shares for sale to
the public and any expenses of advertising incurred by the
Distributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class C Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act
remains in effect, any expenses incurred by the Distributor
hereunder may be paid from amounts recovered by it from the Fund
under such Plan.
(c) The Fund shall bear the cost and expenses of
qualification of the Class C 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), as incurred, arising by
reason of any person acquiring any Class C shares, which may be
based upon the Securities Act, or on any other statute or at
common law, on the ground that the registration statement or
related prospectus and statement of additional information, as
from time to time amended and supplemented, or an annual or
interim report to Class C shareholders of the Fund, includes an
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make
the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with,
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 indemnity
agreement contained in this paragraph with respect to any claim
made against the Distributor or any such controlling persons,
unless the Distributor or such controlling persons, as the case
may be, shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after
the Distributor or such controlling persons shall have received
notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve it from any
liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled
to participate at its own expense in the defense or, if it so
elects, to assume the defense of any suit brought to enforce any
such liability, but if the Fund elects to assume the defense,
such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or
persons, defendant or defendants in the suit. In the event the
Fund elects to assume the defense of any such suit and retain
such counsel, the Distributor or such controlling person or
persons, defendant or defendants in the suit shall bear the fees
and expenses, as incurred, of any additional counsel retained by
them, but in case the Fund does not elect to assume the defense
of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the
suit, for the reasonable fees and expenses, as incurred, of any
counsel retained by them. The Fund shall promptly notify the
Distributor of the commencement of any litigation or proceedings
against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the
Fund and each of its Directors and officers and each person, if
any, who controls the Fund against any loss, liability, claim,
damage or expense, as incurred, described in the foregoing
indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon,
and in conformity with, information furnished to the Fund in
writing by or on behalf of the Distributor for use in connection
with the registration statement or related prospectus and
statement of additional information, as from time to time
amended, or the annual or interim reports to 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. Merrill Lynch Mutual Fund Adviser Program. In
connection with the Merrill Lynch Mutual Fund Adviser Program,
the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, are authorized to offer and sell shares of
the Fund, as agent for the Fund, to participants in such program.
The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
to the Fund, the duties of the Distributor, the payment of
expenses and indemnification obligations of the Fund and the
Distributor.
Section 11. Duration and Termination of this Agreement.
This Agreement shall become effective as of the date first above
written and shall remain in force until August __, 1995 and
thereafter, but only for so long as such continuance is
specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of a majority of those Directors
who are not parties to this Agreement or interested persons of
any such party cast in person at a meeting called for the purpose
of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by the Directors or by vote of a majority
of the outstanding voting securities of the Fund, or by the
Distributor, on sixty days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
The terms "vote of a majority of the outstanding voting
securities", "assignment", "affiliated person" and "interested
person", when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act.
Section 12. Amendments of this Agreement. This Agreement
may be amended by the parties only if such amendment is
specifically approved by (i) the Directors or by the vote of a
majority of outstanding voting securities of the Fund and (ii) by
the vote of a majority of those Directors of the Fund who are not
parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on
such approval.
Section 13. Governing Law. The provisions of this
Agreement shall be construed and interpreted in accordance with
the laws of the State of New York as at the time in effect and
the applicable provisions of the Investment Company Act. To the
extent that the applicable law of the State of New York, or any
of the provisions herein, conflict with the applicable provisions
of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
MERRILL LYNCH AMERICAS INCOME FUND, INC.
By
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
Title:
EXHIBIT A
MERRILL LYNCH AMERICAS INCOME FUND INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor")
has an agreement with Merrill Lynch Americas Income Fund Inc., a
[Massachusetts business trust or Maryland corporation] (the
"Fund"), pursuant to which it acts as the distributor for the
sale of Class C shares of common stock, par value $0.10 per share
(herein referred to as the "Class C shares"), of the Fund and as
such has the right to distribute Class C shares of the Fund for
resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its
Class C shares being offered to the public are registered under
the Securities Act of 1933, as amended. You have received a copy
of the Class C Shares Distribution Agreement (the "Distribution
Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. The
terms "Prospectus" and "Statement of Additional Information" as
used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and
Exchange Commission which is part of the most recent effective
registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected
Dealers Group, Class C shares of the Fund upon the following
terms and conditions:
1. In all sales of these Class C shares to the public, you
shall act as dealer for your own account and in no transaction
shall you have any authority to act as agent for the Fund, for us
or for any other member of the Selected Dealers Group, except in
connection with the Merrill Lynch Mutual Fund Adviser program and
such other special programs as we from time to time agree, in
which case you shall have authority to offer and sell shares, as
agent for the Fund, to participants in such program.
2. Orders received from you will be accepted through us
only at the public offering price applicable to each order, as
set forth in the current Prospectus and Statement of Additional
Information of the Fund. The procedure relating to the handling
of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either. The minimum
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 Class C shares
unless you have already received purchase orders for such Class C
shares at the applicable public offering prices and subject to
the terms hereof and of the Distribution Agreement. You agree
that you will not offer or sell any of the Class C shares except
under circumstances that will result in compliance with the
applicable Federal and state securities laws and that in
connection with sales and offers to sell Class C shares you will
furnish to each person to whom any such sale or offer is made a
copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will
not furnish to any person any information relating to the Class C
shares of the Fund which is inconsistent in any respect with the
information contained in the Prospectus and Statement of
Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in
any public place without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to
place orders directly with the Fund for Class C shares of the
Fund to be resold by us to you subject to the applicable terms
and conditions governing the placement of orders by us set forth
in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption
subject to the applicable terms and conditions set forth in
Section 4 of the Distribution Agreement.
5. You shall not withhold placing orders received from your
customers so as to profit yourself as a result of such
withholding: e.g., by a change in the "net asset value" from
that used in determining the offering price to your customers.
6. No person is authorized to make any representations
concerning Class C shares of the Fund except those contained in
the current Prospectus and Statement of Additional Information of
the Fund and in such printed information subsequently issued by
us or the Fund as information supplemental to such Prospectus and
Statement of Additional Information. In purchasing Class C
shares through us you shall rely solely on the representations
contained in the Prospectus and Statement of Additional
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 is our sole responsibility and
not the responsibility of the Fund, and you agree that the Fund
shall have no liability or responsibility to you in these
respects unless expressly assumed in connection therewith.
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 Class C shares
entirely or to certain persons or entities in a class or classes
specified by us. Each party hereto has the right to cancel this
Agreement upon notice to the other party.
9. We shall have full authority to take such action as we
may deem advisable in respect of all matters pertaining to the
continuous offering. We shall be under no liability to you
except for lack of good faith and for obligations expressly
assumed by us herein. Nothing contained in this paragraph is
intended to operate as, and the provisions of this paragraph
shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as
amended, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
10. You represent that you are a member of the National
Association of Securities Dealers, Inc. and, with respect to any
sales in the United States, we both hereby agree to abide by the
Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the
states in which we believe the Class C shares have been qualified
for sale under, or are exempt from the requirements of, the
respective securities laws of such states, but we assume no
responsibility or obligation as to your right to sell Class C
shares in any jurisdiction. We will file with the Department of
State in New York a Further State Notice with respect to the
Class C shares, if necessary.
12. All communications to us should be sent to the address
below. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. Your first order placed pursuant to this Agreement for
the purchase of Class C shares of the Fund will represent your
acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
(Authorized Signature)
Please return one signed copy
of this Agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
By:
Address: [800 Scudders Mill Road]
[Plainsboro, New Jersey 08536]
Date: , 1994
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 21st day of October 1994 between Merrill Lynch
Americas Income Fund, Inc., a Maryland corporation (the "Fund"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as the principal underwriter and distributor of the Fund to sell
Class D shares of common stock in the Fund (sometimes herein referred to as
"Class D shares") to the public and hereby agrees during the term of this
Agreement to sell Class D shares of the Fund to the Distributor upon the terms
and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
(a) It is contemplated that the Fund will commence an offering of its
Class D shares, and thereafter the Distributor shall have the right to buy from
the Fund the Class D shares needed, but not more than the Class D shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class D shares of the Fund placed with the Distributor by eligible investors or
securities dealers. Investors eligible to purchase Class D shares shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class D shares. The price which
the Distributor shall pay for the Class D shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof,
used in determining the public offering price on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors
at the public offering price, as set forth in Section 3(c) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed 4.0% of the public offering price
(4.17% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Directors, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Fund hereunder shall be made in the manner set forth in Section
3(f).
(d) The net asset value of Class D shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(e) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts or certificates for such Class D shares pursuant to the instructions of
the Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article VII of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class
D shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class D shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class D shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class D shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class D shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the continuous offering of the Class D shares is attached hereto as
Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class
D shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class D
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to
selected dealers as reimbursement for their expenses associated with payments of
sales commissions to financial consultants. In addition, after the
prospectuses, statements of additional information and annual and interim
reports have been prepared and set in type, the Distributor shall bear the costs
and expenses of printing and distributing any copies thereof which are to be
used in connection with the offering of Class D shares to selected dealers or
investors pursuant to this Agreement. The Distributor shall bear the costs and
expenses of preparing, printing and distributing any other literature used by
the Distributor or furnished by it for use by selected dealers in connection
with the offering of the Class D shares for sale to the public and any expenses
of advertising incurred by the Distributor in connection with such offering. It
is understood and agreed that so long as the Fund's Class D Shares Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act remains in effect,
any expenses incurred by the Distributor hereunder in connection with account
maintenance activities may be paid from amounts recovered by it from the Fund
under such plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses of any
additional counsel retained by them, but in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any of the Class D shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each
of its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to Class D shareholders. In case any action shall be brought
against the Fund or any person so indemnified, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights and
duties given to the Fund, and the Fund and each person so indemnified shall have
the rights and duties given to the Distributor by the provisions of subsection
(a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection
with the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until August __, 1995 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH AMERICAS INCOME FUND, INC.
By
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
Title:
EXHIBIT A
Merrill Lynch Americas Income Fund, Inc.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Americas Income Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class D
shares of common stock, par value $0.10 per share (herein referred to as "Class
D shares"), of the Fund and as such has the right to distribute Class D shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class D shares
being offered to the public are registered under the Securities Act of 1933, as
amended. You have received a copy of the Class D Shares Distribution Agreement
(the "Distribution Agreement") between ourself and the Fund and reference is
made herein to certain provisions of such Distribution Agreement. The terms
"Prospectus" and "Statement of Additional Information" used herein refer to the
prospectus and statement of additional information, respectively, on file with
the Securities and Exchange Commission which is part of the most recent
effective registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class D shares of the Fund upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 5 hereof and
instructions which we or the Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by the Distributor or the Fund in
the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the current Prospectus and Statement of
Additional Information of the Fund.
3. The sales charges for sales to the public, computed as percentages
of the public offering price and the amount invested, and the related discount
to Selected Dealers are as follows:
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- -------------- ----------
Less than $10,000........ 4.00% 4.17% 3.75%
$10,000 but less
than $25,000............ 4.00% 4.17% 3.75%
$25,000 but less
than $50,000............ 3.75% 3.90% 3.50%
$50,000 but less
than $100,000........... 3.25% 3.36% 3.00%
$100,000 but less
than $250,000........... 2.50% 2.56% 2.25%
$250,000 but less
than $1,000,000......... 1.50% 1.52% 1.25%
$1,000,000 and over**.... 0.00% 0.50% 0.40%
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class D shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class D shares of the Fund or Class D shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which eligible investors are permitted to purchase Class D shares of the
Fund at the offering price applicable to the total of (a) the public offering
price of the shares being purchased plus (b) an amount equal to the then current
net asset value or cost, whichever is higher, of the purchaser's combined
holdings of Class A, Class B, Class C and Class D shares of the Fund and of any
other investment company with an initial sales charge for which the Distributor
acts as the distributor. For any such right of accumulation to be made
available, the Distributor must be provided at the time of purchase, by the
purchaser or you, with sufficient information to permit confirmation of
qualification, and acceptance of the purchase order is subject to such
confirmation.
The reduced sales charges are applicable to purchases aggregating $10,000
or more of Class A shares or of Class D shares of any other investment company
with an initial sales charge for which the Distributor acts as the distributor
made through you within a thirteen-month period starting with the first purchase
pursuant to a Letter of Intention in the form provided in the Prospectus. A
purchase not originally made pursuant to a Letter of Intention may be included
under a subsequent letter executed within 90 days of such purchase if the
Distributor is informed in writing of this intent within such 90-day period. If
the intended amount of shares is not purchased within the thirteen-month period,
an appropriate price adjustment will be made pursuant to the terms of the Letter
of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to the public qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
4. You shall not place orders for any of the Class D shares unless you
have already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers
so as to profit yourself as a result of such withholding: e.g., by a change in
the "net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class D
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class D shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase
of Class D shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
(Authorized Signature)
Please return one signed copy
of this agreement to:
[MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011]
Accepted:
Firm Name: [Merrill Lynch, Pierce, Fenner & Smith Inc.]
By:
Address: [800 Scudders Mill Road]
[Plainsboro, New Jersey 08536]
Date: , 1994
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Americas Income Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 2 to Registration
Statement No. 33-64398 of our report dated February 14, 1994 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption 'Financial Highlights'
appearing in the Prospectus, which also is a part of such Registration
Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
October 12, 1994
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH AMERICAS INCOME FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994,
by and between Merrill Lynch Americas Income Fund, Inc., a
Maryland corporation (the "Fund"), and Merrill Lynch Funds
Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end
investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business
of selling shares of investment companies either directly to
purchasers or through other securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares
Distribution Agreement with MLFD, pursuant to which MLFD will act
as the exclusive distributor and representative of the Fund in
the offer and sale of Class C shares of common stock, par value
$0.10 per share (the "Class C shares"), of the Fund to the
public; and
WHEREAS, the Fund desires to adopt this Class C Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act, pursuant to which the Fund will pay an account
maintenance fee and a distribution fee to MLFD with respect to
the Fund's Class C shares; and
WHEREAS, the Directors of the Fund have determined that
there is a reasonable likelihood that adoption of the Plan will
benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby
agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay MLFD an account maintenance fee under
the Plan at the end of each month at the annual rate of 0.25% of
average daily net assets of the Fund relating to Class C shares
to compensate MLFD and securities firms with which MLFD enters
into related agreements pursuant to Paragraph 3 hereof ("Sub-
Agreements") for providing account maintenance activities with
respect to Class C shareholders of the Fund. Expenditures under
the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class C shares of the
Fund and payment of expenses incurred in connection with such
account maintenance activities including the costs of making
services available to shareholders including assistance in
connection with inquiries related to shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the
Plan at the end of each month at the annual rate of .55% of
average daily net assets of the Fund relating to Class C shares
to compensate MLFD and securities firms with which MLFD enters
into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will
relate to the sale, promotion and marketing of the Class C shares
of the Fund. Such expenditures may consist of sales commissions
to financial consultants for selling Class C shares of the Fund,
compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its
sales and promotional activities, including advertising
expenditures related to the Fund and the costs of preparing and
distributing promotional materials. The distribution fee may
also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment
of the distribution fee described in this Paragraph 2 shall be
subject to any limitations set forth in any applicable regulation
of the National Association of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into
Sub-Agreements with certain securities firms ("Securities
Firms"), including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs
1 and 2 hereof. MLFD may reallocate all or a portion of its
account maintenance fee or distribution fee to such Securities
Firms as compensation for the above-mentioned activities and
services. Such Sub-Agreement shall provide that the Securities
Firms shall provide MLFD with such information as is reasonably necessary to
permit MLFD to comply with the reporting requirements set forth in Paragraph 4
hereof.
4. MLFD shall provide the Fund for review by the Board of
Directors, and the Directors shall review, at least quarterly, a
written report complying with the requirements of Rule 12b-1
regarding the disbursement of the account maintenance fee and the
distribution fee during such period.
5. This Plan shall not take effect until it has been
approved by a vote of at least a majority, as defined in the
Investment Company Act, of the outstanding Class C voting securities of the
Fund.
6. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of a
majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the
Fund, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting or meetings called for
the purpose of voting on the Plan and such related agreements.
7. The Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding Class C voting securities of the Fund.
9. The Plan may not be amended to increase materially the
rate of payments provided for herein unless such amendment is
approved by at least a majority, as defined in the Investment
Company Act, of the outstanding Class C voting securities of the
Fund, and by the Directors of the Fund in the manner provided for
in Paragraph 6 hereof, and no material amendment to the Plan
shall be made unless approved in the manner provided for approval
and annual renewal in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Distribution Plan as of the date first above written.
MERRILL LYNCH AMERICAS INCOME FUND, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and
between Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"),
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill
Lynch Americas Income Fund, a Maryland corporation (the "Fund"),
pursuant to which it acts as the exclusive distributor for the
sale of Class C shares of common stock, par value $0.10 per share
(the "Class C shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C
Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Act"),
pursuant to which MLFD receives an account maintenance fee from
the Fund at the annual rate of 0.25% of average daily net assets
of the Fund relating to Class C shares for account maintenance
activities related to Class C shares of the Fund and a
distribution fee from the Fund at the annual rate of .55% of
average daily net assets of the Fund relating to Class C shares
for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain
account maintenance activities and sales and promotional
activities and services for the Fund's Class C shareholders and
the Securities Firm is willing to perform such activities and
services;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance
activities and services with respect to the Class C shares of the
Fund and incur expenditures in connection with such activities
and services of the types referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional
activities and services with respect to the sale of the Class C
shares of the Fund, and incur distribution expenditures, of the
types referred to in Paragraph 2 of the Plan.
3. As compensation for its activities and services
performed under this Agreement, MLFD shall pay the Securities
Firm an account maintenance fee and a distribution fee at the end
of each calendar month in an amount agreed upon by the parties
hereto.
4. The Securities Firm shall provide MLFD, at least
quarterly, such information as reasonably requested by MLFD to
enable MLFD to comply with the reporting requirements of Rule
12b-1 regarding the disbursement of the account maintenance fee
and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been
approved by votes of a majority of both (a) the Directors of the
Fund and (b) those Directors of the Fund who are not "interested
persons" of the Fund, as defined in the Act, and have no direct
or indirect financial interest in the operation of the Plan, this
Agreement or any agreements related to the Plan or this Agreement
(the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as
such continuance is specifically approved at least annually in
the manner provided for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the
event of its assignment or in the event of the termination of the
Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH AMERICAS INCOME FUND, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the 21st day of October 1994,
by and between Merrill Lynch Americas Income Fund, Inc., a
Maryland corporation (the "Fund"), and Merrill Lynch Funds
Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H :
WHEREAS, the Fund is engaged in business as an open-end
investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business
of selling shares of investment companies either directly to
purchasers or through other securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares
Distribution Agreement with MLFD, pursuant to which MLFD will act
as the exclusive distributor and representative of the Fund in
the offer and sale of Class D shares of common stock, par value
$0.10 per share (the "Class D shares"), of the Fund to the
public; and
WHEREAS, the Fund desires to adopt this Class D Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act, pursuant to which the Fund will pay an account maintenance fee to
MLFD with respect to the Fund's Class D shares; and
WHEREAS, the Directors of the Fund have determined that
there is a reasonable likelihood that adoption of the Plan will
benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby
agrees to the terms of, the Plan in accordance with Rule 12b-1
under the Investment Company Act on the following terms and
conditions:
1. The Fund shall pay MLFD an account maintenance fee under
the Plan at the end of each month at the annual rate of 0.25% of
average daily net assets of the Fund relating to Class D shares
to compensate MLFD and securities firms with which MLFD enters
into related agreements ("Sub-Agreements") pursuant to Paragraph
2 hereof for providing account maintenance activities with
respect to Class D shareholders of the Fund. Expenditures under
the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class D shares of the
Fund and payment of expenses incurred in connection with such
account maintenance activities including the costs of making
services available to shareholders including assistance in
connection with inquiries related to shareholder accounts.
2. The Fund hereby authorizes MLFD to enter into
Sub-Agreements with certain securities firms ("Securities
Firms"), including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may
reallocate all or a portion of its account maintenance fee to
such Securities Firms as compensation for the above-mentioned
activities. Such Sub-Agreement shall provide that the Securities
Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting
requirements set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of
Directors, and the Directors shall review, at least quarterly, a
written report complying with the requirements of Rule 12b-1
regarding the disbursement of the account maintenance fee during
such period.
4. This Plan shall not take effect until it has been
approved by a vote of at least a majority, as defined in the
Investment Company Act, of the outstanding Class D voting securities of the
Fund.
5. This Plan shall not take effect until it has been
approved, together with any related agreements, by votes of a
majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the
Fund, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting or meetings called for
the purpose of voting on the Plan and such related agreements.
6. The Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the
manner provided for approval of the Plan in Paragraph 5.
7. The Plan may be terminated at any time by vote of a
majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding Class D voting securities of the Fund.
8. The Plan may not be amended to increase materially the
rate of payments provided for in Paragraph 1 hereof unless such
amendment is approved by at least a majority, as defined in the
Investment Company Act, of the outstanding Class D voting
securities of the Fund, and by the Directors of the Fund in the
manner provided for in Paragraph 5 hereof, and no material
amendment to the Plan shall be made unless approved in the
manner provided for approval and annual renewal in Paragraph 5
hereof.
9. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
10. The Fund shall preserve copies of the Plan and any
related agreements and all reports made pursuant to Paragraph 3
hereof, for a period of not less than six years from the date of
the Plan, or the agreements or such report, as the case may be,
the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this
Distribution Plan as of the date first above written.
MERRILL LYNCH AMERICAS INCOME FUND, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the 21st day of October 1994, by and
between Merrill Lynch Funds Distributor, Inc. a Delaware
corporation ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation ("Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill
Lynch Americas Income Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the exclusive distributor
for the sale of Class D shares of common stock, par value $0.10
per share (the "Class D shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D
Shares Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Act"),
pursuant to which MLFD receives an account maintenance fee from
the Fund at the annual rate of 0.25% of average daily net assets
of the Fund relating to Class D shares for providing account
maintenance activities and services with respect to Class D
shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain
account maintenance activities and services, including assistance
in connection with inquiries related to shareholder accounts, for
the Fund's Class D shareholders and the Securities Firm is
willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance
activities and services with respect to the Class D shares of the
Fund and incur expenditures in connection with such activities
and services, of the types referred to in Paragraph 1 of the
Plan.
2. As compensation for its services performed under this
Agreement, MLFD shall pay the Securities Firm a fee at the end of
each calendar month in an amount agreed upon by the parties
hereto.
3. The Securities Firm shall provide MLFD, at least
quarterly, such information as reasonably requested by MLFD to
enable MLFD to comply with the reporting requirements of Rule
12b-1 regarding the disbursement of the fee during such period
referred to in Paragraph 3 of the Plan.
4. This Agreement shall not take effect until it has been
approved by votes of a majority of both (a) the Directors of the
Fund and (b) those Directors of the Fund who are not "interested
persons" of the Fund, as defined in the Act, and have no direct
or indirect financial interest in the operation of the Plan, this
Agreement or any agreements related to the Plan or this Agreement
(the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as
such continuance is specifically approved at least annually in
the manner provided for approval of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the
event of its assignment or in the event of the termination of the
Plan or any amendment to the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 160084010
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