<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1994
SECURITIES ACT FILE NO. 33-51193
INVESTMENT COMPANY ACT FILE NO. 811- 07127
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
----------------
WORLDWIDE DOLLARVEST FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
----------------
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(609) 282-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ARTHUR ZEIKEL
WORLDWIDE DOLLARVEST FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
MAILING ADDRESS, BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
THOMAS R. SMITH, JR. BROWN & WOOD ONE
MARK B. GOLDFUS FUND ASSET MANAGEMENT WORLD TRADE CENTER NEW YORK, NEW YORK
BOX 9011 PRINCETON, NEW JERSEY 08543- 10048-0557
9011
APPROXIMATE DATE OF PROPOSED OFFERING: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR
INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING. [_]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE(1) FEE(2)
- -------------------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C>
Common Stock (par value
$.10 per share)....... 6,966,666 Shs. $15.00 $104,499,990 $36,035
- -------------------------------------------------------------------------------------------
- -
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes 633,333 shares subject to the Underwriter's over-allotment option.
(2) 7,500,000 shares previously were registered by registering 66,667 shares
(registration fee of $344.83) on November 24, 1993 in connection with the
initial Registration Statement and 7,433,333 shares (registration fee of
$38,449) on December 17, 1993 in connection with Pre-Effective Amendment
No. 1 to the Registration Statement.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WORLDWIDE DOLLARVEST FUND, INC.
----------------
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(C)
<TABLE>
<CAPTION>
ITEM NUMBER, FORM N-2 CAPTION IN PROSPECTUS
--------------------- ---------------------
PART A--INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
1. Outside Front Cover Page....................... Cover Page
2. Inside Front and Outside Back Cover Pages...... Cover Page, Underwriting
3. Fee Table and Synopsis......................... Fee Table
4. Financial Highlights .......................... Not Applicable
5. Plan of Distribution........................... Underwriting
6. Selling Shareholders........................... Not Applicable
7. Use of Proceeds................................ Use of Proceeds
8. General Description of the Registrant.......... The Fund; Investment Objectives and
Policies
9. Management..................................... Directors and Officers; Investment
Advisory and Management
Arrangements
10. Capital Stock, Long-Term Debt and Other
Securities....................................... Description of Shares
11. Defaults and Arrears on Senior Securities...... Not Applicable
12. Legal Proceedings.............................. Not Applicable
13. Table of Contents of the Statement of
Additional Information........................... Not Applicable
PART B--INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
14. Cover Page..................................... Not Applicable
15. Table of Contents.............................. Not Applicable
16. General Information and History................ Not Applicable
17. Investment Objectives and Policies............. Investment Objectives and Policies;
Other Investment Policies;
Investment Restrictions
18. Management..................................... Directors and Officers; Investment
Advisory and Management
Arrangements
19. Control Persons and Principal Holders of
Securities....................................... Investment Advisory and Management
Arrangements
20. Investment Advisory and Other Services......... Investment Advisory and Management
Arrangements; Underwriting;
Transfer Agent, Dividend Disbursing
Agent and Registrar; Custodian;
Experts
21. Brokerage Allocation and Other Practices....... Portfolio Transactions
22. Tax Status..................................... Taxes
23. Financial Statements........................... Statement of Assets, Liabilities and
Capital
</TABLE>
PART C--OTHER INFORMATION
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
6,333,333 SHARES
WORLDWIDE DOLLARVEST FUND, INC.
COMMON STOCK
----------------
Worldwide DollarVest Fund, Inc. (the "Fund") is a newly organized, non-
diversified, closed-end management investment company investing exclusively in
U.S. dollar-denominated securities, substantially all of which will be debt
securities. The primary investment objective of the Fund is to seek high
current income. As a secondary objective, the Fund will seek capital
appreciation. The Fund will invest at least 65% of its total assets in debt
securities or obligations of government and government-related issuers located
in foreign countries and high yield, high risk corporate debt securities of
non-U.S. issuers (collectively, "non-U.S. obligations"). The government and
government-related debt securities or obligations, which include the
obligations of entities organized to restructure outstanding debt of foreign
countries, are referred to herein as "'sovereign debt securities." The Fund
expects that, based on current market conditions, the primary emphasis
(Continued on page 2)
----------------
INVESTMENTS ON AN INTERNATIONAL BASIS INVOLVE SPECIAL CONSIDERATIONS AND
RISKS WHICH ARE NOT TYPICALLY PRESENT IN INVESTMENTS EXCLUSIVELY IN THE
SECURITIES OF U.S. ISSUERS. THE FUND MAY INVEST SUBSTANTIALLY ALL OF THE FUND'S
ASSETS AT ANY ONE TIME IN DEBT SECURITIES THAT ARE LOW RATED OR UNRATED. SUCH
SECURITIES GENERALLY INVOLVE GREATER VOLATILITY OF PRICE AND RISKS TO PRINCIPAL
AND INCOME THAN SECURITIES IN THE HIGHER RATING CATEGORIES. THE FUND MAY INVEST
WITHOUT LIMITATION IN SECURITIES THAT ARE NOT READILY MARKETABLE. SEE
"PROSPECTUS SUMMARY--SPECIAL CONSIDERATIONS AND RISK FACTORS."
BECAUSE THE FUND IS NEWLY ORGANIZED, ITS SHARES HAVE NO HISTORY OF PUBLIC
TRADING. SHARES OF CLOSED-END INVESTMENT COMPANIES FREQUENTLY TRADE AT A
DISCOUNT FROM THEIR NET ASSET VALUE. THIS RISK MAY BE GREATER FOR INVESTORS
EXPECTING TO SELL THEIR SHARES IN A RELATIVELY SHORT PERIOD AFTER COMPLETION OF
THE PUBLIC OFFERING. SEE "PROSPECTUS SUMMARY--SPECIAL CONSIDERATIONS AND RISK
FACTORS."
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM PRICE MAXIMUM PROCEEDS TO
TO PUBLIC(1) SALES LOAD(1)(2) THE FUND(3)
- -------------------------------------------------------------------------------
- -
<S> <C> <C> <C>
Per Share....................... $15.00 $.825 $14.175
- -------------------------------------------------------------------------------
- -
Total(4)........................ $94,999,995 $5,225,000 $89,774,995
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Footnotes on following page)
The shares are offered by Merrill Lynch, subject to prior sale, when, as and
if issued by the Fund and accepted by Merrill Lynch, subject to approval of
certain legal matters by counsel for Merrill Lynch and certain other
conditions. Merrill Lynch reserves the right to withdraw, cancel or modify such
offer and to reject orders in whole or in part. It is expected that delivery of
the shares will be made in New York, New York on or about February 4, 1994.
----------------
MERRILL LYNCH & CO.
----------------
The Date of this Prospectus is January 28, 1994
<PAGE>
(Continued from page 1)
initially will be on non-U.S. obligations of issuers located in emerging market
countries. The Fund may also invest up to 35% of its total assets in high yield
corporate debt securities of U.S. issuers. Under normal circumstances,
substantially all of the Fund's assets will be invested in debt securities
rated in the lower rating categories of the established rating services ("Baa"
or lower by Moody's Investors Service, Inc. and "BBB" or lower by Standard &
Poor's Corporation) or in unrated securities of comparable quality. The Fund
may engage in various portfolio strategies to enhance income and to hedge its
portfolio against investment and interest rate risks, including the utilization
of leverage and the use of interest rate transactions and options and futures.
There can be no assurance that the Fund's investment objectives will be
achieved.
The Fund anticipates that its initial investments in non-U.S. obligations
will be primarily in countries considered emerging market countries at the time
of purchase. The Fund anticipates that a substantial part of its initial
investment focus will be in Argentina, Brazil, Mexico, and Venezuela. It is
anticipated that under current market conditions at least 50% of the Fund's
total assets will consist of "Brady Bond" obligations or obligations of
entities organized to restructure Brady Bond obligations. Generally, the Brady
Bonds will be collateralized in full as to principal by zero coupon U.S.
Government or government agency obligations having the same maturity as the
Brady Bond obligations. See "Investment Objectives and Policies." The Fund will
not invest 25% or more of its total assets in the sovereign debt securities of
any single foreign country. As market conditions change, however, the
percentage of the Fund's assets invested as described above may change.
At times, the Fund expects to utilize leverage through borrowings or issuance
of short-term debt securities or shares of preferred stock. Under current
market conditions, the Fund intends to utilize leverage in an amount equal to
between 20% and 33 1/3% of its total assets (including the amount obtained from
leverage). The Fund will generally not utilize leverage if it anticipates that
the Fund's leveraged capital structure would result in a lower rate of return
to holders of the Common Stock than that obtainable if the Common Stock were
unleveraged for any significant amount of time. Use of leverage creates an
opportunity for increased income, but, at the same time, creates special risks.
See "Other Investment Policies -- Leverage and Borrowing."
As a "non-diversified" investment company, the Fund may invest more than 5%
of its assets in the obligations of any single issuer, subject to certain tax
requirements. Since the Fund may invest a relatively high percentage of its
assets in the 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. See "Investment Objectives and Policies."
Prior to this offering, there has been no public market for the Fund's
shares. The Fund's shares have been approved for listing on the New York Stock
Exchange under the symbol "WDV." However, during an initial period which is not
expected to exceed four weeks from the date of this Prospectus, the Fund's
shares will not be listed on any securities exchange. During such period,
Merrill Lynch, Pierce, Fenner & Smith Incorporated does not intend to make a
market in the Fund's shares. Consequently, it is anticipated that an investment
in the Fund will be illiquid during such period. The address of the Fund is 800
Scudders Mill Road, Plainsboro, New Jersey 08536, and its telephone number is
(609) 282-2000. Investors are advised to read this Prospectus carefully and
retain it for future reference. Fund Asset Management, L.P. is the Fund's
Investment Adviser.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE FUND'S COMMON
STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
- -------
(Footnotes from previous page.)
(1) The "Maximum Price to Public" and "Maximum Sales Load" per share will be
reduced to $14.85 and $.675, respectively, for purchases in single
transactions of between 3,500 and 6,999 shares and to $14.70 and $.525,
respectively, for purchases in single transactions of 7,000 or more shares.
See "Underwriting."
(2) The Fund and the Investment Adviser have agreed to indemnify Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting organizational and offering costs payable by the Fund
estimated at $375,000.
(4) The Fund has granted Merrill Lynch an option, exercisable for 45 days after
the date hereof, to purchase up to an additional 633,333 shares to cover
over-allotments. If all such shares are purchased, the total Maximum Price
to Public, Maximum Sales Load and Proceeds to the Fund will be
$104,499,990, $5,747,500 and $98,752,490, respectively. See "Underwriting."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with the detailed
information appearing elsewhere in this Prospectus.
The Fund.................. Worldwide DollarVest Fund, Inc. (the "Fund") is
a newly organized, non-diversified, closed-end
management investment company investing
exclusively in U.S. dollar-denominated
securities, substantially all of which will be
debt securities. See "The Fund."
The Offering..............
The Fund is offering 6,333,333 shares of Common
Stock at a maximum initial offering price of
$15.00 per share, except that the price will be
reduced to $14.85 for purchases in single
transactions of between 3,500 and 6,999 shares
and to $14.70 for purchases in single
transactions of 7,000 or more shares. The
shares are being offered by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). Merrill Lynch has been granted an
option, exercisable for 45 days from the date
of this Prospectus, to purchase up to 633,333
additional shares of Common Stock to cover
over-allotments. See "Underwriting."
Investment Objectives and The primary investment objective of the Fund is
Policies.................. to seek high current income by investing
exclusively in U.S. dollar-denominated
securities, substantially all of which will be
debt securities. As a secondary objective, the
Fund will seek capital appreciation. The Fund
will invest at least 65% of its total assets in
debt securities or obligations of government
and government-related issuers located in
foreign countries and high yield, high risk
corporate debt securities of non-U.S. issuers
(collectively, "non-U.S. obligations"). The
government and government-related debt
securities or obligations, which include the
obligations of entities organized to
restructure outstanding debt of foreign
countries, are referred to herein as "sovereign
debt securities." The Fund expects that, based
on current market conditions, the primary
emphasis initially will be on non-U.S.
obligations of issuers located in emerging
market countries. The Fund may also invest up
to 35% of its total assets in corporate debt
securities of U.S. issuers. Under normal
circumstances, substantially all of the Fund's
assets will be invested in debt securities
rated in the lower rating categories of the
established rating services, or in unrated
securities of comparable quality.
The investment objectives of the Fund reflect
the belief that the debt securities of emerging
market issuers offer attractive investment
opportunities both with respect to current
income and capital appreciation. In recent
years, a number of emerging market countries
have been instituting economic, financial and
political reforms
3
<PAGE>
encouraging greater market orientation and less
government intervention in economic affairs.
These measures are benefitting the capital
markets of such countries and resulting in
significantly improved credit fundamentals for
the sovereign and corporate debt securities
issued in such markets. The Investment Adviser
believes the debt securities of these markets
currently offer high yields relative to the
improving credit quality. Furthermore, since
sovereign debt securities typically trade in
the secondary markets at substantial discounts,
there is opportunity for capital appreciation
to the extent there is a favorable change in
the market perception of the creditworthiness
of the issuer.
The Fund's investments in sovereign debt
securities will consist of debt securities or
obligations issued or guaranteed by foreign
governments, their agencies, instrumentalities
and political subdivisions and by entities
controlled or sponsored by such governments.
The investments may include participations in
or assignments of loans made by financial
institutions to such issuers. The Fund may also
invest in interests in entities organized and
operated for the purpose of restructuring the
investment characteristics of sovereign debt
securities. The restructured sovereign debt
securities will include Brady Bonds, which are
debt securities issued under the framework of
the Brady Plan, an initiative established in
1989 as a mechanism for debtor nations to
restructure their outstanding external
commercial bank indebtedness.
The Fund anticipates that its initial
investments in non-U.S. obligations will be
primarily in countries considered emerging
market countries at the time of purchase. The
Fund anticipates that a substantial part of its
initial investment focus will be in Argentina,
Brazil, Mexico and Venezuela. It is anticipated
that, under current market conditions, at least
50% of the Fund's total assets will consist of
Brady Bond obligations or obligations of
entities organized to restructure Brady Bond
obligations. Under current market conditions,
the Fund will not invest 25% or more of its
total assets in the sovereign debt securities
of any single foreign country. As market
conditions change, however, the percentage of
the Fund's assets invested as described above
may change. See "Investment Objectives and
Policies."
The Fund's investments in U.S. and non-U.S.
high yield corporate securities will include
debt securities, preferred stocks and
convertible securities which are rated in the
lower rating categories of the established
rating services ("Baa" or lower by Moody's
Investors Service, Inc. ("Moody's") and "BBB"
or lower by Standard
4
<PAGE>
& Poor's Corporation ("S&P")), or in unrated
U.S. and non-U.S. securities considered by the
Investment Adviser to be of comparable quality.
Securities rated below "Baa" by Moody's or
below "BBB" by S&P, and unrated securities of
comparable quality, are commonly known as "junk
bonds."
The Fund has no restrictions on portfolio
maturity. The average maturity of the Fund's
portfolio securities will vary based upon the
Investment Adviser's assessment of economic and
market conditions. As with all debt securities,
changes in market interest rates will affect
the Fund's net asset value as the prices of
portfolio securities generally increase when
interest rates decline and decrease when
interest rates rise. Prices of longer term
securities generally fluctuate more in response
to interest rate changes than do shorter term
securities.
Investment in shares of Common Stock of the
Fund offers several benefits. The Fund offers
investors the opportunity to receive high
current income and, secondarily, capital
appreciation by investing in a professionally
managed portfolio comprised of sovereign debt
securities and high yield corporate debt
securities. Many of the types of non-U.S.
obligations in which the Fund will invest are
investments not typically available to
individual investors. In managing such
portfolio, the Investment Adviser will provide
the Fund and its shareholders with professional
credit analysis and the use of professional
money management investment techniques. The
Fund also relieves the investor of the
administrative details involved in managing a
portfolio of such investments. Additionally,
the Investment Adviser may seek to enhance the
yield on the Common Stock by leveraging the
Fund's capital structure. These benefits are at
least partially offset by the expenses involved
in operating an investment company. Such
expenses primarily consist of the advisory fee
and operational costs. Additionally, the use of
leverage involves certain expenses and risk
considerations. See "Other Investment
Policies--Leverage and Borrowing."
Listing................... Prior to this offering, there has been no
public market for the shares of the Fund. The
Fund's shares have been approved for listing on
the New York Stock Exchange. However, during an
initial period which is not expected to exceed
four weeks from the date of this Prospectus,
the Fund's shares will not be listed on any
securities exchange. During such period,
Merrill Lynch does not intend to make a market
in the Fund's shares. Consequently, it is
anticipated that an investment in the Fund will
be illiquid during such period. See
"Underwriting."
5
<PAGE>
Investment Adviser........ Fund Asset Management, L.P. is the Fund's
investment adviser (the "Investment Adviser")
and is responsible for the management of the
Fund's investment portfolio and for providing
administrative services to the Fund. For its
services, the Fund pays the Investment Adviser
a monthly fee at the annual rate of 0.60% of
the Fund's average weekly net assets plus the
proceeds of any outstanding borrowings used for
leverage. The Investment Adviser is an
affiliate of Merrill Lynch Asset Management,
L.P. ("MLAM"). Both the Investment Adviser and
MLAM are owned and controlled by Merrill Lynch
& Co., Inc. ("ML & Co."). The Investment
Adviser, or MLAM, acts as the investment
adviser for over 90 other registered management
investment companies. The Investment Adviser
also offers portfolio management and portfolio
analysis services to individuals and
institutions. As of December 29, 1993, the
Investment Adviser and MLAM had a total of
approximately $160 billion in investment
company and other portfolio assets under
management, including accounts of certain
affiliates of the Investment Adviser. See
"Investment Advisory and Management
Arrangements."
Dividends and
Distributions............. The Fund intends to pay dividends monthly and
to distribute substantially all of its net
investment income to holders of Common Stock.
Net capital gains, if any, will be distributed
at least annually to holders of Common Stock.
The Fund expects that it will commence paying
dividends within approximately 90 days of the
date of this Prospectus.
Automatic Dividend
Reinvestment Plan........ All dividends and capital gains distributions
automatically will be reinvested in additional
shares of the Fund unless a shareholder elects
to receive cash. Shareholders whose shares are
held in the name of a broker or nominee should
contact such broker or nominee to confirm that
they may participate in the Fund's dividend
reinvestment plan. See "Automatic Dividend
Reinvestment Plan."
Mutual Fund Investment
Option................... Purchasers of shares of the Fund in this
offering will have an investment option
consisting of the right to reinvest the net
proceeds from a sale of such shares (the
"Original Shares") in Class A initial sales
charge shares of certain Merrill Lynch-
sponsored open-end mutual funds ("Eligible
Class A Shares") at their net asset value,
without the imposition of the initial sales
charge, if the conditions set forth below are
satisfied. First, the sale of the Original
Shares must be made through Merrill Lynch, and
the net proceeds therefrom
6
<PAGE>
must be reinvested immediately in Eligible
Class A Shares. Second, the Original Shares
must have either been acquired in this offering
or be shares representing reinvested dividends
from shares acquired in this offering. Third,
the Original Shares must have been maintained
continuously 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 certain of
the mutual funds may be subject to an account
maintenance fee at an annual rate of up to
0.25% of the average daily net asset value of
such mutual fund. See "Mutual Fund Investment
Option."
Custodian.................
The Bank of New York will act as custodian for
the Fund. See "Custodian."
Transfer Agent, Dividend
Disbursing Agent and
Registrar................
The Bank of New York will act as transfer
agent, dividend disbursing agent and registrar
for the Fund. See "Transfer Agent, Dividend
Disbursing Agent and Registrar."
Special Considerations
and Risk Factors.........
The Fund is a newly organized, non-diversified,
closed-end management investment company and
has no operating history. As described under
"Listing" above, it is anticipated that an
investment in the Fund will be illiquid prior
to the listing of the Fund's shares on the New
York Stock Exchange. See "Underwriting." Shares
of closed-end investment companies frequently
trade at a discount from their net asset value.
This risk may be greater for investors
expecting to sell their shares in a relatively
short period after completion of the public
offering. Accordingly, the Common Stock of the
Fund is designed primarily for long-term
investors and should not be considered a
vehicle for trading purposes. The net asset
value of the Fund's shares of Common Stock will
fluctuate with interest rate changes as well as
with price changes of the Fund's portfolio
securities, and these fluctuations are likely
to be greater in the case of a fund having a
leveraged capital structure, as contemplated
for the Fund. See "Other Investment Policies--
Leverage and Borrowing."
International Investing. Investment in non-U.S.
obligations generally involves risks not
typically involved in domestic investment,
including 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 emerging market countries. On the
other hand, because the Fund will only invest
in U.S. dollar-denominated
7
<PAGE>
securities, it will not be subject to the
foreign exchange risk normally associated with
international investing. 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 growing in
volume, have, for the most part, substantially
less volume than U.S. markets, and securities
of many foreign issuers are less liquid and
their prices more volatile than securities of
comparable domestic issuers. 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. Costs associated
with transactions in foreign securities are
generally higher than with transactions in U.S.
securities. In addition, there is generally
less government supervision and regulation of
exchanges, financial institutions and issuers
in foreign countries than there is in the
United States.
Emerging Market Securities. The Fund initially
intends to emphasize investments in sovereign
debt and high yield, high risk corporate debt
securities of issuers located in certain
emerging market countries. As used in this
Prospectus, an "emerging market country" is any
country that is considered to be an emerging or
developing country by the International Bank
for Reconstruction and Development (more
commonly referred to as the "World Bank"). The
economics of individual emerging market
countries may differ favorably or unfavorably
from the U.S. economy in such respects as
growth of gross domestic product, rate of
inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and
balance of payments position. Further, the
economies of developing countries generally are
heavily dependent upon international trade and,
accordingly, have been and may continue to be
adversely affected by trade barriers, exchange
controls, managed adjustments in relative
currency values and other protectionist
measures imposed or negotiated by the countries
with which they trade. These economies also
have been and may continue to be adversely
affected by economic conditions in the
countries with which they trade.
With respect to any emerging market country,
there is the possibility of nationalization,
expropriation or confiscatory taxation,
political
8
<PAGE>
changes, governmental regulation, social
instability or diplomatic developments
(including war) which could affect adversely
the economies of such countries or the value of
the Fund's investments in those countries.
Foreign investment in certain emerging market
country debt securities is restricted or
controlled to varying degrees. These
restrictions or controls may at times limit or
preclude foreign investment in certain emerging
market country debt securities, and increase
the costs and expenses of the Fund. Certain
emerging market countries require governmental
approval prior to investments by foreign
persons, limit the amount of investment by
foreign persons in a particular issuer, and/or
impose additional taxes on foreign investors.
Emerging market countries may require
governmental approval for the repatriation of
investment income, capital or the proceeds of
sales of securities by foreign investors. In
addition, if a deterioration occurs in an
emerging market country's balance of payments,
the country could impose temporary restrictions
on foreign capital remittances. The Fund could
be adversely affected by delays in, or a
refusal to grant, any required governmental
approval for repatriation of capital, as well
as by the application to the Fund of any
restrictions on investments. Investing in local
markets in emerging market countries may
require the Fund to adopt special procedures,
seek local government approvals or take other
actions, each of which may involve additional
costs to the Fund.
Certain of these emerging market countries are
among the largest debtors to commercial banks
and foreign governments. Trading in sovereign
debt obligations issued or guaranteed by
emerging market 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
9
<PAGE>
governmental entities have defaulted may be
collected in whole or in part. The sovereign
debt securities in which the Fund may invest
involve significant risks and are deemed to be
the equivalent in terms of quality to high
yield, high risk securities and are subject to
many of the same risks as such securities.
Similarly, the Fund may have difficulty
disposing of certain sovereign debt securities
because there may be a thin trading market for
such securities.
Lower-Rated and Unrated Securities. At any
time, substantially all of the Fund's assets
may be invested in high yield, high risk debt
securities, often referred to as "junk bonds."
Junk bonds are regarded as being predominantly
speculative as to the issuer's ability to make
payments of principal and interest. Investment
in such securities involves substantial risk.
Issuers of junk bonds may be highly leveraged
and may not have available to them more
traditional methods of financing. Therefore,
the risks associated with acquiring the
securities of such issuers generally are
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 junk bonds 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.
Junk bonds tend to be more volatile than higher
rated debt securities, so that adverse economic
events may have a greater impact on the prices
of junk bonds than on higher rated debt
securities. Factors adversely affecting the
market value of such securities generally will
adversely affect the Fund's net asset value.
Like higher rated debt securities, junk bonds
generally are purchased and sold through
dealers who make a market in such securities
for their own accounts. However, there are
fewer dealers in the junk bond market which may
be less liquid than the market for higher rated
debt securities, even under normal economic
conditions. This may be particularly true with
respect to junk bonds of non-U.S. issuers.
Also, there may be significant disparities in
the prices quoted for junk bonds by various
dealers. Adverse economic conditions and
investor perceptions thereof (whether or not
based on economic fundamentals) may impair the
liquidity of this market, and may cause the
prices the Fund receives for its junk bonds to
be reduced, or the Fund may experience
difficulty in liquidating a portion of its
portfolio in response to a specific economic
event such as deterioration in the
10
<PAGE>
creditworthiness of the issuer. Under such
conditions, judgment may play a greater role in
valuing certain of the Fund's portfolio
securities than in the case of securities
trading in a more liquid market. In addition,
the Fund may incur additional expenses to the
extent that it is required to seek recovery
upon a default on a portfolio holding or to
participate in the restructuring of the
obligations.
Leverage. The use of leverage by the Fund
creates an opportunity for increased net
income, but, at the same time creates special
risks. The Fund intends to utilize leverage to
provide the holders of Common Stock with a
potentially higher rate of return. Leverage
creates risk for holders of Common Stock,
including the likelihood of greater volatility
of net asset value and market price of shares
of the Common Stock, and the risk that
fluctuations in interest rates on borrowing or
in the dividend rates on any preferred stock
may affect the yield to holders of Common
Stock. To the extent the income derived from
securities purchased with funds received from
leverage exceeds the cost of leverage, the
Fund's net income will be greater than if
leverage had not been used. Conversely, if the
income from the securities purchased with such
funds is not sufficient to cover the cost of
leverage, the net income of the Fund will be
less than if leverage had not been used, and
therefore the amount available for distribution
to the shareholders as dividends will be
reduced. In the latter case, the Fund
nevertheless may determine to maintain its
leveraged position in order to avoid capital
losses on securities purchased with the
leverage. Certain types of borrowings may
result in the Fund being subject to covenants
in credit agreements relating to asset coverage
and portfolio composition requirements. The
Fund may be subject to certain restrictions on
investments imposed by guidelines of one or
more nationally recognized rating services
which may issue ratings for the short-term
corporate debt securities or preferred stock
issued by the Fund. These guidelines may impose
asset coverage or portfolio composition
requirements that are more stringent than those
imposed by the Investment Company Act of 1940,
as amended. It is not anticipated that these
covenants or guidelines will impede the
Investment Adviser from managing the Fund's
portfolio in accordance with the Fund's
investment objectives and policies. See "Other
Investment Policies--Leverage and Borrowing."
Derivative Investments. In order to seek to
enhance income and to hedge various portfolio
positions, the Fund may invest in certain
instruments which may be characterized as
derivatives. Investments in indexed securities,
including inverse securities, subject the Fund
to the risks associated with changes in the
particular indices, which
11
<PAGE>
may include reduced or eliminated interest
payments and losses of invested principal.
Interest rate transactions involve the risk of
an imperfect correlation between the index used
in the hedging transactions and that pertaining
to the securities which are the subject of such
transactions. Similarly, utilization of options
and futures transactions involves the risk of
imperfect correlation in movements in the price
of options and futures and movements in the
price of the securities or interest rates which
are the subject of the hedge. For a further
discussion of the risks associated with these
investments, see "Investment Objectives and
Policies--Other Investments," "Other Investment
Policies--Portfolio Strategies Involving
Interest Rate Transactions, Options and
Futures" and Appendix B--"Interest Rate,
Options and Futures Transactions."
Other Investment Management Techniques. The
Fund may use various other investment
management techniques that also involve special
considerations including making short sales of
securities, entering into repurchase agreements
and reverse repurchase agreements, making
forward commitments and lending its portfolio
securities. For further discussion of these
practices and the associated risks and special
considerations, see "Other Investment
Policies".
Illiquid Securities. At any one time, the Fund
may invest 100% of its total assets in
securities that lack an established secondary
trading market or otherwise are considered
illiquid. Liquidity of a security relates to
the ability to dispose easily of the security
and the price to be obtained and generally does
not relate to the credit risk or likelihood of
receipt of cash at maturity. Illiquid sovereign
and corporate debt securities may trade at a
discount from comparable, more liquid
investments. In addition, the Fund may invest
in privately placed securities which may or may
not have registration rights. Such securities
may not be sold unless registered under
applicable securities laws or sold in a
transaction exempt from registration.
Antitakeover Provisions. The Fund's Articles of
Incorporation include provisions that could
have the effect of limiting the ability of
other entities or persons to acquire control of
the Fund or to change the composition of its
Board of Directors and could have the effect of
depriving shareholders of an opportunity to
sell their shares at a premium over prevailing
market prices by discouraging a third party
from seeking to obtain control of the Fund. See
"Description of Shares--Certain Provisions of
the Articles of Incorporation."
12
<PAGE>
FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of offering price)........................ 5.50%(a)
Dividend Reinvestment and Cash Purchase Plan Fees............................. None
ANNUAL EXPENSES (as a percentage of net assets attributable to Common Stock)(b)
Management Fees(c)............................................................ 0.60%
Interest Payments on Borrowed Funds........................................... None
Other Expenses................................................................ 0.25%
----
TOTAL ANNUAL EXPENSES.......................................................... 0.85%
====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE ------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment, including the maximum
front-end sales load of $55.00 and assuming
(1) total annual expenses of 0.85% and (2) a
5% annual return throughout the periods: $63.20 $80.63 $99.54 $154.13
</TABLE>
- --------
(a) Reduced to 4.55% for purchases in single transactions of between 3,500 and
6,999 shares and to 3.57% for purchases in single transactions of 7,000 or
more shares. See the cover page of this Prospectus and "Underwriting"--page
45.
(b) The expenses set forth in this table do not include expenses associated
with leverage, since neither the manner of leverage nor the cost of
leverage has been determined at the date of this Prospectus. See "Other
Investment Policies--Leverage and Borrowing"--page 22.
(c)See "Investment Advisory and Management Arrangements"--page 33.
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 expenses set forth under "Other Expenses" in the Fee Table
above are based on estimated amounts through the end of the Fund's first fiscal
year on an annualized basis. 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 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.
13
<PAGE>
THE FUND
Worldwide DollarVest Fund, Inc. (the "Fund") is a newly organized, non-
diversified, closed-end management investment company. The Fund was
incorporated under the laws of the State of Maryland on November 12, 1993, and
has registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). See "Description of Shares." The Fund's principal
office is located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, and
its telephone number is (609) 282-2000.
The Fund has been organized as a closed-end investment company. Closed-end
investment companies differ from open-end investment companies (commonly
referred to as mutual funds) in that closed-end investment companies do not
redeem their securities at the option of the shareholder, whereas open-end
investment companies issue securities redeemable at net asset value at any time
at the option of the shareholder and typically engage in a continuous offering
of their shares. Accordingly, open-end investment companies are subject to
continuous asset in-flows and out-flows that can complicate portfolio
management. However, shares of closed-end investment companies frequently trade
at a discount from asset value. This risk may be greater for investors
expecting to sell their shares in a relatively short period after completion of
the public offering.
USE OF PROCEEDS
The net proceeds of this offering will be approximately 89,399,995 (or
approximately 98,377,490 assuming Merrill Lynch exercises the over-allotment
option in full) after payment of the sales load and organizational and offering
costs.
The net proceeds of the offering will be invested in accordance with the
Fund's investment objectives and policies within approximately six months after
completion of the offering of the shares of Common Stock, depending on market
conditions and the availability of appropriate securities. Pending such
investment, it is anticipated that the proceeds will be invested in U.S.
Government securities or high grade corporate debt securities. See "Investment
Objectives and Policies."
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The Fund's primary investment objective is to seek high current income by
investing exclusively in a portfolio of U.S. dollar-denominated securities,
substantially all of which will be debt securities. As a secondary objective,
the Fund will seek capital appreciation. The investment objectives are
fundamental policies of the Fund and may not be changed without a vote of a
majority of the outstanding shares of the Fund. The Fund will invest at least
65% of its total assets in debt securities or obligations of government and
government-related issuers located in foreign countries and high yield, high
risk corporate debt securities of non-U.S. issuers (collectively, "non-U.S.
obligations"). The government and government-related debt securities or
obligations, which include the obligations of entities organized to restructure
outstanding debt of foreign countries, are referred to herein as "sovereign
debt securities." The Fund expects that based on current market conditions the
primary emphasis initially will be on non-U.S. obligations of issuers located
in emerging market countries, and that a substantial portion of such
investments will be in the debt securities of Argentina, Brazil, Mexico and
Venezuela. The Fund may also invest up to 35% of its total assets in high
yield, high risk corporate debt securities of U.S. issuers. Under normal
circumstances, substantially all of the Fund's assets will be invested in debt
securities rated in the lower rating categories of established rating
14
<PAGE>
services or in unrated securities of comparable quality. The Fund may engage in
various portfolio strategies to enhance income and to hedge its portfolio
against investment and interest rate risks, including the utilization of
leverage and the use of interest rate transactions and options and futures.
There can be no assurance that the Fund's investment objectives will be
achieved.
The investment objectives of the Fund reflect the belief that the debt
securities of emerging market issuers offer attractive investment opportunities
both with respect to current income and capital appreciation. In recent years,
a number of emerging market countries have been instituting economic, financial
and political reforms encouraging greater market orientation and less
government intervention in economic affairs which are benefitting the capital
markets of such countries and resulting in significantly improved credit
fundamentals for the sovereign and corporate debt securities issued in such
markets. The Investment Adviser believes the debt securities of these markets
currently offers high yields relative to the improving credit quality.
Furthermore, since the sovereign debt securities typically trade in the
secondary markets at substantial discounts, there is opportunity for capital
appreciation to the extent there is a favorable change in the market perception
of the creditworthiness of the issuer.
The Fund's investment adviser, Fund Asset Management, L.P. (the "Investment
Adviser"), will actively manage the Fund's assets, 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 objectives. In the selection and
supervision of investments, the Investment Adviser will consider market,
political and general economic and financial conditions and various other
factors including its evaluation of the credit risk of issuers of sovereign
debt and high yield corporate debt securities and its analysis of the
prevailing investment characteristics of such securities such as interest rate
sensitivity, volatility and liquidity. The Investment Adviser will also seek to
enhance yield by taking advantage of yield disparities that regularly occur
among debt securities trading in the various emerging markets. 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 Fund has established no rating criteria for the debt securities in which
it may invest and under normal circumstances, substantially all of the Fund's
assets will be invested in debt securities that are rated in the lower rating
categories of the established rating services ("Baa" or lower by Moody's
Investors Service, Inc. ("Moody's") and "BBB" or lower by Standard & Poor's
Corporation ("S&P")), or in unrated securities considered by the Investment
Adviser to be of comparable quality. Securities rated below "Baa" by Moody's or
below "BBB" by S&P, and unrated securities of comparable quality, are commonly
known as "junk bonds." See Appendix A--"Description of Corporate Bond Ratings"
for additional information concerning rating categories. Although lower-rated
and unrated debt securities can be expected to provide higher yields, such
securities may be subject to greater market fluctuation and risk of loss of
income and principal than lower-yielding, higher-rated debt securities.
At times, the Fund expects to utilize leverage through borrowings or issuance
of short-term debt securities or shares of preferred stock, or through entering
into reverse repurchase agreements and dollar rolls. Under current market
conditions, the Fund intends to utilize leverage in an amount equal to between
20% to 33 1/3% of its total assets (including the amount obtained from
leverage). The Fund intends to utilize leverage to provide the holders of
Common Stock with a potentially higher rate of return. The Fund generally will
not utilize leverage if it anticipates that the Fund's leveraged capital
structure would result in a lower rate of return to holders of the Common Stock
than that obtainable if the Common Stock were
15
<PAGE>
unleveraged for any significant amount of time. Use of leverage creates an
opportunity for increased income, but, at the same time, creates special risk.
See "Other Investment Policies--Leverage and Borrowing."
The Fund may engage in various portfolio strategies to seek to enhance and to
hedge its portfolio against investment and interest rate risk through the use
of interest rate transactions, short sales, the purchase of call and put
options on securities, the sale of covered call and put options on its
portfolio securities and transactions in financial futures and related options
on such futures. See "Other Investment Policies."
The Fund may vary its investment policies for temporary defensive purposes
during periods in which the Investment Adviser believes that conditions in the
securities markets for non-U.S. obligations or other economic, financial or
political conditions warrant. Under such circumstances, the Fund may reduce its
holdings in non-U.S. obligations and invest without limit in high yield
corporate debt securities of U.S. issuers. Furthermore, when changing economic
conditions and other factors cause the yield difference between lower-rated and
higher-rated securities to narrow, the Fund may purchase higher-rated
securities if the Investment Adviser believes that the risk of loss of income
and principal may be reduced substantially with only a relatively small
reduction in yield. In addition, under unusual market or economic conditions,
the Fund for temporary defensive purposes may invest up to 100% of its total
assets in securities issued or guaranteed by the United States Government or
its instrumentalities or agencies, certificates of deposit, bankers'
acceptances and other bank obligations, commercial paper rated in the highest
category by an established rating agency, or other debt securities deemed by
the Investment Adviser to be consistent with a defensive posture, or may hold
its assets in cash. As discussed under "Other Investment Policies," the Fund
may hold cash, cash equivalents or liquid high grade debt securities in
connection with certain of its investment activities. The yield on such
securities may be lower than the yield on lower-rated debt securities.
The Fund is classified as non-diversified within the meaning of the
Investment Company Act, which means that the Fund is not limited by such Act in
the proportion of its assets that it may invest in securities of a single
issuer. However, the Fund's investments will be limited so as to qualify the
Fund as a "regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). See "Taxes." To qualify, among other
requirements, the Fund will limit 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 (other than U.S.
Government 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 (other than U.S. Government
securities) of a single issuer. A fund which elects to be classified as
"diversified" under the Investment Company Act must satisfy the foregoing 5%
requirement with respect to 75% of its total assets. To the extent that the
Fund assumes large positions in the securities of a small number of issuers,
the Fund's yield may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.
The following is a description of certain securities in which the Fund may
invest.
SOVEREIGN DEBT SECURITIES
The Fund's investments in sovereign debt securities will consist of debt
securities or obligations issued or guaranteed by foreign governments, their
agencies, instrumentalities and political subdivisions and by entities
controlled or sponsored by such governments. The investments may include
participations in, and assignments of, loans made by financial institutions to
such issuers. The Fund may also invest in interests in entities organized and
operated for the purpose of restructuring the investment characteristics of
sovereign debt securities. The restructured sovereign debt securities will
include Brady Bonds, which are debt securities
16
<PAGE>
issued under the framework of the Brady Plan, an initiative announced by former
U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external commercial bank indebtedness.
The Fund is not required to invest any specified minimum amount of its total
assets in sovereign debt securities of issuers located in any particular
country. The Fund will emphasize investments in sovereign debt securities of
countries that are considered emerging market countries at the time of
purchase. As used in this Prospectus, an "emerging market country" is any
country that is considered to be an emerging or developing country by the
International Bank for Reconstruction and Development (more commonly referred
to as the "World Bank").
The Fund anticipates that its initial investments in sovereign debt
securities will be primarily countries considered emerging market countries at
the time of purchase and that a substantial portion of such investments will be
in the sovereign debt securities of Argentina, Brazil, Mexico and Venezuela.
Information about these four countries appears in Appendix C hereto. The
Investment Adviser believes that these countries are the principal participants
in debt restructuring programs that will provide the most attractive investment
opportunities for the Fund. Under current market conditions, the Fund will not
invest 25% or more of its total assets in the sovereign debt securities of any
single foreign country.
A substantial portion of the Fund's total assets (including most Brady Bonds)
is likely to be invested from time to time in debt obligations acquired at a
discount. Pursuant to the Code, the Fund is required to accrue a portion of any
original issue discount with respect to such securities as income each year
even though the Fund does not receive interest payments in cash during the year
which reflect the discount so accrued. The Fund will also elect similar
treatment for any market discount with respect to such securities. As a result,
the Fund expects to make distributions of net investment income in amounts
greater than the total amount of cash interest actually received. Such
distributions will be made from the cash assets of the Fund, from borrowings
or, if necessary, by liquidation of portfolio securities. See "Other Investment
Policies--Leverage and Borrowing," and "Taxes."
Brady Bonds. Brady Bonds are debt obligations which are created through the
exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a plan introduced in
1989 by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady
Plan"). Brady Plan debt restructurings have been implemented to date in Mexico,
Venezuela, Argentina, Uruguay, Costa Rica, Nigeria and the Philippines. Brazil
has reached agreement with its lending banks with respect to Brady Plan
restructuring and Brazil's Brady Plan restructuring is being implemented. To
date, Brady Bonds aggregating approximately $90 billion have been issued, based
on current estimates, with the largest proportion of Brady Bonds having been
issued by Mexico, Argentina and Venezuela. Brazil has announced plans to issue
Brady Bonds in respect of approximately $44 billion of bank debt. It is
expected that other countries will undertake Brady Plan debt restructuring in
the future, including Peru, Ecuador, Panama, Poland, Bulgaria and Russia. The
Fund anticipates that it will invest in bank loans (through participations or
assignments) that may be restructured as Brady Bond obligations.
Brady Bonds have been issued relatively recently and, accordingly, do not
have a long payment history. They may be collateralized and issued in various
currencies (although most are U.S. dollar-denominated) and they are actively
traded in the over-the-counter secondary market.
17
<PAGE>
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in full
as to principal by U.S. Treasury zero coupon bonds which have the same maturity
as the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments but generally are not collateralized. For example, some Mexican and
Venezuelan Brady Bonds include attached value recovery options which increase
interest payments if oil revenues rise. Brady Bonds are often viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk"). In light of the residual risk of Brady Bonds and, among other
factors, the history of defaults with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds are considered speculative.
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and interest coupon payments
collateralized on an 18-month rolling-forward basis by funds held in escrow by
an agent for the bondholders. A significant portion of the Venezuelan Brady
Bonds and the Argentine Brady Bonds issued to date have principal repayments at
final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New
York as collateral agent.
Loan Participations and Assignments. The Fund may invest in fixed and
floating rate loans ("Loans") arranged through private negotiation between an
issuer of sovereign debt securities and one or more financial institutions
("Lenders"). It is anticipated that certain of such investments will be in
loans which may be restructured as Brady Bond obligations. Under normal
circumstances, the Fund's investments in Loans are expected to be in the form
of participations in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. An investment in a
Participation will result in the Fund having a right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In most instances, the Fund's investment in Participations
will result in the Fund having a contractual relationship with the Lender only
and not the borrower; therefore, the Fund generally will have no right to
enforce the borrower's compliance with the terms of the loan agreement or to
exercise the rights of the Lender under the loan agreement. Similarly, the Fund
generally will not have any rights to set-off against the borrower, and the
Fund may not benefit directly from any collateral supporting the Loan in which
it has purchased the Participation. Consequently, the Fund assumes the credit
risk of both the borrower and the Lender that are selling the Participation. In
the event of the insolvency of the Lender selling a Participation, the Fund may
be treated as a general creditor of the Lender and might incur costs or delays
on realizing payments on a Loan or suffer a loss of principal and interest and
may not benefit from any set-off between the Lender and the borrower. Certain
Participations may be structured in a manner designed to avoid purchasers of
Participations being subject to the credit risk of the Lender with respect to
such Participations, but even under
18
<PAGE>
such a structure, in the event of the Lender's insolvency, the Lender's
servicing of the Participation may be delayed and the assignability of the
Participation impaired. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is determined by the
Investment Adviser to be creditworthy.
When the Fund purchases Assignments from Lenders, it will acquire direct
rights against the borrower on the Loan; however, the rights and obligations
acquired by the Fund as the purchaser of an Assignment may differ from, and be
more limited than, those held by the assigning Lender. There may be
restrictions on the assignability of certain sovereign debt securities with
respect to the nature of the assignee such that the only way in which the Fund
can acquire an interest in a Loan is through a Participation and not an
Assignment. In addition, certain of the Fund's investments in Participations
and Assignments may require debtor approval. The Fund may have difficulty
disposing of Assignments and Participations. Because there is no liquid market
for such securities, the Fund anticipates that Assignments and Participations
could be sold only to a limited number of institutional investors. The lack of
a liquid secondary market may have an adverse impact on the value of
Assignments and Participations and the Fund's ability to dispose of such
securities 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 borrower. In addition, the lack of a liquid secondary market for
Assignments and Participations also may make it more difficult for the Fund to
assign a value to these securities for purposes of valuing the Fund's portfolio
and calculating its net asset value.
Structured Investments. The Fund may invest a portion of its assets in
interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of various sovereign debt
securities. This type of restructuring involves the deposit with or purchase by
an entity, such as a corporation or a trust, of specified instruments (such as
Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Structured Investments") backed by, or representing interests in,
the underlying investments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Investments to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow of the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Investments typically have higher yields and present
greater risks than unsubordinated Structured Investments. Although the Fund's
purchase of subordinated Structured Investments could have a similar economic
effect to that of borrowing against the underlying securities, the purchase
will not be deemed to be leverage for purposes of the limitations placed on the
extent of the Fund's assets that may be used for borrowing and other leveraging
activities. See "Other Investment Policies--Leverage and Borrowing."
Certain issuers of Structured Investments may be deemed to be "investment
companies," as defined in the Investment Company Act. As a result, the Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the Investment Company Act described below. Structured Investments
are typically sold in private placement transactions, and there currently is no
active trading market for Structured Investments.
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CORPORATE DEBT SECURITIES
The Fund may invest in high yield corporate debt securities of U.S. and non-
U.S. issuers which are rated in the lower rating categories of the established
rating services ("Baa" or lower by Moody's and "BBB" or lower by S&P), or in
unrated securities considered by the Investment Adviser to be of comparable
quality. Securities rated below "Baa" by Moody's or below "BBB" by S&P, and
unrated securities of comparable quality, are commonly known as "junk bonds."
See Appendix A--"Description of Corporate Bond Ratings" for additional
information concerning rating categories. The high yield corporate securities
held by the Fund may take the form of debt securities, preferred stocks or
convertible securities of U.S. and non-U.S. issuers.
Although high yield debt securities can be expected to provide higher yields,
such securities may be subject to greater market fluctuations and risk of loss
of income and principal than lower-yielding, higher-rated debt securities.
Economic conditions and interest rate levels may impact significantly the
values of high yield debt securities. For example, representative indices of
high yield bonds showed a negative total return (i.e., the aggregate of capital
value changes and income) for 1990 but then reflected significant returns
during the following two years as economic conditions and other factors in the
high yield market improved. Because investment in high yield securities entails
relatively greater risk of loss of income or principal, the Fund is not
intended as a complete investment program.
OTHER INVESTMENTS
Private Placements. The Fund may invest in securities that are sold in
private placement transactions between their issuers and their purchasers and
that are neither listed on an exchange nor traded over-the-counter. In many
cases, privately placed securities will be subject to contractual or legal
restrictions on transfer. As a result of the absence of a public trading
market, privately placed securities may in turn be less liquid and more
difficult to value than publicly traded securities. Although privately placed
securities may be resold in privately negotiated transactions, the prices
realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair market value. In addition,
issuers whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements that may be applicable if
their securities were publicly traded. If any privately placed securities held
by the Fund are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration.
Convertible Securities. The Fund may invest in convertible securities, which
are bonds, debentures, notes, preferred stocks or other securities that may be
converted into or exchanged for a prescribed amount of common stock of the same
or a different issuer within a particular period of time at a specified price
or formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique investment characteristics such as:
(1) higher yields than common stocks, but lower yields than comparable
nonconvertible securities, (2) a lesser degree of fluctuation in value than the
underlying stock since they have fixed income characteristics, and (3) the
potential for capital appreciation of the market price if the underlying common
stock increases.
The Fund has no current intention of converting any convertible securities it
may own into equity securities or holding them as an equity investment upon
conversion, although it may do so for temporary purposes. A convertible
security might be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. If a
convertible security held by the Fund is
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called for redemption, the Fund may be required to permit the issuer to redeem
the security, convert it into the underlying common stock or sell it to a third
party.
Indexed and Inverse Securities. The Fund may invest in securities whose
potential investment return is based on the change in particular measurements
of value or rate (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 on 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. Indexed and inverse securities are currently issued by a
number of U.S. governmental agencies such as the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association, as well as a number
of other financial institutions. To the extent the Fund invests in such
instruments, under current market conditions, it most likely will purchase
indexed and inverse securities issued by the above-mentioned U.S. governmental
agencies.
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 different market
conditions.
Investment in Other Investment Companies. The Fund may invest in other
investment companies whose investment objectives and policies are consistent
with those of the Fund. In accordance with the Investment Company Act, the Fund
may invest up to 10% of its total assets in securities of other investment
companies. In addition, under the Investment Company Act the Fund may not own
more than 3% of the total outstanding voting stock of any investment company
and not more than 5% of the value of the Fund's total assets may be invested in
the securities of any investment company. If the Fund acquires shares in
investment companies, shareholders would bear both their proportionate share of
expenses in the Fund (including management and advisory fees) and, indirectly,
the expenses of such investment companies (including management and advisory
fees).
Warrants. The Fund may invest in warrants, which are securities permitting,
but not obligating, their holder to subscribe for other securities. The Fund
may invest in warrants for equity securities that are acquired as units with
debt instruments and warrants for debt securities. Warrants do not carry with
them the right to dividends or voting rights with respect to the securities
that they entitle their holders to purchase, and they do not represent any
rights in the assets of the issuer. As a result, an investment in warrants may
be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date. The Fund does not intend to retain in
its portfolio any common stock received upon the exercise of a warrant and will
sell the common stock as promptly as practicable and in a manner that it
believes will reduce its risk of a loss in connection with the sale.
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OTHER INVESTMENT POLICIES
The Fund has adopted certain other policies as set forth below:
LEVERAGE AND BORROWING
At times, the Fund expects to utilize leverage through borrowings or issuance
of short-term debt securities or shares of preferred stock. Under current
market conditions, the Fund intends to utilize leverage in an amount equal to
between 20% and 33 1/3% of its total assets (including the amount obtained from
leverage). The Fund generally will not utilize leverage if it anticipates that
the Fund's leveraged capital structure would result in a lower rate of return
to holders of Common Stock than that obtainable if the Common Stock were
unleveraged for any significant amount of time. The Fund also may borrow money
as a temporary measure for extraordinary or emergency purposes, including the
payment of dividends and the settlement of securities transactions which
otherwise may require untimely dispositions of Fund securities.
The concept of leveraging is based on the premise that the cost of the assets
to be obtained from leverage will be based on short-term rates which normally
will be lower than the return earned by the Fund on its longer term portfolio
investments. Since the total assets of the Fund (including the assets obtained
from leverage) will be invested in the higher yielding portfolio investments,
the holders of Common Stock will be the beneficiaries of the incremental yield.
Should the differential between the underlying interest rates narrow, the
incremental yield "pick up" will be reduced. Furthermore, if long-term rates
rise, the Common Stock net asset value will reflect the full decline in the
entire portfolio holdings resulting therefrom.
Leverage creates risks for holders of Common Stock including the likelihood
of greater volatility of net asset value and market price of shares of the
Common Stock, and the risk that fluctuations in interest rates on borrowings or
in the dividend rates on any preferred stock may affect the yield to holders of
Common Stock. To the extent the income derived from securities purchased with
funds received from leverage exceeds the cost of leverage, the Fund's net
income will be greater than if leverage had not been used. Conversely, if the
income from the securities purchased with such funds is not sufficient to cover
the cost of leverage, the net income of the Fund will be less than if leverage
had not been used, and, therefore, the amount available for distribution to
shareholders as dividends will be reduced. In the latter case, the Fund
nevertheless may determine to maintain its leveraged position in order to avoid
capital losses on securities purchased with the leverage.
Capital raised through leverage will be subject to interest costs or dividend
payments which may or may not exceed the interest on the assets purchased. 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 will increase the cost of borrowing over
the stated interest rate. The issuance of additional classes of preferred stock
involves offering expenses and other costs and may limit the Fund's freedom to
pay dividends on shares of Common Stock or to engage in other activities.
Borrowings and the issuance of a class of preferred stock having priority over
the Fund's Common Stock create an opportunity for greater income per share of
Common Stock, but at the same time such borrowing or issuance is a speculative
technique in that it will increase the Fund's exposure to capital risk. Unless
the income and appreciation, if any, on assets acquired with borrowed funds or
offering proceeds exceed the cost of borrowing or issuing additional classes of
securities, the use of leverage will diminish the investment performance of the
Fund compared with what it would have been without leverage.
Certain types of borrowings may result in the Fund being subject to covenants
in credit agreements relating to asset coverage and portfolio composition
requirements. The Fund may be subject to certain
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restrictions on investments imposed by guidelines of one or more nationally
recognized rating services which may issue ratings for the short-term corporate
debt securities or preferred stock. These guidelines may impose asset coverage
or portfolio composition requirements that are more stringent than those
imposed by the Investment Company Act. It is not anticipated that these
covenants or guidelines will impede the Investment Adviser from managing the
Fund's portfolio in accordance with the Fund's investment objectives and
policies.
Under the Investment Company Act, the Fund is not permitted to incur
indebtedness unless immediately after such incurrence the Fund has an asset
coverage of 300% of the aggregate outstanding principal balance of indebtedness
(i.e., such indebtedness may not exceed 33 1/3% of the Fund's total assets).
Additionally, under the Investment Company Act, the Fund under most
circumstances may not declare any dividend or other distribution upon any class
of its capital stock, or purchase any such capital stock, unless the aggregate
indebtedness of the Fund has, at the time of the declaration of any such
dividend or distribution or at the time of any such purchase, an asset coverage
of at least 300% after deducting the amount of such dividend, distribution or
purchase price, as the case may be. Under the Investment Company Act, the Fund
is not permitted to issue shares of preferred stock unless immediately after
such issuance the value of the Fund's total assets is at least 200% of the
liquidation value of the outstanding preferred stock (i.e., such liquidation
value may not exceed 50% of the Fund's total assets). In addition, the Fund is
not permitted to declare any cash dividend or other distribution on its Common
Stock unless, at the time of such declaration, the net asset value of the
Fund's portfolio (determined after deducting the amount of such dividend or
distribution) is at least 200% of such liquidation value. In the event
preferred shares are issued, the Fund intends, to the extent possible, to
purchase or redeem shares of preferred stock from time to time to maintain
coverage of any preferred stock of at least 200%. To the extent the Fund is
unable to declare dividends on the Common Stock as a result of the asset
coverage limitations applicable to indebtedness or preferred shares, it may be
unable to satisfy the distribution requirements for qualification as a
"regulated investment company" under the Internal Revenue Code. See "Taxes."
Reverse Repurchase Agreements. The Fund also may leverage by entering into
reverse repurchase agreements with the same parties with whom it may enter into
repurchase agreements (as discussed below). Under the reverse repurchase
agreement, the Fund sells securities and agrees to repurchase them at a
mutually agreed upon date and price. The value of the securities subject to
such agreements may exceed the proceeds of the reverse repurchase agreement. 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, if the Fund does not establish and
maintain such a segregated account, a reverse repurchase agreement will be
considered a borrowing for the purpose of the Fund's limitation on borrowing.
A reverse repurchase agreement involves 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 effectively may 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.
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Dollar Rolls. The Fund also may enter into "dollar rolls." A dollar roll is
where the Fund sells debt 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 forgoes 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 considered borrowings for the purpose of the Fund's limitation on
borrowing.
----------------
The Fund's willingness to borrow money and issue new securities for
investment purposes, and the amount it will borrow, will depend on many
factors, the most important of which are investment outlook, market conditions
and interest rates. Successful use of a leveraging strategy depends on the
Investment Adviser's ability to predict correctly interest rates and market
movements, and there is no assurance that a leveraging strategy will be
successful during any period in which it is employed.
PORTFOLIO STRATEGIES INVOLVING INTEREST RATE TRANSACTIONS, OPTIONS AND FUTURES
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 movements in interest rates. 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. Each of
these portfolio strategies is described below.
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 movements in interest rates occur. Reference is made to
Appendix B--"Interest Rate, Options and Futures Transactions" for further
information concerning these strategies.
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
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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
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 security due to rising interest rates but
would also limit its ability to benefit from falling interest rates.
Conversely, if the Fund holds a 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 party 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 on 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 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 also may 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
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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.
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
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.
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 Commodities 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 an increase 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
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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 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 sell 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'
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC options transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
See "Restrictions on OTC Options" below for information as to restrictions on
the use of the OTC options.
Restrictions on the Use of Futures Transactions. Regulations of the CFTC
applicable to the Fund require that all of the Fund's transactions in futures
contracts and options on futures contracts constitute bona fide hedging
transactions and that the Fund not enter into such transactions if, immediately
thereafter, the sum of the amount of initial margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets.
When the Fund purchases a futures contract, writes a put option or purchases
a call option thereon, an amount of cash and cash equivalents will be deposited
in a segregated account with the Fund's custodian so that the amount so
segregated, plus the amount of variation margin held in the account of its
broker, equals the market value of the futures contract, thereby ensuring that
the use of such futures contract is unleveraged.
An order has been obtained from the 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 and Futures
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
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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 contracts and movements in the prices of the securities which are
the subject of the hedge. If the price of the options or futures contracts
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 contracts and options thereon since it will generally use
such instruments as a so-called "cross-hedge," which means that the security
that is the subject of the futures contract is different from the security
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.
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.
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. 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.
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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 may also make short sales "against the box." 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.
REPURCHASE AGREEMENTS AND PURCHASE AND SALE CONTRACTS
The Fund may invest in securities pursuant to repurchase agreements and
purchase and sale contracts. Repurchase agreements and purchase and sale
contracts may be entered into only with a member bank of the Federal Reserve
System or primary dealer in U.S. government securities. Under such agreements,
the bank or primary dealer agrees, upon entering into the contract, to
repurchase the security at a mutually fixed rate of return insulated from
market fluctuations during such period. In the case of repurchase agreements,
the prices at which the trades are conducted do not reflect accrued interest on
the underlying obligations; whereas, in the case of purchase and sale
contracts, the prices take into account accrued interest. Such agreements
usually cover short periods, such as under one week. Repurchase agreements may
be construed to be collateralized loans by the purchaser to the seller secured
by the securities transferred to the purchaser. In the case of a repurchase
agreement, the Fund will require the seller to provide additional collateral if
the market value of the securities falls below the repurchase price at any time
during the term of the repurchase agreement; the Fund does not have the right
to seek additional collateral in the case of purchase and sale contracts. In
the event of default by the seller under a repurchase agreement construed to be
a collateralized loan, the underlying securities are not owned by the Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, the Fund may suffer time delays and incur costs or possible
losses in connection with the disposition of the collateral. A purchase and
sale contract differs from a repurchase agreement in that the contract
arrangements stipulate that the securities are owned by the Fund. In the event
of a default under such a repurchase agreement or a purchase and sale contract,
instead of the contractual fixed rate of return, the rate of return to the Fund
shall be dependent upon intervening fluctuations of the market value of such
security and the accrued interest in the security. In such event, the Fund
would have rights against the seller for breach of contract with respect to any
losses arising from market fluctuations following the failure of the seller to
perform.
LENDING 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, its agencies or instrumentalities which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The purpose of such loans is to permit
the borrower to use such securities for delivery to purchasers when such
borrower has sold short. If cash collateral is received by the Fund, it is
invested in short-term money market securities, and a portion of the yield
received in respect of such investment is retained by the Fund. Alternatively,
if securities are delivered to the Fund as collateral, the Fund and the
borrower negotiate a rate for the loan premium to be received by the Fund for
lending its portfolio securities. In either event, the total yield on the
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Fund's portfolio is increased by loans of its portfolio securities. The Fund
will have the right to regain record ownership of loaned securities to exercise
beneficial rights such as voting rights, subscription rights and rights to
dividends, interest or other distributions. Such loans are terminable at any
time. The Fund may pay reasonable finder's, administrative and custodial fees
in connection with such loans.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis in order to hedge against
anticipated changes in interest rates and prices. In some cases, such
transactions may be conditioned upon the occurrence of a subsequent event, such
as approval and consummation of a debt restructuring (i.e., a "when, as and if
issued" trade). When such transactions are negotiated, the price, which is
generally expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Fund will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. If the Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it can incur a gain or loss.
At the time the Fund enters into a transaction on a when-issued or forward
commitment basis, it will segregate with the custodian cash or other liquid
high grade debt securities with a value of not less than the value of the when-
issued or forward commitment securities. The value of these assets will be
monitored daily to ensure that their marked to market value will at all times
exceed the corresponding obligations of the Fund. If the Fund establishes and
maintains such a segregated account, when-issued or forward commitment
securities will not be considered borrowings by the Fund; however, if the Fund
does not establish and maintain such a segregated account, when-issued or
forward commitment securities will be considered borrowings for the purpose of
the Fund's limitation or borrowing. There is always a risk that the securities
may not be delivered, and the Fund may incur a loss. Settlements in the
ordinary course are not treated by the Fund as when-issued or forward
commitment transactions and accordingly are not subject to the foregoing
restrictions.
STANDBY COMMITMENT AGREEMENTS
The Fund from time to time may enter into standby commitment agreements. Such
agreements commit the Fund, for a stated period of time, to purchase a stated
amount of a fixed-income security which may be issued and sold to the Fund at
the option of the issuer. The price and coupon of the security is fixed at the
time of the commitment. At the time of entering into the agreement the Fund is
paid a commitment fee, regardless of whether or not the security ultimately is
issued. The Fund will enter into such agreements only for the purpose of
investing in the security underlying the commitment at a yield and price which
are considered advantageous to the Fund. The Fund at all times will maintain a
segregated account with its custodian of cash and/or liquid, high-grade debt
obligations in an amount equal to the purchase price of the securities
underlying the commitment.
There can be no assurance that the securities subject to a standby commitment
will be issued and the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the Fund may bear the
risk of decline in the value of such security and may not benefit from an
appreciation in the value of the security during the commitment period.
The purchase of a security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the security
reasonably can be expected to be issued and the value of
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the security thereafter will be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by the amount of
the commitment fee. In the event the security is not issued, the commitment fee
will be recorded as income on the expiration date of the standby commitment.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions of the Fund and, prior
to the issuance of any preferred stock, may not be changed without the approval
of the holders of a majority of the Fund's outstanding shares of Common Stock
(which for this purpose and under the Investment Company Act means the lesser
of (i) 67% of the shares of Common Stock represented at a meeting at which more
than 50% of the outstanding shares of Common Stock are represented or (ii) more
than 50% of the outstanding shares). Subsequent to the issuance of a class of
preferred stock, the following investment restrictions may not be changed
without the approval of a majority of the outstanding shares of Common Stock
and of preferred stock, voting together as a class, and the approval of a
majority of the outstanding shares of preferred stock, voting separately by
class. The Fund may not:
1. Issue senior securities (including borrowing money) in excess of the
limits set forth in the Investment Company Act.
2. Make investments for the purpose of exercising control or management.
3. Purchase securities of other investment companies, except to the
extent that such purchases are permitted by applicable law.
4. Purchase or sell real estate, commodities or commodity contracts,
provided that the Fund may invest in securities secured by real estate or
interests therein or issued by companies that invest in real estate or
interests therein, and the Fund may purchase and sell financial futures
contracts and options thereon.
5. Underwrite securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
6. Make loans to other persons, except (i) to the extent that the Fund
may be deemed to be making loans by purchasing debt securities and entering
into repurchase agreements in accordance with its investment objectives,
policies and restrictions and (ii) the Fund may lend its portfolio
securities in an amount not in excess of 33 1/3% of its total assets, taken
at market value, provided that such loans shall be made in accordance with
the guidelines set forth in this Prospectus.
7. Invest more than 25% of its total assets in the securities of issuers
in any one industry, provided that this limitation shall not apply with
respect to obligations issued or guaranteed by the U.S. Government or by
its agencies or instrumentalities.
Additional investment restrictions adopted by the Fund, which may be changed by
the Board of Directors, provide that the Fund may not:
1. Purchase any securities on margin, except that the Fund may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities.
2. Make short sales of securities or maintain a short position, except as
described under "Other Investment Policies--Short Sales" herein and short
sales "against the box," or invest in put, call, straddle
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or spread options, except as described under "Other Investment Policies"
herein. [A short sale "against the box" occurs when the Fund owns an equal
amount of the securities sold short or owns securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short.]
If a percentage restriction on investment policies or the investment or use
of assets set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing values will not be
considered a violation.
The Investment Adviser and Merrill Lynch are wholly owned and controlled by
Merrill Lynch & Co., Inc. Because of the affiliation of Merrill Lynch with the
Fund, the Fund is prohibited from engaging in certain transactions involving
Merrill Lynch except pursuant to an exemptive order or otherwise in compliance
with the provisions of the Investment Company Act and the rules and regulations
thereunder. Included among such restricted transactions will be purchases from
or sales to Merrill Lynch of securities in transactions in which it acts as
principal. See "Portfolio Transactions."
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund and their principal
occupations during the last five years are set forth below. Unless otherwise
noted, the address of each Director and executive officer is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
ARTHUR ZEIKEL--President and Director (1)(2)--President, Director and Chief
Investment Officer of the Investment Adviser since 1977; President of Merrill
Lynch Asset Management, L.P. (doing business as Merrill Lynch Asset Management
("MLAM")) since 1977 and Chief Investment Officer thereof since 1976; President
and Director of Princeton Services, Inc. ("Princeton Services") since 1993;
Executive Vice President of Merrill Lynch & Co., Inc. since 1990; Executive
Vice President of Merrill Lynch since 1990 and a Senior Vice President thereof
from 1985 to 1990; Director of Merrill Lynch Funds Distributor, Inc. ("MLFD").
DONALD CECIL--Director (2)--1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland Partners (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., Ethan Allen Interiors Inc. and
Harman International Industries, Inc.
CHARLES C. REILLY--Director (2)--9 Hampton Harbor Road, Hampton Bays, New
York 11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 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, and Dean from 1984 to 1993, New York University Leonard
N. Stern School of Business Administration; Director of Vornado Realty Trust
(real estate investment trust), Bowne & Co, Inc., Smith-Corona Corporation
(manufacturer of typewriters and word processors) and Alexander's Inc.
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TERRY K. GLENN--Executive Vice President (1)(2)--Executive Vice President of
the Investment Adviser and MLAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President of MLFD since 1986 and a
Director thereof since 1991.
N. JOHN HEWITT--Senior Vice President (1)(2)--Senior Vice President of the
Investment Adviser and MLAM since 1976.
JOSEPH T. MONAGLE--Senior Vice President and Portfolio Manager (1)(2)--Senior
Vice President of the Investment Adviser and MLAM since 1990 and Vice President
of MLAM from 1978 to 1990.
PAOLO H. VALLE--Vice President and Portfolio Manager (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.
VINCENT T. LATHBURY, III--Vice President and Portfolio Manager (1)(2)--Vice
President of MLAM since 1982; Portfolio Manager of the Investment Adviser and
of MLAM since 1982.
DONALD C. BURKE--Vice President (1)(2)--Vice President and Director of
Taxation of MLAM since 1990; Employee at Deloitte & Touche from 1982 to 1990.
GERALD M. RICHARD--Treasurer (1)(2)--Senior Vice President and Treasurer of
MLAM and the Investment Adviser since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Vice President of MLFD since 1981 and
Treasurer since 1984.
MARK B. GOLDFUS--Secretary (1)(2)--Vice President of the Investment Adviser
and MLAM since 1985.
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(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
other investment companies for which the Investment Adviser or MLAM acts as
investment advisor.
The Fund pays each Director not affiliated with the Investment Adviser a fee
of $2,000 per year plus $500 per meeting attended, together with such
Director's actual out-of-pocket expenses relating to attendance at meetings.
The Fund also pays members of its audit committee, which consists of all of the
Directors not affiliated with the Investment Adviser, a fee of $500 per meeting
attended.
INVESTMENT ADVISORY AND MANAGEMENT ARRANGEMENTS
The Investment Adviser is a limited partnership, the partners of which are
Merrill Lynch & Co., Inc. ("ML & Co."), Fund Asset Management, Inc. and
Princeton Services, Inc. The Investment Adviser will provide the Fund with
investment advisory and management services. The Investment Adviser or MLAM
acts as the investment adviser for over 90 other registered investment
companies. The Investment Adviser also offers portfolio management and
portfolio analysis services to individuals and institutions. As of December 29,
1993, the Investment Adviser and MLAM had a total of approximately $160 billion
in investment company and other portfolio assets under management, including
accounts of certain affiliates of the Investment Adviser. In addition to such
assets under management, as of that date ML & Co. and its subsidiaries held
assets aggregating over $500 billion on behalf of their customers. The
principal business address of the Investment Adviser is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
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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. 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.
The Investment Adviser provides the portfolio management for the Fund. Such
portfolio management will consider analyses from various sources (including
brokerage firms with which the Fund does business), make the necessary
investment decisions, and place orders for transactions accordingly. The
Investment Adviser also will be responsible for the performance of certain
administrative and management services for the Fund.
For the services rendered, the facilities furnished and the expenses assumed
by the Investment Adviser under the Investment Advisory Agreement, the Fund
will pay a monthly fee at the annual rate of 0.60% of the Fund's average weekly
net assets plus the proceeds of any outstanding borrowings used for leverage
("average weekly net assets" means the average weekly value of the total assets
of the Fund minus the sum of (i) accrued liabilities of the Fund, (ii) any
accrued and unpaid interest on outstanding borrowings and (iii) accumulated
dividends on shares of preferred stock). For purposes of this calculation,
average weekly net assets are determined at the end of each month on the basis
of the average net assets of the Fund for each week during the month. The
assets for each weekly period are determined by averaging the net assets at the
last business day of a week with the net assets at the last business day of the
prior week.
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 compensation of all Directors of the Fund who are affiliated persons of the
Investment Adviser or any of its affiliates. The Fund pays all other expenses
incurred in the operation of the Fund, including, among other things, expenses
for legal and auditing services, taxes, costs of printing proxies, stock
certificates and shareholder reports, listing fees, charges of the custodian
and the transfer agent, dividend disbursing agent and registrar, Securities and
Exchange Commission fees, fees and expenses of unaffiliated Directors,
accounting and pricing costs, insurance, interest, brokerage costs, litigation
and other extraordinary or non-recurring expenses, mailing 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.
Securities held by the Fund also may be held by or be appropriate investments
for other funds for which the Investment Adviser or MLAM acts as an advisor or
by investment advisory clients of MLAM. Because of different investment
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 for the Fund or other funds for which the
Investment Adviser or MLAM acts as investment adviser or for their 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 MLAM 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.
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Unless earlier terminated as described below, the Investment Advisory
Agreement will remain in effect until November 30, 1995, and 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 the shareholders of the
Fund.
PORTFOLIO TRANSACTIONS
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. In executing such transactions, the Investment Adviser
seeks to obtain the best results for the Fund, taking into account such factors
as price (including the applicable fee, commission or spread), size of order,
difficulty of execution and operational facilities of the firm involved, the
firm's risk in positioning a block of securities and the provision of
supplemental investment research by the firm. While the Investment Adviser
generally seeks reasonably competitive fees, commissions or spreads, the Fund
does not necessarily pay the lowest fee, commission or spread available.
The Fund has no obligation to deal with any broker or dealer in execution of
transactions in portfolio securities. Subject to obtaining the best price and
execution, securities firms which provide supplemental investment research to
the Investment Adviser, including Merrill Lynch, 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.
Securities in which the Fund may invest are traded primarily in the over-the-
counter markets, and the Fund intends to deal directly with the dealers who
make markets in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Under the Investment
Company Act, except as permitted by exemptive order, persons affiliated with
the Fund are prohibited from dealing with the Fund as principals in the
purchase and sale of securities. Since transactions in the over-the-counter
market usually involve transactions with dealers acting as principals for their
own account, the Fund will not deal with affiliated persons, including Merrill
Lynch and its affiliates, in connection with such transactions. In addition,
the Fund may not purchase securities for the Fund during the existence of any
underwriting syndicate of which Merrill Lynch is a member except pursuant to
procedures approved by the Board of Directors of the Fund which comply with
rules adopted by the Securities and Exchange Commission. An affiliated person
of the Fund may serve as its broker in over-the-counter transactions conducted
on an agency basis.
PORTFOLIO TURNOVER
The Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities, to seek short-term profits
during periods of fluctuating interest rates or for other reasons. Such trading
will increase the Fund's rate of turnover and the incidence of short-term
capital gain taxable as ordinary income. While it is not possible to predict
turnover rates with any certainty, at present it is anticipated that the Fund's
annual portfolio turnover rate, under normal circumstances, will not be in
excess of 400% (excluding turnover of securities whose maturities at the time
of acquisition are one year or less).
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<PAGE>
The portfolio turnover rate is calculated by dividing the lesser of purchases
or sales of portfolio securities for the particular fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
particular fiscal year. A high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which expenses must be
borne by the Fund and its shareholders. High portfolio turnover also may result
in the realization of substantial net short-term capital gains. In order to
continue to qualify as a regulated investment company for Federal tax purposes,
less than 30% of the annual gross income of the Fund must be derived from the
sale of securities held by the Fund for less than three months.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income
monthly. Monthly distributions to holders of Common Stock consist of
substantially all of the Fund's net investment income remaining after the
payment of interest on any borrowing or dividends or interest on any senior
securities from and after any borrowing or issuance of any senior securities.
All net realized long-term or short-term capital gains, if any, are distributed
at least annually to holders of Common Stock. In the event the Fund should
utilize leverage through the issuance of preferred stock, from and after the
issuance of the preferred stock, monthly distributions to holders of Common
Stock will consist of substantially all of the Fund's net investment income
remaining after the payment of dividends on the preferred stock.
Under the Investment Company Act, the Fund is not permitted to incur
indebtedness unless immediately after such incurrence the Fund has an asset
coverage of 300% of the aggregate outstanding principal balance of
indebtedness. Additionally, under the Investment Company Act, the Fund may not
declare any dividend or other distribution upon any class of its capital stock,
or purchase any such capital stock, unless the aggregate indebtedness of the
Fund has, at the time of the declaration of any such dividend or distribution
or at the time of any such purchase, an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.
While any shares of preferred stock are outstanding, the Fund may not declare
any cash dividend or other distribution on its Common Stock, unless at the time
of such declaration, (1) all accumulated preferred stock dividends have been
paid and (2) the value of the Fund's total assets (determined after deducting
the amount of such dividend or other distribution) is at least 200% of the
liquidation value of the outstanding preferred stock (expected to be equal to
the original purchase price per share plus any accumulated and unpaid dividends
thereon). This limitation, and the limitation contained in the preceding
paragraph, on the Fund's ability to make distributions on its Common Stock
under certain circumstances could impair the ability of the Fund to maintain
its qualification for taxation as a regulated investment company. See "Other
Investment Policies--Leverage and Borrowing" and "Taxes."
See "Automatic Dividend Reinvestment Plan" for information concerning the
manner in which dividends and distributions to holders of Common Stock may be
reinvested automatically in shares of Common Stock of the Fund. Dividends and
distributions may be taxable to shareholders whether they are reinvested in
shares of the Fund or received in cash.
The Fund expects that it will commence paying regular monthly dividends
within approximately 90 days of the date of this Prospectus.
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TAXES
The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). If it so qualifies, the Fund (but not
its shareholders) will not be subject to Federal income tax on the part of its
net ordinary income and net realized capital gains which it distributes to
shareholders. The Fund intends to distribute substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
("capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Any loss upon the sale or exchange of Fund shares held for six months or less,
however, will be treated as long-term capital loss to the extent of any capital
gain dividends received by the shareholder. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, 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 or capital gain dividends.
Distributions attributable to any dividend income earned by the Fund will be
eligible for the dividends received deduction allowed to corporations under the
Code, if certain requirements are met. If the Fund pays a dividend in January
which was declared in the previous October, November or December to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and
received by its shareholders on December 31 of 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 reportable dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom a certified taxpayer identification
number is not on file with the Fund or who, to the Fund's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
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 United States 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 provisions 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
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<PAGE>
shareholders of the Fund will be required to include their proportionate share
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.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Fund intends to distribute its income
and capital gains in the manner necessary to avoid imposition of the 4% excise
tax, there can be no assurance that sufficient amounts of the Fund's taxable
income and capital gains will be distributed to avoid entirely the imposition
of the tax. In such event, the Fund will be liable for the tax only on the
amount by which it does not meet the foregoing distribution requirements.
Substantially all of the Fund's investments will be in low rated or unrated
obligations as described earlier in this prospectus. A large portion of such
securities (including most Brady Bonds) will be purchased or originally issued
at a discount, and under current Federal tax law the Fund may be required to
accrue income before amounts due under the obligations are paid. In order to
avoid Federal income and excise taxes, the Fund may have to pay out as income
each year an amount significantly greater than the total amount of cash
received on its investments. If amounts due on the securities are ultimately
not paid in full, the Fund will realize a loss. In addition, a portion of the
interest payments on such investments may be treated as dividends for Federal
income tax purposes, and if the issuer of the underlying securities is a
domestic corporation, the dividend payments by the Fund will be eligible for
the dividends received deduction allowed to domestic corporations to the extent
of the deemed dividend portion of such interest payments.
The Federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Fund to treat payments received
under such arrangements as ordinary income and to amortize such payments under
certain circumstances. The Fund anticipates that its activity in this regard
will not affect its qualification as a RIC.
The Fund may invest up to 10% of its total assets in securities of closed-end
investment companies. If the Fund purchases shares of an investment company (or
similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal
income tax and an additional tax in the nature of interest (the "interest
charge") on a portion of distributions from such company and on gain from the
disposition of the shares of such company (collectively referred to as "excess
distributions"), even if such excess distributions are paid by the Fund as a
dividend to its shareholders. The Fund may be eligible to make an election with
respect to certain PFICs in which it owns shares that will allow it to avoid
the taxes on excess distributions. However, such election may cause the Fund to
recognize income in a particular year in excess of the distributions received
from such PFICs. Alternatively, under proposed regulations which, when
finalized, are expected to apply retroactively, the Fund may elect to "mark to
market" at the end of
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<PAGE>
each taxable year all shares that it holds in PFICs. If it makes this election,
the Fund will recognize as ordinary income any increase in the value of such
shares. Unrealized losses, however, will not be recognized. By making the mark-
to-market election, the Fund can avoid imposition of the interest charge with
respect to its distributions from PFICs, but in any particular year may be
required to recognize income in excess of the distributions it receives from
PFICs and its proceeds from dispositions of PFIC stock.
TAX TREATMENT OF OPTION AND FUTURES TRANSACTIONS
The Fund may purchase or sell options and futures contracts. In general,
unless an election is available to the Fund or an exception applies, such
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, and any gain or loss
attributable to 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.
Code Section 1092, which applies to certain "straddles", may affect the
taxation of the Fund's options, futures and interest rate transactions 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 and futures contracts and interest rate swaps and on
certain short sales of securities.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income may be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting closing transactions with respect to
certain short sales and within three months after entering into an options or
futures contract.
OFFERS TO PURCHASE SHARES
Under current law, a holder of Common Stock who, pursuant to any Tender
Offer, tenders all shares of Common Stock owned by such shareholder and any
shares considered owned by such shareholder under attribution rules contained
in the Code will realize a taxable gain or loss depending on such shareholder's
basis in the shares. Such gain or loss will be treated as capital gain or loss
if the shares are held as capital assets in the shareholder's hands and will be
long-term or short-term depending on the shareholder's holding period for the
shares. Different tax consequences may apply to tendering and nontendering
holders of Common Stock in connection with a Tender Offer, and these
consequences will be disclosed in related offering documents. For example, if a
tendering holder of Common Stock tenders less than all shares owned by or
attributed to such shareholder, and if the distribution to such shareholder
does not otherwise qualify as an exchange, the proceeds received will be
treated as a taxable dividend, return of capital or capital gain depending on
the Fund's earnings and profits and the shareholder's basis in the tendered
shares. Also, there is a remote risk that non-tendering holders of Common Stock
may be considered to have received a deemed distribution which may be a taxable
dividend in whole or in part. Holders of Common Stock may wish to consult their
tax advisers prior to tendering. If holders of Common Stock whose shares are
acquired by the Fund in the open market sell less than all shares owned by or
attributed to them, a risk exists that these shareholders will be subject to
taxable dividend treatment, and there is a remote risk that the remaining
shareholders may be considered to have received a deemed distribution.
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<PAGE>
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
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 that
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.
AUTOMATIC DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Automatic Dividend Reinvestment Plan (the "Plan"),
unless a shareholder otherwise elects, all dividend and capital gains
distributions will be reinvested automatically by The Bank of New York, as
agent for shareholders in administering the Plan (the "Plan Agent"), in
additional shares of Common Stock of the Fund. Shareholders who elect not to
participate in the Plan will receive all distributions in cash paid by check
mailed directly to the shareholder of record (or, if the shares are held in
street or other nominee name, then to such nominee) by The Bank of New York, as
dividend paying agent. Such participants may elect not to participate in the
Plan and to receive all distributions of dividends and capital gains in cash by
sending written instructions to The Bank of New York, as dividend paying agent,
at the address set forth below. Participation in the Plan is completely
voluntary and may be terminated or resumed at any time without penalty by
written notice if received by the Plan Agent not less than ten days prior to
any dividend record date; otherwise such termination will be effective with
respect to any subsequently declared dividend or distribution.
Whenever the Fund declares an ordinary income dividend or a capital gain
dividend (collectively referred to as "dividends") payable either in shares or
in cash, non-participants in the Plan will receive cash, and participants in
the Plan will receive the equivalent in shares of Common Stock. The shares will
be acquired by the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of additional
unissued but authorized shares of Common Stock from the Fund ("newly issued
shares") or (ii) by purchase of outstanding shares of Common Stock on the open
market ("open-market purchases") on the New York Stock Exchange or elsewhere.
If on the payment date for the dividend, the net asset value per share of the
Common Stock is equal to or less than the market price per share of the Common
Stock plus estimated brokerage commissions (such condition being referred to
herein as "market premium"), the Plan Agent will invest the dividend amount in
newly issued shares on behalf of the participant. The number of newly issued
shares of Common Stock to be credited to the participant's account will be
determined by dividing the dollar amount of the dividend by the net asset value
per share on the date the shares are issued, provided that the maximum discount
from the then current market price per share on the date of issuance may not
exceed 5%. If on the dividend payment date the net asset value per share is
greater than the market value (such condition being referred to herein as
"market discount"), the Plan Agent will invest the dividend amount in shares
acquired on behalf of the participant in open-market purchases.
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<PAGE>
Prior to the time the shares of Common Stock commence trading on the New York
Stock Exchange, participants in the Plan will receive any dividends in newly
issued shares.
In the event of a market discount on the dividend payment date, the Plan
Agent will have until the last business day before the next date on which the
shares trade on an "ex-dividend" basis or in no event more than 30 days after
the dividend payment date (the "last purchase date") to invest the dividend
amount in shares acquired in open-market purchases. It is contemplated that the
Fund will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a share of Common Stock exceeds the
net asset value per share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in
the acquisition of fewer shares than if the dividend had been paid in newly
issued shares on the dividend payment date. Because of the foregoing difficulty
with respect to open-market purchases, the Plan provides that if the Plan Agent
is unable to invest the full dividend amount in open-market purchases during
the purchase period or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will cease making open-market purchases and
will invest the uninvested portion of the dividend amount in newly issued
shares at the close of business on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the accounts, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent on behalf of the Plan participant,
and each shareholder's proxy will include those shares purchased or received
pursuant to the Plan. The Plan Agent will forward all proxy solicitation
materials to participants and vote proxies for shares held pursuant to the Plan
in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by
the record shareholders as representing the total amount registered in the
record shareholder's name and held for the account of beneficial owners who are
to participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by
the Fund as a result of dividends or capital gains distributions payable either
in shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends. See "Taxes."
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at less than they could otherwise
purchase them and will have shares with a cash value greater than the value of
any cash distribution they would have received on their shares. If the market
price plus commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem its
shares, the price on resale may be more or less than the net asset value. See
"Taxes" for a discussion of tax consequences of the Plan.
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<PAGE>
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan. There
is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the
participants.
All correspondence concerning the Plan should be directed to the Plan Agent
at 101 Barclay Street, New York, N.Y. 10286.
MUTUAL FUND INVESTMENT OPTION
Purchasers of shares of the Fund in this offering will have an investment
option consisting of the right to reinvest the net proceeds from a sale of such
shares (the "Original Shares") in Class A initial sales charge shares of
certain Merrill Lynch-sponsored open-end mutual funds ("Eligible Class A
Shares") at their net asset value, without the imposition of the initial sales
charge, if the conditions set forth below are satisfied. First, the sale of the
Original Shares must be made through Merrill Lynch, and the net proceeds
therefrom must be reinvested immediately in Eligible Class A Shares. Second,
the Original Shares must either have been acquired in this offering or be
shares representing reinvested dividends from shares acquired in this offering.
Third, the Original Shares must have been maintained continuously 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 certain of the mutual
funds may be subject to an account maintenance fee at an annual rate of up to
0.25% of the average daily net asset value of such mutual fund. The Eligible
Class A Shares may be redeemed at any time at the next determined net asset
value, subject in certain cases to a redemption fee. Prior to the time the
shares commence trading on the New York Stock Exchange, the distributor for the
mutual funds will advise Merrill Lynch financial consultants as to those mutual
funds which offer the investment option described above.
NET ASSET VALUE
Net asset value per share is determined at 4:15 P.M., New York time, on the
last business day in each week. For purposes of determining the net asset value
of a share of Common Stock, the value of the securities held by the Fund plus
any cash or other assets (including interest accrued but not yet received)
minus all liabilities (including accrued expenses) and the aggregate
liquidation value of any outstanding shares of preferred stock is divided by
the total number of shares of Common Stock outstanding at such time. Expenses,
including the fees payable to the Investment Adviser, are accrued daily.
The Fund determines and makes available for publication the net asset value
of its shares weekly. Currently, the net asset values of shares of publicly
traded, closed-end investment companies investing in debt securities are
published in Barron's and in the Monday editions of The Wall Street Journal and
The New York Times.
Portfolio securities (other than short-term obligations but including listed
issues) may be valued on the basis of prices furnished by one or more pricing
services which determine prices for normal, institutional-size trading units of
such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities are valued at the last sale price on the exchange that is the
primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. The value of
interest
42
<PAGE>
rate swaps, caps and floors is determined in accordance with a formula and then
confirmed periodically by obtaining a bank or dealer quotation. Positions in
options or futures contracts are valued at the last sale price on the market
where any such option or futures contract is principally traded or, in the case
of options traded in the over-the-counter market, the last bid price (or
average of the last bid prices) from one or more dealers. Obligations with
remaining maturities of 60 days or less are valued at amortized cost unless
this method no longer produces fair valuations. Repurchase agreements are
valued at cost plus accrued interest. Rights or warrants to acquire stock, or
stock acquired pursuant to the exercise of a right or warrant, may be valued
taking into account various factors such as original cost to the Fund, earnings
and net worth of the issuer, market prices for securities of similar issuers,
assessment of the issuer's future prosperity, liquidation value or third party
transactions involving the issuer's securities. Securities for which there
exist no price quotations or valuations and all other assets are valued at fair
value as determined in good faith by or on behalf of the Board of Directors of
the Fund.
DESCRIPTION OF SHARES
The Fund is authorized to issue 200,000,000 shares of capital stock, par
value $0.10 per share, all of which shares initially are classified as Common
Stock. The Board of Directors is authorized, however, to classify and
reclassify any unissued shares of capital stock by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption. The Fund may reclassify an amount of unissued Common Stock as
preferred stock and at that time offer shares of preferred stock in accordance
with limitations set forth in the Investment Company Act.
Shares of Common Stock, when issued and outstanding, will be fully paid and
non-assessable. Shareholders are entitled to share pro rata in the net assets
of the Fund available for distribution to shareholders upon liquidation of the
Fund. Shareholders are entitled to one vote for each share held.
In the event that the Fund issues preferred stock and so long as any shares
of the Fund's preferred stock are outstanding, holders of Common Stock will not
be entitled to receive any net income of or other distributions from the Fund
unless all accumulated dividends on preferred stock have been paid, and unless
asset coverage (as defined in the Investment Company Act) with respect to
preferred stock would be at least 200% after giving effect to such
distributions. See "Other Investment Policies--Leverage and Borrowing."
The Fund will send unaudited reports at least semi-annually and audited
annual financial statements to all of its shareholders.
As of January 20, 1994, there were 7,055 shares issued and outstanding, all
of which were owned by the Investment Adviser.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Fund's Articles of Incorporation include provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of the Fund or to change the composition of its Board of Directors and could
have the effect of depriving shareholders of an opportunity to sell their
shares at a premium over prevailing market prices by discouraging a third party
from seeking to obtain control of the Fund. A Director may be removed from
office with or without cause but only by vote of the holders of at least 66
2/3% of the shares entitled to be voted on the matter.
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<PAGE>
In addition, the Articles of Incorporation require the favorable vote of the
holders of at least 66 2/3% of the Fund's shares of capital stock, then
entitled to be voted, voting as a single class, to approve, adopt or authorize
the following:
(i) a merger or consolidation or statutory share exchange of the Fund
with any other corporation,
(ii) a sale of all or substantially all of the Fund's assets (other
than in the regular course of the Fund's investment activities), or
(iii) a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of Directors fixed in
accordance with the by-laws of the Fund, in which case the affirmative vote of
a majority of the Fund's shares of capital stock is required. Following any
issuance of preferred stock by the Fund, it is anticipated that the approval,
adoption or authorization of the foregoing also would require the favorable
vote of a majority of the Fund's shares of preferred stock then entitled to be
voted, voting as a separate class.
In addition, conversion of the Fund to an open-end investment company would
require an amendment to the Fund's Articles of Incorporation. The amendment
would have to be declared advisable by the Board of Directors prior to its
submission to shareholders. Such an amendment would require the favorable vote
of the holders of at least 66 2/3% of the Fund's outstanding shares (including
any preferred stock) entitled to be voted on the matter, voting as a single
class (or a majority of such shares if the amendment previously was approved,
adopted or authorized by at least two-thirds of the total number of Directors
fixed in accordance with the Fund's by-laws), and, assuming preferred stock is
issued, the affirmative vote of a majority of outstanding shares of preferred
stock of the Fund, voting as a separate class. Such a vote also would satisfy a
separate requirement in the Investment Company Act that the change be approved
by the shareholders. Shareholders of an open-end investment company may require
the company to redeem their shares of common stock at any time (except in
certain circumstances as authorized by or under the Investment Company Act) at
their net asset value, less such redemption charge, if any, as might be in
effect at the time of a redemption. All redemptions will be made in cash. If
the Fund is converted to an open-end investment company, it could be required
to liquidate portfolio securities to meet requests for redemption and the
shares no longer would be listed on a stock exchange. Conversion to an open-end
investment company also would require redemption of all outstanding shares of
preferred stock and would require changes in certain of the Fund's investment
policies and restrictions, such as those relating to the borrowing of money and
the purchase of illiquid securities.
The Board of Directors has determined that the 66 2/3% voting requirements
described above, which are greater than the minimum requirements under Maryland
law or the Investment Company Act, are in the best interests of shareholders
generally. Reference should be made to the Articles of Incorporation on file
with the Securities and Exchange Commission for the full text of these
provisions.
CUSTODIAN
The Fund's securities and cash are held under a custodian agreement with The
Bank of New York, One Wall Street, New York, New York 10286.
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UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") has
agreed, subject to the terms and conditions of a Purchase Agreement with the
Fund and the Investment Adviser, to purchase 6,333,333 shares of Common Stock
from the Fund. Merrill Lynch is committed to purchase all of such shares if any
are purchased.
Merrill Lynch has advised the Fund that it proposes initially to offer the
shares to the pubic at the public offering price set forth on the cover page of
this Prospectus, except that the price will be reduced to $14.85 per share for
purchases in single transactions of between 3,500 and 6,999 shares ($14.70 for
purchases in single transactions of 7,000 or more shares). Merrill Lynch also
has advised the Fund that it may offer shares to certain dealers at the initial
offering price set forth in the preceding sentence less a concession not in
excess of $.65 per share ($.53 per share for purchases in single transactions
of between 3,500 and 6,999 shares and $.41 for purchases in single transactions
of 7,000 or more shares). Merrill Lynch may allow, and such dealers may
reallow, a discount on sales to certain other dealers not in excess of $.10 per
share. After the initial public offering, the public offering price, concession
and discount may be changed. Investors must pay for any shares of Common Stock
purchased in the initial public offering on or before February 4, 1994. The
maximum sales load of $.825 per share is equal to 5.50%, the sales load of
$.675 per share is equal to 4.55% and the sales load of $.525 per share is
equal to 3.57% of the respective initial public offering prices.
The Fund has granted Merrill Lynch an option, exercisable for 45 days after
the date hereof, to purchase up to 633,333 additional shares of Common Stock to
cover over-allotments, if any, at the initial offering price less the sales
load.
Prior to this offering, there has been no public market for the shares of the
Fund. The Fund's shares have been approved for listing on the New York Stock
Exchange. However, during an initial period which is not expected to exceed
four weeks from the date of this Prospectus, the Fund's shares will not be
listed on any securities exchange. Additionally, during such period, Merrill
Lynch does not intend to make a market in the Fund's shares, although a limited
market may develop. Consequently, it is anticipated that an investment in the
Fund will be illiquid during such period. In order to meet the requirements for
listing, Merrill Lynch has undertaken to sell lots of 100 or more shares to a
minimum of 2,000 beneficial owners.
The Fund anticipates that Merrill Lynch from time to time may act as a broker
in connection with the execution of the Fund's portfolio transactions.
Merrill Lynch is an affiliate of the Investment Adviser of the Fund. Merrill
Lynch's principal business address is Merrill Lynch World Headquarters, World
Financial Center, North Tower, New York, New York 10281-1305.
The Fund and the Investment Adviser have agreed to indemnify Merrill Lynch
against certain liabilities including liabilities under the Securities Act of
1933.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for the shares of
the Fund is The Bank of New York, 101 Barclay Street, New York, New York 10286.
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LEGAL OPINIONS
Certain legal matters in connection with the shares offered hereby will be
passed upon for the Fund and Merrill Lynch by Brown & Wood, New York, New York.
Brown & Wood will rely as to matters of Maryland law on the opinion of
Ginsburg, Feldman and Bress, Chartered, Washington, D.C.
EXPERTS
The statement of assets, liabilities and capital of the Fund included in this
Prospectus has been so included in reliance on the report of Deloitte & Touche,
independent auditors, and on their authority as experts in auditing and
accounting. The principal business address of Deloitte & Touche is 117 Campus
Drive, Princeton, New Jersey 08540.
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder of
Worldwide DollarVest Fund, Inc.
We have audited the accompanying statement of assets, liabilities and capital
of Worldwide DollarVest Fund, Inc. as of January 20, 1994. This financial
statement is the responsibility of the Fund's management. Our responsibility is
to express an opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 statement of assets, liabilities and capital presents
fairly, in all material respects, the financial position of Worldwide
DollarVest Fund, Inc. as of January 20, 1994 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE
Princeton, New Jersey
January 24, 1994
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<PAGE>
WORLDWIDE DOLLARVEST FUND, INC.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
JANUARY 20, 1994
ASSETS
<TABLE>
<S> <C>
Cash................................................................ $100,005
Deferred organization and offering costs (Note 1)................... 418,500
--------
Total Assets...................................................... 518,505
LIABILITIES
Deferred organization and offering costs (Note 1)................... 418,500
--------
NET ASSETS............................................................ $100,005
========
CAPITAL
Common Stock, par value $.10 per share; 200,000,000 shares
authorized; 7,055 shares issued and outstanding (Note 1)........... $ 706
Paid in Capital in excess of par.................................... 99,299
--------
Total Capital-Equivalent of $14.175 net asset value per share of
Common Stock
(Note 1)......................................................... $100,005
========
</TABLE>
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
NOTE 1. ORGANIZATION
The Fund was incorporated under the laws of the State of Maryland on November
12, 1993, as a closed-end, non-diversified management investment company and
has had no operations other than the sale to Fund Asset Management, L.P. (the
"Investment Adviser") of an aggregate of 7,055 shares for $100,005 on January
20, 1994.
Deferred organization costs will be amortized on a straight-line basis over a
five-year period beginning with the commencement of operations of the Fund.
Direct costs relating to the public offering of the Fund's shares will be
charged to capital at the time of issuance.
NOTE 2. MANAGEMENT ARRANGEMENTS
The Fund has engaged the Investment Adviser to provide investment advisory
and management services to the Fund. The Investment Adviser will receive a
monthly fee at the annual rate of 0.60% of the Fund's average weekly net assets
plus the proceeds of any outstanding borrowings used for leverage.
NOTE 3. FEDERAL INCOME TAXES
The Fund intends to qualify as a "regulated investment company" and as such
(and by complying with the applicable provisions of the Internal Revenue Code
of 1986, as amended) will not be subject to Federal income tax on taxable
income (including realized capital gains) that is distributed to shareholders.
48
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS OF MOODY'S INVESTORS SERVICE, INC.
("MOODY'S"):
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are 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 generally are
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with 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 with 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 medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
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 a desirable
investment. 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.
A-1
<PAGE>
The modifier 1 indicates that the bond 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 rating category.
Note: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic
rating classification from "Aa" through "B" in its corporate bond rating
system.
DESCRIPTION OF CORPORATE BOND RATINGS OF STANDARD & POOR'S CORPORATION ("S&P"):
AAA Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher-rated issues only in small degree.
A Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher-rated categories.
BBB Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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 bonds in this category than in higher-
rated categories.
BB,B,
CCC,CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds likely will have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C The C rating is reserved for income bonds on which no interest is being
paid.
D Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of bond as a matter of policy.
Plus (+) or Minus (-): The ratings from AA to B may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
APPENDIX B
INTEREST RATE, OPTIONS AND FUTURES TRANSACTIONS
Reference is made to the discussion under the caption "Investment Objective
and Policies--Other Investment Policies--Portfolio Strategies Involving
Interest Rate Transactions, Options and Futures" above for information with
respect to various portfolio strategies involving such portfolio strategies.
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.
OPTIONS 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,
B-1
<PAGE>
that the Fund will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market on an exchange include the following: (i)
there may be insufficient trading interest in certain options; (ii)
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options or
underlying securities; (iv) unusual or unforeseen circumstances may interrupt
normal operations on an exchange; (v) the facilities of an exchange or the
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by the Clearing Corporation as a result of trade 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
price and terms negotiated between the buyer and seller. The staff of 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.
B-2
<PAGE>
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 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 the futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to hedge effectively its portfolio.
The exchanges on which the Fund intends to conduct its 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.
B-3
<PAGE>
APPENDIX C
To provide a better understanding of emerging market countries and their
potential, the following is a brief overview of some countries in which the
Fund may invest:
MEXICO. Mexico is undergoing an unprecedented wave of competition and market
development. The economic outlook is for a pickup in growth, particularly now
that NAFTA has been approved, and a falling rate of inflation as the government
continues to pursue appropriate fiscal and monetary policies. President
Salinas's performance while in office, and the obvious popularity of the
economic reforms in Mexico, increases the likelihood that the present economic
policies will remain in place at least through the rest of the 1990s.
ARGENTINA. Argentina has enjoyed an unprecedented degree of economic
stability in 1992-1993 as the rate of inflation fell to a record low of 8.1% in
October of 1993. Argentine productivity has reached a ten-year high, based on
genuine economic strength derived from an ongoing fundamental restructuring of
the economy. Thus far, 1993 economic indicators estimate productivity to be
growing at 3%-4%, despite new strains from lagging adjustments in certain
sectors of the economy.
VENEZUELA. Venezuela's market-oriented economic reforms have been among the
most thorough in Latin America. Although economic activity has slowed in 1993
due to political uncertainties, Venezuela has ranked among the fastest growing
emerging markets in the world. Political uncertainty should dissipate and
economic activity should recuperate with the inauguration in February 1994.
BRAZIL. Brazil is distinguished by its size as the largest country in Latin
America. Political uncertainty is high and the Franco government may not be
able to fully implement its recently announced plan to reduce inflation. The
bright spot in the Brazilian economy continues to be the balance of payments
and international reserves. Brazil has achieved large surpluses of trade in
recent years due to manufactured export performance. Brazil's international
reserve position has improved substantially with reserves in excess of U.S. $20
billion, an all-time record.
- --------
Source: Merrill Lynch Global Securities Research
C-1
<PAGE>
The following chart sets forth the yields to maturity on U.S. dollar-
denominated sovereign debt for Argentina, Brazil, Mexico, Morocco, the
Philippines and Venezuela as of December 2, 1993.
YIELDS TO MATURITY ON U.S. DOLLAR DENOMINATED SOVEREIGN DEBT*
<TABLE>
<CAPTION>
SOVEREIGN DEBT/MATURITY YIELD
- ------------------------------------------------------------------------------------------
- -
<S> <C> <C>
Argentina: Par Bonds (3/31/23)................................................ 8.99%
Brazil: IDU Bonds (1/1/01)................................................. 12.04%
Mexico: Par Bonds (12/31/19)............................................... 8.06%
Morocco: Consolidated A Loans (1/1/09)...................................... 10.61%
Philippines: Par Bonds-B (12/1/17).............................................. 8.27%
Venezuela: Par Bonds-A (3/31/20).............................................. 9.82%
- ------------------------------------------------------------------------------------------
- -
</TABLE>
* Source: Merrill Lynch Global Securities Research. Yields are subject to
change as a result of market activity.
C-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY STATE OR JURISDICTION OF THE UNITED STATES OR ANY COUNTRY WHERE
SUCH OFFER WOULD BE UNLAWFUL.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Fee Table.................................................................. 13
The Fund................................................................... 14
Use of Proceeds............................................................ 14
Investment Objectives and Policies......................................... 14
Other Investment Policies.................................................. 22
Investment Restrictions.................................................... 31
Directors and Officers..................................................... 32
Investment Advisory and Management
Arrangements.............................................................. 33
Portfolio Transactions..................................................... 35
Dividends and Distributions................................................ 36
Taxes...................................................................... 37
Automatic Dividend Reinvestment Plan....................................... 40
Mutual Fund Investment Option.............................................. 42
Net Asset Value............................................................ 42
Description of Shares...................................................... 43
Custodian.................................................................. 44
Underwriting............................................................... 45
Transfer Agent, Dividend Disbursing Agent and Registrar.................... 45
Legal Opinions............................................................. 46
Experts.................................................................... 46
Independent Auditors' Report............................................... 47
Statement of Assets, Liabilities and Capital............................... 48
Appendix A................................................................. A-1
Appendix B................................................................. B-1
Appendix C................................................................. C-1
</TABLE>
---------------
UNTIL APRIL 28, 1994 (90 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,333,333 SHARES
WORLDWIDE DOLLARVEST FUND, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
JANUARY 28, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Code# 16969
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(1) Financial Statements
Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of January 20, 1994
(2) Exhibits:
<TABLE>
<C> <S>
(a) --Articles of Incorporation*
(b) --Form of By-Laws*
(c) --Not applicable
(d)(1) --Specimen certificate for Common Stock
(d)(2) --Portions of the Articles of Incorporation and the By-Laws of the
Registrant defining the rights of holders of shares of the
Registrant**
(e) --Form of Dividend Reinvestment Plan*
(f) --Not applicable
(g) --Form of Investment Advisory Agreement between the Fund and Fund
Asset Management, L.P.*
(h)(1) --Form of Purchase Agreement*
(2) --Merrill Lynch Standard Dealer Agreement*
(i) --Not applicable
(j) --Custodian Contract between the Fund and The Bank of New York
(k) --Registrar, Transfer Agency and Service Agreement between the
Fund and The Bank of New York
(l) --Opinion and Consent of Brown & Wood, counsel to the Fund
(m) --Not applicable
(n) --Consent of Deloitte & Touche, independent auditors for the Fund
(o) --Not applicable
(p) --Certificate of Fund Asset Management, L.P.
(q) --Not applicable
</TABLE>
--------
* Previously filed.
** Reference is made to Article V, Article VI (sections 2, 3, 4, 5 and 6),
Article VII, Article VIII, Article X, Article XI, Article XII and Article
XIII of the Registrant's Articles of Incorporation, filed as Exhibit (a) to
the Registration Statement; and to Article II, Article III (sections 1, 3, 5
and 17), Article VI, Article VII, Article XIII and Article XIV of the
Registrant's By-Laws, filed as Exhibit (b) to the Registration Statement.
ITEM 25. MARKETING ARRANGEMENTS.
See Exhibit (h).
C-1
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration Fee................................................. $ 36,035
Stock Exchange listing fee....................................... 95,100
Printing (other than stock certificates)......................... 105,000
Engraving and printing stock certificates........................ 20,000
Fees and expenses of qualifications under state securities laws
(including fees of counsel)..................................... 15,000
Legal fees and expenses.......................................... 85,000
Accounting fees and expenses..................................... 3,600
NASD fees........................................................ 10,950
Miscellaneous.................................................... 4,315
--------
Total.......................................................... $375,000
========
</TABLE>
--------
* To be provided by amendment.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The information in the Prospectus under the caption "Investment Advisory and
Management Arrangements" and in Note l to the Statement of Assets, Liabilities
and Capital is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
There will be one record holder of the Common Stock, par value $.10 per
share, as of the effective date of this Registration Statement.
ITEM 29. INDEMNIFICATION.
Section 2-418 of the General Corporation Law of the State of Maryland,
Article VI of the Fund's Articles of Incorporation, Article VI of the Fund's
By-Laws and the Investment Advisory Agreement filed as Exhibit (g) provide for
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be provided to directors, officers and controlling
persons of the Fund, pursuant to the foregoing provisions or otherwise, the
Fund 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 Fund of
expenses incurred or paid by a director, officer or controlling person of the
Fund in connection with any successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Fund 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.
Reference is made to Section Six of the Purchase Agreement, a form of which
is filed as Exhibit (h) (l) hereto, for provisions relating to the
indemnification of the underwriter.
C-2
<PAGE>
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
Fund Asset Management, L.P. (the "Investment Adviser") acts as investment
adviser for the following 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., 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 Institutional
Tax-Exempt Fund, Merrill Lynch Multi-State Municipal Series Trust, Merrill
Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund, Inc., Merrill
Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund, Inc.,
MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund
Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc.,
MuniVest California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Fund,
Inc., MuniVest Fund II, Inc., 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., Taurus MuniCalifornia Holdings, Inc. and Taurus MuniNewYork 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
Institutional Series and Merrill Lynch Institutional Tax-Exempt Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
the Investment Adviser and its affiliate, Merrill Lynch Asset Management, L.P.,
doing business as MLAM, also, is 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 North Tower, World
Financial Center, 250 Vesey Street, New York, New York 10281-1213.
Set forth below is a list of each 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
January 20, 1992 for his own account or in the capacity of director, officer,
employee, partner or trustee. In addition, Mr. Zeikel is President and
Director, Mr. Richard is Treasurer and Mr. Glenn is Executive Vice President of
all or substantially all of the investment companies described in the preceding
paragraph and also hold the same positions with all or substantially all of the
investment companies advised by MLAM as they do with those advised by the
Investment Adviser. Messrs. Durnin, Giordano, Harvey, Hewitt and Monagle are
directors or officers of one or more of such companies.
C-3
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
BUSINESS,
POSITION(S) WITH THE INVESTMENT PROFESSION, VOCATION OR
NAME ADVISER EMPLOYMENT
---- ------------------------------- -----------------------
<C> <C> <S>
ML & Co. .......... Limited Partner Financial Services
Holding Company
Fund Asset Manage-
ment, Inc. ....... Limited Partner Investment Advisory
Princeton Services, Services
Inc. ("Princeton
Services")........ General Partner General Partner of MLAM
Arthur Zeikel...... President President of MLAM;
President and Director
of Princeton Services;
Director of Merrill
Lynch Funds Distributor,
Inc. ("MLFD"); Executive
Vice President of ML &
Co.; Executive Vice
President of Merrill
Lynch
Terry K. Glenn..... Executive Vice President Executive Vice President
of MLAM;
Executive Vice President
and Director of
Princeton Services;
President and Director
of MLFD
Bernard J. Durnin.. Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
Vincent R. Giordano Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
Elizabeth Griffin.. Senior Vice President Senior Vice President of
MLAM
Norman R. Harvey... Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
N. John Hewitt..... Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
Philip L. Kirstein. Senior Vice President, General
Counsel and Secretary Senior Vice President,
General Counsel and
Secretary of MLAM;
Senior Vice President,
General Counsel,
Director and Secretary
of Princeton Services;
Director of MLFD
Ronald M. Kloss.... Senior Vice President and Controller Senior Vice President
and Controller of MLAM;
Senior Vice President
and Controller of
Princeton Services
Joseph T. Monagle.. Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
Gerald M. Richard.. Senior Vice President and Treasurer Senior Vice President
and Treasurer of MLAM;
Senior Vice President
and Treasurer of
Princeton Services; Vice
President and Treasurer
of MLFD
Richard L. Rufener. Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services; Vice President
of MLFD
Ronald L. Welburn.. Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
Anthony Wiseman.... Senior Vice President Senior Vice President of
MLAM; Senior Vice
President of Princeton
Services
</TABLE>
C-4
<PAGE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31 (a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained at the offices of the Registrant (800 Scudders Mill
Road, Plainsboro, New Jersey 08536), its investment adviser (800 Scudders Mill
Road, Plainsboro, New Jersey 08536), and its custodian (One Wall Street, New
York, New York 10286) and transfer agent (101 Barclay Street, New York, N.Y.
10286).
ITEM 32. MANAGEMENT SERVICES.
Not applicable.
ITEM 33. UNDERTAKINGS.
(a) Registrant undertakes to suspend offering of the shares of Common Stock
covered hereby until it amends its Prospectus contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share of Common Stock declines more than 10 percent from its net
asset value per share of Common Stock as of the effective date of this
Registration Statement, or (2) its net asset value per share of Common Stock
increases to an amount greater than its net proceeds as stated in the
Prospectus contained herein.
(b) Registrant undertakes that:
(1) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 497(h) under
the Securities Act shall be deemed to be part of the registration statement
as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
C-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF PLAINSBORO AND STATE OF NEW JERSEY, ON THE 27TH DAY OF JANUARY,
1994.
WORLDWIDE DOLLARVEST FUND, INC.
(REGISTRANT)
By:
/s/ Arthur Zeikel,
____________________________________
(ARTHUR ZEIKEL, PRESIDENT)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE(S) INDICATED.
SIGNATURES TITLE DATE
President (Principal
/s/ Arthur Zeikel Executive Officer) and January 27,
________________________________ Director 1994
(ARTHUR ZEIKEL)
Treasurer (Principal
/s/ Gerald M. Richard Financial and January 27,
________________________________ Accounting Officer) 1994
(GERALD M. RICHARD) and Director
Donald Cecil* Director
________________________________
(DONALD CECIL)
Director
________________________________
(EDWARD H. MEYER)
Charles C. Reilly* Director
________________________________
(CHARLES C. REILLY)
Richard R. West* Director
________________________________
(RICHARD R. WEST)
*By
/s/ Arthur Zeikel January 27,
1994
____________________________
(ATTORNEY-IN-FACT)
C-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NO.
------- ----
<C> <S> <C>
(d)(1) --Specimen certificate for Common Stock
(j) --Custodian Contract between the Fund and The Bank of New
York
(k) --Registrar, Transfer Agency and Service Agreement between
the Fund and The Bank of New York
(l) --Opinion and Consent of Brown & Wood, counsel to the Fund
(n) --Consent of Deloitte & Touche, independent auditors for the
Fund
(p) --Certificate of Fund Asset Management, L.P.
</TABLE>
<PAGE>
EXHIBIT 99.(D)(1)
WORLDWIDE DOLLARVEST FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
COMMON STOCK CUSIP
PAR VALUE $.10 See Reverse For Certain
Definitions
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Worldwide
DollarVest Fund, Inc., transferable on the books of the Corporation by the
holder in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Articles of Incorporation and of the By-Laws of the Corporation, and of all of
the amendments from time to time made thereto. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Mark B. Goldfus /s/ Arthur Zeikel
Secretary President
Countersigned and Registered:
THE BANK OF NEW YORK
By:
Transfer Agent and Registrar
<PAGE>
WORLDWIDE DOLLARVEST FUND, INC.
A full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Corporation to any stockholder,
without charge, upon request to the Secretary of the Corporation at its
principal office.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--
_______Custodian_______
(Cust) (Minor)
TEN ENT--as tenants by the entireties under Uniform Gifts to
Minors Act ________
JT TEN--as joint tenants with right (State)
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received.................hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________
________________________________________________________________________________
(Please Print or Typewrite Name and Address, Including Zip Code, of Assignee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:___________________
_____________________________________________
<PAGE>
NOTICE: The Signature to this assignment must correspond with the
name as written upon the face of the Certificate, in every
particular, without alteration or enlargement, or any change
whatever.
__________________________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" as such term is defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934.
__________________________________________________________________
<PAGE>
EXHIBIT 99.(J)
CUSTODY AGREEMENT
-----------------
Agreement made as of this day of , 1994, between WORLDWIDE
DOLLARVEST FUND, INC., a corporation organized and existing under the laws of
the State of Maryland having its principal office and place of business at
(hereinafter called the "Fund"), and THE BANK OF
NEW YORK, a New York corporation authorized to do a banking business, having its
principal office and place of business at 48 Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two Officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a Terminal Link.
4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
<PAGE>
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository"
shall further mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, its successor or successors
and its nominee or nominees, specifically identified in a certified copy of a
resolution of the Fund's Board of Directors specifically approving deposits
therein by the Custodian.
8. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
9. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
11. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited
2
<PAGE>
in, or withdrawn from, a Margin Account upon the Custodian's effecting an
appropriate entry in its books and records.
12. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instru-mentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer, and any other person or persons, whether or
not any such other person is an officer of the Fund, duly authorized by the
Board of Directors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Officer or from a person reasonably believed by the
Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
3
<PAGE>
19. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
21. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the
Fund.
22. "Shares" shall mean the shares of capital stock of the Fund, each of
which is, in the case of a Fund having Series, allocated to a particular Series.
23. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
25. "Terminal Link" shall mean an electronic data trans-mission link
between the Fund and the Custodian requiring in connection with each use of the
Terminal Link by or on behalf of
4
<PAGE>
the Fund use of an authorization code provided by the Custodian and at least two
access codes established by the Fund.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent
5
<PAGE>
possible with respect to such Securities in connection with its performance
hereunder, including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and deliveries and
returns of Securities collateral. Securities and moneys deposited in either the
Book-Entry System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a fiduciary or
representative capacity and will be specifically allocated on the Custodian's
books to the separate account for the applicable Series. Prior to the
Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and on-
going basis, until instructed to the contrary by a Certificate actually received
by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which payment
is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
6
<PAGE>
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the Book-
Entry System, shall be held by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the Fund, in the name of any
duly appointed registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the Book-
Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix B annexed hereto, which may be amended at
any time by the Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount payable upon all Securities
which mature;
(d) Surrender Securities in temporary form for definitive Securities;
7
<PAGE>
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or the Depository with
respect to Securities therein deposited, for the account of a Series, all rights
and similar securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consoli-dation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series specified
in such Certificate, and take such other steps as shall be stated in such
Certificate to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable upon Securities not
described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
8
<PAGE>
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in book-
entry form or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that notwithstanding
the foregoing, payments to or deliveries from the Margin Account, and payments
with respect to Securities to which a Margin Account relates, shall be made in
accordance with the terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available, the Custodian
shall, notwithstanding any provision in this Agreement to the contrary, make
payment for any Futures Contract, Option, or Futures Contract Option for which
such instruments or such certificates are available only against the delivery to
the Custodian of such instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such instruments or such
certificates are available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the Custodian shall
be held by the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a
9
<PAGE>
Futures Contract Option, the Fund shall deliver to the Custodian (i) with
respect to each purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money Market Securities,
a Certificate or Oral Instructions, specifying with respect to each such
purchase: (a) the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase price per unit; (f)
the total amount payable upon such purchase; (g) the name of the person from
whom or the broker through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom payment is to be
made. The Custodian shall, upon receipt of Securities purchased by or for the
Fund, pay to the broker specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale
of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, to Fund shall
deliver to the Custodian a Certificate specifying with respect to each Option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option
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(put or call); (c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Options purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in connection with such
purchase; (h) the name of the Clearing Member through whom such Option was
purchased; and (i) the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing Member for the account of the
Custodian (or any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the account of the Series to
which such Option is to be specifically allocated, the total amount payable upon
such purchase to the Clearing Member through whom the purchase was made,
provided that the same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Call Option: (a) the Series to
which such Call Option was specifically allocated; (b) the name of the issuer
and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for
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the account of the Series to which such Call Option was specifically allocated
the total amount payable to the Clearing Member through whom the Call Option was
exercised, provided that the same conforms to the total amount payable as set
forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The
Custodian shall, upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the Series for which such Covered Call Option was written; (b)
the name of the issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the Fund; (f) the date
such Covered Call Option was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such receipts as are
required in accordance with the customs prevail-ing among Clearing Members
dealing in Covered Call Options and shall impose, or direct the Depository to
impose, upon the underlying Securities specified in the Certificate specifically
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<PAGE>
allocated to such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any, specifically allocated
to such Series to be deposited in the Senior Security Account for such Series;
and (i) the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral Account for such
Series. The Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue any Put Option
guarantee letter or similar document if it is unable to make any of the
representations contained therein.
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9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series; and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the moneys held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Account for such
Series; and (k) the amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Senior Security Account specified in the
Certificate, and either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2) make the
deposits into the Margin Account specified in the Certificate.
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11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of
the premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
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<PAGE>
13. Upon the expiration, exercise or consummation Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make wish withdrawals from the Collateral Account, and the Marked Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contracts (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures Contract(s); (g)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if any, to be paid
and the name of the broker, dealer, or futures commission merchant to whom such
amount is to be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of the Margin Account
Agreement. The Custodian shall make payment out of the moneys specifically
allocated to such Series of the fee or commission, if any, specified in the
Certificate and deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker,
dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be
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<PAGE>
received and dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer, or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment
or delivery specified in the Certificate, and delete such Futures Contract from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or
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futures commission merchant through whom such option was purchased; and (i) the
name of the broker, or futures commission merchant, to whom payment is to be
made. The Custodian shall pay out of the moneys specifically allocated to such
Series, the total amount to be paid upon such purchase to the broker or futures
commissions merchant through whom the purchase was made, provided that the same
conforms to the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series
to which such Futures Contract Option was specifically allocated; (b) the type
of Futures Contract Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b)
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the type of Futures Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to identify the Futures
Contract underlying the Futures Contract Option; (d) the expiration date; (e)
the exercise price; (f) the premium to be received by the Fund; (g) the name of
the broker or futures commission merchant through whom the premium is to be
received; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon receipt of the premium specified in the Certificate, make
out of the moneys and Securities specifically allocated to such Series the
deposits into the Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of
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<PAGE>
the net total amount payable to the Fund, if any, specified in the Certificate,
make out of the moneys and Securities specifically allocated to such Series, the
payments, if any, and the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or withdrawals from the
Margin Account, if any, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract Option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such
Option is specifically allocated; (b) that the transaction is a closing
transaction; (c) the type of Future Contract and such other information as may
be necessary to identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by the Fund; (f)
the expiration date; (g) the name of the broker or futures commission merchant
to whom the premium is to be paid; and (h) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the Senior Security Account
for such Series. The Custodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such withdrawals from and/or in the case
of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
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ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the
Series for which such short sale was made; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale and settlement;
(e) the sale price per unit; (f) the total amount credited to the Fund upon such
sale, if any; (g) the amount of cash and/or the amount and kind of Securities,
if any, which are to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in a Senior Security
Account; and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
2. In connection with the closing-out of any short sale, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
each such closing-out: (a) the Series for which such transaction is being made;
(b) the name of the issuer and the title of the Security; (c) the number of
shares or the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the broker; (d) the dates
of closing-out and settlement; (e) the purchase price per unit; (f) the net
total amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
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ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable to the Fund in connection with such
Reverse Repurchase Agreement and specifically allocated to such Series; (c) the
broker or dealer through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions, or Written Instructions make
the delivery to the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described
in preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
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ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
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ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions
with respect to Securities deposited in any Margin Account shall be dealt with
in accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest
in and to any property at any time held by the Custodian in any Collateral
Account described herein. In accordance with applicable law the Custodian may
enforce its lien and realize on any such property whenever the Custodian has
made payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian
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shall make available upon request to any broker, dealer, or futures commission
merchant specified in the name of a Margin Account a copy of the statement
furnished the Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall furnish to the
Custodian a Certificate or Written Instructions specifying the then market value
of the Securities described in such statement. In the event such then market
value is indicated to be less than the Custodian's obligation with respect to
any outstanding Put Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution
of the Board of Directors of the Fund, certified by the Secretary or any
Assistant Secretary, either (i) setting forth with respect to the Series
specified therein the date of the declaration of a dividend or distribution, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund on
the payment date, or (ii) authorizing with respect to the Series specified
therein the declaration of dividends and distributions on a daily basis and
authorizing the Custodian to rely on Oral Instructions or a Certificate setting
forth the date of the declaration of such dividend distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share of such Series to the
shareholders of record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the moneys held for the account of each Series the total amount payable to the
Dividend Agent and any
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sub-dividend agent or co-dividend agent of the Fund with respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the
foregoing provisions of this Article, the Custodian shall pay, out of the money
held for the account of such Series, all original issue or other taxes required
to be paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Whenever the Fund desires the Custodian to make payment out of the
money held by the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian:
(a) A resolution by the Board of Directors of the Fund directing the
Transfer Agent to redeem the Shares;
(b) A Certificate specifying the number and Series of Shares
redeemed; and
(c) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
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ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the moneys held by
the Custodian in the separate account for such Series shall be insufficient to
pay the total amount payable upon a purchase of Securities specifically
allocated to such Series, as set forth in a Certificate or Oral Instructions, or
which results in an overdraft in the separate account of such Series for some
other reason, or if the Fund is for any other reason indebted to the Custodian
with respect to a Series, including any indebtedness to The Bank of New York
under the Fund's Cash Management and Related Services Agreement (except a
borrowing for investment or for temporary or emergency purposes using Securities
as collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the
Fund hereby agrees that the Custodian shall have a continuing lien and security
interest in and to any property specifically allocated to such Series at any
time held by it for the benefit of such Series or in which the Fund may have an
interest which is then in the Custodian's possession or control or in possession
or control of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using
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Securities held by the Custodian hereunder as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a) the Series to
which such borrowing relates; (b) the name of the bank; (c) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement;
(d) the time and date, if known, on which the loan is to be entered into; (e)
the date on which the loan becomes due and payable; (f) the total amount payable
to the Fund on the borrowing date; (g) the market value of Securities to be
delivered as collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any particular
Securities; and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the Investment Company Act of 1940 and the Fund's prospectus.
The Custodian shall deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from collateral status
to be returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the event
that the Fund fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated
to have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
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2. The Terminal Link shall be utilized by the Fund only for the
purpose of the Fund providing Certificates to the Custodian with respect to
transactions involving Securities or for the transfer of money to be applied to
the payment of dividends, distributions or redemptions of Fund Shares, and shall
be utilized by the Custodian only for the purpose of providing notices to the
Fund. Such use shall commence only after the Fund shall have delivered to the
Custodian a Certificate substantially in the form of Exhibit D and shall have
established access codes. Each use of the Terminal Link by the Fund shall
constitute a representation and warranty that the Terminal Link is being used
only for the purposes permitted hereby, that at least two Officers have each
utilized an access code, that such safekeeping procedures have been established
by the Fund, and that such use does not contravene the Investment Company Act of
1940, as amended, or the rules or regulations thereunder.
3. The Fund shall obtain ana maintain at its own cost and expense all
equipment and services, including, but not limited to communications services,
necessary for it to utilize the Terminal Link, and the Custodian shall not be
responsible for the reliability or availability of any such equipment or
services.
4. The Fund acknowledges that any data bases made available as part
of, or through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, to keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property and trade
secrets, and shall neither make nor permit any disclosure without the express
prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall
return to the Custodian any and all copies of the Information which are in the
Fund's possession or under its control, or which the Fund distributed to third
parties. The provisions of this Article shall not affect the copyright status
of any of the Information which may be copyrighted and shall apply to all
Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from
time to time without notice to the Fund except that the Custodian shall give the
Fund notice not less than 75 days in advance of any modification which would
materially adversely affect the Fund's operation, and the Fund agrees that the
Fund
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shall not modify or attempt to modify the Terminal Link without the Custodian's
prior written consent. The Fund acknowledges that any software or procedures
provided the Fund as part of the Terminal Link are the property of the Custodian
and, accordingly, the Fund agrees that any modifications to the Terminal Link,
whether by the Fund, or by the Custodian and whether with or without the
Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it
utilizes or the Fund utilizes in connection with the Terminal Link makes any
warranties or representations, express or implied, in fact or in law, including
but not limited to warranties of merchantability and fitness for a particular
purpose.
8. The Fund will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance with
and rely on Certificates received by it through the Terminal Link. The Fund
acknowledges that it is its responsibility to assure that only its Officers use
the Terminal Link on its behalf, and that a Custodian shall not be responsible
nor liable for use of the Terminal Link on the Fund's behalf by persons other
than such persons or Officers, or by only a single Officer, nor for any
alteration, omission, or failure to promptly forward.
9.(a) Except as otherwise specifically provided in Section 9(b) of
this Article, the Custodian shall have no liability for any losses, damages,
injuries, claims, costs or expenses arising out of or in connection with any
failure, malfunction or other problem relating to the Terminal Link except for
money damages suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000; provided, however, that the
Custodian shall have no liability under this Section 9 if the Fund fails to
comply with the provisions of Section 11.
9.(b) The Custodian's liability for its negligence in executing or
failing to execute in accordance with a Certificate received through Terminal
Link shall be only with respect to a transfer of funds which is not made in
accordance with such Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon the Fund complying
with the provisions of Section 12 of this Article, and shall be limited to (i)
restoration of the principal amount mistransferred, if and to the extent that
the Custodian would be required to make such restoration under applicable law,
and (ii) the lesser of (A) a Fund's actual pecuniary loss incurred by
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reason of its loss of use of the mistransferred funds or the funds which were
not transferred, as the case may be, or (B) compensation for the loss of the use
of the mistransferred funds or the funds which were not transferred, as the case
may be, at a rate per annum equal to the average federal funds rate as computed
from the Federal Reserve Bank of New York's daily determination of the effective
rate for federal funds, for the period during which a Fund has lost use of such
funds. In no event shall the Custodian have any liability for failing to
execute in accordance with a Certificate a transfer of funds where the
Certificate is received by the Custodian through Terminal Link other than
through the applicable transfer module for the particular instructions contained
in such Certificate.
10. Without limiting the generality of the foregoing, in no event
shall the Custodian or any manufacturer or supplier of its computer equipment,
software or services relating to the Terminal Link be responsible for any
special, indirect, incidental or consequential damages which the Fund may incur
or experience by reason of its use of the Terminal Link even if the Custodian or
any manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall the Custodian or
any such manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever the Custodian learns
of any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Fund, by use of the Terminal
Link, receipt of each Certificate the Custodian receives through the Terminal
Link, and in the absence of such verification the Custodian shall not be liable
for any failure to act in accordance with such Certificate and the Fund may not
claim that such Certificate was received by the Custodian. Such verification,
which may occur after the Custodian has acted upon
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such Certificate, shall be accomplished on the same day on which such
Certificate is received.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT
TO PROPERTY OF ANY SERIES HELD OUTSIDE
OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-
custodian for each Series' Foreign Securities (as such term is defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, as
amended) and other assets, the foreign banking institutions and foreign
securities depositories and clearing agencies designated on Schedule I hereto
("Foreign Sub-Custodians") to carry out their respective responsibilities in
accordance with the terms of the sub-custodian agreement between each such
Foreign Sub-Custodian and the Custodian, copies of which have been previously
delivered to the Fund and receipt of which is hereby acknowledged (each such
agreement, a "Foreign Sub-Custodian Agreement"). The Custodian shall be liable
for the acts and omissions of each Foreign Sub-Custodian constituting negligence
or willful misconduct in the conduct of its responsibilities under the terms of
the Foreign Sub-Custodian Agreement. Upon receipt of a Certificate, together
with a certified resolution substantially in the form attached as Exhibit E of
the Fund's Board of Directors, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a
Certificate from the Fund, the Custodian shall cease the employment of any one
or more Foreign Sub-Custodians for maintaining custody of the Fund's assets and
such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or
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such Series has not been made whole for any such loss, damage, cost, expense,
liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of each Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually
agreed upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the Fund's initial approval of such
Foreign Sub-Custodians and, in any event, shall include information pertaining
to (i) the Foreign Custodians' financial strength, general reputation and
standing in the countries in which they are located and their ability to provide
the custodial services required, and (ii) whether the Foreign Sub-Custodians
would provide a level of safeguards for safekeeping and custody of securities
not materially different from those prevailing in the United States. The
Custodian shall monitor the general operating performance of each Foreign Sub-
Custodian, and at least annually obtain and review the and financial report
published by such Foreign Sub-Custodian to determine that it meets the financial
criteria of an "Eligible Foreign Custodian" under Rule 17f-5(c)(2)(i) or (ii).
The Custodian will promptly inform the Fund in the event that the Custodian
learns that a Foreign Sub-Custodian no longer satisfies the financial criteria
of an "Eligible Foreign Custodian" under such Rule. The Custodian agrees that
it will use reasonable care in monitoring compliance by each Foreign Sub-
Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and
that if it learns of any breach of such Foreign Sub-Custodian Agreement believed
by the Custodian to have a material adverse effect on the Fund or any Series it
will promptly notify the Fund of such breach. The Custodian also agrees to use
reasonable and diligent efforts to enforce its rights under the relevant Foreign
Sub-Custodian Agreement.
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7. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Funds Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent or such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided n Article XVI
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality
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of the purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the
Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or
held by it at any time as a result of such loan of portfolio Securities of
the Fund is adequate collateral for the Fund against any loss it might
sustain as a result of such loan. The Custodian specifically, but not by
way of limitation, shall not be under any duty or obligation periodically
to check or notify the Fund that the amount of such cash collateral held by
it or the Fund is sufficient collateral for the Fund, but such duty or
obligation shall be the sole responsibility of the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any broker,
dealer or financial institution to which portfolio Securities of the Fund
are lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the
Fund during the period of such loan or at the termination of such loan;
provided, however, that the Custodian shall promptly notify the Fund in the
event that such dividends or interest are not paid and received when due;
or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or obligation to see that
any broker, dealer, futures commission merchant or Clearing Member makes
payment to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Fund is entitled to receive, or to notify
the Fund of the Custodian's receipt or non-receipt of any such payment.
35
<PAGE>
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the Book-
Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign Sub-
Custodians pursuant to Article XVI appoint one or more banking institutions as
Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as Co-
Custodian or Co-Custodians including, but not limited to, banking institutions
located in foreign countries, of Securities and moneys at any
36
<PAGE>
time owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay
to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice
or other instrument in writing received by the Custodian and reasonably believed
by the Custodian to be a Certificate. The Custodian shall be entitled to rely
upon any Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a Certificate or
facsimile thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not received
by the Custodian shall
37
<PAGE>
in no way affect the validly of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Officer.
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver and
receive Securities, and receipts with respect to such Securities, and arrange
for payments to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and
38
<PAGE>
receipt of payment therefor may not be completed simultaneously. The Fund
assumes all responsibility and liability for all credit risks involved in
connection with the Custodian's delivery of Securities pursuant to instructions
of the Fund, which responsibility and liability shall continue until final
payment in full has been received by the Custodian.
15. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by
39
<PAGE>
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present Officers of the Fund. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event any such
present Officer ceases to be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the Officers as set forth in
the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
40
<PAGE>
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate Officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
WORLDWIDE DOLLARVEST FUND, INC.
[SEAL]
By: __________________________
Attest:
__________________________
THE BANK OF NEW YORK
[SEAL]
By: __________________________
Attest:
__________________________
42
<PAGE>
APPENDIX A
I, __________________________, and I, _____________________, of Worldwide
DollarVest Fund, Inc., a Maryland corporation (the "Fund"), do hereby certify
that:
The following individuals serve in the following positions with the Fund
and each has been duly elected or appointed by the Board of Directors of the
Fund to each such position and qualified therefor in conformity with the Fund's
Articles of Incorporation and By-Laws, and the signatures set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
_______________ _______________ _______________
<PAGE>
APPENDIX B
I, Jorge Ramos, a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
The Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, _______________________, hereby certifies that he or she
is the duly elected and acting _________________ of Worldwide DollarVest Fund,
Inc., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on ____________, 1994, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of
________________, 1994 (the "Custody Agreement"), is authorized and instructed
on a continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit therein,
regardless of the Series to which the same are specifically allocated, and to
utilize the Book-Entry System to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc. as of the ____ day of ____________, 1994.
________________________
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, ________________________, hereby certifies that he or she
is the duly elected and acting ________________ of Worldwide DollarVest Fund,
Inc., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on ______________, 1994, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of
________________, 1994 (the "Custody Agreement"), is authorized and instructed
on a continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Depository, as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Depository to the extent possible in connection
with its performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc. as of the ____ day of ___________, 1994.
__________________________
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, ____________________, hereby certifies that he or she is
the duly elected and acting ________________ of Worldwide DollarVest Fund, Inc.,
a Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at a meeting duly
held on ____________, 1994, at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of
________________, 1994 (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis until such time as it receives a Certificate, as
defined in the Custody Agreement, to the contrary to deposit in the Participants
Trust Company as Depository, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Participants Trust Company to the
extent possible in connection with its performance thereunder, including,
without limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc., as of the ____ day of _________, 1994.
__________________________
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, ________________, hereby certifies that he or she is the
duly elected and acting __________________ of Worldwide DollarVest Fund, Inc., a
Maryland corporation (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Directors of the Fund at a meeting duly
held on ______________, 1994, at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a Custody
Agreement between The Bank of New York and the Fund dated as of _______________,
1994, (the "Custody Agreement") is authorized and instructed on a continuous and
ongoing basis until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act with respect to
Clearing Member confirmations for Options and transaction in Options, regardless
of the Series to which the same are specifically allocated, as such terms are
defined in the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc. as of the ____ day of _________, 1994.
__________________________
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, ____________________, hereby certifies that he or she is
the duly elected and acting ____________________ of Worldwide DollarVest Fund,
Inc., a Maryland corporation (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Directors of the Fund at a meeting duly
held on ______________, 1994, at which a quorum was at all times present and
that such resolutions have not been modified or rescinded and are in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of
________________, 1994 (the "Custody Agreement") is authorized and instructed on
a continuous and ongoing basis to act in accordance with, and to rely on
Certificates (as defined in the Custody Agreement) given by the Fund to the
Custodian by a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Officers of the Fund as defined in the Custody Agreement,
shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes, shall limit its use of
the Terminal Link to those purposes permitted by the Custody Agreement, shall
require at least two such Officers to utilize their respective access codes in
connection with each such Certificate, and shall use the Terminal Link only in a
manner that does not contravene the Investment Company Act of 1940, as amended,
or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the establishment of
such access codes and such internal safekeeping procedures, advise the Custodian
that the same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely upon such
advice.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc., as of the ____ day of __________, 1994.
__________________________
[SEAL]
<PAGE>
EXHIBIT E
The undersigned, __________________, hereby certifies that he or she is the
duly elected and acting ___________________ of Worldwide DollarVest Fund, Inc.,
a Maryland corporation (the "Fund"), further certifies that the following
resolutions were adopted by the Board of Directors of the Fund at a meeting duly
held on ______________, 1994, at which a quorum was at all times present and
that such resolutions have not been modified or rescinded and are in full force
and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country listed
in Schedule I hereto be, and hereby is, approved by the Board of Directors as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the foreign subcustodians and
depositories listed in Schedule I located in the countries specified therein be,
and hereby is, approved by the Board of Directors as consistent with the best
interest of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to this meeting
between the Bank and each of the foreign subcustodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Directors as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the appropriate officers of the Fund are hereby authorized
to place assets of the Fund with the aforementioned foreign branches and foreign
subcustodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are
authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of Worldwide
DollarVest Fund, Inc., as of the ____ day of __________, 1994.
__________________________
[SEAL]
<PAGE>
SCHEDULE I
BANK OF NEW YORK BRANCHES
AND
ELIGIBLE FOREIGN CUSTODIANS
<TABLE>
<CAPTION>
COUNTRY BANK NAME AND ADDRESS STATUS
<S> <C> <C>
Argentina The First National Bank of Boston Correspondent
Florida 99, 1005 Buenos Aires,
Argentina
Australia Australia and New Zealand Banking Correspondent
Group, Limited
55 Colins Street,
Melbourne, Australia
Austria GiroCredit Bank Aktiengesellschaft Correspondent
der Sparkassen
A-1010 Wien, Schubertring 5,
Vienna, Austria
Belgium Banque Bruxelles Lambert, S.A. Correspondent
24 Avenue Marnix,
Brussels 1050
Belgium
Brazil The First National Bank of Boston Correspondent
Rua Libero Badaro, 487,
01009 - Sao Paulo SP (Alt 226)
Brazil
Canada Royal Trust Corporation of Canada Correspondent
55 King Street West
Royal Trust Tower, Toronto,
Ontario M5H 1P9, Canada
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK - 1092 Copenhagen K.
Denmark
Finland Union Bank of Finland Ltd. Correspondent
Aleksanterinkatu 30,
Helsinki, Finland
France Banque Paribas Correspondent
3 Rue D'Antin
75002 Paris, France
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Germany Dresdner Bank A.G. Correspondent
Jurgen-Ponto-Platz 1 (Alt 207)
6000 Frankfurt 11,
Federal Republic of Germany
Hong Kong The Hongkong & Shanghai Banking Correspondent
Corporation
1 Queen's Road Central,
Hong Kong
Indonesia The Hongkong & Shanghai Banking Correspondent
Corporation
P.O. Box 2307, Jakarta 1001,
Indonesia
Ireland Allied Irish Bank Correspondent
Bankcentre, Ballsbridge,
Dublin 4, Ireland
Italy Citibank, N.A. Correspondent
Foro Buonaparte, 16
1-20121 Milano
Italy
Japan The Yasuda Trust & Banking Correspondent
Company, Limited
2-1 Yaesu, 1-chome
Chuo-ku, Tokyo 103,
Japan
Korea Bank of Seoul Correspondent
10-1, Namdaeman-Ro 2-Ka
Chung-ku, Seoul, 100-092,
Korea
Luxembourg Cedel, S.A. Depository
67 Boulevard Grande-Duchesse
Charlotte
L-1010, Luxembourg
Malaysia The Hongkong & Shanghai Banking Correspondent
Corporation Ltd.
Kuala Lumpur, Malaysia
Mexico Citibank, N.A. Correspondent
Paseo de la Reforma 390,
Mexico City, 06695
Mexico
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
Netherlands Amsterdam-Rotterdam Bank, N.V. Correspondent
Kemelstede 2, 4817 ST Breda
The Netherlands
New Zealand Australia and New Zealand Banking Correspondent
Group Ltd.
215-229 Lambton Quay
P.O. Box 1492
Wellington, 1
New Zealand
Norway Den norske Bank AS Correspondent
Kirkengaten 21, 0153 Oslo 1,
Norway
Philippines The Hongkong and Shangahi Correspondent
Corporation Ltd.
Makti, Metro Manila,
Philippines
Portugal Banco Comercial Portugues (Alt 136) Correspondent
Rua Augusta, 41, 1100 Lisbon,
Portugal
Singapore United Overseas Bank Limited Correspondent
1 Bonham Street, #01-00,
Singapore
Spain Banco Bilbao Vizcaya, S.A. Correspondent
Plaza de San Nicolas 4,
Bilbao, Spain
Sweden Skandinaviska Enskilda Banken Correspondent
Kungstradgardsgatan 8, (Alt 132)
Stockholm, Sweden
Switzerland Union Bank of Switzerland Correspondent
45 Bahnhofstrasse,
Zurich, Switzerland
Thailand The Siam Commercial Bank, Ltd. Correspondent
1050 Phetchaburi Road,
Bangkok 10400, Thailand
United The Bank of New York Branch
Kingdom 45 Berkeley Street
London W1X 6AA, England
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Venezuela Citibank, N.A. Correspondent
Carmelitas a Altagracia,
Edificio Citibank,
Caracas, 1010, Venezuela
</TABLE>
4
<PAGE>
EXHIBIT 99.(K)
STANDARD FORM
STOCK TRANSFER AGENCY AGREEMENT
AGREEMENT, made as of ___________, between Worldwide Dollar Vest Fund, Inc., a
corporation organized and existing under the laws of the state of _____________
(hereinafter referred to as the "Customer"), and The Bank of New York, a New
York trust company (hereinafter referred to as the "Bank").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I.
DEFINITIONS
Wherever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "Business Day" shall be deemed to be each day on which the Bank is
open for business.
2. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to
the Bank by the Customer which is signed by any Officer, as
hereinafter defined, and actually received by the Bank.
3. "Officer" shall be deemed to be the Customer's Chief Executive
Officer, President, any Vice President, the Secretary, the Treasurer,
the Controller, any Assistant Treasurer and any Assistant Secretary
duly authorized by the Board of Directors of the Customer to execute
any Certificate, instruction, notice or other instrument on behalf of
the Customer and named in a Certificate, as such Certificate may be
amended from time to time.
4. "Shares" shall mean all or any part of each class of the shares of
capital stock of the Customer which from time to time are authorized
and/or issued by the Customer and identified in a Certificate of the
Secretary of the Customer under corporate seal, as such Certificate
may be amended from time to time, with respect to which the Bank is to
act hereunder.
<PAGE>
ARTICLE II.
APPOINTMENT OF BANK
1. The Customer hereby constitutes and appoints the Bank as its agent to
perform the services described herein and as more particularly
described in Schedule I attached hereto (the "Services"), and the Bank
hereby accepts appointment as such agent and agrees to perform the
Services in accordance with the terms hereinafter set forth.
2. In connection with such appointment, the Customer shall deliver the
following documents to the Bank:
(a) A certified copy of the Certificate of Incorporation or other
document evidencing the Customer's form of organization (the
"Charter") and all amendments thereto;
(b) A certified copy of the By-Laws of the Customer;
(c) A certified copy of a resolution of the Board of Directors of the
Customer appointing the Bank to perform the Services and
authorizing the execution and delivery of this Agreement;
(d) A Certificate signed by the Secretary of the Customer specifying:
the number of authorized Shares, the number of such authorized
Shares issued and currently outstanding, and the names and
specimen signatures of all persons duly authorized by the Board
of Directors of the Customer to execute any Certificate on behalf
of the Customer, as such Certificate may be amended from time to
time;
(e) A Specimen Share certificate for each class of Shares in the form
approved by the Board of Directors of the Customer, together with
a Certificate signed by the Secretary of the Customer as to such
approval and covenanting to supply a new such Certificate and
specimen whenever such form shall change;
(f) An opinion of counsel for the Customer with respect to the
validity of the authorized and outstanding Shares, the obtaining
of all necessary governmental consents, whether such Shares are
fully paid and nonassessable and the status of such Shares under
the Securities Act of 1933, as
2
<PAGE>
amended, and any other applicable law or regulation (i.e, if
subject to registration, that they have been registered and that
the Registration Statement has become effective or, if exempt,
the specific grounds therefor);
(g) A list of the name, address, social security or taxpayer
identification number of each Shareholder, number of Shares
owned, certificate numbers, and whether any "stops" have been
placed.
3. The Customer shall furnish the Bank with a sufficient supply of blank
Share certificates and from time to time will renew such supply upon
request of the Bank. Such blank Share certificates shall be properly
signed, by facsimile or otherwise, by officers of the Customer
authorized by law or by the By-Laws to sign Share certificates, and,
if required, shall bear the corporate seal or a facsimile thereof.
ARTICLE III.
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Customer shall deliver to the Bank the following documents on or
before the effective date of any increase, decrease or other change in
the total number of Shares authorized to be issued.
(a) A certified copy of the amendment to the Charter giving effect to
such increase, decrease or change;
(b) An opinion of counsel for the Customer with respect to the
validity of the Shares and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable
federal law or regulations (i.e., if subject to registration,
that they have been registered and that the Registration
Statement has become effective or, if exempt, the specific
grounds therefor); and
(c) In the case of an increase, if the appointment of the Bank was
theretofore expressly limited, a certified copy of a resolution
of the Board of Directors of the Customer increasing the
authority of the Bank.
3
<PAGE>
2. Prior to the issuance of any additional Shares pursuant to stock
dividends, stock splits or otherwise, and prior to any reduction in
the number of Shares outstanding the Customer shall deliver the
following documents to the Bank:
(a) A certified copy of the resolutions adopted by the Board of
Directors and/or the shareholders of the Customer authorizing
such issuance of additional Shares of the Customer or such
reduction, as the case may be;
(b) A certified copy of the order or consent of each governmental or
regulatory authority required by law as a prerequisite to the
issuance or reduction of such Shares, as the case may be, and an
opinion of counsel for the Customer that no other order or
consent is required; and
(c) An opinion of counsel for the Customer with respect to the
validity of the Shares and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable law
or regulation (i.e., if subject to registration, that they have
been registered and that the Registration Statement has become
effective, or, if exempt, the specific grounds therefor).
ARTICLE IV.
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share
certificates, the Bank will issue Share certificates in the new form
in exchange for, or upon transfer of, outstanding Share certificates
in the old form, upon receiving:
(a) A Certificate authorizing the issuance of Share certificates in
the new form;
(b) A certified copy of any amendment to the Charter with respect to
the change;
(c) Specimen Share certificates for each class of Shares in the new
form approved by the Board of Directors of the Customer, with a
Certificate signed by the Secretary of the Customer as to such
approval;
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<PAGE>
(d) A certified copy of the order or consent of each governmental or
regulatory authority required by law as a prerequisite to the issuance
of the Shares in the new form, and an opinion of counsel for the
Customer that the order or consent of no other governmental or
regulatory authority is required; and
(e) An opinion of counsel for the Customer with respect to the
validity of the Shares in the new form and the status of such
Shares under the Securities Act of 1933, as amended, and any
other applicable law or regulation (i.e., if subject to
registration that the Shares have been registered and that the
Registration Statement has become effective or, if exempt, the
specific grounds therefor).
2. The Customer shall furnish the Bank with a sufficient supply of blank
Share certificates in the new form, and from time to time will
replenish such supply upon the request of the Bank. Such blank Share
certificates shall be properly signed, by facsimile or otherwise, by
Officers of the Customer authorized by law or by the By-Laws to sign
Share certificates and, if required, shall bear the corporate seal or
a facsimile thereof.
ARTICLE V.
ISSUANCE AND TRANSFER OF SHARES
1. The Bank will issue Share certificates upon receipt of a Certificate
from an Officer but shall not be required to issue Share certificates
after it has received from an appropriate federal or state authority
written notification that the sale of Shares has been suspended or
discontinued, and the Bank shall be entitled to rely upon such written
notification. The Bank shall not be responsible for the payment of
any original issue or other taxes required to be paid by the Customer
in connection with the issuance of any shares.
2. Shares will be transferred upon presentation to the Bank of Share
certificates in form deemed by the Bank properly endorsed for
transfer, accompanied by such documents as the Bank deems necessary to
evidence the authority of the person making such transfer, and bearing
satisfactory evidence of the payment of applicable stock transfer
taxes. In the case of small estates where no administration is
contemplated, the
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<PAGE>
Bank, may, when furnished with an appropriate surety bond, and without
further approval of the customer, transfer Shares registered in the
name of the decedent where the current market value of the Shares
being transferred does not exceed such amount as may from time to time
be prescribed by the various states. The Bank reserves the right to
refuse to transfer Shares until it is satisfied that the endorsements
on Share certificates are valid and genuine, and for that purpose it
may require, unless otherwise instructed by an Officer of the
Customer, a guaranty of signature by a member firm of the New York
Stock Exchange or by a bank or trust company acceptable to the Bank.
The Bank also reserves the right to refuse to transfer Shares until it
is satisfied that the requested transfer is legally authorized, and it
shall incur no liability for the refusal in good faith to make
transfers which the Bank, in its judgment, deems improper or
unauthorized, or until it is satisfied that there is no basis to any
claims adverse to such transfer. The Bank may, in effecting transfers
of Shares, rely upon those provisions of the Uniform Act for the
Simplification of Fiduciary Security Transfers or the Uniform
Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Customer shall
indemnify the Bank for any act done or omitted by it in good faith in
reliance upon such laws.
3. All certificates representing Shares that are subject to restrictions
on transfer (e.g., securities acquired pursuant to an investment
representation, securities held by controlling persons, securities
subject to stockholders' agreement, etc.), shall be stamped with a
legend describing the extent and conditions of the restrictions or
referring to the source of such restrictions. The Bank assumes no
responsibility with respect to the transfer of restricted securities
where counsel for the Customer advises that such transfer may be
properly effected.
ARTICLE VI.
DIVIDENDS AND DISTRIBUTIONS
1. The Customer shall furnish to the Bank a copy of a resolution of its
Board of Directors, certified by the Secretary or any Assistant
Secretary, either (i) setting forth the date of the declaration of a
dividend or distribution, the date of accrual or payment, as the case
may be, the record date as of which shareholders
6
<PAGE>
entitled to payment, or accrual, as the case may be, shall be
determined, the amount per Share of such dividend or distribution, the
payment date on which all previously accrued and unpaid dividends are
to be paid, and the total amount, if any, payable to the Bank on such
payment date, or (ii) authorizing the declaration of dividends and
distributions on a periodic basis and authorizing the Bank to rely on
a Certificate setting forth the information described in subsection
(i) of this paragraph.
2. Prior to the payment date specified in such Certificate or resolution,
as the case may be, the Customer shall, in the case of a cash dividend
or distribution, pay to the Bank an amount of cash, sufficient for the
Bank to make the payment, specified in such Certificate or resolution,
to the shareholders of record as of such payment date. The Bank will,
upon receipt of any such cash, (i) in the case of shareholders who are
participants in a dividend reinvestment and/or cash purchase plan of
the Customer, reinvest such cash dividends or distributions in
accordance with the terms of such plan, and (ii) in the case of
shareholders who are not participants in any such plan, make payment
of such cash dividends or distributions to the shareholders of record
as of the record date by mailing a check, payable to the registered
shareholder, to the address of record or dividend mailing address.
The Bank shall not be liable for any improper payment made in
accordance with a Certificate or resolution described in the preceding
paragraph. If the Bank shall not receive sufficient cash prior to the
payment date to make payments of any cash dividend or distribution
pursuant to subsections (i) and (ii) above to all shareholders of the
Customer as of the record date, the Bank shall, upon notifying the
Customer, withhold payment to all shareholders of the Customer as of
the record date until sufficient cash is provided to the Bank.
3. It is understood that the Bank shall in no way be responsible for the
determination of the rate or form of dividends or distributions due to
the shareholders.
4. It is understood that the Bank shall file such appropriate information
returns concerning the payment of dividends and distributions with the
proper federal, state and local authorities as are required by law to
be filed by the Customer but shall in no way be responsible for the
collection or withholding of taxes
7
<PAGE>
due on such dividends or distributions due to shareholders, except and
only to the extent required of it by applicable law.
ARTICLE VII.
CONCERNING THE CUSTOMER
1. The Customer shall promptly deliver to the Bank written notice of any
change in the Officers authorized to sign Share certificates,
certificates notifications or requests, together with a specimen
signature of each new Officer. In the event any Officer who shall
have signed manually or whose facsimile signature shall have been
affixed to blank Share certificates shall die, resign or be removed
prior to issuance of such Share certificates, the Bank may issue such
Share certificates as the Share certificates of the Customer
notwithstanding such death, resignation or removal, and the Customer
shall promptly deliver to the Bank such approvals, adoptions or
ratifications as may be required by law.
2. Each copy of the Charter of the Customer and copies of all amendments
thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of incorporation, and if such
Charter and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing
shall be filed with a certified copy submitted to the Bank. Each copy
of the By-Laws and copies of all amendments thereto, and copies of
resolutions of the Board of Directors of the Customer, shall be
certified by the Secretary or an Assistant Secretary of the Customer
under the corporate seal.
3. Customer hereby represents and warrants:
(a) It is a corporation duly organized and validly existing under the
laws of __________.
(b) This Agreement has been duly authorized, executed and delivered
on its behalf and constitutes the legal, valid and binding
obligation of Customer. The execution, delivery and performance
of this Agreement by Customer do not and will not violate any
applicable law or regulation and do not require the consent of
any governmental or other regulatory body except for such
consents and
8
<PAGE>
approvals as have been obtained and are in full force and effect.
ARTICLE VIII.
CONCERNING THE BANK
1. The Bank shall not be liable and shall be fully protected in acting
upon any oral instruction, writing or document reasonably believed by
it to be genuine and to have been given, signed or made by the proper
person or persons and shall not be held to have any notice of any
change of authority of any person until receipt of written notice
thereof from an Officer of the Customer. It shall also be protected
in processing Share certificates which it reasonably believes to bear
the proper manual or facsimile signatures of the duly authorized
officers of the Customer and the proper countersignature of the Bank.
2. The Bank may establish such additional procedures, rules and
regulations governing the transfer or registration of Share
certificates as it may deem advisable and consistent with such rules
and regulations generally adopted by bank transfer agents.
3. The Bank may keep such records, in such form and manner, as it deems
advisable but not inconsistent with resolutions adopted by the Board
of Directors of the Customer. The Bank may deliver to the Customer
from time to time at its discretion, for safekeeping or disposition by
the Customer in accordance with law, such records, papers, Share
certificates which have been cancelled in transfer or exchange and
other documents accumulated in the execution of its duties hereunder
as the Bank may deem expedient, other than those which the Bank is
itself required to maintain pursuant to applicable laws and
regulations, and the Customer shall assume all responsibility for any
failure thereafter to produce any record, paper, cancelled Share
certificate or other document so returned, if and when required. The
records maintained by the Bank pursuant to this paragraph which have
not been previously delivered to the Customer pursuant to the
foregoing provisions of this paragraph shall be considered to be the
property of the Customer, shall be made available upon request for
inspection by the Officers, employees and auditors of the Customer,
and shall be delivered to the Customer upon request and in any event
upon the date of termination of this
9
<PAGE>
Agreement, as specified in Article IX of this Agreement, in the form
and manner kept by the Bank on such date of termination or such
earlier date as may be requested by the Customer.
4. The Bank may employ agents or attorneys-in-fact at the reasonable
expenses of the Customer, and shall not be liable for any loss or
expense arising out of, or in connection with, the actions or
omissions to act of its agents or attorneys-in-fact, so long as the
Bank acts in good faith and without negligence or willful misconduct
in connection with the selection of such agents or attorneys-in-fact.
5. The Bank shall only be liable for any loss or damage arising out of
its own negligence or willful misconduct; provided, however, that the
Bank shall not be liable for any indirect, special, punitive or
consequential damages.
6. The Customer shall indemnify and hold harmless the Bank from and
against any and all claims (whether with or without basis in fact or
law), costs, demands, expenses and liabilities, including reasonable
attorney's fees, which the Bank may sustain or incur or which may be
asserted against the Bank except for any liability which the Bank has
assumed pursuant to the immediately preceding section. The Bank shall
be deemed not to have acted with negligence and not to have engaged in
willful misconduct by reason of or as a result of any action taken or
omitted to be taken by the Bank without its own negligence or willful
misconduct in reliance upon (i) any provision of this Agreement, (ii)
any instrument, order or Share certificate reasonably believed by it
to be genuine and to be signed, countersigned or executed by any duly
authorized Officer of the Customer, (iii) any Certificate or other
instructions of an Officer, (iv) any opinion of legal counsel for the
Customer or the Bank, or (v) any law, act, regulation or any
interpretation of the same even though such law, act or regulation may
thereafter have been altered, changed, amended or repealed. Nothing
contained herein shall limit or in any way impair the right of the
Bank to indemnification under any other provision of this Agreement.
7. Specifically, but not by way of limitation, the Customer shall
indemnify and hold harmless the Bank from and against any and all
claims (whether with or without basis in fact or law) costs, demands,
expenses
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<PAGE>
and liabilities, including reasonable attorney's fees, of any and
every nature which the Bank may sustain or incur or which may be
asserted against the Bank in connection with the genuineness of a
Share certificate, the Bank's capacity and authorization to issue
Shares and the form and amount of authorized Shares.
8. At any time the Bank may apply to an Officer of the Customer for
written instructions with respect to any matter arising in connection
with the Bank's duties and obligations under this Agreement, and the
Bank shall not be liable for any action taken or omitted to be taken
by the Bank in good faith in accordance with such instructions. Such
application by the Bank for instructions from an Officer of the
Customer may, at the option of the Bank, set forth in writing any
action proposed to be taken or omitted to be taken by the Bank with
respect to its duties or obligations under this Agreement and the date
on and/or after which such action shall be taken, and the Bank shall
not be liable for any action taken or omitted to be taken in
accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting
to take any such action, the Bank has received written instructions in
response to such application specifying the action to be taken or
omitted. The Bank may consult counsel to the Customer or its own
counsel, at the expense of the Customer, and shall be fully protected
with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of such counsel.
9. When mail is used for delivery of non-negotiable Share certificates,
the value of which does not exceed the limits of the Bank's Blanket
Bond, the Bank shall send such non-negotiable Share certificates by
first class mail, and such deliveries will be covered while in transit
by the Bank's Blanket Bond. Non-negotiable Share certificates the
value of which exceeds the limits of the Bank's Blanket Bond, will be
sent by insured registered mail. Negotiable Share certificates will
be sent by insured registered mail. The Bank shall advise the
Customer of any Share certificates returned as undeliverable after
being mailed as herein provided for.
10. The Bank may issue new Share certificates in place of Share
certificates represented to have been lost, stolen or destroyed upon
receiving instructions in writing from an Officer and indemnity
satisfactory to
11
<PAGE>
the Bank. Such instructions from the Customer shall be in such form
as approved by the Board of Directors of the Customer in accordance
with applicable law or the By-Laws of the Customer governing such
matters. If the Bank receives written notification from the owner of
the lost, stolen or destroyed Share certificate within a reasonable
time after he has notice of it, the Bank shall promptly notify the
Customer and shall act pursuant to written instructions signed by an
Officer. If the Customer receives such written notification from the
owner of the lost, stolen or destroyed Share certificate within a
reasonable time after he has notice of it, the Customer shall promptly
notify the Bank and the Bank shall act pursuant to written
instructions signed by an Officer. The Bank shall not be liable for
any act done or omitted by it pursuant to the written instructions
described herein. The Bank may issue new Share certificates in
exchange for, and upon surrender of, mutilated Share certificates.
11. The Bank will issue and mail subscription warrants for Shares, Shares
representing stock dividends, exchanges or splits, or act as
conversion agent upon receiving written instructions from an Officer
and such other documents as the Bank may deem necessary.
12. The Bank will supply shareholder lists to the Customer from time to
time upon receiving a request therefor from an Officer of the
Customer.
13. In case of any requests or demands for the inspection of the
shareholder records of the Customer, the Bank will notify the Customer
and endeavor to secure instructions from an officer as to such
inspection. The Bank reserves the right, however, to exhibit the
shareholder records to any person whenever it is advised by its
counsel that there is a reasonable likelihood that the Bank will be
held liable for the failure to exhibit the shareholder records to such
person.
14. At the request of an Officer, the Bank will address and mail such
appropriate notices to shareholders as the Customer may direct.
15. Notwithstanding any provisions of this Agreement to the contrary, the
Bank shall be under no duty or obligation to inquire into, and shall
not be liable for:
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<PAGE>
(a) The legality of the issue, sale or transfer of any Shares, the
sufficiency of the amount to be received in connection therewith,
or the authority of the Customer to request such issuance, sale
or transfer;
(b) The legality of the purchase of any Shares, the sufficiency of
the amount to be paid in connection therewith, or the authority
of the Customer to request such purchase;
(c) The legality of the declaration of any dividend by the Customer,
or the legality of the issue of any Shares in payment of any
stock dividend; or
(d) The legality of any recapitalization or readjustment of the
Shares.
16. The Bank shall be entitled to receive and the Customer hereby agrees
to pay to the Bank for its performance hereunder (i) out-of-pocket
expenses (including legal expenses and attorney's fees) incurred in
connection with this Agreement and its performance hereunder, and (ii)
the compensation for services as set forth in Schedule I.
17. The Bank shall not be responsible for any money, whether or not
represented by any check, draft or other instrument for the payment of
money, received by it on behalf of the Customer, until the Bank
actually receives and collects such funds.
18. The Bank shall have no duties or responsibilities whatsoever except
such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied against the
Bank in connection with this Agreement.
19. The provisions of this Agreement are intended to benefit only the Bank
and the Customer, and no rights shall be granted to any other person
by virtue of this Agreement.
ARTICLE IX.
TERMINATION
Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such
termination, which
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<PAGE>
shall be not less than 60 days after the date of receipt of such
notice. In the event such notice is given by the Customer, it shall
be accompanied by a copy of a resolution of the Board of Directors of
the Customer, certified by the Secretary electing to terminate this
Agreement and designating a successor transfer agent or transfer
agents. In the event such notice is given by the Bank, the Customer
shall, on or before the termination date, deliver to the Bank a copy
of a resolution of its Board of Directors certified by the Secretary
designating a successor transfer agent or transfer agents. In the
absence of such designation by the Customer, the Bank may designate a
successor transfer agent. If the Customer fails to designate a
successor transfer agent and if the Bank is unable to find a successor
transfer agent, the Customer shall, upon the date specified in the
notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the
Bank shall thereafter be relieved of all duties and responsibilities
hereunder. Upon termination hereof, the Customer shall pay to the
Bank such compensation as may be due to the Bank as of the date of
such termination, and shall reimburse the Bank for any disbursements
and expenses made or incurred by the Bank and payable or reimbursable
hereunder.
ARTICLE X.
MISCELLANEOUS
1. The indemnities contained herein shall be continuing obligations of
the Customer, its successors and assigns, notwithstanding the
termination of this Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Customer shall be sufficiently given
if addressed to the Customer and mailed or delivered to it at _______,
or at such other place as the Customer may from time to time designate
in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Bank shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its office at
101 Barclay Street (12W), New York, New York 10286 or at such other
place as the Bank may from time to time designate in writing.
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<PAGE>
4. This Agreement may not be amended or modified in any manner except by
a written agreement duly authorized and executed by both parties. Any
duly authorized Officer may amend any Certificate naming Officers
authorized to execute and deliver Certificates, instructions, notices
or other instruments, and the Secretary or any Assistant Secretary may
amend any Certificate listing the shares of capital stock of the
Customer for which the Bank performs Services hereunder.
5. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by either party without
the prior written consent of the other party, and provided, further,
that any reorganization, merger, consolidation, or sale of assets, by
the Bank shall not be deemed to constitute an assignment of this
Agreement.
6. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts,
together, shall constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the Bank
and the Customer, and no rights shall be granted to any other person,
by virtue of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officer, thereunto duly authorized and their
respective corporate seals to be hereunto affixed, as of the day and year first
above written.
Attest: WORLDWIDE DOLLAR VEST FUND, INC.
__________________________ By: ___________________________
Title: _________________________
Attest: THE BANK OF NEW YORK
__________________________ By: ___________________________
Title: _________________________
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<PAGE>
EXHIBIT 99.(L)
Brown & Wood
One World Trade Center
New York, New York 10048
January 28, 1994
Worldwide DollarVest Fund, Inc.
800 Scudders Mill Road
Princeton, New Jersey 08536
Dear Sir or Madam:
This opinion is being furnished in connection with the registration by
Worldwide DollarVest Fund, Inc., a Maryland corporation (the "Fund"), of shares
of common stock, par value $0.10 per share (the "Shares"), under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to the Fund's
registration statement on Form N-2, as amended (the "Registration Statement")
under the Securities Act, in the amount set forth under "Amount Being
Registered" on the facing page of the Registration Statement.
As counsel for the Fund, we are familiar with the proceedings taken by it
in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Articles of Incorporation
of the Fund, as amended, the By-Laws of the Fund, as amended and such other
documents as we have deemed relevant to the matters referred to in this opinion.
<PAGE>
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement, will
be legally issued, fully paid and non-assessable shares of common stock of the
Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Prospectus constituting
a part thereof.
Very truly yours,
/s/ Brown & Wood
2
<PAGE>
EXHIBIT 99.(N)
INDEPENDENT AUDITORS' CONSENT
Worldwide DollarVest Fund, Inc.:
We consent to the use in Pre-Effective Amendment No. 2 to Registration Statement
No. 33-51193 of our report dated January 20, 1994 and to the reference to us
under the caption "Experts" both of which appear in the Prospectus, which also
is a part of such Registration Statement.
Deloitte & Touche
Princeton, New Jersey
January , 1994
<PAGE>
EXHIBIT 99.(P)
CERTIFICATE OF SOLE STOCKHOLDER
Fund Asset Management, L.P. ("FAM"), the holder of 7,055 shares of common
stock, par value $0.10 per share, of Worldwide DollarVest Fund, Inc. (the
"Fund"), a Maryland corporation, does hereby confirm to the Fund its
representation that it purchased such shares for investment purposes, with no
present intention of redeeming or reselling any portion thereof, and further
does agree that if it redeems (by tender offer or otherwise) any portion of such
shares prior to the amortization of the Fund's organizational expenses, the
proceeds thereof will be reduced by the proportionate amount of unamortized
organizational expenses which the number of shares being redeemed bears to the
number of shares initially purchases and outstanding at the time of redemption.
FAM further agrees that in the event such shares are sold or otherwise
transferred to any other party, that prior to such sale or transfer FAM will
obtain on behalf of the Fund an agreement from such other party to comply with
the foregoing as to the reduction of redemption proceeds and to obtain a similar
agreement from any transferee of such party.
FUND ASSET MANAGEMENT, L.P.
By: /s/ Mark B. Goldfus
-----------------------
Dated: January 20, 1994
