<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 14a-11(c) or 14a-12
</TABLE>
Emerging Tigers Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------
<PAGE> 2
EMERGING TIGERS FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
------------------------
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
MARCH 27, 1996
------------------------
TO THE STOCKHOLDERS OF EMERGING TIGERS FUND, INC.:
Notice is hereby given that the 1996 Annual Meeting of Stockholders (the
"Meeting") of Emerging Tigers Fund, Inc. (the "Fund") will be held at the
offices of Merrill Lynch Asset Management, L.P., 800 Scudders Mill Road,
Plainsboro, New Jersey, on March 27, 1996, at 9:00 A.M. for the following
purposes:
(1) To elect six Directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified;
(2) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche LLP to serve as independent auditors of the Fund for its
current fiscal year;
(3) To consider and act on a proposal to convert the Fund from a
closed-end investment company to an open-end investment company, which
proposal includes the following:
(a) Changing the Fund's subclassification from a closed-end
investment company to an open-end investment company;
(b) Approving the Fund's Amended and Restated Articles of
Incorporation to, among other things:
1. Reflect the Fund's status as an open-end investment company;
2. Implement the Merrill Lynch Select PricingSM System, a
multi-class distribution system for the offer and sale of shares of
the Fund; and
3. Change the Fund's name to "Merrill Lynch Emerging Tigers
Fund, Inc.";
(4) To consider and act upon a proposal to amend the Fund's
fundamental investment restrictions;
(5) To consider and act upon a proposal to approve an Amended
Investment Advisory Agreement between the Fund and Fund Asset Management,
L.P.; and
(6) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 14, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournment thereof.
A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after March 13, 1996 at the office of the Fund, 800 Scudders Mill Road,
Plainsboro,
<PAGE> 3
New Jersey. You are cordially invited to attend the Meeting. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED
FOR THIS PURPOSE. The enclosed proxy is being solicited on behalf of the Board
of Directors of the Fund.
By Order of the Board of Directors
MICHAEL J. HENNEWINKEL
Secretary
Plainsboro, New Jersey
Dated: February 21, 1996
<PAGE> 4
PROXY STATEMENT
------------------------
EMERGING TIGERS FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
------------------------
1996 ANNUAL MEETING OF STOCKHOLDERS
MARCH 27, 1996
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Emerging Tigers Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the 1996 Annual Meeting of
Stockholders of the Fund (the "Meeting"), to be held at the offices of Merrill
Lynch Asset Management, L.P. ("MLAM"), 800 Scudders Mill Road, Plainsboro, New
Jersey, on Wednesday, March 27, 1996 at 9:00 A.M. The approximate mailing date
of this Proxy Statement is February 23, 1996.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted "FOR" the election of the Board of Directors, "FOR" the
ratification of the selection of independent auditors to serve for the Fund's
current fiscal year, "FOR" the proposal to convert the Fund from a closed-end
investment company to an open-end investment company, "FOR" amending the Fund's
fundamental investment restrictions and "FOR" approval of the Amended Investment
Advisory Agreement. By voting "FOR" the proposal to convert the Fund to open-end
status, a stockholder will also be deemed to be voting "FOR" approval of the
Fund's Amended and Restated Articles of Incorporation which incorporates
adoption of the Merrill Lynch Select PricingSM System (the "Select Pricing
System") and changing the Fund's name to Merrill Lynch Emerging Tigers Fund,
Inc. Any proxy may be revoked at any time prior to the exercise thereof by
giving written notice to the Secretary of the Fund at the Fund's address
indicated above or by voting in person at the Meeting.
THE FUND WILL NOT CONVERT TO OPEN-END STATUS UNLESS THE REQUIRED FAVORABLE
VOTE OF STOCKHOLDERS IS OBTAINED ON EACH OF THE THREE OPEN-ENDING PROPOSALS: THE
PROPOSAL TO CONVERT TO AN OPEN-END INVESTMENT COMPANY; THE PROPOSAL TO AMEND THE
FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS; AND THE PROPOSAL TO APPROVE THE
AMENDED INVESTMENT ADVISORY AGREEMENT. IF ANY OF THESE THREE PROPOSALS IS
REJECTED, THE FUND WILL CONTINUE AS A CLOSED-END INVESTMENT COMPANY.
The Board of Directors has fixed the close of business on February 14, 1996
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Meeting and at any adjournment thereof.
Stockholders on the Record Date will be entitled to one vote for each share
held, with no shares having cumulative voting rights. As of the Record Date, the
Fund had outstanding 22,007,055 shares of common stock, par value $.10 per share
("Common Stock"). To the knowledge of the Fund, as of the Record Date, no person
is the beneficial owner of more than five percent of its outstanding shares of
Common Stock.
<PAGE> 5
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 through 5 of the Notice of Meeting which will be presented
for consideration at the Meeting. If any other matter is properly presented, it
is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
ITEM 1. ELECTION OF DIRECTORS
At the Meeting, the Board of Directors will be elected to serve until the
next Annual Meeting of Stockholders and until their successors are elected and
qualified. If the proposal to convert the Fund to open-end status is approved,
however, each Director elected at the Meeting will be elected to serve for an
indefinite term until his successor is elected and qualified, until his death,
until he resigns or is otherwise removed under the charter or until December 31
of the year in which he reaches age 72. It is the intention of the persons named
in the enclosed proxy to nominate and vote in favor of the election of the
persons listed below. It is intended that all properly executed proxies will be
voted (unless such authority has been withheld in the proxy) in favor of the
persons designated as Directors to be elected by holders of Common Stock.
The Board of Directors of the Fund knows of no reason why any of these
nominees will be unable to serve, but in the event of any such unavailability,
the proxies received will be voted for such substitute nominee or nominees as
the Board of Directors may recommend.
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
PRINCIPAL OCCUPATION BENEFICIALLY OWNED
DURING PAST FIVE YEARS DIRECTOR ON THE
NAME AND ADDRESS AND PUBLIC DIRECTORSHIPS(1) AGE SINCE RECORD DATE
- ----------------------------------- ----------------------------------- --- -------- ------------------
<S> <C> <C> <C> <C>
Arthur Zeikel*..................... President of Fund Asset Management, 63 1994 6,080**
P.O. Box 9011 L.P. ("FAM", which term as used
Princeton, New Jersey 08543-9011 herein includes its corporate
predecessors) since 1977;
President of MLAM (which term as
used herein includes its
corporate predecessors) since
1977; President and Director of
Princeton Services, Inc.
("Princeton Services") since
1993; Executive Vice President of
Merrill Lynch & Co., Inc.
("ML&Co.") since 1990; Director
of Merrill Lynch Funds
Distributor, Inc. ("MLFD").
Donald Cecil(2).................... Special Limited Partner of 69 1994 37,213**
1114 Avenue of the Americas Cumberland Partners (an investment
New York, New York 10036 partnership) since 1982; Member
of Institute of Chartered
Financial Analysts; Member and
Chairman of Westchester County
(N.Y.) Board of Transportation.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
PRINCIPAL OCCUPATION BENEFICIALLY OWNED
DURING PAST FIVE YEARS DIRECTOR ON THE
NAME AND ADDRESS AND PUBLIC DIRECTORSHIPS(1) AGE SINCE RECORD DATE
- ----------------------------------- ----------------------------------- --- -------- ------------------
<S> <C> <C> <C> <C>
Edward H. Meyer(2)................. President of Grey Advertising, Inc. 69 1994 0
777 Third Avenue since 1968, Chief Executive Officer
New York, New York 10017 since 1970 and Chairman of the
Board of Directors since 1972;
Director of The May Department
Stores Company, Bowne & Co., Inc.
(financial printers), Ethan Allen
Interiors, Inc. and Harman
International Industries, Inc.
Charles C. Reilly(2)............... Self-employed financial consultant 64 1994 0
9 Hampton Harbor Road since 1990; President and Chief
Hampton Bays, New York 11946 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; Partner,
Small Cities Cablevision, Inc.
Richard R. West(2)................. Professor of Finance since 1984, 58 1994 10,000**
Box 604 and Dean from 1984 to 1993, of New
Genoa, Nevada 89411 York University Leonard N. Stern
School of Business
Administration; Director of Bowne
& Co., Inc. (financial printers),
Vornado, Inc. (real estate
holding company), Smith-Corona
Corporation (manufacturer of
typewriters and word processors)
and Alexander's Inc. (real estate
company).
Edward D. Zinbarg(2)............... Executive Vice President of The 61 1994 0
5 Hardwell Road Prudential Insurance Company of
Short Hills, New Jersey America from 1988 to 1994; former
07078-2117 Director of Prudential
Reinsurance Company and former
Trustee of the Prudential
Foundation.
</TABLE>
- ---------------
* Interested person, as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), of the Fund.
** Represents less than 0.2% of the shares of Common Stock outstanding.
(1) Each of the nominees is a director, trustee or member of an advisory board
of certain other investment companies for which FAM or MLAM acts as
investment adviser. See "Compensation of Directors and Officers" below.
(2) Member of Audit Committee of the Board of Directors.
3
<PAGE> 7
Committees and Board of Directors' Meetings. The Board of Directors has a
standing Audit Committee, which consists of the Directors who are not
"interested persons" of the Fund within the meaning of the Investment Company
Act. The principal purpose of the Audit Committee is to review the scope of the
annual audit conducted by the Fund's independent auditors and the evaluation by
such auditors of the accounting procedures followed by the Fund. The
non-interested Directors have retained independent legal counsel to assist them
in connection with these duties. The Board of Directors does not currently have
a Nominating Committee. If the proposal to convert the Fund to open-end status
is approved, however, the Audit Committee will also serve as the Nominating
Committee.
During the fiscal year ended November 30, 1995, the Board of Directors held
five meetings and the Audit Committee held four meetings. Each of the Directors
then in office attended at least 75% of the aggregate of the total number of
meetings of the Board of Directors held during the last fiscal year and the
total number of meetings of the Audit Committee held during such period.
Compliance with Section 16(a) of the Securities Exchange Act of
1934. Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's officers, directors and persons who own
more than ten percent of a registered class of the Fund's equity securities, to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Fund with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its fiscal year
ended November 30, 1995, and written representations from certain reporting
persons that they were not required to file Form 5 with respect to the most
recent fiscal year, the Fund believes that all of its officers, directors,
greater than ten percent beneficial owners and other persons subject to Section
16 of the Exchange Act because of the requirements of Section 30 of the
Investment Company Act (i.e., any advisory board member, investment adviser or
affiliated person of the Fund's investment adviser) have complied with all
filing requirements applicable to them with respect to transactions during the
Fund's most recent fiscal year.
Interested Persons. The Fund considers Mr. Zeikel to be an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act because of the position he holds with FAM and its affiliates. Mr.
Zeikel is the President and a Director of the Fund and the President of FAM and
MLAM.
Compensation of Directors and Officers. FAM, the Fund's investment
adviser, pays all compensation of all officers of the Fund and all Directors of
the Fund who are affiliated with ML&Co. or its subsidiaries. The Fund pays each
Director not affiliated with the investment adviser a fee of $2,000 per year
plus $500 per regular meeting attended, together with such Director's actual
out-of-pocket expenses relating to attendance at Board and committee meetings.
The Fund also compensates each member of its Audit Committee, which consists of
all of the non-affiliated Directors, at a rate of $500 per meeting attended.
Fees and expenses paid to the non-affiliated Directors for the fiscal year ended
November 30, 1995 aggregated $30,376.
The following table sets forth for the fiscal year ended November 30, 1995,
compensation paid by the Fund to the non-affiliated Directors and, for the
calendar year ended December 31, 1995, the aggregate
4
<PAGE> 8
compensation paid by all registered investment companies advised by FAM and its
affiliate, MLAM ("FAM/MLAM Advised Funds"), to the non-affiliated Directors.
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
PENSION OR FROM FUND AND
RETIREMENT BENEFITS FAM/MLAM ADVISED
NAME OF COMPENSATION ACCRUED AS PART FUNDS PAID TO
DIRECTOR FROM FUND OF FUND EXPENSES DIRECTORS(1)
- ----------------------------------------- ------------ ------------------- ----------------
<S> <C> <C> <C>
Donald Cecil............................. $6,000 None $271,850
Edward H. Meyer.......................... $6,000 None $239,225
Charles C. Reilly........................ $6,000 None $269,600
Richard R. West.......................... $6,000 None $294,600
Edward D. Zinbarg........................ $6,167 None $155,063
</TABLE>
- ---------------
(1) In addition to the Fund, the Directors serve on the Boards of other FAM/MLAM
Advised Funds as follows: Mr. Cecil (35 funds and portfolios), Mr. Meyer (35
funds and portfolios), Mr. Reilly (54 funds and portfolios), Mr. West (54
funds and portfolios) and Mr. Zinbarg (17 funds and portfolios).
Officers of the Fund. The Board of Directors has elected six officers of
the Fund. The following table sets forth information concerning each of these
officers:
<TABLE>
<CAPTION>
OFFICER
NAME AND PRINCIPAL OCCUPATION OFFICE AGE SINCE
---------------------------------------------------- ------------------------- --- -------
<S> <C> <C> <C>
Arthur Zeikel....................................... President 63 1994
President of FAM and MLAM since 1977; President
and Director of Princeton Services since 1993;
Executive Vice President of ML&Co. since 1990;
Director of MLFD.
Terry K. Glenn...................................... Executive Vice President 55 1994
Executive Vice President of FAM and MLAM since
1983; Executive Vice President and Director of
Princeton Services since 1993; President of
MLFD since 1986 and Director thereof since
1991; President of Princeton Administrators,
L.P. since 1988.
Donald C. Burke..................................... Vice President 35 1994
Vice President and Director of Taxation of MLAM
since 1990; employee of Deloitte & Touche LLP
from 1982 to 1990.
Kara W. Y. Tan Bhala................................ Vice President 36 1994
Senior Portfolio Manager with FAM and MLAM since
1992; Portfolio Manager with Fiduciary Trust
Company International from 1990 to 1992; Vice
President of James Capel Inc. from 1988 to
1990; Senior Investment Analyst of James Capel
(Far East) Ltd. from 1986 to 1988.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
OFFICER
NAME AND PRINCIPAL OCCUPATION OFFICE AGE SINCE
---------------------------------------------------- ------------------------- --- -------
<S> <C> <C> <C>
Gerald M. Richard................................... Treasurer 46 1994
Senior Vice President and Treasurer of FAM and
MLAM since 1984; Senior Vice President and
Treasurer of Princeton Services since 1993;
Vice President of MLFD since 1981 and Treasurer
since 1984.
Michael J. Hennewinkel.............................. Secretary 43 1994
Vice President of MLAM since 1985 and attorney
associated with FAM and MLAM since 1982.
</TABLE>
Stock Ownership. At the Record Date, the Directors and officers of the
Fund as a group (eleven persons) owned an aggregate of less than 1% of the
Common Stock of the Fund outstanding. At such date, Mr. Zeikel, a Director and
officer of the Fund, and the other officers of the Fund owned an aggregate of
less than 1% of the outstanding shares of common stock of ML&Co.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of Deloitte &
Touche LLP ("D&T"), independent auditors, to examine the financial statements of
the Fund for the current fiscal year. The Fund knows of no direct or indirect
financial interest of D&T in the Fund. Such appointment is subject to
ratification or rejection by the stockholders of the Fund. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such auditors.
D&T also acts as independent auditors for ML&Co. and all of its
subsidiaries and for most other investment companies for which FAM or MLAM acts
as investment adviser. The fees received by D&T from these other entities are
substantially greater, in the aggregate, than the total fees received by it from
the Fund. The Board of Directors of the Fund considered the fact that D&T has
been retained as the independent auditors for ML&Co. and the other entities
described above in its evaluation of the independence of D&T with respect to the
Fund.
Representatives of D&T are expected to be present at the Meeting and will
have the opportunity to make a statement if they so desire and to respond to
questions from stockholders.
6
<PAGE> 10
THE FOLLOWING THREE PROPOSALS ARE LINKED IN THAT EACH RELATES TO THE
PROPOSAL TO CONVERT THE FUND TO AN OPEN-END INVESTMENT COMPANY:
- ITEM 3 -- CONVERSION OF THE FUND TO OPEN-END STATUS INCLUDING AMENDMENT
TO THE FUND'S ARTICLES OF INCORPORATION AND IMPLEMENTATION OF THE SELECT
PRICING SYSTEM,
- ITEM 4 -- ADOPTION OF AMENDED FUNDAMENTAL INVESTMENT RESTRICTIONS, AND
- ITEM 5 -- AMENDMENT OF THE INVESTMENT ADVISORY AGREEMENT TO MAKE IT
APPLICABLE TO ANY OPEN-END FUND.
THE FUND WILL NOT CONVERT TO OPEN-END STATUS UNLESS THE REQUIRED FAVORABLE VOTE
OF STOCKHOLDERS IS OBTAINED ON ALL THREE OF THE OPEN-ENDING PROPOSALS. IF ANY OF
THE THREE PROPOSALS IS REJECTED, THE FUND WILL CONTINUE TO OPERATE AS A
CLOSED-END INVESTMENT COMPANY.
ITEM 3. APPROVAL OR DISAPPROVAL OF CONVERSION OF
THE FUND FROM A CLOSED-END INVESTMENT COMPANY
TO AN OPEN-END INVESTMENT COMPANY
The following is a proposal to convert the Fund from a closed-end
investment company to an open-end investment company. As explained in more
detail below, the primary effect of the proposed conversion of the Fund is that
stockholders will be permitted to redeem their shares for cash at any time at
the net asset value of such shares next determined after initial receipt of
proper notice of redemption. The Fund will also continuously offer its shares to
the public and will be operated so as to accommodate such sales and redemptions.
Although the Fund's investment objective and investment policies will remain
largely unchanged, in connection with the conversion to an open-end investment
company, the Fund is proposing to amend its fundamental investment restrictions.
See Item 4. "Adoption of Amended Fundamental Investment Restrictions".
The Fund's current Articles of Incorporation require that during the period
from January 1, 1996 to March 31, 1996, if the Board of Directors determines it
to be in the best interests of the Fund's stockholders at that time, there be
submitted to stockholders of the Fund a proposal to convert the Fund from a
closed-end investment company to an open-end investment company and, in
connection therewith, that there be submitted for stockholder approval the
Amended and Restated Articles of Incorporation of the Fund, attached hereto as
Exhibit A, reflecting the Fund's status as an open-end company. Those matters
and certain other proposals related to conversion of the Fund to an open-end
investment company are discussed in more detail below.
If the proposed conversion of the Fund is approved, stockholders will be
permitted to redeem their shares for cash at any time (except in certain
circumstances authorized by the Investment Company Act) at the net asset value
of such shares next determined after the tender for redemption. Upon converting
to an open-end investment company the Fund also would commence a continuous
offering of its shares and would no longer list its shares on the New York Stock
Exchange. These changes in the manner of offering and repurchase of Fund shares
may result in certain modifications in management of the Fund, including greater
expenses. For example, when cash in-flows are not sufficient, the Fund may hold
a greater percentage of its assets in temporary investments or may be required
to liquidate portfolio securities in order to meet redemption requests. In such
circumstances, the performance of the Fund may be affected. The Fund's
investment
7
<PAGE> 11
objective and investment policies, however, will remain largely unchanged. See
Item 4. "Adoption of Amended Fundamental Investment Restrictions" for the Fund's
proposal to amend its fundamental investment restrictions.
BACKGROUND OF THE PROPOSAL
When the Fund was organized in 1993, it was determined that using a
closed-end investment company structure, rather than an open-end structure, was
the most appropriate form of organization for the Fund. Closed-end investment
companies differ from open-end investment companies in that closed-end
investment companies have a permanent capital base, while open-end investment
companies issue securities redeemable at net asset value at any time at the
option of the stockholder and typically engage in a continuous offering of their
shares. Accordingly, open-end investment companies are subject to periodic asset
in-flows and out-flows that can complicate portfolio management, especially in
the early years of operation. Conversely, closed-end investment companies do not
face the prospect of having to maintain cash positions or liquidate portfolio
holdings to meet redemptions. Thus, the Fund has emerged from its initial stages
of development having operated successfully during such time.
At the same time, it was recognized that the shares of stock of closed-end
investment companies frequently trade at a discount from their net asset value.
Thus, specific measures were taken to address the possibility that the market
value of Fund shares would drop below the net asset value of those shares. One
such measure, which is the subject of the instant proposal, was to specify in
the Fund's Articles of Incorporation that there be submitted to stockholders
during the first quarter of 1996 a proposal to convert the Fund from a
closed-end investment company structure to an open-end investment company
structure.
The following table for each of the periods indicated shows the high and
low sale prices of the Fund's Common Stock on the New York Stock Exchange
Composite Tape, the corresponding net asset value per share and the premium or
discount to net asset value per share at which the Fund's shares were trading.
<TABLE>
<CAPTION>
PREMIUM/(DISCOUNT)
NET ASSET TO NET ASSET
MARKET PRICE*($) VALUE($) VALUE(%)
----------------- --------------- -----------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
- ----------------------------------- ------ ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994**................... 15.125 14.375 14.16 14.03 7.80 2.46
June 30, 1994...................... 14.125 12.375 14.56 13.99 (0.82) (12.11)
September 30, 1994................. 14.875 12.375 16.12 14.01 (3.66) (11.95)
December 31, 1994.................. 14.250 11.125 15.90 13.19 (8.24) (19.78)
March 31, 1995..................... 12.125 10.125 14.04 12.17 (5.59) (20.96)
June 30, 1995...................... 13.875 10.750 15.47 12.96 (7.05) (17.05)
September 30, 1995................. 14.375 12.375 15.58 14.16 (6.64) (15.59)
December 31, 1995.................. 13.000 11.125 14.30 12.62 (7.41) (15.18)
Through February 9, 1996........... 15.125 13.375 15.88 14.05 (2.18) (9.75)
</TABLE>
- ---------------
* As reported on the New York Stock Exchange
** The Fund commenced operations on March 4, 1994.
As the above table indicates, except for a period immediately following the
commencement of the Fund's operations when the shares traded at a slight
premium, the shares of the Fund have traded at a discount from
8
<PAGE> 12
their net asset value. FAM has advised the Directors that the shares of
closed-end investment companies typically may trade at significant discounts
from their net asset value, and that, historically, share repurchases alone have
not proven to eliminate the market discount over the long term.
Consequently, the Board of Directors believes that the best way to assure
that stockholders of the Fund have an ongoing opportunity to realize the value
of their investment is to convert the Fund to an open-end investment company. At
the same time, the Board of Directors believes that operating the Fund as an
open-end investment company would be beneficial to the Fund and its
stockholders. Through the continuous offering of its shares the Fund would have
an ongoing source of new capital available for investment. Depending on the
level of new share purchases as compared with share redemptions, and certain
other factors, Fund assets may increase as a result of such purchases. Such
asset growth could enable the Fund to achieve certain expense reductions
attributable to economies of scale, although there is no assurance that expense
reductions will result. It is also possible, however, that after the conversion,
Fund assets may decrease and/or Fund expenses may increase. See "Changes in Fund
Operations as a Result of Conversion to an Open-End Investment Company -- (d)
Expenses; Potential Net Redemptions" below. At a meeting held on January 23,
1996, the Board of Directors, including the Directors who are not interested
persons of the Fund (the "Independent Directors"), determined that conversion of
the Fund to an open-end investment company is advisable and in the best
interests of the Fund and its stockholders at this time. As described further
below, at that meeting, the Directors, including the Independent Directors, also
considered and approved new arrangements for the management, distribution and
operation of the Fund as an open-end investment company, including certain
changes to the Fund's investment restrictions. Stockholders are now being asked
to approve the conversion of the Fund to an open-end investment company and
those additional arrangements.
CHANGES IN FUND OPERATIONS AS A RESULT OF CONVERSION TO AN OPEN-END INVESTMENT
COMPANY
The Fund is currently registered as a closed-end investment company under
the Investment Company Act. Closed-end investment companies do not redeem their
outstanding shares of stock. In addition, while it is theoretically possible for
such companies to engage in a continuous offering of their shares, the existence
of market discounts often make such offerings impracticable. Thus, closed-end
investment companies generally operate with a relatively fixed capitalization.
The stock of closed-end investment companies is normally bought and sold on
national securities exchanges. The Fund's shares are currently traded on the New
York Stock Exchange. The Fund's shares will be delisted from this Exchange,
however, if the Fund's conversion to an open-end investment company is approved.
In contrast, open-end investment companies, commonly referred to as "mutual
funds," issue redeemable securities. The holders of redeemable securities have
the right to surrender those securities to the company and receive an amount
approximately equal to the net asset value of the shares. Open-end investment
companies (including the Fund, if the proposed conversion is effected) also
typically continuously issue new shares of stock to investors based on the net
asset value of such shares next computed after receipt of a valid purchase
order.
Some of the other legal and practical differences between the Fund's
present operation as a closed-end investment company and its likely operation as
an open-end investment company are as follows:
(a) Acquisition and Disposition of Shares. Stockholders presently pay
brokerage commissions in connection with the purchase and sale of Fund
shares on the New York Stock Exchange. If the Fund
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<PAGE> 13
were to be converted into an open-end investment company, investors wishing
to acquire shares of the Fund's common stock would be able to purchase such
shares either through securities dealers or agents who have entered into
selected dealer agreements with MLFD, which would be the Fund's principal
underwriter (the "Distributor"), or directly from Merrill Lynch Financial
Data Services, Inc. ("MLFDS"), which would become the Fund's transfer agent
(the "Transfer Agent"), through the Distributor. Such shares would be
purchased at their net asset value plus any applicable initial sales
charge. Stockholders desiring to realize the value of their shares would be
able to do so by exercising their right to have such shares redeemed by the
Fund at the then current net asset value of the shares or at such net asset
value less any applicable contingent deferred sales charge ("CDSC"). The
Fund's net asset value per share is calculated by dividing (i) the value of
its portfolio securities plus all cash and other assets (including accrued
interest and dividends received but not collected) less all liabilities
(including accrued expenses) by (ii) the number of outstanding shares of
the Fund. Reference is made to "Implementation of the Merrill Lynch Select
PricingSM System" in this Item 3 for a description of the Select Pricing
System, including the proposed sales charges, pursuant to which investors
in the Fund may select one of the alternative sales charge arrangements
upon the purchase of shares.
The Board of Directors also reserves the right to redeem Fund shares
in kind if, in the opinion of FAM, such a redemption would be advisable. If
redemptions are made in kind, a stockholder would incur transaction costs
in disposing of any securities received. The Board has no current intention
to redeem Fund shares in kind.
(b) Stockholder Meetings. Stockholders will have fewer voting
opportunities if the Fund converts to open-end status, since the Fund
ordinarily will not hold annual stockholder meetings. As discussed above,
the shares of the Fund presently are listed on the New York Stock Exchange
in order to provide a liquid trading market for Fund shares. Exchange rules
generally provide for annual meetings of the stockholders of listed
companies for the election of directors. The Articles of Incorporation of
the Fund presently provide for one class of directors, each with a term of
office of one year. If the proposal to convert the Fund to an open-end
investment company is approved, the Fund's shares will be delisted and
voting for the election of directors will be determined solely by reference
to the Investment Company Act and to Maryland corporate law.
Under the Investment Company Act, the Fund would be required to hold a
stockholder meeting if the number of Directors elected by the stockholders
were less than a majority of the total number of Directors, or if a change
were sought in the fundamental investment policies of the Fund, in the
Investment Advisory Agreement or in a distribution plan adopted pursuant to
Rule 12b-1 under the Investment Company Act (where such change involved a
material increase in Fund expenses).
Maryland corporate law provides that, if the articles of incorporation
or by-laws of either an open-end or closed-end investment company
registered under the Investment Company Act so provides, the company is not
required to hold an annual stockholder meeting in any year in which the
election of directors is not required to be acted upon under the Investment
Company Act. The Fund's current Articles of Incorporation and By-Laws do
not presently so provide. However, the Board of Directors has adopted
By-Laws which will go into effect if the proposal to convert the Fund to an
open-end investment company is approved, which provide that the Fund will
not be required to hold an annual meeting in any year in which the election
of directors is not required to be acted upon under the Investment Company
Act. Thus, the Fund does not intend to hold annual meetings in any year in
which it is not so required. By
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<PAGE> 14
not holding annual stockholder meetings, the Fund would save the costs of
preparing proxy materials and soliciting stockholders' votes on the usual
proposals contained therein. Based on the number of outstanding shares and
stockholders as of the Record Date, such costs would aggregate
approximately $65,000 (unaudited) per year.
While, as described above, Maryland law would not require the Fund to
hold annual meetings of stockholders, such law requires the directors to
call a special meeting of stockholders when requested in writing to do so
by the stockholders entitled to cast at least 25% of all the votes entitled
to be cast at the special meeting; provided, however, that, unless
requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the special meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter
voted on at any special meeting of the stockholders held during the
preceding twelve months. The By-Laws that will go into effect if the Fund
converts to an open-end investment company reduce the Maryland law
requirement that stockholders entitled to cast at least 25% of the votes
entitled to be cast at the special meeting request a meeting to at least
10% of the votes entitled to be cast request a meeting.
The holders of shares of the Fund will continue to have one vote for
each share held on each matter submitted to a vote of stockholders if the
Fund converts to open-end status. Under Maryland law and the Amended and
Restated Articles of Incorporation, the Board of Directors will have the
authority to increase the number of shares of any class the Fund is
authorized to issue and may reclassify unissued shares into additional
classes of stock and may also reclassify issued shares into additional
classes (provided such reclassification of issued shares does not
substantially adversely affect the rights of holders of such issued shares)
and, accordingly, these matters need not be submitted to a vote of the
stockholders. As discussed in "Implementation of the Merrill Lynch Select
PricingSM System" below, the Board of Directors has approved the Select
Pricing System, a multiclass distribution system involving the issuance of
four classes of shares bearing different expenses specifically related to
the distribution of shares of each class. The four classes will have the
same rights except that each class will vote separately as a class with
respect to any distribution plan applicable to such class.
(c) Determination of Net Asset Value. The net asset value of the Fund
presently is determined as of fifteen minutes after the close of business
on the New York Stock Exchange (generally 4:00 p.m., New York time), on the
last business day in each week. SEC regulations under the Investment
Company Act generally require open-end investment companies to value their
assets on each business day in order to determine the current net asset
value on the basis of which their shares may be redeemed by stockholders or
purchased by investors. Net asset values of most such companies are
published daily by leading financial publications. It is anticipated that
the net asset value of the Fund will be similarly published.
(d) Expenses; Potential Net Redemptions. The Fund's expenses may
increase upon conversion to an open-end investment company, either as a
result of the cost of additional services typically available to an
open-end company or because of higher operating costs. For example,
transfer agency costs will likely increase as a result of the processing of
ongoing purchase and redemption requests. In addition, conversion to
open-end status could result in immediate, substantial redemptions and,
consequently, a marked reduction in the size of the Fund. As a result of
that decrease in size, the Fund could experience an increase in its expense
ratio, i.e., the Fund's ratio of operating costs to average net assets. On
the other hand, this result could be offset by new sales of the Fund's
shares and reinvestment of dividends and
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<PAGE> 15
capital gains distributions in shares of the Fund. All other things being
equal, if the Fund's asset base were to decrease, producing an increase in
the expense ratio, the Fund may experience a lower return than is currently
being produced. For the fiscal year ended November 30, 1995, the Fund's
total expenses aggregated 1.32% of its average net assets. In addition, the
Fund might be required to sell portfolio securities in order to meet
redemptions, thereby resulting in realization of gains (or losses) and in
brokerage and other transactional expenses.
As a closed-end investment company listed on the New York Stock
Exchange, the Fund is currently not subject to state securities law
operating expense limitations. However, upon conversion to an open-end
investment company, the Fund will become subject to certain limitations on
expenses imposed by state securities laws. Currently, the Fund believes
that the most restrictive state expense limitations are those of the State
of California, which are presently 2.5% of the Fund's average daily net
assets up to $30 million, 2.0% of the next $70 million of such assets and
1.5% of the remaining daily net assets. If the Fund's expenses (excluding
interest, taxes, brokerage fees and commissions, litigation expenses,
distribution fees and certain other items) were to exceed such limit in any
fiscal year, the compensation due to FAM, as the investment adviser, would
be reduced by the amount of such excess. Reductions in excess of the total
compensation payable to FAM would be paid by FAM to the Fund. FAM is not
presently required to waive its fee or to reimburse the Fund for any part
of its fee, although the existing Investment Advisory Agreement does
contemplate the expense limitations.
Significant net redemptions could also cause the Fund to become too
small to be considered economically viable. In that event, the Board of
Directors would consider alternatives to continuing the Fund's operations,
ranging from merger of the Fund with another investment company to
liquidation of the Fund. The Fund has no plans to pursue such alternatives
at this time, and any such merger or liquidation would require stockholder
approval.
(e) Elimination of Discount or Premium. The fact that stockholders
who wish to realize the value of their shares will be able to do so by
redemption will eliminate any market discount from net asset value. It will
also eliminate any possibility that the Fund's shares will trade at a
premium over net asset value. If the proposal to convert the Fund to an
open-end investment company is approved by the stockholders, the discount
may be reduced prior to the date of such conversion to the extent
purchasers of shares in the open market are willing to accept less of a
discount in anticipation of the prospect of the Fund becoming an open-end
company.
(f) Dividends. The Fund intends to continue to provide the
opportunity for stockholders to elect to receive dividends and capital
gains distributions in cash or, at no charge to stockholders, in shares of
the Fund. There are no sales charges imposed upon dividend reinvestments.
Effective upon conversion to an open-end investment company, such
reinvestments in shares would be made at net asset value, rather than, as
presently provided by the Fund's dividend reinvestment plan, at market
value (if Fund shares are trading at a discount from net asset value) or at
the greater of net asset value or 95% of market value (if Fund shares are
trading at or above net asset value). At the time of conversion,
stockholders who now participate in the Fund's dividend reinvestment plan
will continue to have their dividends and distributions reinvested and
those not participating will continue to receive their dividends and
distributions in cash. New stockholders may elect on the purchase
application either to participate in the dividend reinvestment plan or to
receive their dividends and distributions in cash. If no choice is made on
the application, dividends and distributions will be automatically
reinvested.
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<PAGE> 16
(g) Portfolio Management. Unlike open-end investment companies,
closed-end investment companies do not face the prospect of redemptions
which might cause them to sell portfolio securities at disadvantageous
times or to maintain adequate reserves of cash or cash equivalents in order
to meet such redemptions. The sale of portfolio securities could increase
transaction costs, taxable distributions and portfolio turnover. The
absence of redemptions also enables closed-end companies to be more fully
invested than open-end companies by obviating the need to maintain such
cash reserves. Similarly, the additional reserves of cash that may be
maintained by open-end companies to meet anticipated net redemptions could
reduce the Fund's investment flexibility and the scope of its investment
opportunities. On the other hand, a positive cash flow resulting from
ongoing sales could potentially better enable the Fund to take advantage of
investment opportunities. FAM expects that the Fund's investment objective
and policies will remain largely unchanged as a result of converting to
open-end status. However, the Fund is submitting for stockholder approval,
as part of the proposal to convert to open-end status, the approval of
amended fundamental investment restrictions. See Item 4. "Adoption of
Amended Fundamental Investment Restrictions".
(h) Illiquid Securities. An open-end investment company is subject to
the Investment Company Act requirement that no more than 15% of its net
assets may be invested in securities that are not readily marketable. This
may be further limited to 10% by certain state laws. If the Fund is
converted to an open-end investment company it will be required to meet the
15% limitation (10% to the extent required by certain state laws). FAM does
not anticipate that the Fund will be required to dispose of any securities
in order to meet this limitation.
(i) Blue Sky Restrictions. In order to register shares of its common
stock and continuously offer such shares to the public under applicable
state securities regulations ("state blue sky regulations") as an open-end
investment company, the Fund would have to agree to conform to certain
restrictions imposed by laws and regulations of various states covering the
investments of such companies. While the Fund is not currently subject to
these restrictions, FAM does not believe that the adoption of the
restrictions would materially change the current investment practices of
the Fund or hamper the Fund's ability to react to changing market
conditions. See Item 4. "Adoption of Amended Fundamental Investment
Restrictions".
(j) Senior Securities and Borrowings. The Investment Company Act
prohibits open-end investment companies from issuing "senior securities"
representing indebtedness (i.e., bonds, debentures, notes and other similar
securities), except that such companies may borrow from banks where there
is an asset coverage of at least 300% for all borrowings. Similarly,
open-end investment companies may not issue preferred stock. Closed-end
investment companies, on the other hand, are permitted to issue senior
securities representing indebtedness if an asset coverage of 300% is met.
Closed-end companies may incur such indebtedness with respect to any type
of lender; they are not limited to bank borrowings. In addition, closed-end
investment companies may issue preferred stock where there is an asset
coverage of at least 200% and certain other requirements are met. This
ability to issue senior securities may give closed-end companies more
flexibility than open-end companies in "leveraging" their stockholders'
investments. To date, the Fund has not leveraged its assets. Indeed, it
presently is subject to an investment restriction that it may not issue
senior securities (including borrowing money) except that if it converts to
an open-end investment company, it is authorized to borrow up to 20% of its
total assets in order to meet redemptions.
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<PAGE> 17
The Fund intends to remain unleveraged after conversion to open-end
status. Accordingly, although the amended fundamental investment
restrictions being submitted to stockholders at the Meeting provide in
restriction (6) that the Fund may borrow money from a bank in an amount up
to 33 1/3% of its total assets, proposed non-fundamental investment
restriction (i) further restricts such borrowings. Such non-fundamental
investment restriction permits only borrowings from a bank as a temporary
measure for extraordinary or emergency purposes or to meet redemptions in
amounts not exceeding 20% of total assets and permits short-term credit as
necessary for the clearance of purchases and sales of portfolio securities.
See Item 4. "Adoption of Amended Fundamental Investment Restrictions".
(k) Stockholder Services. If this Proposal is approved and the Fund
becomes an open-end investment company, stockholders will have access to
various services that are often available to stockholders in such a
company. These will include participation in an exchange privilege which
allows stockholders of the Fund to exchange their shares for shares of
certain other mutual funds advised by FAM or MLAM, the use of the Fund for
retirement plans, and the facility for stockholders to effect various
transactions by telephone. Details of such services will be disclosed in
the Fund's prospectus and statement of additional information. The cost of
such services would normally be borne by the Fund rather than by individual
stockholders.
(l) Distribution Plan. An open-end investment company, unlike a
closed-end investment company, is permitted to finance the distribution of
its shares by adopting a plan of distribution pursuant to Rule 12b-1 under
the Investment Company Act. If the Fund is converted to an open-end
investment company, pursuant to the Select Pricing System discussed below,
the Fund intends to adopt distribution plans pursuant to Rule 12b-1 with
respect to the new classes of shares of the Fund in order to pay for the
costs incurred in distributing such shares and providing ongoing
stockholder account maintenance. Shares of the Fund presently held by its
stockholders will be designated Class A shares and will not be subject to a
Rule 12b-1 plan or such fees. See "Implementation of the Merrill Lynch
Select PricingSM System" below in this Item 3.
(m) Minimum Investment. If the Fund is converted to an open-end
investment company, it will adopt requirements that an initial investment
in Fund shares and any subsequent investment must be in a specified minimum
amount in order to reduce the administrative burdens incurred in monitoring
numerous small accounts. The Fund expects that the minimum initial
investment requirement will be $1,000 and the minimum subsequent investment
requirement will be $50. The Fund may waive or reduce the minimum for
certain retirement and employee savings plans or custodial accounts for the
benefit of minors. Any such minimum investment requirement will not apply
to existing stockholders at the time of conversion, except with respect to
minimums for subsequent investments.
(n) Qualification as a Regulated Investment Company. The Fund intends
to continue to qualify for treatment as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), after
conversion to open-end status, so that it will continue to be relieved of
federal income tax on that part of its investment company taxable income
and net capital gain that is distributed to its stockholders. To qualify
for this treatment the Fund must currently meet several requirements, one
of which is that less than 30% of the Fund's gross income in each taxable
year be derived from the sale or other disposition of securities, options
or futures contracts held for less than three months. FAM anticipates that
the Fund will continue to be able to meet this requirement after the
conversion. No assurance exists, however, that this requirement will be met
under all possible circumstances, particularly
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<PAGE> 18
if the Fund is required to sell recently acquired portfolio securities
because of unexpectedly large net redemptions or large influxes of cash
followed within a short time by significant redemptions of Fund shares.
(o) Stock Certificates. Upon effectiveness of the conversion of the
Fund to open-end status, each certificate representing shares of the Fund
as a closed-end investment company would automatically represent the same
number of shares of the Fund as an open-end investment company and shares
currently issued and outstanding would be classified as "Class A shares".
CHANGING THE FUND'S SUBCLASSIFICATION TO AN OPEN-END INVESTMENT COMPANY
If the proposed conversion to open-end status is approved, the Board will
take such other actions as are necessary to effect the conversion. Since shares
of an open-end investment company are offered to the public on a continuous
basis, the Fund will enter into a Distribution Agreement with the Distributor
with respect to each of Class A, Class B, Class C and Class D shares in a form
approved by the Directors, including a majority of the Independent Directors. A
registration statement under the Securities Act of 1933, as amended, covering
the offering of the shares of the Fund and appropriate state securities law
qualifications will be filed, and, if conversion is approved, the Fund will file
the Amended and Restated Articles of Incorporation with the State Department of
Assessments and Taxation of Maryland. Conversion is not, however, conditioned
upon prior or simultaneous receipt of regulatory approvals or entry into
contractual arrangements regarding the sale of Fund shares.
Although management will use all practicable measures to keep costs at a
minimum, certain costs will be incurred, many of which will be nonrecurring, in
connection with the change from a closed-end to an open-end investment company,
including costs associated with the seeking of necessary government clearances,
the preparation of a registration statement and prospectuses as required by
federal securities laws (including printing and mailing costs), the incremental
costs of preparing this proxy statement as a result of the consideration at the
Meeting of the non-routine matters and legal fees and accounting fees related to
the foregoing. The Fund estimates that these additional costs, which will be
paid by the Fund, will range from approximately $200,000 (unaudited) to $260,000
(unaudited), or between $.009 (unaudited) and $.012 (unaudited) per share based
on the current number of shares outstanding. Management anticipates that
substantially all of these costs will be incurred by the Fund prior to the
effective date of the conversion.
In the opinion of Brown & Wood, counsel to the Fund, neither the Fund nor
its stockholders will realize any gain or loss for tax purposes as a result of
the Fund's conversion. Such opinion is based, in part, upon the view that the
conversion does not, for federal income tax purposes, involve the exchange or
disposition of a stockholder's holdings in the Fund, or even if the conversion
were to be deemed an exchange of a stockholder's holdings in the Fund for
federal income tax purposes, such exchange would not be a taxable event pursuant
to section 1036 of the Code. However, the stockholders will recognize a gain or
loss if they later redeem their shares to the extent that the redemption
proceeds are greater or less than the respective adjusted tax bases of their
shares.
Payment for any such redemption will be made within seven days after
receipt of a proper request for redemption (in accordance with redemption
procedures as will be specified in the prospectus). Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on such Exchange is restricted,
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<PAGE> 19
(c) when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or (d)
during any other period when the SEC, by order, so permits; provided that
applicable rules and regulations of the SEC shall govern as to whether the
conditions prescribed in (b), (c) or (d) exist.
APPROVAL OF THE FUND'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
Approval of the Amended and Restated Articles of Incorporation includes
approval of conversion to open-end status, approval of implementation of the
Select Pricing System and approval of the change of name to Merrill Lynch
Emerging Tigers Fund, Inc., all of which are dealt with in various sections of
the Amended and Restated Articles of Incorporation.
It is intended that if the proposed conversion to open-end status is
approved, the Fund will be organized as set forth in the Fund's Amended and
Restated Articles of Incorporation in the form approved by the Board of
Directors at their meeting on January 23, 1996 and presently being submitted for
stockholder approval. The Amended and Restated Articles of Incorporation rename
the Fund as "Merrill Lynch Emerging Tigers Fund, Inc.", increase the authorized
capital stock from 200,000,000 shares of common stock, par value $.10 per share,
to 400,000,000 shares of common stock, par value $.10 per share, authorize the
issuance of multiple classes of redeemable securities at net asset value and
provide that the Fund's outstanding common stock will be redeemable at the
option of the stockholders. In connection with such Amended and Restated
Articles of Incorporation, the Board of Directors has adopted new By-Laws, which
will go into effect upon conversion to an open-end company, reflecting the
necessary conforming changes. A copy of the Amended and Restated Articles of
Incorporation, which reflect the amendments contemplated by this Item 3, is
attached hereto as Exhibit A.
The Amended and Restated Articles of Incorporation also would eliminate the
present provisions requiring that a Director be removed (with or without cause)
only by the affirmative vote of 66 2/3% of the votes entitled to be cast for the
election of Directors. In the absence of such a provision, Maryland General
Corporation Law permits a Director to be removed for any reason with the
affirmative vote of a majority of all of the votes entitled to be cast for the
election of Directors.
IMPLEMENTATION OF THE MERRILL LYNCH SELECT PRICINGSM SYSTEM
In connection with the conversion of the Fund to an open-end investment
company, FAM and the Distributor propose the implementation of the Select
Pricing System which will permit the Fund to provide investors with several
different distribution alternatives. These alternative sales arrangements permit
each investor to choose the method of purchasing shares that is most beneficial
given the amount of the investor's purchase, the length of time the investor
expects to hold the shares and other relevant circumstances.
In April, 1994, the SEC issued an order (the "Multi-Class Order")
permitting new and existing FAM/MLAM Advised Funds which are distributed by MLFD
to issue multiple classes of shares. Subsequent to the issuance of the
Multi-Class Order, the SEC adopted a rule containing conditions substantially
the same as those in the Multi-Class Order permitting open-end investment
companies to issue multiple classes of shares and permitting funds that
previously relied on an order to rely on the rule. The rule permits the Fund to
create an unlimited number of classes of shares offering alternative sales
charge arrangements to investors. The Select Pricing System has been adopted by
over 50 other funds advised by FAM or MLAM ("Select
16
<PAGE> 20
Pricing Funds"). Pursuant to the SEC rule and if the proposal to convert the
Fund to an open-end investment company is approved, FAM proposes to implement
the Select Pricing System with respect to the Fund, under which shareholders may
choose from four sales charge alternatives, as described below.
Class A: Class A shares will incur an initial sales charge when they are
purchased and will bear no ongoing distribution or account maintenance
fees. Class A shares of the Fund will be offered to a limited group of
investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares. Investors that own Class A shares in a
shareholder account will be entitled to purchase additional Class A
shares of the Fund in that account. Other eligible investors will
include certain retirement plans and participants in certain
investment programs. In addition, Class A shares will be offered to
ML&Co. and its subsidiaries (the term "subsidiaries", when used herein
with respect to ML&Co., includes MLAM, FAM and certain other entities
directly or indirectly wholly-owned and controlled by ML&Co.) and
their directors and employees and to members of the Boards of FAM/MLAM
Advised Funds. The maximum initial sales charge will be 5.25%, which
will be reduced for purchases of $25,000 and over, and waived for
purchases by certain retirement plans in connection with certain
investment programs. Purchases of $1,000,000 or more may not be
subject to an initial sales charge but if the initial sales charge is
waived, such purchases will be subject to a 1.0% CDSC if the shares
are redeemed within one year after purchase. Sales charges also are
reduced under a right of accumulation which takes into account the
investor's holdings of all classes of all Select Pricing Funds.
Class B: Class B shares will not incur a sales charge when they are purchased,
but they will be subject to an ongoing account maintenance fee
of 0.25% and an ongoing distribution fee of 0.75%, of average net
assets of the Fund attributable to Class B shares, and a CDSC for a
period of four years at a rate of 4.0% during the first year,
decreasing 1% annually to 0.0% after four years. Approximately eight
years after issuance, Class B shares will convert automatically into
Class D shares of the Fund, which are subject to the same account
maintenance fee of 0.25% but no distribution fee; Class B shares of
certain other Select Pricing Funds into which exchanges may be made
convert into Class D shares automatically after approximately ten
years. If Class B shares of the Fund are exchanged for Class B shares
of another Select Pricing Fund, the conversion period applicable to
the Class B shares acquired in the exchange will apply, (as will the
Class D account maintenance fee of the acquired fund upon the
conversion) and the holding period for the shares exchanged will be
tacked onto the holding period for the shares acquired. Automatic
conversion of Class B shares into Class D shares will occur at least
once a month on the basis of the relative net asset values of the
shares of the two classes on the conversion date, without the
imposition of any sales load, fee or other charge. Conversion of
Class B shares to Class D shares will not be deemed a purchase or
sale of the shares for Federal income tax purposes. Shares purchased
through reinvestment of dividends on Class B shares also will convert
automatically to Class D shares.
Class C: Class C shares will not incur a sales charge when they are purchased,
but they will be subject to an ongoing account maintenance fee of
0.25%, and an ongoing distribution fee of 0.75%, of average net assets
of the Fund attributable to Class C shares. Class C shares will also
be subject to a CDSC if they are redeemed within one year of purchase.
Although Class C shares will be subject to a 1.0% CDSC for only one
year (as compared to four years for Class B), Class C shares will have
no conversion feature and, accordingly, an investor that purchases
Class C shares will be subject to
17
<PAGE> 21
distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Fund's Board of
Directors and regulatory limitations.
Class D: Class D shares will incur an initial sales charge when they are
purchased and will be subject to an ongoing account maintenance fee of
0.25% of average net assets of the Fund attributable to Class D
shares. Class D shares will not be subject to an ongoing distribution
fee or any CDSC when they are redeemed. Purchases of $1,000,000 or
more may not be subject to an initial sales charge but, if the initial
sales charge is waived, such purchases will be subject to a CDSC of
1.0% if the shares are redeemed within one year of purchase. The
schedule of initial sales charges and reductions for the Class D
shares is the same as the schedule for Class A shares, except that
there is no waiver for purchases by retirement plans in connection
with certain investment programs. Class D shares also will be issued
upon conversion of Class B shares as described above under "Class B".
The Fund intends to designate 100,000,000 Class A shares, 150,000,000 Class
B shares, 50,000,000 Class C shares and 100,000,000 Class D shares.
THE IMPLEMENTATION OF THE SELECT PRICING SYSTEM WILL NOT AFFECT THE NET
ASSET VALUE OF A CURRENT STOCKHOLDER'S INVESTMENT IN THE FUND. If the conversion
to open-end status is approved, the currently issued and outstanding shares of
common stock will be classified as Class A shares and will not be subject to any
charge as a result of the classification. If the conversion to open-end status
is approved, a current stockholder of the Fund will hold Class A shares in his
or her stockholder account and will be eligible to purchase additional Class A
shares of the Fund in that stockholder account only. If a current stockholder
wishes to purchase shares of the Fund in any other stockholder account, he or
she may purchase either Class B, Class C or Class D shares, as he or she
chooses.
Each Class A, Class B, Class C and Class D share will represent identical
interests in the investment portfolio of the Fund except that (i) each class
would bear the expenses of the differing Rule 12b-1 plan payments and account
maintenance fees, expenses of deferred sales arrangements and stockholder
servicing costs attributable solely to a particular class and any other
incremental expenses subsequently identified that should be properly allocated
to such class; (ii) the stockholders of each class subject to a Rule 12b-1 plan
would have exclusive voting rights with respect to the Rule 12b-1 plan pursuant
to which, in conjunction with any CDSC, deferred charges would be paid; and
(iii) pursuant to the terms of the exchange privilege with other Select Pricing
Funds, the classes would have different exchange privileges as will be described
in the Fund's prospectus and statement of additional information.
On January 23, 1996, the Directors of the Fund approved the use of the
Select Pricing System by the Fund, and the Fund's Amended and Restated Articles
of Incorporation are designed to enable the Fund to issue different classes of
shares and implement the Select Pricing System.
VOTE REQUIRED
The proposal regarding a change in the Fund's subclassification under the
Investment Company Act from a closed-end investment company to an open-end
investment company, which includes amending the Fund's Articles of
Incorporation, requires the affirmative vote of a majority of the outstanding
shares of Common Stock entitled to be voted on the matter, voting in person or
by proxy.
IF THE REQUIRED FAVORABLE VOTE IS NOT ALSO OBTAINED ON ITEMS 4 AND 5 (THE
OTHER OPEN-ENDING PROPOSALS), THE FUND WILL NOT CONVERT TO OPEN-END STATUS AND
WILL CONTINUE TO OPERATE AS A CLOSED-END INVESTMENT COMPANY.
18
<PAGE> 22
ITEM 4. ADOPTION OF AMENDED FUNDAMENTAL INVESTMENT RESTRICTIONS
Each of the FAM/MLAM Advised Funds has adopted investment restrictions that
govern generally the operations of the Fund. Investment restrictions that are
deemed fundamental may not be changed without a vote of the outstanding shares
of the Fund, while non-fundamental investment restrictions may be changed by the
Fund's Board of Directors if it deems it in the best interest of the Fund and
its stockholders to do so. In addition to investment restrictions, the Fund
operates pursuant to investment objectives and policies that govern the
investment activities of the Fund and further limit its ability to invest in
certain types of securities or engage in certain types of transactions. These
investment objectives and policies will be for the most part unaffected by the
adoption of the proposed investment restrictions. Generally the investment
objective of the Fund is a fundamental policy of the Fund that may be changed
only by stockholder vote. The investment policies of a Fund are non-fundamental
and may not be changed unless and until (i) the Board of Directors of the Fund
explicitly authorizes, by resolution, a change in the investment policy and (ii)
the prospectus of the Fund is amended to reflect the change in policy and, if
appropriate, to include additional disclosure. You should note that certain of
the proposed fundamental investment restrictions are stated in terms of "to the
extent permitted by applicable law". Applicable law can change over time and may
become more or less restrictive as a result. The restrictions have been drafted
in this manner so that a change in law would not require the Fund to seek a
stockholder vote to amend the restriction to conform to applicable law, as
revised.
In 1994 MLAM created a set of standard fundamental and non-fundamental
investment restrictions which were approved by the stockholders of each of the
FAM/MLAM-advised mutual funds. These restrictions, which are proposed to be
adopted by the Fund, are designed to provide the Fund with as much investment
flexibility as possible under the Investment Company Act and state blue sky
regulations, help promote operational efficiencies and facilitate monitoring of
compliance.
Adoption of the proposed investment restrictions is not expected to affect
materially the current operations of the Fund. In this regard, the Board of
Directors proposes in connection with its conversion to open-end status, that
the Fund adopt, as described below, the proposed investment restrictions.
Except as otherwise discussed herein, the proposed fundamental investment
restrictions restate the fundamental restrictions currently in effect for the
Fund. Fundamental investment restrictions may not be changed without a vote of
the stockholders of the Fund, and the costs of stockholder meetings for these
purposes generally are borne by the Fund and its stockholders. Once the Fund
converts to an open-end fund, annual stockholder meetings will no longer be
required. See "Changes in Fund Operations as a Result of Conversion to an
Open-End Investment Company -- (b) Stockholder Meetings" in Item 3. By making
certain restrictions non-fundamental, the Board may amend a restriction as it
deems appropriate and in the best interest of the Fund and its stockholders,
without incurring the costs of seeking a stockholder vote.
The Fund's current investment restrictions are set forth in Exhibit B
hereto.
Under the proposed fundamental investment restrictions, the Fund may not:
1. Invest more than 25% of its total assets, taken at market value at
the time of each investment, in the securities of issuers in any particular
industry (excluding the U.S. Government and its agencies and
instrumentalities).
19
<PAGE> 23
2. Make investments for the purpose of exercising control or
management. Investments by the Fund in wholly-owned investment entities
created under the laws of certain countries will not be deemed to be the
making of investments for the purpose of exercising control or management.
3. Purchase or sell real estate, except that, to the extent permitted
by applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that
invest in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances and repurchase agreements and purchase and
sale contracts and any similar instruments shall not be deemed to be the
making of a loan, and except further that the Fund may lend its portfolio
securities, provided that the lending of portfolio securities may be made
only in accordance with applicable law and the guidelines set forth in the
Fund's prospectus and statement of additional information, as they may be
amended from time to time. [See "Changes in Fund Operations as a Result of
Conversion to an Open-End Investment Company -- (j) Senior Securities and
Borrowings" in Item 3.]
5. Issue senior securities to the extent such issuance would violate
applicable law. [See "Changes in Fund Operations as a Result of Conversion
to an Open-End Investment Company -- (j) Senior Securities and Borrowings"
in Item 3.]
6. Borrow money, except that the Fund (i) may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities and (iv) may purchase securities on
margin to the extent permitted by applicable law. The Fund may not pledge
its assets other than to secure such borrowings or, to the extent permitted
by the Fund's investment policies as set forth in its prospectus and
statement of additional information, as they may be amended from time to
time, in connection with hedging transactions, short sales, when-issued and
forward commitment transactions and similar investment strategies.
7. Underwrite securities of other issuers, except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act"), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to
the extent the Fund may do so in accordance with applicable law and the
Fund's prospectus and statement of additional information, as they may be
amended from time to time, and without the Fund registering as a commodity
pool operator under the Commodity Exchange Act.
Additional non-fundamental investment restrictions proposed to be adopted
by the Fund, which may be changed by the Directors without stockholder approval,
provide that the Fund may not:
a. Purchase securities of other investment companies, except to the
extent that such purchases are permitted by applicable law. Applicable law
currently allows the Fund to purchase the securities of other investment
companies only if immediately thereafter not more than (i) 3% of the total
outstanding voting stock of such company is owned by the Fund, (ii) 5% of
the Fund's total assets, taken at market value,
20
<PAGE> 24
would be invested in any one such company, (iii) 10% of the Fund's total
assets, taken at market value, would be invested in such securities, and
(iv) the Fund, together with other investment companies having the same
investment adviser and companies controlled by such companies, owns not
more than 10% of the total outstanding stock of any one closed-end
investment company. Investments by the Fund in wholly-owned investment
entities created under the laws of certain countries will not be deemed an
investment in other investment companies.
b. Make short sales of securities or maintain a short position except
to the extent permitted by applicable law. The Fund does not, however,
currently intend to engage in short sales, except short sales "against the
box".
c. Invest in securities which cannot be readily resold because of
legal or contractual restrictions, or which cannot otherwise be marketed,
redeemed or put to the issuer or to a third party, if at the time of
acquisition more than 15% of its net assets would be invested in such
securities. This restriction shall not apply to securities which mature
within seven days or securities which the Board of Directors of the Fund
has otherwise determined to be liquid pursuant to applicable law.
Notwithstanding the 15% limitation herein, to the extent that the laws of
any state in which the Fund's shares are registered or qualified for sale
require a lower limitation, the Fund will observe such limitation. As of
the date hereof, therefore, the Fund will not invest more than 10% of its
net assets in securities which are subject to this investment restriction
(c). Securities purchased in accordance with Rule 144A under the Securities
Act and determined to be liquid by the Board of Directors are not subject
to the limitations set forth in this investment restriction (c).
d. Invest in warrants if, at the time of acquisition, its investments
in warrants, valued at the lower of cost or market value, would exceed 5%
of the Fund's net assets; included within such limitation, but not to
exceed 2% of the Fund's net assets, are warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange or a major
foreign exchange. For purposes of this restriction, warrants acquired by
the Fund in units or attached to securities may be deemed to be without
value.
e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities,
asset-backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Fund, the officers and general
partner of the Investment Adviser, the directors of such general partner or
the officers and directors of any subsidiary thereof each owning
beneficially more than one-half of one percent of the securities of such
issuer own in the aggregate more than 5% of the securities of such issuer.
g. Invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases or exploration or development programs,
except that the Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
(This is currently a fundamental investment restriction of the Fund.)
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
prospectus and statement of additional information, as amended from time to
time.
21
<PAGE> 25
i. Notwithstanding fundamental investment restriction (6) above,
borrow money or pledge its assets, except that the Fund (a) may borrow from
a bank as a temporary measure for extraordinary or emergency purposes or to
meet redemptions in amounts not exceeding 20% (taken at market value) of
its total assets and pledge its assets to secure such borrowings, (b) may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (c) may purchase securities
on margin to the extent permitted by applicable law. However, at the
present time, applicable law prohibits the Fund from purchasing securities
on margin. The deposit or payment by the Fund of initial or variation
margin in connection with financial futures contracts or options
transactions is not considered to be the purchase of a security on margin.
The purchase of securities while borrowings are outstanding will have the
effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk, and borrowed funds are subject to interest
costs which will reduce net income. The Fund will not purchase securities
while borrowings exceed 5% of its total assets.
As discussed above under "Changes in Fund Operations as a Result of
Conversion to an Open-End Investment Company" in Item 3, conversion to open-end
status will have a significant effect on the Fund's operations as it relates to
borrowings and the issuance of senior securities (fundamental investment
restrictions 5 and 6) and the acquisition of illiquid securities
(non-fundamental investment restriction (c)). Under the Fund's current
investment restriction (5), the Fund may not lend its portfolio securities in
excess of 33 1/3% of its total assets, taken at market value. The lending of
portfolio securities is dealt with as a clause in proposed fundamental
investment restriction (4) which states that the Fund may lend its portfolio
securities in accordance with applicable law and the guidelines set forth in its
prospectus and statement of additional information, as they may be amended from
time to time. Applicable law generally permits the lending of a fund's portfolio
securities in an amount up to 33 1/3% of the fund's total assets provided such
loans are in accordance with prescribed guidelines which typically are set forth
in the statement of additional information of the fund. There is, therefore, no
substantive change with regard to this practice.
VOTE REQUIRED
The proposal to amend the Fund's fundamental investment restrictions
requires the affirmative vote of a majority of the Fund's outstanding voting
securities (which for this purpose and under the Investment Company Act means
the lesser of (i) 67% or more of the voting securities present at the Meeting,
if more than 50% of the outstanding voting securities are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities).
IF THE REQUIRED FAVORABLE VOTE IS NOT ALSO OBTAINED ON ITEMS 3 AND 5 (THE
OTHER OPEN-ENDING PROPOSALS), THE FUND WILL NOT CONVERT TO OPEN-END STATUS AND
WILL CONTINUE TO OPERATE AS A CLOSED-END INVESTMENT COMPANY.
ITEM 5. APPROVAL OR DISAPPROVAL OF AN AMENDED INVESTMENT ADVISORY
AGREEMENT
On February 1, 1994, the Fund entered into an investment advisory agreement
(the "Investment Advisory Agreement"), pursuant to which FAM serves as the
investment adviser to the Fund (the "Investment Adviser"), and the Board of
Directors of the Fund approved the Investment Advisory Agreement to remain in
effect for a period ending February 2, 1996. The Investment Advisory Agreement
was approved by the sole stockholder of the Fund on February 25, 1994. On
October 24, 1995, the Board of Directors of the Fund, including a majority of
the Independent Directors, approved the continuation of the Investment
22
<PAGE> 26
Advisory Agreement for a period of one year. In their consideration of this
matter, the Directors received information relating to, among other things,
alternatives to the present arrangements, the nature, quality and extent of the
advisory and other services provided to the Fund by FAM and comparative data
with respect to the advisory and management arrangements of other investment
companies. The Directors also received information as to the profitability of
FAM for providing such services.
At the Meeting, stockholders are being asked to consider amending the
Investment Advisory Agreement to reflect the Fund's status as an open-end
company. If stockholders approve the Fund's conversion to open-end status, the
Investment Advisory Agreement will be amended as proposed (and as amended will
be referred to herein as the "Amended Advisory Agreement"). The Amended Advisory
Agreement will remain in effect for so long as it is approved annually by
Directors (including a majority of the Independent Directors) as described above
and is not otherwise terminated. See "Duration and Termination" below. If,
however, the Fund does not convert to open-end status, the current Investment
Advisory Agreement will continue in effect for the period previously approved by
the Directors and thereafter, for so long as it is approved annually by such
Directors.
TERMS OF INVESTMENT ADVISORY AGREEMENT
The current Investment Advisory Agreement provides that, subject to the
direction of the Board of Directors of the Fund, FAM is responsible for the
actual management of the Fund's portfolio and for the review of the Fund's
holdings in light of its own research analysis and analyses from other relevant
sources. The responsibility for making decisions to buy, sell or hold a
particular security rests with FAM, subject to review by the Board of Directors.
FAM provides the portfolio managers for the Fund, who consider analyses from
various sources, make the necessary investment decisions and place transactions
accordingly. FAM is also obligated to perform certain administrative and
management services for the Fund and is obligated to provide all the office
space, facilities, equipment and personnel necessary to perform its duties under
the Investment Advisory Agreement.
Investment Advisory Fee. The Investment Advisory Agreement provides that
as compensation for its services to the Fund, FAM receives from the Fund at the
end of each month a fee based upon the average weekly value of the net assets of
the Fund at the annual rate of 1.00% of the average weekly net assets of the
Fund ("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 and
(ii) any accrued and unpaid interest on outstanding borrowings). The assets for
each weekly period are determined by averaging the net assets at the end of a
week with the net assets at the end of the prior week. For the fiscal year ended
November 30, 1995, the investment advisory fee paid by the Fund to FAM
aggregated $3,068,007 (based upon average net assets of approximately $306.8
million). At January 31, 1996 the Fund had net assets of approximately $341.8
million. At this asset level the Fund's annual investment advisory fee would
aggregate $3,418,039.
Payment of Expenses. The Investment Advisory Agreement obligates FAM to
provide investment advisory services and to pay all compensation of and furnish
office space for officers and employees of the Fund connected with the
investment and economic research, trading and investment management of the Fund,
as well as the fees of all Directors of the Fund who are affiliated persons of
FAM. The Fund pays all other expenses incurred in the operation of the Fund,
including, without limitation, expenses for legal and auditing services, taxes,
costs of printing proxies, stock certificates and shareholder reports,
prospectuses, charges of the Custodian, any Sub-Custodian and Transfer Agent,
Dividend Disbursing Agent and Registrar,
23
<PAGE> 27
SEC 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 FAM, and the Fund
reimburses FAM for its costs in connection with such services. For the fiscal
year ended November 30, 1995, the Fund reimbursed $73,536 to FAM for such
accounting services.
Duration and Termination. The Investment Advisory Agreement will continue
in effect from year to year if approved annually (a) by the Board of Directors
of the Fund, or by a majority of the outstanding voting securities of the Fund,
and (b) by a majority of the Directors who are not parties to such agreement or
interested persons (as defined in the Investment Company Act) of any such party
cast in person at a meeting called for the purpose of voting on such approval.
Such agreement is not assignable and may be terminated without penalty on 60
days' written notice at the option of either party thereto or by a vote of the
majority of the outstanding voting securities of the Fund.
Brokerage Transactions With Affiliates. For the fiscal year ended November
30, 1995, the Fund paid $14,389 in brokerage commissions to Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), representing 2.1% of the
aggregate brokerage commissions paid by the Fund during the year.
THE AMENDED ADVISORY AGREEMENT
On January 23, 1996, a majority of the Board of Directors, including a
majority of the Independent Directors, approved the Amended Advisory Agreement
between the Fund and FAM subject to the approval by the stockholders of the
conversion of the Fund to an open-end investment company. The terms of the
Amended Advisory Agreement are essentially the same as the terms of the
Investment Advisory Agreement currently in effect, except as discussed below.
Upon effectiveness of the conversion of the Fund to open-end status, the current
Investment Advisory Agreement will be terminated and the Amended Advisory
Agreement will become effective. The terms of the current Investment Advisory
Agreement are described above. The form of Amended Advisory Agreement (with
deletions from the current agreement shown in brackets and additions shown by
underscoring) appears as Exhibit C to this Proxy Statement.
Under the Amended Advisory Agreement, the advisory fee payable to FAM by
the Fund will be accrued daily and paid monthly at the annual rate of 1.00% of
the Fund's average daily net assets. The rate of the advisory fee under the
Amended Advisory Agreement (1.00%) is the same as the rate under the current
Investment Advisory Agreement except that the method of calculating the fee
differs. Under the current Investment Advisory Agreement, FAM is paid at the end
of each month a fee based upon the Fund's average weekly net assets. Under the
Amended Advisory Agreement, the fee is accrued daily and is calculated based
upon the Fund's average daily net assets. Under the Amended Advisory Agreement,
FAM will continue to provide the Fund with accounting services, and the Fund
will reimburse FAM for its costs in connection with such services.
In addition, the Amended Advisory Agreement contains certain provisions not
found in the current Investment Advisory Agreement that accommodate (i) the
continuous offering of the classes of shares of common stock of the Fund, and
(ii) the adoption of distribution plans pursuant to Rule 12b-1 under the
Investment Company Act. See "Implementation of the Merrill Lynch Select
PricingSM System" above in Item 3. Under the Amended Advisory Agreement, the
Fund will continue to pay for all expenses incurred in the operation of the
Fund, as detailed above in "Terms of Investment Advisory Agreement -- Payment of
24
<PAGE> 28
Expenses", except that the Distributor will pay certain of the expenses of the
Fund incurred in connection with the continuous offering of Fund shares.
VOTE REQUIRED
The proposal to approve the Amended Advisory Agreement requires the
affirmative vote of a majority of the Fund's outstanding voting securities
(which for this purpose and under the Investment Company Act means the lesser of
(i) 67% or more of the voting securities present at the Meeting, if more than
50% of the outstanding voting securities are present or represented by proxy, or
(ii) more than 50% of the outstanding voting securities).
IF THE REQUIRED FAVORABLE VOTE IS NOT ALSO OBTAINED ON ITEMS 3 AND 4 (THE
OTHER OPEN-ENDING PROPOSALS), THE FUND WILL NOT CONVERT TO OPEN-END STATUS AND
WILL CONTINUE TO OPERATE AS A CLOSED-END INVESTMENT COMPANY.
INFORMATION CONCERNING MLAM AND FAM
FAM, located at 800 Scudders Mill Road, Plainsboro, New Jersey, is a
limited partnership of which ML&Co. is the sole limited partner and Princeton
Services is the sole general partner. MLAM, located at 800 Scudders Mill Road,
Plainsboro, New Jersey, is a limited partnership of which ML&Co. is the sole
limited partner and Princeton Services is the sole general partner. ML&Co. is a
financial services holding company and the parent of Merrill Lynch. ML&Co. and
Princeton Services are "controlling persons" of the Investment Adviser as
defined under the Investment Company Act because of their ownership of its
voting securities or their power to exercise a controlling influence over its
management or policies. The address of ML&Co. is World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281. The address of Princeton
Services, Inc. is P.O. Box 9011, Princeton, New Jersey 08543-9011.
FAM or MLAM acts as the investment adviser for more than 130 other
registered investment companies and offers portfolio management and portfolio
analysis services to individuals and institutions. As of January 31, 1996, MLAM
and FAM had a total of approximately $202.8 billion in investment company and
other portfolio assets under management, including accounts of certain
affiliates of MLAM.
The following table sets forth information relating to the registered
investment companies which invest primarily in equity securities with the
investment objective of long-term capital appreciation, for which FAM or MLAM
acts as the investment adviser.
<TABLE>
<CAPTION>
MANAGEMENT FEE
-------------------------------------------------------------
NET ASSETS ANNUAL RATE ANNUAL EFFECTIVE FEE
AT JANUARY 31, (PERCENTAGE FIRST BREAKPOINT RATE AT JANUARY 31,
INVESTMENT COMPANY(1) 1996(IN MILLIONS)($) OF NET ASSETS)(%) IN MILLIONS($)(2) 1996(%)(3)
- ---------------------------- --------------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Merrill Lynch Asset Builder
Program, Inc. --
Fundamental Value
Portfolio 31.5 .65 N/A .65
Merrill Lynch
Basic Value Fund, Inc. 6,925.6 .60 100 .40
Merrill Lynch Developing
Capital Markets Fund, Inc. 650.3 1.00 N/A 1.00
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
MANAGEMENT FEE
-------------------------------------------------------------
NET ASSETS ANNUAL RATE ANNUAL EFFECTIVE FEE
AT JANUARY 31, (PERCENTAGE FIRST BREAKPOINT RATE AT JANUARY 31,
INVESTMENT COMPANY(1) 1996(IN MILLIONS)($) OF NET ASSETS)(%) IN MILLIONS($)(2) 1996(%)(3)
- ---------------------------- --------------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Merrill Lynch Dragon Fund,
Inc. 1,609.1 1.00 N/A 1.00
Merrill Lynch EuroFund 1,072.1 .75 N/A .75
Merrill Lynch Fundamental
Growth Fund, Inc. 184.6 .65 N/A .65
Merrill Lynch Fund For
Tomorrow, Inc. 380.8 .65 750 .65
Merrill Lynch Global
Allocation Fund, Inc. 9,562.6 .75 2,500 .68
Merrill Lynch
Global Resources Trust 241.2 .60 N/A .60
Merrill Lynch Global
SmallCap Fund, Inc. 144.3 .85 N/A .85
Merrill Lynch Global Utility
Fund, Inc. 453.7 .60 N/A .60
Merrill Lynch Growth Fund
for Investment and
Retirement 3,508.7 .65 1,000 .62
Merrill Lynch Healthcare
Fund, Inc. 307.6 1.00 N/A 1.00
Merrill Lynch International
Equity Fund 1,271.7 .75 N/A .75
Merrill Lynch Latin America
Fund, Inc. 705.1 1.00 N/A 1.00
Merrill Lynch Middle
East/Africa Fund, Inc. 11.3 1.00 N/A 0
Merrill Lynch Pacific Fund,
Inc. 1,998.3 .60 N/A .60
Merrill Lynch Phoenix Fund,
Inc. 719.4 1.00 500 .98
Merrill Lynch Special Value
Fund, Inc. 543.9 .75 N/A .75
Merrill Lynch Technology
Fund, Inc. 958.5 1.00 N/A 1.00
</TABLE>
- ---------------
(1) MLAM is the investment adviser for each investment company other than
Merrill Lynch Basic Value Fund, Inc., Merrill Lynch Phoenix Fund, Inc. and
Merrill Lynch Special Value Fund, Inc., which are advised by FAM.
(2) The term "breakpoint" refers to the level of net assets at which the
management fee rate is reduced. The breakpoint indicated is the lowest net
asset level at which the fee is reduced, either pursuant to the fund's
management or investment advisory agreement or applicable fee waivers, if
any.
(footnotes continue on next page)
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<PAGE> 30
(3) The effective fee rate is the annual management fee rate, taking into
account any applicable breakpoints, payable at the net asset level at
January 31, 1996. The annual management fee payable at the January 31, 1996
net asset level can be obtained by multiplying the effective fee rate by the
net assets at such date. In certain instances, the actual effective fee
indicated is lower than the rate that would apply under the fund's
management or investment advisory agreement, because all or a portion of the
management fee is waived either voluntarily or pursuant to applicable
expense limitations.
Securities held by the Fund may also be held by or be appropriate
investments for other FAM/MLAM Advised Funds or by investment advisory clients
of MLAM or FAM. 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 security. If purchases or sales of securities for the
Fund or other investment company or advisory clients arise for consideration at
or about the same time, transactions in such securities will be made, insofar as
feasible, for the respective investment companies and clients in a manner deemed
equitable to all. To the extent that transactions on behalf of more than one
client of FAM 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.
Set forth below is the name, address and principal occupation of the
principal executive officer and each director or partner of the Investment
Adviser. In addition, Mr. Zeikel is President of substantially all of the
FAM/MLAM Advised Funds, including those listed above. The business address of
each of Princeton Services and Arthur Zeikel is P.O. Box 9011, Princeton, New
Jersey 08543-9011. The address of ML&Co. is World Financial Center, North Tower,
250 Vesey Street, New York, New York 10281. The officers and directors of the
Fund are listed under "Compensation of Directors and Officers" and "Officers of
the Fund" above in Item 1.
<TABLE>
<CAPTION>
POSITION(S) WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
NAME INVESTMENT ADVISER OR EMPLOYMENT
- ------------------------- ------------------ -------------------------------------------------
<S> <C> <C>
ML&Co. .................. Limited Partner Financial Services Holding Company; Limited
Partner of MLAM
Princeton Services....... General Partner General Partner of MLAM
Arthur Zeikel............ President President of MLAM; President and Director of
Princeton Services; Director of MLFD; Executive
Vice President of ML&Co.
</TABLE>
27
<PAGE> 31
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund. The
Fund will reimburse banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation material to the beneficial owners of the shares of
the Fund. The Fund may also hire proxy solicitors at the expense of the Fund.
In order to obtain the necessary quorum at the Meeting (i.e., a majority of
the shares of the Fund entitled to vote at the Meeting, present in person or by
proxy), supplementary solicitation may be made by mail, telephone, telegraph or
personal interview by officers of the Fund. It is anticipated that the cost of
such supplementary solicitation, if any, will be nominal.
All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the Director nominees, "FOR" the ratification of D&T as independent
auditors for the Fund, "FOR" the conversion of the Fund to an open-end
investment company including approval of the Amended and Restated Articles of
Incorporation and implementation of the Select Pricing System, "FOR" adoption of
the amended fundamental investment restrictions and "FOR" approval of the
Amended Advisory Agreement.
The proposal to elect the Fund's Board of Directors (Item 1) and the
proposal to ratify the selection of the Fund's independent auditors (Item 2) may
be approved at a meeting at which a quorum is duly constituted by the
affirmative vote of a majority of the votes cast at the meeting by the Fund's
stockholders, voting in person or by proxy. The proposal to convert the Fund to
an open-end investment company (Item 3) may be approved at a meeting at which a
quorum is duly constituted by the affirmative vote of a majority of the Fund's
outstanding voting securities entitled to be voted on the matter, voting in
person or by proxy. The proposal to adopt the amended fundamental investment
restrictions (Item 4) and the proposal to approve the Amended Advisory Agreement
(Item 5) may be approved at a meeting at which a quorum is duly constituted by
the affirmative vote of a majority of the Fund's outstanding voting securities
(which for this purpose and under the Investment Company Act means the lesser of
(i) 67% or more of the voting securities present at the Meeting, if more than
50% of the outstanding voting securities are present or represented by proxy, or
(ii) more than 50% of the outstanding voting securities). THE FUND WILL NOT
CONVERT TO OPEN-END STATUS UNLESS THE REQUIRED FAVORABLE VOTE OF STOCKHOLDERS IS
OBTAINED ON ITEMS 3, 4 AND 5, THE OPEN-ENDING PROPOSALS. IF ANY ONE OF THE THREE
PROPOSALS IS REJECTED, THE FUND WILL CONTINUE TO OPERATE AS A CLOSED-END
INVESTMENT COMPANY.
Broker-dealer firms, including Merrill Lynch, holding Fund shares in
"street name" for the benefit of their customers and clients, will request the
instructions of such customers and clients on how to vote their shares on each
Item before the Meeting. The Fund understands that, under the rules of the New
York Stock Exchange, such broker-dealer firms may, without instructions from
their customers and clients, grant authority to the proxies designated to vote
on the election of Directors (Item 1) and ratification of the selection of
independent auditors (Item 2), if no instructions have been received prior to
the date specified in the broker-dealer firm's request for voting instructions.
Broker-dealer firms, including Merrill Lynch, will not be permitted to grant
voting authority without instructions with respect to the proposal to convert
the Fund from a closed-end investment company to an open-end investment company
(Item 3), the proposal to amend the Fund's fundamental investment restrictions
(Item 4) or the proposal to approve the Amended Advisory Agreement (Item 5). The
Fund will include shares held of record by broker-dealers as to which such
authority
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<PAGE> 32
has been granted in its tabulation of the total number of votes present for
purposes of determining whether the necessary quorum of stockholders exists.
Proxies which are returned but which are marked "abstain" or on which a
broker-dealer has declined to vote on any proposal ("broker non-votes") will be
counted as present for the purpose of a quorum. Merrill Lynch has advised that
it intends to exercise discretion over shares held in its name for which no
instructions are received by voting such shares on Items 1 and 2 (but not on
Items 3, 4 or 5) in the same proportion as it has voted shares for which it has
received instructions. However, abstentions and broker non-votes will not be
counted as votes cast. Abstentions and broker non-votes will not have an effect
on the vote on Item 1 or Item 2; however, abstentions and broker non-votes will
have the same effect as a vote against Items 3, 4 and 5.
ADDRESS OF INVESTMENT ADVISER
The principal office of FAM is 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
ANNUAL REPORT DELIVERY
The Fund will furnish, without charge, a copy of its annual report for the
fiscal year ended November 30, 1995, to any stockholder upon request. Such
requests should be directed to Emerging Tigers Fund, Inc., P.O. Box 9011,
Princeton, New Jersey 08543-9011, Attention: Michael J. Hennewinkel or to
1-800-456-4587 ext. 123.
STOCKHOLDER PROPOSALS
A stockholder proposal intended to be presented at any subsequent meeting
of stockholders of the Fund must be received by the Fund in a reasonable time
before the Board of Directors solicitation relating to such meeting is to be
made in order to be considered in the Fund's proxy statement and form of proxy
relating to the meeting.
By Order of the Board of Directors
MICHAEL J. HENNEWINKEL
Secretary
Dated: February 21, 1996
29
<PAGE> 33
EXHIBIT A
EMERGING TIGERS FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
EMERGING TIGERS FUND, INC. a Maryland corporation (the "Corporation"), does
hereby certify to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The name of the Corporation is Emerging Tigers Fund, Inc. The
Corporation desires to amend and restate its charter as currently in effect. The
original Articles of Incorporation were filed with the State Department of
Assessments and Taxation of Maryland on December 23, 1993.
SECOND: These Articles of Amendment and Restatement contain a provision
changing the name of the Corporation from "Emerging Tigers Fund, Inc." to
"Merrill Lynch Emerging Tigers Fund, Inc."
THIRD: Pursuant to Section 2-609 of the Maryland Corporations and
Associations Code, these Articles of Amendment and Restatement restate and amend
the provisions of the Articles of Incorporation of the Corporation.
FOURTH: The text of the charter of the Corporation is hereby restated to
read in its entirety as follows:
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH EMERGING TIGERS FUND, INC.
ARTICLE I
NAME
The name of the corporation is MERRILL LYNCH EMERGING TIGERS FUND, INC.
ARTICLE II
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed, the powers,
rights and privileges that the Corporation shall be authorized to exercise and
enjoy, and the business or objects to be transacted, carried on and promoted by
it are as follows:
(1) To conduct and carry on the business of an investment company of
the management type.
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or
kind of consideration now or hereafter permitted by the General Laws of the
State of Maryland and by these Articles of Incorporation, as its Board of
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Directors may determine; provided, however, that the value of the
consideration per share to be received by the Corporation upon the sale or
other disposition of any shares of its capital stock shall not be less than
the net asset value per share of such capital stock outstanding at the time
of such event.
(4) To exchange, classify, reclassify, change the designation of,
convert, rename, redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its issued or unissued capital
stock, in any manner and to the extent now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of
Incorporation.
(5) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of all or any of the foregoing purposes or
objects.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
this State is The Corporation Trust Incorporated, a corporation of this State,
and the post office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202.
ARTICLE IV
CAPITAL STOCK
(1) The total number of shares of capital stock which the Corporation shall
have authority to issue is Four Hundred Million (400,000,000) shares, of the par
value of Ten Cents ($.10) per share, and of the aggregate par value of Forty
Million Dollars ($40,000,000). The capital stock initially is classified into
one class, consisting of Four Hundred Million (400,000,000) shares of Class A
Common Stock.
(2) The Board of Directors may classify and reclassify any unissued shares
of capital stock into one or more additional or other classes or series as may
be established from time to time by setting or changing in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.
(3) The Board of Directors may classify and reclassify any issued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions,
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limitations as to dividends, qualifications or terms or conditions of redemption
of such shares of stock and pursuant to such classification or reclassification
to increase or decrease the number of authorized shares of any existing class or
series; provided, however, that any such classification or reclassification
shall not substantially adversely affect the rights of holders of such issued
shares. The Board's authority pursuant to this paragraph shall include, but not
be limited to, the power to vary among all of the holders of a particular class
or series (a) the length of time shares must be held prior to reclassification
to shares of another class or series (the "Holding Period(s)"), (b) the manner
in which the time for such Holding Period(s) is determined and (c) the class or
series into which the particular class or series is being reclassified;
provided, however, that, subject to the first sentence of this section, with
respect to holders of the Corporation's shares issued on or after the date of
the Corporation's first effective prospectus which sets forth Holding Period(s),
the Holding Period(s), the manner in which the time for such Holding Period(s)
is determined and the class or series into which the particular class or series
is being reclassified shall be disclosed in the Corporation's prospectus or
statement of additional information in effect at the time such shares, which are
the subject of the reclassification, were issued.
(4) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, the holders of each class or series of capital stock shall be entitled to
dividends and distributions in such amounts and at such times as may be
determined by the Board of Directors, and the dividends and distributions paid
with respect to the various classes or series of capital stock may vary among
such classes and series. Dividends on a class or series may be declared or paid
only out of the net assets of that class or series. Expenses related to the
distribution of, and other identified expenses that should properly be allocated
to, the shares of a particular class or series of capital stock may be charged
to and borne solely by such class or series and the bearing of expenses solely
by a class or series of capital stock may be appropriately reflected (in a
manner determined by the Board of Directors) and cause differences in the net
asset value attributable to, and the dividend, redemption and liquidation rights
of, the shares of each class or series of capital stock.
(5) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article II, Section (4) hereof and
including any Articles Supplementary creating any class or series of capital
stock, on each matter submitted to a vote of stockholders, each holder of a
share of capital stock of the Corporation shall be entitled to one vote for each
share standing in such holder's name on the books of the Corporation,
irrespective of the class or series thereof, and all shares of all classes and
series shall vote together as a single class; provided, however, that (a) as to
any matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended, and in effect from
time to time, or any rules, regulations or orders issued thereunder, or by the
Maryland General Corporation Law, such requirement as to a separate vote by that
class or series shall apply in lieu of a general vote of all classes and series
as described above, (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more classes or series,
then, subject to paragraph (c) below, the shares of all other classes and series
not entitled to a separate class vote shall vote as a single class and (c) as to
any matter which does not affect the interest of a particular class or series,
such class or series shall not be entitled to any vote and only the holders of
shares of the affected classes and series, if any, shall be entitled to vote.
(6) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of capital stock of the Corporation (or of any class or series entitled
to vote thereon as a separate class or series) to take or authorize any action,
the
A-3
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Corporation is hereby authorized (subject to the requirements of the Investment
Company Act of 1940, as amended, and in effect from time to time, and any rules,
regulations and orders issued thereunder) to take such action upon the
concurrence of a majority of the votes entitled to be cast by holders of capital
stock of the Corporation (or a majority of the votes entitled to be cast by
holders of a class or series entitled to vote thereon as a separate class or
series).
(7) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of each class or
series of capital stock of the Corporation shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation, to
share ratably in the remaining net assets of the Corporation applicable to that
class or series.
(8) Any fractional shares shall carry proportionately all of the rights of
a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(9) The presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast shall constitute a quorum at any
meeting of stockholders, except with respect to any matter which requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast by each class entitled to vote as a
separate class shall constitute a quorum.
(10) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter and the By-Laws of the
Corporation. As used in the charter of the Corporation, the terms "charter" and
"Articles of Incorporation" shall mean and include the Articles of Incorporation
of the Corporation as amended, supplemented and restated from time to time by
Articles of Amendment, Articles Supplementary, Articles of Restatement or
otherwise.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall be six (6), which
number may be increased pursuant to the By-Laws of the Corporation but shall
never be less than three (3). The names of the directors who shall act until the
next annual meeting and until their successors are duly elected and qualify are:
Arthur Zeikel
Donald Cecil
Edward H. Meyer
Charles C. Reilly
Richard R. West
Edward D. Zinbarg
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereafter authorized, for such consideration as the Board of
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Directors may deem advisable, subject to such limitations as may be set forth in
these Articles of Incorporation or in the By-Laws of the Corporation or in the
General Laws of the State of Maryland.
(3) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine.
(4) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland, subject to the requirements of the Investment Company Act of 1940,
as amended. No amendment of these Articles of Incorporation or repeal of any
provision hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940, as
amended, no director or officer of the Corporation shall be personally liable to
the Corporation or its security holders for money damages. No amendment of these
Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.
(6) The Board of Directors of the Corporation is vested with the sole
power, to the exclusion of the stockholders, to make, alter or repeal from time
to time any of the By-Laws of the Corporation except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.
(7) The Board of Directors of the Corporation from time to time may change
the Corporation's name, without the vote or consent of the stockholders of the
Corporation, in any manner and to the extent now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of Incorporation.
ARTICLE VI
REDEMPTION
Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of Directors of the Corporation. Payment of the redemption price shall be
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made in cash by the Corporation at such time and in such manner as may be
determined from time to time by the Board of Directors of the Corporation.
ARTICLE VII
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which such reserves
or charges shall have been created, shall have been paid or discharged or shall
be then or thereafter required to be paid or discharged), as to the price of any
security owned by the Corporation or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors as to whether any transaction
constitutes a purchase of securities on "margin," a sale of securities "short,"
or an underwriting or the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to (a) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any director
or officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE VIII
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
ARTICLE IX
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, in any manner now or
hereafter prescribed by statute, including any amendment which alters the
contract rights, as expressly set forth in the charter, of any outstanding stock
and substantially
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adversely affects the stockholder's rights, and all rights conferred upon
stockholders herein are granted subject to this reservation.
FIFTH: The authorized capital stock of the Corporation has been increased
by these Articles of Amendment and Restatement. Immediately before the amendment
effected by these Articles of Amendment and Restatement, the Corporation had the
authority to issue Two Hundred Million (200,000,000) shares of capital stock,
all of one class of stock, par value of Ten Cents ($.10) per share with an
aggregate par value of Twenty Million Dollars ($20,000,000), formerly designated
"Common Stock," and now designated by the Articles of Amendment and Restatement
as "Class A Common Stock."
The Corporation effected, in the manner and by the vote required by the
Corporation's charter and the laws of the State of Maryland, an increase in the
total number of authorized shares of the Corporation.
After this increase in the number of authorized shares of capital stock of
the Corporation, the Corporation will have authority to issue Four Hundred
Million (400,000,000) shares of Class A Common Stock, par value of Ten Cents
($.10) per share with an aggregate par value of Forty Million Dollars
($40,000,000).
SIXTH: These Articles of Amendment and Restatement have been effected in
the manner and by the vote required by the Corporation's charter and the laws of
the State of Maryland. Pursuant to Section 2-604 of the Maryland Corporations
and Associations Code, these Articles of Amendment and Restatement were advised
by the Board of Directors of the Corporation and approved by the stockholders.
IN WITNESS WHEREOF, EMERGING TIGERS FUND, INC. has caused these presents to
be signed in its name and on its behalf by its Executive Vice President and
attested to by its Secretary as of the day of , 1996.
<TABLE>
<S> <C>
EMERGING TIGERS FUND, INC.
ATTEST: (a Maryland corporation)
By:
- -------------------------------------------- --------------------------------------------
Michael J. Hennewinkel Terry K. Glenn
Secretary Executive Vice President
</TABLE>
THE UNDERSIGNED, Executive Vice President of EMERGING TIGERS FUND, INC., a
Maryland corporation, who executed on behalf of the Corporation the foregoing
Articles of Amendment and Restatement of which this certificate is made a part,
hereby acknowledges in the name and on behalf of the Corporation the foregoing
Articles of Amendment and Restatement to be the corporate act of the Corporation
and hereby certifies that to the best of his knowledge, information and belief
the matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties for
perjury.
------------------------------------
Terry K. Glenn
Executive Vice President
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EXHIBIT B
Set forth below are the Fund's current fundamental and non-fundamental
investment restrictions:
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Fund may not:
1. Invest more than 25% of its assets, taken at market value at the
time of each investment, in the securities of issuers in any particular
industry (excluding the U.S. Government and its agencies and
instrumentalities).
2. Make investments for the purpose of exercising control or
management. Investments by the Fund in wholly-owned investment entities
created under the laws of certain countries will not be deemed the making
of investments for the purpose of exercising control or management.
3. Purchase or sell real estate, 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.
4. Make loans to other persons, except that the acquisition of bonds,
debentures, loan participations or other corporate debt securities and
investment in government obligations, or participations therein, short-term
commercial paper, certificates of deposit, bankers' acceptances and
repurchase agreements and purchase and sale contracts shall not be deemed
to be the making of a loan, and except further that the Fund may lend its
portfolio securities as set forth in (5) below.
5. Lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value; provided that such loans may only be made in
accordance with the guidelines set forth above.
6. Issue senior securities (including borrowing money) except that in
the event it converts to an open-end investment company, the Fund is
authorized to borrow up to 20% of its total assets in order to meet
redemptions; or pledge its assets other than to secure such issuances or in
connection with hedging transactions, short sales, when-issued and forward
commitment transactions and similar investment strategies.
7. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter in selling portfolio securities.
8. Purchase or sell interests (including leases) in oil, gas or other
mineral exploration or development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or development activities.
NON-FUNDAMENTAL INVESTMENT RESTRICTION
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. The payment by the Fund of initial or
variation margin in connection with futures or related options
transactions, if applicable, shall not be considered the purchase of a
security on margin.
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EXHIBIT C
INVESTMENT ADVISORY AGREEMENT
(REVISIONS ARE REFLECTED BY UNDERSCORING
ADDITIONS AND BRACKETING DELETIONS.)
AGREEMENT made this [1st] day of [February, 1994], 1996, by and between
MERRILL LYNCH EMERGING TIGERS FUND, INC., a Maryland corporation [(](hereinafter
referred to as the "Fund"), and FUND ASSET MANAGEMENT, L.P., a Delaware limited
partnership [(] (hereinafter referred to as the "Investment Adviser").
WITNESSETH:
WHEREAS, the Fund is engaged in business as [a closed-end management] an
open-end investment company registered under the Investment Company Act of 1940,
as amended [(] (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Investment Adviser is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Investment Adviser to [provide]
render management and investment advisory services to the Fund in the manner and
on the terms hereinafter set forth; and
WHEREAS, the Investment Adviser is willing to provide management and
investment advisory services to the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the [premises] promises and the
covenants hereinafter contained, the Fund and the Investment Adviser hereby
agree as follows:
ARTICLE I
DUTIES OF THE INVESTMENT ADVISER
The Fund hereby employs the Investment Adviser to act as a manager [of] and
[an] investment adviser [to] of the Fund and to furnish [,] or arrange for [its]
affiliates to furnish, the management and investment advisory services described
below, subject to [the] policies of, review by and overall control of [,] the
Board of Directors of the Fund (the "Directors"), for the period and on the
terms and conditions set forth in this Agreement. The Investment Adviser hereby
accepts such employment and agrees during such period, at its own expense, to
render, or arrange for the rendering of, such services and to assume the
obligations herein set forth for the compensation provided for herein. The
Investment Adviser and its affiliates shall for all purposes herein [shall] be
deemed to be an independent [contractors] contractor and shall, unless otherwise
expressly provided or authorized, [shall] have no authority to act for or
represent the Fund in any way or otherwise be deemed [agents] an agent of the
Fund.
(a) Management and Administrative Services. The Investment Adviser shall
perform (or arrange for [its] the performance by affiliates [to perform)] of)
the management and administrative services necessary for the operation of the
Fund [,] including administering shareholder accounts and handling shareholder
relations. The Investment Adviser shall provide the Fund with office space,
[facilities,] equipment and
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[necessary personnel] facilities and such other services as the Investment
Adviser, subject to review by the [Board of] Directors, shall from time to time
[shall] determine to be necessary or useful to perform its obligations under
this Agreement. The Investment Adviser [,] shall also, on behalf of the Fund,
[shall] conduct relations with custodians, depositories, transfer agents,
[pricing agents,] dividend disbursing agents, other shareholder servicing
agents, accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity
deemed to be necessary or desirable. The Investment Adviser shall generally
[shall] monitor the Fund's compliance with investment policies and restrictions
as set forth in [filings made by] the currently effective prospectus and
statement of additional information relating to the shares of the Fund under the
[Federal securities laws] Securities Act of 1933, as amended (the "Prospectus"
and "Statement of Additional Information", respectively). The Investment Adviser
shall make reports to the [Board of] Directors of its performance of obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Fund as it shall determine to be
desirable.
(b) Investment Advisory Services. The Investment Adviser shall provide (or
arrange for [its] affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time [may] consider
necessary for the proper supervision of the assets of the Fund, shall furnish
continuously an investment program for the Fund and shall determine from time to
time which securities shall be purchased, sold or exchanged and what portion of
the assets of the Fund shall be held in the various securities in which the Fund
invests, options, futures, options on futures or cash, subject always to the
restrictions [of] set forth in the Articles of Incorporation and [the] By-Laws
of the Fund, as amended from time to time, the provisions of the Investment
Company Act and the statements relating to the Fund's investment [objective]
objectives, investment policies and investment restrictions as the same are set
forth in [filings made by the Fund under the Federal securities laws] the
Prospectus and Statement of Additional Information. The Investment Adviser shall
[make decisions for the Fund as to foreign currency matters. The Investment
Advisor shall] also make decisions for the Fund as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining to
the Fund's portfolio securities shall be exercised. Should the Directors at any
time, however, make any definite determination as to investment policy and
notify the Investment Adviser thereof in writing, the Investment Adviser shall
be bound by such determination for the period, if any, specified in such notice
or until similarly notified that such determination has been revoked. The
Investment Adviser shall take, on behalf of the Fund, [shall take] all actions
which it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or sale
of portfolio securities for the Fund's account with brokers or dealers selected
by it, and to that end, the Investment Adviser is authorized as the agent of the
Fund to give instructions to the [custodian] Custodian of the Fund as to
deliveries of securities and payments of cash for the account of the Fund. In
connection with the selection of such brokers or dealers and the placing of such
orders with respect to assets of the Fund, the Investment Adviser is directed at
all times to seek to obtain execution and [prices] price within the policy
guidelines determined by the [Board of Directors and set forth in filings made
by the Fund under the Federal securities laws] Directors as set forth in the
Prospectus and Statement of Additional Information. Subject to this requirement
and the provisions of the Investment Company Act, the Securities Exchange Act of
1934, as amended, and other applicable provisions of law, the Investment Adviser
may select brokers or dealers with which it or the Fund is affiliated.
(c) Notice Upon Change in Partners of Investment Adviser. The Investment
Adviser is a limited partnership [and its limited partners are] of which Merrill
Lynch & Co., Inc. is the sole limited partner and
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[Fund Asset Management, Inc. and its general partner is] Princeton Services,
Inc. is the sole general partner. The Investment Adviser will notify the Fund of
any change in the membership of the partnership within a reasonable time after
such change.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
(a) The Investment Adviser. The Investment Adviser assumes and shall
[provide] pay for maintaining the staff and personnel necessary to perform its
obligations under this Agreement, and shall [assume and pay or cause to be paid
all expenses incurred in connection with the maintenance of such staff and
personnel, and,] at its own expense, [shall] provide the office space,
[facilities,] equipment and [necessary personnel] facilities which it is
obligated to provide under Article I hereof, and shall pay all compensation of
officers of the Fund and all Directors [of the Fund] who are affiliated persons
of the Investment Adviser.
(b) The Fund. The Fund assumes[,] and shall pay or cause to be paid[,] all
other expenses of the Fund (except for the expenses paid by the Distributor),
including, without limitation: [taxes, expenses for legal and auditing services,
costs of printing proxies, stock certificates, shareholder reports and
prospectuses, charges of the custodian, any sub custodian and transfer agent]
redemption expenses, expenses of portfolio transactions, expenses of registering
shares under federal and state securities laws, pricing costs (including the
daily calculation of net asset value), expenses of printing shareholder reports,
stock certificates, prospectuses and statements of additional information,
Securities and Exchange Commission fees, [expenses of registering the shares
under Federal, state and foreign laws] interest, taxes, custodian and transfer
agency fees, fees and actual out-of-pocket expenses of Directors who are not
affiliated persons of the Investment Adviser, [accounting and pricing costs
(including the daily calculation of the net asset value), insurance, interest,
brokerage costs, litigation and other extraordinary or non recurring expenses]
fees for legal and auditing services, litigation expenses, costs of printing
proxies and other expenses related to shareholder meetings, and other expenses
properly payable by the Fund. It is also [is] understood that the Fund will
reimburse the Investment Adviser for its costs [incurred] in providing
accounting services to the Fund. The Distributor will pay certain of the
expenses of the Fund incurred in connection with the continuous offering of Fund
shares.
ARTICLE III
COMPENSATION OF THE INVESTMENT ADVISER
(a) [Investment Advisory] Management Fee. For the services rendered, the
facilities furnished and [the] expenses assumed by the Investment Adviser, the
Fund shall pay to the Investment Adviser at the end of each calendar month a fee
based upon the average [weekly] daily value of the net assets of the Fund, as
determined and computed in accordance with the description of the determination
of net asset value contained in the Prospectus and Statement of Additional
Information, at the annual rate of 1.00% of the average [weekly] daily net
assets of the Fund [("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). 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
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with the net assets at the last business day of the prior week], commencing on
the day following effectiveness hereof. If this Agreement becomes effective
subsequent to the first day of a month or [terminates] shall terminate before
the last day of a month, compensation for that part of the month this Agreement
is in effect shall be prorated in a manner consistent with the calculation of
the fee as set forth above. Subject to the provisions of subsection (b) hereof,
payment of the Investment Adviser's compensation for the preceding month shall
be made as promptly as possible after completion of the computations
contemplated by subsection (b) hereof. During any period when the determination
of net asset value is suspended by the [Board of] Directors, the [average] net
asset value of a share [for] as of the last [week] business day prior to such
suspension shall for this purpose [shall] be deemed to be the net asset value at
the close of each succeeding [week] business day until it is again [is]
determined.
(b) Expense Limitations. In the event the operating expenses of the Fund,
including amounts payable to the Investment Adviser pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect [,] exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Investment Adviser shall reduce
its management [and investment advisory] fee by the extent of such excess and,
if required pursuant to any such laws or regulations, will reimburse the Fund in
the amount of such excess; provided, however, [that] to the extent permitted by
law, there shall be excluded from such expenses the amount of any interest,
taxes, brokerage [fees and] commissions, distribution fees and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by the
Fund. Whenever the expenses of the Fund exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the management fee due to the Investment Adviser. Should two or more
such expense limitations be applicable as at the end of the last business day of
the month, that expense limitation which results in the largest reduction in the
Investment Adviser's fee shall be applicable.
ARTICLE IV
LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER
The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder. As used in this
Article [IV] V, the term "Investment Adviser" shall include any affiliates of
the Investment Adviser performing services for the Fund contemplated hereby and
directors, officers and employees of the Investment Adviser and [of] such
affiliates.
ARTICLE V
ACTIVITIES OF THE INVESTMENT ADVISER
The services of the Investment Adviser to the Fund are not to be deemed to
be exclusive[;], and the Investment Adviser and any person controlled by or
under common control with the Investment Adviser (for purposes of [this] Article
[V] VI referred to as "affiliates") [are] is free to render services to others.
It is
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understood that Directors, officers, employees and shareholders of the Fund are
or may become interested in the Investment Adviser and its affiliates, as
directors, officers, employees and shareholders or otherwise and that directors,
officers, employees and shareholders of the Investment Adviser and its
affiliates are or may become similarly interested in the Fund, and that the
Investment Adviser and directors, officers, employees, [partners and
shareholders or otherwise, and that directors, officers, employees, partners and
shareholders of the Investment Adviser and its affiliates are or may become
similarly interested in the Fund, and that the Investment Adviser and directors,
officers, employees,] partners and shareholders of its affiliates may become
interested in the Fund as [shareholders] shareholder or otherwise.
ARTICLE VI
DURATION AND TERMINATION OF THIS [AGREEMENT] CONTRACT
This Agreement shall become effective as of the date [first above written]
of the commencement of operations of the Fund and shall remain in force until
[February 1, 1996], 1998 and thereafter, but only so long as such continuance is
specifically [is] approved at least annually by (i) the [Board of] Directors [of
the Fund], or by the vote of a majority of the outstanding voting securities of
the Fund, and (ii) a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the [Board of] Directors or by [the] vote of a majority of the
outstanding voting securities of the Fund, or by the Investment Adviser, on
sixty days' written notice to the other party. This Agreement shall [terminate]
automatically terminate in the event of its assignment.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically [is] approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the [rules] Rules and [regulations] Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under [said] the Investment Company Act.
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ARTICLE IX
GOVERNING LAW
This Agreement shall be [governed by and] construed in accordance with
[the] laws of the State of New York and the applicable provisions of the
Investment Company Act. To the extent that the applicable laws of the State of
New York, or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the [date] day and year first above written.
MERRILL LYNCH EMERGING TIGERS FUND, INC.
By[:]
--------------------------------------------
Title: [Authorized signatory]
FUND ASSET MANAGEMENT, L.P.
By[:]
--------------------------------------------
Title: [Authorized signatory]
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EMERGING TIGERS FUND, INC.
P. O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and
James W. Harshaw, III as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse hereof, all the shares of Common Stock of
Emerging Tigers Fund, Inc. (the "Fund") held of record by the undersigned
on February 14, 1996 at the annual meeting of stockholders of the Fund to
be held on March 27, 1996, or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
(Continued and to be signed on the reverse side)
1. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees
contrary below) / / listed below / /
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Donald Cecil, Edward H. Meyer, Charles C. Reilly, Richard R. West, Arthur
Zeikel, Edward D. Zinbarg
2. Proposal to ratify the selection of Deloitte & Touche LLP as the
independent auditors of the Fund to serve for the current fiscal year.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to convert the Fund from a closed-end investment company
to an open-end investment company.
FOR / / AGAINST / / ABSTAIN / /
4. Proposal to amend the fundamental investment restrictions of the Fund.
FOR / / AGAINST / / ABSTAIN / /
5. Proposal to approve the Amended Investment Advisory Agreement.
FOR / / AGAINST / / ABSTAIN / /
Conversion of the Fund to open-end status requires approval of Items 3,
4 and 5.
6. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both
<PAGE> 48
should sign. When signing as attorney or as
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please
sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized persons.
Dated: , 1996
-------------------------
X
-----------------------------------
Signature
X
------------------------------------
Signature, if held jointly
PLEASE MARK BOXES /X/ OR /X/ IN BLUE OR BLACK INK. SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
