<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1994
SECURITIES ACT FILE NO. 33-53887
INVESTMENT COMPANY ACT FILE NO. 811-7177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [_]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 1 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
COUNSEL FOR THE PROGRAM: MARK B. GOLDFUS, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET
ONE WORLD TRADE CENTER MANAGEMENT
NEW YORK, NEW YORK 10048-0557 P.O. BOX 9011
ATTENTION: THOMAS R. SMITH, JR., ESQ. PRINCETON, N.J. 08543-9011
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the registration statement.
----------------
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF COMMON STOCK
UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
------------- --------
<C> <S> <C>
PART A
Item 1. Cover Page.............. Cover Page
Item 2. Synopsis................ Fee Table
Item 3. Condensed Financial
Information............. Not Applicable
Item 4. General Description of
Registrant.............. Investment Objectives and Policies;
Additional Information
Item 5. Management of the Fund.. Fee Table; Management of the Program;
Portfolio Transactions and Brokerage;
Inside Back Cover Page
Item 5A. Management's Discussion
of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other
Securities.............. Cover Page; Additional Information
Item 7. Purchase of Securities
Being Offered........... Cover Page; Fee Table; Merrill Lynch
Select Pricing SM System; Purchase of
Shares; Shareholder Services; Additional
Information; Inside Back Cover Page
Item 8. Redemption or
Repurchase.............. Fee Table; Merrill Lynch Select Pricing SM
System; Purchase of Shares; Shareholder
Services; Redemption of Shares
Item 9. Pending Legal
Proceedings............. Not Applicable
PART B
Item 10. Cover Page.............. Cover Page
Item 11. Table of Contents....... Back Cover Page
Item 12. General Information and
History................. Not Applicable
Item 13. Investment Objectives
and Policies............ Investment Objectives and Policies
Item 14. Management of the Fund.. Management of the Fund
Item 15. Control Persons and
Principal Holders of
Securities.............. Management of the Program
Item 16. Investment Advisory and
Other Services.......... Management of the Program; Purchase of
Shares; General Information
Item 17. Brokerage Allocation and
Other Practices......... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other
Securities.............. General Information
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered........... Purchase of Shares; Redemption of Shares;
Determination of Net Asset Value;
Shareholder Services
Item 20. Tax Status.............. Dividends, Distributions and Taxes
Item 21. Underwriters............ Purchase of Shares
Item 22. Calculation of
Performance Data........ Performance Data
Item 23. Financial Statements.... Independent Auditors' Reports; Statements
of Assets and Liabilities
PART C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration
Statement.
<PAGE>
PROSPECTUS
DECEMBER , 1994
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO QUALITY U.S. GOVERNMENT SECURITIES PORTFOLIO
BOND PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a
professionally managed, open-end investment company. The Program consists of
four separate portfolios: the Fundamental Value Portfolio, the Quality Bond
Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity
Portfolio (each a "Portfolio"). Each Portfolio has its own separate investment
objectives and may employ a variety of instruments and techniques to enhance
income and to hedge against market risk and, in the case of the Fundamental
Value and Global Opportunity Portfolios, currency risk. Investments on an
international basis involve risks not typically associated with investments in
domestic securities. See "Risk Factors and Special Considerations". There can
be no assurance that the investment objectives of any Portfolio will be
achieved.
(Cover continues on next page)
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------
This Prospectus is a concise statement of information about the Program that
is relevant to making an investment in the Program. This Prospectus should be
retained for future reference. A statement containing additional information
about the Program, dated December , 1994 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and
can be obtained without charge, by calling or by writing the Program at the
above telephone number or address. The Statement of Additional Information is
hereby incorporated by reference into this Prospectus.
-----------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
----------------
Each Portfolio is a separate series of the Program issuing its own shares
pursuant to the Merrill Lynch Select Pricing SM System. Each Portfolio offers
four classes of shares, each with a different combination of sales charges,
ongoing fees and other features. The Merrill Lynch Select Pricing SM System
permits an investor to choose the method of purchasing shares that the
investor believes is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other relevant
circumstances. See "Merrill Lynch Select Pricing SM System" on page 8.
Shares of each Portfolio are available for purchase solely by holders of
individual retirement plans, individual retirement rollover accounts and
simplified employee pension plans (collectively "IRAs") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as
custodian. Merrill Lynch has advised the Program that it will not charge an
annual account fee upon any IRA which participates in the Merrill Lynch
Retirement Asset Builder SM Service, receives additional contributions of at
least $250 annually and is invested solely in one or more of the Program's
Portfolios or a money market fund advised by Merrill Lynch Asset Management,
L.P. ("MLAM" or the "Investment Adviser"), or its affiliates. The minimum
initial purchase in any Portfolio is $100 and the minimum subsequent purchase
is $1. Merrill Lynch may charge its customers a processing fee (presently
$4.85) for confirming purchases and repurchases. See "Purchase of Shares" and
"Redemption of Shares". The holder of each IRA is responsible for making
investment decisions concerning the funds contributed to his or her IRA.
To permit the Program to invest the net proceeds from the sale of its shares
in an orderly manner, the Program may, from time to time, suspend the sale of
its shares, except for dividend reinvestments.
2
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of each of the Portfolios follows:
<TABLE>
<CAPTION>
FUNDAMENTAL VALUE PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------------------------- -------------------------------------------------
CLASS A(A) CLASS B(B) CLASS C CLASS D CLASS A(A) CLASS B(B) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price).... 5.25%(c) None None 5.25%(c) 4.00%(c) None None 4.00%(c)
Sales Charge
Imposed on
Dividend
Reinvestments...... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower).............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory Fees(f)... 0.65% 0.65% 0.65% 0.65% 0.50% 0.50% 0.50% 0.50%
12b-1 Fees(g):
Account
Maintenance Fees. None 0.25% 0.25% 0.25% None 0.25% 0.25% 0.25%
Distribution
Fees............. None 0.75%(i) 0.75% None None 0.50%(j) 0.55% None
Other Expenses:
Custodial Fees... 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
Shareholder Ser-
vicing Costs(h).. 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26%
Other............ 0.20% 0.20% 0.20% 0.20% 0.21% 0.21% 0.21% 0.21%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex-
penses........... 0.48% 0.48% 0.48% 0.48% 0.49% 0.49% 0.49% 0.49%
Total Portfolio ---- ---- ---- ---- ---- ---- ---- ----
Operating Ex-
penses............. 1.13% 2.13% 2.13% 1.38% 0.99% 1.74% 1.79% 1.24%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
(footnotes appear on next page)
3
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
------------------------------------------------- -------------------------------------------------
CLASS A(A) CLASS B(B) CLASS C CLASS D CLASS A(A) CLASS B(B) CLASS C CLASS D
---------- ------------------- -------- --------- ---------- ------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Charge Imposed on
Purchases (as a
percentage of
offering price)... 4.00%(c) None None 4.00%(c) 5.25%(c) None None 5.25%(c)
Sales Charge
Imposed on
Dividend
Reinvestments..... None None None None None None None None
Deferred Sales
Charge (as a
percentage of None(d) 4.0% during 1.0% for None(d) None(d) 4.0% during 1.0% for None(d)
original purchase the first year, one year the first year, one year
price or decreasing 1.0% decreasing 1.0%
redemption annually thereafter annually thereafter
proceeds, to 0.0% after to 0.0% after
whichever is the fourth year the fourth year
lower)............
Exchange Fee....... None None None None None None None None
ANNUAL PROGRAM
OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET
ASSETS)(E):
Investment
Advisory
Fees(f)........... 0.50% 0.50% 0.50% 0.50% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(g):
Account
Maintenance
Fees............ None 0.25% 0.25% 0.25% None 0.25% 0.25% 0.25%
Distribution
Fees............ None 0.50%(j) 0.55% None None 0.75%(i) 0.75% None
Other Expenses:
Custodial Fees... 0.02% 0.02% 0.02% 0.02% 0.08% 0.08% 0.08% 0.08%
Shareholder Ser-
vicing Costs(h). 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% 0.26%
Other............ 0.21% 0.21% 0.21% 0.21% 0.20% 0.20% 0.20% 0.20%
---- ---- ---- ---- ---- ---- ---- ----
Total Other Ex-
penses.......... 0.49% 0.49% 0.49% 0.49% 0.54% 0.54% 0.54% 0.54%
Total Portfolio ---- ---- ---- ---- ---- ---- ---- ----
Operating Ex-
penses............ 0.99% 1.74% 1.79% 1.24% 1.29% 2.29% 2.29% 1.54%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
- -------
(a) Class A shares are sold to a limited group of investors including existing
Class A shareholders. See "Purchase of Shares--Initial Sales Charge
Alternatives--Class A and Class D Shares"--page 34.
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase for the Fundamental Value and Global
Opportunity Portfolios and approximately ten years after initial purchase
for the Quality Bond and U.S. Government Securities Portfolios. See
"Purchase of Shares--Deferred Sales Charge Alternatives--Class B and Class
C Shares"--page 35.
(c) Reduced for purchases of $25,000 and over decreasing to 0.00% for purchases
of $1,000,000 or more. See "Purchase of Shares--Initial Sales Charge
Alternatives--Class A and Class D Shares"--page 34.
(d) Under certain limited conditions, purchases of Class A and Class D shares
will be subject to a contingent deferred sales charge ("CDSC") rather than
an initial sales charge.
(e) Information under "Other Expenses" is estimated for the fiscal year ending
January 31, 1995.
(f) See "Management of the Program--Management and Advisory Arrangements"--page
28.
(g) See "Purchase of Shares--Distribution Plans"--page 38.
(h) See "Management of the Program--Transfer Agency Services"--page 29.
(i) Class B shares convert to Class D shares automatically after approximately
eight years and cease being subject to distribution fees.
(j) Class B shares convert to Class D shares automatically after approximately
ten years and cease being subject to distribution fees.
4
<PAGE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE
EXPENSES PAID
OPERATING FOR THE PERIOD OF:
EXPENSE ---------------------
RATIO 1 YEAR 3 YEARS
--------- --------- ---------
<S> <C> <C> <C>
An investor in the Portfolios (and classes)
listed below would pay the following
expenses on a $1,000 investment including,
for Class A and Class D shares of the
Fundamental Value and Global Opportunity
Portfolios, the maximum $52.50 initial sales
charge and, for Class A and Class D shares
of the Quality Bond and U.S. Government
Securities Portfolios, the maximum $40.00
initial sales charge and assuming (1) the
Total Program Operating Expenses for each
class set forth above; (2) a 5% annual
return throughout the periods and (3)
redemption at the end of the period:
Fundamental Value Portfolio
Class A.................................. 1.13% $63 $87
Class B.................................. 2.13% $62 $87
Class C.................................. 2.13% $32 $67
Class D.................................. 1.38% $66 $94
Quality Bond Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $58 $75
Class C.................................. 1.79% $28 $56
Class D.................................. 1.24% $52 $78
U.S. Government Securities Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $58 $75
Class C.................................. 1.79% $28 $56
Class D.................................. 1.24% $52 $78
Global Opportunity Portfolio
Class A.................................. 1.29% $65 $91
Class B.................................. 2.29% $63 $92
Class C.................................. 2.29% $33 $72
Class D.................................. 1.54% $67 $99
An investor would pay the following expenses
on the same $1,000 investment assuming no
redemption at the end of the period:
Fundamental Value Portfolio
Class A.................................. 1.13% $63 $87
Class B.................................. 2.13% $22 $67
Class C.................................. 2.13% $22 $67
Class D.................................. 1.38% $66 $94
Quality Bond Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $18 $55
Class C.................................. 1.79% $18 $56
Class D.................................. 1.24% $52 $78
U.S. Government Securities Portfolio
Class A.................................. 0.99% $50 $70
Class B.................................. 1.74% $18 $55
Class C.................................. 1.79% $18 $56
Class D.................................. 1.24% $52 $78
Global Opportunity Portfolio
Class A.................................. 1.29% $65 $91
Class B.................................. 2.29% $23 $72
Class C.................................. 2.29% $23 $72
Class D.................................. 1.54% $67 $99
</TABLE>
5
<PAGE>
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in a Portfolio will bear directly or
indirectly. The Example set forth above assumes reinvestment of all dividends
and distributions and utilizes a 5% annual rate of return as mandated by
Securities and Exchange Commission ("Commission") regulations. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RATES OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Class B and Class C
shareholders who hold their shares for an extended period of time may pay more
in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charges permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD"). Merrill Lynch may
charge its customers a processing fee (presently $4.85) for confirming
purchases and redemptions. Purchases and redemptions directly through the
Program's transfer agent are not subject to the processing fee. See "Purchase
of Shares" and "Redemption of Shares".
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus and the Statement
of Additional Information.
THE PROGRAM
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a
professionally managed, open-end investment company consisting of four
separate portfolios: the Fundamental Value Portfolio, the Quality Bond
Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity
Portfolio.
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio pursues its investment objectives through the separate
investment policies described below:
Fundamental Value Portfolio is a diversified portfolio seeking capital
appreciation and, secondarily, income by investing in securities, primarily
(i.e., at least 65% of the Portfolio's assets) in equities, that the
management of the Portfolio believes are undervalued and therefore represent
investment value. The Portfolio seeks special opportunities in securities that
are selling at a discount either from book value or historical price-earnings
ratios, or seem capable of recovering from temporarily out of favor
considerations. Particular emphasis is placed on securities which provide an
above-average dividend return and sell at a below-average price-earnings
ratio. The Portfolio may invest up to 30% of its total assets in securities of
foreign issuers. See "Risk Factors and Special Considerations".
Quality Bond Portfolio is a diversified portfolio seeking income and,
secondarily, capital appreciation by investing primarily in long-term
corporate bonds that are rated A or better by a nationally recognized rating
agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors
Service, Inc. ("Moody's") or Fitch Investors Services, Inc. ("Fitch"), or that
possess, in the judgment of the Investment Adviser, similar credit
characteristics.
U.S. Government Securities Portfolio is a diversified portfolio seeking high
current return by investing in U.S. Government and Government agency
securities, including Government National Mortgage Association ("GNMA")
mortgage-backed securities and other mortgage-backed government securities.
6
<PAGE>
Global Opportunity Portfolio is a diversified portfolio seeking high total
investment return through a fully-managed investment policy utilizing United
States and foreign equity, debt and money market securities, the combination of
which will be varied from time to time, both with respect to types of
securities and markets, in response to changing market and economic trends.
Total investment return is the aggregate of capital value changes and income.
RISK FACTORS AND SPECIAL CONSIDERATIONS
All of the Portfolios may invest in fixed income securities and to the extent
a Portfolio does invest in fixed income securities, the net asset value of its
shares will be affected by changes in the general level of interest rates.
The Fundamental Value and Global Opportunity Portfolios are authorized to
invest in foreign securities. Investments in securities of foreign entities and
securities denominated in foreign currencies involve risks not typically
involved in domestic investment, including fluctuations in foreign exchange
rates, future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign or U.S. governmental laws or
restrictions applicable to such investments. These risks are often heightened
for investments in small capital markets.
The Global Opportunity Portfolio has established no rating criteria for the
fixed income securities in which it may invest and securities in the lower
rated categories are predominantly speculative with respect to the capacity to
pay interest and repay principal.
The Portfolios also may invest in certain derivative securities. See "Risk
Factors and Special Considerations".
THE INVESTMENT ADVISER
Merrill Lynch Asset Management, L.P. (the "Investment Adviser" or "MLAM")
acts as a manager for the Program and provides the Program with management
services. The Investment Adviser or its affiliate, Fund Asset Management, L.P.
("FAM"), acts as the investment adviser for over 100 other registered
investment companies. The Investment Adviser and FAM also offer portfolio
management and portfolio analysis services to individuals and institutions. As
of November 30, 1994, the Investment Adviser and FAM had a total of
approximately $167.5 billion in investment company and other portfolio assets
under management, including accounts of certain affiliates of the Investment
Adviser. See "Management of the Program -- Management and Advisory
Arrangements".
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolios may be purchased at a price equal to the next
determined net asset value per share subject to the sales charges and ongoing
fee arrangements described below. See "Merrill Lynch Select Pricing SM System"
and "Purchase of Shares".
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net
investment income, if any, of each Portfolio. All long-term and short-term
capital gains, if any, including gains from option and futures contract
7
<PAGE>
transactions will be distributed by each Portfolio at least annually. See
"Additional Information -- Dividends and Distributions".
DETERMINATION OF NET ASSET VALUE
The net asset value of each Portfolio is determined by the Investment
Adviser once daily 15 minutes after the close of business on the New York
Stock Exchange (generally 4:00 P.M., New York time) on each day during which
the New York Stock Exchange is open for trading and, under certain
circumstances, on other days. See "Additional Information -- Determination of
Net Asset Value".
MERRILL LYNCH SELECT PRICING SM SYSTEM
Each Portfolio offers four classes of shares under the Merrill Lynch Select
Pricing SM System. The shares of each class may be purchased at a price equal
to the next determined net asset value per share subject to the sales charges
and ongoing fee arrangements described below. Shares of Class A and Class D
are sold to investors choosing the initial sales charge alternatives, and
shares of Class B and Class C are sold to investors choosing the deferred
sales charge alternatives. The Merrill Lynch Select Pricing SM System is used
by more than 50 mutual funds advised by MLAM or FAM, an affiliate of MLAM.
Funds advised by MLAM or FAM are referred to herein as "MLAM-advised mutual
funds".
Each Class A, Class B, Class C or Class D share of a Portfolio represents an
identical interest in the investment portfolio of that Portfolio and has the
same rights, except that Class B, Class C and Class D shares bear the expenses
of the ongoing account maintenance fees and Class B and Class C shares bear
the expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, will be imposed directly against those classes and
not against all assets of the Portfolio and, accordingly, such charges will
not affect the net asset value of any other class or have any impact on
investors choosing another sales charge option. Dividends paid by a Portfolio
for each class of shares will be calculated in the same manner at the same
time and will differ only to the extent that account maintenance and
distribution fees and any incremental transfer agency costs relating to a
particular class are borne exclusively by that class. Each class has different
exchange privileges. See "Shareholder Services -- Exchange Privilege". If
pursuant to the exchange privilege, shares of any Portfolio are exchanged for
shares of a fund other than a Portfolio of the Program or a money market fund
advised by the Investment Adviser or its affiliates, then the imposition of
the IRA annual account fee may result. For information about current IRA fees
charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement.
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Program. The distribution-
related revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select PricingSM System,
followed by a more detailed description of each class and a
8
<PAGE>
discussion of the factors that investors should consider in determining the
method of purchasing shares under the Merrill Lynch Select PricingSM System
that the investor believes is most beneficial under his particular
circumstances. More detailed information as to each class of shares is set
forth under "Purchase of Shares".
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately eight
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ----------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. Contingent deferred sales charges ("CDSCs") are
imposed if the redemption occurs within the applicable CDSC time period.
The charge will be assessed on an amount equal to the lesser of the
proceeds of redemption or the cost of the shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial
Sales Charge Alternatives -- Class A and Class D Shares --Eligible Class A
Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year. See "Class
A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares is modified. Also,
Class B shares of the Quality Bond and U.S. Government Securities
Portfolios and certain other MLAM-advised mutual funds into which
exchanges may be made have a ten-year conversion period. If Class B shares
of a Portfolio are exchanged for Class B shares of another Portfolio or
MLAM-advised mutual fund, the conversion period applicable to the Class B
shares acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked on to the holding period for the shares
acquired.
9
<PAGE>
QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately ten
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs are imposed if the redemption occurs within
the applicable CDSC time period. The charge will be assessed on an amount
equal to the lesser of the proceeds of redemption or the cost of the
shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial
Sales Charge Alternatives -- Class A and Class D Shares --Eligible Class A
Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year. See "Class
A" and "Class D" below.
(4) The conversion period for dividend reinvestment shares is modified. Also,
Class B shares of the Fundamental Value and Global Opportunity Portfolios
and certain other MLAM-advised mutual funds into which exchanges may be
made have an eight-year conversion period. If Class B shares of a
Portfolio are exchanged for Class B shares of another Portfolio or MLAM-
advised mutual fund, the conversion period applicable to the Class B
shares acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked on to the holding period for the shares
acquired.
Class A: Class A shares of a Portfolio incur an initial sales charge when they
are purchased and bear no ongoing distribution or account maintenance
fees. Class A shares are offered to a limited group of investors and
also will be issued upon reinvestment of dividends on outstanding
Class A shares. Class A shares will be offered to Merrill Lynch &
Co., Inc. ("ML&Co.") and its subsidiaries (the term "subsidiaries"
when used herein with respect to ML&Co., includes MLAM, FAM and
certain other entities directly or indirectly wholly-owned and
controlled by ML&Co.) and their directors and employees and to
members of the Boards of MLAM-advised mutual funds. The maximum
initial sales charge is 5.25% for the Fundamental Value and Global
Opportunity Portfolios and 4.00% for the Quality Bond and U.S.
Government Securities Portfolios, which is reduced for purchases of
$25,000 and over. Purchases of $1,000,000 or more may not be subject
to an initial sales charge, but if the initial sales charge is
waived, such purchases will be subject to a CDSC of 1.0% if the
shares are redeemed within one year after purchase. Sales charges
also are reduced under a right of accumulation which takes into
account the investor's holdings of all classes of all MLAM-advised
mutual funds. See "Purchase of Shares -- Initial Sales Charge
Alternatives -- Class A and Class D Shares".
10
<PAGE>
Class B: Class B shares of a Portfolio do not incur a sales charge when they
are purchased, but they are subject to an ongoing account maintenance
fee of 0.25% of the Portfolio's average net assets attributable to
Class B shares, an ongoing distribution fee of 0.75% of average net
assets attributable to Class B shares for the Fundamental Value and
Global Opportunity Portfolios and 0.50% of average net assets
attributable to Class B shares for the Quality Bond and U.S.
Government Securities Portfolios, and a CDSC if they are redeemed
within four years of purchase. Class B shares of a Portfolio will
convert automatically into Class D shares of the same Portfolio
approximately eight years after issuance in the case of the
Fundamental Value and Global Opportunity Portfolios and approximately
ten years after issuance in the case of the Quality Bond and U.S.
Government Securities Portfolios. Class D shares are subject to an
account maintenance fee but no distribution fee. If Class B shares of
a Portfolio are exchanged for Class B shares of another Portfolio or
MLAM-advised mutual fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding
period for the shares exchanged will be tacked on to the holding
period for the shares acquired. Automatic conversion of Class B shares
into Class D shares will occur at least once each month on the basis
of the relative net asset values of the shares of the two classes on
the conversion date, without the imposition of any sales load, fee or
other charge. Conversion of Class B shares to Class D shares will not
be deemed a purchase or sale of the shares for Federal income tax
purposes. Shares purchased through reinvestment of dividends on Class
B shares will also convert automatically to Class D shares. The
conversion period for dividend reinvestment shares is modified as
described under "Purchase of Shares -- Deferred Sales Charge
Alternatives -- Class B and Class C Shares -- Conversion of Class B
Shares to Class D Shares".
Class C: Class C shares of a Portfolio do not incur a sales charge when they
are purchased, but they are subject to an ongoing account maintenance
fee of 0.25% of the Portfolio's average net assets attributable to
Class C shares and an ongoing distribution fee of 0.75% of the
Portfolio's average net assets attributable to Class C shares in the
case of the Fundamental Value and Global Opportunity Portfolios or
0.55% of the Portfolio's average net assets attributable to Class C
shares in the case of the Quality Bond and U.S. Government Securities
Portfolios. Class C shares are also subject to a CDSC if they are
redeemed within one year of purchase. Although Class C shares are
subject to a 1.0% CDSC for only one year (as compared to four years
for Class B), Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject
to distribution fees that will be imposed on Class C shares for an
indefinite period subject to annual approval by the Program's Board of
Directors and regulatory limitations.
Class D: Class D shares of a Portfolio incur an initial sales charge when they
are purchased and are subject to an ongoing account maintenance fee of
0.25% of the Portfolio's average net assets attributable to Class D
shares. Class D shares are not subject to an ongoing distribution fee
or any CDSC when they are redeemed. Purchases of $1,000,000 or more
may not be subject to an initial sales charge, but if the initial
sales charge is waived, such purchases will be subject to a CDSC of
1.0% if the shares are redeemed within one year after purchases. The
schedule of initial sales charges and reductions for Class D shares
for each Portfolio is the same as the schedule for Class A shares of
that Portfolio. Class D shares also will be issued upon conversion of
Class B shares as described above under "Class B". See "Purchase of
Shares -- Initial Sales Charge Alternatives -- Class A and Class D
Shares".
11
<PAGE>
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
PricingSM System that the investor believes is most beneficial under his
particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because there is an account maintenance fee
imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative
particularly attractive because similar sales charge reductions are not
available with respect to the deferred sales charges imposed in connection with
purchases of Class B or Class C shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for an extended
period of time also may elect to purchase Class A or Class D shares, because
over time the accumulated ongoing account maintenance and distribution fees on
Class B or Class C shares may exceed the initial sales charge on Class A
shares, or may exceed the initial sales charge plus the accumulated ongoing
account maintenance fee on Class D shares. Although some investors that
previously purchased Class A shares may no longer be eligible to purchase Class
A shares of other MLAM-advised mutual funds, those previously purchased Class A
shares, together with Class B, Class C and Class D share holdings, will count
toward a right of accumulation which may qualify the investor for reduced
initial sales charges on new initial sales charge purchases. In addition, the
ongoing Class B and Class C account maintenance and distribution fees will
cause Class B and Class C shares to have higher expense ratios, pay lower
dividends and have lower total returns than the initial sales charge shares.
The ongoing Class D account maintenance fees will cause Class D shares to have
a higher expense ratio, pay lower dividends and have a lower total return than
Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the
benefit of putting all of the investor's dollars to work from the time the
investment is made. The deferred sales charge alternatives may be particularly
appealing to investors who do not qualify for a reduction in initial sales
charges. Both Class B and Class C shares are subject to ongoing account
maintenance fees and distribution fees; however, the ongoing account
maintenance and distribution fees potentially may be offset to the extent any
return is realized on the additional funds initially invested in Class B or
Class C shares. In addition, Class B shares of a Portfolio will be converted
into Class D shares of the same Portfolio after a conversion period of
approximately eight years for the Fundamental Value and Global Opportunity
Portfolios or ten years for the Quality Bond and U.S. Government Securities
Portfolios, and thereafter investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all their funds invested initially and intend
to hold their shares for an extended period of time. Investors in Class B
shares should take into account whether they intend to redeem their shares
within the CDSC period and, if not, whether they intend to remain invested
until the end of the conversion period and thereby take advantage of the
reduction in ongoing fees resulting from the conversion into Class D shares.
Other investors, however, may elect to purchase Class C shares if they
determine that it is advantageous to have all their assets invested initially
and they are uncertain as to the length of time they intend to hold their
assets in MLAM-advised mutual funds. Although Class C shareholders are subject
to a shorter CDSC period at a lower rate, they forgo the Class B conversion
feature, making their investment subject to account maintenance and
distribution fees for an indefinite period of time. In addition, while both
Class B and Class C distribution fees are subject to the limitations on asset-
based sales charges imposed by the NASD, the Class B distribution fees are
further limited under a voluntary waiver of asset-based sales charges. See
"Purchase of Shares --Limitations on the Payment of Deferred Sales Charges".
12
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in Fixed Income Securities. All of the Portfolios are authorized
to invest in fixed income securities. To the extent a portfolio invests in
fixed income securities, the net asset value of its shares will be affected by
changes in the general level of interest rates. Typically, when interest rates
decline, the value of a portfolio of fixed income securities can be expected to
rise. Conversely, when interest rates rise typically the value of a portfolio
of fixed income securities can be expected to decline. See "Other Investment
Policies and Practices of the Portfolios--Investments in Debt Securities".
Investments in Foreign Securities. The Fundamental Value Portfolio may invest
up to 30% of its total assets, and the Global Opportunity Portfolio may invest
without limitation, in the securities of foreign issuers. Investments in
securities of foreign entities and securities denominated in foreign currencies
involve risks not typically involved in domestic investment, including
fluctuations in foreign exchange rates, future foreign political and economic
developments, and the possible imposition of exchange controls or other foreign
or U.S. governmental laws or restrictions applicable to such investments. Since
the Fundamental Value and Global Opportunity Portfolios may invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may affect the value of investments
in the portfolio and the unrealized appreciation or depreciation of investments
insofar as U.S. investors are concerned. Changes in foreign currency exchange
rates relative to the U.S. dollar will affect the U.S. dollar value of the
Fundamental Value and Global Opportunity Portfolios' assets denominated in
those currencies and the corresponding Portfolio's yield on such assets.
Foreign currency exchange rates are determined by forces of supply and demand
on the foreign exchange markets. These forces are, in turn, affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation, and other factors. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments position.
With respect to certain foreign countries, there is the possibility of
expropriation of assets, confiscatory taxation, political or social instability
or diplomatic developments which could affect investment in those countries.
There may be less publicly available information about a foreign financial
instrument than about a U.S. instrument, and foreign entities may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. entities are subject. Foreign
financial markets, while growing in volume, generally have substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable domestic
companies. Foreign markets also have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fundamental Value or Global Opportunity
Portfolios are uninvested and no return is earned thereon. The inability of
either Portfolio to make intended security purchases due to settlement problems
could cause that Portfolio to miss attractive investment opportunities.
Inability to dispose of securities in a Portfolio due to settlement problems
could result either in losses to that Portfolio due to subsequent declines in
value of the portfolio securities or, if the Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. Costs associated with transactions in foreign securities generally
are higher than costs associated with transactions in U.S. securities. There is
generally less government supervision and regulation of exchanges, financial
institutions and issuers in foreign countries than there is in the United
States.
13
<PAGE>
The operating expense ratios of the Fundamental Value and Global Opportunity
Portfolios can be expected to be higher than those of an investment company
investing exclusively in U.S. securities because the expenses of each
Portfolio, such as custodial costs, may be higher. See "Risk Factors and
Special Considerations -- Investments in Foreign Securities".
Dividends and interest received by the Global Opportunity Portfolio and, to a
lesser extent, the Fundamental Value Portfolio, may give rise to withholding
and other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Because
their participation in such Portfolios is in an IRA, shareholders will
generally not be able to credit or deduct such taxes in computing their taxable
incomes. See "Taxes".
International Investing in Countries with Smaller Capital Markets. The risks
associated with investments in foreign securities discussed above are often
heightened for investments in small capital markets.
There may be less publicly available information about an issuer in a smaller
capital market than would be available about a U.S. company, and it may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject. As a
result, traditional investment measurements, such as price/earnings ratios, as
used in the United States, may not be applicable in certain capital markets.
Smaller capital markets, while often growing in trading volume, typically
have substantially less volume than U.S. markets, and securities in many
smaller capital markets are less liquid and their prices may be more volatile
than securities of comparable U.S. companies. Brokerage commissions, custodial
services, and other costs relating to investment in smaller capital markets are
generally more expensive than in the United States. Such markets have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Further, satisfactory custodial services for investment securities may not be
available in some countries having smaller capital markets, which may result in
the Portfolio's incurring additional costs and delays in transporting and
custodying such securities outside such countries. Delays in settlement could
result in temporary periods when assets of the Portfolio are uninvested and no
return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to the
Portfolio due to subsequent declines in value of the portfolio security or, if
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser. There is generally less government
supervision and regulation of exchanges, brokers and issuers in countries
having smaller capital markets than there is in the United States.
As a result, management of the Program may determine that, notwithstanding
otherwise favorable investment criteria, it may not be practicable or
appropriate to invest in a particular country. The Portfolios may invest in
countries in which foreign investors, including management of the Program, have
had no or limited prior experience.
Investments in Lower Rated Securities. The Global Opportunity Portfolio has
established no rating criteria for the fixed income securities in which it may
invest. Securities rated in the medium to lower rating
14
<PAGE>
categories of nationally recognized rating agencies (commonly referred to as
"junk bonds") are predominately speculative with respect to the capacity to pay
interest and repay principal in accordance with the terms of the security and
generally involve a greater volatility of price than securities in higher
rating categories. The Portfolio does not intend to purchase securities that
are in default. See "Other Investment Policies and Practices of the
Portfolios--Investments in Debt Securities".
Derivative Investments. In order to seek to enhance income or to hedge
various portfolio positions, including to hedge against price movements in
markets in which the Portfolios anticipate increasing their exposure, the
Portfolios may invest in certain instruments which may be characterized as
derivative investments. These investments include various types of interest
rate transactions, options and futures. Such investments also may consist of
indexed securities, including inverse securities. The Program has express
limitations on the percentage of its assets that may be committed to certain of
such investments. Other of such investments have no express quantitative
limitations, although they may be made solely for hedging purposes, not for
speculation, and may in some cases require limitations as to the type of
permissible counter-party to the transaction. Interest rate transactions
involve the risk of an imperfect correlation between the index used in the
hedging transactions and that pertaining to the securities which are the
subject of such transactions. Similarly, utilization of options and futures
transactions involves the risk of imperfect correlation in movements in the
price of options and futures and movements in the price of the securities or
interest rates which are the subject of the hedge. Investments in indexed
securities, including inverse securities, subject the Portfolios to the risks
associated with changes in the particular indexes, which may include reduced or
eliminated interest payments and losses of invested principal. An investment in
derivative instruments for the purpose of enhancing income may have certain
speculative characteristics and may increase a Portfolio's volatility. For a
further discussion of the risks associated with these investments, see "Other
Investment Policies and Practices of the Portfolios -- Indexed and Inverse
Securities" "--Portfolio Strategies Involving Options and Futures" and Appendix
A--"Options and Futures Transactions". Management of the Program believes the
above investments are appropriate for the Portfolios.
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value
Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio
and the Global Opportunity Portfolio, each with its own separate investment
objectives. Each of the Portfolios pursues its investment objectives through
separate investment policies. Set forth below are the specific investment
objectives and policies of each Portfolio, followed by a description of general
investment policies applicable to some or all of the Portfolios. Management of
the Program believes that all of the Portfolios' investments will be
appropriate for the retirement plans for which the Program is designed.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily,
income by investing in securities, with at least 65% of the Portfolio's assets
being invested in equities. These objectives are fundamental policies of the
Fundamental Value Portfolio and may not be changed without the approval of a
majority of the Portfolio's outstanding voting securities. The Portfolio seeks
special opportunities in securities that the Investment Adviser believes are
undervalued and therefore represent investment value, including
15
<PAGE>
securities that are selling at a discount, either from book value or historical
price-earnings ratios, or seem capable of recovering from temporarily out of
favor considerations. Particular emphasis is placed on securities which provide
an above-average dividend return and sell at a below-average price-earnings
ratio. There can be no assurance that the objectives of the Fundamental Value
Portfolio will be achieved.
Investment emphasis is on equities, primarily common stock and, to a lesser
extent, securities convertible into common stocks. The Fundamental Value
Portfolio also may invest in preferred stocks and non-convertible debt
securities. The Portfolio may invest up to 30% of its total assets, taken at
market value at the time of acquisition, in the securities of foreign issuers.
See "Other Investment Policies and Practices of the Portfolios" below for
additional investment policies applicable to the Fundamental Value Portfolio.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks a high level of current income through
investment in a diversified portfolio of debt obligations, such as corporate
bonds and notes, convertible securities, preferred stocks and governmental
obligations. The Portfolio will invest primarily in securities rated in the top
three rating categories (typically "A" or better) of a nationally recognized
rating agency such as Moody's, S&P or Fitch, or in securities that possess, in
the judgment of the Investment Adviser, similar credit characteristics. This
objective is a fundamental policy of the Quality Bond Portfolio and may not be
changed without the approval of a majority of the Portfolio's outstanding
voting securities. The credit risk of the Portfolio should be minimized by the
quality of the bonds in which it will invest, but the long maturities that
typically provide the best yields will subject the Portfolio to possible
substantial price changes resulting from market yield fluctuations. Portfolio
management strategy will attempt to mitigate adverse price changes and optimize
favorable price changes through active trading that shifts the maturity and/or
quality structure of the Portfolio within the overall investment guidelines.
There can be no assurance that the objectives of the Quality Bond Portfolio
will be achieved.
The Quality Bond Portfolio may continue to hold securities which, after being
purchased by the Portfolio, are downgraded to a rating below the top three
rating categories of a nationally recognized rating agency as well as any
unrated securities which, in the Investment Adviser's judgment, have suffered a
similar decline in quality.
The securities in the Quality Bond Portfolio will be varied from time to time
depending upon the judgment of management as to prevailing conditions in the
economy and the securities markets and the prospects for interest rate changes
among different categories of fixed income securities. The Portfolio
anticipates that under normal circumstances more than 90% of the assets of the
Portfolio will be invested in fixed income securities, including convertible
and nonconvertible debt securities and preferred stock. In addition, as a
matter of operating policy, at least 65% of the assets of the Portfolio will
under normal circumstances be invested in corporate bonds. The remaining assets
of the Portfolio may be held in cash or, as described herein, may be used in
connection with hedging transactions in futures contracts, related options, and
options on debt securities, or in connection with non-hedging transactions in
options on debt securities. The Portfolio does not intend to invest in common
stocks, rights or other equity securities. Transactions in options on debt
securities for non-hedging purposes may have certain speculative
characteristics.
See "Other Investment Policies and Practices of the Portfolios" below for
additional investment policies applicable to the Quality Bond Portfolio.
16
<PAGE>
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks a high current return through
investments in U.S. Government and Government agency securities, including GNMA
mortgage-backed certificates and other mortgage-backed government securities.
This investment objective is a fundamental policy of the Portfolio which may
not be changed without a vote of a majority of the outstanding shares of the
Portfolio. There can be no assurance that the objectives of the U.S. Government
Securities Portfolio will be achieved.
The securities in which the U.S. Government Securities Portfolio may invest
are marketable securities issued or guaranteed by the U.S. Government, by
various agencies of the U.S. Government and by various instrumentalities which
have been established or sponsored by the U.S. Government ("U.S. Government
securities"). Certain of these obligations, including U.S. Treasury bills,
notes and bonds and securities of GNMA and the Federal Housing Administration
("FHA"), are issued or guaranteed by the U.S. Government and supported by the
full faith and credit of the United States. Other U.S. Government securities
are issued or guaranteed by Federal agencies or government-sponsored
enterprises and are not direct obligations of the United States but involve
sponsorship or guarantees by Government agencies or enterprises. The guarantee
by Federal agencies or government-sponsored enterprises of their securities
does not extend to the Program's shares. These obligations include securities
that are supported by the right of the issuer to borrow from the Treasury, such
as obligations of Federal Home Loan Banks, and securities that are supported
only by the credit of the instrumentality, such as Federal National Mortgage
Association ("FNMA") bonds. Because the U.S. Government is not obligated to
provide support to its instrumentalities, the Portfolio will invest in
obligations issued by these instrumentalities where the Portfolio is satisfied
that the credit risk with respect to the issuers is minimal. In addition, the
Portfolio may invest up to 5% of its assets in obligations issued or guaranteed
by the International Bank for Reconstruction and Development (the "World
Bank").
The Portfolio has authority to invest in all U.S. Government securities. It
is anticipated that under certain circumstances as described below, a
significant portion of its portfolio of U.S. Government securities may consist
of GNMA mortgaged-backed certificates ("GNMA Certificates") and other U.S.
Government securities representing ownership interests in mortgage pools.
The Investment Adviser will effect portfolio transactions without regard to
any holding period if, in its judgment, such transactions are advisable in
light of a change in general market, economic or financial conditions. While
the Portfolio anticipates that its annual turnover rate should not exceed 400%
under normal conditions, it is impossible to predict portfolio turnover rates.
A high portfolio turnover rate involves correspondingly greater transaction
costs in the form of dealer spreads and brokerage commissions, which are borne
directly by the Portfolio. Such turnover also has certain tax consequences for
the Portfolio.
See "Other Investment Policies and Practices of the Portfolios" below for
additional investment policies applicable to the U.S. Government Securities
Portfolio.
GLOBAL OPPORTUNITY PORTFOLIO
The Global Opportunity Portfolio seeks a high total investment return through
a fully-managed investment policy utilizing United States and foreign equity,
debt and money market securities, the combination of which will be varied from
time to time, both with respect to types of securities and markets, in response
to changing market and economic trends. Total investment return is the
aggregate of capital value
17
<PAGE>
changes and income. This objective is a fundamental policy of the Global
Opportunity Portfolio and may not be changed without the approval of a majority
of the Portfolio's outstanding voting securities. There can be no assurance
that the objectives of the Global Opportunity Portfolio will be achieved.
The Global Opportunity Portfolio will invest in a portfolio of U.S. and
foreign equity, debt and money market securities. The composition of the
portfolio among these securities and markets will be varied from time to time
by the Investment Adviser in response to changing market and economic trends.
This fully managed investment approach provides the Portfolio with the
opportunity to benefit from anticipated shifts in the relative performance of
different types of securities and different capital markets. For example, at
times the Portfolio may emphasize investments in equity securities in
anticipation of significant advances in stock markets and at times may
emphasize debt securities in anticipation of significant declines in interest
rates. Similarly, the Portfolio may emphasize foreign markets in its security
selection when such markets are expected to outperform, in U.S. dollar terms,
the U.S. markets. The Portfolio will seek to identify longer-term structural or
cyclical changes in the various economies and markets of the world which are
expected to benefit certain capital markets and certain securities in those
markets to a greater extent than other investment opportunities.
In determining the allocation of assets among capital markets, the Investment
Adviser will consider, among other factors, the relative valuation, condition
and growth potential of the various economies, including current and
anticipated changes in the rates of economic growth, rates of inflation,
corporate profits, capital reinvestment, resources, self-sufficiency, balance
of payments, governmental deficits or surpluses and other pertinent financial,
social and political factors which may affect such markets. In allocating among
equity, debt and money market securities within each market, the Investment
Adviser also will consider the relative opportunity for capital appreciation of
equity and debt securities, dividend yields, and the level of interest rates
paid on debt securities of various maturities.
While there are no prescribed limits on the geographical allocation of the
Portfolio's assets, the Investment Adviser anticipates that it will invest
primarily in the securities of corporate and governmental issuers domiciled or
located in the U.S., Canada, Western Europe and the Far East. In addition, the
Investment Adviser anticipates that a portion of the Portfolio's assets
normally will be invested in the U.S. securities markets and the other major
capital markets. Under normal conditions, the Portfolio's investments will be
denominated in at least three currencies or multinational currency units.
However, the Portfolio reserves the right to invest substantially all of its
assets in U.S. markets or U.S. dollar-denominated obligations when market
conditions warrant.
Similarly, there are no prescribed limits on the allocation of the
Portfolio's assets among equity, debt and money market securities. Therefore,
at any given time, the Portfolio's assets may be primarily invested in either
equity, debt or money market securities or in any combination thereof. However,
the Investment Adviser anticipates that the Portfolio's holdings generally will
include both equity and debt securities.
The Global Opportunity Portfolio may invest up to 34% of the Portfolio's
assets in debt securities rated below "investment grade" (i.e., Ba or lower by
Moody's or BB or lower by S&P or Fitch) or which possess, in the judgment of
the Investment Adviser, similar credit characteristics. Investment in debt
securities rated in the medium to lower rating categories of a nationally
recognized rating agency or in unrated securities of comparable quality involve
special risks which are described more fully below under "Other Investment
Policies and Practices of the Portfolios--Investments in Debt Securities--
Credit Quality".
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See "Other Investment Policies and Practices of the Portfolios" below for
additional investment policies applicable to the Global Opportunity Portfolio.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Set forth below are additional investment policies applicable to some or all
of the Portfolios.
INVESTMENTS IN EQUITY SECURITIES
The Fundamental Value Portfolio will invest primarily (at least 65% of the
Portfolio's net assets) in equity securities. A significant portion of the
Global Opportunity Portfolio also may be invested in equity securities. In
purchasing equity securities for these Portfolios, the Investment Adviser will
seek to identify the securities of companies and industry sectors which are
expected to provide high total return relative to alternative equity
investments. Both Portfolios generally will seek to invest in securities the
Investment Adviser believes to be undervalued. Undervalued issues include
securities selling at a discount from the price-to-book value ratios and price-
earnings ratios computed with respect to the relevant stock market averages. A
Portfolio also may consider as undervalued securities selling at a discount
from their historic price-to-book value or price-earnings ratios, even though
these ratios may be above the ratios for the stock market averages. Securities
offering dividend yields higher than the yields for the relevant stock market
averages or higher than such securities' historic yield may also be considered
to be undervalued. The Portfolios may also invest in the securities of small
and emerging growth companies when such companies are expected to provide a
higher total return than other equity investments. Such companies are
characterized by rapid historical growth rates, above-average returns on equity
or special investment value in terms of their products or services, research
capabilities or other unique attributes. The Investment Adviser will seek to
identify small and emerging growth companies that possess superior management,
marketing ability, research and product development skills and sound balance
sheets.
Investment in the securities of small and emerging growth companies involves
greater risk than investment in larger, more established companies. Such risks
include the fact that securities of small or emerging growth companies may be
subject to more abrupt or erratic market movements than larger, more
established companies or the market average in general. Also, these companies
may have limited product lines, markets or financial resources, or they may be
dependent on a limited management group.
There may be periods when market and economic conditions exist that favor
certain types of tangible assets as compared to other types of investments.
INVESTMENTS IN DEBT SECURITIES
The Quality Bond and U.S. Government Securities Portfolios will invest
primarily in debt securities. A significant portion of the Global Opportunity
Portfolio also may be invested in debt securities. The average maturity of a
Portfolio's holdings of debt securities will vary based on the Investment
Adviser's assessment of pertinent economic and market conditions. As with all
debt securities, changes in market yields will affect the value of such
securities. Prices generally increase when interest rates decline and decrease
when interest rates rise. Prices of longer term securities generally fluctuate
more in response to interest rate changes than do shorter term securities.
The debt securities in which these Portfolios may invest include securities
issued or guaranteed by the U.S. Government and its agencies or
instrumentalities and debt obligations issued by U.S. corporations. Such
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securities may include mortgage-backed securities issued or guaranteed by U.S.
governmental entities or by private issuers. In addition, the Fundamental Value
and Global Opportunity Portfolios may invest in debt securities issued by
foreign corporations or issued or guaranteed by foreign governments (including
foreign states, provinces and municipalities), by agencies and
instrumentalities thereof or by international organizations designed or
supported by multiple governmental entities (which are not obligations of the
U.S. Government or foreign governments) to promote economic reconstruction or
development ("supranational entities") such as the World Bank.
GNMA Certificates and Other Mortgage-Backed Government Securities. The U.S.
Government Securities and Global Opportunity Portfolios may invest in GNMA
Certificates and other mortgage-backed government securities. GNMA Certificates
are mortgage-backed securities of the modified pass-through type, which means
that both interest and principal payments (including prepayments) are passed
through monthly to the holder of the Certificate. The National Housing Act
provides that the full faith and credit of the United States is pledged to the
timely payment of principal and interest by GNMA of amounts due on these GNMA
Certificates. Each Certificate evidences an interest in a specific pool of
mortgage loans insured by the FHA or the Farmers Home Administration or
guaranteed by the Veterans Administration ("VA"). GNMA is a wholly-owned
corporate instrumentality of the United States within the Department of Housing
and Urban Development.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments which have maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as a result of prepayments or
refinancing of such mortgages. Such prepayments are passed through to the
registered holder with the regular monthly payments of principal and interest.
In addition, GNMA offers a pass-through security backed by adjustable-rate
mortgages. As prepayment rates vary widely, it is not possible to predict
accurately the average life of a particular pool. The actual yield of each GNMA
Certificate is influenced by the prepayment experience of the mortgage pool
underlying the certificate.
In addition to GNMA Certificates, the U.S. Government Securities and Global
Opportunity Portfolios may invest in mortgage-backed securities issued by FNMA
and by the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA, a federally-
chartered and privately-owned corporation, issues pass-through securities and
certificates representing an interest in a pool of FNMA pass-through securities
which are guaranteed as to payment of principal and interest by FNMA. FHLMC, a
corporate instrumentality of the United States, issues participation
certificates which represent an interest in mortgages from FHLMC's portfolio
and securities representing an interest in a pool of FHLMC participation
certificates. FHLMC guarantees the timely payment of interest and the ultimate
collection of principal. As is the case with GNMA Certificates, the actual
maturity of and realized yield on particular FNMA and FHLMC mortgage-backed
securities will vary based on the prepayment experience of the underlying pool
of mortgages. Securities guaranteed by FNMA and FHLMC are not backed by the
full faith and credit of the United States.
Mortgage-backed U.S. Government securities typically provide a higher
potential for current income than other types of U.S. Government securities;
however, U.S. Treasury bills, notes and bonds typically provide a higher
potential for capital appreciation than mortgage-backed securities.
Payments of principal of and interest on mortgage-backed securities are made
more frequently than are payments on conventional debt securities. In addition,
holders of mortgage-backed securities may receive unscheduled payments of
principal at any time representing prepayments on the underlying mortgage loans
or financial assets. Such prepayments may usually be made by the related
obligor without penalty.
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Prepayment rates are affected by changes in prevailing interest rates and
numerous other economic, geographic, social and other factors. Changes in the
rate of prepayments will generally affect the yield to maturity of the
security. Moreover, when the holder of the security attempts to reinvest
prepayments or even the scheduled payments of principal and interest, it may
receive a rate of interest which is higher or lower than the rate on the
mortgage-backed securities originally held. To the extent that mortgage-backed
securities are purchased at a premium, mortgage foreclosures and principal
prepayments may result in a loss to the extent of the premium paid. If such
securities are bought at a discount, both scheduled payments of principal and
unscheduled prepayments will increase current and total returns of the
Portfolio.
Stripped Mortgage-Backed Securities. The U.S. Government Securities and
Global Opportunity Portfolios may invest in stripped mortgage-backed securities
("SMBSs") issued by agencies or instrumentalities of the United States. SMBSs
are derivative multiclass mortgage-backed securities. SMBS arrangements
commonly involve two classes of securities that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. A
common variety of SMBS is where one class (the principal-only or "PO" class)
receives some of the interest and most of the principal from the underlying
assets, while the other class (the interest-only or "IO" class) receives most
of the interest and the remainder of the principal. In the most extreme case,
the IO class receives all of the interest, while the PO class receives all of
the principal. While a Portfolio may purchase securities of a PO class, it is
more likely to purchase the securities of an IO class. The yield to maturity of
an IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying assets, and a rapid rate of principal
payments in excess of that considered in pricing the securities will have a
material adverse effect on an IO security's yield to maturity. If the
underlying mortgage assets experience greater than anticipated payments of
principal, a Portfolio may fail to recoup fully its initial investment in IOs.
In addition, there are certain types of IOs which represent the interest
portion of a particular class as opposed to the interest portion of the entire
pool. The sensitivity of this type of IO to interest rate fluctuations may be
increased because of the characteristics of the principal portion to which they
relate. As a result of the above factors, the Portfolios generally will
purchase IOs only as a component of so-called "synthetic" securities. This
means that purchases of IOs will be matched with certain purchases of other
securities such as inverse floating rate collateralized mortgage obligations
("CMOs") or fixed rate securities; as interest rates fall, presenting a greater
risk of unanticipated prepayments of principal, the negative effect on the
Portfolio because of its holdings of IOs should be diminished somewhat because
of the increased yield on the inverse floating rate CMOs or the increased
appreciation on the fixed rate securities. IOs and POs of SMBSs are considered
by the staff of the Commission to be illiquid securities and, consequently, as
long as the staff maintains this position, the Portfolio will not invest in IOs
or POs in an amount which, taken together with the Portfolio's other
investments in illiquid securities, exceeds 15% of the Portfolio's net assets.
Foreign Debt Securities. The obligations of foreign governmental entities
have various kinds of government support and include obligations issued or
guaranteed by foreign governmental entities with taxing
power. These obligations may or may not be supported by the full faith and
credit of a foreign government. The Global Opportunity Portfolio will invest in
foreign government securities of issuers considered stable by the Investment
Adviser. The Investment Adviser does not believe that the credit risk inherent
in the obligations of stable foreign governments is significantly greater than
that of U.S. Government securities.
Portfolio Maturity. Neither the U.S. Government Securities Portfolio nor the
portion of the Global Opportunity Portfolio invested in debt securities is
limited as to the maturities of its portfolio investments. The Investment
Adviser may adjust the average maturity of a Portfolio's investments from time
to time,
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depending on its assessment of the relative yields available on securities of
different maturities and its assessment of future interest rate patterns. Thus,
at various times the average maturity of the Portfolio may be relatively short
(from under one year to five years, for example) and at other times may be
relatively long (over 10 years, for example).
Credit Quality. The Quality Bond Portfolio will invest primarily in
securities rated in the top three (typically "A" or better) rating categories
of a nationally recognized rating agency such as Moody's, S&P or Fitch, or in
securities that possess, in the judgment of the Investment Adviser, similar
credit characteristics.
The Investment Adviser considers the ratings assigned by nationally
recognized rating agencies as one of several factors in its independent credit
analysis of issuers. If a debt security in the Quality Bond Portfolio is
downgraded below A the Investment Adviser will consider factors such as price,
credit risk, market conditions and interest rates and will sell such security
only if, in the Investment Adviser's judgment, it is advantageous to do so.
The Global Opportunity Portfolio is authorized to invest without limitation
in fixed income securities rated below Ba by Moody's or BB by S&P or Fitch or
in unrated securities which, in the Investment Adviser's judgment, possess
similar credit characteristics ("high yield bonds"). The Program's Board of
Directors has adopted a policy that the Global Opportunity Portfolio will not
invest more than 34% of its assets in obligations rated by a nationally
recognized rating agency below investment grade, or in obligations deemed by
the Investment Adviser to possess similar credit characteristics. Investment in
high yield bonds (which are sometimes referred to as "junk" bonds) involves
substantial risk. Investments in high yield bonds will be made only when, in
the judgment of the Investment Adviser, such securities provide attractive
total return potential, relative to the risk of such securities, as compared to
higher quality debt securities. Securities rated BB or lower by S&P or Fitch or
Ba or lower by Moody's are considered by those rating agencies to have varying
degrees of speculative characteristics. Consequently, although high yield bonds
can be expected to provide higher yields, such securities may be subject to
greater market price fluctuations and risk of loss of principal than lower
yielding, higher rated fixed income securities. The Global Opportunity
Portfolio will not invest in debt securities in the lowest rating categories
(CC or lower for S&P or Fitch or Ca or lower for Moody's) unless the Investment
Adviser believes that the financial condition of the issuer or the protection
afforded the particular securities is stronger than would otherwise be
indicated by such low ratings. See Appendix B-- "Ratings of Corporate Debt
Securities" for additional information regarding high yield bonds.
High yield bonds may be issued by less creditworthy companies or by larger,
highly leveraged companies and are frequently issued in corporate
restructurings such as mergers and leveraged buyouts. Such securities
are particularly vulnerable to adverse changes in the issuer's industry and in
general economic conditions. High yield bonds frequently are junior obligations
of their issuers, so that in the event of the issuer's bankruptcy, claims of
the holders of high yield bonds will be satisfied only after satisfaction of
the claims of senior security holders. While the high yield bonds in which the
Portfolio may invest normally do not include securities which, at the time of
investment, are in default or the issuers of which are in bankruptcy, there can
be no assurance that such events will not occur after the Portfolio purchases a
particular security, in which case the Portfolio may experience losses and
incur costs.
High yield bonds tend to be more volatile than higher rated fixed income
securities so that adverse economic events may have a greater impact on the
prices of high yield bonds than on higher rated fixed income securities. Like
higher rated fixed income securities, high yield bonds are generally purchased
and
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sold through dealers who make a market in such securities for their own
accounts. However, there are fewer dealers in the high yield bond market which
may be less liquid than the market for higher rated fixed income securities
even under normal economic conditions. Also, there may be significant
disparities in the prices quoted for high yield bonds by various dealers.
Adverse economic conditions or investor perceptions (whether or not based on
economic fundamentals) may impair the liquidity of this market and may cause
the prices the Portfolio receives for its high yield bonds to be reduced, or
the Portfolio may experience difficulty in liquidating a portion of its
portfolio. Under such conditions, judgment may play a greater role in valuing
certain of the Portfolio's securities than in the case of securities trading in
a more liquid market.
INVESTMENTS IN SECURITIES DENOMINATED IN FOREIGN CURRENCIES
Both the Fundamental Value and Global Opportunity Portfolios may invest in
securities denominated in currencies other than the U.S. dollar. In selecting
securities denominated in foreign currencies, the Investment Adviser will
consider, among other factors, the effect of movement in currency exchange
rates on the U.S. dollar value of such securities. An increase in the value of
a currency will increase the total return to the Portfolio of securities
denominated in such currency. Conversely, a decline in the value of the
currency will reduce the total return. The Investment Adviser may seek to hedge
all or a portion of a Portfolio's foreign securities through the use of forward
foreign currency contracts, currency options, futures contracts and options
thereon or derivative securities. See "Indexed and Inverse Securities" and
"Portfolio Strategies Involving Options and Futures" below and Appendix A --
"Options and Futures Transactions".
INVESTMENTS IN MONEY MARKET SECURITIES
The Global Opportunity Portfolio may invest a significant portion of its
assets in short-term, high quality debt instruments. In addition, for temporary
or defensive purposes or in anticipation of redemptions, each of the Portfolios
is authorized to invest up to 100% of its assets in such money market
instruments, including obligations of or guaranteed by the U.S. Government or
its instrumentalities or agencies, certificates of deposit, bankers'
acceptances and other bank obligations, commercial paper rated in the highest
category by a nationally recognized rating agency or other fixed income
securities deemed by the Investment Adviser to be consistent with the
objectives of the Portfolio, or the Portfolio may hold its assets in cash. The
obligations of commercial banks may be issued by U.S. banks, foreign branches
of U.S. banks ("Eurodollar" obligations) or U.S. branches of foreign banks
("Yankeedollar" obligations).
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED DELIVERY TRANSACTIONS
Each Portfolio may purchase securities on a when-issued or forward commitment
basis and may purchase or sell securities for delayed delivery. These
transactions occur when securities are purchased or sold by a Portfolio with
payment and delivery taking place in the future to secure what is considered an
advantageous yield and price to the Portfolio at the time of entering into the
transaction. Although none of the Portfolios has established limits on the
percentage of its assets that may be committed in connection with such
transactions, each Portfolio will maintain with the Program's custodian a
segregated account of cash, cash equivalents, U.S. Government securities or
other high grade liquid debt or equity securities denominated in U.S. dollars
or non-U.S. currencies in an aggregate amount equal to the amount of the
Portfolio's commitment in connection with such purchase transactions.
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STANDBY COMMITMENT AGREEMENTS
Each Portfolio may from time to time enter into standby commitment
agreements. Such agreements commit a Portfolio, for a stated period of time,
to purchase a stated amount of a fixed income security which may be issued and
sold to the Portfolio at the option of the issuer. The price and coupon of the
security is fixed at the time of the commitment. At the time of entering into
the agreement, the Portfolio is paid a commitment fee, regardless of whether
or not the security is ultimately issued, which typically is approximately
0.5% of the aggregate purchase price of the security which the Portfolio has
committed to purchase. A Portfolio will enter into such agreements only for
the purpose of investing in the security underlying the commitment at a yield
and price which is considered advantageous to the Portfolio. None of the
Portfolios will enter into a standby commitment with a remaining term in
excess of 45 days, and each Portfolio will limit its investment in such
commitments so that the aggregate purchase price of the securities subject to
such commitments, together with the value of portfolio securities subject to
legal restrictions on resale, will not exceed 15% of its assets taken at the
time of acquisition of such commitment or security. The Portfolio will at all
times maintain a segregated account with its custodian of cash, cash
equivalents, U.S. Government securities or other high grade liquid debt or
equity securities denominated in U.S. dollars or non-U.S. currencies in an
aggregate amount equal to the purchase price of the securities underlying the
commitment.
There can be no assurance that the securities subject to a standby
commitment will be issued and, if issued, the value of the security on the
delivery date may be more or less than its purchase price. Since the issuance
of the security underlying the commitment is at the option of the issuer, a
Portfolio may bear the risk of a decline in the value of such security and may
not benefit from an appreciation in the value of the security during the
commitment period.
The purchase of a security subject to a standby commitment agreement and the
related commitment fee will be recorded on the date on which the security
reasonably can be expected to be issued, and the value of the security will
thereafter be reflected in the calculation of the related Portfolio's net
asset value. The cost basis of the security will be adjusted by the amount of
the commitment fee. In the event the security is not issued, the commitment
fee will be recorded as income on the expiration date of the standby
commitment.
REPURCHASE AGREEMENTS AND PURCHASE AND SALE CONTRACTS
Each Portfolio may invest in securities pursuant to repurchase agreements or
purchase and sale contracts. Repurchase agreements and purchase and sale
contracts may be entered into only with financial institutions which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million. Under such agreements, the
other party agrees, upon entering into the contract with a Portfolio, to
repurchase the security at a mutually agreed upon time and price in a
specified currency, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period, although such return may be affected by
currency fluctuations. In the case of repurchase agreements, the prices at
which the trades are conducted do not reflect accrued interest on the
underlying obligation; whereas, in the case of purchase and sale contracts,
the prices take into account accrued interest. Such agreements usually cover
short periods, such as under one week. Repurchase agreements may be construed
to be collateralized loans by the purchaser to the seller secured by the
securities transferred to the purchaser. In the case of a repurchase
agreement, as a purchaser, a Portfolio will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement; the
Portfolio does not have the right to seek additional collateral
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in the case of purchase and sale contracts. In the event of default by the
seller under a repurchase agreement construed to be a collateralized loan, the
underlying securities are not owned by the Portfolio but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
a Portfolio may suffer time delays and incur costs or possible losses in
connection with disposition of the collateral.
A purchase and sale contract differs from a repurchase agreement in that the
contract arrangements stipulate that the securities are owned by the
Portfolio. In the event of a default under such a repurchase agreement or
under a purchase and sale contract, instead of the contractual fixed rate, the
rate of return to the Portfolio would be dependent upon intervening
fluctuations of the market values of such securities and the accrued interest
on the securities. In such event, the Portfolio would have rights against the
seller for breach of contract with respect to any losses arising from market
fluctuations following the failure of the seller to perform. A Portfolio may
not invest more than 15% of its net assets in repurchase agreements or
purchase and sale contracts maturing in more than seven days.
INDEXED AND INVERSE SECURITIES
The Portfolios may invest in securities whose potential investment return is
based on the change in particular measurements of value or rate (an "index").
As an illustration, the Portfolios may invest in a security that pays interest
and returns principal based on the change in an index of interest rates or of
the value of a precious or industrial metal. Interest and principal payable on
a security may also be based on relative changes among particular indexes. In
addition, the Portfolios may invest in securities whose potential investment
return is inversely based on the change in particular indexes. For example,
the Portfolios may invest in securities that pay a higher rate of interest and
principal when a particular index decreases and pay a lower rate of interest
and principal when the value of the index increases. To the extent that the
Portfolios invest in such types of securities, they will be subject to the
risks associated with changes in the particular indexes, which may include
reduced or eliminated interest payments and losses of invested principal.
Indexed and inverse securities are currently issued by a number of U.S.
governmental agencies such as FHLMC and FNMA, as well as a number of other
financial institutions. To the extent the Portfolios invest in such
instruments, under current market conditions, they most likely will purchase
indexed and inverse securities issued by the above-mentioned U.S. governmental
agencies.
Certain indexed securities, including certain inverse securities, may have
the effect of providing a degree of investment leverage, because they may
increase or decrease in value at a rate that is a multiple of the changes in
applicable indices. As a result, the market value of such securities will
generally be more volatile than the market values of fixed-rate securities.
The Portfolios believe that indexed securities, including inverse securities,
represent flexible portfolio management instruments that may allow the
Portfolios to seek potential investment return, hedge other portfolio
positions, or vary the degree of portfolio leverage relatively efficiently
under different market conditions.
LENDING OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities from its portfolio with
a value not exceeding 33 1/3% of its total assets, to banks, brokers and other
financial institutions and receive collateral in cash or securities
issued or guaranteed by the U.S. Government. Such collateral will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. This limitation is a fundamental
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policy of each Portfolio, and it may not be changed without the approval of the
holders of a majority of the Portfolio's outstanding voting securities, as
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"). During the period of such a loan, the Portfolio receives the
income on the loaned securities and either receives the income on the
collateral or other compensation, i.e., negotiated loan premium or fee, for
entering into the loan and thereby increases its yield. In the event that the
borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, a Portfolio could experience delays and costs in
gaining access to the collateral and could suffer a loss to the extent that the
value of the collateral falls below the market value of the borrowed
securities.
PORTFOLIO STRATEGIES INVOLVING OPTIONS AND FUTURES
Each Portfolio may engage in various portfolio strategies to seek to increase
its return through the use of listed or over-the-counter ("OTC") options on its
portfolio securities and to hedge its portfolio against adverse movements in
the markets in which it invests. Each Portfolio is authorized to write (i.e.,
sell) covered put and call options on its portfolio securities or securities in
which it anticipates investing and purchase put and call options on securities.
In addition, the Fundamental Value and Global Opportunity Portfolios may engage
in transactions in stock index options, stock index futures and related options
on such futures and may deal in forward foreign exchange transactions and
foreign currency options and futures and related options on such futures. The
Quality Bond, U.S. Government Securities and Global Opportunity Portfolios may
engage in transactions in interest rate futures and related options on such
futures. Each of these portfolio strategies is described in more detail in
"Appendix A--Options and Futures Transactions" attached to this Prospectus and
in the Statement of Additional Information. Although certain risks are involved
in options and futures transactions (as discussed in the Appendix), the
Investment Adviser believes that, because the Portfolios will (i) write only
covered options on portfolio securities or securities in which they anticipate
investing and (ii) engage in other options and futures transactions only for
hedging purposes, the options and portfolio strategies of the Portfolios will
not subject any Portfolio to the risks frequently associated with the
speculative use of options and futures transactions. While each Portfolio's use
of hedging strategies is intended to reduce the volatility of the net asset
value of shares of that Portfolio, each Portfolio's net asset value will
fluctuate. There can be no assurance that any Portfolio's hedging transactions
will be effective. Furthermore, each Portfolio will only engage in hedging
activities from time to time and may not necessarily be engaging in hedging
activities when movements in the equity or debt markets, interest rates or
currency exchange rates occur.
ILLIQUID SECURITIES
Each Portfolio may invest up to 15% of its assets in illiquid securities,
although it will limit such investments to 10% of its assets to the extent
required by state law. Pursuant to that restriction, the Portfolios may not
invest in securities that cannot readily be resold because of legal or
contractual restrictions or which cannot otherwise be marketed, redeemed, put
to the issuer or a third party, or which do not mature within seven days, or
which the Board of Directors of the Program has not determined to be liquid
pursuant to applicable law, if at the time of acquisition more than 15% (or
10%, if state law so requires) of that Portfolio's assets, taken at market
value, would be invested in such securities. Securities subject to this
restriction include repurchase agreements maturing in more than seven days and
securities the disposition of which is subject to other legal restrictions,
such as restrictions imposed by the Securities Act of 1933, as amended (the
"Securities Act"), on the resale of securities acquired in certain private
placements. If registration of these securities
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under the Securities Act is required, such registration may not be readily
accomplished, and if such securities may be resold without registration, such
resale may be permissible only in limited quantities. In either event, a
Portfolio may not be able to sell these restricted securities at a time which,
in the judgment of the Investment Adviser, would be most opportune.
Although not a fundamental policy, each Portfolio will include OTC options
and securities underlying such options (to the extent provided under
"Restrictions on OTC Options" in Appendix A hereto) in calculating the amount
of its assets subject to the limitation on restricted securities. No Portfolio
will change or modify this policy prior to the change or modification by the
Commission staff of its positions regarding OTC options.
Notwithstanding the above limitation, each Portfolio may purchase securities
that are not registered under the Securities Act but that can be offered and
sold to "qualified institutional buyers" under Rule 144A under the Securities
Act, provided that the Program's Board of Directors, or the Investment Adviser
pursuant to guidelines adopted by the Board, continuously determines, based on
trading markets for the specific Rule 144A security, that it is liquid. The
Board of Directors, however, will retain oversight and is ultimately
responsible for the liquidity determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities
offered and sold under Rule 144A will develop, the Board of Directors will
monitor carefully each Portfolio's investments in these securities, focusing on
such factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Portfolio to the extent that qualified institutional
buyers become for a time uninterested in purchasing these securities.
INVESTMENT RESTRICTIONS
Each Portfolio's investment activities are subject to further restrictions
that are described in the Statement of Additional Information. Investment
restrictions and policies which are fundamental policies may not be changed
without the approval of the holders of a majority of a Portfolio's outstanding
voting securities (which for this purpose and under the Investment Company Act
means the lesser of (a) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented or (b) more than 50% of
the outstanding shares). Among each Portfolio's fundamental policies, a
Portfolio may not invest more than 25% of its assets, taken at market value at
the time of each investment, in the securities of issuers of any particular
industry (excluding the U.S. Government and its agencies or instrumentalities).
Investment restrictions and policies that are non-fundamental policies may be
changed by the Board of Directors without shareholder approval. As a non-
fundamental policy, no Portfolio may borrow amounts in excess of 10% of its
total assets, taken at market value, and then only from banks as a temporary
measure for extraordinary or emergency purposes, such as the redemption of
Portfolio shares. No Portfolio will purchase securities while borrowings exceed
5% of its assets. None of the Portfolios has a present intention to borrow
money in amounts exceeding 5% of its assets.
MANAGEMENT OF THE PROGRAM
BOARD OF DIRECTORS
The Board of Directors of the Program consists of six individuals, five of
whom are not "interested persons" of the Program as defined in the Investment
Company Act. The Directors of the Program are
27
<PAGE>
responsible for the overall supervision of the operations of the Program and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act.
The Directors of the Program are:
Arthur Zeikel*--President and Chief Investment Officer of the Investment
Adviser and FAM; President and Director of Princeton Services, Inc. ("Princeton
Services"); Executive Vice President of ML & Co. and Merrill Lynch and Director
of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills--Member of the Committee of Investment of Employee Benefit Assets
of Financial Executives Institute ("CIEBA"); Member of CIEBA's Executive
Committee; Member of the Investment Advisory Committee of the State of New York
Common Retirement Fund; Director, Duke Management Company and Winthrop
Financial Associates (real estate management).
Walter Mintz--Special Limited Partner of Cumberland Associates (an investment
partnership).
Melvin R. Seiden--President of Silbanc Properties, Ltd. (real estate,
investment and consulting).
Stephen B. Swensrud--Principal of Fernwood Associates (financial
consultants); Director, Hitchiner Manufacturing Company.
Harry Woolf--Member of the editorial board, Interdisciplinary Science
Reviews; Director, Alex. Brown Mutual Funds, Advanced Technology Laboratories,
Family Health International and SpaceLabs Medical (medical equipment
manufacturing and marketing).
- --------
* Interested person, as defined in the Investment Company Act, of the Program.
MANAGEMENT AND ADVISORY ARRANGEMENTS
The Investment Adviser acts as the investment adviser to the Program and
provides each Portfolio with management and investment advisory services. The
Investment Adviser is owned and controlled by ML & Co., a financial services
holding company and the parent of Merrill Lynch. The Investment Adviser or its
affiliates act as investment adviser(s) to more than 100 other registered
investment companies and provide investment advisory services to individuals
and institutions. As of November 30, 1994, the Investment Adviser and its
affiliates had a total of approximately $167.5 billion in investment company
and other portfolio assets under management.
The investment advisory agreement with the Investment Adviser relating to
each Portfolio (each an "Investment Advisory Agreement") provides that, subject
to the direction of the Board of Directors of the Program, the Investment
Adviser is responsible for the actual management of that Portfolio and for the
review of that Portfolio'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 the Investment Adviser,
subject to review by the Board of Directors. The Investment Adviser supplies
the portfolio managers for each Portfolio, who consider analyses from various
sources, make the necessary investment decisions and place transactions
accordingly. The Investment Adviser also is obligated to perform certain
administrative and management services for the Program and is required to
provide all the office
28
<PAGE>
space, facilities, equipment and personnel necessary to perform its duties
under each Investment Advisory Agreement. The Investment Adviser has access to
the total securities research, economic research and computer applications
facilities of Merrill Lynch and makes extensive use of these facilities.
Each Portfolio pays the Investment Adviser a monthly fee based on the average
daily value of that Portfolio's net assets at the following annual rates:
<TABLE>
<CAPTION>
U.S.
FUNDAMENTAL QUALITY GOVERNMENT GLOBAL
VALUE BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- -----------
<S> <C> <C> <C>
0.65% 0.50% 0.50% 0.75%
</TABLE>
Each Investment Advisory Agreement obligates a Portfolio to pay certain
expenses incurred in its operations and a portion of the Program's general
administrative expenses allocated on the basis of the asset size of the
respective Portfolios. Expenses that will be borne directly by the Portfolios
include redemption expenses, expenses of portfolio transactions, shareholder
servicing costs, expenses of registering the shares under Federal and state
securities laws, pricing costs (including the daily calculation of net asset
value), interest, certain taxes, charges of the Custodian and Transfer Agent
and other expenses attributable to a particular Portfolio. Expenses which will
be allocated on the basis of the size of the respective Portfolios include
directors' fees, legal expenses, state franchise taxes, auditing services,
costs of printing proxies, stock certificates, shareholder reports and
prospectuses (except to the extent paid by the Distributor), Securities and
Exchange Commission fees, accounting costs and other expenses properly payable
by the Program and allocable on the basis of the size of the respective
Portfolios. Accounting services are provided for the Portfolios by the
Investment Adviser and the Portfolios reimburse the Investment Adviser for its
costs in connection with such services.
Set forth below is information about the Portfolio Manager for each of the
Program's Portfolios. The Portfolio Manager is the individual who is primarily
responsible for the day to day management of the Portfolio.
Fundamental Value Portfolio--Kevin Rendino. Mr. Rendino has served as Vice
President of the Investment Adviser since December 1993. Prior to that he was a
Senior Research Analyst from 1990 to 1992 and a Corporate Analyst from 1988 to
1990.
Quality Bond Portfolio--Jay C. Harbeck. Mr. Harbeck has served as Vice
President of the Investment Adviser since 1986 and as Portfolio Manager of the
Investment Adviser since 1992.
U.S. Government Securities Portfolio--Gregory Mark Maunz. Mr. Maunz has been
Vice President of the Investment Adviser since 1985 and Portfolio Manager since
1984.
Global Opportunity Portfolio--Joel Heymsfeld. Mr. Heymsfeld has been a Vice
President of the Investment Adviser since 1978.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a wholly-owned
subsidiary of ML & Co., acts as the Program's transfer agent pursuant to a
transfer agency, dividend disbursing agency and shareholder servicing agency
agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer Agency
Agreement, the Transfer Agent is responsible for the issuance, transfer and
redemption of shares and the opening and maintenance of shareholder accounts.
Pursuant to the Transfer Agency Agreement, each Portfolio pays the Transfer
Agent a fee of $11 per Class A and Class D shareholder account and $14 per
Class B and Class C shareholder account and nominal miscellaneous fees (e.g.,
account closing fees) and reimburses the Transfer Agent for out-of-pocket
expenses incurred under the Transfer Agency Agreement.
29
<PAGE>
PURCHASE OF SHARES
The Program will offer shares solely to holders of IRAs for which Merrill
Lynch acts as custodian, including individual retirement rollover accounts and
SEP-IRAs. The minimum initial purchase in any Portfolio is $100, and the
minimum subsequent purchase in any Portfolio is $1.
The Distributor, an affiliate of both the Investment Adviser and Merrill
Lynch, acts as the distributor of shares of the Portfolios. Shares of the
Portfolios are offered continuously for sale by the Distributor and other
eligible securities dealers (including Merrill Lynch). Shares of the Portfolios
may be purchased from securities dealers or by mailing a purchase order
directly to the Transfer Agent.
The Program is offering shares of the Portfolios in four classes at a public
offering price equal to the next determined net asset value per share plus
sales charges imposed either at the time of purchase or on a deferred basis
depending upon the class of shares selected by the investor under the Merrill
Lynch Select PricingSM System, as described below. The applicable offering
price for purchase orders is based upon the net asset value of the Portfolio
next determined after receipt of the purchase orders by the Distributor. As to
purchase orders received by securities dealers prior to 15 minutes after the
close of business on the New York Stock Exchange (generally, 4:00 P.M., New
York time), which includes orders received after the determination of the net
asset value on the previous day, the applicable offering price will be based on
the net asset value as of 15 minutes after the close of business on the New
York Stock Exchange, on the day the orders are placed with the Distributor,
provided the orders are received by the Distributor prior to 30 minutes after
the close of business on the New York Stock Exchange on that day. If the
purchase orders are not received prior to 30 minutes after the close of
business on the New York Stock Exchange such orders shall be deemed received on
the next business day. The Program or the Distributor may suspend the
continuous offering of any Portfolio's shares of any class at any time in
response to conditions in the securities markets or otherwise and may
thereafter resume such offering from time to time. Any order may be rejected by
the Distributor or the Program. Neither the Distributor nor the dealers are
permitted to withhold placing orders to benefit themselves by a price change.
Merrill Lynch may charge its customers a processing fee (presently $4.85) to
confirm a sale of shares to such customers. Purchases directly through the
Transfer Agent are not subject to the processing fee.
Each Portfolio issues four classes of shares under the Merrill Lynch Select
PricingSM System, which permits each investor to choose the method of
purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Shares of Class A and Class D are sold
to investors choosing the initial sales charge alternatives and shares of Class
B and Class C are sold to investors choosing the deferred sales charge
alternatives. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Portfolio with the
investment thereafter being subject to a CDSC and ongoing distribution fees. A
discussion of the factors that investors should consider in determining the
method of purchasing shares under the Merrill Lynch Select PricingSM System is
set forth under "Merrill Lynch Select PricingSM System" on page 8.
Shareholders considering transferring a tax-deferred account such as an IRA
from Merrill Lynch to another brokerage firm or financial institution should be
aware that shares of the Portfolios may only be held in a Merrill Lynch
custodied IRA. Prior to any such transfer, a shareholder must either redeem the
shares so that the cash proceeds can be transferred to the account at the new
firm or exchange the shares for shares of another MLAM-advised mutual fund
pursuant to the exchange privilege. It is possible, however, that the
30
<PAGE>
firm to which the IRA is to be transferred will not take delivery of shares of
such fund, in which case the shareholder would have to redeem these shares
(paying any applicable CDSC) so that the cash proceeds can be transferred or
continue to maintain an IRA account at Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically
invested in shares of a Portfolio will be invested as follows. Cash balances
arising from the sale of securities held in the IRA account which do not
settle on the day of the transaction (such as most common and preferred stock
transactions) become available to the Program and will be invested in shares
of a Portfolio on the business day following the day that proceeds with
respect thereto are received in the IRA account. Proceeds giving rise to cash
balances from the sale of securities held in the IRA account settling on a
same day basis and from principal repayments on debt securities held in the
account become available to the Program and will be invested in shares of a
Portfolio on the next business day following receipt. Cash balances arising
from dividends or interest payments on securities held in the IRA account or
from a contribution to the IRA account are invested in shares of the
Portfolios on the business day following the date the payment is received in
the IRA account.
Merrill Lynch has advised the Program that it will not charge an annual
account fee upon any IRA which is then invested solely in one or more of the
Program's Portfolios or in a money market fund advised by the Investment
Adviser or its affiliates. Merrill Lynch has also advised the Program that it
will not charge an annual account fee upon any IRA which participates in the
Merrill Lynch Retirement Asset Builder SM Service, receives additional
contributions of $250 annually and is invested solely in one or more of the
Program's Portfolios or a money market fund advised by the Investment Adviser
or its affiliates. If, however, a shareholder of any of the Portfolios
exchanges any of his or her shares of a Portfolio for shares of another MLAM-
advised mutual fund, Merrill Lynch will reinstate the IRA annual account fee.
For information about current IRA fees charged by Merrill Lynch, consult the
Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial
agreement.
Each Class A, Class B, Class C and Class D share of a Portfolio represents
an identical interest in the same investment portfolio and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, will be imposed directly against those classes and
not against all assets of the Portfolio and, accordingly, such charges will
not affect the net asset value of any other class or have any impact on
investors choosing another sales charge option. Dividends paid by a Portfolio
for each class of shares will be calculated in the same manner at the same
time and will differ only to the extent that account maintenance and
distribution fees and any incremental transfer agency costs relating to a
particular class are borne exclusively by that class. Class B, Class C and
Class D shares each have exclusive voting rights with respect to the Rule 12b-
1 distribution plan adopted with respect to such class pursuant to which
account maintenance and/or distribution fees are paid. See "Distribution
Plans" below. Each class has different exchange privileges. See "Shareholder
Services--Exchange Privilege". If pursuant to the exchange privilege, shares
of any Portfolio are exchanged for shares of a fund other than a Portfolio of
the Program or a money market fund advised by the Investment Adviser or its
affiliates then the imposition of the IRA annual account fee may result. For
information about current IRA fees charged by Merrill Lynch, consult the
Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial
agreement.
31
<PAGE>
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in
that the sales charges applicable to each class provide for the financing of
the distribution of the shares of the Program. The distribution-related
revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares. Investors are
advised that only Class A and Class D shares may be available for purchase
through securities dealers, other than Merrill Lynch, which are eligible to
sell shares.
The following table sets forth a summary of the distribution arrangements
for each class of shares under the Merrill Lynch Select PricingSM System.
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY PORTFOLIOS
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ---------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
A Maximum 5.25% initial No No No
sales charge(/2/)(/3/)
- ---------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.75% B shares convert to D shares
years, at a rate of automatically after
4.0% during the first approximately eight
year, decreasing 1.0% years(/4/)
annually to 0.0%
- ---------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.75% No
- ---------------------------------------------------------------------------------------
D Maximum 5.25% initial 0.25% No No
sales charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs may be imposed if the redemption occurs
within the applicable CDSC time period. The charge will be assessed on an
amount equal to the lesser of the proceeds of redemption or the cost of
the shares being redeemed.
(2) Offered only to eligible investors. See "Initial Sales Charge
Alternatives -- Class A and Class D Shares -- Eligible Class A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares is modified. Also,
Class B shares of the Quality Bond and U.S. Government Securities
Portfolios and certain other MLAM-advised mutual funds into which
exchanges may be made have a ten-year conversion period. If Class B shares
of a Portfolio are exchanged for Class B shares of another Portfolio or
MLAM-advised mutual fund, the conversion period applicable to the Class B
shares acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked on to the holding period for the shares
acquired.
32
<PAGE>
QUALITY BOND AND U.S. GOVERNMENT SECURITIES PORTFOLIOS
<TABLE>
<CAPTION>
ACCOUNT
MAINTENANCE DISTRIBUTION
CLASS SALES CHARGE(/1/) FEE FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
A Maximum 4.00% initial No No No
sales charge(/2/)(/3/)
- ----------------------------------------------------------------------------------------
B CDSC for a period of 4 0.25% 0.50% B shares convert to D shares
years at a rate of 4.0% automatically after
during the first year, approximately ten
decreasing 1.0% years(/4/)
annually to 0.0%
- ----------------------------------------------------------------------------------------
C 1.0% CDSC for one year 0.25% 0.55% No
- ----------------------------------------------------------------------------------------
D Maximum 4.00% initial 0.25% No No
sales charge(/3/)
</TABLE>
- --------
(1) Initial sales charges are imposed at the time of purchase as a percentage
of the offering price. CDSCs are imposed if the redemption occurs within
the applicable CDSC time period. The charge will be assessed on an amount
equal to the lesser of the proceeds of redemption or the cost of the
shares being redeemed.
(2) Offered only to eligible investors. See "Purchase of Shares -- Initial
Sales Charge Alternatives -- Class A and Class D Shares -- Eligible Class
A Investors".
(3) Reduced for purchases of $25,000 or more. Class A and Class D share
purchases of $1,000,000 or more may not be subject to an initial sales
charge but instead will be subject to a 1.0% CDSC for one year.
(4) The conversion period for dividend reinvestment shares is modified. Also,
Class B shares of the Fundamental Value and Global Opportunity Portfolios
and certain other MLAM-advised mutual funds into which exchanges may be
made have an eight-year conversion period. If Class B shares of a
Portfolio are exchanged for Class B shares of another Portfolio or MLAM-
advised mutual fund, the conversion period applicable to the Class B
shares acquired in the exchange will apply, and the holding period for the
shares exchanged will be tacked on to the holding period for the shares
acquired.
33
<PAGE>
INITIAL SALES CHARGE ALTERNATIVES -- CLASS A AND CLASS D SHARES
Investors choosing the initial sales charge alternatives who are eligible to
purchase Class A shares should purchase Class A shares rather than Class D
shares because there is an account maintenance fee imposed on Class D shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
FUNDAMENTAL VALUE AND GLOBAL OPPORTUNITY
PORTFOLIOS
--------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD AS A PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- ------------------ --------------- --------------- ------------------
<S> <C> <C> <C>
Less than $25,000........... 5.25% 5.54% 5.00%
$25,000 but less than
$50,000.................... 4.75 4.99 4.50
$50,000 but less than
$100,000................... 4.00 4.17 3.75
$100,000 but less than
$250,000................... 3.00 3.09 2.75
$250,000 but less than
$1,000,000................. 2.00 2.04 1.80
$1,000,000 and over**....... 0.00 0.00 0.00
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND AND
U.S. GOVERNMENT SECURITIES PORTFOLIOS
-----------------------------------------------------
SALES LOAD AS A DISCOUNT TO
SALES LOAD PERCENTAGE* OF SELECT DEALERS
AS A PERCENTAGE NET AMOUNT AS A PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING PRICE INVESTED OF OFFERING PRICE
- ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Less than $25,000........ 4.00% 4.16% 3.75%
$25,000 but less than
$50,000................. 3.75 3.90 3.50
$50,000 but less than
$100,000................ 3.25 3.36 3.00
$100,000 but less than
$250,000................ 2.50 2.56 2.25
$250,000 but less than
$1,000,000.............. 1.50 1.52 1.25
$1,000,000 and more**.... 0.00 0.00 0.00
</TABLE>
- --------
*Rounded to the nearest one-hundredth percent.
** Class A and Class D purchases of $1,000,000 or more will be subject to a
CDSC of 1.0% if the shares are redeemed within one year after purchase. The
charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and
Class D shares of the Program will receive a concession equal to most of the
sales charge, they may be deemed to be underwriters under the Securities Act.
Eligible Class A Investors. Class A shares are offered to a limited group of
investors and also will be issued upon reinvestment of dividends on outstanding
Class A shares. Class A shares may be purchased at net asset value by
participants in certain investment programs to which Merrill Lynch Trust
Company
34
<PAGE>
provides discretionary trustee services. In addition, Class A shares will be
offered at net asset value to ML & Co. and its subsidiaries and their directors
and employees and to members of the Boards of MLAM-advised investment
companies, including the Program. Certain persons who acquired shares of
certain MLAM-advised closed-end funds who wish to reinvest the net proceeds
from a sale of their closed-end fund common shares in shares of the Program
also may purchase Class A shares of a Portfolio if certain conditions set forth
in the Statement of Additional Information are met. For example, Class A shares
of the Program and certain other MLAM-advised mutual funds are offered at net
asset value to shareholders of Merrill Lynch Senior Floating Rate Fund, Inc.
who wish to reinvest the net proceeds from a sale of certain of their shares of
common stock of Merrill Lynch Senior Floating Rate Fund, Inc. in shares of such
funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges
also may be reduced under a Right of Accumulation and a Letter of Intention.
Class A shares are offered at net asset value to certain eligible Class A
investors as set forth above under "Eligible Class A Investors".
Class D shares are offered at net asset value without sales charge to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met.
Additional information concerning these reduced initial sales charges is set
forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVES -- CLASS B AND CLASS C SHARES
Investors choosing the deferred sales charge alternatives should consider
Class B shares if they intend to hold their shares for an extended period of
time and Class C shares if they are uncertain as to the length of time they
intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net
asset value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, with respect to the Fundamental Value and Global Opportunity Portfolios,
approximately eight years after Class B shares are issued, and with respect to
the Quality Bond and U.S. Government Securities Portfolios, approximately ten
years after Class B shares are issued, such Class B shares, together with
shares issued upon dividend reinvestment with respect to those shares, are
automatically converted into Class D shares of the same Portfolio and
thereafter will be subject to lower continuing fees. See "Conversion of Class B
Shares to Class D Shares" below. Both Class B and Class C shares of each of the
Portfolios are subject to ongoing account maintenance and distribution fees as
discussed below under "Distribution Plans". The proceeds from the account
maintenance fees are used to compensate Merrill Lynch for providing continuing
account maintenance activities.
Class B and Class C shares of each Portfolio are sold without an initial
sales charge so that the Portfolio will receive the full amount of the
investor's purchase payment. Merrill Lynch compensates its financial
35
<PAGE>
consultants for selling Class B and Class C shares at the time of purchase from
its own funds. See "Distribution Plans" below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor
and are used in whole or in part by the Distributor to defray the expenses of
dealers (including Merrill Lynch) related to providing distribution-related
services to the Program in connection with the sale of the Class B and Class C
shares of the Portfolios, such as the payment of compensation to financial
consultants for selling Class B and Class C shares, from its own funds. The
combination of the CDSC and the ongoing distribution fee facilitates the
ability of the Program to sell the Class B and Class C shares without a sales
charge being deducted at the time of purchase. Class B shares of a Portfolio
will convert automatically into Class D shares of the same Portfolio
approximately eight years after issuance in the case of the Fundamental Value
and Global Opportunity Portfolios and approximately ten years after issuance in
the case of the Quality Bond and U.S. Government Securities Portfolios. Class D
shares are subject to an account maintenance fee but no distribution fee. Class
B shares of certain MLAM-advised mutual funds into which exchanges may be made
convert into Class D shares automatically after approximately eight years, and
Class B shares of certain other MLAM-advised mutual funds into which exchanges
may be made convert into Class D shares automatically after approximately ten
years. If Class B shares of a Portfolio are exchanged for Class B shares of
another Portfolio or MLAM-advised mutual fund, the conversion period applicable
to Class B shares acquired in the exchange will apply, and the holding period
for the shares exchanged will be tacked on to the holding period for the shares
acquired.
Imposition of the CDSC and the distribution fee on Class B and Class C shares
is limited by the NASD asset-based sales charge rule. See "Limitations on the
Payment of Deferred Sales Charges" below. Class B shareholders of a Portfolio
exercising the exchange privilege described under "Shareholder Services --
Exchange Privilege" will continue to be subject to that Portfolio's CDSC
schedule if such schedule is higher than the CDSC schedule relating to the
Class B shares acquired as a result of the exchange.
Contingent Deferred Sales Charges -- Class B Shares. Class B shares which are
redeemed within four years of purchase may be subject to a CDSC at the rates
set forth below charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no CDSC will
be imposed on increases in net asset value above the initial purchase price. In
addition, no CDSC will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
CLASS B CDSC
AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
------------------- -----------------
<S> <C>
0-1........................................................ 4.00%
1-2........................................................ 3.00
2-3........................................................ 2.00
3-4........................................................ 1.00
4 and thereafter........................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in the manner that results in the lowest possible rate being
charged. Therefore, it will be assumed that the
36
<PAGE>
redemption is first of shares held for over four years or shares acquired
pursuant to reinvestment of dividends or distributions and then of shares held
longest during the four-year period. The charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase. A transfer of shares from a shareholder's account to another account
will be assumed to be made in the same order as a redemption.
To provide an example, assume an investor purchases 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to the CDSC because of dividend reinvestment. With respect
to the remaining 40 shares, the CDSC is applied only to the original cost of
$10 per share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at a rate of
2.0% (the applicable rate in the third year after purchase).
The Class B CDSC is waived on redemptions of shares in connection with
certain post-retirement withdrawals from an IRA or following the death or
disability (as defined in the Internal Revenue Code of 1986, as amended) of a
shareholder. Additional information concerning the waiver of the Class B CDSC
is set forth in the Statement of Additional Information.
Contingent Deferred Sales Charges -- Class C Shares. Class C shares which are
redeemed within one year after purchase may be subject to a 1.0% CDSC charged
as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the proceeds of redemption or the
cost of the shares being redeemed. Accordingly, no Class C CDSC will be imposed
on increases in net asset value above the initial purchase price. In addition,
no Class C CDSC will be assessed on shares derived from reinvestment of
dividends or capital gains distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest
possible rate being charged. Therefore, it will be assumed that the redemption
is first of shares held for over one year or shares acquired pursuant to
reinvestment of dividends or distributions and then of shares held longest
during the one-year period. The charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase. A
transfer of shares from a shareholder's account to another account will be
assumed to be made in the same order as a redemption.
Conversion of Class B Shares to Class D Shares. After approximately eight
years in the case of the Fundamental Value and Global Opportunity Portfolios
and ten years in the case of the Quality Bond and U.S. Government Securities
Portfolios (the "Conversion Period"), Class B shares of a Portfolio will be
converted automatically into Class D shares of the same Portfolio. Class D
shares are subject to an ongoing account maintenance fee of 0.25% of net assets
but are not subject to the distribution fee that is borne by Class B shares.
Automatic conversion of Class B shares into Class D shares will occur at least
once each month (on the "Conversion Date") on the basis of the relative net
asset values of the shares of the two classes on the Conversion Date, without
the imposition of any sales load fee or other charge. Conversion of Class B
shares to Class D shares will not be deemed a purchase or sale of the shares
for Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
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outstanding. If at a Conversion Date the conversion of Class B shares to Class
D shares of a Portfolio in a single account will result in less than $50 worth
of Class B shares being left in the account, all of the Class B shares of that
Portfolio held in the account on the Conversion Date will be converted to Class
D shares of that Portfolio.
Share certificates for Class B shares of a Portfolio to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
the Transfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
In general, Class B shares of equity MLAM-advised mutual funds will convert
approximately eight years after initial purchase, and Class B shares of taxable
and tax-exempt fixed income MLAM-advised mutual funds will convert
approximately ten years after initial purchase. If, during the Conversion
Period, a shareholder exchanges Class B shares with an eight-year Conversion
Period for Class B shares with a ten-year Conversion Period, or vice versa, the
Conversion Period applicable to the Class B shares acquired in the exchange
will apply, and the holding period for the shares exchanged will be tacked on
to the holding period for the shares acquired.
DISTRIBUTION PLANS
The Program has adopted separate distribution plans on behalf of each of the
Portfolios for Class B, Class C and Class D shares pursuant to Rule 12b-1 under
the Investment Company Act (each a "Distribution Plan") with respect to the
account maintenance and/or distribution fees paid by the Portfolio to the
Distributor with respect to such classes. The Class B and Class C Distribution
Plans provide for the payment of account maintenance fees and distribution
fees, and the Class D Distribution Plan provides for the payment of account
maintenance fees.
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Portfolio pays the Distributor an account maintenance fee relating to
the shares of the relevant class, accrued daily and paid monthly, at the annual
rate of 0.25% of the average daily net assets of the Portfolio attributable to
shares of the relevant class in order to compensate the Distributor and Merrill
Lynch (pursuant to a sub-agreement) in connection with account maintenance
activities.
The Distribution Plans for Class B and Class C shares each provide that the
respective Portfolio also pays the Distributor a distribution fee relating to
the shares of the relevant class, accrued daily and paid monthly, (i) at the
annual rate of 0.75% of the average daily net assets attributable to the Class
B and Class C shares of the Fundamental Value and Global Opportunity Portfolios
or (ii) at the annual rates of 0.50% and 0.55% of the average daily net assets
attributable to the Class B and Class C shares, respectively, of the Quality
Bond and U.S. Government Securities Portfolios, in order to compensate the
Distributor and Merrill Lynch (pursuant to a sub-agreement) for providing
shareholder and distribution services, and bearing certain distribution-related
expenses of the Portfolios, including payments to financial consultants for
selling Class B and Class C shares of that Portfolio. The Distribution Plans
relating to Class B and Class C shares are designed to permit an investor to
purchase Class B and Class C shares through dealers without the assessment of
an initial sales charge and at the same time permit the dealer to compensate
its financial consultants in connection with the sale of the Class B and Class
C shares. In this regard, the purpose and
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function of the ongoing distribution fees and the CDSC are the same as those of
the initial sales charge with respect to the Class A and Class D shares of the
Portfolios in that the deferred sales charges provide for the financing of the
distribution of the Portfolio's Class B and Class C shares.
The payments under the Distribution Plans are based upon a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred, and accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C Distribution
Plans. This information is presented annually as of December 31 of each year on
a "fully allocated accrual" basis and quarterly on a "direct expense and
revenue/cash" basis. On the fully allocated accrual basis, revenues consist of
the account maintenance fees, distribution fees, CDSCs and certain other
related revenues, and expenses consist of financial consultant compensation,
branch office and regional operation center selling and transaction processing
expenses, advertising, sales promotion and marketing expenses, corporate
overhead and interest expense. On the direct expense and revenue/cash basis,
revenues consist of the account maintenance fees, distribution fees and CDSCs,
and the expenses consist of financial consultant compensation.
The Program has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with Class B, Class C and Class D shares, and there is no assurance
that the Directors of the Program will approve the continuance of the
Distribution Plans from year to year. However, the Distributor intends to seek
annual continuation of the Distribution Plans. In their review of the
Distribution Plans, the Directors will be asked to take into consideration
expenses incurred in connection with the account maintenance and/or
distribution of each class of shares separately. The initial sales charges, the
account maintenance fee, the distribution fee and/or the CDSCs received with
respect to one class will not be used to subsidize the sale of shares of
another class. Payments of the distribution fee on Class B shares will
terminate upon conversion of those Class B shares into Class D shares as set
forth under "Deferred Sales Charge Alternatives -- Class B and Class C
Shares -- Conversion of Class B Shares to Class D Shares".
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the NASD
imposes a limitation on certain asset-based sales charges such as the
Portfolios' distribution fees and the CDSCs but not the account maintenance
fees. The maximum sales charge rule is applied separately to each Portfolio and
to each class. As applicable to the Portfolios, the maximum sales charge rule
limits the aggregate of distribution fee payments and CDSCs payable by each
Portfolio to (1) 6.25% of eligible gross sales of Class B shares and Class C
shares, computed separately (defined to exclude shares issued pursuant to
dividend reinvestments and exchanges) plus (2) interest on the unpaid balance
for the respective class, computed separately, at the prime rate plus 1% (the
unpaid balance being the maximum amount payable minus amounts received from the
payment of the distribution fee and the CDSC). In connection with the Class B
shares, the Distributor has voluntarily agreed to waive interest charges on the
unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the
maximum amount payable to the Distributor (referred to as the "voluntary
maximum") in connection with the Class B shares is 6.75% of eligible gross
sales. The Distributor retains the right to stop waiving interest charges at
any time. To the extent payments would exceed the voluntary
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maximum, the Portfolio in question will not make further payments of the
distribution fee with respect to Class B shares, and any CDSCs will be paid to
the Portfolio rather than to the Distributor; however, the Portfolio will
continue to make payments of the account maintenance fee. In certain
circumstances the amount payable pursuant to the voluntary maximum may exceed
the amount payable under the NASD formula. In such circumstances payment in
excess of the amount payable under the NASD formula will not be made.
REDEMPTION OF SHARES
Distributions from an IRA to a participant prior to the time the participant
reaches age 59 1/2 may subject the participant to income and excise taxes. See
"Taxes". There are no adverse tax consequences resulting from redemptions of
shares of the Portfolios where the redemption proceeds remain in the IRA
account and are otherwise invested. Shareholders should consult their tax
advisers concerning tax consequences resulting from redemptions of shares of
the Portfolios. Shareholders should be aware, however, that redemption of
shares of a Portfolio and reinvestment of the proceeds in shares of another
fund advised by the Investment Adviser or an affiliate may subject the
investor's IRA to an annual IRA account fee. For information about the current
IRA fees charged by Merrill Lynch, consult the Merrill Lynch IRA disclosure
statement and the Merrill Lynch IRA custodial agreement.
The Program is required to redeem for cash shares of each Portfolio of the
Program at the request of shareholders. The redemption price is the net asset
value per share next determined after the initial receipt by Merrill Lynch of
proper notice of redemption, as described below. If such notice is received by
Merrill Lynch prior to the determination of net asset value (15 minutes after
the close of business on the New York Stock Exchange), the redemption will be
effective on that day and payment generally will be made on the next business
day. If the notice is received after the determination of net asset value on
any day, the redemption will be effective on the next business day and payment
will be made on the second business day after receipt of the notice.
Shareholders liquidating their holdings will receive upon redemption all
dividends reinvested through the date of redemption. Accrued but unpaid
dividends will be paid on the payable date next following the date of
redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written
notice of redemption to Merrill Lynch. Participants in the Program should
contact their Merrill Lynch financial consultant to effect such redemptions.
Redemption requests should not be sent to the Program or to the Transfer Agent.
The notice must bear the signature of the person in whose name the IRA is
maintained, signed exactly as his or her name appears on the IRA adoption
agreement.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans
designed to facilitate investment in its shares. Full details as to each of
such services, copies of the various plans described below and instructions as
to how to participate in the various services or plans, or how to change
options with respect thereto, can be obtained from the Program by calling the
telephone number on the cover page hereof or from the Distributor or Merrill
Lynch.
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Exchange Privilege. Shareholders of each Portfolio have an exchange privilege
with each other Portfolio of the Program, with certain money market funds
advised by the Investment Adviser or its affiliates and with certain other
MLAM-advised mutual funds. There is currently no limitation on the number of
times a shareholder may exercise the exchange privilege. The exchange privilege
may be modified or terminated in accordance with the rules of the Commission.
If, however, a shareholder exchanges any of his or her shares of a Portfolio
for shares of another MLAM-advised mutual fund, Merrill Lynch will reinstate
the IRA annual account fee. For information about the current IRA fees charged
by Merrill Lynch, consult the Merrill Lynch IRA disclosure statement and the
Merrill Lynch IRA custodial agreement.
Under the Merrill Lynch Select PricingSM System, Class A shareholders may
exchange Class A shares of a Portfolio for Class A shares of a second Portfolio
or MLAM-advised mutual fund if the shareholder holds any Class A shares of the
second Portfolio or fund in his account in which the exchange is made at the
time of the exchange or is otherwise eligible to purchase Class A shares of the
second Portfolio or fund. If the Class A shareholder wants to exchange Class A
shares for shares of a second Portfolio or MLAM-advised mutual fund, and the
shareholder does not hold Class A shares of the second Portfolio or fund in his
account at the time of the exchange and is not otherwise eligible to acquire
Class A shares of the second Portfolio or fund, the shareholder will receive
Class D shares of the second Portfolio or fund as a result of the exchange.
Class D shares also may be exchanged for Class A shares of a second Portfolio
or MLAM-advised mutual fund at any time as long as, at the time of the
exchange, the shareholder holds Class A shares of the second Portfolio or fund
in the account in which the exchange is made or is otherwise eligible to
purchase Class A shares of the second Portfolio or fund.
Exchanges of Class A and Class D shares are made on the basis of the relative
net asset values per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the Class A or Class D shares being exchanged and the sales charge payable at
the time of the exchange on the shares being acquired.
Class B, Class C and Class D shares will be exchanged with shares of the same
class of another Portfolio or MLAM-advised mutual fund.
Shares of the Portfolios which are subject to a CDSC will be exchangeable on
the basis of relative net asset value per share without the payment of any CDSC
that might otherwise be due upon redemption of the shares of the Portfolio. For
purposes of computing the CDSC that may be payable upon a disposition of the
shares acquired in the exchange, the holding period for the previously owned
shares of the Portfolio is tacked on to the holding period of the newly
acquired shares of the other Portfolio or fund.
Class A, Class B, Class C and Class D shares also will be exchangeable for
shares of certain MLAM- advised money market funds specifically designated as
available for exchange by holders of Class A, Class B, Class C or Class D
shares. The period of time that Class A, Class B, Class C or Class D shares are
held in a money market fund, however, will not count toward satisfaction of the
holding period requirement for reduction of any CDSC imposed on such shares, if
any, and with respect to Class B shares, toward satisfaction of the Conversion
Period.
Class B shareholders of a Portfolio exercising the exchange privilege will
continue to be subject to the Portfolio's CDSC schedule if such schedule is
higher than the CDSC schedule relating to the new Class B shares. In addition,
Class B shares of a Portfolio acquired through use of the exchange privilege
will be subject
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to the Portfolio's CDSC schedule if such schedule is higher than the CDSC
schedule relating to the Class B shares of the MLAM-advised mutual fund from
which the exchange has been made.
Exercise of the exchange privilege is treated as a sale for Federal income
tax purposes. For further information, see "Shareholder Services -- Exchange
Privilege" in the Statement of Additional Information.
MERRILL LYNCH HAS ADVISED THE PROGRAM THAT IT WILL NOT CHARGE AN ANNUAL
ACCOUNT FEE UPON ANY IRA WHICH IS THEN INVESTED SOLELY IN ONE OR MORE OF THE
PROGRAM'S PORTFOLIOS OR A MONEY MARKET FUND ADVISED BY THE INVESTMENT ADVISER
OR ITS AFFILIATES. IN THIS REGARD, EXCHANGE OF PORTFOLIO SHARES FOR SHARES OF A
FUND OTHER THAN A PORTFOLIO OF THE PROGRAM OR A MONEY MARKET FUND ADVISED BY
THE INVESTMENT ADVISER OR ITS AFFILIATES MAY RESULT IN THE IMPOSITION OF AN
ANNUAL IRA FEE. FOR INFORMATION ABOUT THE CURRENT IRA FEES CHARGED BY MERRILL
LYNCH, CONSULT THE MERRILL LYNCH IRA DISCLOSURE STATEMENT AND THE MERRILL LYNCH
IRA CUSTODIAL AGREEMENT.
For further information, see "Shareholder Services--Exchange Privilege" in
the Statement of Additional Information.
Automatic Reinvestment of Dividends and Capital Gains Distributions. All
dividends and capital gains distributions of a Portfolio are reinvested
automatically in full and fractional shares of that Portfolio, at the net asset
value per share of the respective Portfolio next determined on the ex-dividend
date of such dividend or distribution in the case of the Fundamental Value and
Global Opportunity Portfolios and at the close of business on the monthly
payment date for such dividends and distributions in the case of the Quality
Bond and U.S. Government Securities Portfolios. A shareholder may, at any time,
by written notification to Merrill Lynch, elect to have subsequent dividends or
both dividends and capital gains distributions held in the IRA as a cash
balance rather than reinvested.
Systematic Withdrawal Plans. At age 59 1/2, a Class A or Class D shareholder
may elect to receive systematic redemption payments from his or her account in
the form of payments by check or through automatic payment by direct deposit to
his or her bank account on either a monthly or quarterly basis. A Class A or
Class D shareholder may elect to have shares redeemed on a monthly, bimonthly,
quarterly, semiannual or annual basis through the Systematic Redemption
Program, subject to certain conditions. See "Taxes" for consequences of
withdrawals from IRA accounts prior to attaining age 59 1/2.
Automatic Investment Plans. Regular additions of Class A, Class B, Class C or
Class D shares may be made to an investor's account by prearranged charges of
$50 or more to his regular bank account. In addition, Merrill Lynch offers an
automated funding service which permits regular current year IRA contributions
of up to $2,000 per year to be made to IRAs and an automated investment program
which may be used for automated subsequent purchases of shares of the Program.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Program, the
Investment Adviser is primarily responsible for the Program's portfolio
decisions and the execution of the Program's portfolio transactions. With
respect to such transactions, the Investment Adviser seeks to obtain the best
results for each Portfolio, taking into account such factors as price
(including the applicable fee, brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm involved,
the firm's risk in positioning a block of securities and the provision of
supplemental investment research by the firm. While the Investment Adviser
generally seeks reasonably competitive fees, commissions or spreads, the
Portfolios will not necessarily be paying the lowest fee, commission or spread
available. The Board of Directors of the Program has adopted procedures to
ensure that brokerage transactions with affiliated persons, including the
frequency of such transactions, the receipt of commissions payable and the
selection of the broker effecting the transactions, are fair and reasonable to
the Program's shareholders.
The fixed income securities and certain equity securities in which the
Portfolios will invest are traded in the over-the-counter markets, and where
possible the Portfolios intend to deal directly with the dealers who make
markets in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Under the Investment Company Act,
except as permitted by exemptive order, persons affiliated with the Program are
prohibited from dealing with any Portfolio as principal in the purchase and
sale of securities. Since transactions in the over-the-counter market usually
involve transactions with dealers acting as principal for their own account,
the Portfolios will not deal with affiliated persons, including Merrill Lynch
and its affiliates, in connection with such transactions. In addition, the
Portfolios may not purchase securities during the existence of any underwriting
syndicate for such securities of which Merrill Lynch is a member except
pursuant to procedures approved by the Board of Directors of the Program which
comply with rules adopted by the Commission. Affiliated persons of the Program
may serve as its broker in over-the-counter transactions conducted on an agency
basis.
No Portfolio has any obligation to deal with any broker or dealer in the
execution of its portfolio transactions. Subject to obtaining the best price
and execution, securities firms, including Merrill Lynch, which provide
supplemental investment research to the Investment Adviser may receive orders
for transactions by the Portfolios. Information so received is in addition to
and not in lieu of the services required to be performed by the Investment
Adviser under the Investment Advisory Agreement, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt
of such supplemental information. Supplemental investment research received by
the Investment Adviser also may be used in connection with other investment
advisory accounts of the Investment Adviser and its affiliates. Each Portfolio
will pay brokerage fees to Merrill Lynch in connection with portfolio
transactions executed on its behalf by Merrill Lynch.
The Program anticipates that its brokerage transactions involving securities
of companies domiciled in countries other than the United States generally will
be conducted primarily on the principal stock exchanges of such countries.
Brokerage commissions and other transaction costs on foreign stock exchange
transactions are generally higher than in the United States although the
Portfolios will endeavor to achieve the best net results in effecting such
transactions. There is generally less governmental supervision and regulation
of foreign stock exchanges and brokers than in the United States.
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PERFORMANCE DATA
From time to time the Program may include each Portfolio's average annual
total return and, in the case of the Quality Bond and U.S. Government
Securities Portfolios, yield for various specified time periods in
advertisements or information furnished to present or prospective shareholders.
Average annual total return and yield are computed separately for each
Portfolio in accordance with formulas specified by the Commission.
Average annual total return quotations for each Portfolio for the specified
periods will be computed by finding the average annual compounded rates of
return (based on net investment income and any capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return will be computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses, including the maximum sales charge in the case of
Class A and Class D shares and the CDSC that would be applicable to a complete
redemption of the investment at the end of the specified period in the case of
Class B and Class C shares. Dividends paid by a Portfolio with respect to all
shares, to the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in the same amount, except
that account maintenance and distribution fees and any incremental transfer
agency costs relating to each class of shares will be borne exclusively by that
class. The Portfolios will include performance data for all classes of shares
of the Portfolio in any advertisement or information including performance data
of the Portfolio.
The Program also may quote each Portfolio's total return and aggregate total
return performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charges will not be included with respect to annual or annualized rates of
return calculations. Aside from the impact on the performance data calculations
of including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average total
return data since the average annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over a
longer period of time. In advertisements directed to investors whose purchases
are subject to reduced sales charges in the case of Class A and Class D shares
or waiver of the CDSC in the case of Class B shares, performance data may take
into account the reduced, and not the maximum, sales charge or may not take
into account the CDSC and therefore may reflect greater total return since, due
to the reduced sales charges or waiver of the CDSC, a lower amount of expenses
may be deducted. See "Purchase of Shares". Each Portfolio's total return may be
expressed either as a percentage or as a dollar amount in order to illustrate
the effect of such total return on a hypothetical $1,000 investment in the
Program at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average daily number of shares outstanding in the Portfolio during the
period that were entitled to receive dividends multiplied by (c) the maximum
offering price/net asset value per share of that Portfolio on the last day of
the period.
Total return figures and yield figures are based on each Portfolio's
historical performance and are not intended to indicate future performance.
Each Portfolio's total return will vary depending on market
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conditions, the securities comprising such Portfolio's holdings, the
Portfolio's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in any
Portfolio will fluctuate and an investor's shares, when redeemed, may be worth
more or less than their original cost.
On occasion, a Portfolio may compare its performance to that of the Standard
& Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week,
CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with
other performance data, performance comparisons should not be considered
indicative of the Portfolio's relative performance for any future period.
TAXES
FEDERAL
RICs. The following is a general summary of the treatment of regulated
investment companies ("RICs") and their shareholders under the Internal Revenue
Code of 1986, as amended (the "Code"). The Program intends to elect and to
qualify each Portfolio for the special tax treatment afforded RICs under the
Code. If it so qualifies, each Portfolio (but not its shareholders) will not be
subject to Federal income tax on the part of its net ordinary income and net
realized capital gains which it distributes to Class A, Class B, Class C and
Class D shareholders. If in any taxable year a Portfolio does not qualify as a
RIC, all of its taxable income will be taxed to the Program at corporate rates.
The Program intends to cause each Portfolio to distribute substantially all of
such income.
Dividends paid by a Portfolio from its ordinary income and distributions of a
Portfolio's net realized short-term capital gains (together referred to
hereafter as "ordinary income dividends") are ordinarily taxable to
shareholders as ordinary income. Distributions made from a Portfolio's net
realized long-term capital gains (including long-term gains from certain
transactions in futures or options) ("capital gain dividends") are ordinarily
taxable to shareholders as long-term capital gains, regardless of the length of
time the shareholder has owned Portfolio shares. Distributions in excess of a
Portfolio's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming the shares are held as a
capital asset). Dividends of a RIC are ordinarily taxable to shareholders even
though they are reinvested in additional shares of the Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Program or who, to the Program's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for
which Merrill Lynch acts as passive custodian. Accordingly, the general
description of the tax treatment of RICs as set forth above is qualified with
respect to the special tax treatment afforded IRAs under the Code. Under the
Code, neither
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ordinary income dividends nor capital gain dividends represent current income
to shareholders if such shares are held in an IRA. Rather, distributions from
an IRA will be taxable as ordinary income at the rate applicable to the
participant at the time of the distribution. Such distributions would include
(i) any pre-tax contributions to the IRA (including pre-tax contributions that
have been rolled over from another IRA or qualified retirement plan), and (ii)
dividends (whether or not such dividends are classified as ordinary income or
capital gain dividends). In addition to ordinary income tax, participants may
be subject to the imposition of excise taxes on any distributed amount,
including: (i) a 10 percent excise tax on any amount withdrawn from an IRA
prior to the participant's attainment of age 59 1/2; and (ii) a 15 percent
excise tax on the amount of any "excess distributions" (generally, amounts in
excess of $150,000) made from the IRA and any other IRA or qualified retirement
plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by a Portfolio subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a
lesser extent, the Fundamental Value Portfolio may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes. Because of
their participation in an IRA, shareholders will not be able to credit or
deduct such taxes in computing their taxable incomes. However, in the event of
IRA disqualification, as discussed above, shareholders of the Global
Opportunity Portfolio might be entitled to a credit or deduction with respect
to their proportionate shares of foreign taxes paid by the Portfolio, subject
to certain conditions and limitations in the Code, if the Portfolio is eligible
and makes an election with the Internal Revenue Service. It is unlikely,
however, that the Fundamental Value Portfolio will be able to make this
election.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
STATE
Ordinary income and capital gain dividends on RIC shares held in a
disqualified IRA or outside of an IRA also may be subject to state and local
taxes. Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as
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to whether dividend income attributable to United States Government obligations
is exempt from state income tax. Generally, however, states exempt from state
income taxation dividends on shares held within an IRA, and commence taxation
on such amounts when actually distributed from an IRA. Such amounts are
generally treated as ordinary income.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in a Portfolio of the Program.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Program's intention to distribute substantially all of the net
investment income, if any, of each Portfolio. The net investment income of the
Quality Bond and U.S. Government Securities Portfolios is declared as dividends
daily immediately prior to the determination of the net asset value of each
Portfolio on that day. The net investment income of the Quality Bond and U.S.
Government Securities Portfolios for dividend purposes consists of interest and
dividends earned on portfolio securities, less expenses, in each case computed
since the most recent determination of net asset value. Dividends from net
investment income of the Fundamental Value and Global Opportunity Portfolios
will be declared at least annually. All net long-term and short-term capital
gains, if any, including gains from option and futures contract transactions,
will be distributed by each Portfolio at least annually. Dividends and
distributions on all Portfolios will be reinvested in additional full and
fractional shares of the Portfolio at net asset value unless the shareholder
elects to receive such dividends as cash in his or her IRA account. Expenses of
each Portfolio including the investment advisory fees, distribution and account
maintenance fees with respect to Class B and Class C shares, and account
maintenance fees with respect to Class D shares, are accrued daily. Shares will
accrue dividends as long as they are issued and outstanding. Shares are issued
and outstanding as of the settlement date of a purchase order to the settlement
date of a redemption order.
Premiums from expired call options written by a Portfolio and net gains from
closing purchase transactions are treated as short-term capital gains for
Federal income tax purposes. Dividends and distributions paid by a Portfolio
may be reinvested automatically in shares of the same Portfolio, at net asset
value without sales charge. Shareholders may elect in writing to receive any
such dividends or distributions, or both, as cash in their IRA accounts.
Dividends and distributions are, for tax purposes, treated by shareholders as
described above whether they are reinvested in shares of a Portfolio or held in
their IRA accounts as a cash balance.
Certain gains or losses attributable to foreign currency related gains or
losses from certain of the Global Opportunity Portfolio's investments, and to a
lesser extent, Fundamental Value Portfolio, may increase or decrease the amount
of such Portfolio's income available for distribution. If such losses exceed
other income during a taxable year, (a) the related Portfolio would not be able
to make any ordinary income dividend distributions, and (b) distributions made
before the losses were realized would be recharacterized as returns of capital
to shareholders, rather than as ordinary dividends, reducing each shareholder's
tax basis in the Portfolio shares for Federal income tax purposes. If in any
fiscal year either Portfolio has net income from certain foreign currency
transactions, such income will be distributed annually.
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The per share dividends and distributions on Class B, Class C and Class D
shares will be lower than the per share dividends and distributions on Class A
shares as a result of the effect of the account maintenance, distribution and
higher transfer agency fees applicable with respect to the Class B and Class C
shares and the account maintenance fees with respect to the Class D shares. See
"Additional Information--Determination of Net Asset Value".
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio is determined once daily
15 minutes after the close of business on the New York Stock Exchange
(generally 4:00 p.m., New York time) on each day during which the New York
Stock Exchange is open for trading and, under certain circumstances, on other
days. Any assets or liabilities initially expressed in terms of non-U.S. dollar
currencies are translated into U.S. dollars at the prevailing market rates as
quoted by one or more banks or dealers on the day of valuation. The net asset
value per share of a Portfolio is computed by dividing the sum of the value of
the securities held by such Portfolio plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time, rounded to the nearest cent. Expenses, including the investment advisory
fees payable to the Investment Adviser, are accrued daily. The Program will
employ Merrill Lynch Securities Pricing Service, an affiliate of the Investment
Adviser, to provide certain securities prices for the Portfolios.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the
time of valuation. When a Portfolio writes a call option, the amount of the
premium received is recorded on the books of the Portfolio as an asset and an
equivalent liability. The amount of the liability is subsequently valued to
reflect the current market value of the option written, based upon the last
sale price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last asked price. Options purchased
by a Portfolio are valued at their last sale price in the case of exchange-
traded options or, in the case of options traded in the over-the-counter
market, the last bid price. Securities and assets for which market quotations
are not readily available are valued at fair market value as determined in good
faith by or under the direction of the Board of Directors of the Program.
The Program values corporate debt securities, mortgage-backed securities,
municipal securities, asset-backed securities and other debt securities on the
basis of valuations provided by dealers or by a pricing service which uses
information with respect to transactions in such securities, quotations from
dealers, market transactions in comparable securities, various relationships
between securities and yield to maturity. Portfolio securities (other than
short-term obligations but including listed issues) may be valued on the basis
of prices furnished by one or more pricing services which determine prices for
normal, institutional-size trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
Obligations with remaining maturities of 60 days or less are valued at
amortized cost unless this method no longer produces fair valuations.
The per share net asset value of Class A shares generally will be higher than
the per share net asset value of shares of the other classes, reflecting the
daily expense accruals of the account maintenance, distribution and higher
transfer agency fees applicable with respect to Class B and Class C shares and
the
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daily expense accruals of the account maintenance fees applicable with respect
to Class D shares; moreover, the per share net asset value of Class D shares
generally will be higher than the per share net asset value of Class B and
Class C shares, reflecting the daily expense accruals of the distribution and
the higher transfer agency fees applicable with respect to Class B and Class C
shares. It is expected, however, that the per share net asset value of the
classes will tend to converge immediately after the payment of dividends or
distributions which will differ by approximately the amount of the expense
accrual differentials between the classes.
Option Accounting Principles. When a Portfolio sells an option, an amount
equal to the premium received by the Portfolio is included in that Portfolio's
Statement of Assets and Liabilities as a deferred credit. The amount of such
liability subsequently will be marked-to-market to reflect the current market
value of the option written. If current market value exceeds the premium
received there is an unrealized loss; conversely, if the premium exceeds
current market value there is an unrealized gain. The current market value of a
traded option is the last sale price or, in the absence of a sale, the last
offering price. If an option expires on its stipulated expiration date or if a
Portfolio enters into a closing purchase transaction, the affected Portfolio
will realize a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option will be extinguished. If an option is exercised, the Program
will realize a gain or loss from the sale of the underlying security and the
proceeds of sales are increased by the premium originally received.
ORGANIZATION OF THE PROGRAM
The Program was incorporated under Maryland law on May 12, 1994. The Program
is an open-end management investment company comprised of separate series
("Series"), each of which is a separate portfolio offering shares to selected
groups of purchasers. Each Series is to be managed independently. At the date
of this Prospectus, the Program has authorized capital of 100,000,000 shares of
Common Stock, par value $0.10 per share, divided as follows:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B CLASS C CLASS D
COMMON COMMON COMMON COMMON
PORTFOLIO STOCK STOCK STOCK STOCK
- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fundamental Value....................... 6,250,000 6,250,000 6,250,000 6,250,000
Quality Bond............................ 6,250,000 6,250,000 6,250,000 6,250,000
U.S. Government Securities.............. 6,250,000 6,250,000 6,250,000 6,250,000
Global Opportunity...................... 6,250,000 6,250,000 6,250,000 6,250,000
</TABLE>
The Program has received an order (the "Order") from the SEC permitting the
issuance and sale of multiple classes of shares, and the Directors of the
Program may classify and reclassify the shares of the Program into additional
Series or classes of common stock at a future date without shareholder
approval. Shares of Class A, Class B, Class C and Class D Common Stock of each
Portfolio represent interests in the same assets of that Portfolio and are
identical in all respects except that Class B, Class C and Class D shares bear
certain expenses related to the account maintenance associated with such
shares, and Class B and Class C shares bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with
respect to matters relating to account maintenance and distribution
expenditures, as applicable. See "Purchase of Shares".
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Shareholders are entitled to one vote for each full share and to fractional
votes for fractional shares held in the election of Directors (to the extent
hereinafter provided) and on other matters submitted to the vote of
shareholders. There normally will be no meeting of shareholders for the purpose
of electing Directors unless and until such time as less than a majority of the
Directors holding office have been elected by shareholders, at which time the
Directors then in office will call a shareholders' meeting for the election of
Directors. Shareholders may, in accordance with the Articles of Incorporation
of the Program, cause a meeting of shareholders to be held for the purpose of
voting on the removal of Directors. Also, the Program will be required to call
a special meeting of shareholders of a Series in accordance with the
requirements of the Investment Company Act to seek approval of new management
and advisory arrangements, of a material increase in distribution fees or of a
change in the fundamental policies, objectives or restrictions of a Series.
Except as set forth above, the Directors shall continue to hold office and
appoint successor Directors. Each issued and outstanding share is entitled to
participate equally in dividends and distributions declared by the respective
Series and in net assets of such Series upon liquidation or dissolution
remaining after satisfaction of outstanding liabilities except that, as noted
above, Class B, Class C and Class D shares of each Series bear certain
additional expenses. The obligations and liabilities of a particular Series are
restricted to the assets of that Series and do not extend to the assets of the
Program generally. Shares of each Series represent an interest only in that
Series and not in any other Series of the Program. The shares of each Series,
when issued, will be fully-paid and non-assessable by the Program.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of the
number of accounts such shareholder has. If a shareholder wishes to receive
separate copies of each report and communication for each of the shareholder's
related accounts, the shareholder should notify in writing:
Financial Data Services, Inc.
Attn: TAMFO
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and/or mutual fund account numbers. If you have any questions regarding this,
please call your Merrill Lynch financial consultant or Financial Data Services,
Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Program at the address or
telephone number set forth on the cover page of this Prospectus.
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APPENDIX A: OPTIONS AND FUTURES TRANSACTIONS
As described under "Other Investment Policies and Practices of the
Portfolios--Portfolio Strategies Involving Options and Futures", each Portfolio
is authorized to engage in various portfolio management strategies involving
options, futures and options on futures. These strategies are described in
detail below:
Writing Covered Options. Each Portfolio is authorized to write (i.e., sell)
covered call options on the securities in which it may invest and to enter into
closing purchase transactions with respect to certain of such options. A
covered call option is an option where a Portfolio in return for a premium
gives another party a right to buy specified securities owned by the Portfolio
at a specified future date and price set at the time of the contract. The
principal reason for writing call options is to attempt to realize, through the
receipt of premiums, a greater return than would be realized on the securities
alone. By writing covered call options, a Portfolio gives up the opportunity,
while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price. In addition, the
Portfolio's ability to sell the underlying security will be limited while the
option is in effect unless the Portfolio effects a closing purchase
transaction. A closing purchase transaction cancels out the Portfolio's
position as the writer of an option by means of an offsetting purchase of an
identical option prior to the expiration of the option it has written. Covered
call options serve as a partial hedge against the price of the underlying
security declining.
Each Portfolio also may write put options which give the holder of the option
the right to sell the underlying security to the Portfolio at the stated
exercise price. A Portfolio will receive a premium for writing a put option,
which increases the Portfolio's return. The Portfolios write only covered put
options, which means that so long as the Portfolio is obligated as the writer
of the option it will, through its custodian, have deposited and maintained
cash, cash equivalents, U.S. Government securities or other high grade liquid
debt or equity securities denominated in U.S. dollars or non-U.S. currencies
with a securities depository with a value equal to or greater than the exercise
price of the underlying securities. By writing a put, the Portfolio will be
obligated to purchase the underlying security at a price that may be higher
than the market value of that security at the time of exercise for as long as
the option is outstanding. A Portfolio may engage in closing transactions in
order to terminate put options that it has written.
Purchasing Options. Each Portfolio is authorized to purchase put options to
hedge against a decline in the market value of its securities. By buying a put
option, a Portfolio has a right to sell the underlying security at the exercise
price, thus limiting the Portfolio's risk of loss through a decline in the
market value of the security until the put option expires. The amount of any
appreciation in the value of the underlying security will be partially offset
by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction, and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out the Portfolio's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. In certain circumstances, a Portfolio may purchase call options
on securities held in its portfolio on which it has written call options or on
securities which it intends to purchase. A Portfolio will not purchase options
on securities (including stock index options discussed below) if, as a result
of such purchase, the aggregate cost of all outstanding options on securities
held by the Portfolio would exceed 5% of the market value of the Portfolio's
total assets.
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Stock Index Options. The Fundamental Value and Global Opportunity Portfolios
are authorized to engage in transactions in stock index options. These
Portfolios may purchase or write put and call options on stock indexes to hedge
against the risks of market-wide stock price movements in the securities in
which either Portfolio invests. Options on indexes are similar to options on
securities, except that on exercise or assignment, the parties to the contract
pay or receive an amount of cash equal to the difference between the closing
value of the index and the exercise price of the option times a specified
multiple. A Portfolio may invest in stock index options based on a broad market
index, e.g., the S&P 500 Index, or on a narrow index representing an industry
or market segment, e.g., the AMEX Oil & Gas Index.
Stock Index Futures and Interest Rate Futures Contracts. The Fundamental
Value and Global Opportunity Portfolios may purchase and sell stock index
futures contracts, and the Quality Bond, Global Opportunity and U.S. Government
Securities Portfolios may purchase and sell interest rate futures contracts, as
a hedge against adverse changes in the market value of portfolio securities, as
described below. Stock index futures contracts and interest rate futures
contracts are herein together referred to as "futures contracts".
A futures contract is an agreement between two parties which obligates the
purchaser of the futures contract to buy and the seller of a futures contract
to sell a financial instrument for a set price on a future date. The terms of a
futures contract require either actual delivery of the financial instrument
underlying the contract or, in the case of a stock index futures contract, a
cash settlement based upon the difference in value of the index between the
time the contract was entered into and the time of its settlement. The
Fundamental Value and Global Opportunity Portfolios may effect transactions in
stock index futures contracts in connection with the equity securities in which
they invest; the Quality Bond, Global Opportunity and U.S. Government
Securities Portfolios may invest in interest rate futures contracts in
connection with the debt securities in which they invest. Transactions by a
Portfolio in futures contracts are subject to limitations as described below
under "Restrictions on the Use of Futures Transactions".
The Portfolios may sell futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of such
Portfolio's securities that might otherwise result. When a Portfolio is not
fully invested in the securities markets and anticipates a significant advance,
it may purchase futures in order to gain rapid market exposure. This technique
generally will allow the Portfolios to gain exposure to a market in a manner
which is more efficient than purchasing individual securities and may in part
or entirely offset increases in the cost of securities in such market that the
Portfolio ultimately purchases. As such purchases are made, an equivalent
amount of futures contracts will be terminated by offsetting sales. The Program
does not consider purchases of futures contracts by the Portfolios to be a
speculative practice under these circumstances. It is anticipated that, in a
substantial majority of these transactions, each Portfolio will purchase such
securities upon termination of the long futures position, whether the long
position is the purchase of a futures contract or the purchase of a call option
or the writing of a put option on a future, but under unusual circumstances
(e.g., a Portfolio experiences a significant amount of redemptions), a long
futures position may be terminated without the corresponding purchase of
securities.
Each Portfolio also has authority to purchase and write call and put options
on futures contracts (and, in the case of the Fundamental Value and Global
Opportunity Portfolios, stock indexes) in connection with its hedging
(including anticipatory hedging) activities. Generally, these strategies are
utilized under the same market and market sector conditions (i.e., conditions
relating to specific types of investments) in which a Portfolio enters into
futures transactions. A Portfolio may purchase put options or write call
options on futures contracts or stock indexes rather than selling the
underlying futures contract in anticipation of a
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decrease in the market value of its securities. Similarly, a Portfolio may
purchase call options, or write put options on futures contracts or stock
indexes, as a substitute for the purchase of such futures contract to hedge
against the increased cost resulting from an increase in the market value of
securities which the Portfolio intends to purchase.
Each Portfolio may engage in options and futures transactions on U.S. (and,
in the case of the Fundamental Value and Global Opportunity Portfolios,
foreign) exchanges and in the over-the-counter markets ("OTC options"). In
general, exchange-traded contracts are third-party contracts (i.e., performance
of the parties' obligations is guaranteed by an exchange or clearing
corporation) with standardized strike prices and expiration dates. OTC options
are two-party contracts with prices and terms negotiated by the buyer and
seller. See "Restrictions on OTC Options" below for information as to
restrictions on the use of OTC options.
Foreign Currency Hedging. The Fundamental Value and Global Opportunity
Portfolios are authorized to deal in forward foreign exchange among currencies
of the different countries in which they will invest and multinational currency
units as a hedge against possible variations in the foreign exchange rates among
these currencies. Foreign currency hedging is accomplished through contractual
agreements to purchase or sell a specified currency at a specified future date
(up to one year) and price set at the time of the contract. The Fundamental
Value and Global Opportunity Portfolios' dealings in forward foreign exchange
will be limited to hedging involving either specific transactions or portfolio
positions.
Transaction hedging is the purchase or sale of forward foreign currency with
respect to specific receivables or payables of the Portfolio accruing in
connection with the purchase and sale of its portfolio securities, the sale and
redemption of shares of the Portfolio or the payment of dividends and
distributions by the Portfolio. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
such foreign currency. No Portfolio will speculate in forward foreign exchange.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Portfolio to hedge against a devaluation that is
so generally anticipated that the Portfolio is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
The Fundamental Value and Global Opportunity Portfolios also are authorized
to purchase or sell listed or OTC foreign currency options, foreign currency
futures and related options on foreign currency futures as a short or long
hedge against possible variations in foreign exchange rates. Such transactions
may be effected with respect to hedges on non-U.S. dollar denominated
securities owned by the Portfolio, sold by the Portfolio but not yet delivered,
or committed or anticipated to be purchased by the Portfolio. As an
illustration, a Portfolio may use such techniques to hedge the stated value in
U.S. dollars of an investment in a yen denominated security. In such
circumstances, for example, the Portfolio may purchase a foreign currency put
option enabling it to sell a specified amount of yen for dollars at a specified
price by a future date. To the extent the hedge is successful, a loss in the
value of the yen relative to the dollar will tend to be offset by an increase
in the value of the put option. To offset, in whole or in part, the cost of
acquiring such a put option, the Portfolio may also sell a call option which,
if exercised, requires it to sell a specified amount of yen for dollars at a
specified price by a future date (a technique called a "straddle"). By selling
such call option in
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this illustration, the Portfolio gives up the opportunity to profit without
limit from increases in the relative value of the yen to the dollar. The
Investment Adviser believes that "straddles" of the type which may be utilized
by the Fundamental Value and Global Opportunity Portfolios constitute hedging
transactions and are consistent with the policies described above.
Certain differences exist between these foreign currency hedging instruments.
Foreign currency options provide the holder thereof the right to buy or sell a
currency at a fixed price on a future date. A futures contract on a foreign
currency is an agreement between two parties to buy and sell a specified amount
of a currency for a set price on a future date. Futures contracts and options
on futures contracts are traded on boards of trade or futures exchanges.
Neither the Fundamental Value nor the Global Opportunity Portfolio will
speculate in foreign currency options, futures or related options. Accordingly,
neither Portfolio will hedge a currency substantially in excess of the market
value of securities which it has committed or anticipates to purchase which are
denominated in such currency and, in the case of securities which have been
sold by the Portfolio but not yet delivered, the proceeds thereof in its
denominated currency. The Fundamental Value and Global Opportunity Portfolios
each are limited regarding potential net liabilities from foreign currency
options, futures or related options to no more than 20% of such Portfolio's
total assets.
Restrictions on the Use of Futures Transactions. Regulations of the Commodity
Futures Trading Commission (the "CFTC") applicable to the Portfolios provide
that the futures trading activities described herein will not result in any
Portfolio being deemed a "commodity pool" as defined under such regulations if
each Portfolio adheres to certain restrictions. In particular, a Portfolio may
purchase and sell futures contracts and options thereon (i) for bona fide
hedging purposes and (ii) for non-hedging purposes, if the aggregate initial
margin and premiums required to establish positions in such contracts and
options does not exceed 5% of the liquidation value of the Portfolio's
holdings, after taking into account unrealized profits and unrealized losses on
any such contracts and options. Margin deposits may consist of cash or
securities acceptable to the broker and the relevant contract market.
When a Portfolio purchases a futures contract, or writes a put option or
purchases a call option thereon, an amount of cash and cash equivalents will be
deposited in a segregated account in the name of the Portfolio with the
Program's custodian so that the amount so segregated, plus the amount of
initial and variation margin held in the account of its broker, equals the
market value of the futures contract, thereby ensuring that the use of such
futures contract is unleveraged.
Restrictions on OTC Options. The Portfolios may engage in OTC options,
including OTC stock index options, OTC foreign currency options and options on
foreign currency futures, only with such banks or dealers which have capital of
at least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.
The staff of the SEC has taken the position that purchased OTC options and
the assets used as cover for written OTC options are illiquid securities.
Therefore, each Portfolio has adopted an investment policy pursuant to which it
will not purchase or sell OTC options (including OTC options on futures
contracts) if, as a result of such transaction, the sum of the market value of
OTC options currently outstanding which are held by the Portfolio, the market
value of the underlying securities covered by OTC call options currently
outstanding which were sold by the Portfolio and margin deposits on the
Portfolio's existing OTC options on futures contracts exceed 10% of the total
assets of the Portfolio, taken at market value, together with all other assets
of the Portfolio which are illiquid or are not otherwise readily marketable.
However, if the OTC
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option is sold by the Portfolio to a primary U.S. Government securities dealer
recognized by the Federal Reserve Bank of New York and if the Portfolio has the
unconditional contractual right to repurchase such OTC option from the dealer
at a predetermined price, then the Portfolio will treat as illiquid such amount
of the underlying securities as is equal to the repurchase price less the
amount by which the option is "in-the-money" (i.e., current market value of the
underlying security minus the option's strike price). The repurchase price with
the primary dealers is typically a formula price which is generally based on a
multiple of the premium received for the option, plus the amount by which the
option is "in-the-money". This policy as to OTC options is not a fundamental
policy of each Portfolio and may be amended by the Directors of the Program
without the approval of the Portfolio's shareholders. However, no Portfolio
will change or modify this policy prior to the change or modification by the
SEC staff of its position.
Options on GNMA Certificates. The following information relates to unique
characteristics of options on GNMA Certificates. Since the remaining principal
balance of GNMA Certificates declines each month as a result of mortgage
payments, the U.S. Government Securities Portfolio, as a writer of a GNMA call
holding GNMA Certificates as "cover" to satisfy its delivery obligation in the
event of exercise, may find that the GNMA Certificates it holds no longer have
a sufficient remaining principal balance for this purpose. Should this occur,
the Portfolio will purchase additional GNMA Certificates from the same pool (if
obtainable) or other GNMA Certificates in the cash market in order to maintain
its "cover".
A GNMA Certificate held by the Portfolio to cover an option position in any
but the nearest expiration month may cease to represent cover for the option in
the event of a decline in the GNMA coupon rate at which new pools are
originated under the FHA/VA loan ceiling in effect at any given time. If this
should occur, the Portfolio will no longer be covered, and the Portfolio will
either enter into a closing purchase transaction or replace such Certificate
with a certificate which represents cover. When the Portfolio closes its
position or replaces such Certificate, it may realize an unanticipated loss and
incur transaction costs.
Risk Factors in Options and Futures Transactions. Utilization of options and
futures transactions to hedge a Portfolio involves the risk of imperfect
correlation in movements in the price of options and futures and movements in
the price of the securities or currencies which are the subject of the hedge.
If the price of the options or futures moves more or less than the price of the
hedged securities or currencies, the Portfolio will experience a gain or loss
which will not be completely offset by movements in the price of the subject of
the hedge. The successful use of options and futures also depends on the
Investment Adviser's ability to correctly predict price movements in the market
involved in a particular options or futures transaction. To compensate for
imperfect correlations, the Portfolio may purchase or sell stock index options
or futures contracts in a greater dollar amount than the hedged securities if
the volatility of the hedged securities is historically greater than the
volatility of the stock index options or futures contracts. Conversely, the
Portfolio may purchase or sell fewer stock index options or futures contracts
if the volatility of the price of the hedged securities is historically less
than that of the stock index options or futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
stock index option or futures contract approaches.
The Portfolios intend to enter into options and futures transactions, on an
exchange or in the over-the-counter market, only if there appears to be a
liquid secondary market for such options or futures or, in the case of over-
the-counter transactions, the Investment Adviser believes the Portfolio can
receive on each business day at least two independent bids or offers. However,
there can be no assurance that a liquid secondary market will exist at any
specific time. Thus, it may not be possible to close an options or futures
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position. The inability to close options and futures positions also could have
an adverse impact on the Portfolio's ability to hedge effectively its
portfolio. There is also the risk of loss by the Portfolio of margin deposits
or collateral in the event of bankruptcy of a broker with whom the Portfolio
has an open position in an option, a futures contract or related option.
The exchanges on which the Portfolios intend to conduct options transactions
have generally established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not
covered) which may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or
through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts which any person may trade on a particular trading day. The
Investment Adviser does not believe that these trading and position limits will
have any adverse impact on the portfolio strategies for hedging the Portfolios'
holdings.
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APPENDIX B: RATINGS OF CORPORATE DEBT SECURITIES
(INCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S") CORPORATE
DEBT RATINGS
A Standard & Poor's corporate or municipal rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
<TABLE>
<S> <C>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity
to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than for debt in higher-rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
</TABLE>
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<TABLE>
<S> <C>
B Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C The rating C typically is applied to debt subordinated to senior debt which is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no interest is being paid.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
Plus (+) or
minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
c The letter c indicates that the holder's option to tender the security for
purchase may be canceled under certain prestated conditions enumerated in the
tender option documents.
L The letter L indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is federally
insured and interest is adequately collateralized. In the case of certificates
of deposit, the letter L indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued pre-default interest up to the federal insurance limits
within 30 days after closing of the insured institution or, in the event that
the deposit is assumed by a successor insured institution, upon maturity.
p The letter p indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk
of default upon failure of, such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.
* Continuance of the rating is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
N.R. Not rated.
</TABLE>
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Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "Investment Grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments impose certain rating
or other standards for obligations eligible for investment by savings banks,
trust companies, insurance companies and fiduciaries generally.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. Ratings are graded into several categories, ranging from A-1 for the
highest quality obligations to D for the lowest. These categories are as
follows:
A-1 This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated B are regarded as having only speculative capacity for timely
payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell, or hold
a security inasmuch as it does not comment as to market price or suitability
for a particular investor. The ratings are based on current information
furnished to Standard & Poor's by the issuer or obtained by Standard & Poor's
from other sources it considers reliable. Standard & Poor's does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as
a result of changes in, or unavailability of, such information, or based on
other circumstances.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE RATINGS
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
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Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act of
1933, as amended.
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that
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such obligations are exempt from registration under the Securities Act of 1933,
nor does it represent that any specific note is a valid obligation of a rated
issuer or issued in conformity with any applicable law. Moody's employs the
following three designations, all judged to be investment grade, to indicate
the relative repayment ability of rated issuers.
Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of short-term promissory obligations. PRIME-1 repayment ability
will often be evidenced by many of the following characteristics:
--Leading market positions in well-established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability
for repayment of short-term promissory obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, in assigning ratings to
such issuers, Moody's evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment. Moody's
makes no representation and gives no opinion on the legal validity or
enforceability of any support arrangement.
DESCRIPTION OF FITCH INVESTOR SERVICE, INC.'S ("FITCH") INVESTMENT GRADE BOND
RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the
issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guarantees unless otherwise indicated.
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Bonds that have the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security. Fitch ratings are based on
information obtained from issuers, other obligors, underwriters, their experts,
and other sources Fitch believes to be reliable. Fitch does not audit or verify
the truth or accuracy of such information. Ratings may be changed, suspended,
or withdrawn as a result of changes in, or the unavailability of, information
or for other reasons.
AAA
Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
F-1+.
A
Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
Credit Trend Indicator: Credit trend indicators show whether credit
fundamentals are improving, stable, declining, or uncertain, as follows:
Improving [UP ARROW]
Stable [LEFT/RIGHT ARROW]
Declining [DOWN/ARROW]
Uncertain [UP/DOWN ARROW]
Credit trend indicators are not predictions that any rating change will occur,
and have a longer-term time frame than issues placed on FitchAlert.
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NR INDICATES THAT FITCH DOES NOT RATE THE SPECIFIC ISSUE
Conditional: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or
refinanced and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive" indicating a potential
upgrade. "Negative" for potential downgrade, or "Evolving" where ratings may be
raised or lowered. FitchAlert is relatively short-term, and should be resolved
within 12 months.
DESCRIPTION OF FITCH'S INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2
Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned F-1+ and F-1 ratings.
F-3
Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is
adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
F-4
Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D
Default. Issues assigned this rating are in actual or imminent
payment default.
LOC
The symbol "LOC" indicates that the rating is based on a letter of
credit issued by a commercial bank.
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[THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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INVESTMENT ADVISER
Merrill Lynch Asset Management
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
DISTRIBUTOR
Merrill Lynch Funds Distributor, Inc.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mailing Address:
P.O. Box 9011
Princeton, New Jersey 08543-9011
TRANSFER AGENT
Financial Data Services, Inc.
Administrative Offices:
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32232-5289
CUSTODIAN
The Bank of New York
90 Washington Street
12th Floor
New York, New York 10286
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0557
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PROGRAM, THE INVESTMENT ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table................................................................. 3
Prospectus Summary........................................................ 6
Merrill Lynch Select PricingSM System..................................... 8
Risk Factors and Special Considerations................................... 13
Investment Objectives and Policies........................................ 15
Fundamental Value Portfolio.............................................. 15
Quality Bond Portfolio................................................... 16
U.S. Government Securities Portfolio..................................... 17
Global Opportunity Portfolio............................................. 17
Other Investment Policies and Practices of the Portfolios................. 19
Investments in Equity Securities......................................... 19
Investments in Debt Securities........................................... 19
Investments in Securities Denominated in Foreign Currencies.............. 23
Investments in Money Market Securities................................... 23
When-Issued Securities, Forward Commitments and Delayed Delivery Transac-
tions................................................................... 23
Standby Commitment Agreements............................................ 24
Repurchase Agreements and Purchase and Sale Contracts.................... 24
Indexed and Inverse Securities........................................... 25
Lending of Portfolio Securities.......................................... 25
Portfolio Strategies Involving Options and Futures....................... 26
Illiquid Securities...................................................... 26
Investment Restrictions.................................................. 27
Management of the Program................................................. 27
Board of Directors....................................................... 27
Management and Advisory Arrangements..................................... 28
Transfer Agency Services................................................. 29
Purchase of Shares........................................................ 30
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 34
Deferred Sales Charge Alternatives--
Class B and Class C Shares.............................................. 35
Distribution Plans....................................................... 38
Limitations on the Payment of Deferred Sales Charges..................... 39
Redemption of Shares...................................................... 40
Shareholder Services...................................................... 40
Portfolio Transactions and Brokerage...................................... 43
Performance Data.......................................................... 44
Taxes..................................................................... 45
Federal.................................................................. 45
State.................................................................... 46
Additional Information.................................................... 47
Dividends and Distributions.............................................. 47
Determination of Net Asset Value......................................... 48
Organization of the Program.............................................. 49
Shareholder Reports...................................................... 50
Shareholder Inquiries.................................................... 50
Appendix A--Options and Futures Transactions.............................. 51
Appendix B--Ratings of Corporate Debt Securities.......................... 57
</TABLE>
Code # 18471-1294
[LOGO MERRILL LYNCH]
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
PROSPECTUS
December , 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be retained for future reference.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO U.S. GOVERNMENT SECURITIES
PORTFOLIO
QUALITY BOND PORTFOLIO
GLOBAL OPPORTUNITY PORTFOLIO
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
---------------
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") is a
professionally managed, open-end investment company. The Program consists of
four separate portfolios: the Fundamental Value Portfolio, the Quality Bond
Portfolio, the U.S. Government Securities Portfolio and the Global Opportunity
Portfolio (each a "Portfolio"). Each Portfolio has its own separate investment
objectives and may employ a variety of instruments and techniques to enhance
income and to hedge against market risk and, in the case of the Fundamental
Value and Global Opportunity Portfolios, currency risk.
The Fundamental Value Portfolio is a diversified portfolio seeking capital
appreciation and, secondarily, income by investing in securities, primarily
equities, that the management of the Portfolio believes are undervalued and
therefore represent investment value.
The Quality Bond Portfolio is a diversified portfolio seeking income and,
secondarily, capital appreciation by investing primarily in long-term
corporate bonds that are rated A or better by a nationally recognized rating
agency such as Standard & Poor's Ratings Group ("S&P"), Moody's Investors
Service, Inc. ("Moody's") and Fitch Investors Services, Inc. ("Fitch"), or
that possess, in the judgment of the Investment Adviser, similar credit
characteristics.
The U.S. Government Securities Portfolio is a diversified portfolio seeking
high current return by investing in U.S. Government and government agency
securities, including Government National Mortgage Association ("GNMA")
mortgage-backed securities and other mortgage-backed government securities.
The Global Opportunity Portfolio is a diversified portfolio seeking high
total investment return through a fully-managed investment policy utilizing
United States and foreign equity, debt and money market securities, the
combination of which will be varied from time to time, both with respect to
types of securities and markets, in response to changing market and economic
trends.
---------------
Each portfolio is a separate series of the Program issuing its own shares.
Shares of each Portfolio are available for purchase solely by holders of the
individual retirement plans, individual retirement rollover accounts and
simplified employee pension plans (collectively "IRAs") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") acts as
custodian. For a description of the IRAs, see Appendix A to this Statement of
Additional Information.
Pursuant to the Merrill Lynch Select Pricing SM System, each Portfolio
offers four classes of shares each with a different combination of sales
charges, ongoing fees and other features. The Merrill Lynch Select Pricing SM
System permits an investor to choose the method of purchasing shares that the
investor believes is most beneficial given the amount of the purchase, the
length of time the investor expects to hold the shares and other relevant
circumstances.
---------------
This Statement of Additional Information of the Program is not a prospectus
and should be read in conjunction with the prospectus of the Program, dated
December , 1994 (the "Prospectus"), which has been filed with the Securities
and Exchange Commission and can be obtained, without charge, by calling or by
writing the Program at the above telephone number or address. This Statement
of Additional Information has been incorporated by reference into the
Prospectus.
---------------
MERRILL LYNCH ASSET MANAGEMENT--INVESTMENT ADVISER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
---------------
The date of this Statement of Additional Information is December , 1994.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Program consists of four separate Portfolios: the Fundamental Value
Portfolio, the Quality Bond Portfolio, the U.S. Government Securities Portfolio
and the Global Opportunity Portfolio, each with its own separate investment
objectives. Each of the Portfolios pursues its investment objectives through
separate investment policies. Reference is made to "Investment Objectives and
Policies" in the Prospectus for a discussion of the investment objectives and
policies of each Portfolio.
FUNDAMENTAL VALUE PORTFOLIO
The Fundamental Value Portfolio seeks capital appreciation and, secondarily,
income by investing in securities, primarily (i.e., at least 65% of the
Portfolio's assets) in equities, that the Investment Adviser believes are
undervalued and therefore represent investment value.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor
and, given the Portfolio's investment policies, it is anticipated that there
may be periods when high portfolio turnover will exist. The use of covered call
options at times when the underlying securities are appreciating in value may
result in higher portfolio turnover. The Portfolio pays brokerage commissions
in connection with writing call options and effecting closing purchase
transactions, as well as in connection with purchases and sales of portfolio
securities. Although the Portfolio anticipates that its annual portfolio
turnover rates should not exceed 100%, the turnover rate may vary greatly from
year to year or during periods within a year. A high rate of portfolio turnover
results in correspondingly greater brokerage commission expenses. The portfolio
turnover rate for each of the Portfolios is calculated by dividing the lesser
of the Portfolio's annual sales or purchases of portfolio securities (exclusive
of purchases or sales of all securities with maturities at the time of
acquisition of one year or less) by the monthly average value of the securities
in the portfolio during the year.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio seeks a high level of current income through
investment primarily in securities rated in the top three rating categories of
a nationally recognized rating agency such as Moody's, S&P or Fitch or in
securities that possess, in the judgment of the Investment Adviser, similar
credit characteristics. The Quality Bond Portfolio seeks to achieve its
objectives by investing in a diversified portfolio of fixed income securities,
including corporate bonds and notes, convertible and nonconvertible debt
securities and preferred stock and government obligations.
Portfolio Turnover. The rate of portfolio turnover is not a limiting factor
when management deems it appropriate to purchase or sell securities. The
Portfolio expects that its annual turnover rate should not generally exceed
100%; however, during periods when interest rates fluctuate significantly, as
they have during the past few years, the portfolio turnover rate may be
substantially higher. In any particular year, however, market conditions could
result in portfolio activity at a greater or lesser rate than anticipated.
U.S. GOVERNMENT SECURITIES PORTFOLIO
The U.S. Government Securities Portfolio seeks a high current return through
investments in U.S. Government and Government agency securities ("U.S.
Government securities"), including GNMA mortgage-backed certificates, and other
mortgage-backed government securities.
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While the Portfolio has authority to invest in all U.S. Government
securities, it is anticipated that under certain market conditions, a
significant portion of its portfolio of U.S. Government securities may consist
of GNMA mortgage-backed certificates ("GNMA Certificates") and other U.S.
Government securities representing ownership interests in mortgage pools. The
Portfolio is authorized to acquire all types of U.S. Government securities
representing ownership interests in mortgage pools which are presently issued
or which may be issued in the future. In this regard, GNMA recently began
offering a pass-through security backed by adjustable-rate mortgages. These
securities bear interest at a rate which is adjusted either quarterly or
annually. The prepayment experience of the mortgages underlying these
securities may vary from that for fixed-rate mortgages. These securities are
eligible for purchase by the Portfolio.
Portfolio Turnover. The Investment Adviser will effect portfolio transactions
without regard to any holding period if, in its judgment, such transactions are
advisable in light of a change in general market, economic or financial
conditions. While the Portfolio anticipates that its annual turnover rate
should not exceed 400% under normal conditions, it is impossible to predict
portfolio turnover rates. A high portfolio turnover rate involves
correspondingly greater transaction costs in the form of dealer spreads and
brokerage commissions, which are borne directly by the Portfolio. See
"Portfolio Transactions and Brokerage--Portfolio Turnover".
GLOBAL OPPORTUNITY PORTFOLIO
The Portfolio's investment objective is to seek a high total investment
return through a fully-managed investment policy utilizing United States and
foreign equity, debt and money market securities, the combination of which will
be varied from time to time both with respect to types of securities and
markets, in response to changing market and economic trends.
The U.S. Government has from time to time in the past imposed restrictions,
through taxation and otherwise, on foreign investments by U.S. investors such
as the Portfolio. If such restrictions should be reinstituted, it might become
necessary for the Portfolio to invest all or substantially all of its assets in
U.S. securities. In such event, the Portfolio would review its investment
objective and investment policies to determine whether changes are appropriate.
Any changes in the investment objective or fundamental policies set forth under
"Investment Restrictions" below would require the approval of the holders of a
majority of the Portfolio's outstanding voting securities.
The Portfolio's ability and decisions to purchase or sell portfolio
securities may be affected by laws or regulations relating to the
convertibility and repatriation of assets. Because the shares of the Portfolio
are redeemable on a daily basis on each day the Portfolio determines its net
asset value in U.S. dollars, the Portfolio intends to manage its portfolio so
as to give reasonable assurance that it will be able to obtain U.S. dollars to
the extent necessary to meet anticipated redemptions. See "Redemption of
Shares". Under present conditions, the Portfolio does not believe that these
considerations will have any significant effect on its portfolio strategy,
although there can be no assurance in this regard.
Portfolio Turnover. While it is the policy of the Portfolio generally not to
engage in trading for short-term gains, the Investment Adviser will effect
portfolio transactions without regard to holding period if, in its judgment,
such transactions are advisable in light of a change in circumstances of a
particular company or within a particular industry or due to general market,
economic or financial conditions. Accordingly, while the Portfolio anticipates
that its annual turnover rate should not exceed 200% under normal conditions,
it is impossible to predict portfolio turnover rates. A high rate of portfolio
turnover results in correspondingly greater brokerage commission expenses. See
"Portfolio Transactions and Brokerage--Portfolio Turnover".
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All of the Portfolios are subject to the Federal income tax requirement that
less than 30% of the Portfolio's gross income be derived from gains from the
sale or other disposition of securities held for less than three months.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE PORTFOLIOS
Writing of Covered Call Options. Each Portfolio may from time to time write
(i.e., sell) covered call options on its portfolio securities and enter into
closing purchase transactions with respect to certain of such options. A call
option is considered covered where the writer of the option owns the underlying
securities. By writing a covered call option, the Portfolio, in return for the
premium income realized from the sale of the option may give up the opportunity
to profit from a price increase in the underlying security above the option
exercise price. In addition, the Portfolio will not be able to sell the
underlying security until the option expires, is exercised or the Program
effects a closing purchase transaction as described below. A closing purchase
transaction cancels out the Program's position as the writer of an option by
means of an offsetting purchase of an identical option prior to the expiration
of the option it has written. If the option expires unexercised, the Program
realizes a gain in the amount of the premium received for the option which may
be offset by a decline in the market price of the underlying security during
the option period. The use of covered call options is not a primary investment
technique of any of the Portfolios and such options normally will be written on
underlying securities as to which management does not anticipate significant
short-term capital appreciation. In its use of options, the Program's
investment adviser has access to personnel of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") with extensive experience in options
research and strategy. No Portfolio may write covered options on underlying
securities exceeding 15% of that Portfolio's total assets.
All options referred to herein and in the Program's Prospectus are options
issued by The Options Clearing Corporation (the "Clearing Corporation") which
are currently traded on the Chicago Board Options Exchange, American Stock
Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange or New York Stock
Exchange. An option gives the purchaser of the option the right to buy, and
obligates the writer (seller) to sell the underlying security at the exercise
price during the option period. The option period normally ranges from three to
nine months from the date the option is written. For writing an option, the
Program receives a premium, which is the price of such option on the exchange
on which it is traded. The exercise price of the option may be below, equal to,
or above the current market value of the underlying security at the time the
option is written.
The writer may terminate its obligation prior to the expiration date of the
option by executing a closing purchase transaction which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction ordinarily will be effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to permit the writing of a new
call option containing different terms on such underlying security. The cost of
such a liquidation purchase plus transaction costs may be greater than the
premium received upon the original option, in which event the Portfolio will
have incurred a loss in the transaction. An option may be closed out only on an
exchange which provides a secondary market for an option of the same series and
there is no assurance that a liquid secondary market on an exchange will exist
for any particular option. A covered option writer unable to effect a closing
purchase transaction will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon
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exercise, with the result that the writer will be subject to the risk of market
decline in the underlying security during such period. A Portfolio will write
an option on a particular security only if management believes that a liquid
secondary market will exist on an exchange for options of the same series which
will permit the Portfolio to make a closing purchase transaction in order to
close out its position.
Due to the relatively short time that exchanges have been dealing with
options, options involve risks of possible unforeseen events which can be
disruptive to the option markets or could result in the institution of certain
procedures, including restriction of certain types of orders.
Investment Restrictions. In addition to the investment restrictions set forth
in the Prospectus, each of the Portfolios has adopted the following
restrictions and policies relating to the investment of its assets and its
activities, which are fundamental policies and may not be changed without the
approval of the holders of a majority of the Portfolio's outstanding voting
securities (which for this purpose and under the Investment Company Act of
1940, as amended (the "Investment Company Act") means the lesser of (a) 67% of
the shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (b) more than 50% of the outstanding shares). The
Portfolios may not:
1. Make any investment inconsistent with the Portfolio's classification
as a diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities).
3. Make investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that, to the extent permitted by
applicable law, a Portfolio may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be deemed to be the making of a loan, and except
further that a Portfolio 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 Program's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
6. Issue senior securities to the extent such issuance would violate
applicable law.
7. Borrow money, except that (i) a Portfolio 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) a Portfolio may borrow up to
an additional 5% of its total assets for temporary purposes, (iii) a
Portfolio may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) a
Portfolio may purchase securities on margin to the extent permitted by
applicable law. A Portfolio may not pledge its assets other than to secure
such borrowings or, to the extent permitted by such Portfolio's investment
policies as set forth in the Program's 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.
8. Underwrite securities of other issuers except insofar as a Portfolio
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act"), in selling portfolio securities.
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9. Purchase or sell commodities or contracts on commodities, except to
the extent that a Portfolio may do so in accordance with applicable law and
the Program's Prospectus and Statement of Additional Information, as they
may be amended from time to time, and without registering as a commodity
pool operator under the Commodity Exchange Act.
Additional investment restrictions adopted by the Portfolios, which may be
changed by the Program's Board of Directors, provide that the Portfolios may
not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law. Applicable law
currently prohibits the Portfolios from purchasing 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
Portfolio, (ii) 5% of the Portfolio's total assets, taken at market value,
would be invested in any one such company, (iii) 10% of the Portfolio's
total assets, taken at market value, would be invested in such securities,
and (iv) the Portfolio, 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 Portfolios 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.
c. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which cannot otherwise be marketed, redeemed
or put to the issuer or a third party, if at the time of acquisition more
than 15% of its total assets would be invested in such securities. This
restriction shall not apply to securities which mature within seven days or
securities which the Board of Directors of the Program has otherwise
determined to be liquid pursuant to applicable law. Notwithstanding the 15%
limitation herein, to the extent the laws of any state in which a
Portfolio's shares are registered or qualified for sale require a lower
limitation, the Portfolio will observe such limitation. As of the date
hereof, therefore, a Portfolio will not invest more than 10% of its total
assets in securities which are subject to this investment restriction (c).
Securities purchased in accordance with Rule 144A under the Securities Act
(a "Rule 144A security") and determined to be liquid by the Program's Board
of Directors are not subject to the limitations set forth in this
investment restriction (c). Notwithstanding the fact that the Board may
determine that a Rule 144A security is liquid and not subject to
limitations set forth in this investment restriction (c), the State of Ohio
does not recognize Rule 144A securities as securities that are free of
restrictions as to resale. To the extent required by Ohio law, no Portfolio
will invest more than 50% of its total assets in securities of issuers that
are restricted as to disposition, including Rule 144A securities, or in
securities of issuers described in (e) below.
d. Invest in warrants if, at the time of acquisition, its investments in
warrants, valued at the lower of cost or market value, would exceed 5% of
the Portfolio's net assets; included within such limitation, but not to
exceed 2% of the Portfolio's net assets, are warrants which are not listed
on the New York Stock Exchange or American Stock Exchange or a major
foreign exchange. For purposes of this restriction, warrants acquired by
the Portfolio 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 Portfolio's total assets would be invested in such
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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 Program, the officers and general partner of
the Manager, 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 a Portfolio may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Program's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
i. Notwithstanding fundamental investment restriction (7) above, borrow
amounts in excess of 10% of its total assets, taken at market value, and
then only from banks as a temporary measure for extraordinary or emergency
purposes such as the redemption of Portfolio shares. A Portfolio will not
purchase securities while borrowings exceed 5% (taken at market value) of
its total assets.
Portfolio securities of the Portfolios generally may not be purchased from,
sold or loaned to the Investment Adviser or its affiliates or any of their
directors, officers or employees, acting as principal, unless pursuant to a
rule or exemptive order under the Investment Company Act.
Because of the affiliation of the Investment Adviser with the Program, the
Portfolios are prohibited from engaging in certain transactions involving the
Investment Adviser's affiliate, Merrill Lynch, or its affiliates except for
brokerage transactions permitted under the Investment Company Act involving
only usual and customary commissions or transactions pursuant to an exemptive
order under the Investment Company Act. See "Portfolio Transactions and
Brokerage". Without such an exemptive order, the Portfolios are prohibited from
engaging in portfolio transactions with Merrill Lynch or its affiliates acting
as principal and from purchasing securities in public offerings which are not
registered under the Securities Act in which such firms or any of their
affiliates participate as an underwriter or dealer.
Investment in Foreign Issuers. The Fundamental Value and Global Opportunity
Portfolios may invest in securities of foreign issuers. Foreign companies may
not be subject to uniform accounting and auditing and financial reporting
standards or to practices and requirements comparable to those applicable to
domestic issuers. Securities of foreign issuers may be less liquid and more
volatile than securities of United States issuers. Investment in foreign
securities also involves certain risks, including fluctuations in foreign
exchange rates, political and economic developments and the possible imposition
of exchange controls.
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MANAGEMENT OF THE PROGRAM
DIRECTORS AND OFFICERS
The Directors and executive officers of the Program and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Director is P.O. Box
9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel--President and Director(1)(2)--President of the Investment
Adviser (which term as used herein includes its corporate predecessors) since
1977 and Chief Investment Officer since 1976; President and Chief Investment
Officer of Fund Asset Management, L.P. ("FAM") (which term as used herein
includes its corporate predecessors) since 1977; President and Director of
Princeton Services, Inc. ("Princeton Services") since 1993; Executive Vice
President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990; Executive Vice
President of Merrill Lynch since 1990 and Senior Vice President from 1985 to
1990; Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Joe Grills--Director(2)--183 Soundview Lane, New Canaan, Connecticut 06840.
Member of the Committee of Investment of Employee Benefit Assets of the
Financial Executives Institute ("CIEBA") since 1986, member of CIEBA's
Executive Committee since 1988 and its Chairman from 1991 to 1992; Assistant
Treasurer of International Business Machines Corporation ("IBM") and Chief
Investment Officer of IBM Retirement Funds from 1986 until 1993; Member of the
Investment Advisory Committee of the State of New York Common Retirement Fund;
Director, Duke Management Company and Winthrop Financial Associates (real
estate management).
Walter Mintz--Director(2)--1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland Associates (investment
partnership) since 1982.
Melvin R. Seiden--Director(2)--780 Third Avenue, New York, New York 10017.
President of Silbanc Properties, Ltd. (real estate, investments and consulting)
since 1987; Chairman and President of Seiden & de Cuevas, Inc. (private
investment firm) from 1964 to 1987.
Stephen B. Swensrud--Director(2)--24 Federal Street, Boston, Massachusetts
02110. Principal of Fernwood Associates (financial consultants); Director,
Hitchiner Manufacturing Company.
Harry Woolf--Director(2)--The Institute for Advanced Study, Olden Lane,
Princeton, New Jersey 08540. Member of the editorial board of Interdisciplinary
Science Reviews; Director, Alex. Brown Mutual Funds, Advanced Technology
Laboratories, Family Health International, Inc. and SpaceLabs Medical (medical
equipment manufacturing and marketing).
Terry K. Glenn--Executive Vice President(1)(2)--Executive Vice President of
the Investment Adviser and FAM since 1983; Executive Vice President and
Director of Princeton Services since 1993; President and Director of the
Distributor since 1986.
N. John Hewitt--Senior Vice President(1)(2)--Senior Vice President of the
Investment Adviser and FAM since 1976; Senior Vice President of Princeton
Services since 1993.
Bernard J. Durnin--Senior Vice President(1)(2)--Senior Vice President of the
Investment Adviser and FAM since 1981; Senior Vice President of Princeton
Services since 1993.
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Norman R. Harvey--Senior Vice President(1)(2)--Senior Vice President of the
Investment Adviser and FAM since 1982; Senior Vice President of Princeton
Services since 1993.
Joel Heymsfeld--Vice President(1)(2)--Vice President of the Investment
Adviser since 1978.
Jay C. Harbeck--Vice President(1)(2)--Vice President of the Investment
Adviser since 1986.
Kevin Rendino--Vice President(1)(2)--Vice President of the Investment Adviser
since December 1993; Senior Research Analyst from 1990 to 1992; Corporate
Analyst from 1988 to 1990.
Gregory Mark Maunz--Vice President(1)(2)--Vice President of the Investment
Adviser since 1985 and Portfolio Manager since 1984.
Donald C. Burke--Vice President(2)--Vice President and Director of Taxation
of MLAM since 1990; employee of Deloitte & Touche LLP from 1982 to 1990.
Gerald M. Richard--Treasurer(1)(2)--Senior Vice President and Treasurer of
the Investment Adviser and FAM since 1984; Senior Vice President and Treasurer
of Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.
Mark B. Goldfus--Secretary(1)(2)--Vice President of the Investment Adviser
since 1985.
- --------
(1) Interested person, as defined in the Investment Company Act, of the
Program.
(2) Such Director or officer is a director or officer of certain other
investment companies for which the Investment Adviser or its affiliates act
as investment adviser(s).
At November 30, 1994, the Directors and officers of the Program as a group
(17 persons) owned an aggregate of less than 1% of the outstanding shares of
the Program. At that date, Mr. Zeikel, a Director of the Program, and the
officers of the Program owned less than 1% of the outstanding Common Stock of
ML & Co.
Pursuant to the terms of the Program's investment advisory agreement with the
Investment Adviser relating to each Portfolio (each an "Investment Advisory
Agreement"), the Investment Adviser pays all compensation of officers and
employees of the Program as well as the fees of all Directors of the Program
who are affiliated persons of ML & Co. or its subsidiaries. Each unaffiliated
Director is paid a fee by the Program plus actual out-of-pocket expenses for
each meeting of the Board of Directors which he attends. The Program also
compensates each member of the Audit Committee, which consists of the
unaffiliated Directors.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Program--Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Program.
The Investment Advisory Agreements provide that, subject to the direction of
the Board of Directors of the Program, the Investment Adviser is responsible
for the actual management of that Portfolio and for the review of that
Portfolio'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 the
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Investment Adviser, subject to review by the Board of Directors. The Investment
Adviser supplies the portfolio managers for each Portfolio, who consider
analyses from various sources, make the necessary investment decisions and
place transactions accordingly. The Investment Adviser also is obligated to
perform certain administrative and management services for the Portfolios and
is required to provide all the office space, facilities, equipment and
personnel necessary to perform its duties under the Investment Advisory
Agreement. The Investment Adviser has access to the total securities research,
economic research and computer applications facilities of Merrill Lynch and
makes extensive use of these facilities.
Securities held by the Portfolios also may be held by or be appropriate
investments for other funds for which the Investment Adviser or its affiliates
act as adviser or by investment advisory clients of the Investment Adviser.
Because of different investment objectives or other factors, a particular
security may be bought for one or more clients when one or more clients are
selling the same security. If purchases or sales of securities for the Program
or other funds for which the Investment Adviser or its affiliates act as
investment adviser or for their advisory clients arise for consideration at or
about the same time, transactions in such securities will be made, insofar as
feasible, for the respective funds and clients in a manner deemed equitable to
all. To the extent that transactions on behalf of more than one client of the
Investment Adviser or its affiliates during the same period may increase the
demand for securities being purchased or the supply of securities being sold,
there may be an adverse effect on price.
As compensation for its services to the Portfolios, the Investment Adviser
will receive from each Portfolio a monthly fee based on the average daily value
of that Portfolio's net assets at the following annual rates:
<TABLE>
<CAPTION>
U.S. GOVERNMENT GLOBAL
FUNDAMENTAL VALUE QUALITY BOND SECURITIES OPPORTUNITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ------------ --------------- -----------
<S> <C> <C> <C>
0.65% 0.50% 0.50% 0.75%
</TABLE>
The State of California imposes limitations on the expenses of the Program.
At the date of this Statement of Additional Information, the limitations
require that the Investment Adviser reimburse the Program in an amount
necessary to prevent the aggregate ordinary operating expenses of the Program
(excluding interest, taxes, brokerage fees and commissions and extraordinary
charges such as litigation costs) from exceeding in any fiscal year 2.5% of the
Program's first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of the remaining average daily net
assets. No fee payment will be made to the Investment Adviser during any fiscal
year which will cause such expenses to exceed the pro rata expense limitation
at the time of such payment.
Each Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and furnish
office space for officers and employees of the Portfolios connected with
investment and economic research, trading and investment management of the
Portfolios, as well as the fees of all Directors of the Program who are
affiliated persons of ML & Co. or any of its subsidiaries. Each Portfolio pays
all other expenses incurred in its operations and a portion of the Program's
general administrative expenses allocated on the basis of the asset size of the
respective Portfolios. Expenses that will be borne directly by the Portfolios
include redemption expenses, expenses of portfolio transactions; shareholder
servicing costs, expenses of registering the shares under Federal and state
securities laws, pricing costs (including the daily calculation of net asset
value), interest, certain taxes, charges of the Custodian and
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Transfer Agent and other expenses attributable to the particular Portfolio.
Expenses which will be allocated on the basis of the size of the respective
Portfolios include directors' fees, legal expenses, state franchise taxes,
auditing services, costs of printing proxies, stock certificates, shareholder
reports and prospectuses (except to the extent paid by the Distributor),
Securities and Exchange Commission fees, accounting costs and other expenses
properly payable by the Portfolios and allocable on the basis of the size of
the respective Portfolios. Accounting services are provided for the Portfolios
by the Investment Adviser and the Portfolios reimburse the Investment Adviser
for its costs in connection with such services. As required by the Distribution
Agreements, the Distributor will pay certain of the expenses of the Portfolios
incurred in connection with the offering of shares of each Portfolio, including
the expenses of printing the prospectuses and statements of additional
information used in connection with the continuous offering of shares by the
Portfolios.
Duration and Termination. Unless earlier terminated as described below, the
Investment Advisory Agreement for each Portfolio will remain in effect from
year to year if approved annually (a) by the Board of Directors of the Program
or by a majority of the outstanding shares of the subject Portfolio and (b) by
a majority of the Directors who are not parties to such contract or interested
persons (as defined in the Investment Company Act) of any such party. Such
contract is not assignable and may be terminated without penalty on 60 days'
written notice at the option of either party or by the vote of the shareholders
of the Portfolios.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares" in the
Prospectus for certain information as to the purchase of shares of the
Portfolios.
The Program will offer shares solely to holders of IRAs for which Merrill
Lynch acts as custodian. The minimum initial purchase in any Portfolio is $100
and the minimum subsequent purchase in any Portfolio is $1.
The Distributor, a subsidiary of the Investment Adviser, acts as the
distributor of the shares of the Program. The applicable offering price for
purchase orders is based on the net asset value of the Portfolio next
determined after receipt of the purchase orders by the Distributor. As to
purchase orders received by securities dealers prior to 4:15 P.M., New York
time, which includes orders received after the determination of net asset value
on the previous day, the applicable offering price will be based on the net
asset value determined as of 4:15 P.M., New York time, on the day the orders
are placed with the Distributor, provided the orders are received by the
Distributor prior to 4:30 P.M., New York time, on that day. If the purchase
orders are not received by the Distributor prior to 4:30 P.M., New York time,
such orders shall be deemed received on the next business day. Any order may be
rejected by the Distributor or the Program. The Program or the Distributor may
suspend the continuous offering of any Portfolio's shares at any time in
response to conditions in the securities markets or otherwise and may
thereafter resume such offering from time to time. Neither the Distributor nor
the dealers are permitted to withhold placing orders to benefit themselves by a
price change. Merrill Lynch may charge its customers a processing fee
(presently $4.85) to confirm a sale of shares to such customers.
Each Portfolio issues four classes of shares under the Merrill Lynch Select
PricingSM System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives, and shares of Class B
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and Class C are sold to investors choosing the deferred sales charge
alternatives. Each Class A, Class B, Class C and Class D share of each
Portfolio represents identical interests in the investment portfolio of that
Portfolio and has the same rights, except that Class B, Class C and Class D
shares bear the expenses of the ongoing account maintenance fees, and Class B
and Class C shares bear the expenses of the ongoing distribution fees and the
additional incremental transfer agency costs resulting from the deferred sales
charge arrangements. Class B, Class C and Class D shares each have exclusive
voting rights with respect to the Rule 12b-1 distribution plan adopted with
respect to such class pursuant to which account maintenance and/or distribution
fees are paid. Each class has different exchange privileges. See "Shareholder
Services -- Exchange Privilege".
The Merrill Lynch Select PricingSM System is used by more than 50 mutual
funds advised by the Investment Adviser, or its affiliate, FAM. Funds advised
by the Investment Adviser or FAM are referred to herein as "MLAM-advised mutual
funds".
The Program has entered into separate distribution agreements with the
Distributor on behalf of each Portfolio in connection with the continuous
offering of each class of shares of each of the Portfolios (the "Distribution
Agreements"). The Distribution Agreements obligate the Distributor to pay
certain expenses in connection with the offering of each class of shares of the
Portfolios. After the prospectuses, statements of additional information and
periodic reports have been prepared, set in type and mailed to shareholders,
the Distributor pays for the printing and distribution of copies thereof used
in connection with the offering to dealers and investors. The Distributor also
pays for other supplementary sales literature and advertising costs. The
Distribution Agreements are subject to the same renewal requirements and
termination provisions as the Management Agreement described above.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
The term "purchase", as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class D
shares of the Portfolios, refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing shares for his or their own account and to single
purchases by a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under Section
401 of the Code) although more than one beneficiary is involved. The term
"purchase" also includes purchases by any "company", as that term is defined in
the Investment Company Act, but does not include purchases by any such company
which has not been in existence for at least six months or which has no purpose
other than the purchase of shares of the Portfolio or shares of other
registered investment companies at a discount; provided, however, that it shall
not include purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or broker-
dealer or clients of an investment adviser.
Closed-End Fund Investment Option. Class A shares of the Portfolios and other
MLAM-advised mutual funds ("Eligible Class A Shares") are offered at net asset
value to shareholders of certain closed-end funds advised by MLAM or the
Investment Adviser who purchased such closed-end fund shares prior to October
21, 1994, and wish to reinvest the net proceeds from a sale of their closed-end
fund shares of common stock in Eligible Class A Shares, if the conditions set
forth below are satisfied. Alternatively, closed-end fund
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shareholders who purchased such shares on or after October 21, 1994, and wish
to reinvest the net proceeds from a sale of their closed-end fund shares are
offered Class A shares (if eligible to buy Class A shares) or Class D shares of
the Portfolios and other MLAM-advised mutual funds ("Eligible Class D Shares"),
if the following conditions are met. First, the sale of the closed-end fund
shares must be made through Merrill Lynch, and the net proceeds therefrom must
be immediately reinvested in Eligible Class A or Class D shares. Second, the
closed-end fund shares must either have been acquired in the initial public
offering or be shares representing dividends from shares of common stock
acquired in such offering. Third, the closed-end fund shares must have been
continuously maintained in a Merrill Lynch securities account. Fourth, there
must be a minimum purchase of $250 to be eligible for the investment option.
Class A shares of the Portfolio are offered at net asset value to shareholders
of Merrill Lynch Senior Floating Rate Fund, Inc. ("Senior Floating
Rate Fund") who wish to reinvest the net proceeds from a sale of certain of
their shares of common stock of Senior Floating Rate Fund in shares of the
Portfolio. In order to exercise this investment option, Senior Floating Rate
Fund shareholders must sell their Senior Floating Rate Fund shares to the
Senior Floating Rate Fund in connection with a tender offer conducted by the
Senior Floating Rate Fund and reinvest the proceeds immediately in a Portfolio.
This investment option is available only with respect to the proceeds of Senior
Floating Rate Fund shares as to which no Early Withdrawal Charge (as defined in
the Senior Floating Rate Fund prospectus) is applicable. Purchase orders from
Senior Floating Rate Fund shareholders wishing to exercise this investment
option will be accepted only on the day that the related Senior Floating Rate
Fund tender offer terminates and will be effected at the net asset value of the
Portfolio at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase shares
of the Portfolios subject to an initial sales charge at the offering price
applicable to the total of (a) the public offering price of the shares then
being purchased plus (b) an amount equal to the then current net asset value or
cost, whichever is higher, of the purchaser's combined holdings of all classes
of shares of the Program and of other MLAM-advised mutual funds. For any such
right of accumulation to be made available, the Distributor must be provided at
the time of purchase, by the purchaser or the purchaser's securities dealer,
with sufficient information to permit confirmation of qualification. Acceptance
of the purchase order is subject to such confirmation. The right of
accumulation may be amended or terminated at any time. Shares held in the name
of a nominee or custodian under pension, profit-sharing, or other employee
benefit plans may not be combined with other shares to qualify for the right of
accumulation.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Program or any
other MLAM-advised mutual funds made within a 13-month period starting with the
first purchase pursuant to a Letter of Intention. The Letter of Intention is
available only to investors whose accounts are maintained at the Program's
transfer agent. The Letter of Intention is not available to employee benefit
plans for which Merrill Lynch provides plan-participant record-keeping
services. The Letter of Intention is not a binding obligation to purchase any
amount of Class A or Class D shares; however, its execution will result in the
purchaser paying a lower sales charge at the appropriate quantity purchase
level. A purchase not originally made pursuant to a Letter of Intention may be
included under a subsequent Letter of Intention executed within 90 days of such
purchase if the Distributor is informed in writing of this intent within such
90-day period. The value of Class A and Class D shares of the Program and of
other MLAM-advised mutual funds presently held, at cost or maximum offering
price
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(whichever is higher), on the date of the first purchase under the Letter of
Intention, may be included as a credit toward completion of such Letter, but
the reduced sales charge applicable to the amount covered by such Letter will
be applied only to new purchases. If the total amount of shares purchased does
not equal the amount stated in the Letter of Intention (minimum of $25,000),
the investor will be notified and must pay, within 20 days of the expiration
of such Letter, the difference between the sales charge on the Class A or
Class D shares purchased at the reduced rate and the sales charge applicable
to the shares actually purchased through the Letter. Class A or Class D shares
equal to five percent of the intended amount will be held in escrow during the
13-month period (while remaining registered in the name of the purchaser) for
this purpose. The first purchase under the Letter of Intention must be at
least five percent of the dollar amount of such Letter. If a purchase during
the term of such Letter would otherwise be subject to a further reduced sales
charge based on the right of accumulation, the purchaser will be entitled on
that purchase and subsequent purchases to the reduced percentage sales charge
which would be applicable to a single purchase equal to the total dollar value
of the Class A or Class D shares then being purchased under such Letter, but
there will be no retroactive reduction of the sales charges on any previous
purchase.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be deducted
from the total purchases made under such Letter. An exchange from a MLAM-
advised money market fund into a Portfolio that creates a sales charge will
count toward completing a new or existing Letter of Intention from the
Portfolio.
Purchase Privilege of Certain Persons. Directors of the Program, directors
and trustees of other MLAM-advised investment companies, 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 may
purchase Class A shares of the Portfolios at net asset value.
Class D shares of the Portfolios will be offered at net asset value, without
a sales charge, to an investor who has a business relationship with a
financial consultant who joined Merrill Lynch from another investment firm
within six months prior to the date of purchase by such investor if the
following conditions are satisfied. First, the investor must advise Merrill
Lynch that it will purchase Class D shares of the Portfolio with proceeds from
a redemption of a mutual fund that was sponsored by the financial consultant's
previous firm and was subject to a sales charge either at the time of purchase
or on a deferred basis. Second, the investor also must establish that such
redemption had been made within 60 days prior to the investment in the
Portfolio, and the proceeds from the redemption had been maintained in the
interim in cash or a money market fund.
Class D shares of the Portfolios are also offered at net asset value,
without sales charge, to an investor who has a business relationship with a
Merrill Lynch financial consultant and who has invested in a mutual fund
sponsored by a non-Merrill Lynch company for which Merrill Lynch has served as
a selected dealer and where Merrill Lynch has either received or given notice
that such arrangement will be terminated, if the following conditions are
satisfied: first, the investor must purchase Class D shares of a Portfolio
with proceeds from a redemption of shares of such other mutual fund and such
fund was subject to a sales charge either at the time of purchase or on a
deferred basis; second, such purchase of Class D shares must be made within 90
days after such notice of termination.
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Class D shares of the Portfolios will be offered at net asset value, without
a sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who has invested in a mutual fund for which
Merrill Lynch has not served as a selected dealer if the following conditions
are satisfied: First, the investor must advise Merrill Lynch that it will
purchase Class D shares of a Portfolio with proceeds from the redemption of
such shares of other mutual funds and that such shares have been outstanding
for a period of no less than six months. Second, such purchase of Class D
shares must be made within 60 days after the redemption and the proceeds from
the redemption must be maintained in the interim in cash or a money market
fund.
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be
needed in obtaining such investments.
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares -- Distribution Plans" in the
Prospectus for certain information with respect to the separate distribution
plans for Class B, Class C and Class D shares pursuant to Rule 12b-1 under the
Investment Company Act (each a "Distribution Plan").
Payments of the account maintenance fees and/or distribution fees are subject
to the provisions of Rule 12b-1 under the Investment Company Act. Among other
things, each Distribution Plan provides that the Distributor shall provide and
the Directors shall review quarterly reports of the disbursement of the account
maintenance fees and/or distribution fees paid the Distributor. In their
consideration of each Distribution Plan, the Directors must consider all
factors they deem relevant, including information as to the benefits of the
Distribution Plan to the Portfolio and its related class of shareholder. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Program, as defined in the Investment Company Act
(the "Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that such Distribution Plan will benefit the Portfolio
and its related class of shareholders. Each Distribution Plan can be terminated
at any time, without penalty, by the vote of a majority of the Independent
Directors or by the vote of the holders of a majority of the outstanding
related class of voting securities of the Portfolio. A Distribution Plan cannot
be amended to increase materially the amount to be spent by the Portfolio
without the approval of the related class of shareholders, and all material
amendments are required to be approved by the vote of the Directors, including
a majority of the Independent Directors who have no direct or indirect
financial interest in such Distribution Plan, cast in person at a meeting
called for that purpose. Rule 12b-1 further requires that the Portfolio
preserve copies of each Distribution Plan and any report made pursuant to such
plan for a period of not less than six years from the date of such Distribution
Plan or such report, the first two years in an easily accessible place.
LIMITATIONS ON THE PAYMENT OF DEFERRED SALES CHARGES
The maximum sales charge rule in the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. ("NASD") imposes a limitation on
certain asset-backed sales charges such as the distribution fee and the CDSC
borne by the Class B and Class C shares but not the account maintenance fee.
The
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maximum sales charge rule is applied separately to each class. As applicable to
the Portfolios, the maximum sales charge rule limits the aggregate of
distribution fee payments and CDSCs payable by the Portfolios to (1) 6.25% of
eligible gross sales of Class B shares and Class C shares, computed separately
(defined to exclude shares issued pursuant to dividend reinvestments and
exchanges), plus (2) interest on the unpaid balance for the respective class,
computed separately, at the prime rate plus 1% (the unpaid balance being the
maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). In connection with the Class B shares, the
Distributor has voluntarily agreed to waive interest charges on the unpaid
balance in excess of 0.50% of eligible gross sales. Consequently, the maximum
amount payable to the Distributor (referred to as the "voluntary maximum") in
connection with the Class B shares is 6.75% of eligible gross sales. The
Distributor retains the right to stop waiving the interest charges at any time.
To the extent payments would exceed the voluntary maximum, the Portfolio will
not make further payments of the distribution fee with respect to Class B
shares, and any CDSCs will be paid to the Portfolio rather than to the
Distributor, however, the Portfolio will continue to make payments of the
account maintenance fee. In certain circumstances the amount payable pursuant
to the voluntary maximum may exceed the amount payable under the NASD formula.
In such circumstances payment in excess of the amount payable under the NASD
formula will not be made.
As described in Appendix A, there are three types of self-directed plans
which are eligible to invest in the Portfolios: the individual retirement
account, the individual retirement rollover account ("IRRA") and the Simplified
Employee Pension Plan ("SEP-IRA") (collectively, "IRAs"). Although the amount
which may be contributed to an IRA account in any one year is subject to
certain limitations, assets already in an IRA account may be invested in the
Portfolios without regard to such limitations.
Shareholders considering transferring a tax-deferred account such as an IRA
from Merrill Lynch to another brokerage firm or financial institution should be
aware that Program shares may only be held in a Merrill Lynch custodied IRA.
Prior to any such transfer, a shareholder must either redeem the shares (paying
any applicable CDSC), so that the cash proceeds can be transferred to the
account at the new firm or exchange the shares for shares of another mutual
fund advised by the Investment Adviser or its affiliates pursuant to the
exchange privilege. It is possible, however, that the firm to which the
retirement account is to be transferred will not take delivery of shares of
such fund, and then the shareholder would have to redeem these shares so that
the cash proceeds can be transferred or continue to maintain an IRA account at
Merrill Lynch for those shares.
Cash balances of participants who elect to have such funds automatically
invested in shares of a Portfolio will be invested as follows. Cash balances
arising from the sale of securities held in the IRA account which do not settle
on the day of the transaction (such as most common and preferred stock
transactions) become available to the Program and will be invested in shares of
a Portfolio on the business day following the day that proceeds with respect
thereto are received in the IRA account. Proceeds giving rise to cash balances
from the sale of securities held in the IRA account settling on a same day
basis and from principal repayments on debt securities held in the account
become available to the Program and will be invested in shares of a Portfolio
on the next business day following receipt. Cash balances arising from
dividends or interest payments on securities held in the IRA account or from a
contribution to the IRA account are invested in shares of the Portfolios on the
business day following the date the payment is received in the IRA account.
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Merrill Lynch has advised the Program that it will not charge an annual
account fee upon any IRA which is then invested solely in one or more of the
Program's Portfolios or in a money market fund advised by the Investment
Adviser or its affiliates. If, however, a shareholder of any of the Portfolios
exchanges any of his or her shares of a Portfolio for shares of another fund
advised by the Investment Adviser or its affiliates, other than shares of a
Portfolio or a money market fund advised by the Investment Adviser or its
affiliates, then Merrill Lynch will reinstate the IRA annual account fee. For
information about the current IRA fees charged by Merrill Lynch, consult the
Merrill Lynch IRA disclosure statement and the Merrill Lynch IRA custodial
agreement.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of shares of the Portfolios.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended only for any period during which trading on the New
York Stock Exchange is restricted as determined by the Securities and Exchange
Commission (the "Commission") or such Exchange is closed (other than customary
weekend and holiday closings), for any period during which an emergency exists
as defined by the Commission as a result of which disposal of portfolio
securities or determination of the net asset value of any Portfolio is not
reasonably practicable, and for such other periods as the Commission may by
order permit for the protection of shareholders of the Portfolios.
Distributions from an IRA account to a participant prior to the time the
participant reaches age 59 1/2 may subject the participant to income and excise
taxes. See "Dividends, Distributions and Taxes". There are, however, no adverse
tax consequences resulting from redemptions of shares of the Portfolios where
the redemption proceeds remain in the IRA account and are otherwise invested.
The Program is required to redeem for cash all shares of each Portfolio of
the Program. The redemption price is the net asset value per share next
determined after the initial receipt of proper notice of redemption as
described below. If such notice is received by Merrill Lynch prior to the
determination of net asset value on any day (15 minutes after the close of
business on the New York Stock Exchange), the redemption will be effective on
that day and payment generally will be made on the next business day. If the
notice is received after the determination of net asset value on any day, the
redemption will be effective on the next business day and payment will be made
on the second business day after receipt of the notice. Shareholders
liquidating their holdings will receive upon redemption all dividends
reinvested through the date of redemption. Accrued but unpaid dividends will be
paid on the payable date next following the date of redemption.
Any shareholder may redeem shares of the Portfolios by submitting a written
notice of redemption to Merrill Lynch. Participants in the Program should
contact their Merrill Lynch financial consultant to effect such redemptions.
Redemption requests should not be sent to the Program or to its Transfer Agent.
The notice must bear the signature of the person in whose name the IRA is
maintained, signed exactly as his or her name appears on the IRA adoption
agreement.
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DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares redeemed
within four years of purchase are subject to a CDSC, under most circumstances,
the charge is waived (i) on redemptions of Class B shares in connection with
certain post-retirement withdrawals from an IRA or other retirement plan or
(ii) on redemptions of Class B shares following the death or disability of a
Class B shareholder. Redemptions for which the waiver applies are: (a) any
partial or complete redemption in connection with a tax-free distribution
following retirement under a tax-deferred retirement plan or attaining age 59
1/2 in the case of an IRA or other retirement plan, or part of a series of
equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) or any redemption resulting from the tax-free return of an
excess contribution to an IRA or (b) any partial or complete redemption
following the death or disability (as defined in the Code) of a Class B
shareholder (including one who owns the Class B shares as joint tenant with his
or her spouse), provided the redemption is requested within one year of the
death or initial determination of disability.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Reference is made to "Portfolio Transactions and Brokerage" in the
Prospectus. Subject to policies established by the Board of Directors of the
Program, the Investment Adviser is primarily responsible for the portfolio
decisions of each of the Portfolios and the placing of the portfolio
transactions for each of the Portfolios. With respect to such transactions, the
Investment Adviser seeks to obtain the best net results for each Portfolio,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in positioning
a block of securities. While the Investment Adviser generally seeks reasonably
competitive commission rates, the Portfolios will not necessarily be paying the
lowest commission or spread available. Transactions with respect to the
securities of small and emerging growth companies in which the Fundamental
Value Portfolio may invest may involve specialized services on the part of the
broker or dealer and thereby entail higher commissions or spreads than would be
the case with transactions involving more widely traded securities of more
established companies. The Portfolios have no obligation to deal with any
broker in the execution of transactions for their portfolio securities. In
addition, consistent with the Rules of Fair Practice of the NASD and policies
established by the Directors of the Program, the Investment Adviser may
consider sales of shares of the Portfolios as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Portfolios.
The Program has been informed by Merrill Lynch that it will in no way, at any
time, attempt to influence or control the placing by the Investment Adviser or
by the Program of orders for brokerage transactions. Brokers and dealers,
including Merrill Lynch, who provide supplemental investment research (such as
securities and economic research and market forecasts) to the Investment
Adviser may receive orders for transactions by the Portfolios. If, in the
judgment of the Investment Adviser, a Portfolio will be benefited by such
supplemental research services, the Investment Adviser is authorized to pay
commissions to brokers furnishing such services which are in excess of
commissions which another broker may charge for the same
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transaction. Information so received is in addition to and not in lieu of the
services required to be performed by the Investment Adviser under the
Investment Advisory Agreement with the Program, and the expenses of the
Investment Adviser will not necessarily be reduced as a result of the receipt
of such supplemental information. Supplemental investment research received by
the Investment Adviser may also be used in connection with other investment
advisory accounts of the Investment Adviser and its affiliates.
The Portfolios also may invest in securities traded in the over-the-counter
market. Transactions in the over-the-counter market generally are principal
transactions with dealers and the costs of such transactions involve dealer
spreads. With respect to the over-the-counter transactions, the Portfolios,
where possible, will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. On occasion, securities may be purchased directly from the
issuer. Bonds and money market securities are generally traded on a net basis
and do not normally involve either brokerage commissions or transfer taxes. The
cost of portfolio securities transactions of the Quality Bond and the U.S.
Government Securities Portfolios will consist primarily of dealer or
underwriter spreads.
Under the Investment Company Act, persons affiliated with the Program are
prohibited from dealing with the Portfolios as a principal in the purchase and
sale of securities unless a permissive order allowing such transactions is
obtained from the Commission. Since transactions in the over-the-counter market
usually involve transactions with dealers acting as principal for their own
account, affiliated persons of the Program, including Merrill Lynch, may not
serve as the Program's dealer in connection with such transactions. See
"Investment Objectives and Policies--Investment Restrictions". However,
affiliated persons of the Program may serve as its broker in the over-the-
counter transactions conducted on an agency basis.
The ability and decisions of the Global Opportunity and Fundamental Value
Portfolios to purchase or sell portfolio securities may be affected by laws or
regulations relating to the convertibility and repatriation of assets. Because
the shares of the Portfolios are redeemable on a daily basis in U.S. dollars,
the Global Opportunity and Fundamental Value Portfolios intend to manage their
portfolios so as to give reasonable assurance that they will be able to obtain
U.S. dollars to the extent necessary to meet anticipated redemptions. Under
present conditions, it is not believed that these considerations will have any
significant effect on portfolio strategies.
The Global Opportunity and Fundamental Value Portfolios anticipate that
brokerage transactions involving securities of companies domiciled in countries
other than the U.S. will be conducted primarily on the principal stock
exchanges of such countries. Brokerage commissions and other transaction costs
on foreign stock exchange transactions are generally higher than in the U.S.,
although the Global Opportunity and Fundamental Value Portfolios will endeavor
to achieve the best net results in effecting the transactions. There is
generally less governmental supervision and regulation of foreign stock
exchanges and brokers than in the U.S.
The Board of Directors of the Program has considered the possibilities of
seeking to recapture for the benefit of the Program brokerage commissions,
dealer spreads and other expenses of possible portfolio transactions, such as
underwriting commissions and tender offer solicitation fees, by conducting such
portfolio transactions through affiliated entities, including Merrill Lynch.
For example, brokerage
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commissions received by Merrill Lynch could be offset against the advisory fee
payable by the Program to the Investment Adviser. After considering all factors
deemed relevant, the Board made a determination not to seek such recapture. The
Board will reconsider this matter from time to time. The Investment Adviser has
arranged for the Program's custodian to receive any tender offer solicitation
fees on behalf of the Program payable with respect to portfolio securities of
the Program.
The Global Opportunity and Fundamental Value Portfolios may invest in the
securities of foreign issuers in the form of American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs) or other securities convertible
into securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, which are issued in registered form,
are designed for use in the United States securities markets and EDRs, which
are issued in bearer form, are designed for use in European securities markets.
Section 11(a) of the Securities Exchange Act of 1934 generally prohibits
members of the national securities exchanges from executing exchange
transactions for their affiliates and institutional accounts which they manage
unless the member (i) has obtained prior express authorization from the account
to effect such transactions, (ii) at least annually furnishes the account with
the aggregate compensation received by the member in effecting such
transactions, and (iii) complies with any rules the Commission has prescribed
with respect to the requirements of clauses (i) and (ii). To the extent Section
11(a) would apply to Merrill Lynch acting as a broker for the Portfolios in any
of the portfolio transactions executed on any such securities exchange of which
it is a member, appropriate consents have been obtained from the Program, and
annual statements as to aggregate compensation will be provided to the
Portfolios. The Commission has the authority to issue regulations to broaden
the prohibition contained in Section 11(a) to extend to transactions executed
otherwise than on a national securities exchange. While there is no indication
that it will do so, the Commission could under this authority issue regulations
at any time which would prohibit affiliates from executing portfolio
transactions for the Portfolios on foreign securities exchanges.
PORTFOLIO TURNOVER
Each Portfolio intends to comply with the various requirements of the
Internal Revenue Code so as to qualify as a "regulated investment company"
thereunder. See "Dividends, Distributions and Taxes." Among such requirements
is a limitation to less than 30% on the amount of gross income which the
Portfolios may derive from gain on the sale or other disposition of securities
held for less than three months. Accordingly, the Portfolios' ability to effect
certain portfolio transactions may be limited.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information--Determination of Net Asset
Value" in the Prospectus concerning the determination of net asset value. The
net asset value of the shares of each Portfolio is determined once daily Monday
through Friday 15 minutes after the close of business on the New York Stock
Exchange (generally, 4:00 P.M., New York time) on each day during which the New
York Stock Exchange is open for trading. The New York Stock Exchange is not
open on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Any assets
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or liabilities initially expressed in terms of non-U.S. dollar currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the day of valuation. Each Portfolio also will
determine its net asset value on any day in which there is sufficient trading
in its portfolio securities that the net asset value might be affected
materially, but only if on any such day the Portfolio is required to sell or
redeem shares. The net asset value per share of a Portfolio is computed by
dividing the sum of the value of the securities held by the Portfolio plus any
cash or other assets (including interest and dividends accrued but not yet
received) minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest cent.
Expenses, including the investment advisory fees and distribution fees, are
accrued daily. The per share net asset value of the Class B, Class C and Class
D shares of a Portfolio generally will be lower than the per share net asset
value of the Class A shares of the same Portfolio reflecting the daily expense
accruals of the account maintenance, distribution and higher transfer agency
fees applicable with respect to the Class B and Class C shares and the daily
expense accruals of the account maintenance fees applicable with the respect to
the Class D shares; moreover, the per share net asset value of the Class B and
Class C shares generally will be lower than the per share net asset value of
its Class D shares reflecting the daily expense accruals of the distribution
fees and higher transfer agency fees applicable with respect to the Class B and
Class C shares of the Portfolio. It is expected, however, that the per share
net asset value of the four classes will tend to converge immediately after the
payment of dividends or distributions, which will differ by approximately the
amount of the expense accrual differential between the classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued,
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the
time of valuation. Securities and assets for which market quotations are not
readily available are valued at fair market value as determined in good faith
by or under the direction of the Board of Directors of the Program.
Option Accounting Principles. When a Portfolio writes a call option, the
amount of the premium received is recorded on the books of the Portfolio as an
asset and an equivalent liability. The amount of the liability is subsequently
valued to reflect the current market value of the option written, based upon
the last sale price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price. Options
purchased by a Portfolio are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the over-the-
counter market, the last bid price.
SHAREHOLDER SERVICES
The Program offers a number of shareholder services and investment plans
designed to facilitate investment in its shares. Full details as to each of
such services, copies of the various plans described below and instructions as
to how to participate in the various services or plans, or how to change
options with respect thereto, can be obtained from the Program by calling the
telephone number on the cover page hereof or from the Distributor or Merrill
Lynch.
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INVESTMENT ACCOUNT
A shareholder must maintain his or her account through a Merrill Lynch-
custodied IRA and will receive information regarding activity in his or her
Merrill Lynch IRA as part of the Merrill Lynch retirement account statement.
Shareholders also will receive separate confirmations for each purchase or sale
transaction other than reinvestments of ordinary income dividends and long-term
capital gains distributions. Shareholders considering transferring a tax-
deferred retirement account such as an IRA from Merrill Lynch to another
brokerage firm or financial institution should be aware that Program shares may
only be held in a Merrill Lynch-custodied IRA. Prior to any such transfer, a
shareholder must either redeem the shares (paying any applicable CDSC) so that
the cash proceeds can be transferred to the account at the new firm or exchange
the shares for shares of another mutual fund advised by the Investment Adviser
or its affiliates pursuant to the exchange privilege. It is possible, however,
that the firm to which the retirement account is to be transferred will not
take delivery of shares of such fund, and then the shareholder would have to
redeem these shares so that the cash proceeds can be transferred or such
shareholder must continue to maintain a retirement account at Merrill Lynch for
those shares. In addition, shareholders considering transferring the holdings
in their Merrill Lynch custodied IRA to a Merrill Lynch brokerage account
should be aware that because Program shares may only be held in a Merrill
Lynch-custodied IRA, the shares will also in this instance have to be redeemed
prior to such transfer or exchanged for another mutual fund advised by the
Investment Adviser or its affiliates.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All dividends and capital gains distributions of a Portfolio are reinvested
automatically in full and fractional shares of that Portfolio, at the net asset
value per share, of the respective Portfolio next determined on the ex-dividend
date of such dividend or distribution. A shareholder may, at any time, by
written notification to Merrill Lynch, elect to have subsequent dividends or
both dividends and capital gains distributions paid in cash and held in such
shareholder's IRA account rather than reinvested.
SYSTEMATIC REDEMPTION AND AUTOMATIC INVESTMENT PLANS
At age 59 1/2, a Class A or Class D shareholder may elect to receive
systematic redemption payments from his or her Investment Account in the form
of payments by check or through automatic payment by direct deposit to his or
her bank account on either a monthly or quarterly basis. Regular additions of
Class A, Class B, Class C or Class D shares may be made to an investor's
Investment Account by prearranged charges of $50 or more to his or her regular
bank account. See "Dividends, Distributions and Taxes" for consequences of
withdrawals from IRA accounts prior to age 59 1/2. In addition, Merrill Lynch
offers an automated funding service which permits regular current year IRA
contributions of up to $2,000 per year to be made to IRAs and an automated
investment program which may be used for automated subsequent purchases of
shares of the Program.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of each of the Portfolios have an
exchange privilege with certain other MLAM-advised mutual funds listed below.
If, however, a shareholder of any of the Portfolios exchanges any of his or her
shares of a Portfolio for shares of another MLAM-advised mutual fund, Merrill
Lynch will
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reinstate the IRA annual account fee. Under the Merrill Lynch Select PricingSM
System, Class A shareholders may exchange Class A shares of a Portfolio for
Class A shares of another MLAM-advised mutual fund if the shareholder holds any
Class A shares of the second fund in his account in which the exchange is made
at the time of the exchange or is otherwise eligible to purchase Class A shares
of the second fund. If the Class A shareholder wants to exchange Class A shares
for shares of a second MLAM-advised mutual fund, but does not hold Class A
shares of the second fund in his account at the time of the exchange and is not
otherwise eligible to acquire Class A shares of the second fund, the
shareholder will receive Class D shares of the second fund as a result of the
exchange. Class D shares also may be exchanged for Class A shares of a second
MLAM-advised mutual fund at any time as long as, at the time of the exchange,
the shareholder holds Class A shares of the second fund in the account in which
the exchange is made or is otherwise eligible to purchase Class A shares of the
second fund. Class B, Class C and Class D shares will be exchangeable with
shares of the same class of other MLAM-advised mutual funds. For purposes of
computing the CDSC that may be payable upon a disposition of the shares
acquired in the exchange, the holding period for the previously owned shares of
the Program is tacked on to the holding period of the newly acquired shares of
the other fund as more fully described below. Class A, Class B, Class C and
Class D shares also will be exchangeable for shares of certain MLAM-advised
money market funds specifically designated below as available for exchange by
holders of Class A, Class B, Class C or Class D shares. Shares with a net asset
value of at least $100 are required to qualify for the exchange privilege, and
any shares utilized in an exchange must have been held by the shareholder for
15 days. It is contemplated that the exchange privilege may be applicable to
other new mutual funds whose shares may be distributed by the Distributor.
Exchanges of Class A or Class D shares outstanding ("outstanding Class A or
Class D shares") for Class A or Class D shares of another MLAM-advised mutual
fund ("new Class A or Class D shares") are transacted on the basis of relative
net asset value per Class A or Class D share, respectively, plus an amount
equal to the difference, if any, between the sales charge previously paid on
the outstanding Class A or Class D shares and the sales charge payable at the
time of the exchange on the new Class A or Class D shares. With respect to
outstanding Class A or Class D shares as to which previous exchanges have taken
place, the "sales charge previously paid" shall include the aggregate of the
sales charge paid with respect to such Class A or Class D shares in the initial
purchase and any subsequent exchange. Class A or Class D shares issued pursuant
to dividend reinvestment are sold on a no-load basis in each of the funds
offering Class A or Class D shares. For purposes of the exchange privilege,
Class A and Class D shares acquired through dividend reinvestment shall be
deemed to have been sold with a sales charge equal to the sales charge
previously paid on the Class A or Class D shares on which the dividend was
paid. Based on this formula, Class A and Class D shares of a Portfolio
generally may be exchanged into the Class A or Class D shares of the other
funds or into shares of the Class A and Class D money market funds with a
reduced or without a sales charge.
In addition, each of the funds with Class B and Class C shares outstanding
("outstanding Class B or Class C shares") offers to exchange its Class B or
Class C shares for Class B or Class C shares, respectively, of another MLAM-
advised mutual fund ("new Class B or Class C shares") on the basis of relative
net asset value per Class B or Class C share, without the payment of any CDSC
that might otherwise be due on redemption of the outstanding shares. Class B
shareholders of a Portfolio exercising the exchange privilege will continue to
be subject to the Portfolio's CDSC schedule if such schedule is higher than the
CDSC schedule relating to the new Class B shares acquired through use of the
exchange privilege. In addition, Class B shares of a Portfolio acquired through
use of the exchange privilege will be subject to the Portfolio's CDSC
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<PAGE>
schedule if such schedule is higher than the CDSC schedule relating to the
Class B shares of the fund from which the exchange has been made. For purposes
of computing the sales charge that may be payable on a disposition of the new
Class B or Class C shares, the holding period for the outstanding Class B or
Class C shares is tacked on to the holding period of the new Class B or Class C
shares. For example, an investor may exchange Class B shares of a Portfolio for
those of Merrill Lynch Special Value Fund, Inc. ("Special Value Fund") after
having held the Portfolio Class B shares for two and a half years. The 2% CDSC
that generally would apply to a redemption would not apply to the exchange.
Three years later the investor may decide to redeem the Class B shares of
Special Value Fund and receive cash. There will be no CDSC due on this
redemption, since by tacking the two and a half year holding period of
Portfolio Class B shares to the three year holding period for the Special Value
Fund Class B shares, the investor will be deemed to have held the new Class B
shares for more than five years.
Shareholders also may exchange shares of a Portfolio into shares of a money
market fund advised by the Investment Adviser or its affiliates, but the period
of time that Class B or Class C shares are held in a money market fund will not
count towards satisfaction of the holding period requirement for purposes of
reducing the CDSC or with respect to Class B shares, towards satisfaction of
the conversion period. However, shares of a money market fund which were
acquired as a result of an exchange for Class B or Class C shares of a
Portfolio may, in turn, be exchanged back into Class B or Class C shares,
respectively, of any fund offering such shares, in which event the holding
period for Class B or Class C shares of the fund will be aggregated with
previous holding periods for purposes of reducing the CDSC. Thus, for example,
an investor may exchange Class B shares of a Portfolio for shares of Merrill
Lynch Institutional Fund ("Institutional Fund") after having held the Portfolio
Class B shares for two and a half years and three years later decide to redeem
the shares of Institutional Fund for cash. At the time of this redemption, the
2% CDSC that would have been due had the Class B shares of the Portfolio been
redeemed for cash rather than exchanged for shares of Institutional Fund will
be payable. If instead of such redemption the shareholder exchanged such shares
for Class B shares of a fund which the shareholder continued to hold for an
additional two and half years, any subsequent redemption will not incur a CDSC.
Set forth below is a description of the investment objectives of the other
funds into which exchanges can be made:
Funds Issuing Class A, Class B, Class C and Class D Shares:
Merrill Lynch Adjustable Rate
Securities Fund, Inc..........
High current income consistent with a policy
of limiting the degree of fluctuation in net
asset value by investing primarily in a
portfolio of adjustable rate securities,
consisting principally of mortgage-backed
and asset-backed securities.
Merrill Lynch Americas Income
Fund, Inc.....................
A high level of current income, consistent
with prudent investment risk, by investing
primarily in debt securities denominated in
a currency of a country located in the
Western Hemisphere (i.e., North and South
America and the surrounding waters).
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Merrill Lynch Arizona Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Arizona income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Arizona Municipal Bonds.
Merrill Lynch Arizona
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arizona
income taxes as is consistent with prudent
investment management.
Merrill Lynch Arkansas
Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Arkansas
income taxes as is consistent with prudent
investment management.
Merrill Lynch Asset Growth
Fund, Inc. ..............
High total investment return, consistent with
prudent risk, from investment in United
States and foreign equity, debt and money
market securities the combination of which
will be varied both with respect to types of
securities and markets in response to
changing market and economic trends.
Merrill Lynch Asset Income
Fund, Inc. ..............
A high level of current income through
investment primarily in United States fixed
income securities.
Merrill Lynch Balanced Fund
for Investment and
Retirement....................
As high a level of total investment return as
is consistent with reasonable risk by
investing in common stocks and other types
of securities, including fixed income
securities and convertible securities.
Merrill Lynch Basic Value
Fund, Inc.....................
Capital appreciation and, secondarily, income
through investment in securities, primarily
equities, that are undervalued and therefore
represent basic investment value.
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Merrill Lynch California
Insured Municipal Bond Fund...
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management through investment in
a portfolio consisting primarily of insured
California Municipal Bonds.
Merrill Lynch California
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and California income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade California Municipal Bonds.
Merrill Lynch California
Municipal Bond Fund...........
A portfolio of Merrill Lynch California
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and California
income taxes as is consistent with prudent
investment management.
Merrill Lynch Capital Fund, The highest total investment return
Inc........................... consistent with prudent risk through a fully
managed investment policy utilizing equity,
debt and convertible securities.
Merrill Lynch Colorado
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Colorado
income taxes as is consistent with prudent
investment management.
Merrill Lynch Connecticut
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Connecticut
income taxes as is consistent with prudent
investment management.
Merrill Lynch Corporate Bond
Fund, Inc.....................
Current income from three separate
diversified portfolios of fixed income
securities.
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Merrill Lynch Developing
Capital Markets Fund, Inc..... Long-term appreciation through investment in
securities, principally equities, of issuers
in countries having smaller capital markets.
Merrill Lynch Dragon Fund,
Inc........................... Capital appreciation primarily through
investment in equity and debt securities of
issuers domiciled in developing countries
located in Asia and the Pacific Basin.
Merrill Lynch Eurofund......... Capital appreciation primarily through
investment in equity securities of
corporations domiciled in Europe.
Merrill Lynch Federal
Securities Trust..............
High current return through investments in
U.S. Government and Government agency
securities, including GNMA mortgage-backed
certificates and other mortgage-backed
Government securities.
Merrill Lynch Florida Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal income taxes as is consistent with
prudent investment management while serving
to offer shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes through investment
in a portfolio primarily of intermediate-
term investment grade Florida Municipal
Bonds.
Merrill Lynch Florida
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as
is consistent with prudent investment
management, while seeking to offer
shareholders the opportunity to own
securities exempt from Florida intangible
personal property taxes.
Merrill Lynch Fund For
Tomorrow, Inc.................
Long-term growth through investment in a
portfolio of good quality securities,
primarily common stock, potentially
positioned to benefit from demographic and
cultural changes as they affect consumer
markets.
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Merrill Lynch Fundamental
Growth Fund, Inc..............
Long-term growth of capital through
investment in a diversified portfolio of
equity securities placing particular
emphasis on companies that have exhibited an
above-average growth rate in earnings.
Merrill Lynch Global
Allocation Fund, Inc. ...
High total return, consistent with prudent
risk, through a fully managed investment
policy utilizing U.S. and foreign equity,
debt and money market securities, the
combination of which will be varied from
time to time both with respect to the types
of securities and markets in response to
changing market and economic trends.
Merrill Lynch Global Bond Fund
for Investment and
Retirement....................
High total investment return from investment
in government and corporate bonds
denominated in various currencies and
multinational currency units.
Merrill Lynch Global
Convertible Fund, Inc.........
High total return from investment primarily
in an internationally diversified portfolio
of convertible debt securities, convertible
preferred stock and "synthetic" convertible
securities consisting of a combination of
debt securities or preferred stock and
warrants or options.
Merrill Lynch Global Holdings,
Inc. (residents of Arizona
must meet investor
suitability standards)........
The highest total investment return
consistent with prudent risk through
worldwide investment in an internationally
diversified portfolio of securities.
Merrill Lynch Global Resources
Trust.........................
Long-term growth and protection of capital
from investment in securities of domestic
and foreign companies that possess
substantial natural resource assets.
Merrill Lynch Global SmallCap
Fund, Inc. ..............
Long-term growth of capital by investing
primarily in equity securities of companies
with relatively small market capitalizations
located in various foreign countries and in
the United States.
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Merrill Lynch Global Utility
Fund, Inc.....................
Capital appreciation and current income
through investment of at least 65% of its
total assets in equity and debt securities
issued by domestic and foreign companies
primarily engaged in the ownership or
operation of facilities used to generate,
transmit or distribute electricity,
telecommunications, gas or water.
Merrill Lynch Growth Fund for
Investment and Retirement.....
Growth of capital and, secondarily, income
from investment in a diversified portfolio
of equity securities placing principal
emphasis on those securities which
management of the fund believes to be
undervalued.
Merrill Lynch Healthcare Fund,
Inc. (residents of Wisconsin
must meet investor
suitability standards)........
Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in healthcare.
Merrill Lynch International
Equity Fund...................
Capital appreciation and, secondarily, income
by investing in a diversified portfolio of
equity securities of issuers located in
countries other than the United States.
Merrill Lynch Latin America
Fund, Inc.....................
Capital appreciation by investing primarily
in Latin American equity and debt
securities.
Merrill Lynch Maryland
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Maryland
income taxes as is consistent with prudent
investment management.
Merrill Lynch Massachusetts
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Massachusetts income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Massachusetts Municipal Bonds.
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Merrill Lynch Massachusetts
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Massachusetts
income taxes as is consistent with prudent
investment management.
Merrill Lynch Michigan Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Michigan income taxes as is
consistent with prudent investment
management through investment in a portfolio
primarily of intermediate-term investment
grade Michigan Municipal Bonds.
Merrill Lynch Michigan
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Michigan
income taxes as is consistent with prudent
investment management.
Merrill Lynch Minnesota
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Minnesota
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Municipal Bond
Fund, Inc.....................
Tax-exempt income from three separate
diversified portfolios of municipal bonds.
Merrill Lynch Municipal
Intermediate Term Fund........
Currently the only portfolio of Merrill Lynch
Municipal Series Trust, a series fund, whose
objective is to provide as high a level as
possible of income exempt from Federal
income taxes by investing in investment
grade obligations with a dollar weighted
average maturity of five to twelve years.
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Merrill Lynch New Jersey
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and New Jersey income taxes as is
consistent with prudent investment
management through a portfolio primarily of
intermediate-term investment grade New
Jersey Municipal Bonds.
Merrill Lynch New Jersey
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Jersey
income taxes as is consistent with prudent
investment management.
Merrill Lynch New Mexico
Municipal Bond Fund......
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and New Mexico
income taxes as is consistent with prudent
investment management.
Merrill Lynch New York Limited
Maturity Municipal Bond Fund..
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal, New York State and New York City
income taxes as is consistent with prudent
investment management through investment in
a portfolio primarily of intermediate-term
investment grade New York Municipal Bonds.
Merrill Lynch New York
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal, New York State
and New York City income taxes as is
consistent with prudent investment
management.
Merrill Lynch North Carolina
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and North
Carolina income taxes as is consistent with
prudent investment management.
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Merrill Lynch Ohio Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Ohio income
taxes as is consistent with prudent
investment management.
Merrill Lynch Oregon Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Oregon income
taxes as is consistent with prudent
investment management.
Merrill Lynch Pacific Fund, Capital appreciation by investing in equity
Inc........................... securities of corporations domiciled in Far
Eastern and Western Pacific countries,
including Japan, Australia, Hong Kong and
Singapore.
Merrill Lynch Pennsylvania
Limited Maturity Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Limited Maturity Municipal Series Trust, a
series fund, whose objective is to provide
as high a level of income exempt from
Federal and Pennsylvania income taxes as is
consistent with prudent investment
management through investment in a portfolio
of intermediate-term investment grade
Pennsylvania Municipal Bonds.
Merrill Lynch Pennsylvania
Municipal Bond Fund...........
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal and Pennsylvania
personal income taxes as is consistent with
prudent investment management.
Merrill Lynch Phoenix Fund, Long-term growth of capital by investing in
Inc........................... equity and fixed income securities,
including tax-exempt securities, of issuers
in weak financial condition or experiencing
poor operating results believed to be
undervalued relative to the current or
prospective condition of such issuer.
Merrill Lynch Short-Term
Global Income Fund, Inc.......
As high a level of current income as is
consistent with prudent investment
management from a global portfolio of high
quality debt securities denominated in
various currencies and multinational
currency units and having remaining
maturities not exceeding three years.
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Merrill Lynch Special Value
Fund, Inc.....................
Long-term growth of capital from investments
in securities, primarily common stock, of
relatively small companies believed to have
special investment value and emerging growth
companies regardless of size.
Merrill Lynch Strategic
Dividend Fund.................
Long-term total return from investment in
dividend paying common stocks which yield
more than Standard & Poor's 500 Composite
Stock Price Index.
Merrill Lynch Technology Fund,
Inc...........................
Capital appreciation through worldwide
investment in equity securities of companies
that derive or are expected to derive a
substantial portion of their sales from
products and services in technology.
Merrill Lynch Texas Municipal
Bond Fund.....................
A portfolio of Merrill Lynch Multi-State
Municipal Series Trust, a series fund, whose
objective is to provide as high a level of
income exempt from Federal income taxes as
is consistent with prudent investment
management by investing primarily in a
portfolio of long-term, investment grade
obligations issued by the State of Texas,
its political subdivisions, agencies and
instrumentalities.
Merrill Lynch Utility Income
Fund, Inc.....................
High current income through investment in
equity and debt securities issued by
companies which are primarily engaged in the
ownership or operation of facilities used to
generate, transmit or distribute
electricity, telecommunications, gas or
water.
Merrill Lynch World Income
Fund, Inc.....................
High current income by investing in a global
portfolio of fixed income securities
denominated in various currencies, including
multinational currencies.
Class A Share Money Market Funds:
Merrill Lynch Ready
AssetsTrust..............
Preservation of capital, liquidity and the
highest possible current income consistent
with the foregoing objectives from the
short-term money market securities in which
the Trust invests.
33
<PAGE>
Merrill Lynch Retirement
Reserves Money Fund
(available only for exchanges
within certain retirement
plans)...................
Currently the only portfolio of Merrill Lynch
Retirement Series Trust, a series fund,
whose objectives are current income,
preservation of capital and liquidity
available from investing in a diversified
portfolio of short-term money market
securities.
Merrill Lynch U.S.A.
Government Reserves......
Preservation of capital, current income and
liquidity available from investing in direct
obligations of the U.S. Government and
repurchase agreements relating to such
securities.
Merrill Lynch U.S. Treasury
Money Fund...............
Preservation of capital, liquidity and
current income through investment
exclusively in a diversified portfolio of
short-term marketable securities which are
direct obligations of the U.S. Treasury.
Class B, Class C and Class D Share Money Market Funds:
Merrill Lynch Government Fund.. A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in securities
issued or guaranteed by the U.S. Government,
its agencies and instrumentalities and in
repurchase agreements secured by such
obligations.
Merrill Lynch Institutional
Fund.....................
A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide maximum current
income consistent with liquidity and the
maintenance of a high quality portfolio of
money market securities.
Merrill Lynch Institutional
Tax-Exempt Fund..........
A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
exempt from Federal income taxes,
preservation of capital and liquidity
available from investing in a diversified
portfolio of short-term, high quality
municipal bonds.
Merrill Lynch Treasury Fund.... A portfolio of Merrill Lynch Funds for
Institutions Series, a series fund, whose
objective is to provide current income
consistent with liquidity and security of
principal from investment in direct
obligations of the U.S. Treasury and up to
10% of its total assets in repurchase
agreements secured by such obligations.
34
<PAGE>
Before effecting an exchange, shareholders should obtain a currently
effective prospectus of the fund into which the exchange is to be made.
To exercise the exchange privilege, shareholders should contact their Merrill
Lynch financial consultant, who will advise the Program of the exchange.
Shareholders of the Portfolios, and shareholders of the other funds described
above with shares for which certificates have not been issued, may exercise the
exchange privilege by wire through their securities dealers. The Program
reserves the right to require a properly completed Exchange Application. This
exchange privilege may be modified or terminated in accordance with the rules
of the Commission. The Program reserves the right to limit the number of times
an investor may exercise the exchange privilege. Certain funds may suspend the
continuous offering of their share at any time and thereafter may resume such
offering from time to time. The exchange privilege is available only to U.S.
shareholders in states where the exchange legally may be made.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Reference is made to "Additional Information--Dividends and Distributions" in
the Prospectus.
FEDERAL TAX
RICs. The following is a general summary of the treatment of regulated
investment companies ("RICs") and their shareholders under the Internal Revenue
Code of 1986, as amended (the "Code"). The Program intends to elect and to
qualify each Portfolio for the special tax treatment afforded RICs under the
Code. If it so qualifies, each Portfolio (but not its shareholders) will be
subject to Federal income tax with respect to the net ordinary income and net
realized capital gains which it distributes to Class A, Class B, Class C and
Class D shareholders. The Program intends to cause each Portfolio to distribute
substantially all of such income.
Each Portfolio of the Program is treated as a separate corporation for
Federal income tax purposes. Each Portfolio therefore is considered to be a
separate entity in determining its treatment under the rules for RICs described
in the Prospectus. Losses in one Portfolio do not offset gains in another
Portfolio, and the requirements (other than certain organizational
requirements) for qualifying for RIC status will be determined at the Portfolio
level rather than the Program level.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent
the RIC does not distribute, during each calendar year, 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year end, plus certain undistributed
amounts from previous years. While the Program intends to cause each Portfolio
to distribute its income and capital gains in the manner necessary to avoid
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of each Portfolio's taxable income and capital gains will be
distributed to avoid entirely the imposition of the tax. In such event, the
Portfolios will be liable for the tax only on the amount by which they do not
meet the foregoing distribution requirements.
Dividends paid by a Portfolio from its ordinary income and distributions of a
Portfolio's net realized short-term capital gains (together referred to
hereafter as "ordinary income dividends") are ordinarily taxable
35
<PAGE>
to shareholders as ordinary income. Distributions made from a Portfolio's net
realized long-term capital gains (including long-term gains from certain
transactions in futures or options) ("capital gain dividends") are ordinarily
taxable to shareholders as long-term capital gains, regardless of the length of
time the shareholder has owned Portfolio shares. Distributions in excess of a
Portfolio's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
ordinarily constitute capital gains to such holder (assuming the shares are
held as a capital asset). Dividends of a RIC are ordinarily taxable to
shareholders even though they are reinvested in additional shares of the
Portfolio.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Program or who, to the Program's knowledge, have
furnished an incorrect number. When establishing an account, an investor must
certify under penalty of perjury that such number is correct and that such
investor is not otherwise subject to backup withholding.
IRAs. Investment in the Portfolios is limited to participants in IRAs for
which Merrill Lynch acts as passive custodian. Accordingly, the general
description of the tax treatment of RICs as set forth above is qualified with
respect to the special tax treatment afforded IRAs under the Code. Under the
Code, neither ordinary income dividends nor capital gain dividends represent
current income to shareholders if such shares are held in an IRA. Rather,
distributions from an IRA will be taxable as ordinary income at the rate
applicable to the participant at the time of the distribution. Such
distributions would include (i) any pre-tax contributions to the IRA (including
pre-tax contributions that have been rolled over from another IRA or qualified
retirement plan), and (ii) dividends (whether or not such dividends are
classified as ordinary income or capital gain dividends). In addition to
ordinary income tax, participants may be subject to the imposition of excise
taxes on any distributed amount, including: (i) a 10 percent excise tax on any
amount withdrawn from an IRA prior to the participant's attainment of age 59
1/2; and (ii) a 15 percent excise tax on the amount of any "excess
distributions" (generally, amounts in excess of $150,000) made from the IRA and
any other IRA or qualified retirement plan annually.
Under certain limited circumstances (for example, if an individual for whose
benefit an IRA is established engages in any transaction prohibited under
Section 4975 of the Code with respect to such account), the IRA could cease to
be treated as an IRA as of the first day of such taxable year that such
transaction occurred. If an IRA through which a shareholder holds Portfolio
shares becomes ineligible for the special treatment afforded IRAs under the
Code, such shareholder will be treated as having received a distribution on
such first day of the taxable year from the IRA in an amount equal to the fair
market value of all assets in the account. Thus, the shareholder would be taxed
currently on (i) the amount of any pre-tax contributions and previously untaxed
dividends held within the account, and (ii) all ordinary income and capital
gain dividends paid by the Portfolios subsequent to such event, whether such
dividends are received in cash or reinvested in additional shares. These
ordinary income and capital gain dividends also might be subject to state and
local taxes. In the event of IRA disqualification, shareholders also could be
subject to the excise taxes described above. Additionally, IRA disqualification
may subject a nonresident alien shareholder to a 30% United States withholding
tax on ordinary income dividends paid by a Portfolio unless a reduced rate of
withholding or a withholding exemption is provided under applicable treaty law.
Dividends and interest received by the Global Opportunity Portfolio and, to a
lesser extent, the Fundamental Value Portfolio, may give rise to withholding
and other taxes imposed by foreign countries.
36
<PAGE>
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes. Because of their participation in an IRA, shareholders
will not be able to credit or deduct such taxes in computing their taxable
incomes. However, in the event of IRA disqualification, as discussed above,
shareholders of the Global Opportunity Portfolio might be entitled to a credit
or deduction with respect to their proportionate shares of foreign taxes paid
by the Portfolio, subject to certain conditions and limitations in the Code, if
the Portfolio is eligible and makes an election with the Internal Revenue
Service. It is unlikely, however, that the Fundamental Value Portfolio will be
able to make this election.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
STATE TAX
Ordinary income and capital gain dividends on RIC shares held in a
disqualified IRA or outside of an IRA may also be subject to state and local
taxes. Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on United States Government obligations. State
law varies as to whether dividend income attributable to United States
Government obligations is exempt from state income tax. Generally, however,
states exempt from state income taxation dividends on shares held within an
IRA, and commence taxation on amounts actually distributed from an IRA. Such
amounts are generally treated as ordinary income.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Program.
PERFORMANCE DATA
From time to time the Program may include each Portfolio's average total
return and other total return data, as well as yield for the Quality Bond and
U.S. Government Securities Portfolios, in advertisements or information
furnished to present or prospective shareholders. Total return and yield
figures will be based on each Portfolio's historical performance and are not
intended to indicate future performance. Average annual total return and yield
are determined separately for Class A, Class B, Class C and Class D shares of
each Portfolio in accordance with formulae specified by the Commission.
Average annual total return quotations for each Portfolio for the specified
periods will be computed by finding the average annual compounded rates of
return (based on net investment income and any realized and unrealized capital
gains or losses on portfolio investments over such periods) that would equate
the initial amount invested to the redeemable value of such investment at the
end of each period. Average annual total return will be computed assuming all
dividends and distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses, including the maximum sales
charge in the case of Class A and Class D shares and the CDSC that would be
applicable to a complete redemption of the investment at the end of the
specified period in the case of Class B and Class C shares.
37
<PAGE>
The Program also may quote each Portfolio's total return and aggregate total
return performance data for various specified time periods. Such data will be
computed as described above, except that (1) the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return and (2) the maximum applicable sales charges will not
be included with respect to annual or annualized rates of return calculations.
Aside from the impact on the performance data calculations of including or
excluding the maximum applicable sales charges, actual annual or annualized
total return data generally will be lower than average annual total return data
since the average rates of return reflect compounding of return; aggregate
total return data generally will be higher than average annual total return
since the aggregate rates of return reflect compounding over a longer period of
time. The Program's total return may be expressed either as a percentage or as
a dollar amount in order to illustrate the effect of such total return on a
hypothetical $1,000 investment in a Portfolio at the beginning of each
specified period.
Yield quotations for each Portfolio will be computed based on a 30-day period
by dividing (a) the net income based on the yield of each security earned
during the period by (b) the average daily number of shares outstanding in each
Portfolio during the period that were entitled to receive dividends (c)
multiplied by the maximum offering price/net asset value per share of that
Portfolio on the last day of the period.
Total return figures and yield figures are based on each Portfolio's
historical performance and are not intended to indicate future performance.
Each Portfolio's total return will vary depending on market conditions, the
securities comprising such Portfolio's holdings, the Portfolio's operating
expenses and the amount of realized and unrealized net capital gains or losses
during the period. The value of an investment in any Portfolio will fluctuate
and an investor's shares, when redeemed, may be worth more or less than their
original cost.
On occasion, a Portfolio may compare its performance to that of the Standard
& Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, or
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week,
CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. As with
other performance data, performance comparisons should not be considered
representative of the Portfolio's relative performance for any future period.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Program was incorporated under Maryland law on May 12, 1994. It has an
authorized capital of 100,000,000 shares of Common Stock, par value $0.10 per
share. The shares are divided as follows: Fundamental Value Portfolio Series
Common Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B
shares, 6,250,000 Class C shares and 6,250,000 Class D shares; Quality Bond
Portfolio Series Common Stock which consists of 6,250,000 Class A shares,
6,250,000 Class B shares, 6,250,000 Class C shares and 6,250,000 Class D
shares; U.S. Government Securities Portfolio Series Common Stock which consists
of 6,250,000 Class A shares, 6,250,000 Class B shares, 6,250,000 Class C shares
and 6,250,000 Class D shares; and Global Opportunity Portfolio Series Common
Stock which consists of 6,250,000 Class A shares, 6,250,000 Class B shares,
6,250,000 Class C shares and 6,250,000 Class D shares. The Board of Directors
of the Program may classify and reclassify the shares of a Portfolio into
additional classes of Common Stock at a future date.
38
<PAGE>
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors
and any other matter submitted to a shareholder vote. The Program does not
intend to hold meetings of shareholders in any year in which the Investment
Company Act does not require shareholders to act on any of the following
matters: (i) election of Directors; (ii) approval of an investment advisory
agreement; (iii) approval of a distribution agreement; and (iv) ratification
of selection of independent auditors. Generally, under Maryland law, a meeting
of shareholders may be called for any purpose on the written request of the
holders of at least 10% of the outstanding shares of the Program. Voting
rights for Directors are not cumulative. Shares issued are fully paid and non-
assessable and have no preemptive or conversion rights. Redemption rights are
discussed elsewhere herein and in the Prospectus. Each share is entitled to
participate equally in dividends and distributions declared by the Program and
in the net assets of the Program on liquidation or dissolution after
satisfaction of outstanding liabilities. Stock certificates are issued by the
Transfer Agent only on specific request. Certificates for fractional shares
are not issued in any case.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the initial offering price for
Portfolio shares, based on the projected value of each Portfolio's estimated
net assets and projected number of shares outstanding on the date its shares
are first offered for sale to public investors is as follows:
<TABLE>
<CAPTION>
FUNDAMENTAL VALUE PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------------------ -------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets.............. $ 6,250 $ 6,250 $ 6,250 $ 6,250 $6,250 $6,250 $6,250 $6,250
========= ========= ========= ========= ====== ====== ====== ======
Number of Shares Out-
standing............... 625 625 625 625 625 625 625 625
========= ========= ========= ========= ====== ====== ====== ======
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 $10.00
Sales Charge(1)*........ .55 ** ** .55 .42 ** ** .42
--------- --------- --------- --------- ------ ------ ------ ------
Offering Price.......... $ 10.55 $ 10.00 $ 10.00 $ 10.55 $10.42 $10.00 $10.00 $10.42
========= ========= ========= ========= ====== ====== ====== ======
<CAPTION>
U.S. GOVERNMENT SECURITIES PORTFOLIO GLOBAL OPPORTUNITY PORTFOLIO
------------------------------------------ -------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS A CLASS B CLASS C CLASS D
--------- --------- --------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets.............. $ 6,250 $ 6,250 $ 6,250 $ 6,250 $6,250 $6,250 $6,250 $6,250
========= ========= ========= ========= ====== ====== ====== ======
Number of Shares Out-
standing............... 625 625 625 625 625 625 625 625
========= ========= ========= ========= ====== ====== ====== ======
Net Asset Value Per
Share (net assets
divided by number of
shares outstanding).... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00 $10.00
Sales Charge(1)*........ .42 ** ** .42 .55 ** ** .55
--------- --------- --------- --------- ------ ------ ------ ------
Offering Price.......... $ 10.42 $ 10.00 $ 10.00 $ 10.42 $10.55 $10.00 $10.00 $10.55
========= ========= ========= ========= ====== ====== ====== ======
</TABLE>
- --------
(1) For Class A and Class D shares of each Portfolio as follows: Fundamental
Value and Global Opportunity Portfolios, 5.25% of offering price (5.54% of
net asset value per share); Quality Bond and U.S. Government Securities
Portfolios, 4.00% of offering price (4.17% of net asset value per share).
* Rounded to the nearest one-hundredth percent, assumes maximum sales charge
is applicable.
** Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption of shares. See "Purchase of Shares--
Deferred Sales Charge Alternatives--Class B and Class C Shares" in the
Prospectus.
39
<PAGE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 117 Campus Drive, Princeton, New Jersey 08540, has
been selected as the independent auditors of the Program. The selection of
independent auditors is subject to ratification by the shareholders of the
Program. The independent auditors are responsible for auditing the annual
financial statements of the Program.
CUSTODIAN
The Bank of New York, 90 Washington Street, 12th Floor, New York, New York
10286, acts as Custodian of the Program's assets. The Custodian is responsible
for safeguarding and controlling the Program's cash and securities, handling
the receipt and delivery of securities and collecting interest and dividends on
the Program's investments.
TRANSFER AGENT
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484, acts as the Program's transfer agent. The Transfer Agent is
responsible for the issuance, transfer and redemption of shares and the
opening, maintenance and servicing of shareholder accounts. See "Management of
the Program--Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Program.
REPORTS TO SHAREHOLDERS
The fiscal year of the Program ends on January 31 of each year. The Program
will send to its shareholders at least semiannually reports showing the
Program's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to shareholders
each year. After the end of each year, shareholders will receive Federal income
tax information regarding dividends and capital gains distributions.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information set forth in the Registration Statement and the exhibits
relating thereto which the Program has filed with the Commission, Washington,
D.C., under the Securities Act and the Investment Company Act to which
reference is hereby made.
40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Fundamental Value Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Fundamental Value Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset
Builder Program, Inc. as of November 16, 1994. This financial statement is the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of the Portfolio as of November
16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
41
<PAGE>
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
FUNDAMENTAL VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
<TABLE>
<S> <C>
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... $125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $10.00
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities
(1) Fundamental Value Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
42
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Quality Bond Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Quality Bond Portfolio (the "Portfolio") of Merrill Lynch Retirement Asset
Builder Program, Inc. as of November 16, 1994. This financial statement is the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of the Portfolio as of November
16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
43
<PAGE>
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
QUALITY BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
<TABLE>
<CAPTION>
Assets:
<S> <C>
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au-
thorized........................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding .. $ 10.00
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities
(1) Quality Bond Portfolio (the "Portfolio") is one of the four portfolios of
Merrill Lynch Retirement Asset Builder Program, Inc. (the "Program") which
was organized as a Maryland corporation on May 12, 1994. The Program is
registered under the Investment Company Act of 1940 as an open-end
investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
U.S. Government Securities Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the
U.S. Government Securities Portfolio (the "Portfolio") of Merrill Lynch
Retirement Asset Builder Program, Inc. as of November 16, 1994. This financial
statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of the Portfolio as of November
16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
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MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
<TABLE>
<S> <C>
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees........................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets............................................................ $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... $ 63
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares
authorized.......................................................... 63
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets............................................................ $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities
(1) U.S. Government Securities Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Global Opportunity Portfolio of
Merrill Lynch Retirement Asset Builder Program, Inc.:
We have audited the accompanying statement of assets and liabilities of the
Global Opportunity Portfolio (the "Portfolio") of Merrill Lynch Retirement
Asset Builder Program, Inc. as of November 16, 1994. This financial statement
is the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of the Portfolio as of November
16, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 22, 1994
47
<PAGE>
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
GLOBAL OPPORTUNITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
<TABLE>
<S> <C>
Assets:
Cash................................................................ $ 25,000
Prepaid Registration Fees .......................................... 84,546
Deferred organization costs......................................... 15,500
--------
Total assets.......................................................... 125,046
Liabilities:
Liabilities and accrued expenses.................................... 100,046
--------
Net Assets ........................................................... $ 25,000
========
Net Assets Consist Of:
Class A Shares of Common Stock, $.10 par value, 6,250,000 shares au- $ 63
thorized...........................................................
Class B Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class C Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Class D Shares of Common Stock, $.10 par value, 6,250,000 shares au- 63
thorized...........................................................
Paid-in Capital in excess of par.................................... 24,748
--------
Net Assets ........................................................... $ 25,000
========
Net Asset Value Per Share:
Class A--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class B--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class C--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
Class D--Based on net assets of $6,250 and 625 shares outstanding... $ 10.00
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities
(1) Global Opportunity Portfolio (the "Portfolio") is one of the four
portfolios of Merrill Lynch Retirement Asset Builder Program, Inc. (the
"Program") which was organized as a Maryland corporation on May 12, 1994.
The Program is registered under the Investment Company Act of 1940 as an
open-end investment company.
(2) The Portfolio has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with Merrill Lynch Asset Management (the
"Investment Adviser"), and distribution agreements (the "Distribution
Agreements") with Merrill Lynch Funds Distributor, Inc. (the
"Distributor"). (See "Management and Advisory Arrangements" in the
Statement of Additional Information.) Certain officers and/or directors of
the Program are officers and/or directors of the Investment Adviser and/or
the Distributor.
(3) Prepaid registration fees are charged to income as the related shares are
issued.
(4) Deferred organization expenses will be amortized over a period from the
date the Portfolio commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any
of its original shares prior to the end of the five-year period, the
proceeds of the redemption payable in respect of such shares shall be
reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares
outstanding at the time of redemption) of the unamortized deferred
organization expenses as of the date of such redemption. In the event that
the Portfolio is liquidated prior to the end of the five-year period, the
Investment Adviser (or any subsequent holder) shall bear the unamortized
deferred organization expenses.
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APPENDIX A
DESCRIPTION OF THE SELF-DIRECTED PLANS
This Appendix describes in summary form the various types of self-directed
retirement plans for which Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") acts as custodian (the "Self-Directed Plans"). This
description does not purport to be complete, and it should be read in
conjunction with the materials concerning the Self-Directed Plans, including
copies of the Plans and the forms necessary to establish a plan, which are
available from Merrill Lynch. Investors should read such materials carefully
before establishing a Self-Directed Plan and should consult with their attorney
or tax adviser to determine if any of the Self-Directed Plans are suited to
their needs and circumstances. The laws applicable to the Self-Directed Plans,
including the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Internal Revenue Code of 1986, as amended (the "Code") are
complex and include a variety of transitional rules which may be applicable to
some investors. These laws should be reviewed by investors' attorneys to
determine their applicability. Investors are further advised that the
discussion of taxation contained in this Appendix relates solely to federal tax
laws but generally does not address the numerous transitional rules and that
the tax treatment of the Self-Directed Plans under applicable state law may
vary.
Shares of the Merrill Lynch Retirement Asset Builder Program, Inc. are
available for purchase solely by participants in an IRA (individual retirement
account), an IRRA (individual retirement rollover account) or SEP (simplified
employee pension plan) and, accordingly, the description set forth below will
describe only such arrangements.
ESTABLISHMENT OF A SELF-DIRECTED PLAN ACCOUNT
Self-Directed Plan accounts may be established by qualified individuals and
businesses through Merrill Lynch.
Generally, Self-Directed Plans afford participants the opportunity to take a
tax deduction, up to the maximum amount permitted under the Code for the
particular Self-Directed Plan, for amounts contributed to the Plan. Each Self-
Directed Plan is "self-directed"; that is, each participant is responsible for
making investment decisions concerning the funds contributed to his Self-
Directed Plan.
Merrill Lynch charges an annual custodial fee for each account established
pursuant to the Self-Directed Plans. These fees, which are contained in the
Self-Directed Plan documents, vary according to the type of account. Brokerage
fees will be assessed separately for each transaction to which they apply.
PERMISSIBLE SELF-DIRECTED PLAN INVESTMENTS
The type of investments that may be made depends on the type of Self-Directed
Plan established.
Participants and employers that maintain IRAs, IRRAs or SEPs may invest in
securities through Merrill Lynch or its affiliates, including stocks traded
"over-the-counter" or on a recognized exchange, government or corporate debt
obligations, certain mutual funds, certain limited partnership interests in
real estate, and bank money instruments. Participants and employers may also
invest in annuity contracts issued by a life insurance company (including
Merrill Lynch Life Insurance Company and Merrill Lynch Life Insurance Company
of New York). Those participants and employers desiring a diversified portfolio
but not wishing to actively manage the portfolio may elect to invest all or a
portion of their account in certain mutual funds
49
<PAGE>
advised by Merrill Lynch Asset Management, L.P. (the "Investment Adviser") or
its affiliate. Participants and employers may vary their investment portfolio
as often as they wish.
Cash balances arise in a Self-Directed Plan account from contributions to the
Plan, the sale of securities held in the account and the receipt of dividends,
interest and principal repayments on securities held in the account. Cash
balances for which no other investment directions are given will, in accordance
with the option previously selected by the participant or employer, be invested
in full shares of the Portfolios or in certain money market funds advised by
the Investment Adviser or its affiliate, or maintained uninvested in the Self-
Directed Plan account. If such amounts are not invested, no return will be
earned. All cash balances will be invested or maintained in accordance with the
option selected by the participant or employer, pending instructions as to
further investment.
There can be no assurance, that the yield on an investment in the Portfolios
or a money market fund will be or will remain greater than that available on
any interest-bearing account. In addition, a money market fund is not a bank,
and shares of a money market fund are not equivalent to a bank account. As with
any investment in securities, the value of an investment in the Portfolios will
fluctuate. Amounts deposited in an interest-bearing bank account will be
insured as to principal in an amount of up to $100,000 per account by the
Federal Deposit Insurance Corporation. Cash balances maintained in a Self-
Directed Plan account will be insured, up to $100,000, by the Securities
Investor Protection Corporation.
CONTRIBUTIONS AND DISTRIBUTIONS
The amount which may be contributed to a Self-Directed Plan in any one year
is subject to certain limitations under the Code; however, assets already in a
Self-Directed Plan account may be invested without regard to such limitations
on contributions. With the exception of pretax contributions made by
participants in their IRAs or employer contributions to a SEP, a Self-Directed
Plan participant may deduct from his annual gross income, up to the maximum
permitted under the Code, amounts contributed to his Self-Directed Plan. These
amounts, plus any additional income earned on such contributions, will
ordinarily not be taxed until distributed to the participant.
Generally, under the Code, distributions may be made at any time but, as
discussed below, distributions made prior to the date on which the participant
reaches age 59 1/2 may be subject to a penalty and may be subject to mandatory
federal income tax withholding at a 20 percent rate (as described below).
Distributions will be taxed as ordinary income at the rate applicable to the
participant in the year in which distributed.
Excess Contributions. Under Section 4973 of the Code, contributions to an
IRA, IRRA or SEP in excess of those allowed by law are subject to a six percent
excise tax if not withdrawn, together with additional income attributable to
such excess contributions, prior to the date the participant files his income
tax return for the year in which the excess contribution was made. If an excess
amount is contributed in one year and is not eliminated in later years, the
excess amount will be subject to a cumulative six percent excise tax each year
until it is eliminated. Elimination of the excess may be accomplished either by
reducing the contribution (and deduction) for a succeeding year, or by
withdrawal of the excess amount plus the income attributable to it. Such income
will be considered a premature distribution subject to the ten percent penalty
tax on premature distributions under Section 72(f) of the Code discussed below,
and will additionally be taxable as ordinary income at the applicable rate for
the year in which it is distributed.
Timing of Retirement Benefits. Generally, a participant, upon reaching age 59
1/2, may make such distributions from his Self-Directed Plan account as he
chooses without tax penalties. Generally, the Code
50
<PAGE>
requires that amounts in all Self-Directed Plans must commence being
distributed to a participant on or before April 1 of the calendar year
following the calendar year in which he reaches age 70 1/2, even if the
employee has not retired.
Such distributions may be made in a lump sum or in installments over the life
of the participant, or the joint lives of the participant and a designated
beneficiary, or over a period not to exceed the life expectancy (determined,
generally, by IRS life expectancy tables) of the participant or the joint life
expectancy of the participant and designated beneficiary. If the employee dies
before his entire interest has been distributed, the remaining portion of his
interest must be distributed at least as rapidly as the method of distribution
in effect prior to his death. Special rules apply under the Code to spousal
beneficiaries.
If the minimum payout required from a Self-Directed Plan for a particular
year is not made, a 50% excise tax will be imposed on the amount representing
the difference between the minimum payout required from the Self-Directed Plan
and the amount actually distributed under Section 4974 of the Code.
Treatment of Lump Sum Distributions and Annuities. The recipient of a "lump
sum distribution" (generally a distribution or payment within one taxable year
to the recipient of the balance to the credit of the employee on account of the
employee's death, attainment of age 59 1/2, disability or separation from
service (except in the case of a self-employed individual)) from a qualified
retirement plan may compute his tax liability using the five-year income
averaging tax computation, subject to certain requirements. However, no lump
sum income averaging methods apply to distributions from IRAs, IRRAs or SEPs.
Excise Tax on Large Distributions. To limit the total tax-deferred benefits
any individual can receive annually, Section 4980A of the Code imposes a 15
percent excise tax on certain "excess distributions" from qualified retirement
plans. All distributions from "qualified retirement plans" including IRAs,
IRRAs or SEPs made within one year are aggregated for this purpose. Total
benefits paid in a year exceeding the greater of $112,500, indexed for
inflation ($148,500 for 1994), or $150,000 (unindexed) are subject to the tax
to the extent of the excess. For lump sum distributions eligible to be taxed
under the five-year averaging provisions, the penalty will be applied
separately with respect to the lump sum distribution and other retirement
distributions. The penalty will be applied on the portion of the lump sum
distribution which exceeds five times the otherwise applicable limit for the
year.
Unless an election is made by a spouse, distributions made to beneficiaries
after the death of an individual are disregarded for purposes of applying this
tax; instead, an additional estate tax may be payable. The penalty tax on
excess distributions is reduced by an excise tax on early withdrawals.
Benefits accrued before August 1, 1986 may have been grandfathered and may
not be subject to the excise tax.
Premature Distributions. 1. Excise Tax: Distributions from an IRA, IRRA or
SEP prior to the time the participant reaches age 59 1/2 generally are subject
to penalty unless the participant has died or has become disabled (within the
meaning of Code Section 72(m)(7)). The penalty for early distributions is an
excise tax equivalent to ten percent of the amount so distributed, in addition
to the applicable ordinary income tax payable on such amount for the year in
which it is distributed. The tax will be waived for any distribution that is
part of a scheduled series of substantially level payments under an annuity for
the life or life expectancy of the taxpayer or the joint lives of the taxpayer
and his designated beneficiary. Distributions can also be made, without
penalty, to cover deductible medical expenses, for certain payments in a
divorce settlement, or
51
<PAGE>
to an employee who is age 55 or older, has separated from service, and has
satisfied the requirements of the employer's plan for early retirement (if the
plan permits such payments). In certain cases, the penalty will not be waived
if the distribution is from an IRA or retirement annuity. The penalty is also
not waived for distributions from a qualified retirement plan, if the employee
is a more than five percent owner or has been a more than five-percent owner at
any time during the five plan years preceding the plan year ending in the tax
year in which the amount is received. A five percent owner is a person who, in
the case of a corporate employer, actually or constructively owns more than
five percent of the outstanding stock of the employer or stock possessing more
than five percent of the total combined voting power of all stock of the
employer, or who, in the case of a non-corporate employer, owns more than five
percent of the capital or profits interest in the employer. A rollover will
avoid imposition of the excise tax. However, for distributions prior to 1993,
the Code restricts the rollover of partial distributions to distributions
received on account of an employee's separation from service, death or
disability.
2. Mandatory Income Tax Withholding. Generally, any portion of an "eligible
rollover distribution" made from a qualified retirement plan after December 31,
1992 qualifies for tax-free rollover into an eligible retirement plan under
Section 402(c) of the Code. Under Section 402(c), as amended, all distributions
from a qualified retirement plan (including in-service distributions) are
eligible rollover distributions, except for certain periodic payments, required
amounts distributed to a participant who is over age 70 1/2 as described above,
and amounts otherwise not includible in gross income. Rollovers may be made by
the participant in one of two ways: first, by direct transfers from the
qualified retirement plan to an IRA (including an individual retirement annuity
other than endowment contract), a qualified defined contribution plan or an
annuity under Section 403(a) of the Code (a "direct rollover") or, in the case
of the RSA plan to another 403(b) plan, a tax sheltered annuity; or second, by
rolling over an eligible rollover distribution within 60 days of receipt to any
of the arrangements described above. In the event a direct rollover is not
chosen by the participant, a mandatory 20 percent of the distribution is
withheld to satisfy any federal tax liability that may be assessed. The
mandatory 20 percent withholding tax is not assessed against any distributions
that may not be rolled over (including, but not limited to, distributions to
beneficiaries other than a surviving spouse, or a present or former spouse
under a qualified domestic relations order).
Participants should consult with their attorneys or tax advisers in order to
determine the application of the new rollover and mandatory withholding
requirements to their own circumstances.
The foregoing rules are of general applicability to the Self-Directed Plans.
The following section discusses specific considerations applicable to the
different types of Self-Directed Plans.
TYPES OF SELF-DIRECTED PLANS
Individual Retirement Accounts. As a result of changes made by the Tax Reform
Act of 1986, the allowable deductions for contributions to IRAs are restricted
for certain taxpayers who are (or their spouses are) active participants in
employer-sponsored retirement plans and whose adjusted gross income exceeds
certain levels. An individual will be considered an active participant in a
defined contribution plan if any employer contribution or forfeiture is added
to his account for the year. In the case of a defined benefit plan, an
individual will be considered an active participant if he is not excluded under
the eligibility rules for the year. The determination of whether an individual
is an active participant is made without regard to whether the individual's
rights under a plan are vested. If an unmarried taxpayer, or either spouse in
the case of married taxpayers, is an "active participant" in an employer-
sponsored retirement plan, deductible contributions are permitted subject to a
pro rata phase-out rule where adjusted gross income (before the IRA
52
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deduction) is over $40,000 on a joint return or $25,000 for an unmarried
individual. The allowable deduction is completely eliminated for such taxpayers
when adjusted gross income (before the IRA deduction) reaches $50,000 on a
joint return or $35,000 for an unmarried person. For this purpose, an employer-
sponsored retirement plan means a pension, profit-sharing or stock bonus plan
qualified under Code section 401(a) (including a Keogh plan or 401(k) plan), an
annuity plan qualified under Section 403(a), a SEP, a tax-sheltered Code
section 403(b) annuity and retirement plans covering federal, state or local
government employees. A minimum deductible contribution of $200 is provided for
any taxpayer whose adjusted gross income is not above the phase-out range even
if the phase-out rules would provide for a lower deduction.
Subject to the above limitations, any individual with compensation may
establish an IRA. Generally, the maximum yearly tax deduction that may be taken
for an IRA contribution is the lesser of $2,000 or 100% of the individual's
compensation. If a husband and wife are both employed, they may take a
deduction of up to $4,000 on a joint return. If only one spouse is employed, a
separate IRA, called a "spousal IRA", may be established for the benefit of the
non-working spouse or a spouse that elects to be treated as having no
compensation for the year. The deduction for a spousal IRA may only be taken if
a joint return is filed, and the maximum contribution and aggregate deduction
for the two IRAs for any year is $2,250. Allocations may be made between the
two accounts in any manner so long as no more than $2,000 is contributed to
either of the accounts. No deduction for IRA contributions may be made for or
after the tax year in which a participant reaches age 70 1/2. In addition, no
deduction will be allowed for amounts paid to an "inherited IRA" (i.e., an IRA
acquired on account of the death of another individual other than by the
surviving spouse of the original owner).
Active participants in employer-sponsored plans who are not eligible to make
deductible contributions to IRAs (or whose deductions are limited) may make
nondeductible contributions to a separate account. The nondeductible
contribution is subject to the same dollar limitations (the lesser of $2,000 or
100% of compensation) as deductible contributions described above. Income in
the separate account will accumulate tax-free until distributed; however, only
the account earnings will be included in taxable income upon distribution.
The Self-Directed IRA program allows for the establishment of IRRAs, which
are "rollover IRAs". Prior to 1993, a rollover IRA could have only been
established with a distribution received from a qualified employer-sponsored
pension plan that was of an amount equal to at least 50% of the balance to the
credit of the employee in the plan; after December 31, 1992, this 50%
requirement no longer applies. This distribution would ordinarily be subject to
income tax; however, tax may be deferred to the extent that all or part of the
rollover amount, less any voluntary contributions made to the employer-
sponsored plans, is put into an IRA within 60 days of receiving the
distribution. With respect to a distribution of less than the entire balance to
the credit of the employee in the plan prior to 1993 (a "partial rollover"),
the distribution was eligible for rollover treatment only if the distribution
was made on account of the employee's death, separation from service or
disability and was not one of a series of periodic payments and the employee
elected, in a manner to be prescribed by regulations, to have rollover
treatment apply to such distribution. However, as described above, effective
for rollovers made after December 31, 1992, the limitations described with
respect to partial rollovers have been eliminated, and new mandatory federal
income tax withholding requirements have been imposed for any rollover that is
not a direct rollover. The amounts in a rollover IRA are taxed only upon
distribution, as with other IRAs. However, tax-free rollover treatment will be
denied for amounts received from an "inherited IRA".
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Simplified Employee Pension Plans. A SEP is essentially a collection of IRA
accounts established by employers for their employees, and any employer,
whether it is a sole proprietorship, a partnership or a corporation, may set up
a SEP. To qualify as a SEP, certain requirements must be met; in particular,
the plan must cover all current employees age 21 years or older who have worked
for the business in three of the last five calendar years and have received at
least $300 in compensation from the employer. Up to $30,000 or 15% of the
employee's compensation up to $150,000 (effective for plan years beginning
after December 31, 1993), subject to inflation adjustments may be paid by the
employer to the employee's SEP. The same percentage of compensation (determined
under a written formula) must be contributed on behalf of each employee. Such
contributions are deductible by the employer and excluded from the employee's
income. The tax-free elective deferral of an employee's income for a taxable
year cannot exceed $7,000, as adjusted for inflation (currently, $9,240 in
1994). This cap limits all tax-free elective deferrals by an employee under all
cash and deferred arrangements, SEPs and tax sheltered annuities.
Because the SEP is also an IRA, the employee may, if otherwise eligible under
the rules applicable to IRAs discussed above, make up to a $2,000 contribution
to the SEP or make rollover contributions (see "Individual Retirement Accounts"
above). Amounts contributed to a participant's SEP account vest immediately. If
the participant should cease to be employed by the business maintaining the
SEP, the participant retains full rights to and investment power over the
account. In such case, the account should be changed to a regular IRA so that
the participant may make additional permissible contributions.
Tax-deductible employer contributions may continue to be made to a SEP
participant's account even after he has reached age 70 1/2.
Each of the foregoing Self-Directed Plans is designed to meet differing needs
and has varying financial and tax consequences. An investor should thoroughly
review all of the materials available from Merrill Lynch concerning the Self-
Directed Plans and consult with his attorney or tax adviser in determining
whether any of these Plans is suited to his needs and circumstances.
Top-Heavy Plan Requirements. The Code imposes special rules with respect to
qualified plans that are considered to be "top-heavy" plans (individual
retirement plans are not subject to the Code's rules relating to "top-heavy"
plans). A defined contribution plan (for purposes of these rules, a SEP is
deemed to be a defined contribution plan) is considered to be "top-heavy" where
the account balances of "key employees" exceed 60% of the account balances of
all employees. "Key employees" include all employees who, at any time during
the plan year or the four preceding plan years (1) are officers having annual
compensation of more than $45,000, as adjusted for inflation, (2) are one of
the ten employees with annual compensation of more than $30,000 that actually
or constructively own the largest interests in the employer, (3) are "five-
percent owners", or (4) own more than a one percent interest in the employer
and have annual compensation in excess of $150,000. The account balance of an
individual that has not received compensation as an employee during the five
preceding plan years is not taken into account.
When a plan favoring key employees is determined to be "top-heavy", its
continued qualification under the Code depends on its compliance with certain
requirements, which (1) limit the amount of a participant's compensation that
may be taken into account, (2) provide stringent vesting schedules, (3) provide
minimum contributions or benefits for non-key employees, and (4) reduce the
aggregate limit on benefits and contributions for certain key employees who
participate in both a defined benefit plan and a defined contribution plan.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objectives and Policies......................................... 2
Fundamental Value Portfolio............................................... 2
Quality Bond Portfolio.................................................... 2
U.S. Government Securities Portfolio...................................... 2
Global Opportunity Portfolio.............................................. 3
Other Investment Policies and Practices of the Portfolios................. 4
Management of the Program.................................................. 8
Directors and Officers.................................................... 8
Management and Advisory Arrangements...................................... 9
Purchase of Shares......................................................... 11
Initial Sales Charge Alternatives--
Class A and Class D Shares............................................... 12
Reduced Initial Sales Charges............................................. 13
Distribution Plans ....................................................... 15
Limitations on the Payment of Deferred Sales Charges ..................... 15
Redemption of Shares....................................................... 17
Deferred Sales Charges--
Class B Shares........................................................... 17
Portfolio Transactions and Brokerage....................................... 18
Portfolio Turnover........................................................ 20
Determination of Net Asset Value........................................... 20
Shareholder Services....................................................... 21
Investment Account........................................................ 22
Automatic Reinvestment of Dividends and Capital Gains Distributions....... 22
Systematic Redemption and Automatic Investment Plans...................... 22
Exchange Privilege........................................................ 22
Dividends, Distributions and Taxes......................................... 35
Dividends and Distributions............................................... 35
Federal Tax............................................................... 35
State Tax................................................................. 37
Performance Data........................................................... 37
General Information........................................................ 38
Description of Shares..................................................... 38
Computation of Offering Price Per Share................................... 39
Independent Auditors...................................................... 40
Custodian................................................................. 40
Transfer Agent............................................................ 40
Legal Counsel............................................................. 40
Reports to Shareholders................................................... 40
Additional Information.................................................... 40
Independent Auditors' Report
Fundamental Value Portfolio............................................... 41
Quality Bond Portfolio.................................................... 43
U.S. Government Securities Portfolio...................................... 45
Global Opportunity Portfolio.............................................. 47
Statement of Assets and Liabilities
Fundamental Value Portfolio............................................... 42
Quality Bond Portfolio.................................................... 44
U.S. Government Securities Portfolio...................................... 46
Global Opportunity Portfolio.............................................. 48
Appendix A--Description of the Self Directed Plans........................ 49
</TABLE>
Code # 18471-1294
[LOGO MERRILL LYNCH]
Merrill Lynch
Retirement Asset
Builder Program, Inc.
[ART]
STATEMENT OF
ADDITIONAL
INFORMATION
December , 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Contained in Part B:
Statement of Assets and Liabilities as of November 16, 1994.
Fundamental Value Portfolio
Quality Bond Portfolio
U.S. Government Securities Portfolio
Global Opportunity Portfolio
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
1(a) --Articles of Incorporation of Registrant.
(b) --Articles of Amendment of Articles of Incorporation of Registrant.
2 --By-Laws of Registrant, (a).
3 --None.
4(a) --Portions of the Articles of Incorporation and By-Laws of Registrant
defining the rights of holders of shares of common stock of Registrant
(b).
(b) --Form of specimen certificate for shares of Class A common stock of
Registrant.
(c) --Form of specimen certificate for shares of Class B common stock of
Registrant.
(d) --Form of specimen certificate for shares of Class C common stock of
Registrant.
(e) --Form of specimen certificate for shares of Class D common stock of
Registrant.
5 --Form of Management Agreement between Registrant and Merrill Lynch Asset
Management.
6(a) --Form of Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(b) --Form of Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(c) --Form of Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(d) --Form of Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
7 --None.
8 --Form of Custody Agreement between Registrant and The Bank of New York.
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services, Inc.
(b) --Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.
10 --Opinion letter of Brown & Wood, counsel for Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for Registrant.
12 --None.
13 --Certificate of Merrill Lynch Asset Management.
14 --None.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S> <C>
15(a) --Form of Class B Shares Distribution Plan of Registrant and Class B
Shares Distribution Plan Sub-Agreement.
(b) --Form of Class C Shares Distribution Plan of Registrant and Class C
Shares Distribution Plan Sub-Agreement.
(c) --Form of Class D Shares Distribution Plan of Registrant and Class D
Shares Distribution Plan Sub-Agreement.
16 --None.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
</TABLE>
- --------
(a) Filed on May 27, 1994, as an Exhibit to the Registrants' Registration
Statement on Form N-1A (File No. 33-53887) under the Securities Act of
1933.
(b) Reference is made to Article IV, Article V (Sections 2, 3, 4, 5 and 6),
Article VI, Article VII and Article IX, of the Registrant's Articles of
Incorporation, as amended, filed as Exhibits 1(a) and 1(b) to the
Registration Statement, and to Article II, Article III (Sections 1, 3, 5,
6 and 17), Article VI, Article VII, Article XII, Article XIII and Article
XIV of the Registrant's By-Laws, filed as Exhibit 2 to the Registration
Statement.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is not controlled by or under common control with any other
person.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS AT
TITLE OF CLASS DECEMBER 5, 1994
-------------- ----------------
<S> <C>
Class A Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class B Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class C Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
Class D Shares of Common Stock, par value $0.10 per share:
Fundamental Value Portfolio................................. 1
Quality Bond Portfolio...................................... 1
U.S. Government Securities Portfolio........................ 1
Global Opportunity Portfolio................................ 1
</TABLE>
C-2
<PAGE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of Registrant's Articles of Incorporation,
Article VI of Registrant's By-Laws, Section 2-418 of the Maryland General
Corporation Law and Section 9 of the Class A, Class B, Class C and Class D
Distribution Agreements.
Insofar as the conditional advancing of indemnification moneys for actions
based on the Investment Company Act of 1940 may be concerned, Article VI of the
Registrant's By-Laws provides that the person seeking indemnification shall
provide to the Registrant a written affirmation of his good faith belief that
the standard of conduct necessary for indemnification by the Registrant has
been met and a written undertaking to repay any such advance if it should
ultimately be determined that the standard of conduct has not been met, and
provided further that at least one of the following additional conditions is
met: (a) the person seeking indemnification shall provide a security in form
and amount acceptable to the Registrant for his undertaking; (b) the Registrant
is insured against losses arising by reason of the advance; and (c) a majority
of a quorum of the Registrant's disinterested non-party Directors, or an
independent legal counsel in a written opinion, shall determine, based upon a
review of readily available facts, that there is reason to believe that the
person seeking indemnification will ultimately be found to be entitled to
indemnification.
In Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the
Distributor within the meaning of the Securities Act of 1933 (the "Act"),
against certain types of civil liabilities arising in connection with the
Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the Act may be
permitted to Directors, officers and controlling persons of the Registrant and
the principal underwriter pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer, or controlling
person of the Registrant and the principal underwriter in connection with the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person or the principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Merrill Lynch Asset Management, L.P. (the "Investment Adviser") acts as
investment adviser for the following registered investment companies:
Convertible Holdings, Inc., Merrill Lynch Adjustable Rate Securities Fund,
Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset Growth
Fund, Inc., Merrill Lynch Asset Income Fund, Inc., Merrill Lynch Balanced Fund
for Investment and Retirement, Merrill Lynch Capital Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch Dragon Fund, Inc., Merrill
Lynch EuroFund, Merrill Lynch Fundamental Growth Fund, Inc., Merrill Lynch Fund
For Tomorrow, Inc., Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch
Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Convertible Fund, Inc., Merrill Lynch Global Holdings, Inc., Merrill Lynch
Global Resources Trust, Merrill Lynch Global Utility Fund, Inc., Merrill
C-3
<PAGE>
Lynch Growth Fund for Investment and Retirement, Merrill Lynch Healthcare Fund,
Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch
Institutional Intermediate Fund, Merrill Lynch International Equity Fund,
Merrill Lynch Latin America Fund, Inc., Merrill Lynch Municipal Series Trust,
Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill
Lynch Retirement Series Trust, Merrill Lynch Senior Floating Rate Fund, Inc.,
Merrill Lynch Series Fund, Inc., Merrill Lynch Short-Term Global Income Fund,
Inc., Merrill Lynch Strategic Dividend Fund, Merrill Lynch Technology Fund,
Inc., Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch U.S.A. Government
Reserves, Merrill Lynch Utility Income Fund, Inc., and Merrill Lynch Variable
Series Funds, Inc. Fund Asset Management, L.P. ("FAM"), an affiliate of the
Investment Adviser, acts as the investment adviser for the following investment
companies: Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities
Fund, CMA Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt
Fund, CMA Treasury Fund, The Corporate Fund Accumulation Program, Inc.,
Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc., Emerging
Tigers Fund, Inc., Financial Institutions Series Trust, Income Opportunities
Fund 1999, Inc., Income Opportunities Fund 2000, Inc., Merrill Lynch Basic
Value Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill
Lynch Corporate Bond Fund, Inc., Merrill Lynch Federal Securities Trust,
Merrill Lynch Funds for Institutions Series, Merrill Lynch Multi-State Limited
Maturity Municipal Series Trust, Merrill Lynch Multi-State Municipal Series
Trust, Merrill Lynch Municipal Bond Fund, Inc., Merrill Lynch Phoenix Fund,
Inc., Merrill Lynch Special Value Fund, Inc., Merrill Lynch World Income Fund,
Inc., MuniAssets Fund, Inc., MuniBond Income Fund, Inc., The Municipal Fund
Accumulation Program, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc.,
MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest California Insured Fund,
Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New
Jersey Fund, Inc., MuniVest New York Insured Fund, Inc., MuniVest Pennsylvania
Insured Fund, MuniYield Arizona Fund, Inc., MuniYield Arizona Fund II, Inc.,
MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc.,
MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield
Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc.,
MuniYield Insured Fund II, Inc., MuniYield Michigan Fund, Inc., MuniYield
Michigan Insured Fund, Inc., MuniYield New Jersey Fund, Inc., MuniYield New
Jersey Insured Fund, Inc., MuniYield New York Insured Fund, Inc., MuniYield New
York Insured Fund II, Inc., MuniYield New York Insured Fund III, Inc.,
MuniYield Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality
Fund II, Inc., Senior High Income Portfolio, Inc., Senior High Income Portfolio
II, Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings,
Inc., Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch
Funds for Institutions Series and Merrill Lynch Institutional Intermediate Fund
is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The
address of the Investment Adviser, FAM, Princeton Services, Inc. ("Princeton
Services"), Merrill Lynch Funds Distributor, Inc. ("MLFD") and Princeton
Administrators, L.P. is also P.O. Box 9011, Princeton, New Jersey 08543-9011.
The address of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and Merrill Lynch & Co., Inc. ("ML & Co.") is World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281. The address of
Financial Data Services, Inc. ("FDS") is 4800 Deer Lake Drive East,
Jacksonville, Florida 32246-6484.
C-4
<PAGE>
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since September 30, 1992, for his or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr Zeikel is President, Mr.
Richard is Treasurer and Mr. Glenn is Executive Vice President of substantially
all of the investment companies described in the first paragraph of Item 28,
and Messrs. Geiger, Durnin, Giordano, Harvey, Kirstein, Monagle and Ms. Griffin
are directors, trustees or officers of one or more of such companies.
<TABLE>
<CAPTION>
POSITION(S) WITH THE OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME INVESTMENT ADVISER VOCATION OR EMPLOYMENT
---- --------------------- ---------------------------------------
<S> <C> <C>
ML & Co................. Limited Partner Financial Services Holding Company
Merrill Lynch Investment
Management, Inc........ Limited Partner Investment Advisory Services
Princeton Services...... General Partner General Partner of FAM
Arthur Zeikel........... President President of FAM; President and
Director of Princeton Services;
Director of MLFD; Executive Vice
President of ML & Co.; Executive Vice
President of Merrill Lynch
Terry K. Glenn.......... Executive Vice Executive Vice President of FAM;
President Executive Vice President and Director
of Princeton Services; President and
Director of MLFD; Director of FDS;
President of Princeton
Administrators, L.P.
Bernard J. Durnin....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Vincent R. Giordano..... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Elizabeth Griffin....... Senior Vice President Senior Vice President of FAM
Norman R. Harvey........ Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
N. John Hewitt.......... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Philip L. Kirstein...... Senior Vice Senior Vice President, General Counsel
President, General and Secretary of FAM; Senior Vice
Counsel and President, General Counsel, Director
Secretary and Secretary of Princeton Services;
Director of MLFD
Ronald M. Kloss......... Senior Vice President Senior Vice President and Controller
and Controller of FAM; Senior Vice President and
Controller of Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.;
Joseph T. Monagle, Jr... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME POSITION(S) WITH THE MANAGER VOCATION OR EMPLOYMENT
---- ---------------------------- ---------------------------------------
<S> <C> <C>
Gerald M. Richard....... Senior Vice President Senior Vice President and Treasurer of
and Treasurer FAM; Senior Vice President and
Treasurer of Princeton Services; Vice
President and Treasurer of MLFD
Richard L. Rufener...... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services;
Vice President of MLFD
Ronald L. Welburn....... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Anthony Wiseman......... Senior Vice President Senior Vice President of FAM: Senior
Vice President of Princeton Services
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant and for each of
the investment companies referred to in the first paragraph of Item 28 except
Apex Municipal Fund, Inc., CBA Money Fund, CMA Government Securities Fund, CMA
Money Fund, CMA Multi-State Municipal Series Trust, CMA Tax-Exempt Fund, CMA
Treasury Fund, Convertible Holdings, Inc., The Corporate Fund Accumulation
Program, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., Emerging Tigers Fund, Inc., Income Opportunities Fund 1999, Inc., Income
Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniBond Income Fund,
Inc., The Municipal Fund Accumulation Program, Inc., MuniEnhanced Fund, Inc.,
MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest
California Insured Fund, Inc., MuniVest Florida Fund, MuniVest Michigan Insured
Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest New York Insured Fund,
Inc., MuniVest Pennsylvania Fund, MuniYield Arizona Fund, MuniYield Arizona
Fund II, Inc., MuniYield California Fund, Inc., MuniYield California Insured
Fund, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield
Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II, Inc.,
MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc., MuniYield
New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc., MuniYield New
York Insured Fund, Inc., MuniYield New York Insured Fund II, Inc., MuniYield
New York Insured Fund III, Inc., MuniYield Pennsylvania Fund, MuniYield Quality
Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio II,
Inc., Senior Strategic Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc.,
Taurus MuniNewYork Holdings, Inc. and Worldwide DollarVest Fund, Inc.
(b) Set forth below is information concerning each director and officer of
MLFD. The principal business address of each such person is P.O. Box 9011,
Princeton, New Jersey 08543-9011, except that the address of Messrs. Crook,
Aldrich, Breen, Graczyk, Fatseas, and Wasel is One Financial Center, Boston,
Massachusetts 02111-2646.
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
------ ------------------------- --------------------------------------
<S> <C> <C>
Terry K. Glenn...... President and Executive Vice President
Director
Arthur Zeikel....... Director President and Director
Philip L. Kirstein.. Director None
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) POSITION(S) AND OFFICE(S) POSITION(S) AND OFFICE(S)
NAME WITH MLFD WITH REGISTRANT
------ ------------------------- -------------------------
<S> <C> <C>
William E. Aldrich.......... Senior Vice President None
Robert W. Crook............. Senior Vice President None
Kevin P. Boman.............. Vice President None
Michael J. Brady............ Vice President None
William M. Breen............ Vice President None
Sharon Creveling............ Vice President and None
Assistant Treasurer
Mark A. DeSario............. Vice President None
James T. Fatseas............ Vice President None
Stanley Graczyk............. Vice President None
Michelle T. Lau............. Vice President None
Debra W. Landsman-Yaros..... Vice President None
Gerald M. Richard........... Vice President and Treasurer
Treasurer
Richard L. Rufener.......... Vice President None
Salvatore Venezia........... Vice President None
William Wasel............... Vice President None
Robert Harris............... Secretary None
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant, 800 Scudders Mill
Road, Plainsboro, New Jersey 08536, and its transfer agent, Financial Data
Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Fund--Management
and Advisory Arrangements" in the Prospectus constituting Part A of the
Registration Statement and under "Management of the Fund--Management and
Advisory Arrangements" in the Statement of Additional Information constituting
Part B of the Registration Statement, the Registrant is not a party to any
management-related service contract.
ITEM 32. UNDERTAKINGS.
(a) Registrant undertakes to file a post effective amendment using financial
statements, which need not be certified, within four to six months from the
effective date of this registration statement.
(b) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE INVESTMENT
COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF PLAINSBORO, AND THE STATE OF NEW JERSEY, ON THE 15TH DAY OF
DECEMBER, 1994.
Merrill Lynch Retirement Asset
Builder Program, Inc.
(Registrant)
/s/ Arthur Zeikel
By __________________________________
(Arthur Zeikel, President)
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES ARTHUR ZEIKEL,
TERRY K. GLENN AND GERALD M. RICHARD, OR ANY OF THEM, AS ATTORNEY-IN-FACT, TO
SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ANY
AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE AMENDMENTS)
AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, WITH THE SECURITIES AND
EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE(S) INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Arthur Zeikel December 15, 1994
- -------------------------------------------
(Arthur Zeikel) President (Principal
Executive Officer) and
Director
/s/ Walter Mintz December 15, 1994
- -------------------------------------------
(Walter Mintz) Director
/s/ Melvin R. Seiden December 15, 1994
- -------------------------------------------
(Melvin R. Seiden) Director
/s/ Harry Woolf December 15, 1994
- -------------------------------------------
(Harry Woolf) Director
/s/ Stephen B. Swensrud December 15, 1994
- -------------------------------------------
(Stephen B. Swensrud) Director
/s/ Joe Grills December 15, 1994
- -------------------------------------------
(Joe Grills) Director
/s/ Gerald M. Richard December 15, 1994
- -------------------------------------------
(Gerald M. Richard) Treasurer (Principal
Financial and
Accounting Officer)
</TABLE>
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<S> <C>
1(a) --Articles of Incorporation of Registrant.
(b) --Articles of Amendment of Articles of Incorporation of Registrant.
4(b) --Form of specimen certificate for shares of Class A common stock of
Registrant.
(c) --Form of specimen certificate for shares of Class B common stock of
Registrant.
(d) --Form of specimen certificate for shares of Class C common stock of
Registrant.
(e) --Form of specimen certificate for shares of Class D common stock of
Registrant.
5 --Form of Management Agreement between Registrant and Merrill Lynch Asset
Management.
6(a) --Form of Class A Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(b) --Form of Class B Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(c) --Form of Class C Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
(d) --Form of Class D Shares Distribution Agreement between Registrant and
Merrill Lynch Funds Distributor, Inc. (including Form of Selected Dealers
Agreement).
8 --Form of Custody Agreement between Registrant and The Bank of New York.
9(a) --Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Financial Data Services, Inc.
(b) --Agreement between Merrill Lynch & Co., Inc. and Registrant relating to
Registrant's use of Merrill Lynch name.
10 --Opinion letter of Brown & Wood, counsel for Registrant.
11 --Consent of Deloitte & Touche LLP, independent auditors for Registrant.
13 --Certificate of Merrill Lynch Asset Management.
15(a) --Form of Class B Shares Distribution Plan of Registrant and Class B
Shares Distribution Plan Sub-Agreement.
(b) --Form of Class C Shares Distribution Plan of Registrant and Class C
Shares Distribution Plan Sub-Agreement.
(c) --Form of Class D Shares Distribution Plan of Registrant and Class D
Shares Distribution Plan Sub-Agreement.
17(a) --Financial Data Schedules for Fundamental Value Portfolio.
(b) --Financial Data Schedules for Quality Bond Portfolio.
(c) --Financial Data Schedules for U.S. Government Securities Portfolio.
(d) --Financial Data Schedules for Global Opportunity Portfolio.
</TABLE>
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair
and accurate narrative descriptions of graphic and image material omitted from
this material to the location of each occurrence in the text.
DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
- ---------------------- -------------------
Compass plate, circular Back cover of Prospectus and
graph paper and Merrill Lynch back cover of Statement of
logo including stylized market Additional Information
bull
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> FUNDAMENTAL VALUE PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> FUNDAMENTAL VALUE PORTFOLIO CLASS B
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> FUNDAMENTAL VALUE PORTFOLIO CLASS C
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> FUNDAMENTAL VALUE PORTFOLIO CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> QUALITY BOND PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> QUALITY BOND PORTFOLIO CLASS B
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> QUALITY BOND PORTFOLIO CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> QUALITY BOND PORTFOLIO CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS A
<S> <C>
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<FISCAL-YEAR-END> JAN-31-1996
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS B
<S> <C>
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> U.S. GOVERNMENT SECURITIES PORTFOLIO CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> GLOBAL OPPORTUNITY PORTFOLIO CLASS A
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> GLOBAL OPPORTUNITY PORTFOLIO CLASS B
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 15
<NAME> GLOBAL OPPORTUNITY PORTFOLIO CLASS C
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> GLOBAL OPPORTUNITY PORTFOLIO CLASS D
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> NOV-16-1994
<PERIOD-END> NOV-16-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 125046
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125046
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100046
<TOTAL-LIABILITIES> 100046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25000
<SHARES-COMMON-STOCK> 625
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6250
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1(a)
ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
THE UNDERSIGNED, CHRISTIAN J. VESPER, whose post office address is Brown &
Wood, One World Trade Center, New York, New York 10048-0557, being at least
eighteen years of age, does hereby act as an incorporator, under and by virtue
of the General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.
ARTICLE I
NAME
----
The name of the corporation is MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC. (the "Corporation").
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.
<PAGE>
(3) To issue and sell shares of its own capital stock in such amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
(4) To 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 of any class
or series, as its Board of Directors may determine, 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
2
<PAGE>
upon, corporations by the General Laws of the State of Maryland now or hereafter
in force, and the enumeration of the foregoing purposes, powers, rights and
privileges 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 One Hundred Million (100,000,000) shares, of the par
value of Ten Cents ($.10) per share, and of the aggregate par value of Ten
Million Dollars ($10,000,000). The capital stock initially is divided into four
series, each of which consists of two classes of common stock, as follows:
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
------------------ ------------------
<S> <C> <C>
Fundamental 12,500,000 shares 12,500,000 shares
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Value Portfolio
Quality Bond 12,500,000 shares 12,500,000 shares
Portfolio
U.S. Government 12,500,000 shares 12,500,000 shares
Portfolio
Global Opportunity 12,500,000 shares 12,500,000 shares
Portfolio
</TABLE>
(2) The Board of Directors may classify and reclassify any unissued shares
of capital stock, of any class or series, 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, of any class or series, into one or more additional or other
classes or series as may be established from time to time by setting or changing
in any one or more respects the designations, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of stock and pursuant to
such classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series; provided, however, that
4
<PAGE>
any such classification or reclassification shall not substantially adversely
affect the rights of holders of such issued shares.
(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
5
<PAGE>
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,
6
<PAGE>
the Corporation is hereby authorized (subject to the requirements of the
Investment Company Act of 1940, as amended, and in effect from time to time, and
any rules, regulations and orders issued thereunder) to take such action upon
the concurrence of a majority of the 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 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
7
<PAGE>
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, of any class
or series, shall acquire the same subject to the provisions of the charter and
By-Laws of the Corporation. As used in the charter of the Corporation, the
terms "charter" and "Articles of Incorporation" shall mean and include the
Articles of Incorporation of the 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 three, which
number may be increased pursuant to the By-Laws of the Corporation but shall
never be less than three. The names of the directors who shall act until their
successors are duly elected and qualify are:
Philip L. Kirstein
Jerry Weiss
Mark B. Goldfus
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares
8
<PAGE>
of capital stock, of any class or series, whether now or hereafter authorized,
for such consideration as the Board of 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, of
any class or series, 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
9
<PAGE>
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
10
<PAGE>
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
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
11
<PAGE>
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
12
<PAGE>
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 adversely affects the stockholder's rights, and all rights
conferred upon stockholders herein are granted subject to this reservation.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC. hereby executes the foregoing Articles of
Incorporation and acknowledges the same to be his act.
Dated this 11th day of May, 1994
/s/ Christian J. Vesper
---------------------------
Christian J. Vesper
14
<PAGE>
EXHIBIT 99.1(b)
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland
corporation having its principal Maryland office c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202 (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting
Article IV, Section 1 in its entirety and substituting the following therefor:
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is One Hundred Million (100,000,000) shares, of
the par value of Ten Cents ($.10) per share, and of the aggregate par value of
Ten Million Dollars ($10,000,000). The capital stock is divided into four
series, each of which consists of four classes of common stock, as follows:
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
----------------- -----------------
<S> <C> <C>
Fundamental 6,250,000 shares 6,250,000 shares
Value Portfolio
Quality Bond 6,250,000 shares 6,250,000 shares
Portfolio
U.S. Government 6,250,000 shares 6,250,000 shares
Securities Portfolio
Global Opportunity 6,250,000 shares 6,250,000 shares
Portfolio
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class C Class D
Common Stock Common Stock
----------------- -----------------
<S> <C> <C>
Fundamental 6,250,000 shares 6,250,000 shares
Value Portfolio
Quality Bond 6,250,000 shares 6,250,000 shares
Portfolio
U.S. Government 6,250,000 shares 6,250,000 shares
Securities Portfolio
Global Opportunity 6,250,000 shares 6,250,000 shares
Portfolio
</TABLE>
SECOND: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article IV, Section 3:
The Board's authority pursuant to this paragraph shall include, but not be
limited to, the power to vary among all the holders of a particular class or
series (a) the length of time shares must be held prior to reclassification to
shares of another class or series (the "Holding Period(s)"), (b) the manner in
which the time for such Holding Period(s) is determined and (c) the class or
series into which the particular class or series is being reclassified;
provided, however, that, subject to the first sentence of this section, with
respect to holders of the Corporation's shares issued on or after the date of
the Corporation's first effective prospectus which sets forth Holding Period(s)
(the "First Holding Period Prospectus"), the Holding Period(s), the manner in
which the time for such Holding Period(s) is determined and the class or series
into which the particular class or series is being reclassified shall be
disclosed in the Corporation's prospectus or statement of additional information
in effect at the time such shares, which are the subject of the
reclassification, were issued.
THIRD: The foregoing amendments have been effected in the manner and by
the vote required by the Corporation's charter and the laws of the State of
Maryland. The amendments were duly approved by a majority of the entire Board
of Directors of the Corporation at a meeting held on August 3, 1994; and at the
time of approval by the Directors there were no shares of stock of the
Corporation entitled to vote on the matter either outstanding or subscribed for.
2
<PAGE>
FOURTH: The charter of the Corporation is hereby amended by adding the
following provision at the end of Article IV:
(11) The Corporation's shares of capital stock of all series and classes
may only be purchased by and thereafter held in the following three types of
retirement accounts and Merrill Lynch, Pierce, Fenner & Smith Incorporated (or
its successor in interest) shall act as the sole custodian therefor: an
individual retirement account, an individual retirement rollover account or a
simplified employee pension plan (a "Qualified Stockholder"). A Qualified
Stockholder may not transfer or dispose of such shares except to another
Qualified Stockholder or pursuant to Article VI of these Articles of
Incorporation. Subject to the other provisions of these Articles of
Incorporation, a Qualified Stockholder may, however, at any time exchange shares
of one class or series of the Corporation's capital stock for shares of another
class or series of the Corporation's capital stock on terms and conditions as
may be established by the Board of Directors. In the event that the status of a
Qualified Stockholder changes such that the stockholder is no longer
characterized as a Qualified Stockholder, such stockholder shall be required,
and the Corporation shall be entitled, to redeem such stockholder's shares
immediately upon such change in status. In the event of a proposed transfer of
a Qualified Stockholder's shares to a holder that is not a Qualified
Stockholder, whether such proposed transfer is voluntary or involuntary
(including any proposed transfer by operation of law), the Qualified Stockholder
shall be required to continue holding such shares or to redeem them in
accordance with the provisions of Article VI of these Articles of Incorporation.
Any transfer, exchange or disposition of the Corporation's capital stock in
violation of this provision shall be null and void ab initio. This Article IV,
-- ------
Section 11 may be amended solely by action of the Board of Directors.
FIFTH: The foregoing amendment has been effected in the manner and by the
vote required by the Corporation's charter and the laws of the State of
Maryland. The amendment was duly approved by a majority of the entire Board of
Directors of the Corporation at a meeting held on July 13, 1994; and at the time
of approval by the Directors there were no shares of stock of the Corporation
entitled to vote on the matter either outstanding or subscribed for.
SIXTH: Except as amended hereby, the Corporation's charter shall remain in
full force and effect.
SEVENTH: The authorized capital stock of the Corporation has not been
increased by these Articles of Amendment.
3
<PAGE>
The President acknowledges these Articles of Amendment to be the corporate
act of the Corporation and states that to the best of his knowledge, information
and belief, the matters set forth in these Articles of Amendment with respect to
the authorization and approval of the amendment of the Corporation's charter are
true in all material respects, and that this statement is made under the
penalties for perjury.
4
<PAGE>
IN WITNESS WHEREOF, MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC. has caused these Articles of Amendment to be signed
in its name and on its behalf by its President and attested by its
Secretary on this 4th day of November, 1994.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
/s/ Arthur Zeikel
--------------------------------
Arthur Zeikel
President
Attest:
/s/ Mark B. Goldfus
----------------------------
Mark B. Goldfus
Secretary
5
<PAGE>
EXHIBIT 99.4(b)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS A COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY-
LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE
THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- ---------------------- -----------------------------
President Secretary Authorized Signature
[SEAL]
<PAGE>
A full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Corporation to any stockholder,
without charge, upon request to the Secretary of the Corporation at its
principal office.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
Signatures must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
<PAGE>
EXHIBIT 99.4(c)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS B COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY-
LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE
THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- --------------------- ------------------------------
President Secretary Authorized Signature
[SEAL]
<PAGE>
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Corporation to any stockholder,
without charge, upon request to the Secretary of the Corporation at its
principal office.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
Signatures must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
<PAGE>
EXHIBIT 99.4(d)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS C COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY-
LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE
THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ------------------------- --------------------- -----------------------------
President Secretary Authorized Signature
[SEAL]
<PAGE>
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Corporation to any stockholder,
without charge, upon request to the Secretary of the Corporation at its
principal office.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[________________________________________]
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
Signatures must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
<PAGE>
EXHIBIT 99.4(e)
[Name of Portfolio]
NUMBER SHARES
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES, PAR VALUE TEN CENTS ($0.10) PER SHARE, OF
[NAME OF PORTFOLIO] CLASS D COMMON STOCK OF THE
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD
SUBJECT TO ALL THE PROVISIONS OF THE ARTICLES OF INCORPORATION AND OF THE BY-
LAWS OF THE CORPORATION, AND ALL OF THE AMENDMENTS FROM TIME TO TIME MADE
THERETO.
THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
Dated:
Countersigned:
FINANCIAL DATA SERVICES, INC.
Transfer Agent
By:
/s/ Arthur Zeikel /s/ Mark B. Goldfus
- ----------------------- ----------------------- ------------------------------
President Secretary Authorized Signature
[SEAL]
<PAGE>
A full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
class and series of stock which the Corporation is authorized to issue and the
differences in the relative rights and preferences between the shares of each
class and series to the extent that they have been set, and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
classes and series, will be furnished by the Corporation to any stockholder,
without charge, upon request to the Secretary of the Corporation at its
principal office.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ____ Custodian ____
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to
of survivorship and not as Minors Act _______
tenants in common (State)
Additional abbreviations also may be used though not in the above list.
For value received, _______________ hereby sell, assign and transfer unto
Please insert social security or other identifying number of assignee
[_____________________________________________]
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.
Dated:____________________
_______________________________________________________
NOTICE: The Signature to this assignment must correspond with
the name as written upon the face of the Certificate,
in every particular, without alteration or enlargement,
or any change whatsoever.
Signatures must be guaranteed by an "eligible guarantor institution" as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934.
<PAGE>
EXHIBIT 99.5
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this by and between MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (hereinafter
referred to as the "Program"), and MERRILL LYNCH ASSET MANAGEMENT, L.P., a
Delaware limited partnership (hereinafter referred to as the "Investment
Adviser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Program intends to engage in business as 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 Directors of the Program (the "Directors") are authorized to
establish separate series relating to separate portfolios of securities, each of
which will offer separate classes of shares; and
WHEREAS, the Directors have established and designated the
----------------
Portfolio (the "Portfolio") as a series of the Program; 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
<PAGE>
Act of 1940, as amended; and
WHEREAS, the Program desires to retain the Investment Adviser to render
management and investment advisory services to the Program and the Portfolio 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 Program and the Portfolio on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Program and the Investment Adviser hereby agree as
follows:
ARTICLE I
---------
Duties of the Investment Adviser
--------------------------------
The Program hereby employs the Investment Adviser to act as an investment
manager and investment adviser of the Portfolio and to furnish, or arrange for
affiliates to furnish, the management and investment advisory services described
below, subject to policies of, review by and overall control of 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
2
<PAGE>
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Program or the Portfolio in any way or otherwise be deemed agents
of the Program or the Portfolio.
(a) Management Services. The Investment Adviser shall perform (or arrange
-------------------
for its affiliates to perform) the management and administrative services
necessary for the operation of the Program and the Portfolio including
administering shareholder accounts and handling shareholder relations. The
Investment Adviser shall provide the Program and Portfolio with office space,
equipment and facilities and such other services as the Investment Adviser,
subject to review by the Directors, from time to time shall determine to be
necessary or useful to perform its obligations under this Agreement. The
Investment Adviser, also on behalf of the Program and the Portfolio, shall
conduct relations with custodians, depositories, transfer agents, dividend
disbursing agents, other shareholder service 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 generally shall monitor the Program's and the
Portfolio's compliance with investment policies and restrictions as set forth in
the currently effective prospectus and statement
3
<PAGE>
of additional information relating to the shares of the Portfolio under the
Securities Act of 1933, as amended (the "Prospectus" and "Statement of
Additional Information", respectively). The Investment Adviser shall make
reports to the 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 Program and the Portfolio as it shall determine to be
desirable.
(b) Investment Advisory Services. The Investment Adviser shall provide the
----------------------------
Program with such investment research, advice and supervision as the latter may
from time to time consider necessary for the proper supervision of the assets of
the Portfolio, shall furnish continuously an investment program for the
Portfolio and shall determine from time to time which securities shall be
purchased, sold or exchanged and what portion of the assets of the Portfolio
shall be held in the various money market securities or cash, subject always to
the restrictions of the Articles of Incorporation and By-Laws of the Program, as
amended from time to time, the provisions of the Investment Company Act and the
statements relating to the Portfolio's investment objective, investment policies
and investment restrictions as the same are set forth in the Prospectus and
Statement of Additional Information. The Investment Adviser also shall make
decisions for the Program as to the manner in which
4
<PAGE>
voting rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities held by the Portfolio 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 Portfolio,
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 Portfolio's account with
brokers or dealers selected by it, and to this end the Investment Adviser is
authorized as the agent of the Program to give instructions to the custodian of
the Portfolio as to deliveries of securities and payments of cash for the
account of the Portfolio. In connection with the selection of such brokers or
dealers and the placing of such orders with respect to assets of the Portfolio,
the Investment Adviser is directed at all times to seek to obtain execution and
price within the policy guidelines determined by the 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
5
<PAGE>
other applicable provisions of law, the Investment Adviser may select brokers or
dealers with which it or the Program is affiliated.
(c) Notice Upon Change in Partners of Investment Adviser.
-----------------------------------------------------
The Investment Adviser is a limited partnership and its limited partners are
Merrill Lynch & Co., Inc. and Merrill Lynch Investment Management, Inc. and its
general partner is Princeton Services, Inc. The Investment Adviser will notify
the Program and the Portfolio 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 pay
----------------------
for maintaining the staff and personnel necessary to perform its obligations
under this Agreement, and, at its own expense, shall provide the office space,
equipment and facilities which it is obligated to provide under Article I
hereof, and shall pay all compensation of officers of the Program and all
Directors who are affiliated persons of the Investment Adviser.
(b) The Program. The Program assumes and shall pay or cause to be paid all
-----------
other expenses of the Program and the Portfolio (except for the expenses paid by
the Distributor), including, without limitation: redemption expenses, expenses
of portfolio transactions, expenses of registering shares under federal and
6
<PAGE>
state securities laws, pricing costs (including the daily calculation of net
asset value), expenses of printing shareholder reports, prospectuses and
statements of additional information, Securities and Exchange Commission fees,
interest, taxes, fees and actual out-of-pocket expenses of Directors who are not
affiliated persons of the Investment Adviser, 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
Program and the Portfolio. It also is understood that the Program will
reimburse the Investment Adviser for its costs in providing accounting services
to the Program and the Portfolio. The Distributor will pay certain of the
expenses of the Portfolio incurred in connection with the continuous offering of
Portfolio shares.
ARTICLE III
-----------
Compensation of the Investment Adviser
--------------------------------------
(a) Investment Advisory Fee. For the services rendered, the facilities
-----------------------
furnished and expenses assumed by the Investment Adviser, the Program shall pay
to the Investment Adviser at the end of each calendar month a fee based upon the
average daily value of the net assets of the Portfolio, 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 0.__ of 1.0%
7
<PAGE>
(.050%) of the average daily net assets of the Portfolio commencing on the day
following effectiveness hereof. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month,
compensation for the part of the month that 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 Directors, the net asset value as of the last business
day prior to such suspension shall for this purpose be deemed to be the net
asset value at the close of each succeeding business day until it is again
determined.
(b) Expense Limitations. In the event that the operating expenses of the
-------------------
Portfolio, 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
Portfolio 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
8
<PAGE>
fee by the extent of such excess and, if required pursuant to any such laws or
regulations, will reimburse the Portfolio in the amount of such excess,
provided, however, to the extent permitted by law, there shall be excluded from
such expenses the amount of any interest, taxes, brokerage commissions 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 Program with respect to the Portfolio. Whenever the expenses
of the Portfolio 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 of 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 Program and the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by
9
<PAGE>
reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Investment Adviser" shall include any affiliates
of the Investment Adviser performing services for the Program or the Portfolio
contemplated hereby and directors, officers and employees of the Investment
Adviser and such affiliates.
ARTICLE V
---------
Activities of the Investment Adviser
------------------------------------
The services of the Investment Adviser to the Program and the Portfolio 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 Article V referred to as "affiliates") are free to render services to others.
It is understood that Directors, officers, employees and shareholders of the
Program and the Portfolio 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 Program and the Portfolio, and that the Investment Adviser may become
interested in the Program and the Portfolio as a shareholder or otherwise.
10
<PAGE>
ARTICLE VI
----------
Duration and Termination of this Contract
-----------------------------------------
This Agreement shall become effective as of the date first above written
and shall remain in force until June 30, 1996 and thereafter, but only for so
long as such continuance is specifically approved at least annually by (i) the
Directors, or by the vote of a majority of the outstanding voting securities of
the Portfolio, and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Portfolio, or by the Investment Adviser, on sixty days'
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment.
ARTICLE VII
-----------
Amendment of this Agreement
---------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of (i) a majority of the outstanding voting
securities of the Portfolio, and (ii) a majority of those Directors who are not
parties to this Agreement
11
<PAGE>
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
ARTICLE VIII
------------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under the
Investment Company Act.
ARTICLE IX
----------
Governing Law
-------------
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_________________________________
Title:
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By_________________________________
Title:
13
<PAGE>
EXHIBIT 99.6(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of , 1994, between MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"),
and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Program is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Program to offer its
shares for sale continuously;
and
WHEREAS, the Directors of the Program (the "Directors") are authorized to
establish separate series (the "Series") relating to separate portfolios of
securities, each of which will offer separate classes of shares of common stock,
par value $0.10 per share (collectively referred to as "shares"), to holders of
certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated acts as custodian;
WHEREAS, the Directors have established and designated the [Name of
Portfolio] (the "Portfolio") as a series of the Program; and
<PAGE>
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class A shares of
the Portfolio.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Program hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Program to
sell Class A shares of common stock in the Portfolio (sometimes herein referred
to as "Class A shares") to eligible investors (as defined below) and hereby
agrees during the term of this Agreement to sell Class A shares of the Portfolio
to the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Program to act as principal underwriter and
distributor, except that:
(a) The Program may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class A shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall terminate, but
this Agreement shall
2
<PAGE>
remain otherwise in full effect until terminated in accordance with the other
provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Program shall not apply to Class A shares issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Program or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding Class A shares of any
such company by the Program.
(c) Such exclusive right also shall not apply to Class A shares issued
pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A shares issued
pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Class A shares as shall be agreed between
the Program and the Distributor from time to time.
Section 3. Purchase of Class A shares from the Program.
-------------------------------------------
(a) The Distributor shall have the right to buy from the Program the Class
A shares needed, but not more than the Class A shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class A shares
of the Portfolio placed with the Distributor by eligible investors or securities
dealers. Investors eligible to purchase Class A shares shall be those persons
so identified in the currently effective prospectus and statement of additional
information relating to the Portfolio
3
<PAGE>
(the "prospectus" and "statement of additional information", respectively) under
the Securities Act of 1933, as amended (the "Securities Act"), relating to such
Class A shares ("eligible investors"). The price which the Distributor shall
pay for the Class A shares so purchased from the Program shall be the net asset
value, determined as set forth in Section 3(d) hereof, used in determining the
public offering price on which such orders were based.
(b) The Class A shares are to be resold by the Distributor to eligible
investors at the public offering price, as set forth in Section 3(c) hereof, or
to securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(c) The public offering price(s) of the Class A shares, i.e., the price
- -
per share at which the Distributor or selected dealers may sell Class A shares
to eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such Class A
shares, but not to exceed the net asset value at which the Distributor is to
purchase the Class A shares, plus a sales charge not to exceed _____% of the
public offering price (____% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain Directors, officers
and employees of the Program, directors and employees of Merrill Lynch & Co.,
Inc. and its subsidiaries, and to certain other persons described in the
prospectus and statement of
4
<PAGE>
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the public offering price does not equal an even
cent, the public offering price may be adjusted to the nearest cent. All
payments to the Program hereunder shall be made in the manner set forth in
Section 3(f).
(d) The net asset value of Class A shares shall be determined by the
Program or any agent of the Program in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Directors.
(e) The Program shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Program shall also have the right to suspend
the sale of its Class A shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by Federal
or New York authorities, or if there shall have been some other event, which, in
the judgment of the Program, makes it impracticable or inadvisable to sell the
Class A shares.
(f) The Program, or any agent of the Program designated in writing by the
Program, shall be promptly advised of all purchase orders for Class A shares
received by the Distributor. Any order may be rejected by the Program;
provided, however, that the Program will not arbitrarily or without reasonable
cause refuse
5
<PAGE>
to accept or confirm orders for the purchase of Class A shares from eligible
investors. The Program (or its agent) will confirm orders upon their receipt,
will make appropriate book entries and, upon receipt by the Program (or its
agent) of payment therefor, will deliver deposit receipts or certificates for
such Class A shares pursuant to the instructions of the Distributor. Payment
shall be made to the Program in New York Clearing House funds. The Distributor
agrees to cause such payment and such instructions to be delivered promptly to
the Program (or its agent).
Section 4. Repurchase or Redemption of Class A shares by the Program.
---------------------------------------------------------
(a) Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Program agrees to repurchase or redeem the Class A shares
so tendered in accordance with its obligations as set forth in Article VI of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class
A shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information relating to the Portfolio. All payments
by the Program hereunder shall be made in the manner set forth below. The
redemption or repurchase
6
<PAGE>
by the Program of any of the Class A shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class A
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class A shares.
The Program shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor in New
York Clearing House funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form. The proceeds of
any redemption of shares shall be paid by the Program as follows: (i) any
applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be
paid to or for the account of the shareholder, in each case in accordance with
the applicable provisions of the prospectus and statement of additional
information.
(b) Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Program of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Program
fairly to determine the value of the net assets of
7
<PAGE>
the Portfolio, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Program.
---------------------
(a) The Program shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class A shares
of the Portfolio, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Program by
independent public accountants. The Program shall make available to the
Distributor such number of copies of the prospectus and statement of additional
information relating to the Portfolio as the Distributor shall reasonably
request.
(b) The Program shall take, from time to time, but subject to any
necessary approval of the Class A shareholders, all necessary action to fix the
number of authorized Class A shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor may
reasonably be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Program may approve.
Any such qualification may be withheld, terminated or withdrawn by the Program
at any time in its discretion. As provided in Section 8(c) hereof, the
8
<PAGE>
expense of qualification and maintenance of qualification shall be borne by the
Program. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Program in
connection with such qualification.
(d) The Program will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Program relating to the
Portfolio.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Portfolio but shall not be obligated to sell any
specific number of Class A shares. The services of the Distributor to the
Program hereunder are not to be deemed exclusive and nothing herein contained
shall prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class A shares of the Portfolio, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Program to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of
9
<PAGE>
additional information and any sales literature specifically approved by the
Program.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Program, for the confirmation of sales to eligible investors and
selected dealers, the collection of amounts payable by eligible investors and
selected dealers on such sales, and the cancellation of unsettled transactions,
as may be necessary to comply with the requirements of the National Association
of Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class A shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Program shall approve
the forms of agreements with dealers and the dealer compensation set forth
therein. Class A shares sold to selected dealers shall be for resale by such
dealers only at the public offering price(s) set forth in the prospectus and
statement of additional information. The form of agreement with selected
dealers to be used during the continuous offering of the Class A shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class A
shares only to such selected dealers as are members in good standing of the
NASD.
10
<PAGE>
Section 8. Payment of Expenses.
-------------------
(a) The Program shall bear all costs and expenses of the Portfolio,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class A
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses
of preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to
11
<PAGE>
eligible investors and any expenses of advertising incurred by the Distributor
in connection with such offering.
(c) The Program shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Portfolio decides to discontinue such qualification pursuant
to Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Program shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class A shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information relating
to the Portfolio, as from time to time amended and supplemented, or an annual or
interim report to shareholders relating to the Portfolio, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or
12
<PAGE>
necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Program in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Program in favor of the Distributor and any such controlling persons to be
deemed to protect such Distributor or any such controlling persons thereof
against any liability to the Program or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Program to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling persons, unless the Distributor
or such controlling persons, as the case may be, shall have notified the Program
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Program of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity
13
<PAGE>
agreement contained in this paragraph. The Program will be entitled to
participate at its own expense in the defense or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Program
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Program elects to assume
the defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them, but in case
the Program does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Program shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
shares.
(b) The Distributor shall indemnify and hold harmless the Program and each
of its Directors and officers and each person, if any, who controls the Program
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Program in writing
14
<PAGE>
by or on behalf of the Distributor for use in connection with the registration
statement or related prospectus and statement of additional information, as from
time to time amended, or the annual or interim reports to Class A shareholders.
In case any action shall be brought against the Program or any person so
indemnified, in respect of which indemnity may be sought against the
Distributor, the Distributor shall have the rights and duties given to the
Program, and the Program and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
Section 10. Merrill Lynch Mutual Portfolio Adviser Program. In connection
----------------------------------------------
with the Merrill Lynch Mutual Portfolio Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Portfolio, as agent for the Portfolio, to
participants in such program. The terms of this Agreement shall apply to such
sales, including terms as to the offering price of shares, the proceeds to be
paid to the Portfolio, the duties of the Distributor, the payment of expenses
and indemnification obligations of the Portfolio and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until __, 1996 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
15
<PAGE>
by the vote of a majority of the outstanding Class A voting securities of the
Portfolio and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding Class A
voting securities of the Portfolio, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding Class A voting securities
of the Portfolio and (ii) by the vote of a majority of those Directors of the
Program who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and
16
<PAGE>
the applicable provisions of the Investment Company Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corpration
(the "Program"), pursuant to which it acts as the distributor for the sale of
Class A shares of common stock, par value $0.10 per share (herein referred to as
"Class A shares"), of the Program relating to the [Name of Portfolio] (the
"Portfolio"), and as such has the right to distribute Class A shares of the
Portfolio for resale. The Program is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and the Portfolio's Class
A shares are registered under the Securities Act of 1933, as amended. You have
received a copy of the Class A shares Distribution Agreement (the "Distribution
Agreement") between ourself and the Program and reference is made herein to
certain provisions of such Distribution Agreement. The terms "Prospectus" and
"Statement of Additional Information" used herein refer to the prospectus and
statement of additional information, respectively, on file with the Securities
and Exchange Commission which is part of the most recent effective registration
statement pursuant to the Securities Act of 1933, as amended. We offer to sell
to you, as a member of the Selected Dealers Group, Class A shares of the
Portfolio for resale to investors identified in the Prospectus and Statement of
Additional Information as eligible to purchase Class A shares ("eligible
investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Program, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual
Portfolio Adviser program and such other special programs as we from time to
time agree, in which case you shall have authority to offer and sell shares, as
agent for the Program, to participants in such program.
<PAGE>
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information relating to the Portfolio. The
procedure relating to the handling of orders shall be subject to Section 5
hereof and instructions which we or the Program shall forward from time to time
to you. All orders are subject to acceptance or rejection by the Distributor or
the Program in the sole discretion of either. The minimum initial and
subsequent purchase requirements are as set forth in the current Prospectus and
Statement of Additional Information relating to the Portfolio.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of the Net Percentage
of the Amount of the
Amount of Purchase Offering Price Invested Offering Price
- ----------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$25,000............... % % %
$25,000 but less
than $50,000.......... % % %
$50,000 but less
than $100,000......... % % %
$100,000 but less
than $250,000......... % % %
$250,000 but less
than $1,000,000....... % % %
$1,000,000 and over**.. % % %
</TABLE>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges may be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information relating
to the Portfolio. Such purchase may be subject to a contingent deferred sales
charge as set forth in the current Prospectus and Statement of Additional
Information.
A-2
<PAGE>
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class A shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company" as that term is defined in the Investment Company Act of 1940, as
amended, but does not include purchases by any such company which has not been
in existence for at least six months or which has no purpose other than the
purchase of Class A shares of the Portfolio or Class A shares of other
registered investment companies at a discount; provided, however, that it shall
not include purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or broker-
dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under
which certain eligible investors are permitted to purchase Class A shares of the
Portfolio at the offering price applicable to the total of (a) the public
offering price of the shares then being purchased plus (b) an amount equal to
the then current net asset value or cost, whichever is higher, of the
purchaser's combined holdings of Class A, Class B, Class C and Class D shares of
the Portfolio and of any other series of the Program or investment company with
an initial sales charge for which the Distributor acts as the distributor. For
any such right of accumulation to be made available, the Distributor must be
provided at the time of purchase, by the purchaser or you, with sufficient
information to permit confirmation of qualification, and acceptance of the
purchase order is subject to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or
more of Class A shares or of Class D shares of any other series of the Program
or investment company with an initial sales charge for which the Distributor
acts as the distributor made through you within a thirteen-month period starting
with the first purchase pursuant to a Letter of Intention. A purchase not
originally made pursuant to a Letter of Intention may be included under a
subsequent letter executed within 90 days of such purchase if the Distributor is
informed in writing of this intent within such 90-day period. If the intended
amount of shares is not purchased within the
A-3
<PAGE>
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales made
by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
4. You shall not place orders for any of the Class A shares unless you have
already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Portfolio which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the Program.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Program for Class A shares of the Portfolio to be resold by us
to you subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and subject to
the compensation provisions of Section 3 hereof and (ii) to tender Class A
shares directly to the Program or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
6. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement are
repurchased by the Program or by us for the account of the Program or are
tendered for redemption within seven business days after the date of the
confirmation of the
A-4
<PAGE>
original purchase by you, it is agreed that you shall forfeit your right to, and
refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Portfolio except those contained in the current Prospectus and
Statement of Additional Information relating to the Portfolio and in such
printed information subsequently issued by us or the Program as information
supplemental to such Prospectus and Statement of Additional Information. In
purchasing Class A shares through us you shall rely solely on the
representations contained in the Prospectus and Statement of Additional
Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material of the
Program with respect to the Portfolio is our sole responsibility and not the
responsibility of the Program with respect to the Portfolio, and you agree that
the Program shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Program with respect to the
Portfolio. You further agree to endeavor to obtain proxies from such
purchasers. Additional copies of such Prospectus and Statement of Additional
Information, annual or interim reports and proxy solicitation materials will be
supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class A shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the continuous offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing contained in this paragraph is intended
to operate as, and the provisions of this paragraph shall not in any way
whatsoever constitute, a waiver by you of compliance with any provision of the
Securities Act of 1933, as
A-5
<PAGE>
amended, or of the rules and regulations of the Securities and Exchange
Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class A shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any notice
to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Portfolio will represent your acceptance of this
Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
A-6
<PAGE>
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
______________________________________________________
Date:_________________________________________________
A-7
<PAGE>
EXHIBIT 99.6(b)
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of __________ 1994, between MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, a Maryland corporation (the "Program"), and
MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Program is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Program to offer its
shares for sale continuously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to
establish separate series (the "Series") relating to separate portfolios of
securities, each of which will offer separate classes of shares of common stock,
par value $0.10 per share (collectively referred to as "shares"), to holders of
certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of
Portfolio] (the "Portfolio") as a series of the Program; and
<PAGE>
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Portfolio's Class
B shares in order to promote the growth of the Portfolio and facilitate the
distribution of its Class B shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Program hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Program to
sell Class B shares of common stock in the Portfolio (sometimes herein referred
to as "Class B shares") to the public and hereby agrees during the term of this
Agreement to sell shares of the Portfolio to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Program to act as principal underwriter and
distributor of the Class B shares, except that:
(a) The Program may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class B shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such.
2
<PAGE>
If such designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class B shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class B
shares from the Program shall not apply to Class B shares of the Portfolio
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Program or the acquisition by
purchase or otherwise of all (or substantially all) the assets or the
outstanding Class B shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class B shares issued
pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class B shares issued
pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Class B shares as shall be agreed between
the Program and the Distributor from time to time.
Section 3. Purchase of Class B Shares from the Program.
-------------------------------------------
(a) The Distributor shall have the right to buy from the Program the Class
B shares needed, but not more than the Class B shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class B shares
of the Portfolio
3
<PAGE>
placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class B shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information relating to the Portfolio (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class B shares. The price
which the Distributor shall pay for the Class B shares so purchased from the
Program shall be the net asset value, determined as set forth in Section 3(c)
hereof.
(b) The Class B shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class B shares of the Portfolio shall be
determined by the Program or any agent of the Program in accordance with the
method set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.
(d) The Program shall have the right to suspend the sale of its Class B
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Program shall also have the right to suspend
the sale of its Class B shares if trading on the New York Stock Exchange shall
have been
4
<PAGE>
suspended, if a banking moratorium shall have been declared by Federal or New
York authorities, or if there shall have been some other event, which, in the
judgment of the Program, makes it impracticable or inadvisable to sell the Class
B shares.
(e) The Program, or any agent of the Program designated in writing by the
Program, shall be promptly advised of all purchase orders for Class B shares
received by the Distributor. Any order may be rejected by the Program;
provided, however, that the Program will not arbitrarily or without reasonable
cause refuse to accept or confirm orders for the purchase of Class B shares.
The Program (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Program (or its agent) of
payment therefor, will deliver deposit receipts or certificates for such Class B
shares pursuant to the instructions of the Distributor. Payment shall be made
to the Program in New York Clearing House funds. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Program
(or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Program.
--------------------------------------------- -----------
(a) Any of the outstanding Class B shares may be tendered for redemption
at any time, and the Program agrees to repurchase or redeem the Class B shares
so tendered in accordance with its obligations as set forth in Article VI of its
Articles of Incorporation, as amended from time to time, and in accordance
5
<PAGE>
with the applicable provisions set forth in the prospectus and statement of
additional relating to the Portfolio. The price to be paid to redeem or
repurchase the Class B shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(c) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information relating to the
Portfolio. All payments by the Program hereunder shall be made in the manner
set forth below.
The Program shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Program as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class B shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Program of securities owned by it is not
reasonably practicable or it is not reasonably practicable for
6
<PAGE>
the Program fairly to determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Program.
---------------------
(a) The Program shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class B
shares of the Portfolio, and this shall include, upon request by the
Distributor, one certified copy of all financial statements prepared for the
Program by independent public accountants. The Program shall make available to
the Distributor such number of copies of its prospectus and statement of
additional information as the Distributor shall reasonably request.
(b) The Program shall take, from time to time, but subject to any
necessary approval of the shareholders, all necessary action to fix the number
of authorized shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Class B shares as the Distributor reasonably may be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class B shares for sale under the
securities laws of such states as the Distributor and the Program may approve.
Any such qualification
7
<PAGE>
may be withheld, terminated or withdrawn by the Program at any time in its
discretion. As provided in Section 8(c) hereof, the expense of qualification
and maintenance of qualification shall be borne by the Program. The Distributor
shall furnish such information and other material relating to its affairs and
activities as may be required by the Program in connection with such
qualification.
(d) The Program will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Portfolio.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Portfolio but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Program
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class B shares of the Portfolio, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Program to give any information
8
<PAGE>
or to make any representations, other than those contained in the registration
statement or related prospectus and statement of additional information and any
sales literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Program, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class B shares; provided, that the Program shall approve the forms of
agreements with dealers. Class B shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class B
shares only to such selected dealers that are members in good standing of the
NASD.
9
<PAGE>
Section 8. Payment of Expenses.
-------------------
(a) The Program shall bear all costs and expenses of the Portfolio,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class B
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class B shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class B shares for sale to
10
<PAGE>
the public and any expenses of advertising incurred by the Distributor in
connection with such offering. It is understood and agreed that so long as the
Portfolio's Class B Shares Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act remains in effect, any expenses incurred by the
Distributor hereunder may be paid from amounts recovered by it from the
Portfolio under such Plan.
(c) The Program shall bear the cost and expenses of qualification of the
Class B shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Program shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class B shares, which may be based upon the Securities Act,
or on any other statute or at
11
<PAGE>
common law, on the ground that the registration statement or related prospectus
and statement of additional information relating to the Portfolio, as from time
to time amended and supplemented, or an annual or interim report to Class B
shareholders relating to the Portfolio, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Program in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Program in favor of the Distributor and any such controlling persons to be
deemed to protect such Distributor or any such controlling persons thereof
against any liability to the Program or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Program to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling persons, unless the Distributor
or such controlling persons, as the case may be, shall have notified the Program
in writing within a reasonable time after the summons or other first legal
12
<PAGE>
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the Distributor or
such controlling persons shall have received notice of such service on any
designated agent), but failure to notify the Program of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph. The Program will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if the Program elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Program elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses, as incurred, of any additional counsel retained by them,
but in case the Program does not elect to assume the defense of any such suit,
it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses, as
incurred, of any counsel retained by them. The Program shall promptly notify
the Distributor of the commencement of any litigation or proceedings against it
or any of its officers or
13
<PAGE>
Directors in connection with the issuance or sale of any of the Class B shares.
(b) The Distributor shall indemnify and hold harmless the Program and each
of its Directors and officers and each person, if any, who controls the Program
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Program in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Program or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Program, and the Program and each person
so indemnified shall have the rights and duties given to the Distributor by the
provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Program Adviser Program. In connection
--------------------------------------------
with the Merrill Lynch Mutual Program Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Portfolio, as agent for the Portfolio, to
14
<PAGE>
particpants in such program. The terms of this Agreement shall apply to such
sales, including terms as to the offering price of shares, the proceeds to be
paid to the Portfolio, the duties of the Distributor, the payment of expenses
and indemnification obligations of the Program and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until __, 1996 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the Portfolio
and (ii) by the vote of a majority of those Directors who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Portfolio, or by the Distributor, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
15
<PAGE>
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Portfolio and (ii) by the vote of a majority of those Directors of the Program
who are not parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Asset Builder Program, Inc. a Maryland corporation
(the "Program"), pursuant to which it acts as the distributor for the sale of
Class B shares of common stock, par value $0.10 per share (herein referred to as
the "Class B shares"), of the Program relating to the [Name of Portfolio] (the
"Portfolio") and as such has the right to distribute Class B shares of the
Program for resale. The Program is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class B shares
being offered to the public are registered under the Securities Act of 1933, as
amended. You have received a copy of the Class B Shares Distribution Agreement
(the "Distribution Agreement") between ourself and the Program and reference is
made herein to certain provisions of such Distribution Agreement. The terms
"Prospectus" and "Statement of Additional Information" as used herein refer to
the prospectus and statement of additional information, respectively, on file
with the Securities and Exchange Commission which is part of the most recent
effective registration statement pursuant to the Securities Act of 1933, as
amended. We offer to sell to you, as a member of the Selected Dealers Group,
Class B shares of the Portfolio upon the following terms and conditions:
1. In all sales of these Class B shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Program, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Program
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information relating to the Portfolio. The
procedure relating to the handling of orders shall be subject to Section 4
hereof and instructions which we or the Program shall forward from time to
1
<PAGE>
time to you. All orders are subject to acceptance or rejection by the
Distributor or the Program in the sole discretion of either. The minimum
initial and subsequent purchase requirements are as set forth in the current
Prospectus and Statement of Additional Information relating to the Portfolio.
3. You shall not place orders for any of the Class B shares unless you
have already received purchase orders for such Class B shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class B shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class B shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class B shares of the Portfolio which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the Program.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Program for Class B shares of the Portfolio to be resold by us
to you subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and (ii) to
tender Class B shares directly to the Program or its agent for redemption
subject to the applicable terms and conditions set forth in Section 4 of the
Distribution Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class B
shares of the Portfolio except those contained in the current Prospectus and
Statement of Additional Information of the Portfolio and in such printed
information subsequently issued by us or the Program as information supplemental
to such Prospectus and Statement of Additional Information. In purchasing Class
B shares through us you shall rely solely on the representations contained in
the Prospectus and Statement of Additional Information and supplemental
information above mentioned. Any printed information which we furnish you other
than the Prospectus, Statement of Additional Information,
2
<PAGE>
periodic reports and proxy solicitation material of the Program relating to the
Portfolio is our sole responsibility and not the responsibility of the Program
and you agree that the Program shall have no liability or responsibility to you
in these respects unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Program relating to the
Portfolio. You further agree to endeavor to obtain proxies from such
purchasers. Additional copies of such Prospectus and Statement of Additional
Information, annual or interim reports and proxy solicitation materials will be
supplied to you in reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class B shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the Class B shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class B shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class B shares, if necessary.
3
<PAGE>
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of
Class B shares of the Portfolio will represent your acceptance of this
Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: ____________________________________________
By: ___________________________________________________
Address: ______________________________________________
_______________________________________________________
Date: _________________________________________________
4
<PAGE>
EXHIBIT 99.6(c)
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ______ day of December 1994, between MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"),
and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Program is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Program to offer its
shares for sale continuously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to
establish separate series (the "Series") relating to separate portfolios of
securities, each of which will offer separate classes of shares of common stock,
par value $0.10 per share (collectively referred to as "shares"), to holders of
certain retirement accounts for which Merrill Lynch, Pierce, Fenner & Smith
Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of
Portfolio] (the "Portfolio") as a series of the Program; and
<PAGE>
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Portfolio's Class
C shares in order to promote the growth of the Portfolio and facilitate the
distribution of its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Program hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Program to
sell Class C shares of common stock in the Portfolio (sometimes herein referred
to as "Class C shares") to the public and hereby agrees during the term of this
Agreement to sell shares of the Portfolio to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Program to act as principal underwriter and
distributor of the Class C shares of the Portfolio, except that:
(a) The Program may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such.
2
<PAGE>
If such designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Program shall not apply to Class C shares of the Portfolio
issued in connection with the merger or consolidation of any other investment
company or personal holding company with the Program or the acquisition by
purchase or otherwise of all (or substantially all) the assets or the
outstanding Class C shares of any such company by the Program.
(c) Such exclusive right also shall not apply to Class C shares issued
pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued
pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Class C shares as shall be agreed between
the Program and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Program.
-------------------------------------------
(a) The Distributor shall have the right to buy from the Program the Class
C shares needed, but not more than the Class C shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class C shares
of the Portfolio
3
<PAGE>
placed with the Distributor by eligible investors or securities dealers.
Investors eligible to purchase Class C shares shall be those persons so
identified in the currently effective prospectus and statement of additional
information relating to the Portfolio (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the Class C shares so purchased from the Program
shall be the net asset value, determined as set forth in Section 3(c) hereof.
(b) The Class C shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(c) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of Class C shares of the Portfolio shall be
determined by the Program or any agent of the Program in accordance with the
method set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.
(d) The Program shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Program shall also have the right to suspend
the sale of its Class C shares if trading on the New York Stock Exchange shall
have been
4
<PAGE>
suspended, if a banking moratorium shall have been declared by Federal or New
York authorities, or if there shall have been some other event, which, in the
judgment of the Program, makes it impracticable or inadvisable to sell the Class
C shares.
(e) The Program, or any agent of the Program designated in writing by the
Program, shall be promptly advised of all purchase orders for Class C shares
received by the Distributor. Any order may be rejected by the Program;
provided, however, that the Program will not arbitrarily or without reasonable
cause refuse to accept or confirm orders for the purchase of Class C shares.
The Program (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Program (or its agent) of
payment therefor, will deliver deposit receipts or certificates for such Class C
shares pursuant to the instructions of the Distributor. Payment shall be made
to the Program in New York Clearing House funds. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the Program
(or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Program.
--------------------------------------------- -----------
(a) Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Program agrees to repurchase or redeem the Class C shares
so tendered in accordance with its obligations as set forth in Article VI of its
Articles of Incorporation, as amended from time to time, and in accordance
5
<PAGE>
with the applicable provisions set forth in the prospectus and statement of
additional information relating to the Portfolio. The price to be paid to
redeem or repurchase the Class C shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(c) hereof, less any
contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if
any, set forth in the prospectus and statement of additional information
relating to the Portfolio. All payments by the Program hereunder shall be made
in the manner set forth below.
The Program shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Program as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Program of securities owned by it is not
6
<PAGE>
reasonably practicable or it is not reasonably practicable for the Program
fairly to determine the value of the net assets of the Portfolio, or during any
other period when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Program.
---------------------
(a) The Program shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class C
shares of the Portfolio, and this shall include, upon request by the
Distributor, one certified copy of all financial statements prepared for the
Program by independent public accountants. The Program shall make available to
the Distributor such number of copies of the prospectus and statement of
additional information relating to the Portfolio as the Distributor shall
reasonably request.
(b) The Program shall take, from time to time, but subject to any
necessary approval of the shareholders, all necessary action to fix the number
of authorized shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the
7
<PAGE>
Distributor and the Program may approve. Any such qualification may be
withheld, terminated or withdrawn by the Program at any time in its discretion.
As provided in Section 8(c) hereof, the expense of qualification and maintenance
of qualification shall be borne by the Program. The Distributor shall furnish
such information and other material relating to its affairs and activities as
may be required by the Program in connection with such qualification.
(d) The Program will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Program relating to the
Portfolio.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Portfolio but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Program
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class C shares of the Portfolio, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
8
<PAGE>
other person is authorized by the Program to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Program.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Program, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Program shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(c) hereof. The form of agreement with selected dealers to be used
during the continuous offering of the shares is attached hereto as Exhibit A.
9
<PAGE>
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers that are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Program shall bear all costs and expenses of the Portfolio,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of
10
<PAGE>
preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class C shares for sale to the public and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that so long as the Portfolio's Class C Shares
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
remains in effect, any expenses incurred by the Distributor hereunder may be
paid from amounts recovered by it from the Portfolio under such Plan.
(c) The Program shall bear the costs and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Program shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
11
<PAGE>
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information relating
to the Portfolio, as from time to time amended and supplemented, or an annual or
interim report to Class C shareholders relating to the Portfolio, includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Program in connection therewith by
or on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Program in favor of the Distributor and any such controlling
persons to be deemed to protect such Distributor or any such controlling persons
thereof against any liability to the Program or its security holders to which
the Distributor or any such controlling persons would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Program to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling
12
<PAGE>
persons, unless the Distributor or such controlling persons, as the case may be,
shall have notified the Program in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling persons
(or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Program of
any such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Program will be entitled
to participate at its own expense in the defense or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the
Program elects to assume the defense, such defense shall be conducted by counsel
chosen by it and satisfactory to the Distributor or such controlling person or
persons, defendant or defendants in the suit. In the event the Program elects
to assume the defense of any such suit and retain such counsel, the Distributor
or such controlling person or persons, defendant or defendants in the suit shall
bear the fees and expenses, as incurred, of any additional counsel retained by
them, but in case the Program does not elect to assume the defense of any such
suit, it will reimburse the Distributor or such controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses, as
13
<PAGE>
incurred, of any counsel retained by them. The Program shall promptly notify
the Distributor of the commencement of any litigation or proceedings against it
or any of its officers or Directors in connection with the issuance or sale of
any of the Class C shares.
(b) The Distributor shall indemnify and hold harmless the Program and each
of its Directors and officers and each person, if any, who controls the Program
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Program in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Program or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Program, and the Program and each person
so indemnified shall have the rights and duties given to the Distributor by the
provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Portfolio Adviser Program. In connection
----------------------------------------------
with the Merrill Lynch Mutual Portfolio Adviser
14
<PAGE>
Program, the Distributor and its affiliate, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, are authorized to offer and sell shares of the Portfolio, as
agent for the Portfolio, to participants in such program. The terms of this
Agreement shall apply to such sales, including terms as to the offering price of
shares, the proceeds to be paid to the Portfolio, the duties of the Distributor,
the payment of expenses and indemnification obligations of the Portfolio and the
Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until __, 1996 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding Class C voting securities of the
Portfolio and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding Class C
voting securities of the Portfolio, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
15
<PAGE>
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding Class C voting securities
of the Portfolio and (ii) by the vote of a majority of those Directors of the
Program who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
17
<PAGE>
EXHIBIT A
---------
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland
corporation (the "Program"), pursuant to which it acts as the distributor for
the sale of Class C shares of common stock, par value $0.10 per share (herein
referred to as the "Class C shares"), of the Program relating to the [Name of
Portfolio] (the "Portfolio") and as such has the right to distribute Class C
shares of the Portfolio for resale. The Program is an open-end investment
company registered under the Investment Company Act of 1940, as amended, and the
Portfolio's Class C shares being offered to the public are registered under the
Securities Act of 1933, as amended. You have received a copy of the Class C
Shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Program and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" as used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
which is part of the most recent effective registration statement pursuant to
the Securities Act of 1933, as amended. We offer to sell to you, as a member of
the Selected Dealers Group, Class C shares of the Portfolio upon the following
terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Program, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Portfolio
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information relating to the Portfolio. The
procedure relating to the handling of orders shall be subject to Section 4
hereof and
<PAGE>
instructions which we or the Program shall forward from time to time to you.
All orders are subject to acceptance or rejection by the Distributor or the
Program in the sole discretion of either. The minimum initial and subsequent
purchase requirements are as set forth in the current Prospectus and Statement
of Additional Information relating to the Portfolio.
3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class C shares of the Portfolio which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the Program.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Program for Class C shares of the Portfolio to be resold by us
to you subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and (ii) to
tender Class C shares directly to the Program or its agent for redemption
subject to the applicable terms and conditions set forth in Section 4 of the
Distribution Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class C
shares of the Portfolio except those contained in the current Prospectus and
Statement of Additional Information relating to the Portfolio and in such
printed information subsequently issued by us or the Program as information
supplemental to such Prospectus and Statement of Additional Information. In
purchasing Class C shares through us you shall rely solely on the
representations contained in the Prospectus and Statement of Additional
Information and supplemental information above mentioned. Any printed
information which we
A-2
<PAGE>
furnish you other than the Prospectus, Statement of Additional Information,
periodic reports and proxy solicitation material of the Program relating to the
Portfolio is our sole responsibility and not the responsibility of the Program,
and you agree that the Program shall have no liability or responsibility to you
in these respects unless expressly assumed in connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Program relating to the
Portfolio. You further agree to endeavor to obtain proxies from such
purchasers. Additional copies of the Prospectus and Statement of Additional
Information, annual or interim reports and proxy solicitation materials of the
Program relating to the Portfolio will be supplied to you in reasonable
quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
A-3
<PAGE>
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Portfolio will represent your acceptance of this
Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:_____________________________________________
By:____________________________________________________
Address:_______________________________________________
_______________________________________________________
Date: _________________________________________________
A-4
<PAGE>
EXHIBIT 99.6(d)
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of December, 1994, between MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Program"),
and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Program is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Program to offer its
shares for sale continu-ously; and
WHEREAS, the Directors of the Program (the "Directors") are authorized to
establish separate series (the "Series") relating to separate portfolios of
securities, each of which will offer separate classes of shares of beneficial
interest, par value $0.10 per share (collectively referred to as "shares") to
holders of certain retirement accounts for which Merrill Lynch, Pierce, Fenner &
Smith Incorporated acts as custodian; and
WHEREAS, the Directors have established and designated the [Name of
Portfolio] (the "Portfolio") as a series of the Program; and
<PAGE>
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Program and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Class D shares of
beneficial interest in the Portfolio.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Program hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Program to
sell Class D shares of beneficial interest in the Portfolio (sometimes herein
referred to as "Class D shares") to the public and hereby agrees during the term
of this Agreement to sell Class D shares of the Portfolio to the Distributor
upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Program to act as principal underwriter and
distributor of the Class D shares of the Portfolio, except that:
(a) The Program may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the
2
<PAGE>
areas so designated shall terminate, but this Agreement shall remain otherwise
in full effect until terminated in accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Program shall not apply to Class D shares issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Program or the acquisition by purchase or otherwise of
all (or substantially all) the assets or the outstanding Class D shares of any
such company by the Program.
(c) Such exclusive right also shall not apply to Class D shares issued
pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class D shares issued
pursuant to any conversion, exchange or reinstatement privilege afforded
redeeming shareholders or to any other Class D shares as shall be agreed between
the Program and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Program.
-------------------------------------------
(a) The Distributor shall have the right to buy from the Program the Class
D shares needed, but not more than the Class D shares needed (except for
clerical errors in transmission) to fill unconditional orders for Class D shares
of the Portfolio placed with the Distributor by eligible investors or securities
dealers. Investors eligible to purchase Class D shares shall be those persons
so identified in the currently effective prospectus
3
<PAGE>
and statement of additional information relating to the Portfolio (the
"prospectus" and "statement of additional information", respectively) under the
Securities Act of 1933, as amended (the "Securities Act"), relating to such
Class D shares. The price which the Distributor shall pay for the Class D
shares so purchased from the Program shall be the net asset value, determined as
set forth in Section 3(d) hereof, used in determining the public offering price
on which such orders were based.
(b) The Class D shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(c) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions
set forth in Section 7 hereof.
(c) The public offering price(s) of the Class D shares, i.e., the price
- -
per share at which the Distributor or selected dealers may sell Class D shares
to the public, shall be the public offering price as set forth in the prospectus
and statement of additional information relating to such Class D shares, but not
to exceed the net asset value at which the Distributor is to purchase the Class
D shares, plus a sales charge not to exceed ____% of the public offering price
(_____% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Directors, officers and employees of the
Program, directors and employees of Merrill Lynch & Co., Inc. and its
subsidiaries, and to certain
4
<PAGE>
other persons described in the prospectus and statement of additional
information, without a sales charge or at a reduced sales charge, upon terms and
conditions set forth in the prospectus and statement of additional information.
If the public offering price does not equal an even cent, the public offering
price may be adjusted to the nearest cent. All payments to the Program
hereunder shall be made in the manner set forth in Section 3(f).
(d) The net asset value of Class D shares shall be determined by the
Program or any agent of the Program in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Directors.
(e) The Program shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Program shall also have the right to suspend
the sale of its Class D shares if trading on the New York Stock Exchange shall
have been suspended, if a banking moratorium shall have been declared by Federal
or New York authorities, or if there shall have been some other event, which, in
the judgment of the Program, makes it impracticable or inadvisable to sell the
Class D shares.
(f) The Program, or any agent of the Program designated in writing by the
Program, shall be promptly advised of all purchase orders for Class D shares
received by the Distributor. Any order may be rejected by the Program;
provided, however, that the
5
<PAGE>
Program will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Program (or its agent)
will confirm orders upon their receipt, will make appropriate book entries and,
upon receipt by the Program (or its agent) of payment therefor, will deliver
deposit receipts or certificates for such Class D shares pursuant to the
instructions of the Distributor. Payment shall be made to the Program in New
York Clearing House funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Program (or its agent).
Section 4. Repurchase or Redemption of Class D Shares by the Program.
---------------------------------------------------------
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Program agrees to repurchase or redeem the Class D shares
so tendered in accordance with its obligations as set forth in Article VI of its
Articles of Incorporation, as amended from time to time, and in accordance with
the applicable provisions set forth in the prospectus and statement of
additional information. The price to be paid to redeem or repurchase the Class
D shares shall be equal to the net asset value calculated in accordance with the
provisions of Section 3(d) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information relating to the Portfolio. All payments
by the Program hereunder shall be made in the manner set forth below. The
redemption or repurchase
6
<PAGE>
by the Program of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class D shares.
The Program shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor in New
York Clearing House funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form. The proceeds of
any redemption of shares shall be paid by the Program as follows: (i) any
applicable CDSC shall be paid to the Distributor, and (ii) the balance shall be
paid to or for the account of the shareholder, in each case in accordance with
the applicable provisions of the prospectus and statement of additional
information.
(b) Redemption of Class D shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Program of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Program
fairly to determine the value of the net assets of
7
<PAGE>
the Portfolio, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Program.
---------------------
(a) The Program shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class D shares
of the Portfolio, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Program by
independent public accountants. The Program shall make available to the
Distributor such number of copies of the prospectus and statement of additional
information relating to the Portfolio as the Distributor shall reasonably
request.
(b) The Program shall take, from time to time, but subject to any
necessary approval of the Class D shareholders, all necessary action to fix the
number of authorized Class D shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Class D shares as the Distributor may
reasonably be expected to sell.
(c) The Program shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class
D shares for sale under the securities laws of such states as the Distributor
and the Program may approve. Any such qualification may be withheld, terminated
or withdrawn by the Program at any time in its discretion. As provided in
Section 8(c) hereof, the
8
<PAGE>
expense of qualification and maintenance of qualification shall be borne by the
Program. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Program in
connection with such qualification.
(d) The Program will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Program relating to the
Portfolio.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Portfolio but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the
Program hereunder are not to be deemed exclusive and nothing herein contained
shall prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Portfolio, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Program to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of
9
<PAGE>
additional information and any sales literature specifically approved by the
Program.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Program, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Program shall approve
the forms of agreements with dealers and the dealer compensation set forth
therein. Class D shares sold to selected dealers shall be for resale by such
dealers only at the public offering price(s) set forth in the prospectus and
statement of additional information. The form of agreement with selected
dealers to be used during the continuous offering of the Class D shares is
attached hereto as Exhibit A.
(b) Within the United States, the Distributor shall offer and sell Class D
shares only to such selected dealers as are members in good standing of the
NASD.
10
<PAGE>
Section 8. Payment of Expenses.
-------------------
(a) The Program shall bear all costs and expenses of the Portfolio,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class D
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class D shares for sale to the public and any expenses of advertising
incurred by the
11
<PAGE>
Distributor in connection with such offering. It is understood and agreed that
so long as the Portfolio's Class D Shares Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act remains in effect, any expenses incurred
by the Distributor hereunder in connection with account maintenance activities
may be paid from amounts recovered by it from the Portfolio under such plan.
(c) The Program shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Program as a broker or
dealer in such states of the United States or other jurisdictions as shall be
selected by the Program and the Distributor pursuant to Section 5(c) hereof and
the cost and expenses payable to each such state for continuing qualification
therein until the Program decides to discontinue such qualification pursuant to
Section 5(c) hereof.
Section 9. Indemnification.
---------------
(a) The Program shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related
12
<PAGE>
prospectus and statement of additional information relating to the Portfolio, as
from time to time amended and supplemented, or an annual or interim report to
shareholders relating to the Portfolio, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, unless such
statement or omission was made in reliance upon, and in conformity with,
information furnished to the Program in connection therewith by or on behalf of
the Distributor; provided, however, that in no case (i) is the indemnity of the
Program in favor of the Distributor and any such controlling persons to be
deemed to protect such Distributor or any such controlling persons thereof
against any liability to the Program or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Program to be liable under its
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any such controlling persons, unless the Distributor
or such controlling persons, as the case may be, shall have notified the Program
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Distributor or such controlling persons (or after the
13
<PAGE>
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Program of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Program will be entitled to
participate at its own expense in the defense or, if it so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Program
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Program elects to assume
the defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them, but in case
the Program does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Program shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class D
shares.
(b) The Distributor shall indemnify and hold harmless the Program and each
of its Directors and officers and each person,
14
<PAGE>
if any, who controls the Program against any loss, liability, claim, damage or
expense described in the foregoing indemnity contained in subsection (a) of this
Section, but only with respect to statements or omissions made in reliance upon,
and in conformity with, information furnished to the Program in writing by or on
behalf of the Distributor for use in connection with the registration statement
or related prospectus and statement of additional information, as from time to
time amended, or the annual or interim reports to Class D shareholders. In case
any action shall be brought against the Program or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Program, and the
Program and each person so indemnified shall have the rights and duties given to
the Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Portfolio Adviser Program. In connection
----------------------------------------------
with the Merrill Lynch Mutual Portfolio Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Portfolio, as agent for the Portfolio, to
participants in such program. The terms of this Agreement shall apply to such
sales, including terms as to the offering price of shares, the proceeds to be
paid to the Portfolio, the duties of the Distributor, the payment of expenses
and indemnification obligations of the Portfolio and the Distributor.
15
<PAGE>
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until __, 1996 and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding Class D voting securities of the
Portfolio and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding Class D
voting securities of the Portfolio, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding Class C voting securities
of the Portfolio and (ii) by the vote of a majority of those Directors of the
Program who are not parties to this Agreement or interested persons of
16
<PAGE>
any such party cast in person at a meeting called for the purpose of voting on
such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER
PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland
corporation (the "Program"), pursuant to which it acts as the distributor for
the sale of Class D shares of common stock, par value $0.10 per share (herein
referred to as "Class D shares"), of the Program relating to the [Name of
Portfolio] (the "Portfolio"), and as such has the right to distribute Class D
shares of the Portfolio for resale. The Program is an open-end investment
company registered under the Investment Company Act of 1940, as amended, and the
Portfolio's Class D shares being offered to the public are registered under the
Securities Act of 1933, as amended. You have received a copy of the Class D
Shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Program and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
which is part of the most recent effective registration statement pursuant to
the Securities Act of 1933, as amended. We offer to sell to you, as a member of
the Selected Dealers Group, Class D shares of the Portfolio upon the following
terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Program, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Portfolio
Adviser Program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Program, to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information relating to the Portfolio. The
procedure relating to
A-1
<PAGE>
the handling of orders shall be subject to Section 5 hereof and instructions
which we or the Program shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Program in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information relating to the Portfolio.
3. The sales charges for sales to the public, computed as percentages of
the public offering price and the amount invested, and the related discount to
Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Sales Charge Selected
Sales Charge as Percentage* Dealers as
as Percentage of the Net Percentage
of the Amount of the
Amount of Purchase Offering Price Invested Offering Price
- ------------------ -------------- -------------- --------------
<S> <C> <C> <C>
Less than
$25,000............ % % %
$25,000 but less
than $50,000....... % % %
$50,000 but less
than $100,000...... % % %
100,000 but less
than $250,000...... % % %
$250,000 but less
than $1,000,000.... % % %
$1,000,000 and
over**............. % % %
</TABLE>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information relating
to the Portfolio. Such purchase may be subject to a contingent deferred sales
charge as set forth in the current Prospectus and Statement of Additional
Information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his
A-2
<PAGE>
spouse and their children under the age of 21 years purchasing Class D shares
for his or their own account and to single purchases by a trustee or other
fiduciary purchasing Class D shares for a single trust estate or single
fiduciary account although more than one beneficiary is involved. The term
"purchase" also includes purchases by any "company" as that term is defined in
the Investment Company Act of 1940, as amended, but does not include purchases
by any such company which has not been in existence for at least six months or
which has no purpose other than the purchase of Class D shares of the Portfolio
or Class D shares of other registered investment companies at a discount;
provided, however, that it shall not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit cardholders of a company, policyholders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation under
which eligible investors are permitted to purchase Class D shares of the
Portfolio at the offering price applicable to the total of (a) the dollar amount
then being purchased plus (b) an amount equal to the then current net asset
value or cost, whichever is higher, of the purchaser's combined holdings of
Class A, Class B, Class C and Class D shares of the Portfolio and of any other
series of the Program or investment company with an initial sales charge for
which the Distributor acts as the distributor. For any such right of
accumulation to be made available, the Distributor must be provided at the time
of purchase, by the purchaser or you, with sufficient information to permit
confirmation of qualification, and acceptance of the purchase order is subject
to such confirmation.
The reduced sales charges are applicable to purchases aggregating $25,000 or
more of Class A shares or of Class D shares of any other series of the Program
or investment company with an initial sales charge for which the Distributor
acts as the distributor made through you within a thirteen-month period starting
with the first purchase pursuant to a Letter of Intention. A purchase not
originally made pursuant to a Letter of Intention may be included under a
subsequent letter executed within 90 days of such purchase if the Distributor is
informed in writing of this intent within such 90-day period. If the intended
amount of shares is not purchased within the thirteen-month period, an
appropriate price adjustment will be made pursuant to the terms of the Letter of
Intention.
You agree to advise us promptly at our request as to amounts of any sales made
by you to the public qualifying for reduced sales charges. Further information
as to the reduced sales charges pursuant to the right of accumulation or a
Letter of
A-3
<PAGE>
Intention is set forth in the Prospectus and Statement of Additional
Information.
4. You shall not place orders for any of the Class D shares unless you have
already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Portfolio which
is inconsistent in any respect with the information contained in the Prospectus
and Statement of Additional Information (as then amended or supplemented) or
cause any advertisement to be published in any newspaper or posted in any public
place without our consent and the consent of the Program.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Program for Class D shares of the Portfolio to be resold by us
to you subject to the applicable terms and conditions governing the placement of
orders by us set forth in Section 3 of the Distribution Agreement and subject to
the compensation provisions of Section 3 hereof and (ii) to tender Class D
shares directly to the Program or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
6. You shall not withhold placing orders received from your customers so as
to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement are
repurchased by the Program or by us for the account of the Program or are
tendered for redemption within seven business days after the date of the
confirmation of the original purchase by you, it is agreed that you shall
forfeit your right to, and refund to us, any discount received by you on such
Class D shares.
8. No person is authorized to make any representations concerning Class D
shares of the Portfolio except those contained in the current Prospectus and
Statement of Additional Information relating to the Portfolio and in such
printed information subsequently issued by us or the Program as information
A-4
<PAGE>
supplemental to such Prospectus and Statement of Additional Information. In
purchasing Class D shares through us you shall rely solely on the
representations contained in the Prospectus and Statement of Additional
Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material of the
Program relating to the Portfolio is our sole responsibility and not the
responsibility of the Program, and you agree that the Program shall have no
liability or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Program relating to the
Portfolio. You further agree to endeavor to obtain proxies from such
purchasers. Additional copies of such Prospectus and Statement of Additional
Information, annual or interim reports and proxy solicitation materials will be
supplied to you in reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class D shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the continuous offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing contained in this paragraph is intended
to operate as, and the provisions of this paragraph shall not in any way
whatsoever constitute, a waiver by you of compliance with any provision of the
Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no
A-5
<PAGE>
responsibility or obligation as to your right to sell Class D shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the Class D shares, if necessary.
14. All communications to us should be sent to the address below. Any notice
to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class D shares of the Portfolio will represent your acceptance of this
Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
______________________________________________________
Date:_________________________________________________
A-6
<PAGE>
EXHIBIT 99.8
CUSTODY AGREEMENT
Agreement made as of this day of , 1994,
between MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC., a
corporation organized and existing under the laws of the State
of Maryland having its principal office and place of business at
(hereinafter called
the "Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office
and place of business at 48 Wall Street, New York, New York
10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee
or nominees.
2. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise price,
as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a
Terminal Link.
4. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange qualified
to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a
clearing member.
<PAGE>
5. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article V
herein, or (b) any receipt described in Article V or VIII
herein.
6. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified underlying Securities (excluding
Futures Contracts) which are owned by the writer thereof and
subject to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and
include any other person authorized to act as a depository under
the Investment Company Act of 1940, its successor or successors
and its nominee or nominees, specifically identified in a certi-
fied copy of a resolution of the Fund's Board of Directors
specifically approving deposits therein by the Custodian.
8. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at
an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
11. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or a
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant, or Clearing Member,
or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant
or a Clearing Member (a "Margin Account Agreement"), separate
and distinct from the custody account, in which certain Securi-
ties and/or money of the Fund shall be deposited and withdrawn
from time to time in connection with such transactions as the
Fund may from time to time determine. Securities held in the
Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the
Custodian's effecting an appropriate entry in its books and
records.
- 2 -
<PAGE>
12. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements, debt
obligations issued or guaranteed as to interest and principal by
the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bank-
ers' acceptances, repurchase agreements with respect to the same
and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the
same day as such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
14. "Officers" shall be deemed to include the President,
any Vice President, the Secretary, the Treasurer, the Control-
ler, any Assistant Secretary, any Assistant Treasurer, and any
other person or persons, whether or not any such other person is
an officer of the Fund, duly authorized by the Board of Direc-
tors of the Fund to execute any Certificate, instruction, notice
or other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time.
15. "Option" shall mean a Call Option, Covered Call Op-
tion, Stock Index Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer
thereof for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date and
price.
19. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by
state or municipal governments and by public authorities,
- 3 -
<PAGE>
(including, without limitation, general obligation bonds,
revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obliga-
tions, and any certificates, receipts, warrants or other instru-
ments representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing any other
rights or interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recordation
or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
21. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund listed on Schedule 1 hereto as
amended from time to time.
22. "Shares" shall mean the shares of capital stock of
the Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
23. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to take
or make delivery of an amount of cash equal to a specified dol-
lar amount times the difference between the value of a
particular stock index at the close of the last business day of
the contract and the price at which the futures contract is
originally struck.
24. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
25. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian requiring
in connection with each use of the Terminal Link by or on behalf
of the Fund use of an authorization code provided by the
Custodian and at least two access codes established by the Fund.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys at any time
owned by the Fund during the period of this Agreement.
- 4 -
<PAGE>
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all moneys
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the
Series separate and apart. The Custodian will not be
responsible for any Securities and moneys not actually received
by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf where such credits have been previ-
ously made and moneys are not finally collected. The Fund shall
deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit A
hereto, approving, authorizing and instructing the Custodian on
a continuous and on-going basis to deposit in the Book-Entry
System all Securities eligible for deposit therein, regardless
of the Series to which the same are specifically allocated and
to utilize the Book-Entry System to the extent possible in con-
nection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities and deliveries and
returns of Securities collateral. Prior to a deposit of Securi-
ties specifically allocated to a Series in the Depository, the
Fund shall deliver to the Custodian a certified resolution of
the Board of Directors of the Fund, substantially in the form of
Exhibit B hereto, approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until instructed to
the contrary by a Certificate actually received by the Custodian
to deposit in the Depository all Securities specifically al-
located to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to
such Securities in connection with its performance hereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and
moneys deposited in either the Book-Entry System or the
Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a fiduciary
or representative capacity and will be specifically allocated on
the Custodian's books to the separate account for the applicable
Series. Prior to the Custodian's accepting, utilizing and act-
ing with respect to Clearing Member confirmations for Options
and transactions in Options for a Series as provided in this
- 5 -
<PAGE>
Agreement, the Custodian shall have received a certified resolu-
tion of the Fund's Board of Directors, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the
Custodian on a continuous and on-going basis, until instructed
to the contrary by a Certificate actually received by the
Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such
Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the
Series account from which payment is to be made and the purpose
for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to
the account of the Fund for a Series, the Custodian shall also
by book-entry or otherwise identify as belonging to such Series
a quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or
shown on the Custodian's account on the books of the Book-Entry
System or the Depository. At least monthly and from time to
time, the Custodian shall furnish the Fund with a detailed
statement, on a per Series basis, of the Securities and moneys
held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the
Custodian hereunder, which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry
System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the
Fund, in the name of any duly appointed registered nominee of
the Custodian as the Custodian may from time to time determine,
or in the name of the Book-Entry System or the Depository or
their successor or successors, or their nominee or nominees.
The Fund agrees to furnish to the Custodian appropriate instru-
ments to enable the Custodian to hold or deliver in proper form
- 6 -
<PAGE>
for transfer, or to register in the name of its registered
nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which
may from time to time be registered in the name of the Fund.
The Custodian shall hold all such Securities specifically al-
located to a Series which are not held in the Book-Entry System
or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any
other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i)
the Custodian receives a written notice of such call, or (ii)
notice of such call appears in one or more of the publications
listed in Appendix B annexed hereto, which may be amended at any
time by the Custodian without the prior notification or consent
of the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
the account of a Series, all rights and similar securities
issued with respect to any Securities held by the Custodian for
such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System
or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authoriza-
tions, and any other instruments whereby the authority of the
Fund as owner of any Securities held by the Custodian hereunder
for the Series specified in such Certificate may be exercised;
- 7 -
<PAGE>
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in con-
nection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold
hereunder specifically allocated to such Series any cash or
other Securities received in exchange;
(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically al-
located to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of
the Series specified in such Certificate, and take such other
steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of
this Article which may be called as specified in the
Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until after
it shall have determined, or shall have received a Certificate
from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the avail-
ability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of
the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options, or Futures Contract Options by mak-
ing payments or deliveries specified in Certificates received by
the Custodian in connection with any such purchase, sale, writ-
ing, settlement or closing out upon its receipt from a broker,
dealer, or futures commission merchant of a statement or
confirmation reasonably believed by the Custodian to be in the
form customarily used by brokers, dealers, or future commission
merchants with respect to such Futures Contracts, Options, or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures com-
mission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as custodian
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<PAGE>
for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account,
and payments with respect to Securities to which a Margin Ac-
count relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary,
make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates
are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against
receipt by the Custodian of payment therefor. Any such instru-
ment or certificate delivered to the Custodian shall be held by
the Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract, or
a Futures Contract Option, the Fund shall deliver to the
Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the Series to which such Securities are
to be specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the
date of purchase and settlement; (e) the purchase price per
unit; (f) the total amount payable upon such purchase; (g) the
name of the person from whom or the broker through whom the
purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made.
The Custodian shall, upon receipt of Securities purchased by or
for the Fund, pay to the broker specified in the Certificate out
of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
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Certificate or Oral Instructions, specifying with respect to
each such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e)
the sale price per unit; (f) the total amount payable to the
Fund upon such sale; (g) the name of the broker through whom or
the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
the Securities are to be delivered. The Custodian shall deliver
the Securities specifically allocated to such Series to the
broker specified in the Certificate against payment of the total
amount payable to the Fund upon such sale, provided that the
same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series
to which such Option is specifically allocated; (b) the type of
Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a
Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options purchased; (d) the expira-
tion date; (e) the exercise price; (f) the dates of purchase and
settlement; (g) the total amount payable by the Fund in connec-
tion with such purchase; (h) the name of the Clearing Member
through whom such Option was purchased; and (i) the name of the
broker to whom payment is to be made. The Custodian shall pay,
upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered
nominee of the Custodian) as custodian for the Fund, out of
moneys held for the account of the Series to which such Option
is to be specifically allocated, the total amount payable upon
such purchase to the Clearing Member through whom the purchase
was made, provided that the same conforms to the total amount
payable as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect to each
such sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index Op-
tions sold; (d) the date of sale; (e) the sale price; (f) the
date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the Clearing Member through
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whom the sale was made. The Custodian shall consent to the
delivery of the Option sold by the Clearing Member which previ-
ously supplied the confirmation described in preceding paragraph
1 of this Article with respect to such Option against payment to
the Custodian of the total amount payable to the Fund, provided
that the same conforms to the total amount payable as set forth
in such Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying
with respect to such Call Option: (a) the Series to which such
Call Option was specifically allocated; (b) the name of the is-
suer and the title and number of shares subject to the Call Op-
tion; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total
amount to be paid by the Fund upon such exercise; and (g) the
name of the Clearing Member through whom such Call Option was
exercised. The Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay out of the
moneys held for the account of the Series to which such Call
Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised,
provided that the same conforms to the total amount payable as
set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series to which such
Put Option was specifically allocated; (b) the name of the is-
suer and the title and number of shares subject to the Put Op-
tion; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total
amount to be paid to the Fund upon such exercise; and (g) the
name of the Clearing Member through whom such Put Option was
exercised. The Custodian shall, upon receipt of the amount pay-
able upon the exercise of the Put Option, deliver or direct the
Depository to deliver the Securities specifically allocated to
such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which such Stock Index Option was specifically al-
located; (b) the type of Stock Index Option (put or call); (c)
the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the Fund
in connection with such exercise; and (h) the Clearing Member
from whom such payment is to be received.
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<PAGE>
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same;
(c) the expiration date; (d) the exercise price; (e) the premium
to be received by the Fund; (f) the date such Covered Call Op-
tion was written; and (g) the name of the Clearing Member
through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to such
Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in
Covered Call Options and shall impose, or direct the Depository
to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restric-
tions as may be required by such receipts. Notwithstanding the
foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and
not deposited with the Depository underlying a Covered Call Op-
tion.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the issuer
and the title and number of shares subject to the Covered Call
Option; (c) the Clearing Member to whom the underlying Securi-
ties are to be delivered; and (d) the total amount payable to
the Fund upon such delivery. Upon the return and/or cancella-
tion of any receipts delivered pursuant to paragraph 6 of this
Article, the Custodian shall deliver, or direct the Depository
to deliver, the underlying Securities as specified in the
Certificate against payment of the amount to be received as set
forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series for which such
Put Option was written; (b) the name of the issuer and the title
and number of shares for which the Put Option is written and
which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f)
the date such Put Option is written; (g) the name of the Clear-
ing Member through whom the premium is to be received and to
whom a Put Option guarantee letter is to be delivered; (h) the
amount of cash, and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in
the Senior Security Account for such Series; and (i) the amount
of cash and/or the amount and kind of Securities specifically
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<PAGE>
allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially
in the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying
Securities are to be received; (d) the total amount payable by
the Fund upon such delivery; (e) the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of
Securities, specifically allocated to such Series, if any, to be
withdrawn from the Senior Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter or
similar document issued by the Custodian in connection with such
Put Option, the Custodian shall pay out of the moneys held for
the account of the Series to which such Put Option was
specifically allocated the total amount payable to the Clearing
Member specified in the Certificate as set forth in such
Certificate against delivery of such Securities, and shall make
the withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the
number of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price;
(g) the Clearing Member through whom such Option was written;
(h) the premium to be received by the Fund; (i) the amount of
cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; (j) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Collateral Ac-
count for such Series; and (k) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in
which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security
Account specified in the Certificate, and either (1) deliver
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<PAGE>
such receipts, if any, which the Custodian has specifically
agreed to issue, which are in accordance with the customs
prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series for which such Stock Index Option was written;
(b) such information as may be necessary to identify the Stock
Index Option being exercised; (c) the Clearing Member through
whom such Stock Index Option is being exercised; (d) the total
amount payable upon such exercise, and whether such amount is to
be paid by or to the Fund; (e) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series; and the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Collateral Account for such Series. Upon the return and/or
cancellation of the receipt, if any, delivered pursuant to the
preceding paragraph of this Article, the Custodian shall pay out
of the moneys held for the account of the Series to which such
Stock Index Option was specifically allocated to the Clearing
Member specified in the Certificate the total amount payable, if
any, as specified therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs, 6, 8 or 10
of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its posi-
tion as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the
Option being purchased: (a) that the transaction is a Closing
Purchase Transaction; (b) the Series for which the Option was
written; (c) the name of the issuer and the title and number of
shares subject to the Option, or, in the case of a Stock Index
Option, the stock index to which such Option relates and the
number of Options held; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the type of
Option (put or call); (h) the date of such purchase; (i) the
name of the Clearing Member to whom the premium is to be paid;
and (j) the amount of cash and/or the amount and kind of Securi-
ties, if any, to be withdrawn from the Collateral Account, a
specified Margin Account, or the Senior Security Account for
such Series. Upon the Custodian's payment of the premium and
the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option
being liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities underlying the
Call Option.
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<PAGE>
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund pursuant to paragraph 3 Article III
herein, and upon the return and/or cancellation of any receipts
issued by the Custodian, shall make such withdrawals from the
Collateral Account, and the Margin Account and/or the Senior
Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract, (or with
respect to any number of identical Futures Contract(s)): (a) the
Series for which the Futures Contract is being entered; (b) the
category of Futures Contract (the name of the underlying stock
index or financial instrument); (c) the number of identical
Futures Contracts entered into; (d) the delivery or settlement
date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short)
on such Futures Contract(s); (g) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series; (h) the name of the
broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or
commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to
be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of
the Margin Account Agreement. The Custodian shall make payment
out of the moneys specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures
commission merchant with respect to an outstanding Futures
Contract, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from
a broker, dealer, or futures commission merchant to the Fund
with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
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<PAGE>
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and
the Series to which the same relates; (b) with respect to a
Stock Index Futures Contract, the total cash settlement amount
to be paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered
or received; (c) the broker, dealer, or futures commission
merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be
withdrawn from the Senior Security Account for such Series. The
Custodian shall make the payment or delivery specified in the
Certificate, and delete such Futures Contract from the state-
ments delivered to the Fund pursuant to paragraph 3 of Article
III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b)
the Futures Contract being offset. The Custodian shall make
payment out of the money specifically allocated to such Series
of the fee or commission, if any, specified in the Certificate
and delete the Futures Contract being offset from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Ac-
count for such Series as may be specified in such Certificate.
The withdrawals, if any, to be made from the Margin Account
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall
pay out of the moneys specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or
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<PAGE>
futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such
Certificate.
2. Promptly after the sale of any Futures Contract Op-
tion purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) Series to which
such Futures Contract Option was specifically allocated; (b) the
type of Future Contract Option (put or call); (c) the type of
Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract
Option; (d) the date of sale; (e) the sale price; (f) the date
of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker of futures commission
merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount pay-
able to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Op-
tion (put or call) being exercised; (c) the type of Futures
Contract underlying the Futures Contract Option; (d) the date of
exercise; (e) the name of the broker or futures commission
merchant through whom the Futures Contract Option is exercised;
(f) the net total amount, if any, payable by the Fund; (g) the
amount, if any, to be received by the Fund; and (h) the amount
of cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall make, out of the moneys and Securities specifically al-
located to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series for which such Futures Contract Option was written; (b)
the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be neces-
sary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise
price; (f) the premium to be received by the Fund; (g) the name
of the broker or futures commission merchant through whom the
premium is to be received; and (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Senior Security Account for such Series. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
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<PAGE>
out of the moneys and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made
to the Margin Account shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract
Option; (d) the name of the broker or futures commission
merchant through whom such Futures Contract Option was
exercised; (e) the net total amount, if any, payable to the Fund
upon such exercise; (f) the net total amount, if any, payable by
the Fund upon such exercise; and (g) the amount of cash and/or
the amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified
in the Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which such Option was specifically allocated; (b)
the particular Futures Contract Option exercised; (c) the type
of Futures Contract underlying such Futures Contract Option; (d)
the name of the broker or futures commission merchant through
whom such Futures Contract Option is exercised; (e) the net
total amount, if any, payable to the Fund upon such exercise;
(f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash
to be withdrawn from or deposited in, the Senior Security Ac-
count for such Series, if any. The Custodian shall, upon its
receipt of the net total amount payable to the Fund, if any,
specified in the Certificate, make out of the moneys and Securi-
ties specifically allocated to such Series, the payments, if
any, and the deposits, if any, into the Senior Security Account
as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as
a writer of such Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to the Futures Contract Option being purchased: (a) the
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Series to which such Option is specifically allocated; (b) that
the transaction is a closing transaction; (c) the type of Future
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid;
and (h) the amount of cash and/or the amount and kind of Securi-
ties, if any, to be withdrawn from the Senior Security Account
for such Series. The Custodian shall effect the withdrawals
from the Senior Security Account specified in the Certificate.
The withdrawals, if any, to be made from the Margin Account
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Option
written or purchased by the Fund and described in this Article,
the Custodian shall (a) delete such Futures Contract Option from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security
Account as may be specified in a Certificate. The deposits to
and/or withdrawals from the Margin Account, if any, shall be
made by the Custodian in accordance with the terms and condi-
tions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series for which such short sale
was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total
amount credited to the Fund upon such sale, if any, (g) the
amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in
which such Margin Account has been or is to be established; (h)
the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Senior Security Account, and (i) the
name of the broker through whom such short sale was made. The
Custodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the
Fund upon such sale, if any, as specified in the Certificate is
held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a
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receipt or make the deposits into the Margin Account and the
Senior Security Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing out:
(a) the Series for which such transaction is being made; (b) the
name of the issuer and the title of the Security; (c) the number
of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be
delivered to the broker; (d) the dates of closing-out and
settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h)
the amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (i) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of
the broker through whom the Fund is effecting such closing-out.
The Custodian shall, upon receipt of the net total amount pay-
able to the Fund upon such closing-out, and the return and/ or
cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker the net
total amount payable to the broker, and make the withdrawals
from the Margin Account and the Senior Security Account, as the
same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund
in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is
entered; (d) the amount and kind of Securities to be delivered
by the Fund to such broker or dealer; (e) the date of such
Reverse Repurchase Agreement; and (f) the amount of cash and/or
the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Senior Security
Account for such Series in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the
total amount payable to the Fund specified in the Certificate,
Oral Instructions, or Written Instructions make the delivery to
the broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate or Oral
Instructions.
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2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying:
(a) the Reverse Repurchase Agreement being terminated and the
Series for which same was entered; (b) the total amount payable
by the Fund in connection with such termination; (c) the amount
and kind of Securities to be received by the Fund and
specifically allocated to such Series in connection with such
termination; (d) the date of termination; (e) the name of the
broker or dealer with or through whom the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall,
upon receipt of the amount and kind of Securities to be received
by the Fund specified in the Certificate or Oral Instructions,
make the payment to the broker or dealer, and the withdrawals,
if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title
of the Securities, (c) the number of shares or the principal
amount loaned, (d) the date of loan and delivery, (e) the total
amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the
broker, dealer, or financial institution to which the loan was
made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities.
The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only
in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clear-
ing House funds and may deliver Securities in accordance with
the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
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Series to which the loaned Securities are specifically al-
located; (b) the name of the issuer and the title of the Securi-
ties to be returned, (c) the number of shares or the principal
amount to be returned, (d) the date of termination, (e) the
total amount to be delivered by the Custodian (including the
cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the
broker, dealer, or financial institution from which the Securi-
ties will be returned. The Custodian shall receive all Securi-
ties returned from the broker, dealer, or financial institution
to which such Securities were loaned and upon receipt thereof
shall pay, out of the moneys held for the account of the Fund,
the total amount payable upon such return of Securities as set
forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior
Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and the number of shares or the principal
amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Account,
the Custodian shall be under no obligation to make any such
deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In ac-
cordance with applicable law the Custodian may enforce its lien
and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter
or similar document or any receipt issued hereunder by the
Custodian. In the event the Custodian should realize on any
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<PAGE>
such property net proceeds which are less than the Custodian's
obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed
the Custodian by the Fund within the scope of Article XIV
herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer, or futures commission merchant specified in the name of
a Margin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each busi-
ness day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Fund with a statement with respect to such Collateral Ac-
count specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the
Fund shall furnish to the Custodian a Certificate or Written
Instructions specifying the then market value of the Securities
described in such statement. In the event such then market
value is indicated to be less than the Custodian's obligation
with respect to any outstanding Put Option guarantee letter or
similar document, the Fund shall promptly specify in a
Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Directors of the Fund, certified
by the Secretary or any Assistant Secretary, either (i) setting
forth with respect to the Series specified therein the date of
the declaration of a dividend or distribution, the date of pay-
ment thereof, the record date as of which shareholders entitled
to payment shall be determined, the amount payable per Share of
such Series to the shareholders of record as of that date and
the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund on the pay-
ment date, or (ii) authorizing with respect to the Series
specified therein the declaration of dividends and distributions
on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders
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<PAGE>
entitled to payment shall be determined, the amount payable per
Share of such Series to the shareholders of record as of that
date and the total amount payable to the Dividend Agent on the
payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the
Custodian shall pay out of the moneys held for the account of
each Series the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date,
and price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically allocated to the
separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account in
the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate
specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian a Certificate specify-
ing:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the
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<PAGE>
Certificate issued pursuant to the foregoing paragraph 4 of this
Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time
to time be offered by the Fund, the Custodian, unless otherwise
instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is
in good form for redemption in accordance with the check redemp-
tion procedure, honor the check presented as part of such check
redemption privilege out of the moneys held in the separate ac-
count of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the moneys held by the Custodian in the
separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a
Certificate or Oral Instructions, or which results in an
overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the
Custodian with respect to a Series, including any indebtedness
to The Bank of New York under the Fund's Cash Management and
Related Services Agreement, (except a borrowing for investment
or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article), such overdraft or
indebtedness shall be deemed to be a loan made by the Custodian
to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a
360-day year for the actual number of days involved) equal to
1/2% over Custodian's prime commercial lending rate in effect
from time to time, such rate to be adjusted on the effective
date of any change in such prime commercial lending rate but in
no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien
and security interest in and to any property specifically
allocated to such Series at any time held by it for the benefit
of such Series or in which the Fund may have an interest which
is then in the Custodian's possession or control or in posses-
sion or control of any third party acting in the Custodian's
behalf. The Fund authorizes the Custodian, in its sole discre-
tion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of ac-
count standing to such Series' credit on the Custodian's books.
In addition, the Fund hereby covenants that on each Business Day
on which either it intends to enter a Reverse Repurchase Agree-
ment and/or otherwise borrow from a third party, or which next
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<PAGE>
succeeds a Business Day on which at the close of business the
Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise
the Custodian, in writing, of each such borrowing, shall specify
the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custodian
a Certificate specifying with respect to each such borrowing:
(a) the Series to which such borrowing relates; (b) the name of
the bank, (c) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promis-
sory note, duly endorsed by the Fund, or other loan agreement,
(d) the time and date, if known, on which the loan is to be
entered into, (e) the date on which the loan becomes due and
payable, (f) the total amount payable to the Fund on the borrow-
ing date, (g) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether
such loan is for investment purposes or for temporary or
emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's prospectus. The
Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory
note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to
the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such col-
lateral in its possession, but such collateral shall be subject
to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver
such Securities as additional collateral as may be specified in
a Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian,
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount
of any particular Securities to be delivered as collateral by
the Custodian, the Custodian shall not be under any obligation
to deliver any Securities.
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<PAGE>
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Fund
be obligated to have or utilize the Terminal Link, and the
provisions of this Article shall apply if, but only if, the
Fund in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only
for the purpose of the Fund providing Certificates to the
Custodian with respect to transactions involving Securities or
for the transfer of money to be applied to the payment of
dividends, distributions or redemptions of Fund Shares, and
shall be utilized by the Custodian only for the purpose of
providing notices to the Fund. Such use shall commence only
after the Fund shall have delivered to the Custodian a
Certificate substantially in the form of Exhibit D and shall
have established access codes. Each use of the Terminal Link by
the Fund shall constitute a representation and warranty that the
Terminal Link is being used only for the purposes permitted
hereby, that at least two Officers have each utilized an access
code, that such safekeeping procedures have been established by
the Fund, and that such use does not contravene the Investment
Company Act of 1940, as amended, or the rules or regulations
thereunder.
3. The Fund shall obtain and maintain at its own cost
and expense all equipment and services, including, but not
limited to communications services, necessary for it to utilize
the Terminal Link, and the Custodian shall not be responsible
for the reliability or availability of any such equipment or
services.
4. The Fund acknowledges that any data bases made
available as part of, or through the Terminal Link and any
proprietary data, software, processes, information and docu-
mentation (other than any such which are or become part of the
public domain or are legally required to be made available to
the public) (collectively, the "Information"), are the exclusive
and confidential property of the Custodian. The Fund shall, and
shall cause others to which it discloses the Information, to
keep the Information confidential by using the same care and
discretion it uses with respect to its own confidential property
and trade secrets, and shall neither make nor permit any
disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason,
the Fund shall return to the Custodian any and all copies of the
Information which are in the Fund's possession or under its
control, or which the Fund distributed to third parties. The
provisions of this Article shall not affect the copyright status
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<PAGE>
of any of the Information which may be copyrighted and shall
apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Ter-
minal Link from time to time without notice to the Fund except
that the Custodian shall give the Fund notice not less than 75
days in advance of any modification which would materially
adversely affect the Fund's operation, and the Fund agrees that
the Fund shall not modify or attempt to modify the Terminal Link
without the Custodian's prior written consent. The Fund
acknowledges that any software or procedures provided the Fund
as part of the Terminal Link are the property of the Custodian
and, accordingly, the Fund agrees that any modifications to the
Terminal Link, whether by the Fund, or by the Custodian and
whether with or without the Custodian's consent, shall become
the property of the Custodian.
7. Neither the Custodian nor any manufacturers and
suppliers it utilizes or the Fund utilizes in connection with
the Terminal Link makes any warranties or representations,
express or implied, in fact or in law, including but not limited
to warranties of merchantability and fitness for a particular
purpose.
8. The Fund will cause its Officers and employees to
treat the authorization codes and the access codes applicable to
Terminal Link with extreme care, and irrevocably authorizes the
Custodian to act in accordance with and rely on Certificates
received by it through the Terminal Link. The Fund acknowledges
that it is its responsibility to assure that only its Officers
use the Terminal Link on its behalf, and that a Custodian shall
not be responsible nor liable for use of the Terminal Link on
the Fund's behalf by persons other than such persons or
Officers, or by only a single Officer, nor for any alteration,
omission, or failure to promptly forward.
9(a). Except as otherwise specifically provided in Section
9(b) of this Article, the Custodian shall have no liability for
any losses, damages, injuries, claims, costs or expenses arising
out of or in connection with any failure, malfunction or other
problem relating to the Terminal Link except for money damages
suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000 provided,
however, that the Custodian shall have no liability under this
Section 9 if the Fund fails to comply with the provisions of
Section 11.
9(b). The Custodian's liability for its negligence in
executing or failing to execute in accordance with a Certificate
received through Terminal Link shall be only with respect to a
transfer of funds which is not made in accordance with such
Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon the
Fund complying with the provisions of Section 12 of this
Article, and shall be limited to (i) restoration of the
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<PAGE>
principal amount mistransferred, if and to the extent that the
Custodian would be required to make such restoration under
applicable law, and (ii) the lesser of (A) a Fund's actual
pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred, as
the case may be, or (B) compensation for the loss of the use of
the mistransferred funds or the funds which were not
transferred, as the case may be, at a rate per annum equal to
the average federal funds rate as computed from the Federal
Reserve Bank of New York's daily determination of the effective
rate for federal funds, for the period during which a Fund has
lost use of such funds. In no event shall the Custodian have
any liability for failing to execute in accordance with a
Certificate a transfer of funds where the Certificate is
received by the Custodian through Terminal Link other than
through the applicable transfer module for the particular
instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in
no event shall the Custodian or any manufacturer or supplier of
its computer equipment, software or services relating to the
Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund may incur or
experience by reason of its use of the Terminal Link even if the
Custodian or any manufacturer or supplier has been advised of
the possibility of such damages, nor with respect to the use of
the Terminal Link shall the Custodian or any such manufacturer
or supplier be liable for acts of God, or with respect to the
following to the extent beyond such person's reasonable control:
machine or computer breakdown or malfunction, interruption or
malfunction of communication facilities, labor difficulties or
any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
the Terminal Link as promptly as practicable, and in any event
within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of
any error, the date of actual receipt of the earliest notice
which reflects such error, it being agreed that discovery and
receipt of notice may only occur on a business day. The
Custodian shall promptly advise the Fund whenever the Custodian
learns of any errors, omissions or interruption in, or delay or
unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use of
the Terminal Link, receipt of each Certificate the Custodian
receives through the Terminal Link, and in the absence of such
verification the Custodian shall not be liable for any failure
to act in accordance with such Certificate and the Fund may not
claim that such Certificate was received by the Custodian. Such
verification, which may occur after the Custodian has acted upon
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<PAGE>
such Certificate, shall be accomplished on the same day on which
such Certificate is received.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities (as
such term is defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, as amended) and other assets,
the foreign banking institutions and foreign securities
depositories and clearing agencies designated on Schedule I
hereto ("Foreign Sub-Custodians") to carry out their respective
responsibilities in accordance with the terms of the sub-
custodian agreement between each such Foreign Sub-Custodian and
the Custodian, copies of which have been previously delivered to
the Fund and receipt of which is hereby acknowledged (each such
agreement, a "Foreign Sub-Custodian Agreement"). The Custodian
shall be liable for the acts and omissions of each Foreign Sub-
Custodian constituting negligence or willful misconduct in the
conduct of its responsibilities under the terms of the Foreign
Sub-Custodian Agreement. Upon receipt of a Certificate,
together with a certified resolution substantially in the form
attached as Exhibit E of the Fund's Board of Directors, the Fund
may designate any additional foreign sub-custodian with which
the Custodian has an agreement for such entity to act as the
Custodian's agent, as its sub-custodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Custodian shall
cease the employment of any one or more Foreign Sub-Custodians
for maintaining custody of the Fund's assets and such Foreign
Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the election
of the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims by the Fund or any
Series against a Foreign Sub-Custodian as a consequence of any
loss, damage, cost, expense, liability or claim sustained or
incurred by the Fund or any Series if and to the extent that the
Fund or such Series has not been made whole for any such loss,
damage, cost, expense, liability or claim.
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<PAGE>
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-
Custodian Agreement, use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such
books and records relate to the performance of such Foreign Sub-
Custodian under its agreement with the Custodian on behalf of
the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign Sub-
Custodians, including but not limited to, an identification of
entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers
of Foreign Securities to or from each custodial account
maintained by a Foreign Sub-Custodian for the Custodian on
behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign Sub-
Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial services
required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of
securities not materially different form those prevailing in the
United States. The Custodian shall monitor the general
operating performance of each Foreign Sub-Custodian, and at
least annually obtain and review the annual financial report
published by such Foreign Sub-Custodian to determine that it
meets the financial criteria of an "Eligible Foreign Custodian"
under Rule 17f-5(c)(2)(i) or (ii). The Custodian will promptly
inform the Fund in the event that the Custodian learns that a
Foreign Sub-Custodian no longer satisfies the financial criteria
of an "Eligible Foreign Custodian" under such Rule. The
Custodian agrees that it will use reasonable care in monitoring
compliance by each Foreign Sub-Custodian with the terms of the
relevant Foreign Sub-Custodian Agreement and that if it learns
of any breach of such Foreign Sub-Custodian Agreement believed
by the Custodian to have a material adverse effect on the Fund
or any Series it will promptly notify the Fund of such breach.
The Custodian also agrees to use reasonable and diligent efforts
to enforce its rights under the relevant Foreign Sub-Custodian
Agreement.
7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.
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<PAGE>
8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received for
the account of any Series and delivery of securities maintained
for the account of such Series may be effected in accordance
with the customary or established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser
or dealer.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees, resulting
from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any
such loss or damage arising out of its own negligence or willful
misconduct. In no event shall the Custodian be liable to the
Fund or any third party for special, indirect or consequential
damages or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed of
the possibility of such damages and regardless of the form of
action. The Custodian may, with respect to questions of law
arising hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to the Fund or
of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it
in good faith in conformity with such advice or opinion. The
Custodian shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence or willful
misconduct on the part of the Custodian or any of its employees
or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality of
the purchase, sale or writing thereof, or the propriety of the
amount paid or received therefor;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
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<PAGE>
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities,
nor shall the Custodian be under any duty or obligation to see
to it that any cash collateral delivered to it by a broker,
dealer, or financial institution or held by it at any time as a
result of such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it might
sustain as a result of such loan. The Custodian specifically,
but not by way of limitation, shall not be under any duty or
obligation periodically to check or notify the Fund that the
amount of such cash collateral held by it for the Fund is suf-
ficient collateral for the Fund, but such duty or obligation
shall be the sole responsibility of the Fund. In addition, the
Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio
Securities of the Fund are lent pursuant to Article XIV of this
Agreement makes payment to it of any dividends or interest which
are payable to or for the account of the Fund during the period
of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in
the event that such dividends or interest are not paid and
received when due; or
(f) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Senior Security
Account or Collateral Account in connection with transactions by
the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may
be entitled to receive from such broker, dealer, futures
commission merchant or Clearing Member, to see that any payment
received by the Custodian from any broker, dealer, futures
commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's
receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented by
any check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actu-
ally receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls, conver-
sions, exchange offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
- 33 -
<PAGE>
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in
the Depository which may mature or be redeemed, retired, called
or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities
held in the Depository the Custodian shall make a claim against
the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or
defend any action suit or proceeding in respect to any Securi-
ties held by the Depository which in its opinion may involve it
in expense or liability, unless indemnity satisfactory to it
against all expense and liability be furnished as often as may
be required.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or
if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in
an agreement executed by the Custodian, the Fund and the
appointed institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it or by any Foreign Sub-Custodian,
for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or
(b) to ascertain whether any transactions by the Fund, whether
or not involving the Custodian, are such transactions as may
properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
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<PAGE>
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Custodian may charge
such compensation and any expenses with respect to a Series
incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money specifically al-
located to such Series. Unless and until the Fund instructs the
Custodian by a Certificate to apportion any loss, damage, li-
ability or expense among the Series in a specified manner, the
Custodian shall also be entitled to charge against any money
held by it for the account of a Series such Series' pro rata
share (based on such Series net asset value at the time of the
charge to the aggregate net asset value of all Series at that
time) of the amount of any loss, damage, liability or expense,
including counsel fees, for which it shall be entitled to
reimbursement under the provisions of this Agreement. The
expenses for which the Custodian shall be entitled to reimburse-
ment hereunder shall include, but are not limited to, the
expenses of sub-custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions
involving the purchase and sale of Securities of the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or
facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by
the close of business of the same day that such Oral Instruc-
tions are given to the Custodian. The Fund agrees that the fact
that such confirming instructions are not received by the
Custodian shall in no way affect the validity of the transac-
tions or enforceability of the transactions hereby authorized by
the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided
such instructions reasonably appear to have been received from
an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property of
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<PAGE>
the Fund. Such books and records shall be prepared and
maintained as required by the Investment Company Act of 1940, as
amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representa-
tives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable request
of the Fund, copies of any such books and records shall be
provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its
expenses of providing such copies. Upon reasonable request of
the Fund, the Custodian shall provide in hard copy or on micro-
film, whichever the Custodian elects, any records included in
any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall
reimburse the Custodian for its expenses of providing such hard
copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and
with such reports on its own systems of internal accounting
control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any
check redemption privilege program of the Fund, except for any
such liability, claim, loss and demand arising out of the
Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agree-
ment, including, without limitation, those contained in Article
XVI the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for pay-
ments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or
dealers in such Securities. When the Custodian is instructed to
deliver Securities against payment, delivery of such Securities
and receipt of payment therefor may not be completed
simultaneously. The Fund assumes all responsibility and li-
ability for all credit risks involved in connection with the
Custodian's delivery of Securities pursuant to instructions of
the Fund, which responsibility and liability shall continue
until final payment in full has been received by the Custodian.
16. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
- 36 -
<PAGE>
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice.
In the event such notice is given by the Fund, it shall be ac-
companied by a copy of a resolution of the Board of Directors of
the Fund, certified by the Secretary or any Assistant Secretary,
electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. In the event such notice is
given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolu-
tion of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such designation by
the Fund, the Custodian may designate a successor custodian
which shall be a bank or trust company having not less than
$2,000,000 aggregate capital, surplus and undivided profits.
Upon the date set forth in such notice this Agreement shall
terminate, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys
then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall upon the date specified in the notice
of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund be deemed to be its own custodian
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its corporate
seal, setting forth the names and the signatures of the present
Officers of the Fund. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Fund, or in
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<PAGE>
the event that other or additional Officers are elected or ap-
pointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provi-
sions of this Agreement upon the signatures of the Officers as
set forth in the last delivered Certificate.
2. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other
place as the Custodian may from time to time designate in writ-
ing.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Fund
shall be sufficiently given if addressed to the Fund and mailed
or delivered to it at its office at the address for the Fund
first above written, or at such other place as the Fund may from
time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of
the Fund, authorized or approved by a resolution of the Fund's
Board of Directors.
6. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby consents
to the jurisdiction of a state or federal court situated in New
York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate Officers,
thereunto duly authorized and their respective corporate seals
to be hereunto affixed, as of the day and year first above writ-
ten.
MERRILL LYNCH RETIREMENT
ASSET BUILDER PROGRAM,
INC.
[SEAL] By: _____________________
Attest:
_________________________
THE BANK OF NEW YORK
[SEAL] By: _____________________
Attest:
________________________
- 39 -
<PAGE>
APPENDIX A
I, , and I, , of
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland
corporation (the "Fund"), do hereby certify that:
The following individuals serve in the following positions
with the Fund and each has been duly elected or appointed by the
Board of Directors of the Fund to each such position and
qualified therefor in conformity with the Fund's Articles of
Incorporation and By-Laws, and the signatures set forth opposite
their respective names are their true and correct signatures:
Name Position Signature
<PAGE>
APPENDIX B
I, Jorge Ramos, a Vice President with THE BANK OF NEW YORK
do hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting of Merrill
Lynch Retirement Asset Builder Program, Inc., a Maryland
corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of
the Fund at a meeting duly held on , 1994, at which
a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1994, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis to
deposit in the Book-Entry System, as defined in the Custody
Agreement, all securities eligible for deposit therein, regard-
less of the Series to which the same are specifically allocated,
and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and
sales of securities, loans of securities, and deliveries and
returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Merrill Lynch Retirement Asset Builder Program, Inc. as
of the day of , 1994.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that
he or she is the duly elected and acting of
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland
corporation (the "Fund"), and further certifies that the fol-
lowing resolution was adopted by the Board of Directors of the
Fund at a meeting duly held on , 1994, at which a
quorum was at all times present and that such resolution has not
been modified or rescinded and is in full force and effect as of
the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1994, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary to deposit in the Depository,
as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Depository to the
extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Merrill Lynch Retirement Asset Builder Program, Inc. as
of the day of , 1994.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby
certifies that he or she is the duly elected and acting
of Merrill Lynch Retirement Asset Builder
Program, Inc., a Maryland corporation (the "Fund"), and further
certifies that the following resolution was adopted by the Board
of Trustees of the Fund at a meeting duly held
on , 1994, at which a quorum was at all times
present and that such resolution has not been modified or
rescinded and is in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian
pursuant to a Custody Agreement between The Bank of New
York and the Fund dated as of , 1994, (the
"Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives
a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as
Depository, as defined in the Custody Agreement, all
securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to
utilize the Participants Trust Company to the extent
possible in connection with its performance thereunder,
including, without limitation, in connection with
settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Merrill Lynch Retirement Asset Builder Program, Inc., as
of the day of , 1994.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that
he is the duly elected and acting of
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland
corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of
the Fund at a meeting duly held on , 1994, at
which a quorum was at all times present and that such resolution
has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to a Custody Agreement between The Bank of New York and the Fund
dated as of , 1994, (the "Custody Agreement") is
authorized and instructed on a continuous and ongoing basis
until such time as it receives a Certificate, as defined in the
Custody Agreement, to the contrary, to accept, utilize and act
with respect to Clearing Member confirmations for Options and
transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in
the Custody Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of Merrill Lynch Retirement Asset Builder Program, Inc. as
of the day of , 1994.
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby cer-
tifies that he or she is the duly elected and acting
of Merrill Lynch Retirement Asset Builder
Program, Inc., a Maryland corporation (the "Fund"), further
certifies that the following resolutions were adopted by the
Board of Directors of the Fund at a meeting duly held on
, 1994, at which a quorum was at all times present
and that such resolutions have not been modified or rescinded
and are in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant
to the Custody Agreement between The Bank of New York and the
Fund dated as of , 1994 (the "Custody Agreement")
is authorized and instructed on a continuous and ongoing basis
to act in accordance with, and to rely on Certificates (as
defined in the Custody Agreement) given by the Fund to the
Custodian by a Terminal Link (as defined in the Custody
Agreement).
RESOLVED, that the Fund shall establish access codes and
grant use of such access codes only to Officers of the Fund as
defined in the Custody Agreement, shall establish internal
safekeeping procedures to safeguard and protect the confiden-
tiality and availability of such access codes, shall limit its
use of the Terminal Link to those purposes permitted by the
Custody Agreement, shall require at least two such Officers to
utilize their respective access codes in connection with each
such Certificate, and shall use the Terminal Link only in a
manner that does not contravene the Investment Company Act of
1940, as amended, or the rules and regulations thereunder.
RESOLVED, that Officers of the Fund shall, following the
establishment of such access codes and such internal safekeeping
procedures, advise the Custodian that the same have been
established by delivering a Certificate, as defined in the
Custody Agreement, and the Custodian shall be entitled to rely
upon such advice.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of
Merrill Lynch Retirement Asset Builder Program, Inc., as of the
day of , 1994.
[SEAL]
<PAGE>
EXHIBIT E
The undersigned, , hereby cer-
tifies that he or she is the duly elected and acting
of Merrill Lynch Retirement Asset Builder
Program, Inc., a Maryland corporation (the "Fund"), further
certifies that the following resolutions were adopted by the
Board of Directors of the Fund at a meeting duly held on
, 1994, at which a quorum was at all times present
and that such resolutions have not been modified or rescinded
and are in full force and effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each
country listed in Schedule I hereto be, and hereby is, approved
by the Board of Directors as consistent with the best interests
of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with
the foreign branches of The Bank of New York (the "Bank") listed
in Schedule I located in the countries specified therein, and
with the foreign subcustodians and despositories listed in
Schedule I located in the countries specified therein be, and
hereby is, approved by the Board of Directors as consistent with
the best interest of the Fund and its shareholders; and further
RESOLVED, that the Subcustodian Agreements presented to
this meeting between the Bank and each of the foreign
subcustodians and depositories listed in Schedule I providing
for the maintenance of the Fund's assets with the applicable
entity, be and hereby are, approved by the Board of Directors as
consistent with the best interests of the Fund and its
shareholders; and further
RESOLVED, that the appropriate officers of the Fund are
hereby authorized to place assets of the Fund with the
aforementioned foreign branches and foreign subcustodians and
depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any
of them, are authorized to do any and all other acts, in the
name of the Fund and on its behalf, as they, or any of them, may
determine to be necessary or desirable and proper in connection
with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of
Merrill Lynch Retirement Asset Builder Program, Inc., as of the
day of , 1994.
[SEAL]
<PAGE>
SCHEDULE 1
SERIES
Global Opportunity Portfolio
Fundamental Value Portfolio
Quality Bond Portfolio
US Government Securities Portfolio
<PAGE>
SCHEDULE I
Bank of New York Branches
and
Eligible Foreign Custodians
Country Bank Name and Address Status
Argentina The First National Bank of Boston Correspondent
Florida 99, 1005 Buenos Aires,
Argentina
Australia Australia and New Zealand Banking Correspondent
Group, Limited
35 Elizabeth Street,
Melbourne, Australia
Austria GiroCredit Bank Aktiengesellschaft Correspondent
der Sparkassen
A-1011 Wien, Schubertring 5,
Vienna, Austria
Belgium Banque Bruxelles Lambert, S.A. Correspondent
Cours Saint Michel 60
Brussels 1040
Belgium
Brazil The First National Bank of Boston Correspondent
Rua Libero Badaro, 497,
01009 - Sao - SP (Alt 226)
Brazil
Canada Royal Trust Corporation of Canada Correspondent
55 King Street West
Royal Trust Tower, Toronto,
Ontario M5W 1P9, Canada
Chile Banco de Chile Correspondent
Departamento Comisiones de Confianza
Ahumada 251, Piso 3
Santiago
China Standard Chartered Bank Correspondent
8/F Edinburgh Tower
The Landmark, 15 Queens Road Central
Hong Kong
<PAGE>
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK - 1092 Copenhagen K.
Denmark
Euromarket Cedel, S.A. Depository
67 Boulevard Grande-Duchesse
Charlotte
L-1010, Luxembourg
Finland Union Bank of Finland Ltd. Correspondent
Aleksanterinkatu 30,
Helsinki, Finland
France Banque Paribas Correspondent
BP 141
3 Rue D'Antin
75078 Paris, France
Germany Dresdner Bank A.G. Correspondent
Jurgen-Ponto-Platz 1 (Alt 207)
6000 Frankfurt 11,
Federal Republic of Germany
Greece Creditbank Correspondent
Banking Relations Division
40 Stadiou Street
GR10252 Athens
Hong Kong The HongKong & Shanghai Banking Correspondent
Corporation
1 Queen's Road Central,
Hong Kong
India The HongKong & Shanghai Banking Correspondent
Corporation
52/60 Mahatma Gandi Road
Bombay 400 001
Indonesia The HongKong & Shanghai Banking Correspondent
Corporation
P.O. Box 2307, Jakarta 1001,
Indonesia
Ireland Allied Irish Bank Correspondent
P.O. Box 518
I.F.S.C.
Dublin 1
Israel Israel Discount Bank Limited Correspondent
27-31 Yehuda Halevi Street
65-546 Tel Aviv
<PAGE>
Italy Citibank, N.A. Correspondent
Foro Buonaparte, 16
20121 Milano
Italy
Japan The Yasuda Trust & Banking Correspondent
Company, Limited
2-1 Yaesu, 1-Chome
Chuo-ku, Tokyo 103,
Japan
Korea Bank of Seoul Correspondent
10-1, Namdaeman-Ro 2-Ka
Chung-ku, Seoul, 100-092,
Korea
Malaysia The HongKong & Shanghai Banking Correspondent
Corporation Ltd.
2 Leboh Ampang
Kuala Lumpur, Malaysia
Mexico Citibank, N.A. Correspondent
Paseo de la Reforma 390,
Mexico City, 06695
Mexico
Netherlands Amsterdam-Rotterdam Bank, N.V. Correspondent
Kemelstede 2, 4817 St. Breda
New Zealand Australia and New Zealand Banking Correspondent
Group Ltd.
UDC Tower
113-119, The Terrace
Wellington, l
New Zealand
Norway Den norske Bank AS Correspondent
P.O. Box 1171 Sentrum
0107 OSLO 1
Pakistan Standard Chartered Bank Correspondent
Box 4896
Ismail Ibrahim Chundrigar Road
Karachi 2
<PAGE>
Philippines The HongKong & Shangahi Correspondent
Corporation Ltd.
San Miguel Avenue
Ortigas Centre
Pasig, Metro Manila
Portugal Banco Comercial Portugues Correspondent
Avienda Jose Malhoa
Lote 1686, 7th Floor
1000 Lisbon
Singapore United Overseas Bank Limited Correspondent
1 Bonham Street,
Raffles Place
Singapore
South Africa Standard Bank of South Africa Correspondent
Limited
P.O. Box 3720
Johannesburg 2000
Spain Banco Bilbao Vizcaya, S.A. Correspondent
Clara Del Ray, 26-3 Floor
28002 Madrid
Sri Lanka Standard Chartered Bank Correspondent
P.O. Box 27
17 Janadhipathi Mawatha
Colombo 1
Sweden Skandinaviska Enskilda Banken Correspondent
Jakobsgatan 6
Stockholm, S-106 40
Switzerland Union Bank of Switzerland Correspondent
Bahnhofstrasse, 45
8021 Zurich
Taiwan The HongKong & Shanghai Banking Correspondent
Corporation
333 Section 1, Keelung Road
Taipei 10548
Thailand The Siam Commercial Bank, Ltd. Correspondent
1060 Phetchaburi Road,
Bangkok 10400, Thailand
Turkey Citibank, N.A. Correspondent
Abdi Ipekci Cad. 65
80200 Macka
Istanbul
<PAGE>
United The Bank of New York Branch
Kingdom 3 Birchin Lane
London EC3V 9BY
Uruguay The Bank of Boston Correspondent
Zabala 1463
Casilla de Correo 90
Montevideo
Venezuela Citibank, N.A. Correspondent
Carmelitas a Altagracia,
Edificio Citibank,
Caracas, 1010, Venezuela
<PAGE>
EXHIBIT 99.9(a)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the day of 1994, by and between
Merrill Lynch Retirement Asset Builder Program, Inc., on behalf of itself and
its constituent Portfolios (the "Program") and Financial Data Services, Inc.
("FDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Program wishes to appoint FDS to be the Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent upon, and subject to,
the terms and provisions of this Agreement, and FDS is desirous of accepting
such appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this
Agreement, the Program and FDS agree as follows:
I. Appointment of FDS as Transfer Agent, Dividend Disbursing Agent and
-------------------------------------------------------------------
Shareholder Servicing Agent.
- ----------------------------
A. The Program hereby appoints FDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Program upon, and
subject to, the terms and provisions of this Agreement.
B. FDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Program, and
agrees to act as such upon, and subject to, the terms and provisions of
this Agreement.
II. Definitions.
------------
In this Agreement:
A. The term "Act" means the Investment Company Act of 1940, as
amended from time to time, and any rule or regulation thereunder;
<PAGE>
B. The term "Account" means any account of a Shareholder which shall
be a retirement account for which MLPF&S acts as custodian for benefit of
an identified customer;
C. The term "application" means an application made by a Shareholder
or prospective Shareholder respecting the opening of an Account;
D. The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a
Delaware corporation;
E. The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation;
F. The term "Officer's Instruction" means an instruction in writing
given on behalf of the Program to FDS, and signed on behalf of the Program
by the President, any Vice President, the Secretary or the Treasurer of the
Program;
G. The term "Prospectus" means the Prospectus and the Statement of
Additional Information of the Program as from time to time in effect;
H. The term "Shares" means shares of stock of the Program,
irrespective of class or series;
I. The term "Shareholder" means the holder of record of Shares;
J. The term "Plan Account" means an account opened by a Shareholder
or prospective Shareholder in respect to an open account, monthly payment
or withdrawal plan (in each case by whatever name referred to in the
Prospectus), and may also include an account relating to any other Plan if
and when provision is made for such plan in the Prospectus.
2
<PAGE>
III. Duties of FDS as Transfer Agent, Dividend Disbursing Agent and
--------------------------------------------------------------
Shareholder Servicing Agent.
- ----------------------------
A. Subject to the succeeding provisions of the Agreement, FDS hereby
agrees to perform the following functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Program;
1. Issuing, transferring and redeeming Shares;
2. Opening, maintaining, servicing and closing Accounts;
3. Acting as agent for the Program Shareholders and/or customers of
MLPF&S in connection with Plan Accounts, upon the terms and subject to the
conditions contained in the Prospectus and application relating to the
specific Plan Account;
4. Acting as agent of the Program and/or MLPF&S, maintaining such
records as may permit the imposition of such contingent deferred sales
charges as may be described in the Prospectus, including such reports as
may be reasonably requested by the Program with respect to such Shares as
may be subject to a contingent deferred sales charge;
5. Upon the redemption of Shares subject to such a contingent
deferred sales charge, calculating and deducting from the redemption
proceeds thereof the amount of such charge in the manner set forth in the
Prospectus. FDS shall pay, on behalf of MLFD, to MLPF&S such deducted
contingent deferred sales charges imposed upon all Shares maintained in the
name of MLPF&S, or maintained in the name of an account identified as a
customer account of MLPF&S. Sales charges imposed upon any other Shares
shall be paid by FDS to MLFD.
6. Exchanging the investment of an investor into, or from the shares
of other open-end investment companies or other series portfolios of the
Program, if any, if and to the extent permitted by the Prospectus at the
direction of such investor.
7. Processing redemptions;
8. Examining and approving legal transfers;
3
<PAGE>
9. Replacing lost, stolen or destroyed certificates representing
Shares, in accordance with, and subject to, procedures and conditions
adopted by the Program;
10. Furnishing such confirmations of transactions relating to their
Shares as required by applicable law;
11. Acting as agent for the Program and/or MLPF&S, furnishing such
appropriate periodic statements relating to Accounts, together with
additional enclosures, including appropriate income tax information and
income tax forms duly completed, as required by applicable law;
12. Acting as agent for the Program and/or MLPF&S, mailing annual,
semi-annual and quarterly reports prepared by or on behalf of the Program,
and mailing new Prospectuses upon their issue to Shareholders as required
by applicable law;
13. Furnishing such periodic statements of transactions effected by
FDS, reconciliations, balances and summaries as the Program may reasonably
request;
14. Maintaining such books and records relating to transactions
effected by FDS as are required by the Act, or by any other applicable
provision of law, rule or regulation, to be maintained by the Program or
its transfer agent with respect to such transactions, and preserving, or
causing to be preserved any such books and records for such periods as may
be required by any such law, rule or regulation and as may be agreed upon
from time to time between FDS and the Program. In addition, FDS agrees to
maintain and preserve master files and historical computer tapes on a daily
basis in multiple separate locations a sufficient distance apart to insure
preservation of at least one copy of such information;
15. Withholding taxes on non-resident alien Accounts, preparing and
filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
16. Reinvesting dividends for full and fractional shares and
disbursing cash dividends, as applicable.
B. FDS agrees to act as proxy agent in connection with the holding of
annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy
4
<PAGE>
statements in connection with the holding of such meetings as may be
required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Program the results of such tabulation accompanied
by appropriate certifications, and preparing and furnishing to the Program
certified lists of Shareholders as of such date, in such form and
containing such information as may be required by the Program.
C. FDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of FDS under this
Agreement with respect to Accounts.
D. FDS agrees to furnish to the Program such information and at such
intervals as is necessary for the Program to comply with the registration
and/or the reporting requirements (including applicable escheat laws) of
the Securities and Exchange Commission, Blue Sky authorities or other
governmental authorities.
E. FDS agrees to provide to the Program such information as may
reasonably be required to enable the Program to reconcile the number of
outstanding Shares between FDS's records and the account books of the
Program.
F. Notwithstanding anything in the foregoing provisions of this
paragraph, FDS agrees to perform its functions thereunder subject to such
modification (whether in respect of particular cases or in any particular
class of cases) as may from time to time be contained in an Officer's
Instruction.
IV. Compensation.
-------------
The charges for services described in this Agreement, including "out-of-
pocket" expenses, will be set forth in the Schedule of Fees attached hereto.
V. Right of Inspection.
--------------------
FDS agrees that it will in a timely manner make available to, and permit,
any officer, accountant, attorney or authorized agent of the Program to examine
and make transcripts and copies (including photocopies and computer or other
electronic information storage media and print-outs) of any and all of its books
and records which relate to any transaction or function performed by FDS under
or pursuant to this Agreement.
5
<PAGE>
VI. Confidential Relationship.
--------------------------
FDS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Program, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Program by way
of an Officer's Instruction.
VII. Indemnification.
----------------
The Program shall indemnify and hold FDS harmless from any loss, costs,
damage and reasonable expenses, including reasonable attorney's fees (provided
that such attorney is appointed with the Program's consent, which consent shall
not be unreasonably withheld), incurred by it resulting from any claim, demand,
action, or suit in connection with the performance of its duties hereunder,
provided that this indemnification shall not apply to actions or omissions of
FDS in cases of willful misconduct, failure to act in good faith or negligence
by FDS, its officers, employees or agents, and further provided, that prior to
confessing any claim against it which may be subject to this indemnification,
FDS shall give the Program reasonable opportunity to defend against said claim
in its own name or in the name of FDS. An action taken by FDS upon any
Officer's Instruction reasonably believed by it to have been properly executed
shall not constitute willful misconduct, failure to act in good faith or
negligence under this Agreement.
VIII. Regarding FDS.
--------------
A. FDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and
capabilities as may be reasonably determined by the Program to be necessary
for the satisfactory performance of the duties and responsibilities of FDS.
FDS warrants and represents that its officers and supervisory personnel
charged with carrying out its functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Program possess
the special skill and technical knowledge appropriate for that purpose.
FDS shall at all times exercise due care and diligence in the performance
of its functions as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent for the Program. FDS agrees that, in
determining whether it has exercised due care and diligence, its conduct
6
<PAGE>
shall be measured by the standard applicable to persons possessing such
special skill and technical knowledge.
B. FDS warrants and represents that it is duly authorized and
permitted to act as Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent under all applicable laws and that it will
immediately notify the Program of any revocation of such authority or
permission or of the commencement of any proceeding or other action which
may lead to such revocation.
IX. Termination.
------------
A. This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement
may be terminated by the Program or FDS (without penalty to the Program or
FDS) provided that the terminating party gives the other party written
notice of such termination at least sixty (60) days in advance, except that
the Program may terminate this Agreement immediately upon written notice to
FDS if the authority or permission of FDS to act as Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent has been revoked
or if any proceeding or other action which the Program reasonably believes
will lead to such revocation has been commenced.
B. Upon termination of this Agreement, FDS shall deliver all unissued
and canceled stock certificates representing Shares remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments
and other documents (including computerized or other electronically stored
information) made or accumulated in the performance of its duties as
Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent
for the Program along with a certified locator document clearly indicating
the complete contents therein, to such successor as may be specified in a
notice of termination or Officer's Instruction; and the Program assumes all
responsibility for failure thereafter to produce any paper, record or
documents so delivered and identified in the locator document, if and when
required to be produced.
7
<PAGE>
X. Amendment.
----------
Except to the extent that the performance by FDS or its functions under
this Agreement may from time to time be modified by an Officer's Instruction,
this Agreement may be amended or modified only by further written Agreement
between the parties.
XI. Governing Law.
--------------
This Agreement shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers and their respective
corporate seals hereunto duly affixed and attested, as of the day and year above
written.
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By:___________________________
Title:________________________
FINANCIAL DATA SERVICES, INC.
By:___________________________
Title:________________________
8
<PAGE>
Schedule of Fees
----------------
The Fund will pay to FDS an annual fee of $11.00 per Class A and Class D
Shareholder Account and $14.00 per Class C and Class D Shareholder Account in
addition to reimbursement for the out-of-pocket expenses incurred by FDS
pursuant to this Agreement.
<PAGE>
EXHIBIT 99.9(b)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the day of 1994, by and between MERRILL
LYNCH & CO., INC., a Delaware corporation ("ML&Co."), and MERRILL LYNCH
RETIREMENT ASSET BUILDER PROGRAM, INC., a Maryland corporation (the "Fund");
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, ML&Co. was incorporated under the laws of the State of Delaware on
March 27, 1973 under the corporate name "Merrill Lynch & Co., Inc." and has used
such name at all times thereafter;
WHEREAS, ML&Co. was duly qualified as a foreign corporation under the laws
of the State of New York on April 25, 1973 and has remained so qualified at all
times thereafter;
WHEREAS, the Fund was incorporated under the laws of the State of Maryland
on May 12, 1994; and
WHEREAS, the Fund desires to qualify as a foreign corporation under the
laws of the State of New York and has requested ML&Co. to give its consent to
the use of the name "Merrill Lynch" in the Fund's corporate name.
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, ML&Co. and the Fund hereby agree as follows:
<PAGE>
1. ML&Co. hereby grants the Fund a non-exclusive license to use the words
"Merrill Lynch" in its corporate name.
2. ML&Co. hereby consents to the qualification of the Fund as a foreign
corporation under the laws of the State of New York with the words "Merrill
Lynch" in its corporate name and agrees to execute such formal consents as may
be necessary in connection with such filing.
3. The non-exclusive license hereinabove referred to has been given and is
given by ML&Co. on the condition that it may at any time, in its sole and
absolute discretion, withdraw the non-exclusive license to the use of the words
"Merrill Lynch" in the name of the Fund; and, as soon as practicable after
receipt by the Fund of written notice of the withdrawal of such non-exclusive
license, and in no event later than ninety days thereafter, the Fund will change
its name so that such name will not thereafter include the words "Merrill Lynch"
or any variation thereof.
4. ML&Co. reserves and shall have the right to grant to any other company,
including without limitation, any other investment company, the right to use the
words "Merrill Lynch" or variations thereof in its name and no consent or
permission of the Fund shall be necessary; but, if required by an applicable law
of any state, the Fund will forthwith grant all requisite consents.
2
<PAGE>
5. The Fund will not grant to any other company the right to use a name
similar to that of the Fund or ML&Co. without the written consent of ML&Co.
6. Regardless of whether the Fund should hereafter change its name and
eliminate the words "Merrill Lynch" or any variation thereof from such name, the
Fund hereby grants to ML&Co. the right to cause the incorporation of other
corporations or the organization of voluntary associations which may have names
similar to that of the Fund or to that to which the Fund may change its name and
to own all or any portion of the shares of such other corporations or
associations and to enter into contractual relationships with such other
corporations or associations, subject to any requisite approval of a majority of
the Fund's shareholders and the Securities and Exchange Commission and subject
to the payment of a reasonable amount to be determined at the time of use, and
the Fund agrees to give and execute any such formal consents or agreements as
may be necessary in connection therewith.
7. This Agreement may be amended at any time by a writing signed by the
parties hereto.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH & CO., INC.
By_____________________________
MERRILL LYNCH RETIREMENT ASSET
BUILDER PROGRAM, INC.
By_____________________________
4
<PAGE>
EXHIBIT 99.10
December 16, 1994
Merrill Lynch Retirement Asset Builder Program, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Dear Sir or Madam:
We have acted as counsel for Merrill Lynch Retirement Asset Builder
Program, Inc., a corporation organized under the laws of the State of Maryland
(the "Program"), in connection with the organization of the Program and its
registration as an open-end investment company under the Investment Company Act
of 1940. This opinion is being furnished in connection with the registration of
an indefinite number of shares of common stock, designated Class A, Class B,
Class C and Class D, par value $0.10 per share, of the Program (the "Shares")
under the Securities Act of 1933, which registration is being effected pursuant
to a registration statement on Form N-1A (File No. 33-53887), as amended (the
"Registration Statement").
<PAGE>
As counsel for the Program, we are familiar with the proceedings taken by
it in connection with the authorization, issuance and sale of the Shares. In
addition, we have examined and are familiar with the Articles of Incorporation
of the Program, as amended, the By-Laws of the Program, as amended, and such
other documents as we have deemed relevant to the matters referred to in this
opinion.
Based upon the foregoing, we are of the opinion that the Shares, upon
issuance and sale in the manner referred to in the Registration Statement for
consideration not less than the par value thereof, will be legally issued, fully
paid and non-assessable shares of common stock of the Program.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the prospectus and
statement of additional information constituting parts thereof.
Very truly yours,
/s/ Brown & Wood
2
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch, Retirement Asset Builder, Inc.
We consent to the use in Pre-Effective Amendment No. 1 to Registration Statement
No. 33-53887 of our reports dated November 22, 1994 appearing in the Statement
of Additional Information, which is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Princeton, New Jersey
December 16, 1994
<PAGE>
EXHIBIT 99.13
CERTIFICATE OF SOLE STOCKHOLDER
Merrill Lynch Asset Management, L.P. ("MLAM"), the holder of 5,000 Class A
shares of common stock, par value $0.10 per share, 5,000 Class B shares of
common stock, par value $0.10 per share, 5,000 Class C shares of common stock,
par value $0.10 per share and 5,000 Class D shares of common stock, par value
$0.10 per share of each of the Fundamental Value, Quality Bond, U.S. Government
Securities and Global Opportunity Portfolios (each a "Portfolio") of Merrill
Lynch Retirement Asset Builder Program, Inc. (the "Program"), a Maryland
corporation, hereby does confirm to the Program its representation that it
purchased such shares for investment purposes, with no present intention of
redeeming or reselling any portion thereof, and further does agree that if it
redeems any portion of such shares prior to the amortization of the
organizational expenses of each of the Portfolios, the proceeds thereof will be
reduced by the proportionate amount of unamortized organizational expenses which
the number of shares being redeemed bears to the number of shares initially
purchased and outstanding at the time of redemption. MLAM further agrees that
in the event such shares are sold or otherwise transferred to any other party,
that prior to such sale or transfer MLAM will obtain on behalf of each of the
Portfolios an agreement from such other party to comply with the foregoing as to
the reduction of redemption proceeds and to obtain a similar agreement from any
transferee of such party.
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: /s/ Mark B. Goldfus
---------------------------
Vice President
Dated: November 16, 1994
<PAGE>
EXHIBIT 99.15(a)
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the __ day of December, 1994, by and between
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation
(the "Program"), and Merrill Lynch Funds Distributor, Inc., a Delaware
corporation ("MLFD").
W I T N E S S E T H :
--------------------
WHEREAS, the Program intends to engage in business as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of
which will offer separate classes of shares of common stock, par value $0.10 per
share (the "Shares"), to retirement accounts for which Merrill Lynch, Pierce
Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Program proposes to enter into a Class B Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Program in the offer and sale of Class B
shares of Beneficial Interest, par value $0.10 per share (the "Class B shares"),
of the [Name of Portfolio] [the "Portfolio"] series of the Program to the
public; and
WHEREAS, the Fund desires to adopt this Class B Shares Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant
to which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class B Shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Portfolio and
its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the
terms of the Plan in accordance with Rule 12b-1 under the Investment Company
Act on the following terms and conditions:
<PAGE>
1. The Program shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of _____% of average daily net assets
of the Portfolio relating to Class B shares to compensate MLFD and securities
firms with which MLFD enters into related agreements pursuant to Paragraph 3
hereof ("SubAgreements") for providing account maintenance activities with
respect to Class B shareholders of the Portfolio. Expenditures under the Plan
may consist of payments to financial consultants for maintaining accounts in
connection with Class B shares of the Portfolio and payment of expenses incurred
in connection with such account maintenance activities including the costs of
making services available to shareholders including assistance in connection
with inquiries related to shareholder accounts.
2. The Program shall pay MLFD a distribution fee under the Plan at the end
of each month at the annual rate of _____% of average daily net assets of the
Portfolio relating to Class B shares to compensate MLFD and securities firms
with which MLFD enters into related Sub-Agreements for providing sales and
promotional activities and services. Such activities and services will relate to
the sale, promotion and marketing of the Class B shares of the Portfolio. Such
expenditures may consist of sales commissions to financial consultants for
selling Class B shares of the Fund, compensation, sales incentives and payments
to sales and marketing personnel, and the payment of expenses incurred in its
sales and promotional activities, including advertising expenditures related to
the Portfolio and the costs of preparing and distributing promotional materials.
The distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Program hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Program for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-1
2
<PAGE>
regarding the disbursement of the account maintenance fee and the distribution
fee during such period.
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class B voting securities of the Program.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Program and (b) those Directors of the Program who are not "interested
persons" of the Program, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting or meetings called for the purpose of voting on this Plan and such
related agreements.
7. This Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Paragraph 6.
8. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class B voting
securities of the Portfolio.
9. The Plan may not be amended to increase materially the rate of
payments provided for herein unless such amendment is approved by at least a
majority, as defined in the Investment Company Act, of the outstanding Class B
voting securities of the Portfolio, and by the Directors of the Program in the
manner provided for in Paragraph 6 hereof, and no material amendment to the Plan
shall be made unless approved in the manner provided for approval and annual
renewal in Paragraph 6 hereof.
10. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons, as defined in the Investment Company
Act, of the Program shall be committed to the discretion of the Directors who
are not interested persons.
11. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of this Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Plan as of the
date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By______________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By______________________________________
Title:
4
<PAGE>
CLASS B SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the ___ day of ___________, 1994 by and between
Merrill Lynch Funds Distributor, Inc. (the "MLFD"), and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a Delaware corporation ("Securities Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement
Asset Builder Program, Inc., a Maryland corporation (the "Program"), pursuant to
which it acts as the exclusive distributor for the sale of Class B shares of
common stock, par value $0.10 per share (the "Class B shares"), of the [Name of
Portfolio] [the "Portfolio"] Series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class B Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") pursuant to which MLFD receives an account
maintenance fee from the Portfolio at the annual rate of ___% of average daily
net assets of the Portfolio relating to Class B shares for account maintenance
services related to the Class B shares of the Portfolio and a distribution fee
from the Portfolio at the annual rate of ___% of average daily net assets of the
Portfolio relating to Class B shares for providing sales and promotional
activities and services related to the distribution of Class B shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Portfolio Class B shareholders and the Securities Firm is willing to perform
such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities with
respect to the Class B shares of the Portfolio of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class B shares of the Portfolio, and
incur distribution expenditures of the types referred to in paragraph 2 of the
Plan.
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities
<PAGE>
Firm an account maintenance fee and a distribution fee at the end of each
calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Program and (b) those
Directors of the Fund who are not "interested persons" of the Program, as
defined in the Act, and have no direct or indirect financial interest in the
operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting or meetings called for the purpose of
voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By___________________________________
Title:
2
<PAGE>
EXHIBIT 99.15(b)
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of , 1994, by and between
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation
(the "Program"), and Merrill Lynch Funds Distributor, Inc., a Delaware
corporation ("MLFD").
W I T N E S S E T H:
-------------------
WHEREAS, the Program is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of
which will offer separate classes of shares of common stock, par value $0.10 per
share (the "Shares"), to retirement accounts for which Merrill Lynch, Pierce,
Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Program proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Program in the offer and sale of Class C
shares of beneficial interest, par value $0.10 per share (the "Class C shares"),
of the [Name of Portfolio] (the "Portfolio") series of the Program to the
public; and
WHEREAS, the Program desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Program will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Portfolio's Class C shares; and
WHEREAS, the Directors of the Program have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Portfolio and
its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the
terms of, the Plan in accordance with Rule 12b-1
<PAGE>
under the Investment Company Act on the following terms and conditions:
1. The Program shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Portfolio relating to Class C shares to compensate MLFD and securities firms
with which MLFD enters into related agreements pursuant to Paragraph 3 hereof
("Sub-Agreements") for providing account maintenance activities with respect to
Class C shareholders of the Portfolio. Expenditures under the Plan may consist
of payments to financial consultants for maintaining accounts in connection with
Class C shares of the Portfolio and payment of expenses incurred in connection
with such account maintenance activities including the costs of making services
available to shareholders including assistance in connection with inquiries
related to shareholder accounts.
2. The Program shall pay MLFD a distribution fee under the Plan at the end
of each month at the annual rate of ____% of average daily net assets of the
Portfolio relating to Class C shares to compensate MLFD and securities firms
with which MLFD enters into related Sub-Agreements for providing sales and
promotional activities and services. Such activities and services will relate
to the sale, promotion and marketing of the Class C shares of the Portfolio.
Such expenditures may consist of sales commissions to financial consultants for
selling Class C shares of the Portfolio, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of expenses incurred
in its sales and promotional activities, including advertising expenditures
related to the Portfolio and the costs of preparing and distributing promotional
materials. The distribution fee may also be used to pay the financing costs of
carrying the unreimbursed expenditures described in this Paragraph 2. Payment
of the distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Program hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
2
<PAGE>
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Program for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the Portfolio.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Program and (b) those Directors of the Program who are not "interested
persons" of the Program, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Directors") cast in person at a
meeting or meetings called for the purpose of voting on the Plan and such
related agreements.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting
securities of the Portfolio.
9. The Plan may not be amended to increase materially the rate of payments
provided for herein unless such amendment is approved by at least a majority, as
defined in the Investment Company Act, of the outstanding Class C voting
securities of the Portfolio, and by the Directors of the Program in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Program shall be committed to the discretion of the Directors who are not
interested persons.
11. The Portfolio shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Paragraph 4 hereof, for a period of
not less than six years from the date of
3
<PAGE>
the Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
4
<PAGE>
CLASS C SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of , 1994, by and between
Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD"), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation
("Securities Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch
Retirement Asset Builder Program, Inc., a Maryland corporation (the "Program"),
pursuant to which it acts as the exclusive distributor for the sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of the
[Name of Portfolio] (the "Portfolio") series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class C Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an
account maintenance fee from the Portfolio at the annual rate of ____% of
average daily net assets of the Portfolio relating to Class C shares for account
maintenance activities related to Class C shares of the Portfolio and a
distribution fee from the Portfolio at the annual rate of ____% of average daily
net assets of the Portfolio relating to Class C shares for providing sales and
promotional activities and services related to the distribution of Class C
shares of the Portfolio; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Portfolio's Class C shareholders and the Securities Firm is willing to perform
such activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities
and services with respect to the Class C shares of the Portfolio and incur
expenditures in connection with such activities and services of the types
referred to in Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities
and services with respect to the sale of the Class C shares of the Portfolio,
and incur distribution expenditures, of the types referred to in Paragraph 2 of
the Plan.
<PAGE>
3. As compensation for its activities and services performed under
this Agreement, MLFD shall pay the Securities Firm an account maintenance fee
and a distribution fee at the end of each calendar month in an amount agreed
upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Program and (b) those
Directors of the Program who are not "interested persons" of the Program, as
defined in the Act, and have no direct or indirect financial interest in the
operation of the Plan, this Agreement or any agreements related to the Plan or
this Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner provided
for approval of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
2
<PAGE>
EXHIBIT 99.15(c)
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
PURSUANT TO RULE 12b-1
DISTRIBUTION PLAN made as of the day of , 1994, by and between
Merrill Lynch Retirement Asset Builder Program, Inc., a Maryland corporation
(the "Program"), and Merrill Lynch Portfolios Distributor, Inc., a Delaware
corporation ("MLFD").
W I T N E S S E T H :
--------------------
WHEREAS, the Program is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
WHEREAS, the Program is authorized to establish separate ("Series") each of
which will offer separate classes of shares of common stock, par value $0.10 per
share (the "Shares"), to retirement plans for which Merrill Lynch, Pierce,
Fenner & Smith Incorporated acts as custodian; and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Program proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Program in the offer and sale of Class D
shares of beneficial interest, par value $0.10 per share (the "Class D shares"),
of the [NAME OF PORTFOLIO] (the "Portfolio") series of the Program to the
public; and
WHEREAS, the Program desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Program will pay an account maintenance fee to MLFD with respect to
the Portfolio's Class D shares; and
WHEREAS, the Directors of the Program have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Portfolio and
its shareholders.
NOW, THEREFORE, the Program hereby adopts, and MLFD hereby agrees to the
terms of, the Plan in accordance with Rule 12b-1
<PAGE>
under the Investment Company Act on the following terms and conditions:
1. The Program shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Portfolio relating to Class D shares to compensate MLFD and securities firms
with which MLFD enters into related agreements ("Sub-Agreements") pursuant to
Paragraph 2 hereof for providing account maintenance activities with respect to
Class D shareholders of the Portfolio. Expenditures under the Plan may consist
of payments to financial consultants for maintaining accounts in connection with
Class D shares of the Portfolio and payment of expenses incurred in connection
with such account maintenance activities including the costs of making services
available to shareholders including assistance in connection with inquiries
related to shareholder accounts.
2. The Program hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as is
reasonably necessary to permit MLFD to comply with the reporting requirements
set forth in Paragraph 3 hereof.
3. MLFD shall provide the Program for review by the Board of Directors,
and the Directors shall review, at least quarterly, a written report complying
with the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Portfolio.
5. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Program and (b) those Directors of the Program who are not "interested
persons" of the Program, as defined in the Investment Company Act, and have no
direct or indirect financial interest in the operation of this Plan or any
agreements related to it (the "Rule 12b-1 Directors"), cast in person at a
meeting or meetings called for the purpose of voting on the Plan and such
related agreements.
2
<PAGE>
6. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
7. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting
securities of the Portfolio.
8. The Plan may not be amended to increase materially the rate of payments
provided for in Paragraph 1 hereof unless such amendment is approved by at least
a majority, as defined in the Investment Company Act, of the outstanding Class D
voting securities of the Portfolio, and by the Directors of the Program in the
manner provided for in Paragraph 5 hereof, and no material amendment to the
Plan shall be made unless approved in the manner provided for approval and
annual renewal in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Program shall be committed to the discretion of the Directors who are not
interested persons.
10. The Portfolio shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Paragraph 3 hereof, for a period of
not less than six years from the date of the Plan, or the agreements or such
report, as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH RETIREMENT ASSET BUILDER PROGRAM, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
3
<PAGE>
CLASS D SHARES DISTRIBUTION PLAN SUB-AGREEMENT
AGREEMENT made as of the day of , 1994, by and between Merrill
Lynch Funds Distributor, Inc. a Delaware corporation ("MLFD"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation ("Securities
Firm").
W I T N E S S E T H :
--------------------
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Retirement
Asset Builder Program, Inc., a Maryland corporation (the "Program"), pursuant to
which it acts as the exclusive distributor for the sale of Class D shares of
common stock, par value $0.10 per share (the "Class D shares"), of [NAME OF
PORTFOLIO] (the "Portfolio") series of the Program; and
WHEREAS, MLFD and the Program have entered into a Class D Shares
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "Act"), pursuant to which MLFD receives an
account maintenance fee from the Portfolio at the annual rate of 0.25% of
average daily net assets of the Portfolio relating to Class D shares for
providing account maintenance activities and services with respect to Class D
shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Portfolio's Class D
shareholders and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class D shares of the Portfolio and incur
expenditures in connection with such activities and services, of the types
referred to in Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD
shall pay the Securities Firm a fee at the end of each calendar month in an
amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule
<PAGE>
12b-1 regarding the disbursement of the fee during such period referred to in
Paragraph 3 of the Plan.
4. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Program and (b) those
Directors of the Program who are not "interested persons" of the Program, as
defined in the Act, and have no direct or indirect financial interest in the
operation of the Plan, this Agreement or any agreements related to the Plan or
this Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
2
