<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1994
SECURITIES ACT FILE NO. 33-55843
INVESTMENT COMPANY ACT FILE NO. 811-07155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 2 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
800 SCUDDERS MILL ROAD 08536
PLAINSBORO, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, 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 FUND: PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD MICHAEL J. HENNEWINKEL, ESQ.
ONE WORLD TRADE CENTER MERRILL LYNCH ASSET MANAGEMENT
NEW YORK, NEW YORK 10048-0557
ATTENTION: THOMAS R. SMITH, JR., ESQ. P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
FRANK P. BRUNO, ESQ.
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
----------------
An indefinite number of shares of common stock of the Registrant is being
registered by this Registration Statement 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 MIDDLE EAST/AFRICA FUND, 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; Prospectus Summary
Item 3. Condensed Financial
Information............. Not Applicable
Item 4. General Description of
Registrant.............. Prospectus Summary; Investment Objective
and Policies; Additional Information
Item 5. Management of the Fund.. Fee Table; Management of the Fund; Inside
Back Cover Page
Item 5A. Management's Discussion
of Fund Performance..... Not Applicable
Item 6. Capital Stock and Other
Securities.............. Cover Page; Purchase of Shares; Redemption
of Shares; Shareholder Services; Additional
Information
Item 7. Purchase of Securities
Being Offered........... Cover Page; Fee Table; Prospectus Summary;
Merrill Lynch Select PricingSM System;
Purchase of Shares; Shareholder Services;
Additional Information; Inside Back Cover
Page
Item 8. Redemption or
Repurchase.............. Fee Table; Prospectus Summary; Merrill
Lynch Select PricingSM System; Purchase of
Shares; Redemption of Shares
Item 9. Pending Legal
Proceedings............. Not Applicable
PART B
Item 10. Cover Page.............. Cover Page
Item 11. Table of Contents....... Back Cover Page
Item 12. General Information and
History................. Not Applicable
Item 13. Investment Objective and
Policies................ Investment Objective and Policies
Item 14. Management of the Fund.. Management of the Fund
Item 15. Control Persons and
Principal Holders of
Securities.............. Management of the Fund; General Information
Item 16. Investment Advisory and
Other Services.......... Management of the Fund; Purchase of Shares;
General Information
Item 17. Brokerage Allocation and
Other Practices......... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other
Securities.............. Purchase of Shares; Redemption of Shares;
Shareholder Services; General Information--
Description of Shares
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered........... Purchase of Shares; Redemption of Shares;
Determination of Net Asset Value;
Shareholder Services; General Information--
Computation of Offering Price Per Share
Item 20. Tax Status.............. Taxes
Item 21. Underwriters............ Purchase of Shares
Item 22. Calculation of
Performance Data........ Performance Data
Item 23. Financial Statements.... Independent Auditors' Report; Statement of
Assets and Liabilities
PART C Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement.
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 18, 1994
PROSPECTUS
DECEMBER , 1994
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
--------------
Merrill Lynch Middle East/Africa Fund, Inc. (the "Fund") is a non-
diversified, open-end management investment company seeking long-term capital
appreciation by investing primarily in equity and debt securities of corporate
and governmental issuers in countries located in the Middle East and Africa
("Middle Eastern/African countries"). For purposes of its investment objective,
the Fund may invest in the securities of issuers in all countries in the Middle
East and Africa. The Fund expects initially to emphasize investments in the
securities of issuers in Morocco, South Africa, Turkey, Israel, Jordan and
Zimbabwe. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in equity or debt securities of corporate and
governmental issuers in Middle Eastern/African countries. The Fund may employ a
variety of derivative investments and techniques to hedge against market and
currency risk. There can be no assurance that the Fund's investment objective
will be achieved.
Investments in securities of issuers in Middle Eastern/African countries
involve risks and special considerations not typically associated with
investments in securities of U.S. issuers. The Fund may invest without
limitation in debt securities that are in the lower rating categories or
unrated and may be in default as to repayment of principal and/or payment of
interest at the time of acquisition by the Fund. These securities commonly are
referred to as "junk bonds". Such securities generally involve greater
volatility of price and risks to principal and income than securities in the
higher rating categories. See "Risk Factors and Special Considerations".
(Continued 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 Fund that is
relevant to making an investment in the Fund. This Prospectus should be
retained for future reference. A statement containing additional information
about the Fund, dated December , 1994 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange Commission and
is available, without charge, by calling or by writing the Fund at the above
telephone number or address. The Statement of Additional Information is hereby
incorporated by reference into this Prospectus.
--------------
MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
<PAGE>
(Continued from Cover Page)
Pursuant to the Merrill Lynch Select PricingSM System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select Pricing 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 System".
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), P.O. Box 9011,
Princeton, New Jersey 08543-9011 ((609) 282-2800), and other securities
dealers which have entered into selected dealer agreements with the
Distributor, including Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), will solicit subscriptions for shares of the Fund during a
period expected to end on December 22, 1994, unless extended. On the fifth
business day after the conclusion of the subscription period, the
subscriptions will be payable, the shares will be issued and the Fund will
commence operations. The public offering price of the shares during the
subscription offering will be $10.00 per share in the case of Class B and
Class C shares and $10.00 per share plus a sales charge of 5.25%, subject to
reductions on purchases in single transactions of $25,000 or more, in the case
of Class A and Class D shares. After the completion of the initial
subscription offering, the Fund will engage in a continuous offering of its
shares at a price equal to the next determined net asset value per share in
the case of Class B and Class C shares and the next determined net asset value
per share, plus a sales charge subject to reductions as noted above, in the
case of Class A and Class D shares. Shareholders may redeem their shares at
any time at the next determined net asset value, provided that shares redeemed
within 12 months of purchase will be subject to a redemption fee to be
retained by the Fund of 2.0% of the net asset value at the time of redemption.
In addition, the Class B shares may be subject to a contingent deferred sales
charge (a "CDSC") of up to 4.0% if redeemed within four years of purchase and
are subject to ongoing account maintenance and distribution fees. The Class C
shares may be subject to a CDSC of 1.0% if redeemed within one year of
purchase and are subject to ongoing account maintenance and distribution fees.
The Class D shares are subject to an ongoing account maintenance fee. The
minimum initial purchase during the subscription and continuous offerings is
$1,000 and the minimum subsequent purchase in the continuous offering is $50,
except for retirement plans, where the minimum initial purchase is $100 and
the minimum subsequent purchase is $1. Merrill Lynch may charge its customers
a processing fee (presently $4.85) for confirming purchases and repurchases.
Purchases and redemptions directly through Financial Data Services, Inc., the
Fund's transfer agent (the "Transfer Agent"), are not subject to the
processing fee. See "Purchase of Shares" and "Redemption of Shares".
2
<PAGE>
FEE TABLE
A general comparison of the sales arrangements and other nonrecurring and
recurring expenses applicable to shares of the Fund follows:
<TABLE>
<CAPTION>
CLASS
A(A) CLASS B(B) CLASS C CLASS D
-------- ---------------------------------------- ------------ --------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Pur-
chases (as a percentage of offering
price)................................ 5.25%(c) None None 5.25%(c)
Sales Charge Imposed on Dividend Rein-
vestments............................. None None None None
Deferred Sales Charge (as a percentage
of original purchase price or
redemption proceeds, whichever is
lower)................................ None(d) 4.0% during the first year 1.0% for one None(d)
decreasing 1.0% annually to year
0.0% after the fourth year
Redemption Fee Payable to the Fund (as
a percentage of amount redeemed)(e)... 2.00% 2.00% 2.00% 2.00%
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees(f)..................... 1.00% 1.00% 1.00% 1.00%
Rule 12b-l Fees(g):
Account Maintenance Fees............... None 0.25% 0.25% 0.25%
Distribution Fees..................... None 0.75% 0.75% None
(Class B shares convert to Class D
shares automatically after approximately
eight years and cease being subject to
distribution fees)
Other Expenses(h):
Custodial Fees........................ 0.41% 0.41% 0.41% 0.41%
Shareholder Servicing Costs(i)........ 0.02% 0.02% 0.02% 0.02%
Miscellaneous......................... 0.22% 0.22% 0.22% 0.22%
---- ---- ---- ----
Total Other Expenses................ 0.65% 0.65% 0.65% 0.65%
---- ---- ---- ----
Total Fund Operating Expenses.......... 1.65% 2.65% 2.65% 1.90%
==== ==== ==== ====
</TABLE>
- --------
(a) Class A shares are sold to a limited group of investors, including
existing Class A shareholders, certain retirement plans and investment
programs. See "Purchase of Shares--Initial Sales Charge Alternatives--
Class A and Class D Shares" on page 35.
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C shares on page 37.
(c) Reduced for purchases of $25,000 and over. Class A or Class D purchases of
$1,000,000 or more may not be subject to an initial sales charge. See
"Purchase of Shares--Initial Sales Charge Alternatives--Class A and Class
D Shares" on page 35.
(d) Class A and Class D shares are not subject to a CDSC, except that
purchases of $1,000,000 or more which may not be subject to an initial
sales charge instead may be subject to a CDSC of 1.0% of amounts redeemed
within the first year of purchase.
(e) Applies only to redemptions made within one year of purchase. See
"Redemption of Shares" on page 41.
(f) See "Management of the Fund--Management and Advisory Arrangements" on page
31.
(g) See "Purchase of Shares--Distribution Plans" on page 39.
(h) Information under "Other Expenses" is estimated for the Fund's first
fiscal year.
(i) See "Management of the Fund--Transfer Agency Services" on page 32.
3
<PAGE>
EXAMPLE:
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES PAID FOR
THE PERIOD OF:
------------------------------
1 YEAR 3YEARS 5 YEARS 10 YEARS
------ ------ ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1,000 investment including, the maximum
$52.50 initial sales charge (Class A and Class
D shares only) and assuming (1) The Total Fund
Operating Expenses for each class set forth
above, (2) a 5% annual return throughout the
periods and (3) redemption at the end of the
period:
Class A..................................... $87* $102 $137 $238
Class B..................................... $87* $102 $141 $280**
Class C..................................... $57* $ 82 $141 $298
Class D..................................... $90* $109 $150 $263
An investor would pay the following expenses on
the same $1,000 investment assuming no redemp-
tion at the end of the period:
Class A..................................... $68 $102 $137 $238
Class B..................................... $27 $ 82 $141 $280**
Class C..................................... $27 $ 82 $141 $298
Class D..................................... $71 $109 $150 $263
</TABLE>
- --------
* Reflects the 2.0% redemption fee payable to the Fund charged on redemptions
made within one year of purchase.
** Assumes conversion to Class D shares approximately eight years after
purchase.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The expenses set forth under "Other Expenses" are based on
estimated amounts through the end of the Fund's first fiscal year on an
annualized basis. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF 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. (the "NASD"). Merrill Lynch may charge its
customers a processing fee (presently $4.85) for confirming purchases and
repurchases. Purchases and redemptions directly through the Transfer Agent are
not subject to the processing fee. See "Purchase of Shares" and "Redemption of
Shares".
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus and in the Statement
of Additional Information.
THE FUND
Merrill Lynch Middle East/Africa Fund, Inc. (the "Fund") is a non-
diversified, open-end management investment company investing primarily in
equity and debt securities of corporate and governmental issuers in countries
located in the Middle East and Africa ("Middle Eastern/African countries").
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation by investing primarily in equity and debt securities of corporate
and governmental issuers in Middle Eastern/African countries. For purposes of
its investment objective, the Fund may invest in the securities of issuers in
all countries in the Middle East and Africa. The Fund initially expects to
emphasize investments in the securities of issuers in Morocco, South Africa,
Turkey, Israel, Jordan and Zimbabwe. Under normal market conditions, at least
65% of the Fund's total assets will be invested in equity or debt securities of
corporate and governmental issuers in Middle Eastern/African countries. For
purposes of the Fund's investment objective and policies, the term "Middle
Eastern countries" includes, but is not limited to: Israel, Jordan, Egypt,
Syria, Lebanon, Turkey, Saudi Arabia, Iraq, Iran, Libya, Kuwait, Qatar,
Bahrain, Yemen, Oman and the United Arab Emirates, and the term "African
countries" includes all countries generally considered as part of the African
continent. See "Investment Objective and Policies."
The Fund is authorized to employ a variety of derivative investments and
techniques to hedge against market and currency risks, although at the present
time suitable hedging instruments may not be available with respect to
securities of companies or governments in Middle Eastern/African countries at
all or on a timely basis and on acceptable terms. Furthermore, even if hedging
techniques are available, the Fund only will engage in hedging activities from
time to time and may not necessarily be engaging in hedging activities when
market or currency movements occur. There are certain risks associated with the
use of futures and options to hedge investment portfolios. See Appendix A to
this Prospectus--"Futures, Options and Forward Foreign Exchange Transactions--
Risk Factors in Futures, Options and Currency Transactions."
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in securities of Middle Eastern/African issuers involves risks and
special considerations not typically associated with investment in securities
of U.S. issuers, including the risks associated with international investing
generally, such as currency fluctuations; the risks of investing in countries
with smaller capital markets, such as limited liquidity, price volatility and
restrictions on foreign investment; and the risks associated with emerging
economies of developing countries, including significant political and social
uncertainties, government involvement in the economies, the possibility of
asset expropriation or confiscatory levels of taxation, reliance upon exports
of primary commodities and different legal systems from the United States. See
"Risk Factors and Special Considerations".
The Fund has not established any rating criteria for the debt securities in
which it may invest and such securities may not be rated at all for
creditworthiness. Securities rated in the medium to low rating categories of
nationally recognized statistical rating organizations and unrated securities
of comparable quality are
5
<PAGE>
speculative and generally involve greater volatility of price than securities
in higher rating categories. Also, the Fund may invest in debt securities of
corporate or governmental issuers that are in default. See "Risk Factors and
Special Considerations."
THE MANAGER
Merrill Lynch Asset Management, L.P., doing business as Merrill Lynch Asset
Management (the "Manager" or "MLAM"), which is owned and controlled by Merrill
Lynch & Co., Inc. ("ML & Co."), acts as the manager for the Fund and provides
the Fund with management services. The Manager or an affiliate, Fund Asset
Management, L.P. ("FAM"), acts as the investment adviser for over 100 other
registered investment companies. The Manager and FAM also offer portfolio
management and portfolio analysis services to individuals and institutions. As
of November 2, 1994, the Manager and FAM had a total of approximately $167.6
billion in investment company and other portfolio assets under management,
including accounts of certain affiliates of the Manager. See "Management of the
Fund--Management and Advisory Arrangements".
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund may be purchased during the subscription offering at
$10.00 per share and during the continuous offering at a price equal to the
next determined net asset value per share, plus a sales charge which, at the
election of the purchaser, may be imposed (i) in the case of Class A or Class D
shares, at the time of the purchase or (ii) in the case of Class B or Class C
shares, on a deferred basis. Class D shares pay an ongoing account maintenance
fee, and Class B and Class C shares pay ongoing account maintenance and
distribution fees. See "Purchase of Shares".
Shareholders may redeem their shares at any time at the next determined net
asset value, except that the redemption price for shares redeemed during the
first year after purchase will be subject to the redemption fee discussed below
and Class B shares may be subject to a CDSC on shares redeemed within four
years of purchase and Class C shares may be subject to a CDSC on shares
redeemed within one year of purchase. See "Redemption of Shares".
The Fund is designed for long-term investors. To discourage short-term
trading in shares of the Fund, shares redeemed within 12 months of purchase are
subject to a redemption fee of 2.0% of the net asset value of the shares being
redeemed. The redemption fee is retained by the Fund and may be used to cover
the costs of liquidating portfolio securities.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of its net
investment income. Dividends from such net investment income are paid at least
annually. All net realized long-term and short-term capital gains, if any, will
be distributed to the Fund's shareholders at least annually. See "Additional
Information--Dividends".
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined by the Manager once daily as of
4:15 P.M., New York time, on each day during which the New York Stock Exchange
is open for trading. See "Additional Information--Determination of Net Asset
Value".
6
<PAGE>
MERRILL LYNCH SELECT PRICINGSM SYSTEM
The Fund offers four classes of shares under the Merrill Lynch Select
PricingSM System. The shares of each class may be purchased during the
subscription offering at $10.00 per share and during the continuous offering at
a price equal to the next determined net asset value per share, subject during
both the subscription offering and the continuous offering 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 PricingSM System is used by more than 50
mutual funds advised by MLAM or an affiliate of MLAM, FAM. Funds advised by
MLAM or FAM are referred to herein as "MLAM-advised mutual funds".
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on the Class D shares, will be imposed directly against those classes
and not against all assets of the Fund and, accordingly, such charges will not
affect the net asset value of any other class or have any impact on investors
choosing another sales charge option. Dividends paid by the Fund for each class
of shares will be calculated in the same manner at the same time and will
differ only to the extent that account maintenance and distribution fees and
any incremental transfer agency costs relating to a particular class are borne
exclusively by that class.
Investors should understand that the purpose and function of the initial
sales charges with respect to the Class A and Class D shares are the same as
those of the deferred sales charges with respect to the Class B and Class C
shares in that the sales charges applicable to each class provide for the
financing of the distribution of the shares of the Fund. The distribution-
related revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares.
The following table sets forth a summary of the distribution arrangements for
each class of shares under the Merrill Lynch Select PricingSM System, followed
by a more detailed description of each class and a discussion of the factors
that investors should consider in determining the method of purchasing shares
under the Merrill Lynch Select PricingSM System that the investor believes is
most beneficial under his or her particular circumstances. More detailed
information as to each class of shares is set forth under "Purchase of Shares".
7
<PAGE>
<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
years, at a rate of shares automatically
4.0% during the first after approximately
year, decreasing 1.0% eight 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 $l,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.
Class A:
Class A shares incur an initial sales charge when they are purchased
and bear no ongoing distribution or account maintenance fees. Class A
shares are offered to a limited group of investors and also will be
issued upon reinvestment of dividends on outstanding Class A shares.
Eligible investors include certain retirement plans and participants in
certain investment programs. In addition, Class A shares will be
offered to 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 to their directors and employees and to members of the
Boards of MLAM-advised mutual funds. The maximum initial sales charge
is 5.25%, 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 shares will be subject to a
CDSC of 1.0% if the shares are redeemed within one year after purchase.
Sales charges also are reduced under a right of accumulation which
takes into account the investor's holdings of all classes of all MLAM-
advised mutual funds. See "Purchase of Shares--Initial Sales Charge
Alternatives--Class A and Class D Shares".
Class B:
Class B shares do not incur a sales charge when they are purchased, but
they are subject to an ongoing account maintenance fee of 0.25% of the
Fund's average net assets attributable to the Class B shares, an
ongoing distribution fee of 0.75% and a CDSC if they are redeemed
within four years of purchase. Approximately eight years after
issuance, Class B shares will convert automatically into Class D shares
of the Fund, which are subject to an account maintenance fee but no
distribution fee. 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
8
<PAGE>
D shares will not be deemed a purchase or sale of the shares for Federal
income tax purposes. Shares purchased through reinvestment of dividends
on Class B shares also will convert automatically to Class D shares. The
conversion period for dividend reinvestment shares is modified as
described under "Purchase of Shares--Deferred Sales Charge Alternatives--
Class B and Class C Shares--Conversion of Class B Shares to Class D
Shares".
Class C: Class C shares do not incur a sales charge when they are purchased,
but they are subject to an ongoing account maintenance fee of 0.25% of
average net assets and an ongoing distribution fee of 0.75% of the Fund's
average net assets attributable to Class C Shares. Class C shares also
are subject to a CDSC if they are redeemed within one year of purchase.
Although Class C shares are subject to a 1.0% CDSC for only one year (as
compared to four years for Class B), Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will
be subject to distribution fees that will be imposed on Class C shares
for an indefinite period subject to annual approval by the Fund's Board
of Directors and regulatory limitations.
Class D: Class D shares incur an initial sales charge when they are purchased
and are subject to an ongoing account maintenance fee of 0.25% of the
Fund's average net assets attributable to Class D shares. Class D shares
are not subject to an ongoing distribution fee or any CDSC when they are
redeemed. Purchases of $1,000,000 or more may not be subject to an
initial sales charge but if the initial sales charge is waived, such
purchases will be subject to a CDSC of 1.0% if the shares are redeemed
within one year after purchase. The schedule of initial sales charges and
reductions for the Class D shares is the same as the schedule for Class A
shares. Class D shares also will be issued upon conversion of Class B
shares as described above under "Class B". See "Purchase of Shares--
Initial Sales Charge Alternatives--Class A and Class D Shares".
Shares of each class redeemed within 12 months of purchase are subject to a
redemption fee of 2.0% of the net asset value of shares being redeemed. See
"Redemption of Shares."
The following is a discussion of the factors that investors should consider
in determining the method of purchasing shares under the Merrill Lynch Select
PricingSM System that the investor believes is most beneficial under his or her
particular circumstances.
Initial Sales Charge Alternatives. Investors who prefer an initial sales
charge alternative may elect to purchase Class D shares or, if an eligible
investor, Class A shares. Investors choosing the initial sales charge
alternative who are eligible to purchase Class A shares should purchase Class A
shares rather than Class D shares because of the account maintenance fee
imposed on Class D shares. Investors qualifying for significantly reduced
initial sales charges may find the initial sales charge alternative
particularly attractive because similar sales charge reductions are not
available with respect to the deferred sales charges imposed in connection with
purchases of Class B or Class C shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for an extended
period of time also may decide to purchase Class A or Class D shares, because
over time the accumulated ongoing account maintenance and distribution fees on
Class B or Class C shares may exceed the initial sales charge and, in the case
of Class D shares, the account maintenance fee. Class A, Class B, Class C and
Class D share holdings will count toward a right of accumulation which may
qualify the investor for reduced initial sales charges on new initial sales
charge purchases. In addition, the ongoing Class B and Class C account
maintenance and distribution fees will cause Class B and Class C shares to have
higher expense ratios, pay lower dividends and have lower total returns
9
<PAGE>
than the initial sales charge shares. The ongoing Class D account maintenance
fees will cause Class D shares to have a higher expense ratio, pay lower
dividends and have a lower total return than Class A shares.
Deferred Sales Charge Alternatives. Because no initial sales charges are
deducted at the time of purchase, Class B and Class C shares provide the
benefit of putting all of the investor's dollars to work from the time the
investment is made. The deferred sales charge alternatives may be particularly
appealing to investors who do not qualify for a reduction in initial sales
charges. Both Class B and Class C shares are subject to ongoing account
maintenance fees and distribution fees; however, the ongoing account
maintenance and distribution fees potentially may be offset to the extent any
return is realized on the additional funds initially invested in Class B or
Class C shares. In addition, Class B shares will be converted into Class D
shares of the Fund after a conversion period of approximately eight years, and
thereafter investors will be subject to lower ongoing fees.
Certain investors may elect to purchase Class B shares if they determine it
to be most advantageous to have all of 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 of 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".
10
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
GENERAL
Because the Fund intends to invest primarily in securities of issuers in
Middle Eastern/African countries, an investor in the Fund should be aware of
certain risk factors and special considerations relating not only to investing
in the economies of Middle Eastern/African countries, but also, more generally,
to international investing and investing in smaller, emerging capital markets,
each of which may involve risks which are not typically associated with
investments in securities of U.S. issuers. Consequently, the Fund should be
considered as a means of diversifying an investment portfolio and not in itself
a balanced investment program.
INVESTING ON AN INTERNATIONAL BASIS
Investing on an international basis involves certain risks not involved in
domestic investments, including fluctuations in foreign exchange rates, future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. Securities prices
in different countries are subject to different economic, financial, political
and social factors. Since the Fund invests heavily in securities denominated or
quoted in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the value of securities in the portfolio and the
unrealized appreciation or depreciation of investments. Currencies of certain
Middle Eastern/African countries may be volatile and therefore may affect the
value of securities denominated in such currencies. In addition, with respect
to certain foreign countries, there is the possibility of expropriation of
assets, confiscatory taxation, difficulty in obtaining or enforcing a court
judgment, economic, political or social instability or diplomatic developments
which could affect investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rates of inflation, capital
reinvestment, resources, self-sufficiency and balance of payments position.
Certain foreign investments also may be subject to foreign withholding taxes.
These risks often are heightened for investments in smaller, emerging capital
markets, such as those in Middle Eastern/African countries.
Most of the securities held by the Fund will not be registered with the
Securities and Exchange Commission, nor will the issuers thereof be subject to
the reporting requirements of such agency. Accordingly, there may be less
publicly available information about a foreign issuer than about a U.S. issuer
and such foreign issuers may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those of U.S.
issuers. As a result, traditional investment measurements, such as
price/earnings ratios, as used in the United States, may not be applicable to
certain smaller, emerging foreign capital markets. Foreign issuers, and issuers
in smaller, emerging capital markets in particular, generally are not subject
to uniform accounting, auditing and financial reporting standards or to
practices and requirements comparable to those applicable to domestic issuers.
Foreign markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have failed to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. Delays in settlement could result in periods when assets of
the Fund are uninvested and no return is earned thereon. The inability of the
Fund to make intended security purchases due to settlement problems or the risk
of intermediary counter party failures could cause the Fund to miss investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could
11
<PAGE>
result either in losses to the Fund due to subsequent declines in the value of
such portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.
There generally is less governmental supervision and regulation of exchanges,
brokers and issuers in foreign countries than there is in the United States.
For example, there may be no comparable provisions under certain foreign laws
to insider trading and similar investor protection securities laws that apply
with respect to securities transactions consummated in the United States.
Further, brokerage commissions and other transaction costs on foreign
securities exchanges generally are higher than in the United States.
The Fund may purchase sponsored or unsponsored American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") (collectively, "Depositary Receipts") or other securities convertible
into securities of foreign issuers. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. In addition, the issuers of the securities underlying
unsponsored Depositary Receipts are not obligated to disclose material
information in the United States, and therefore, there may be less information
available regarding such issuers and there may not be a correlation between
such information and the market value of the Depositary Receipts. Depositary
Receipts also involve the risks of other investments in foreign securities, as
discussed above.
RISKS RELATING TO INVESTMENT IN MIDDLE EASTERN/AFRICAN COUNTRIES
Certain of the risks associated with international investments are heightened
for investments in Middle Eastern/African countries. Investment in the
securities of Middle Eastern/African issuers may increase the volatility of the
Fund's net asset value. The securities markets of Middle Eastern/African
countries are significantly smaller than the U.S. securities markets and have
substantially less trading volume, resulting in a lack of liquidity with high
price volatility. Certain markets are in only the earliest stages of
development. There also may be a high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number
of industries, as well as a high concentration of investors and financial
intermediaries. Brokers in Middle Eastern/African countries typically are fewer
in number and less capitalized than brokers in the United States. The Fund may
not invest more than 25% of its total assets in the sovereign debt securities
of any particular Middle Eastern/African country. These factors, combined with
other U.S. regulatory requirements for open-end investment companies and the
restrictions on foreign investment discussed below, result in potentially fewer
investment opportunities for the Fund, limit the degree to which the Fund may
diversify among securities, industries and countries and may have an adverse
impact on the investment performance of the Fund.
Emerging economies present certain risks that do not exist in more
established economies; especially significant are the political and social
uncertainties that exist for many of the Middle Eastern/African countries. Many
of the Middle Eastern/African countries may be subject to a greater degree of
economic, political and social instability than is the case in the United
States and Western European countries. Such instability may result from, among
other things: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions;
12
<PAGE>
(iii) internal insurgencies and terrorist activities; (iv) hostile relations
with neighboring countries; and (v) ethnic, religious and racial disaffection.
Such economic, political and social instability could severely disrupt the
principal financial markets in which the Fund invests and could adversely
affect the value of the Fund's assets. For example, South Africa currently is
undergoing the drastic political transformation from a system of apartheid to
one of racial equality and democracy. South Africa is now led by a national
unity government comprised of three partners: the African National Congress,
the National Party and the Inkatha Freedom Party. In the spring of 1994, Nelson
Mandela, the leader of the dominant party in the government, the African
National Congress, became South Africa's first black president in the country's
first all-race elections. The abolition of apartheid eliminated controversial
racial legislation and led to the lifting of economic sanctions, both of which
had burdened South Africa's political climate and economic structure. Many
problems still persist, however, among them the lingering economic disparity
between the black and white populations, as white citizens continue to hold a
greatly disproportionate portion of the country's wealth. Other difficulties
that continue to beset South Africa include a high rate of unemployment, labor
unrest and ongoing racial tensions. Despite the repeal of economic sanctions
and the government's stated intention to stabilize the economy, anticipated
sustained economic growth has not yet come to fruition. As another example,
Islamic militants have grown in number in a few Middle Eastern countries, and
Iran has been ruled by Islamic fundamentalists since 1979. If these militants
gain strength, they may present a challenge to openness to foreign investment.
In addition, some of these movements may have destabilizing effects because
they espouse violence and anti-Western sentiments as a means to achieving their
goals, and have denounced efforts to resolve the Arab-Israeli conflict. If such
groups were to gain control of the governments of any other Middle Eastern
countries, the resulting economic, political and social changes could have an
adverse effect on the Fund's investments in such countries.
In addition, in certain Middle Eastern/African countries there may be the
possibility of asset expropriations or future confiscatory levels of taxation
affecting the Fund. In the event of expropriation, nationalization or other
confiscation, the Fund may not be fairly compensated for any losses and could
lose its entire investment in the country involved. Actions of the governments
of Middle Eastern/African countries in the future could have a significant
effect on local economies, which could adversely affect private sector
companies, market conditions and the prices and yields of securities in the
Fund's portfolio.
Certain economies in Middle Eastern/African countries depend to a significant
degree upon exports of primary commodities such as gold, silver, copper,
diamonds and oil and, therefore, are vulnerable to changes in commodity prices
which, in turn, may be affected by a variety of factors. In addition,
governments of many Middle Eastern/African countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government owns or controls many companies,
including the largest in the country. Accordingly, governmental actions in the
future could have a significant effect on economic conditions in Middle
Eastern/African countries, which could affect private sector companies and the
Fund, as well as the value of securities in the Fund's portfolio.
The legal systems in certain Middle Eastern/African countries also may have
an adverse impact on the Fund. For example, while the potential liability of a
shareholder in a U.S. corporation with respect to acts of the corporation
generally is limited to the amount of the shareholder's investment, the notion
of limited liability is less clear in certain Middle Eastern/African countries.
The Fund, therefore, may be liable in certain Middle Eastern/African countries
for the acts of a corporation in which it invests for an amount greater
13
<PAGE>
than the Fund's actual investment in such corporation. Similarly, the rights of
investors in Middle Eastern/African issuers may be more limited than those of
shareholders of U.S. corporations. It may be difficult or impossible to obtain
and/or enforce a judgment in a Middle Eastern/African country.
Certain of the risks associated with international investment and investment
in smaller, emerging capital markets are heightened for investment in Middle
Eastern/African countries. For example, some of the currencies of Middle
Eastern/African countries have experienced devaluation relative to the U.S.
dollar and major adjustments have been made periodically in certain of such
currencies. Certain Middle Eastern/African countries face serious exchange
constraints.
In addition to the relative lack of publicly available information about
Middle Eastern/African issuers and the possibility that such issuers may not be
subject to the same accounting, auditing and financial reporting standards as
U.S. issuers, inflation accounting rules in some Middle Eastern/African
countries require, for issuers that keep accounting records in the local
currency, for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting
indirectly may generate losses or profits for certain Middle Eastern/African
issuers.
As a result, management of the Fund may determine that, notwithstanding
otherwise favorable investment criteria, it may not be practicable or
appropriate to invest in a particular Middle Eastern/African country. The Fund
may invest in countries in which foreign investors, including management of the
Fund, have had no or limited prior experience.
RESTRICTIONS ON FOREIGN INVESTMENT
Some Middle Eastern/African countries prohibit or impose substantial
restrictions on investments in their capital markets, particularly their equity
markets, by foreign entities such as the Fund. As illustrations, certain
countries may require governmental approval prior to investment by foreign
persons or limit the amount of investment by foreign persons in a particular
issuer or limit the investment by foreign persons to only a specific class of
securities of an issuer which may have less advantageous terms (including
price) than securities of the issuer available for purchase by nationals. There
can be no assurance that the Fund will be able to obtain required governmental
approvals in a timely manner. In addition, changes to restrictions on foreign
ownership of securities subsequent to the Fund's purchase of such securities
may have an adverse effect on the value of such securities. Certain countries
may restrict investment opportunities in issuers or industries deemed important
to national interests.
The manner in which foreign investors may invest in companies in certain
countries, as well as limitations on such investments, may have an adverse
impact on the operations of the Fund. For example, the Fund may be required in
certain of such countries to invest initially through a local broker or other
entity and then have the shares purchased re-registered in the name of the
Fund. Re-registration in some instances may not be able to occur on a timely
basis, resulting in a delay during which the Fund may be denied certain of its
rights as an investor, including rights as to dividends or to be made aware of
certain corporate actions. There also may be instances where the Fund places a
purchase order but is subsequently informed, at the time of re-registration,
that the permissible allocation of the investment to foreign investors has been
filled, depriving the Fund of the ability to make its desired investment at
that time.
14
<PAGE>
Substantial limitations may exist in certain countries with respect to the
Fund's ability to repatriate investment income, capital or proceeds of sales of
securities by foreign investors. The Fund could be adversely affected by delays
in, or a refusal to grant, any required governmental approval for repatriation
of capital, as well as by the application to the Fund of any restrictions on
investment. Securities which are subject to material legal restrictions on
repatriation of assets will be considered illiquid securities by the Fund and
subject to the limitations on illiquid investments discussed in this
Prospectus. See "Illiquid Securities" below and "Investment Objective and
Policies--Description of Certain Investments--Illiquid Securities."
A number of Middle Eastern/African countries have authorized the formation of
closed-end investment companies to facilitate indirect foreign investment in
their capital markets. There also are investment opportunities in certain of
such countries in pooled vehicles that resemble open-end investment companies.
Under the Investment Company Act, the Fund may invest up to 10% of its total
assets in shares of other investment companies and up to 5% of its total assets
in any one investment company, provided that the investment does not represent
more than 3% of the voting stock of the related acquired investment company.
This restriction on investments in securities of investment companies may limit
opportunities for the Fund to invest indirectly in certain Middle
Eastern/African countries. Shares of certain investment companies at times may
be acquired only at market prices representing premiums to their net asset
values. If the Fund acquires shares of investment companies or of venture
capital funds, shareholders would bear both their proportionate share of
expenses in the Fund (including management and advisory fees) and, indirectly,
the expenses of such investment companies or venture capital funds. The Fund
also may seek, at its own cost, to create its own investment entities under the
laws of certain Middle Eastern/African countries.
In some countries, banks or other financial institutions may constitute a
substantial number of the leading companies or companies with the most actively
traded securities. The Investment Company Act limits the Fund's ability to
invest in any equity security of an issuer which, in its most recent fiscal
year, derived more than 15% of its revenues from "securities related
activities", as defined by the rules thereunder. Since banks may engage in such
activities in many countries, the Fund's ability to invest in such banks may be
limited. The provisions of the Investment Company Act also may restrict the
Fund's investments in certain foreign banks and other financial institutions.
SOVEREIGN DEBT
Certain developing countries are especially large debtors to commercial banks
and foreign governments. Investment in debt obligations ("sovereign debt")
issued or guaranteed by developing countries or their agencies, political
subdivisions and instrumentalities ("governmental entities") involves a high
degree of risk. The governmental entity that controls the repayment of
sovereign debt may not be able or willing to repay the principal and/or pay the
interest when due in accordance with the terms of such debt. A governmental
entity's willingness or ability to repay principal and pay interest when due in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund and the political constraints to which
a governmental entity may be subject. Governmental entities also may be
dependent on expected disbursements from foreign governments, multinational
agencies and others abroad to reduce
15
<PAGE>
principal and interest arrearage on their debt. The commitment on the part of
these governments, agencies and others to make such disbursements may be
conditioned on a governmental entity's implementation of economic reforms
and/or economic performance and the timely service of such debtor's
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or pay interest when due may result in the
cancellation of such third parties' commitments to lend funds to the
governmental entity, which further may impair such debtor's ability or
willingness to service timely its debts. Consequently, governmental entities
may default on their sovereign debt. Holders of sovereign debt securities,
including the Fund, may be requested to participate in the rescheduling of such
debt and to extend further loans to governmental entities. There is no
bankruptcy proceeding by which sovereign debt on which a governmental entity
has defaulted may be collected in whole or in part.
Certain of the sovereign debt securities in which the Fund may invest involve
great risk and are deemed to be the equivalent in terms of quality to high
yield/high risk securities discussed below and are subject to many of the same
risks as such securities. In addition, the Fund's investments in non-dollar
denominated sovereign debt securities are subject to foreign currency risks.
Also, the Fund's investments in dollar denominated sovereign debt securities
are subject to the risk that the issuer may be unable to obtain, on favorable
terms, dollars to service its interest payments and principal repayments
thereon. Similarly, the Fund may have difficulty disposing of certain sovereign
debt securities because there may be a thin trading market for such securities.
The Fund also may invest in debt securities of supranational entities. These
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Examples
include the International Bank for Reconstruction and Development (the World
Bank) and the African Development Bank. The obligations of supranational
entities are guaranteed only by the related supranational entity and are not
backed by the credit of any government. The governmental members, or
"stockholders," usually make initial capital contributions to the supranational
entity and in many cases are committed to make additional capital contributions
if the supranational entity is unable to repay its borrowings. It is possible
that any such governmental member or stockholder, for economic or political
reasons, may refuse to satisfy its commitment if additional capital
contributions are required. The Fund may not invest more than 25% of its total
assets in the sovereign debt securities of any particular Middle
Eastern/African country.
NO RATING CRITERIA FOR DEBT SECURITIES
The Fund has not established any rating criteria for the debt securities in
which it may invest and such securities may not be rated at all for
creditworthiness. Securities rated in the medium to low rating categories of
nationally recognized statistical rating organizations, such as Standard &
Poor's Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"), and
unrated securities of comparable quality (such lower rated and unrated
securities are referred to herein as "high yield/high risk securities" or "junk
bonds") are 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. See
Appendix B to this Prospectus--"Ratings of Debt Securities and Preferred
Stock." These securities commonly are referred to as "junk bonds." In
purchasing such securities, the Fund will rely on the Manager's judgment,
analysis and experience in evaluating the creditworthiness of an issuer of such
securities. The Manager will take into consideration, among other things, the
issuer's financial resources, its sensitivity to
16
<PAGE>
economic conditions and trends, its operating history, the quality of the
issuer's management and regulatory matters. The Fund may invest in debt
securities of corporate or governmental issuers that are in default as
discussed below under "Distressed Securities."
The market values of high yield/high risk securities, or "junk bonds", tend
to reflect individual issuer developments to a greater extent than do higher
rated securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, issuers of high yield/high risk securities may be more likely to
experience financial stress especially if such issuers are highly leveraged.
During such periods, service of debt obligations also may be adversely affected
by specific issuer developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
The risk of loss due to default by the issuer is significantly greater for the
holders of high yield/high risk securities because such securities may be
unsecured and may be subordinated to other creditors of the issuer.
High yield/high risk securities may have call or redemption features which
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund likely would have to replace such called securities with lower yielding
securities, thus decreasing the net investment income to the Fund and dividends
to shareholders.
The Fund may have difficulty disposing of certain high yield/high risk
securities, or "junk bonds", because there may be a thin trading market for
such securities. To the extent that a secondary trading market for high
yield/high risk securities does exist, it generally is not as liquid as the
secondary market for higher rated securities. Reduced secondary market
liquidity may have an adverse impact on market price and the Fund's ability to
dispose of particular issues when necessary to meet the Fund's liquidity needs
or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
high yield/high risk securities also may make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing the Fund's portfolio.
Market quotations generally are available on many high yield/high risk
securities only from a limited number of dealers and may not necessarily
represent firm bids of such dealers of prices for actual sales. The Fund's
Directors, or the Manager will consider carefully the factors affecting the
market for high yield/high risk, lower rated securities in determining whether
any particular security is liquid or illiquid and whether current market
quotations readily are available.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of high
yield/high risk securities, particularly in a thinly traded market. Factors
adversely affecting the market value of high yield/high risk securities are
likely to adversely affect the Fund's net asset value. In addition, the Fund
may incur additional expenses to the extent it is required to seek recovery
upon a default on a portfolio holding or participate in the restructuring of
the obligations.
DISTRESSED SECURITIES
The Fund may invest in debt securities of corporate or governmental issuers
that are in default as to repayment of principal and/or payment of interest at
the time of acquisition by the Fund ("Distressed
17
<PAGE>
Securities"). Investment in Distressed Securities is speculative and involves
significant risk. The Fund only will make such investments when the Manager
believes it is reasonably likely that the issuer of the securities will make an
exchange offer or will be the subject of a plan of reorganization, such as the
rescheduling or other restructuring of debt by a corporate or governmental
issuer. There can be no assurance that such an exchange offer will be made or
that such a plan of reorganization will be adopted. In addition, a significant
period of time may pass between the time at which the Fund makes its investment
in Distressed Securities and the time that any such exchange offer or plan of
reorganization is completed. During this period, it is unlikely that the Fund
will receive any interest payments on the Distressed Securities, the Fund will
be subject to significant uncertainty as to whether or not the exchange offer
or plan of reorganization will be completed, and the Fund may be required to
bear certain expenses to protect its interest in the course of negotiations
surrounding any potential exchange offer or plan of reorganization. In
addition, even if an exchange offer is made or a plan of reorganization is
adopted with respect to Distressed Securities held by the Fund, there can be no
assurance that the securities or other assets received by the Fund in
connection with such exchange offer or plan of reorganization will not have a
lower value or income potential than anticipated when the investment was made.
Moreover, any securities received by the Fund upon completion of an exchange
offer or plan of reorganization may be restricted as to resale. As a result of
the Fund's participation in negotiations with respect to any exchange offer or
plan of reorganization with respect to an issuer of Distressed Securities, the
Fund may be precluded from disposing of such securities.
DERIVATIVE INVESTMENTS
In order to seek to hedge various portfolio positions or to enhance its
return, the Fund may invest in certain instruments which may be characterized
as derivatives. These investments include various types of options
transactions, futures and options thereon and currency transactions. Such
investments also may consist of indexed securities, including inverse
securities. The Fund 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.
Investments in indexed securities, including inverse securities, subject the
Fund to the risks associated with changes in the particular indices, which may
include reduced or eliminated interest payments and losses of invested
principal. Options transactions involve the potential loss of the opportunity
to profit from any price increase in the underlying security above the option
exercise price and the potential loss of the premium paid for an option.
Similarly, utilization of futures and options thereon and currency transactions
involves the risk of imperfect correlation in movements in the price of
futures, options or currency hedge and movements in the price of the securities
or currency which are the subject of the hedge. For a further discussion of the
risks associated with these investments, see "Investment Objective and
Policies--Description of Certain Investments--Indexed and Inverse Securities",
"Other Investment Policies and Practices--Portfolio Strategies Involving
Futures, Options and Forward Foreign Exchange" and Appendix A to this
Prospectus--"Futures, Options and Forward Foreign Exchange Transactions."
BORROWING
The Fund may borrow up to 33 1/3% of its total assets, taken at market value,
but only from banks as a temporary measure for extraordinary or emergency
purposes, including to meet redemptions (so as not to
18
<PAGE>
force the Fund to liquidate securities at a disadvantageous time) or to settle
securities transactions. The Fund will not purchase securities while borrowings
exceed 5% of its total assets, except (a) to honor prior commitments or (b) to
exercise subscription rights when outstanding borrowings have been obtained
exclusively for settlements of other securities transactions. The purchase of
securities while borrowings are outstanding will have the effect of leveraging
the Fund. Such leveraging increases the Fund's exposure to capital risk, and
borrowed funds are subject to interest costs which will reduce net income.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its total assets in securities that lack an
established secondary trading market or otherwise are considered illiquid.
(However, under the law of certain states, the Fund presently is limited with
respect to such investments to 10% of its total assets.) Liquidity of a
security relates to the ability to dispose easily of the security and the price
to be obtained upon disposition of the security, which may be less than a
comparable more liquid security. Investment of the Fund's assets in illiquid
securities may restrict the ability of the Fund to dispose of its investments
in a timely fashion and for a fair price as well as its ability to take
advantage of market opportunities. The risks associated with illiquidity will
be particularly acute in situations in which the Fund's operations require
cash, such as when the Fund redeems shares or pays dividends, and could result
in the Fund borrowing to meet short-term cash requirements or incurring capital
losses on the sale of illiquid investments. Further, issuers whose securities
are not publicly traded are not subject to the disclosure and other investor
protection requirements which would be applicable if their securities were
publicly traded. Illiquid sovereign debt securities and corporate fixed income
and equity securities may trade at a discount from comparable, more liquid
investments. In making investments in such securities, the Fund may obtain
access to material nonpublic information which may restrict the Fund's ability
to conduct portfolio transactions in such securities. In addition, the Fund may
invest in privately placed securities which may or may not be freely
transferable under the laws of the applicable jurisdiction or due to
contractual restrictions on resale. See "Investment Objective and Policies--
Description of Certain Investments--Illiquid Securities."
WITHHOLDING AND OTHER TAXES
Income and capital gains on securities held by the Fund may be subject to
withholding and other taxes imposed by Middle Eastern/African countries, which
would reduce the return to the Fund on those securities. The Fund intends,
unless ineligible, to elect to "pass-through" to the Fund's shareholders, as a
deduction or credit, the amount of foreign taxes paid by the Fund. The taxes
passed through to shareholders will be included in each shareholder's income.
Certain shareholders, including non-U.S. shareholders, will not be entitled to
the benefit of a deduction or credit with respect to foreign taxes paid by the
Fund. Other taxes, such as transfer taxes, may be imposed on the Fund, but
would not give rise to a credit, or be eligible to be passed through to
shareholders.
NON-DIVERSIFICATION
The Fund is classified as a non-diversified investment company under the
Investment Company Act, which means that the Fund is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the obligations of a single issuer. Thus, the Fund may invest a greater
proportion of its assets in the securities of a smaller number of issuers and,
as a result, will be subject to greater risk of loss
19
<PAGE>
with respect to its portfolio securities. The Fund, however, intends to comply
with the diversification requirements imposed by the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated investment
company. See "Taxes" and "Investment Restrictions."
FEES AND EXPENSES
The management fee (at the annual rate of 1.00% of the Fund's average daily
net assets) and other operating expenses of the Fund may be higher than the
management fees and operating expenses of other mutual funds managed by the
Manager and other investment advisers or of investment companies investing
exclusively in the securities of U.S. issuers. The management fees and
operating expenses, however, are believed by the Manager to be comparable to
expenses of other open-end management investment companies that invest
primarily in the securities of issuers in emerging market countries with
investment objectives similar to the investment objective of the Fund.
FOREIGN SUB-CUSTODIANS AND SECURITIES DEPOSITORIES
Rules adopted under the Investment Company Act permit the Fund to maintain
its foreign securities and cash in the custody of certain eligible non-U.S.
banks and securities depositories. Certain banks in foreign countries may not
be eligible sub-custodians for the Fund, in which event the Fund may be
precluded from purchasing securities in certain foreign countries in which it
otherwise would invest or which may result in the Fund's incurring additional
costs and delays in providing transportation and custody services for such
securities outside of such countries. The Fund may encounter difficulties in
effecting on a timely basis portfolio transactions with respect to any
securities of issuers held outside of their countries. Other banks that are
eligible foreign sub-custodians may be recently organized or otherwise lack
extensive operating experience. In addition, in certain countries there may be
legal restrictions or limitations on the ability of the Fund to recover assets
held in custody by foreign sub-custodians in the event of the bankruptcy of the
sub-custodian.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation by investing primarily in equity and debt securities of corporate
and governmental issuers in countries located in the Middle East and Africa
("Middle Eastern/African countries"). For purposes of its investment objective,
the Fund may invest in the securities of issuers in all countries in the Middle
East and Africa. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in equity or debt securities of corporate and
governmental issuers in Middle Eastern/African countries. This investment
objective is a fundamental policy of the Fund and may not be changed without
the approval of the holders of a majority of the Fund's outstanding voting
securities, as defined in the Investment Company Act. The Fund initially
expects to emphasize investments in the securities of issuers in Morocco, South
Africa, Turkey, Israel, Jordan and Zimbabwe. The Fund is authorized to employ a
variety of investment techniques to hedge against market and currency risks,
although suitable hedging instruments may not be available on a timely basis
and on acceptable terms. There can be no assurance that the Fund's investment
objective will be achieved.
20
<PAGE>
The Fund only will invest in securities of issuers in Middle Eastern/African
countries where foreign investment is permitted and that offer market
accessibility and sub-custodial arrangements either inside or outside of such
countries that satisfy the requirements of rules adopted under the Investment
Company Act. See "Risk Factors and Special Considerations--Foreign Sub-
custodians and Securities Depositories." For purposes of the Fund's investment
objective and policies, the term "Middle Eastern countries" includes, but is
not limited to: Israel, Jordan, Egypt, Syria, Lebanon, Turkey, Saudi Arabia,
Iraq, Iran, Libya, Kuwait, Qatar, Bahrain, Yemen, Oman and the United Arab
Emirates, and the term "African countries" includes all countries generally
considered as part of the African continent.
The Manager believes that the quickening pace of political, social and
economic change in certain Middle Eastern/African countries creates the
potential for rapid economic growth which may be reflected in the prices of
securities of issuers in such countries. The Manager also believes that
regional growth may result from governmental policies directed toward market
oriented economic reform. In addition, certain Middle Eastern/African countries
have been introducing deregulatory reforms to encourage development of their
securities markets and, in varying degrees, to permit foreign investment.
Nevertheless, investments in Middle Eastern/African countries are subject to
considerable risks. See "Risk Factors and Special Considerations."
In addition to making equity investments, the Fund seeks capital appreciation
through investment in sovereign and corporate debt securities of issuers in
Middle Eastern/African countries. Such debt securities may be lower rated or
unrated obligations of corporate or sovereign issuers. To the extent such debt
securities are traded in over-the-counter markets, they are traded by a limited
number of dealers. Consequently, these securities may be less liquid than
certain other securities which are traded in over-the-counter markets. The
Fund's investments in sovereign debt consists of debt securities or obligations
issued or guaranteed by foreign governments, their agencies, instrumentalities
and political subdivisions and by entities controlled or sponsored by such
governments. Since such debt securities frequently trade in the secondary
markets at substantial discounts, there is opportunity for capital appreciation
to the extent there is a favorable change in the market perception of the
creditworthiness of the issuer. Capital appreciation in debt securities also
may arise as a result of a favorable change in relative foreign exchange rates
or in relative interest rate levels. In accordance with its investment
objective, the Fund will not seek to benefit from anticipated short-term
fluctuations in currency exchange rates. The receipt of income from such debt
securities is incidental to the Fund's objective of long-term capital
appreciation. The Fund, from time to time, may invest in debt securities with
relatively high yields (as compared with other debt securities meeting the
Fund's investment criteria), notwithstanding that the Fund may not anticipate
that such securities will experience substantial capital appreciation. Such
income can be used, however, to offset the operating expenses of the Fund. Debt
securities with relatively high yields usually are subject to a greater risk of
default than other comparable debt securities with lower yields.
The Fund's investments in high yield/high risk securities include debt
securities, preferred stocks and convertible securities which are rated in the
lower rating categories of the established rating services ("Baa" or lower by
Moody's Investors Service, Inc. ("Moody's") and "BBB" or lower by Standard &
Poor's Corporation ("S&P")), or, if unrated, which are considered by the
Manager to be of comparable quality. Securities rated below "Baa" by Moody's or
below "BBB" by S&P, and unrated securities of comparable quality, are commonly
known as "junk bonds." See "Risk Factors and Special Considerations--No Rating
Criteria for Debt Securities."
21
<PAGE>
Further, the Fund may invest in debt securities that are in default as to the
payment of interest and/or the repayment of principal at the time of
acquisition by the Fund ("Distressed Securities"). The Fund will invest in
Distressed Securities only when the Manager believes it is reasonably likely
that the issuer of the securities will make an exchange offer or will be the
subject of a plan of reorganization, such as the rescheduling or other
restructuring of debt by a corporate or governmental issuer. Capital
appreciation in debt securities may arise as a result of a favorable change in
relative foreign exchange rates, in relative interest rate levels, or in the
creditworthiness of issuers. The receipt of income from such debt securities is
incidental to the Fund's objective of long-term capital appreciation. See "Risk
Factors and Special Considerations--Distressed Securities."
The Fund may invest in debt securities ("sovereign debt securities") issued
or guaranteed by Middle Eastern/African governments (including Middle
Eastern/African countries, provinces and municipalities) or their agencies and
instrumentalities ("governmental entities"), debt securities issued or
guaranteed by international organizations designated or supported by multiple
foreign governmental entities (which are not obligations of foreign
governments) to promote economic reconstruction or development ("supranational
entities"), debt securities issued by corporations or financial institutions or
debt securities issued by the U.S. Government or an agency or instrumentality
thereof. Sovereign debt securities may take the form of Brady Bonds, which are
debt securities issued under the framework of the Brady Plan, an initiative
established in 1989 as a mechanism for debtor nations to restructure their
outstanding external commercial bank indebtedness. Presently, Nigeria is the
only Middle Eastern/African country which has issued Brady Bonds. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related governmental agencies. Examples
include the International Bank for Reconstruction and Development (the "World
Bank") and the African Development Bank. The obligations of supranational
entities are guaranteed only by the related supranational entity and are not
backed by the credit of any government. The governmental members or
"stockholders" of a supranational entity usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. It is possible that any such governmental member or
stockholder, for economic or political reasons, may refuse to satisfy its
commitment if additional capital contributions are required. The Fund may not
invest more than 25% of its total assets in the sovereign debt securities of
any particular Middle Eastern/African country.
The Fund may invest in the securities of foreign issuers in the form of
Depositary Receipts or other securities convertible into securities of foreign
issuers. Depositary Receipts may not necessarily be denominated in the same
currency as the underlying 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. GDRs are receipts issued throughout the world which evidence a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets, and EDRs, in bearer form, are designed for use
in European securities markets. GDRs are tradeable both in the U.S. and in
Europe and are designed for use throughout the world. The Fund may invest in
unsponsored Depositary Receipts. The issuers of unsponsored Depositary Receipts
are not obligated to disclose material information in the United States, and
therefore, there may be less information available regarding such issuers and
there not be a correlation between such information and the market value of the
Depositary Receipts.
22
<PAGE>
Investment in shares of the Fund potentially offers several benefits. Many
investors, particularly individuals, lack the information or capability to
invest in Middle Eastern/African countries. It also may not be permissible for
such investors to invest directly in the capital markets of certain Middle
Eastern/African countries. The Fund offers investors the possibility of
obtaining capital appreciation through a portfolio comprised of securities of
Middle Eastern/African issuers. In managing such portfolio, the Manager will
provide the Fund and its shareholders with professional analysis of investment
opportunities and the use of professional money management techniques. In
addition, unlike many intermediary investment vehicles, such as investment
companies that are limited to investment in a single country, the Fund has the
ability to diversify investment risk among the capital markets of a number of
countries. However, until additional Middle Eastern/African countries become
more readily accessible to investment by foreign entities, the Fund may not be
able to diversify investment risk or realize any potential benefits from
diversification.
The Fund will not necessarily seek to diversify investments among Middle
Eastern/African countries and is not limited as to the percentage of assets it
may invest per country. The allocation of the Fund's assets among the various
securities markets of the Middle Eastern/African countries will be determined
by the Manager. Under certain adverse investment conditions, the Fund may
restrict the Middle Eastern/African countries in which its assets are invested.
An issuer ordinarily will be considered to be in a Middle Eastern/African
country when it is organized in, or the primary trading market of its
securities is located in, a Middle Eastern/African country. The Fund may
consider an issuer to be in a Middle Eastern/African country, without reference
to such issuer's domicile or to the primary trading market of its securities,
when at least 50% of the issuer's non-current assets, capitalization, gross
revenues or profits in any one of the two most recent fiscal years represents
(directly or indirectly through subsidiaries) assets or activities located in
such countries. The Fund may acquire securities of companies or governments in
Middle Eastern/African countries that are denominated in currencies other than
a Middle Eastern/African country's currency. The Fund also may consider a debt
security that is denominated in a Middle Eastern/African country's currency to
be a security of an issuer in a Middle Eastern/African country without
reference to the principal trading market of the security or to the location of
its issuer. Additionally, the Fund may consider a derivative product tied to
securities or issuers located in Middle Eastern/African countries to be the
security of a Middle Eastern/African issuer. The Fund may consider investment
companies or other pooled investment vehicles to be located in the country or
countries in which they primarily make their portfolio investments.
The Fund reserves the right, as a temporary defensive measure or in
anticipation of investment in Middle Eastern/African countries, to hold cash or
cash equivalents (in U.S. dollars or foreign currencies) and short-term
securities including money market securities denominated in U.S. dollars or
foreign currencies ("Temporary Investments").
DESCRIPTION OF CERTAIN INVESTMENTS
Warrants. The Fund may invest in warrants, which are securities permitting,
but not obligating, their holder to subscribe for other securities. Warrants do
not carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holders to purchase, and they do not
represent any rights in the assets of the issuer. As a result, an investment in
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with
23
<PAGE>
the value of the underlying securities and a warrant ceases to have value if it
is not exercised prior to its expiration date.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest generally paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
several unique investment characteristics such as (i) higher yields than common
stocks, but lower yields than comparable nonconvertible securities, (ii) a
lesser degree of fluctuation in value than the underlying stock since they have
fixed income characteristics, and (iii) the potential for capital appreciation
if the market price of the underlying common stock increases. A convertible
security might be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. If a
convertible security held by the Fund is called for redemption, the Fund may be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
Illiquid Securities. The Fund may invest up to 15% of its total assets in
securities that lack an established secondary trading market or otherwise are
considered illiquid. (However, under the laws of certain states, the Fund
presently is limited with respect to such investments to 10% of its total
assets.) The Fund may invest in securities of issuers in Middle Eastern/African
countries that are sold in private placement transactions between the issuers
and their purchasers and that are neither listed on an exchange nor traded in
other established markets. In many cases, privately placed securities will be
subject to contractual or legal restrictions on transfer. As a result of the
absence of a public trading market, privately placed securities in turn may be
less liquid or illiquid and more difficult to value than publicly traded
securities. To the extent that privately placed securities may be resold in
privately negotiated transactions, the prices realized from the sales, due to
illiquidity, could be less than those originally paid by the Fund or less than
their fair market value. In addition, issuers whose securities are not publicly
traded may not be subject to the disclosure and other investor protection
requirements that may be applicable if their securities were publicly traded.
If any privately placed securities held by the Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of registration. Certain
of the Fund's investments in private placements may consist of direct
investments and may include investments in smaller, less-seasoned issuers,
which may involve greater risks. These issuers may have limited product lines,
markets or financial resources, or they may be dependent on a limited
management group. In making investments in such securities, the Fund may obtain
access to material nonpublic information which may restrict the Fund's ability
to conduct portfolio transactions in such securities.
The Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A under that Act. The Board of Directors has determined to treat as
liquid Rule 144A securities which are freely tradeable in their primary markets
offshore. The Board of Directors may adopt guidelines and delegate to the
Manager the daily function of determining and monitoring liquidity of
restricted securities. The Board of Directors, however, will retain sufficient
oversight and be ultimately responsible for the determinations.
The Board of Directors will carefully monitor the Fund's investments in
securities purchased pursuant to Rule 144A, focusing on such factors, among
others, as valuation, liquidity and availability of information.
24
<PAGE>
Investment in these types of securities could have the effect of increasing the
level of illiquidity in the Fund to the extent that qualified institutional
buyers become for a time uninterested in purchasing these securities.
Indexed and Inverse Securities. The Fund may invest in securities whose
potential return is based on the change in particular measurements of value or
rate (an "index"). As an illustration, the Fund may invest in a security that
pays interest and returns principal based on the change in an index of interest
rates or in the value on a precious or industrial metal. Interest and principal
payable on a security also may be based on relative changes among particular
indices. In addition, the Fund may invest in securities whose potential
investment return is inversely based on the change in particular indices. For
example, the Fund may invest in securities that pay a higher rate of interest
and principal when a particular index decreases and pay a lower rate of
interest and principal when the value of the index increases. To the extent
that the Fund invests in such types of securities, it will be subject to the
risks associated with changes in the particular indices, which may include
reduced or eliminated interest payments and losses of invested principal.
Examples of such types of securities are indexed or inverse securities issued
with respect to a stock market index in a particular Middle Eastern/African
country.
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 generally
will be more volatile than the market values of fixed-rate securities.
Management of the Fund believes that indexed securities, including inverse
securities, represent flexible portfolio management instruments that may allow
the Fund to seek potential investment rewards, hedge other portfolio positions,
or vary the degree of portfolio leverage relatively efficiently under different
market conditions.
Investment in Other Investment Companies and Venture Capital Funds. The Fund
may invest in other investment companies and venture capital funds whose
investment objectives and policies are consistent with those of the Fund. In
accordance with the Investment Company Act, the Fund may invest up to 10% of
its total assets in securities of other investment companies. In addition,
under the Investment Company Act the Fund may not own more than 3% of the total
outstanding voting stock of any investment company and not more than 5% of the
value of the Fund's total assets may be invested in the securities of any
investment company. If the Fund acquires shares in investment companies or
venture capital funds, shareholders would bear both their proportionate share
of expenses in the Fund (including management and advisory fees) and,
indirectly, the expenses of such investment companies or venture capital funds
(including management and advisory fees). Investment in such venture capital
funds involves substantial risk of loss to the Fund of its entire investment.
OTHER INVESTMENT POLICIES AND PRACTICES
Portfolio Strategies Involving Futures, Options and Forward Foreign Exchange
Transactions. The Fund is authorized to engage in various portfolio strategies
to hedge its portfolio against adverse movements in the equity, debt and
currency markets. These hedging transactions are considered to be investments
in derivatives.
The Fund has authority to write (i.e., sell) covered put and call options on
its portfolio securities, purchase put and call options on securities and
engage in transactions in stock index options, stock index
25
<PAGE>
futures and financial futures, and related options on such futures. The Fund
also may engage in forward foreign exchange transactions and enter into foreign
currency futures and options, and related options on such futures. Each of
these portfolio strategies is described in more detail in Appendix A to this
Prospectus. Although certain risks are involved in futures and options
transactions (as discussed in "Risk Factors in Futures, Options and Currency
Transactions" in Appendix A to this Prospectus), the Manager believes that,
because the Fund will engage in such transactions only for hedging (including
anticipatory hedging) purposes, the futures, options and currency portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of futures, options and currency
transactions. While the Fund's use of hedging strategies is intended to reduce
the volatility of the net asset value of its shares, the net asset value of
Fund shares will fluctuate. Reference is made to Appendix A to this Prospectus
and to the Statement of Additional Information for further information
concerning these strategies.
There can be no assurance that the Fund's hedging transactions will be
effective. Suitable hedging instruments may not be available with respect to
securities of developing countries on a timely basis and on acceptable terms.
Furthermore, the Fund may only engage in hedging activities from time to time
and may not necessarily engage in hedging transactions when movements in the
equity, debt or currency markets occur.
Portfolio Transactions. Subject to policies established by the Board of
Directors of the Fund, the Manager is primarily responsible for the execution
of the Fund's portfolio transactions. Since portfolio transactions may be
effected on foreign securities exchanges, the Fund may incur settlement delays
on certain of such exchanges. See "Risk Factors and Special Considerations." In
executing portfolio transactions, the Manager seeks to obtain the best net
results for the Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulty of
execution and operational facilities of the firm involved and the firm's risk
in positioning a block of securities. While the Manager generally seeks
reasonably competitive fees, commissions or spreads, the Fund does not
necessarily pay the lowest fee, commission or spread available. The Fund may
invest in certain securities traded in the OTC market and, 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 are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Such
portfolio securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. Securities firms may
receive brokerage commissions on certain portfolio transactions, including
futures, options and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options. The Fund has no obligation
to deal with any broker or group of brokers in the execution of transactions in
portfolio securities. Subject to obtaining the best price and execution,
securities firms which provide supplemental investment research to the Manager,
including Merrill Lynch, may receive orders for transactions by the Fund.
Information so received will be in addition to and not in lieu of the services
required to be performed by the Manager under the Management Agreement and the
expenses of the Manager will not necessarily be reduced as a result of the
receipt of such supplemental information.
Under the Investment Company Act, persons affiliated with the Fund and
persons who are affiliated with such affiliated persons, including Merrill
Lynch, are prohibited from dealing with the Fund as a principal in the purchase
and sale of securities unless a permissive order allowing such transactions is
obtained from the Securities and Exchange Commission. Affiliated persons of the
Fund, and affiliated persons of such affiliated persons, may serve as the
Fund's broker in transactions conducted on an exchange and in OTC transactions
conducted on an agency basis and may receive brokerage commissions from the
Fund. In
26
<PAGE>
addition, the Fund 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 Fund
which comply with rules adopted by the Securities and Exchange Commission. To
the extent Merrill Lynch is active in distributions of securities of issuers in
Middle Eastern/African countries, the Fund may be disadvantaged in that it may
not purchase securities in such distributions. In addition, consistent with the
Rules of Fair Practice of the NASD, the Fund may consider sales of shares of
the Fund as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund. It is expected that the majority of the
shares of the Fund will be sold by Merrill Lynch. Costs associated with
transactions in foreign securities are generally higher than in the U.S.,
although the Fund will endeavor to achieve the best net results in effecting
its portfolio transactions.
The Fund anticipates that its brokerage transactions involving securities of
issuers 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 generally are higher than in the United States, although the Fund
will endeavor to achieve the best net results in effecting its portfolio
transactions. There generally is less governmental supervision and regulation
of foreign stock exchanges and brokers than in the United States.
The Fund's ability and decisions to purchase and sell portfolio securities
may be affected by foreign laws and regulations relating to the convertibility
and repatriation of assets.
Lending of Portfolio Securities. The Fund, from time to time, may lend
securities from its portfolio, with a value not exceeding 33 1/3% of its total
assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the U.S. Government
which will be maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities. This limitation is a
fundamental policy, and it may not be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, as defined
in the Investment Company Act. During the period of such a loan, the Fund
typically receives the income on both the loaned securities and the collateral
and thereby increases its yield. In certain circumstances, the Fund may receive
a flat fee. Such loans are terminable at any time, and the borrower, after
notice, will be required to return borrowed securities within five business
days. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or otherwise, the Fund could
experience delays and costs in gaining access to the collateral and could
suffer a loss to the extent the value of the collateral falls below the market
value of the borrowed securities.
Portfolio Turnover. Generally, the Fund does not purchase securities for
short-term trading profits. However, the Fund may dispose of securities without
regard to the time they have been held when such actions, for defensive or
other reasons, appear advisable to the Manager in light of a change in
circumstances in general market, economic or financial conditions. As a result
of its investment policies, the Fund may engage in a substantial number of
portfolio transactions. Accordingly, while the Fund anticipates that its annual
portfolio turnover rate should not exceed 100% under normal conditions, it is
impossible to predict portfolio turnover rates. The portfolio turnover rate is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of the securities in the portfolio during the year. A high
portfolio turnover rate involves certain tax consequences and correspondingly
greater transaction costs in the form of dealer spreads and brokerage
commissions, which are borne directly by the Fund.
27
<PAGE>
When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase securities on a when-issued basis, and it may purchase or sell
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future to secure what is considered an advantageous yield and price to the Fund
at the time of entering into the transaction. Although the Fund has not
established any limit on the percentage of its assets that may be committed in
connection with such transactions, the Fund will maintain a segregated account
with its custodian of cash, cash equivalents, U.S. Government securities or
other high grade liquid debt securities denominated in U.S. dollars or non-U.S.
currencies in an aggregate amount equal to the amount of its commitments in
connection with such purchase transactions.
There can be no assurance that a security purchased on a when-issued basis or
purchased or sold for delayed delivery will be issued, and the value of the
security, if issued, on the delivery date may be more or less than its purchase
price. The Fund 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.
Standby Commitment Agreements. The Fund, from time to time, may enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a fixed income security or a
stated number of shares of equity securities which may be issued and sold to
the Fund at the option of the issuer. The price and coupon of the security is
fixed at the time of the commitment. At the time of entering into the agreement
the Fund is paid a commitment fee, regardless of whether or not the security is
ultimately issued, which is typically approximately 0.50% of the aggregate
purchase price of the security which the Fund has committed to purchase. The
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price which is considered
advantageous to the Fund. The Fund will not enter into a standby commitment
with a remaining term in excess of 45 days and presently 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 that affect their
marketability, will not exceed 15% of its total assets taken at the time of
acquisition of such a commitment. The Fund at all times will maintain a
segregated account with its custodian of cash, cash equivalents, U.S.
Government securities or other high grade liquid debt securities denominated in
U.S. dollars or non-U.S. currencies in an aggregate amount equal to the
purchase price of the securities underlying a commitment.
There can be no assurance that the securities subject to a standby commitment
will be issued, and the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the Fund may bear the
risk of 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 can
reasonably be expected to be issued, and the value of the security thereafter
will be reflected in the calculation of the Fund's net asset value. The cost
basis of the security will be adjusted by the amount of the commitment fee. In
the event the security is not issued, the commitment fee will be recorded as
income on the expiration date of the standby commitment.
Repurchase Agreements and Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements may be entered into only
28
<PAGE>
with a member bank of the Federal Reserve System or a primary dealer in U.S.
Government securities, or an affiliate thereof. 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 the Fund, to repurchase the security at a
mutually agreed upon time and price in a specified currency, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period although
it may be affected by currency fluctuations. In the case of repurchase
agreements, the price 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, the Fund will require the seller to provide
additional collateral if the market value of the securities falls below the
repurchase price at any time during the term of the repurchase agreement; the
Fund does not have the right to seek additional collateral in the case of
purchase and sale contracts. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs or possible losses in connection with the
disposition of the collateral. A purchase and sale contract differs from a
repurchase agreement in that the contract arrangements stipulate that the
securities are owned by the Fund. In the event of a default under such a
repurchase agreement or under a purchase and sale contract, instead of the
contractual fixed rate, the rate of return to the Fund would be dependent upon
intervening fluctuations of the market values of such securities and the
accrued interest on the securities. In such event, the Fund would have rights
against the seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to perform.
Repurchase agreements and purchase and sale contracts maturing in more than
seven days are deemed to be illiquid by the Securities and Exchange Commission
and are therefore subject to the Fund's investment restriction limiting
investments in securities that are not readily marketable to 15% of the Fund's
total assets. (However, under the law of certain states, the Fund presently is
limited with respect to such investments to 10% of its total assets.) See
"Investment Restrictions" below.
INVESTMENT RESTRICTIONS
The Fund's investment activities are subject to further restrictions that are
described in the Statement of Additional Information. Investment restrictions
and policies which are fundamental policies may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities (which for this purpose and under the Investment Company Act means
the lesser of (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 its fundamental policies, the Fund may not invest
more than 25% of its total assets, taken at market value at the time of each
investment, in the securities of issuers in any particular industry (excluding
the U.S. Government and its agencies and instrumentalities). 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, the Fund may not borrow money or pledge its assets, except that the
Fund (a) may borrow from a bank as a temporary measure for extraordinary or
emergency purposes or to meet redemptions in amounts not exceeding 33 1/3%
(taken at market value) of its total assets and pledge its
29
<PAGE>
assets to secure such borrowings, (b) may obtain such short-term credit as may
be necessary for the clearance of purchases and sales of portfolio securities
and (c) may purchase securities on margin to the extent permitted by applicable
law. (However, at the present time, applicable law prohibits the Fund from
purchasing securities on margin.) (The deposit or payment by the Fund of
initial or variation margin in connection with financial futures contracts or
options transactions is not considered to be the purchase of a security on
margin.) The purchase of securities while borrowings are outstanding will have
the effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk, and borrowed funds are subject to interest
costs which will reduce net income.
As a non-fundamental policy, the Fund will not invest in securities which
cannot readily be resold because of legal or contractual restrictions or which
are not otherwise readily marketable, including repurchase agreements and
purchase and sale contracts maturing in more than seven days, if, regarding all
such securities, more than 15% of its total assets (or 10% of its total assets
as presently required by certain state law) taken at market value would be
invested in such securities. Notwithstanding the foregoing, the Fund may
purchase without regard to this limitation 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 Fund's Board of Directors continuously determines, based on the trading
markets for the specific Rule 144A security, that it is liquid. The Board of
Directors may adopt guidelines and delegate to the Manager the daily function
of determining and monitoring liquidity of restricted securities. The Board has
determined that securities which are freely tradeable in their primary market
offshore should be deemed liquid. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations.
NON-DIVERSIFIED STATUS
The Fund is classified as non-diversified within the meaning of the
Investment Company Act, which means that the Fund is not limited by such Act in
the proportion of its assets that it may invest in securities of a single
issuer. The Fund's investments will be limited, however, in order to qualify as
a "regulated investment company" for purposes of the Code. See "Taxes." To
qualify, the Fund will comply with certain requirements, including limiting its
investments so that at the close of each quarter of the taxable year (i) not
more than 25% of the market value of the Fund's total assets will be invested
in the securities of a single issuer and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer, and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
A fund which elects to be classified as "diversified" under the Investment
Company Act must satisfy the foregoing 5% and 10% requirements with respect to
75% of its total assets. To the extent that the Fund assumes large positions in
the securities of a small number of issuers, the Fund's net asset value may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the
issuers, and the Fund may be more susceptible to any single economic, political
or regulatory occurrence than a diversified company.
For purposes of the diversification requirements set forth above with respect
to regulated investment companies, and to the extent required by the Securities
and Exchange Commission, the Fund, as a non-fundamental policy, will consider
securities issued or guaranteed by the government of any one foreign country as
the obligations of a single issuer.
30
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The Board of Directors of the Fund consists of five individuals, four of whom
are not "interested persons", as defined in the Investment Company Act, of the
Fund. The Board of Directors of the Fund is responsible for the overall
supervision of the operations of the Fund and performs the various duties
imposed on the directors of investment companies under the Investment Company
Act.
The Directors of the Fund are:
Arthur Zeikel* -- President and Chief Investment Officer of the Manager and
FAM; President and Director of Princeton Services, Inc. ("Princeton Services");
Executive Vice President of ML & Co.; Executive Vice President of Merrill
Lynch; Director of the Distributor.
Donald Cecil -- Special Limited Partner of Cumberland Partners (an investment
partnership).
Edward H. Meyer -- Chairman of the Board, President and Chief Executive
Officer of Grey Advertising, Inc.
Charles C. Reilly -- Self-employed financial consultant; former President and
Chief Investment Officer of Verus Capital, Inc.; former Senior Vice President
of Arnold and S. Bleichroeder, Inc.; Adjunct Professor, Columbia University
Graduate School of Business.
Richard R. West -- Professor of Finance, and Dean from 1984 to 1993, New York
University Leonard N. Stern School of Business Administration.
- --------
* Interested person, as defined in the Investment Company Act, of the Fund.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Merrill Lynch Asset Management, L.P. (the "Manager" or "MLAM") acts as the
manager of the Fund and provides the Fund with management and investment
advisory services. The Manager is owned and controlled by ML & Co., a financial
services holding company and the parent of Merrill Lynch. The Manager, or an
affiliate of the Manager, FAM, acts as the investment adviser to more than 100
other registered investment companies and provides investment advisory services
to individual and institutional accounts. As of November 2, 1994, the Manager
and FAM had a total of approximately $167.6 billion in investment company and
other portfolio assets under management, including accounts of certain
affiliates of the Manager.
The Fund has entered into a management agreement (the "Management Agreement")
with the Manager. As described in the Management Agreement, the Manager
receives for its services to the Fund monthly compensation at the annual rate
of 1.00% of the average daily net assets of the Fund. The Management Agreement
provides that, subject to the direction of the Board of Directors of the Fund,
the Manager is responsible for the actual management of the Fund's portfolio
and constantly reviews the Fund's holdings in light of its own research
analysis and that from other relevant sources. The responsibility for making
decisions to buy, sell or hold a particular security rests with the Manager,
subject to review by the Board of Directors.
31
<PAGE>
The Manager provides the portfolio managers for the Fund, who consider analyses
from various sources (including brokerage firms with which the Fund does
business), make the necessary investment decisions and place orders for
transactions accordingly. The Manager also is obligated to perform certain
administrative and management services for the Fund and is obligated to provide
all of the office space, facilities, equipment and personnel necessary to
perform its duties under the Management Agreement.
The Fund pays certain expenses incurred in its operations, including, among
other things, the management fees; legal and audit fees; unaffiliated
Directors' fees and expenses; registration fees; custodian and transfer agency
fees; accounting and pricing costs; and certain of the costs of printing
proxies, shareholder reports, prospectuses and statements of additional
information. Also, accounting services are provided to the Fund by the Manager,
and the Fund reimburses the Manager for its costs in connection with such
services on a semi-annual basis.
Grace Pineda is a Vice President of and Portfolio Manager for the Fund. Ms.
Pineda has been a Vice President of the Manager since 1989. Prior to joining
the Manager, Ms. Pineda was a portfolio manager with Clemente Capital, Inc.
TRANSFER AGENCY SERVICES
Financial Data Services, Inc. (the "Transfer Agent"), which is a wholly-owned
subsidiary of ML & Co., acts as the Fund's transfer agent pursuant to a
transfer agency, dividend disbursing agency and shareholder servicing agency
agreement (the "Transfer Agency Agreement"). Pursuant to the Transfer Agency
Agreement, the Transfer Agent is responsible for the issuance, transfer and
redemption of shares and the opening and maintenance of shareholder accounts.
Pursuant to the Transfer Agency Agreement, the Transfer Agent receives an
annual fee of $11.00 per Class A or Class D shareholder account, $14.00 per
Class B or Class C shareholder account and nominal miscellaneous fees (e.g.,
account closing fees), and the Transfer Agent is entitled to reimbursement for
out-of-pocket expenses incurred by the Transfer Agent under the Transfer Agency
Agreement.
PURCHASE OF SHARES
SUBSCRIPTION OFFERING
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of
both the Manager and Merrill Lynch, acts as the distributor of the shares of
the Fund.
The Distributor, Merrill Lynch and other securities dealers which have
entered into selected dealer agreements with the Distributor will solicit
subscriptions for shares of the Fund during a period expected to end on
December 22, 1994. The subscription period may be extended for up to an
additional 30 days upon agreement between the Fund and the Distributor. On the
fifth business day after the conclusion of the subscription period, the
subscriptions will be payable, the Class A, Class B, Class C and Class D shares
will be issued and the Fund will commence operations. The subscription offering
may be terminated by the Fund or the Distributor at any time, in which event no
Class A, Class B, Class C or Class D shares will be issued (and, therefore, the
Fund will not commence operations and no amounts will be payable by
subscribers, and no sales charges will be assessed) or a limited number of
shares will be issued.
32
<PAGE>
The public offering price of the Class A and Class D shares during the
subscription offering is set forth in the table below:
<TABLE>
<CAPTION>
SUBSCRIPTION PERIOD
---------------------------------------------
SECURITIES DEALERS'
SALES CHARGE CONCESSION
---------------------- ----------------------
PUBLIC PERCENTAGE* OF PERCENTAGE* OF
OFFERING DOLLAR PUBLIC OFFERING DOLLAR PUBLIC OFFERING
PRICE AMOUNT PRICE AMOUNT PRICE
-------- ------ --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Less than $25,000....... $10.554 $.554 5.25% $.554 5.25%
$25,000 but less than
$50,000................ 10.499 .499 4.75 .499 4.75
$50,000 but less than
$100,000............... 10.417 .417 4.00 .417 4.00
$100,000 but less than
$250,000............... 10.309 .309 3.00 .309 3.00
$250,000 but less than
$1,000,000............. 10.204 .204 2.00 .204 2.00
$1,000,000 and over**... 10.000 .000 0.00 .000 0.00
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more. If the sales charge is waived, such purchases will be
subject to a CDSC of 1.0% if the shares are redeemed within one year after
purchase. The charge will be assessed on an amount equal to the lesser of
the proceeds of redemption or the cost of the shares being redeemed. A
sales charge of 0.75% will be charged on purchases of $1,000,000 or more of
Class A or Class D shares by certain 401(k) plans.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and
Class D shares of the Fund will receive a concession equal to most of the
sales charge, they may be deemed to be underwriters under the Securities Act.
The proceeds per share to the Fund from the sale of all Class A and Class D
shares sold during the subscription period will be $10.00.
The public offering price of the Class B and Class C shares during the
subscription offering will be $10.00 per share. However, the Class B and Class
C shares may be subject to the CDSCs described below under "Deferred Sales
Charge Alternatives--Class B and Class C Shares" if redeemed within four years
of purchase, in the case of Class B shares, or one year of purchase, in the
case of Class C shares, and are subject to ongoing account maintenance and
distribution fees as described below.
The minimum initial purchase for Class A, Class B, Class C or Class D shares
during the subscription period is $1,000, except for retirement plans, where
the minimum initial purchase is $100.
CONTINUOUS OFFERING
Commencing immediately after completion of the subscription offering, shares
of the Fund will be offered continuously for sale by the Distributor and other
eligible securities dealers (including Merrill Lynch). During the continuous
offering, shares of the Fund may be purchased from securities dealers or by
mailing a purchase order directly to the Transfer Agent. The minimum initial
purchase during the continuous offering is $1,000. The minimum subsequent
purchase is $50, except for retirement plans, where the minimum initial
purchase is $100 and the minimum subsequent purchase is $1.
33
<PAGE>
The Fund will offer its shares in four classes during the continuous offering
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 Fund next determined after receipt of the purchase orders by the
Distributor. As to purchase orders received by securities dealers prior to 4:15
P.M., New York time, which includes orders received after the determination of
net asset value on the previous day, the applicable offering price will be
based on the net asset value, as of 4:15 P.M. on the day the order is 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 prior to 4:30 P.M., New York time, such orders shall be deemed
received on the next business day. The Fund or the Distributor may suspend the
continuous offering of the Fund's shares of any class at any time in response
to conditions in the securities markets or otherwise and may thereafter resume
such offering from time to time. Any order may be rejected by the Distributor
or the Fund. Neither the Distributor nor the dealers are permitted to withhold
placing orders to benefit themselves by a price change. Merrill Lynch may
charge its customers a processing fee (presently $4.85) to confirm a sale of
shares to such customers. Purchases directly through the Transfer Agent are not
subject to the processing fee.
The Fund issues four classes of shares under the Merrill Lynch Select
Pricingsm System, which permits each investor to choose the method of
purchasing shares that he or she 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 Fund 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 Pricing System is set forth
under "Merrill Lynch Select Pricingsm System" above.
Each Class A, Class B, Class C and Class D share of the Fund represents
identical interests in the investment portfolio of the Fund and has the same
rights, except that Class B, Class C and Class D shares bear the expenses of
the ongoing account maintenance fees, and Class B and Class C shares bear the
expenses of the ongoing distribution fees and the additional incremental
transfer agency costs resulting from the deferred sales charge arrangements.
The deferred sales charges and account maintenance fees that are imposed on
Class B and Class C shares, as well as the account maintenance fees that are
imposed on Class D shares, will be imposed directly against those classes and
not against all assets of the Fund and, accordingly, such charges will not
affect the net asset value of any other class or have any impact on investors
choosing another sales charge option. Dividends paid by the Fund for each class
of shares will be calculated in the same manner at the same time and will
differ only to the extent that account maintenance and distribution fees and
any incremental transfer agency costs relating to a particular class are borne
exclusively by that class. Class B, Class C and Class D shares each have
exclusive voting rights with respect to the Rule 12b-1 distribution plan
adopted with respect to such class pursuant to which account maintenance and/or
distribution fees are paid. See "Distribution Plans" below.
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
34
<PAGE>
Class C shares in that the sales charges applicable to each class provide for
the financing of the distribution of the shares of the Fund. The distribution-
related revenues paid with respect to a class will not be used to finance the
distribution expenditures of another class. Sales personnel may receive
different compensation for selling different classes of shares. Investors are
advised that only Class A and 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,
followed by a more detailed description of each class.
<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
years, at a rate of shares automatically
4.0% during the first after approximately
year, decreasing 1.0% eight 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 $l,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.
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.
35
<PAGE>
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>
SALES CHARGE AS DISCOUNT TO
SALES CHARGE AS PERCENTAGE* OF SELECTED DEALERS
PERCENTAGE OF THE NET AMOUNT AS PERCENTAGE OF
AMOUNT OF PURCHASE THE OFFERING PRICE INVESTED THE 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>
- --------
* Rounded to the nearest one-hundredth percent.
** The initial sales charge may be waived on Class A and Class D purchases of
$1,000,000 or more. If the sales charge is waived, such purchases will be
subject to a CDSC of 1.0% if the shares are redeemed within one year after
purchase. The charge will be assessed on an amount equal to the lesser of
the proceeds of redemption or the cost of the shares being redeemed. A
sales charge of 0.75% will be charged on purchases of $1,000,000 or more of
Class A or Class D shares by certain 401(k) plans.
The Distributor may reallow discounts to selected dealers and retain the
balance over such discounts. At times, the Distributor may reallow the entire
sales charge to such dealers. Since securities dealers selling Class A and
Class D shares of the Fund will receive a concession equal to most of the
sales charge, they may be deemed to be underwriters under the Securities Act.
Eligible Class A Investors. Class A shares are offered to a limited group of
investors and also will be issued upon reinvestment of dividends on
outstanding Class A shares. Certain employer sponsored retirement or savings
plans, including eligible 401(k) plans, may purchase Class A shares at net
asset value provided that such plans meet the required minimum number of
eligible employees or required amount of assets advised by the Manager or any
of its affiliates. Class A shares are available at net asset value to
corporate warranty insurance reserve fund programs provided that the program
has $3 million or more initially invested in MLAM-advised mutual funds. Also
eligible to purchase Class A shares at net asset value are participants in
certain investment programs including TMASM Managed Trusts to which Merrill
Lynch Trust Company provides discretionary trustee services and certain
purchases made in connection with the Merrill Lynch Mutual Fund Adviser
program. In addition, Class A shares will be offered at net asset value to ML
& Co. and its subsidiaries and their directors and employees and to members of
the Boards of MLAM-advised mutual funds, including the Fund. Certain persons
who acquired shares of certain MLAM-advised closed-end funds who wish to
reinvest the net proceeds from a sale of their closed-end fund shares of
common stock in shares of the Fund also may purchase Class A shares of the
Fund if certain conditions set forth in the Statement of Additional
Information are met. For example, Class A shares of the Fund and certain other
MLAM-advised mutual funds are offered at net asset value to shareholders of
Merrill Lynch Senior Floating Rate Fund, Inc. who wish to reinvest the net
proceeds from a sale of certain of their shares of common stock of Merrill
Lynch Senior Floating Rate Fund, Inc. in shares of such funds.
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges
also may be reduced under a Right of Accumulation and a Letter of Intention.
36
<PAGE>
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 a sales charge to an
investor who has a business relationship with a Merrill Lynch financial
consultant, if certain conditions set forth in the Statement of Additional
Information are met. Class D shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies.
Additional information concerning these reduced initial sales charges,
including information regarding investment by employer sponsored retirement and
savings plans, 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 after
they intend to hold their assets in MLAM-advised mutual funds.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net
asset value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a four year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately eight years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend reinvestment with respect to
those shares, are converted automatically into Class D shares of the Fund and
thereafter will be subject to lower continuing fees. See "Conversion of Class B
Shares to Class D Shares" below. Class B and Class C shares are both subject to
an account maintenance fee of 0.25% of net assets and a distribution fee of
0.75% of net assets as discussed below under "Distribution Plans."
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment.
Merrill Lynch compensates its financial consultants for selling Class B and
Class C shares at the time of purchase from its own funds. See "Distribution
Plans" below.
Proceeds from the CDSC and the distribution fee are paid to the Distributor
and are used in whole or in part by the Distributor to defray the expenses of
dealers (including Merrill Lynch) related to providing distribution-related
services to the Fund in connection with the sale of the Class B and Class C
shares, such as the payment of compensation to financial consultants for
selling Class B and Class C shares, from its own funds. The combination of the
CDSC and the ongoing distribution fee facilitates the ability of the Fund to
sell the Class B and Class C shares without a sales charge being deducted at
the time of purchase. Approximately eight years after issuance, Class B shares
will convert automatically into Class D shares of the Fund, which are subject
to an account maintenance fee but no distribution fee.
Imposition of the CDSC and the distribution fee on Class B and Class C shares
is limited by the NASD asset-based sales charge rule. See "Limitations on the
Payment of Deferred Sales Charges" below. The proceeds from the ongoing account
maintenance fee are used to compensate Merrill Lynch for providing continuing
account maintenance activities.
37
<PAGE>
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
YEAR SINCE AS A PERCENTAGE
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 applicable
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over four years or shares acquired pursuant to reinvestment
of dividends or distributions and then of shares held longest during the four-
year period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase. A transfer of
shares from 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 purchased 100 Class B 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 upon 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 charge 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 rates 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 Individual Retirement Account
("IRA") or other retirement plan or following the death or disability (as
defined in the Code) of a shareholder. The Class B CDSC also is waived on
redemptions of shares by certain eligible 401(a) and eligible 401(k) plans. The
CDSC also is waived for any Class B shares which are purchased by eligible
401(k) or eligible 401(a) plans which are rolled over into a Merrill Lynch or
Merrill Lynch Trust Company custodied IRA and held in such account at the time
of redemption. The Class B CDSC also is waived for any Class B shares which are
purchased by a Merrill Lynch rollover IRA that was funded by a rollover from a
terminated 401(k) plan managed by the MLAM Private Portfolio Group and held in
such account at the time of redemption. Additional information concerning the
waiver of the Class B CDSC is set forth in the Statement of Additional
Information.
38
<PAGE>
Contingent Deferred Sales Charges--Class C Shares. Class C shares which are
redeemed within one year of purchase may be subject to a 1.0% CDSC charged as a
percentage of the dollar amount subject thereto. The charge will be assessed on
an amount equal to the lesser of the proceeds of redemption or the cost of the
shares being redeemed. Accordingly, no Class C CDSC will be imposed on
increases in net asset value above the initial purchase price. In addition, no
Class C CDSC will be assessed on shares derived from reinvestment of dividends
or 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 (the "Conversion Period"), Class B shares will be converted automatically
into Class D shares of the Fund. Class D shares are subject to an ongoing
account maintenance fee of 0.25% of net assets but are not subject to the
distribution fee that is borne by Class B shares. Automatic conversion of Class
B shares into Class D shares will occur at least once each month (on the
"Conversion Date") on the basis of the relative net asset values of the shares
of the two classes on the Conversion Date, without the imposition of any sales
load, fee or other charge. Conversion of Class B shares to Class D shares will
not result in recognized gain or loss to shareholders for Federal income tax
purposes.
In addition, shares purchased through reinvestment of dividends on Class B
shares also will convert automatically to Class D shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into account the
length of time the shares underlying such dividend reinvestment shares were
outstanding. If at a Conversion Date the conversion of Class B shares to Class
D shares of the Fund in a single account will result in less than $50 worth of
Class B shares being left in the account, all of the Class B shares of the Fund
held in the account on the Conversion Date will be converted to Class D shares
of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event that 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.
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for Class B, Class C and
Class D shares pursuant to Rule 12b-1 under the Investment Company Act (each a
"Distribution Plan") with respect to the account maintenance and/or
distribution fees paid by the Fund to the Distributor with respect to such
classes. The Class B and Class C Distribution Plans provide for the payment of
account maintenance fees and distribution fees, and the Class D Distribution
Plan provides for the payment of account maintenance fees.
39
<PAGE>
The Distribution Plans for Class B, Class C and Class D shares each provide
that the Fund pays the Distributor an account maintenance fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual
rate of 0.25% of the average daily net assets of the Fund attributable to
shares of the relevant class in order to compensate the Distributor and Merrill
Lynch (pursuant to a sub-agreement) in connection with account maintenance
activities.
The Distribution Plans for Class B and Class C shares each provide that the
Fund also pays the Distributor a distribution fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the shares of the
relevant class in order to compensate the Distributor and Merrill Lynch
(pursuant to a sub-agreement) for providing distribution services, and bearing
certain distribution-related expenses of the Fund, including payments to
financial consultants for selling Class B and Class C shares of the Fund. The
Distribution Plans related to Class B and Class C shares are designed to permit
an investor to purchase Class B and Class C shares through dealers without the
assessment of an initial sales charge and at the same time permit the dealer to
compensate its financial consultants in connection with the sale of the Class B
and Class C shares. In this regard, the purpose and function of the ongoing
distribution fees and the CDSC are the same as those of the initial sales
charges with respect to the Class A and Class D shares of the Fund in that the
deferred sales charges provide for the financing of the distribution of the
Fund's Class B and Class C shares.
The payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred, and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Class B and Class C Distribution
Plans. This information is presented annually as of December 31 of each year on
a "fully allocated accrual" basis and quarterly on a "direct expense and
revenue/cash" basis. On the fully allocated accrual basis, revenues consist of
the account maintenance fees, distribution fees, the CDSC 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 promotional and market 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.
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 distribution fee and the CDSC,
borne by the Class B and Class C shares but not the account maintenance fee.
The maximum sales charge rule is applied separately to each class. As
applicable to the Fund, the maximum sales charge rule limits the aggregate of
distribution fee payments and CDSCs payable by the Fund to (1) 6.25% of
eligible gross sales of Class B shares and Class C shares, computed separately
(defined to exclude shares issued pursuant to dividend reinvestments and
exchanges) plus (2) interest on the unpaid balance for the respective class,
computed separately, at the prime rate plus 1% (the unpaid balance being the
maximum amount payable minus amounts received from the payment of the
distribution fee and the CDSC). In connection with the Class B shares, the
Distributor voluntarily has 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
40
<PAGE>
Distributor (referred to as the "voluntary maximum") in connection with the
Class B shares is 6.75% of eligible gross sales. The Distributor retains the
right to stop waiving the interest charges at any time. To the extent payments
would exceed the voluntary maximum, the Fund will not make further payments of
the distribution fee with respect to Class B shares, and any CDSCs will be paid
to the Fund rather than to the Distributor; however, the Fund will continue to
make payments of the account maintenance fee. In certain circumstances, the
amount payable pursuant to the voluntary maximum may exceed the amount payable
under the NASD formula. In such circumstances, payments in excess of the amount
payable under the NASD formula will not be made.
The Fund has no obligation with respect to distribution and/or account
maintenance-related expenses incurred by the Distributor and Merrill Lynch in
connection with Class B, Class C and Class D shares, and there is no assurance
that the Directors of the Fund will approve the continuance of the Distribution
Plans from year to year. However, the Distributor intends to seek annual
continuation of the Distribution Plans. In their review of the Distribution
Plans, the Directors will be asked to take into consideration expenses incurred
in connection with the account maintenance and/or distribution of each class of
shares separately. The initial sales charges, the account maintenance fee, the
distribution fee and/or the CDSCs received with respect to one class will not
be used to subsidize the sale of shares of another class. Payments of the
distribution fee on Class B shares will terminate upon conversion of those
Class B shares into Class D shares as set forth under "Deferred Sales Charge
Alternatives--Class B and Class C Shares--Conversion of Class B Shares to Class
D Shares."
REDEMPTION OF SHARES
The Fund is required to redeem for cash all full and fractional shares of the
Fund on receipt of a written request in proper form. The redemption price is
the net asset value per share next determined after the initial receipt of
proper notice of redemption, except that the redemption price for any class of
shares redeemed during the first 12 months after purchase will be the net asset
value per share minus a redemption fee of 2.0% of the net asset value of the
shares being redeemed. The redemption fee is designed to discourage short-term
trading in shares of the Fund and is retained by the Fund and may be used to
cover the cost of liquidating portfolio securities. Except for such redemption
fee and any CDSC which may be applicable to Class B and Class C shares, there
will be no charge for redemption if the redemption request is sent directly to
the Transfer Agent. Shareholders liquidating their holdings will receive upon
redemption all dividends and capital gains reinvested through the date of
redemption. The value of shares at the time of redemption may be more or less
than the shareholder's cost, depending on the market value of the securities
held by the Fund at such time.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by tendering
the shares directly to the Transfer Agent, Financial Data Services, Inc.,
Transfer Agency Mutual Fund Operations, P.O. Box 45289, Jacksonville, Florida
32232-5289. Redemption requests delivered other than by mail should be
delivered to Financial Data Services, Inc., Transfer Agency Mutual Fund
Operations, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Proper
notice of redemption in the case of shares deposited with the Transfer Agent
may be accomplished by a written letter requesting redemption. Proper notice of
redemption in the case of shares for which certificates have been issued may be
accomplished by a written letter as noted
41
<PAGE>
above accompanied by certificates for the shares to be redeemed. The notice in
either event requires the signatures of all persons in whose names the shares
are registered, signed exactly as their names appear on the Transfer Agent's
register or on the certificate, as the case may be. The signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution"
(including, for example, Merrill Lynch branches and certain other financial
institutions) as such is defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, the existence and validity of which may be verified by
the Transfer Agent through the use of industry publications. Notarized
signatures are not sufficient. In certain instances, the Transfer Agent may
require additional documents, such as, but not limited to, trust instruments,
death certificates, appointments as executor or administrator, or certificates
of corporate authority. For shareholders redeeming directly with the Transfer
Agent, payment will be mailed within seven days of receipt of a proper notice
of redemption.
At various times the Fund may be requested to redeem shares for which it has
not yet received good payment. The Fund may delay or cause to be delayed the
mailing of a redemption check until such time as "good payment" (e.g., cash or
certified check drawn on a U.S. bank) has been collected for the purchase of
such shares. Normally, this delay will not exceed 10 days.
REPURCHASE
The Fund also will repurchase shares through a shareholder's listed
securities dealer. The Fund normally will accept orders to repurchase shares by
wire or telephone from dealers for their customers at the net asset value next
computed after receipt of the order by the dealer, provided that the request
for repurchase is received by the dealer prior to the close of business on the
New York Stock Exchange on the day received and that such request is received
by the Fund from such dealer not later than 4:30 P.M., New York time, on the
same day. Dealers have the responsibility of submitting such repurchase
requests to the Fund not later than 4:30 P.M., New York time, in order to
obtain that day's closing price.
The foregoing repurchase arrangements are for the convenience of shareholders
and do not involve a charge by the Fund (other than any applicable redemption
fee and CDSC in the case of Class B or Class C shares). Securities firms which
do not have selected dealer agreements with the Distributor, however, may
impose a transaction charge on the shareholder for transmitting the notice of
repurchase to the Fund. Merrill Lynch may charge its customers a processing fee
(presently $4.85) to confirm a repurchase of shares to such customers.
Redemptions directly through the Transfer Agent are not subject to the
processing fee. The Fund reserves the right to reject any order for repurchase,
which right of rejection might adversely affect shareholders seeking redemption
through the repurchase procedure. A shareholder whose order for repurchase is
rejected by the Fund may redeem shares as set forth above.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
designed to facilitate investment in shares of the Fund. Full details as to
each of such services, copies of the various plans described below and
instructions as to how to participate in the various services or plans, or to
change options with respect thereto, can be obtained from the Fund by calling
the telephone number on the cover page hereof or from the
42
<PAGE>
Distributor or Merrill Lynch. Certain of these services are available only to
U.S. investors. Included in the Fund's shareholder services are the following:
Investment Account. Each shareholder whose account is maintained at the
Transfer Agent has an "Investment Account" and will receive, at least
quarterly, statements from the Transfer Agent. The statements will serve as
transaction confirmations for automatic investment purchases and the
reinvestment of ordinary income dividends. The statements also will show any
other activity in the account since the preceding statement. Shareholders will
receive separate transaction confirmations for each purchase or sale
transaction other than automatic investment purchases and the reinvestment of
income dividends. A shareholder may make additions to his or her Investment
Account at any time by mailing a check directly to the Transfer Agent.
Shareholders also may maintain their accounts through Merrill Lynch. Upon the
transfer of shares out of a Merrill Lynch brokerage account, an Investment
Account in the transferring shareholder's name will be opened automatically
without charge, at the Transfer Agent. Shareholders considering transferring
their Class A or Class D shares from Merrill Lynch to another brokerage firm or
financial institution should be aware that, if the firm to which the Class A or
Class D shares are to be transferred will not take delivery of shares of the
Fund, a shareholder either must redeem the Class A or Class D shares (paying
any applicable redemption fee and CDSC) so that the cash proceeds can be
transferred to the account at the new firm or such shareholder must continue to
maintain an Investment Account at the Transfer Agent for those Class A or Class
D shares. Shareholders interested in transferring their Class B or Class C
shares from Merrill Lynch and who do not wish to have an Investment Account
maintained for such shares at the Transfer Agent may request their new
brokerage firm to maintain such shares in an account registered in the name of
the brokerage firm for the benefit of the shareholder at the Transfer Agent.
Shareholders considering transferring a tax deferred retirement account such as
an IRA from Merrill Lynch to another brokerage firm or financial institution
should be aware that, if the firm to which the retirement account is to be
transferred will not take delivery of shares of the Fund, a shareholder must
either redeem the shares (paying any applicable redemption fee and CDSC) so
that the cash proceeds can be transferred to the account at the new firm, or
such shareholder must continue to maintain a retirement account at Merrill
Lynch for those shares.
Automatic Reinvestment of Dividends and Distributions. All dividends and
capital gains distributions are automatically reinvested in full and fractional
shares of the Fund, without a sales charge, at the net asset value per share
next determined after the close of the New York Stock Exchange on the ex-
dividend date of such dividend. A shareholder, at any time, by written
notification to Merrill Lynch if the shareholder's account is maintained with
Merrill Lynch or by written notification or telephone call (1-800-MER-FUND) to
the Transfer Agent if the shareholder's account is maintained with the Transfer
Agent, may elect to have subsequent dividends paid in cash, rather than
reinvested, in which event payment will be mailed on or about the payment date.
No redemption fee or CDSC will be imposed on redemptions of shares issued as a
result of the automatic reinvestment of dividends or distributions.
PERFORMANCE DATA
From time to time, the Fund may include its average annual total return for
various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed
separately for Class A, Class B, Class C and Class D shares in accordance with
a formula specified by the Securities and Exchange Commission.
43
<PAGE>
Average annual total return quotations for the specified periods will be
computed by finding the average annual compounded rates of return (based on net
investment income and any capital gains or losses on portfolio investments over
such periods) that would equate the initial amount invested to the redeemable
value of such investment at the end of each period. Average annual total return
will be computed assuming all dividends are reinvested and taking into account
all applicable recurring and nonrecurring expenses, including any redemption
fee that would be applicable to a complete redemption of the investment at the
end of the specified period, any CDSC that would be applicable to a complete
redemption of the investment at the end of the specified period such as in the
case of Class B and Class C shares and the maximum sales charge in the case of
Class A and Class D shares. Dividends paid by the Fund with respect to all
shares, to the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in the same amount, except
that account maintenance and distribution fees and any incremental transfer
agency costs relating to each class of shares will be borne exclusively by that
class. The Fund will include performance data for all classes of shares of the
Fund in any advertisement or information including performance data of the
Fund.
The Fund also may quote total return and aggregate total return performance
data for various specified time periods. Such data will be calculated
substantially as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return, and (2) the maximum applicable sales
charges will not be included with respect to annual or annualized rates of
return calculations. Aside from the impact on the performance data calculations
of including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average annual
total return data since the average annual rates of return reflect compounding;
aggregate total return data generally will be higher than average annual total
return data since the aggregate rates of return reflect compounding over longer
periods of time. In advertisements directed to investors whose purchases are
subject to reduced sales charges in the case of Class A and Class D shares or
to waiver of the CDSC in the case of Class B shares (such as investors in
certain retirement plans), performance data may take into account the reduced,
and not the maximum, sales charge or may not take into account the CDSC and
therefore may reflect greater total return since, due to the reduced sales
charges or waiver of the CDSC, a lower amount of expenses may be deducted. See
"Purchase of Shares". The Fund's total return may be expressed either as a
percentage or as a dollar amount in order to illustrate the effect of such
total return on a hypothetical $1,000 investment in the Fund at the beginning
of each specified period.
Total return figures are based on the Fund's historical performance and are
not intended to indicate future performance. The Fund's total return will vary
depending on market conditions, the securities comprising the Fund's portfolio,
the Fund's operating expenses and the amount of realized and unrealized net
capital gains or losses during the period. The value of an investment in the
Fund will fluctuate, and an investor's shares, when redeemed, may be worth more
or less than their original cost.
On occasion, the Fund may compare its performance to the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, or to
performance data published by Lipper Analytical Services, Inc., Morningstar
Publications, Inc., Money Magazine, U.S. News & World Report, Business Week,
CDA Investment Technology, Inc., Forbes Magazine, Fortune Magazine or other
industry publications. In addition, from time to time the Fund may include the
Fund's risk adjusted performance ratings assigned by Morningstar Publications,
Inc. in advertising or supplemental sales literature. As with other performance
data, performance comparisons should not be considered representative of the
Fund's relative performance for any future period.
44
<PAGE>
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of its net
investment income, if any. Dividends from such net investment income will be
paid at least annually. All net realized long- or short-term capital gains, if
any, will be distributed as dividends to the Fund's shareholders at least
annually. See "Additional Information--Determination of Net Asset Value".
Dividends may be reinvested automatically in shares of the Fund at net asset
value without a sales charge. Shareholders may elect in writing to receive any
such dividends in cash. See "Shareholder Services". Dividends are taxable to
shareholders as discussed below whether they are reinvested in shares of the
Fund or received in cash. From time to time, the Fund may declare a special
distribution at or about the end of the calendar year in order to comply with a
Federal income tax requirement that certain percentages of its ordinary income
and capital gains be distributed during the calendar year.
The per share dividends on each class of shares will be reduced as a result
of any account maintenance, distribution and transfer agency fees applicable to
that class.
Certain gains or losses attributable to foreign currency gains or losses from
certain forward contracts may increase or decrease the amount of the Fund's
income available for distribution to shareholders. If such losses exceed other
ordinary income during a taxable year, (a) the Fund would not be able to make
any ordinary income dividend distributions and (b) distributions made before
the losses were realized but in the same taxable year would be recharacterized
as a return of capital to shareholders, rather than as an ordinary income
dividend, reducing each shareholder's tax basis in Fund shares for Federal
income tax purposes, and resulting in a capital gain for any shareholder who
received a distribution greater than such shareholder's tax basis in Fund
shares (assuming that the shares were held as a capital asset). See "Additional
Information--Taxes".
TAXES
The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. If it so
qualifies, the Fund (but not its shareholders) will not be subject to Federal
income tax on the part of its net ordinary income and net realized capital
gains which it distributes to Class A, Class B, Class C and Class D
shareholders (together the "shareholders"). The Fund intends to distribute
substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures and options)
("capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Distributions in excess of the Fund's earnings and profits will first reduce
the adjusted tax basis of a holder's shares and, after such adjusted tax basis
is reduced to zero, will constitute capital gains to such holder (assuming the
shares are held as a capital asset).
45
<PAGE>
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
which was declared in the previous October, November or December to
shareholders of record on a specified date in one of such months, then such
dividend will be treated for tax purposes as being paid by the Fund and
received by its shareholders on December 31 of the year in which such dividend
was declared.
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
U.S. withholding tax.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. Shareholders may be
able to claim U.S. foreign tax credits with respect to such taxes, subject to
certain conditions and limitations contained in the Code. For example, certain
retirement accounts cannot claim foreign tax credits on investments in foreign
securities held in the Fund. If more than 50% in value of the Fund's total
assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible, and intends, to file an election with
the Internal Revenue Service pursuant to which shareholders of the Fund will be
required to include their proportionate shares of such withholding taxes in
their U.S. income tax returns as gross income, treat such proportionate shares
as taxes paid by them, and deduct such proportionate shares in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their U.S. income taxes. No deductions for foreign taxes, however, may be
claimed by noncorporate shareholders who do not itemize deductions. A
shareholder that is a nonresident alien individual or a foreign corporation may
be subject to U.S. withholding tax on the income resulting from the Fund's
election described in this paragraph but may not be able to claim a credit or
deduction against such U.S. tax for the foreign taxes treated as having been
paid by such shareholder. The Fund will report annually to its shareholders the
amount per share of such withholding taxes.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
The Fund may invest up to 10% of its total assets in securities of closed-end
investment companies. If the Fund purchases shares of an investment company (or
similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal
income tax, and an additional tax in the nature of interest (the "interest
charge"), on a portion of the distributions from such a company and on gain
from the disposition of the shares of such a company (collectively referred to
as "excess distributions"), even if such excess distributions are paid by the
Fund as a dividend to its shareholders. The Fund may be
46
<PAGE>
eligible to make an election with respect to certain PFICs in which it owns
shares that will allow it to avoid the taxes on excess distributions. However,
such election may cause the Fund to recognize income in a particular year in
excess of the distributions received from such PFICs. Alternatively, under
proposed regulations the Fund would be able to elect to "mark to market" at the
end of each taxable year all shares that it holds in PFICs. If it made this
election, the Fund would recognize as ordinary income any increase in the value
of such shares. Unrealized losses, however, would not be recognized. By making
the mark-to-market election, the Fund could avoid imposition of the interest
charge with respect to its distributions from PFICs, but in any particular year
might be required to recognize income in excess of the distributions it
received from PFICs and its proceeds from dispositions of PFIC stock.
Under Code Section 988, foreign currency gains or losses from certain debt
instruments, from certain forward contracts, from financial futures contracts
that are not "regulated futures contracts" and from unlisted options will
generally be treated as ordinary income or loss. Such Code Section 988 gains or
losses will generally increase or decrease the amount of the Fund's investment
company taxable income available to be distributed to shareholders as ordinary
income. Additionally, if Code Section 988 losses exceed other investment
company taxable income during a taxable year, the Fund would not be able to
make any ordinary income dividend distributions, and any distributions made
before the losses were realized but in the same taxable year would be
recharacterized as a return of capital to shareholders, thereby reducing the
basis of each shareholder's Fund shares and resulting in a capital gain for any
shareholder who received a distribution greater than the shareholder's tax
basis in Fund shares (assuming that the shares were held as a capital asset).
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares into Class D shares. A shareholder's basis in the Class
D shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period for the acquired Class D shares will
include the holding period for the converted Class B shares.
A loss realized on a sale of shares of the Fund will be disallowed if other
Fund shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
----------------
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Ordinary income and capital gain dividends 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 U.S. Government obligations. State law varies as
to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Fund.
47
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of all classes of the Fund is determined once
daily at 4:15 P.M., New York time, on each day during which the New York Stock
Exchange is open for trading. Any assets or liabilities initially expressed in
terms of non-U.S. dollar currencies are translated into U.S. dollars at the
prevailing market rates as quoted by one or more banks or dealers on the day of
valuation. The net asset value per share is computed by dividing the value of
the securities held by the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time. Expenses, including the fees payable to the Manager and the Distributor,
are accrued daily.
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 the Class B and Class C shares
and the 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 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.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the
time of valuation. When the Fund writes a call option, the amount of the
premium received is recorded on the books of the Fund as an asset and an
equivalent liability. The amount of the liability subsequently is valued to
reflect the current market value of the option written, based upon the last
sale price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last asked price. Options purchased
by the Fund are valued at their last sale price in the case of exchange-traded
options or, in the case of options traded in the over-the-counter market, the
last bid price. 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 Fund.
ORGANIZATION OF THE FUND
The Fund was incorporated under Maryland law on March 15, 1994. It has an
authorized capital of 400,000,000 shares of Common Stock, par value $0.10 per
share, divided into four classes, designated Class A, Class B, Class C and
Class D Common Stock, each of which consists of 100,000,000 shares. Shares of
Class A, Class B, Class C and Class D represent interests in the same assets of
the Fund and are identical in all respects except that Class B, Class C and
Class D shares bear certain expenses related to such account maintenance fee
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 such account maintenance fees
and distribution expenditures. See "Purchase of Shares." The Fund has received
48
<PAGE>
an order from the Securities and Exchange Commission permitting the issuance
and sale of multiple classes of shares. Such order permits the Fund to issue
additional classes of shares if the Board of Directors deems such issuance to
be in the best interests of the Fund. Shares issued by the Fund are fully paid,
non-assessable and have no preemptive or conversion rights.
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 matters submitted to a shareholder vote. The Fund does not intend to
hold an annual meeting of shareholders in any year in which the Investment
Company Act does not require shareholders to elect Directors. Also, the by-laws
of the Fund require that a special meeting of shareholders be held upon the
written request of at least 10% of the outstanding shares of the Fund entitled
to vote at such meeting, if they comply with applicable Maryland law. The Fund
will assist in shareholder communications in the manner described in Section
16(c) of the Investment Company Act. Voting rights for Directors are not
cumulative. Each share of Common Stock is entitled to participate equally in
dividends declared by the Fund and in the net assets of the Fund upon
liquidation or dissolution after satisfaction of outstanding liabilities, except
that, as noted above, expenses related to the distribution of the shares of a
class will be borne solely by such class.
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: Transfer Agency Mutual Fund Operations
P.O. Box 45289
Jacksonville, FL 32232-5289
The written notification should include the shareholder's name, address, tax
identification number and Merrill Lynch and/or mutual fund account numbers. If
you have any questions regarding this, please call your Merrill Lynch financial
consultant or Financial Data Services, Inc. at 1-800-637-3863.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
49
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
50
<PAGE>
APPENDIX A
FUTURES, OPTIONS AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund is authorized to engage in various portfolio hedging strategies.
These strategies are described in more detail below:
The Fund may engage in various portfolio strategies to hedge its portfolio
against investment and currency risks. These strategies include the use of
options on portfolio securities, currency and stock index options and futures,
options on such futures and forward foreign exchange transactions. The Fund may
enter into such transactions only in connection with its hedging strategies.
While the Fund's use of hedging strategies is intended to reduce the volatility
of the net asset value of Fund shares, the net asset value of the Fund's shares
will fluctuate. There can be no assurance that the Fund's hedging transactions
will be effective. Furthermore, the Fund may not necessarily be engaging in
hedging activities when movements in the equity markets or currency exchange
rates occur. Reference is made to the Statement of Additional Information for
further information concerning these strategies.
Although certain risks are involved in futures and options transactions (as
discussed below in "Risk Factors in Futures, Options and Currency
Transactions"), the Manager believes that, because the Fund only will engage in
these transactions for hedging purposes, the futures and options portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of futures and options transactions. Tax
requirements may limit the Fund's ability to engage in the hedging transactions
and strategies discussed below. See "Additional Information--Taxes".
Set forth below are descriptions of certain hedging strategies in which the
Fund is authorized to engage.
Writing Covered Options. The Fund is authorized to write (i.e., sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to certain of such options. A covered call
option is an option where the Fund in return for a premium gives another party
a right to buy specified securities owned by the Fund at a specified future
date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects
a closing purchase transaction. A closing purchase transaction cancels out the
Fund's position as the writer of an option by means of an offsetting purchase
of an identical option prior to the expiration of the option it has written.
Covered call options serve as a partial hedge against the price of the
underlying security declining.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options, which means that so
long as the Fund is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S.
Government securities or other high grade liquid debt 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 Fund will be obligated to purchase the underlying security
at a price that may be higher than the market value of that security at the
time of exercise
51
<PAGE>
for as long as the option is outstanding. The Fund may engage in closing
transactions in order to terminate put options that it has written. The Fund
will not write put options if the aggregate value of the obligations underlying
the put options shall exceed 50% of the Fund's net assets.
Purchasing Options. The Fund is authorized to purchase put options to hedge
against a decline in the market value of its securities. By buying a put option
the Fund has a right to sell the underlying security at the exercise price,
thus limiting the Fund's risk of loss through a decline in the market value of
the security until the put option expires. The amount of any profit on the sale
in the value of the underlying security will be partially offset by the amount
of the premium paid for the put option and any related transaction costs. Prior
to its expiration, a put option may be sold in a closing sale transaction and
profit or loss from the sale will depend on whether the amount received is more
or less than the premium paid for the put option plus the related transaction
costs. A closing sale transaction cancels out the Fund's position as the
purchaser of an option by means of any offsetting sale of an identical option
prior to the expiration of the option it has purchased.
In certain circumstances, the Fund 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. The Fund 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 Fund would exceed 5% of the market value of the Fund's total assets.
Stock Index Options and Futures and Financial Futures. The Fund is authorized
to engage in transactions in stock index options and futures and financial
futures, and related options on such futures. The Fund may purchase or write
put and call options on stock indices to hedge against the risks of marketwide
stock price movements in the securities in which the Fund invests. Options on
indices are similar to options on securities except that on exercise or
assignment, the parties to the contract pay or receive an amount of cash equal
to the difference between the closing value of the index and the exercise price
of the option times a specified multiple. The Fund may invest in stock index
options based on a broad market index or based on a narrow index representing
an industry, country or market segment.
The Fund also may purchase and sell stock index financial futures contracts
and financial futures contracts ("financial futures contracts") as a hedge
against adverse changes in the market value of its portfolio securities as
described below. A financial futures contract is an agreement between two
parties which obligates the purchaser of the financial futures contract to buy
and the seller of a financial futures contract to sell a security for a set
price on a future date. Unlike most other financial futures contracts, a stock
index financial futures contract does not require actual delivery of securities
but results in 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 Fund may effect transactions in stock index financial futures contracts in
connection with the equity securities in which it invests and in financial
futures contracts in connection with the debt securities in which it invests.
Transactions by the Fund in stock index futures and financial futures are
subject to limitations as described below under "Restrictions on the Use of
Futures Transactions".
The Fund may sell financial futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
securities portfolio that might otherwise result. When the Fund is not fully
invested in the securities markets and anticipates a significant market
advance, it may purchase futures in order to gain rapid market exposure. This
technique generally will allow the Fund to
52
<PAGE>
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 markets that the Fund ultimately purchases. As such
purchases are made, an equivalent amount of financial futures contracts will be
terminated by offsetting sales. The Manager does not consider purchases of
financial futures contracts to be a speculative practice under these
circumstances. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase such securities upon termination of the
long futures position, whether the long position is the purchase of a financial
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., the Fund experiences
a significant amount of redemptions), a long futures position may be terminated
without the corresponding purchase of securities.
The Fund also has authority to purchase and write call and put options on
financial futures contracts and stock indices 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 the Fund enters into
futures transactions. The Fund may purchase put options or write call options
on financial futures contracts and stock indices rather than selling the
underlying financial futures contract in anticipation of a decrease in the
market value of its securities. Similarly, the Fund may purchase call options,
or write put options on financial futures contracts and stock indices, as a
substitute for the purchase of such futures to hedge against the increased cost
resulting from an increase in the market value of securities which the Fund
intends to purchase.
The Fund may engage in futures and options transactions on U.S. and foreign
exchanges and in options in the over-the-counter markets ("OTC options").
Exchange-traded contracts are third-party contracts (i.e., performance of the
parties' obligations is guaranteed by an exchange or clearing corporation)
which, in general, have standardized strike prices and expiration dates. OTC
options transactions are two-party contracts with prices and terms negotiated
by the buyer and seller. The Fund may engage in OTC options to effect the same
strategies as it would through exchange-traded options. See "Restrictions on
OTC Options" below for information as to restrictions on the use of OTC
options.
Foreign Currency Hedging. The Fund has authority to deal in forward foreign
exchange among currencies of the different countries in which it will invest
and multinational currency units as a hedge against possible variations in the
foreign exchange rates among these currencies. This is accomplished through
contractual agreements to purchase or sell a specified currency at a specified
future date (up to one year) and price set at the time of the contract. The
Fund's dealings in forward foreign exchange will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward foreign currency with respect to
specific receivables or payables of the Fund accruing in connection with the
purchase and sale of its portfolio securities, the sale and redemption of
shares of the Fund or the payment of dividends by the Fund. Position hedging is
the sale of forward foreign currency with respect to portfolio security
positions denominated or quoted in such foreign currency. The Fund has no
limitation on transaction hedging. The Fund will not speculate in forward
foreign exchange. If the Fund enters into a position hedging transaction, the
Fund's custodian will place cash or liquid debt securities in a separate
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of such forward contract. If the value of the
securities placed in the separate account declines, additional cash or
securities will be placed in the account so that the value of the account will
equal the amount of the Fund's commitment with respect to such contracts.
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
53
<PAGE>
such securities decline. Such transactions also preclude the opportunity for
gain if the value of the hedged currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the devaluation level it anticipates. Investors should be aware
that U.S. dollar-denominated securities may not be available in some or all
developing countries, that the forward currency market for the purchase for
U.S. dollars in most, if not all, developing countries is not highly developed
and that in certain developing countries no forward market for foreign
currencies currently exists or such market may be closed to investment by the
Fund.
The Fund also is authorized to purchase or sell listed or OTC foreign
currency options, foreign currency futures and related options on foreign
currency futures, for example, as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be effected with
respect to hedges on non-U.S. Dollar-denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund. As an illustration, the Fund may use such techniques to
hedge the stated value in U.S. dollars of an investment in a pound sterling
denominated security. In such circumstances, for example, the Fund may purchase
a foreign currency put option enabling it to sell a specified amount of pounds
for dollars at a specified price by a future date. To the extent the hedge is
successful, a loss in the value of the pound relative to the dollar will tend
to be offset by an increase in the value of the put option. To offset, in whole
or in part, the cost of acquiring such a put option, the Fund also may sell a
call option which, if exercised, requires it to sell a specified amount of
pounds for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such a call option in this illustration, the Fund gives
up the opportunity to profit without limit from increases in the relative value
of the pound to the dollar. The Manager believes that "straddles" of the type
which may be utilized by the Fund constitute hedging transactions and are
consistent with the policies described above.
Certain differences exist between these foreign currency hedging instruments.
Foreign currency options provide the holder thereof the right to buy or sell a
currency at a fixed price on a future date. Listed options are third-party
contracts (i.e., performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) which are issued by a clearing corporation,
traded on an exchange and have standardized strike prices and expiration dates.
OTC options are two-party contracts and have negotiated strike prices and
expiration dates. A financial 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. Financial futures contracts and options on
financial futures contracts are traded on boards of trade or futures exchanges.
The Fund will not speculate in foreign currency futures, options or related
options. Accordingly, the Fund will not hedge a currency substantially in
excess of the market value of securities which it has committed or anticipates
to purchase which are denominated in such currency and, in the case of
securities which have been sold by the Fund but not yet delivered, the proceeds
thereof in its denominated currency. Further, the Fund will segregate at its
custodian cash, liquid equity or debt securities having a market value
substantially representing any subsequent decrease in the market value of such
hedged security, less any initial or variation margin held in the account of
its broker. The Fund may not incur potential net liabilities of more than 33
1/3% of its total assets from foreign currency futures, options or related
options.
Restrictions on the Use of Futures Transactions. Regulations of the Commodity
Futures Trading Commission applicable to the Fund provide that the futures
trading activities described herein will not result in the Fund being deemed a
"commodity pool" under such regulations if the Fund adheres to certain
restrictions. In particular, the Fund may purchase and sell financial futures
contracts and options thereon (i) for bona fide hedging purposes, and (ii) for
non-hedging purposes, if the aggregate initial margin and
54
<PAGE>
premiums required to establish positions in such contracts and options does not
exceed 5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any such contracts and
options. The Fund has undertaken to the State of California that the aggregate
margin deposits required on all stock index futures or options thereon, or
financial futures or options thereon, held at any time by the Fund will not
exceed 5% of the Fund's total assets.
When the Fund purchases a financial futures contract, or writes a put option
or purchases a call option thereon, an amount of cash and cash equivalents will
be deposited in a segregated account with the Fund's custodian so that the
amount so segregated, plus the amount of initial and variation margin held in
the account of its broker, equals the market value of the financial futures
contract, thereby ensuring that the use of such financial futures contract is
unleveraged.
Restrictions on OTC Options. The Fund will engage in OTC options, including
OTC stock index options, OTC foreign currency options and options on foreign
currency futures, only with member banks of the Federal Reserve System and
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers that have capital of at least $50 million or whose obligations are
guaranteed by an entity having capital of at least $50 million or any other
bank or dealer having capital of at least $150 million or whose obligations are
guaranteed by an entity having capital of at least $150 million.
The staff of the Securities and Exchange Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Fund has adopted an investment policy
pursuant to which it will not purchase or sell OTC options (including OTC
options on financial 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 Fund, the market value of the underlying securities covered by OTC call
options currently outstanding which were sold by the Fund and margin deposits
on the Fund's existing OTC options on financial futures contracts exceeds 15%
of the total assets of the Fund, taken at market value, together with all other
assets of the Fund which are illiquid or are not otherwise readily marketable.
However, if the OTC option is sold by the Fund to a primary U.S. Government
securities dealer recognized by the Federal Reserve Bank of New York and if the
Fund has the unconditional contractual right to repurchase such OTC option from
the dealer at a predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price less
the amount by which the option is "in-the-money" (i.e., current market value of
the underlying 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 the Fund and may be amended by the Directors of the Fund
without the approval of the Fund's shareholders. However, the Fund will not
change or modify this policy prior to the change or modification by the
commission staff of its position.
Risk Factors in Futures, Options and Currency Transactions. Utilization of
futures and options transactions to hedge the portfolio, including to affect
the Fund's exposure in various markets, involves the risk of imperfect
correlation in movements in the price of futures and options 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 Fund will experience a gain or loss which
will not be completely offset by movements in the price of the subject of the
hedge. The successful use of futures and options also depends on the Manager's
ability to predict correctly price movements in the market involved in a
particular options or futures transaction. In addition, futures and options
transactions
55
<PAGE>
in foreign markets are subject to the risk factors associated with foreign
investments generally. See "Risk Factors and Special Considerations".
The Fund intends to enter into futures and options transactions, on an
exchange or in the OTC market, only if there appears to be a liquid secondary
market for such options or futures or, in the case of OTC transactions, the
Manager believes the Fund can receive on each business day at least two
independent bids or offers, unless a quotation from only one dealer is
available, in which case only that dealer's price will be used, or which can be
sold at a formula price provided for in the OTC option agreement. There can be
no assurance, however, that a liquid secondary market will exist at any
specific time. Thus, it may not be possible to close an options or futures
position. The inability to close futures and options positions also could have
an adverse impact on the Fund's ability to hedge effectively its portfolio.
There also is the risk of loss by the Fund of margin deposits or collateral in
the event of the bankruptcy of a broker with whom the Fund has an open position
in an option, a financial futures contract or related option.
The exchanges on which the Fund intends to conduct options transactions
generally have established limitations governing the maximum number of call or
put options on the same underlying security or currency (whether or not
covered) that 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 that any person may trade on a particular trading day. The
Manager does not believe that these trading and position limits will have any
adverse impact on the portfolio strategies for hedging the Fund's portfolio.
56
<PAGE>
APPENDIX B
RATINGS OF DEBT SECURITIES AND PREFERRED STOCK
DESCRIPTION OF CORPORATE DEBT RATINGS OF MOODY'S INVESTORS SERVICE, INC.
("MOODY'S")
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risk appear
somewhat larger than the 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 some time 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 payments and principal repayments 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 the desirable
investments. Assurance of interest payments and principal repayments 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.
57
<PAGE>
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's makes no
representations as to whether such commercial paper is by any other definition
"commercial paper" or is exempt from registration under the Securities Act of
1933, as amended.
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's makes no representation that such obligations
are exempt from registration under the Securities Act of 1933, nor does it
represent that any specific note is a valid obligation of a rated issuer or
issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers.
Issuers rated PRIME-1 (or 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 MOODY'S PREFERRED STOCK RATINGS
Because of the fundamental differences between preferred stocks and bonds, a
variation of the bond rating symbols is being used in the quality ranking of
preferred stocks. The symbols presented below are
58
<PAGE>
designed to avoid comparison with bond quality in absolute terms. It should
always be borne in mind that preferred stock occupies a junior position to
bonds within a particular capital structure and that these securities are rated
within the universe of preferred stocks.
Preferred stock rating symbols and their definitions are as follows:
"aaa" An issue which is rated "aaa" is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance the earnings and
asset protection will remain relatively well maintained in the
foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in
the "aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
"baa" An issue which is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings
and asset protection appear adequate at present but may be questionable
over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse
periods. Uncertainty of position characterizes preferred stocks in this
class.
"b" An issue which is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of
other terms of the issue over any long period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.
"c" This is the lowest rated class of preferred or preference stock. 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 rating
classification: 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 CORPORATE DEBT RATINGS OF STANDARD & POOR'S CORPORATION
("STANDARD & POOR'S")
A Standard & Poor's corporate or municipal debt 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.
59
<PAGE>
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 based on other circumstances.
The ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the 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 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 payments and
principal repayments. The BB rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied BBB-
rating.
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
also is 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 also is used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.
60
<PAGE>
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 repayments 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.
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.
61
<PAGE>
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-l" 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 repayments 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 STANDARD & POOR'S PREFERRED STOCK RATINGS
A Standard & Poor's preferred stock rating is an assessment of the capacity
and willingness of an issuer to pay preferred stock dividends and any
applicable sinking fund obligations. A preferred stock rating differs from a
bond rating inasmuch as it is assigned to an equity issue, which issue is
intrinsically different from, and subordinated to, a debt issue. Therefore, to
reflect this difference, the preferred stock rating symbol will normally not be
higher than the debt rating symbol assigned to, or that would be assigned to,
the senior debt of the same issuer.
The preferred stock ratings are based on the following considerations:
I. Likelihood of payment--capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking
fund requirements in accordance with the terms of the obligation.
62
<PAGE>
II. Nature of, and provisions of, the issue.
III. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA This is the highest rating that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay
the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-quality filed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA".
A An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make
payments for a preferred stock in this category than for issues in the
"A" category.
BB Preferred stock rated "BB", "B", and "CCC" are regarded, on balance, as
predominately
B speculative with respect to the issuer's capacity to pay preferred stock
obligations. "BB"
CCC indicates the lowest degree of speculation and "CCC" the highest degree
of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
CC The rating "CC" is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): To provide more detailed indications of preferred stock
quality, 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.
A preferred stock 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.
63
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
64
<PAGE>
APPENDIX C
INFORMATION CONCERNING CERTAIN
MIDDLE EASTERN/AFRICAN COUNTRIES
GENERAL
The countries within the Middle East/Africa region offer a new investment
frontier. In the Middle East, historical unrest has made economies fragile.
However, ethnic struggles continue to subside and progress towards peace
continues among nations.
Populations, while diverse, realize that economic cooperation is critical as
they enter the next century. The Middle East is an important gateway to oil
fields and is critical to trade routes, especially the Suez Canal. Africa and
the Middle East are rich in resources. As basic needs are met, populations can
concentrate on education, economic development and growth. Progress in
technology and telecommunications will help to connect populations and
encourage economic cooperation.
Global investing may bring both opportunity and diversification to an
investment strategy. Investing in countries with developing economies in Africa
and the Middle East has the potential of providing attractive long-term
returns.
Over the past several years, both equity and bond markets outside of the
United States have grown rapidly in size and importance. With respect to the
global equity market, in 1970 the aggregate market capitalization of securities
worldwide was $1,089 billion, 66% of which was found in the United States; in
1993, the corresponding aggregate market capitalization was $12,286 billion,
only 36% of which was found in the United States. With respect to the global
bond market, in 1980 the nominal value of bonds outstanding was $2,826 billion,
51% of which was found in the United States; in 1993, the corresponding nominal
value of bonds outstanding was $6,476 billion, only 36.2% of which was found in
the United States.
The Fund offers these advantages:
. Potential for higher returns. The Fund's approach is based on the belief
that regional growth may result from governmental policies directed
toward market oriented economic reform. Certain Middle Eastern/African
countries have been introducing deregulatory reforms to encourage
development of their securities markets and, in varying degrees, to
permit foreign investment. While investments of this nature involve a
high degree of financial and market risk, they also have the potential to
realize attractive long-term returns.
. Flexible investing. The Manager has the flexibility to adjust portfolio
holdings geographically and by asset class to take advantage of
opportunities offered in these markets.
Set forth below is additional information with respect to certain Middle
Eastern and African countries in which the Fund initially intends to emphasize
its investments.
SOUTH AFRICA
Under South Africa's first democratically elected president, access to
foreign capital and to foreign export markets should improve. The country has a
positive corporate earnings outlook as exports recover, commodity prices rise,
and confidence improves. As South Africa develops into a free society, the
benefits reaped by the economy there could have a positive influence on the
other African countries. Already, Western nations have invested heavily in
South Africa and foreign companies make up a large part of the economy.
65
<PAGE>
MOROCCO
Morocco is embarking on reforms in its banking sector and stock market, as
well as privatization of state enterprises. Economic performance is stable in
this country, resulting from good economic management over the past 10 years.
Morocco's stock market is still very small, which suggests much potential for
development and the realization of higher stock prices.
ISRAEL
Israel's combination of high-tech companies trading in a developing capital
market results in attractive stock valuations when compared to U.S. counterpart
companies. Israel also has a highly educated, talented and skilled technical
workforce, at lower labor costs than other industrialized economies. In
addition, Israel's government still owns and manages a large part of its
economy, and much can be improved through structural reforms.
TURKEY
Opportunistic companies in Turkey are benefiting from its position at
crossroads between Asia and Europe and the Islamic states. The earnings outlook
for many companies that export goods is positive as the Turkish Lira weakens
and demand increases from the European Union, eastern Europe and the Central
Asian Republics. Also, the adoption of a privatization bill will allow for the
sale of companies in sectors such as telecommunications, airlines, petroleum,
steel and energy.
66
<PAGE>
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.--AUTHORIZATION FORM (PART 1)
- -------------------------------------------------------------------------------
1. SHARE PURCHASE APPLICATION
I, being of legal age, wish to purchase: (choose one)
[_] Class A shares [_] Class B shares [_] Class C shares [_] Class D shares
of Merrill Lynch Middle East/Africa Fund, Inc., and establish an Investment
Account as described in the Prospectus. In the event that I am not eligible to
purchase Class A shares, I understand that Class D shares will be purchased.
Basis for establishing an Investment Account:
A. I enclose a check for $............ payable to Financial Data Services,
Inc. as an initial investment (minimum $1,000). I understand that this
purchase will be executed at the applicable offering price next to be
determined after this Application is received by you.
B. I already own shares of the following Merrill Lynch mutual funds that
would qualify for the Right of Accumulation as outlined in the Statement of
Additional Information: Please list all funds. (Use a separate sheet of
paper if necessary.)
1. .................................. 4. ..................................
2. .................................. 5. ..................................
3. .................................. 6. ..................................
Name...........................................................................
First Name Initial Last Name
Name of Co-Owner (if any)......................................................
First Name Initial Last Name
Address........................................................................
................................................. Date........................
(Zip Code)
Occupation........................... Name and Address of Employer ........
..................................... .....................................
Signature of Owner Signature of Co-Owner (if any)
(In the case of co-owner, a joint tenancy with rights of survivorship will be
presumed unless otherwise specified.)
- -------------------------------------------------------------------------------
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
Ordinary Income Dividends Long-Term Capital Gains
Select [_] Reinvest Select [_] Reinvest
One: [_] Cash One: [_] Cash
If no election is made, dividends and capital gains will be automatically
reinvested at net asset value without a sales charge.
IF CASH, SPECIFY HOW YOU WOULD LIKE YOUR DISTRIBUTIONS PAID TO YOU: [_] CHECK
OR [_] DIRECT DEPOSIT TO BANK ACCOUNT
IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, PLEASE COMPLETE BELOW:
I hereby authorize payment of dividend and capital gain distributions by
direct deposit to my bank account and, if necessary, debit entries and
adjustments for any credit entries made to my account in accordance with the
terms I have selected on the Merrill Lynch Middle East/Africa Fund, Inc.
Authorization Form.
SPECIFY TYPE OF ACCOUNT (CHECK ONE) [_] CHECKING [_] SAVINGS
Name on your account ..........................................................
Bank Name .....................................................................
Bank Number ...................... Account Number ............................
Bank Address ..................................................................
I agree that this authorization will remain in effect until I provide written
notification to Financial Data Services, Inc. amending or terminating this
service.
Signature of Depositor ........................................................
Signature of Depositor ............................... Date...................
(if joint account, both must sign)
NOTE: IF DIRECT DEPOSIT TO BANK ACCOUNT IS SELECTED, YOUR BLANK, UNSIGNED
CHECK MARKED "VOID" OR A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD
ACCOMPANY THIS APPLICATION.
- -------------------------------------------------------------------------------
67
<PAGE>
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.--AUTHORIZATION FORM (PART 1) --
(CONTINUED)
3. SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER
[_][_][_] [_][_] [_][_][_][_]
Social Security Number or Taxpayer Identification Number
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security Number or Taxpayer Identification Number and (2)
that I am not subject to backup withholding (as discussed under "Additional
Information--Taxes") either because I have not been notified that I am subject
thereto as a result of a failure to report all interest or dividends, or the
Internal Revenue Service (the "IRS") has notified me that I am no longer
subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN
NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDER-REPORTING AND
IF YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS
BEEN TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS
CERTIFICATION TO OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
..................................... .....................................
Signature of Owner Signature of Co-Owner (if any)
- -------------------------------------------------------------------------------
4. LETTER OF INTENTION--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND
CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
Dear Sir/Madam:
..................., 19......
Date of Initial Purchase
Although I am not obligated to do so, I intend to purchase shares of Merrill
Lynch Middle East/Africa Fund, Inc. or any other investment company with an
initial sales charge or deferred sales charge for which Merrill Lynch Funds
Distributor, Inc. acts as distributor over the next 13 month period which will
equal or exceed:
[_] $25,000 [_] $50,000 [_] $100,000 [_] $250,000 [_] $1,000,000
Each purchase will be made at the then reduced offering price applicable to
the amount checked above, as described in the Fund's prospectus.
I agree to the terms and conditions of this Letter of Intention. I hereby
irrevocably constitute and appoint Merrill Lynch Funds Distributor, Inc., my
attorney, with full power of substitution, to surrender for redemption any or
all shares of Merrill Lynch Middle East/Africa Fund, Inc. held as security.
By .................................. .....................................
Signature of Owner Signature of Co-Owner
(If registered in joint names,
both must sign)
In making purchases under this letter, the following are the related
accounts on which reduced offering prices are to apply:
(1) Name............................. (2) Name.............................
Account Number.......................
Account Number.......................
- -------------------------------------------------------------------------------
5. FOR DEALER ONLY
Branch Office, Address, Stamp. We hereby authorize Merrill Lynch
Funds Distributor, Inc. to act as
- - - our agent in connection with
transactions under this
authorization form and agree to
notify the Distributor of any
purchases made under a Letter of
Intention or Systematic Withdrawal
Plan. We guarantee the shareholder's
- - - signature.
This form when completed should be .....................................
mailed to: Dealer Name and Address
Merrill Lynch Middle East/Africa By ..................................
Authorized Signature of Dealer
Fund, Inc. [_][_][_] [_][_][_][_] .............
c/o Financial Data Services, Inc. Branch-Code F/C No. F/C Last Name
Transfer Agency Mutual Fund Operations [_][_][_] [_][_][_][_]
P.O. Box 45289 Dealer's Customer A/C No.
Jacksonville, FL 32232-5289
68
<PAGE>
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.--AUTHORIZATION FORM (PART 2)
- -------------------------------------------------------------------------------
NOTE: THIS FORM IS REQUIRED TO APPLY FOR THE AUTOMATIC INVESTMENT PLAN ONLY.
- -------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
Name of Owner...................... [_][_][_] [_][_] [_][_][_][_]
Name of Co-Owner (if any).......... Social Security No. or
Taxpayer Identification
Number
Address............................ Account Number ....................
(if existing account)
...................................
- -------------------------------------------------------------------------------
2. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Financial Data Services, Inc. draw an automated
clearing house ("ACH") debit on my checking account described below each month
to purchase: (choose one)
[_] Class A shares [_] Class B shares [_] Class C shares [_] Class D shares
of Merrill Lynch Middle East/Africa Fund, Inc., subject to the terms set forth
below. In the event that I am not eligible to purchase Class A shares, I
understand that Class D shares will be purchased.
FINANCIAL DATA SERVICES, INC. AUTHORIZATION TO HONOR ACH DEBITS
DRAWN BY FINANCIAL DATA SERVICES,
INC.
You are hereby authorized to draw an To...............................Bank
ACH debit each month on my bank (Investor's Bank)
account for investment in Merrill
Lynch Middle East/ Africa Fund, Inc. Bank Address.........................
as indicated below:
Amount of each ACH debit $........ City...... State...... Zip Code......
Account Number ...................
As a convenience to me, I hereby
request and authorize you to pay and
Please date and invest ACH debits on charge to my account ACH debits
the 20th of each month beginning drawn on my account by and payable
to Financial Data Services, Inc., I
..................................... agree that your rights in respect to
each such debit shall be the same as
................(month) if it were a check drawn on you and
signed personally by me. This
or as soon thereafter as possible. authority is to remain in effect
until revoked by me in writing.
I agree that you are drawing these Until you receive such notice, you
ACH debits voluntarily at my request shall be fully protected in honoring
and that you shall not be liable for any such debit. I further agree that
any loss arising from any delay in if any such debit be dishonored,
preparing or failure to prepare any whether with or without cause and
such debit. If I change banks or whether intentionally or
desire to terminate or suspend this inadvertently, you shall be under no
program, I agree to notify you liability.
promptly in writing. I hereby
authorize you to take any action to ............ .....................
correct erroneous ACH debits of my Date Signature of
bank account or purchases of fund Depositor
shares including liquidating shares
of the Fund and crediting my bank ............ .....................
account. I further agree that if a Bank Signature of Depositor
debit is not honored upon Account (If joint account,
presentation, Financial Data Number both must sign)
Services, Inc. is authorized to
discontinue immediately the Automatic
Investment Plan and to liquidate
sufficient shares held in my account
to offset the purchase made with the
returned dishonored debit.
............ .....................
Date Signature of
Depositor
......................
Signature of Depositor
(If joint account,
both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK
MARKED "VOID" SHOULD ACCOMPANY THIS APPLICATION.
69
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
70
<PAGE>
MANAGER
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 Chase Manhattan Bank, N.A.
Global Securities Services
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
INDEPENDENT AUDITORS
COUNSEL
Brown & Wood
One World Trade Center
New York, New York 10048-0057
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND, THE MANAGER 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........................................................ 5
Merrill Lynch Select PricingSM System..................................... 7
Risk Factors and Special Considerations................................... 11
Investment Objective and Policies......................................... 20
Description of Certain Investments....................................... 23
Other Investment Policies and Practices.................................. 25
Investment Restrictions................................................... 29
Non-Diversified Status................................................... 30
Management of the Fund.................................................... 31
Board of Directors....................................................... 31
Management and Advisory Arrangements..................................... 31
Transfer Agency Services................................................. 32
Purchase of Shares........................................................ 32
Subscription Offering.................................................... 32
Continuous Offering...................................................... 33
Initial Sales Charge Alternatives--Class A and Class D Shares............ 35
Deferred Sales Charge Alternatives--Class B and Class C Shares........... 37
Distribution Plans....................................................... 39
Redemption of Shares...................................................... 41
Redemption............................................................... 41
Repurchase............................................................... 42
Shareholder Services...................................................... 42
Performance Data.......................................................... 43
Additional Information.................................................... 45
Dividends and Distributions.............................................. 45
Taxes.................................................................... 45
Determination of Net Asset Value......................................... 48
Organization of the Fund................................................. 48
Shareholder Reports...................................................... 49
Shareholder Inquiries.................................................... 49
Appendix A................................................................ 51
Appendix B................................................................ 57
Appendix C................................................................ 65
Authorization Form........................................................ 67
</TABLE>
Code # 18415-1094
[LOGO]
Merrill Lynch
Middle East/Africa
Fund, Inc.
[ART]
PROSPECTUS
December , 1994
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This Prospectus should be
retained for future reference.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT +
+CONSTITUTE A PROSPECTUS. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 18, 1994
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011 . PHONE NO. (609) 282-2800
--------------
Merrill Lynch Middle East/Africa Fund, Inc. (the "Fund") is a non-
diversified, open-end management investment company seeking long-term capital
appreciation by investing primarily in equity and debt securities of corporate
and governmental issuers in countries located in the Middle East and Africa
("Middle Eastern/African countries"). For purposes of its investment objective,
the Fund may invest in the securities of issuers in all countries in the Middle
East and Africa. The Fund initially expects to emphasize investments in the
securities of issuers in Morocco, South Africa, Turkey, Israel, Jordan and
Zimbabwe. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in equity or debt securities of corporate and
governmental issuers in Middle Eastern/African countries. The Fund may employ a
variety of derivative investments and techniques to hedge against market and
currency risk. There can be no assurance that the Fund's investment objective
will be achieved.
--------------
Pursuant to the Merrill Lynch Select PricingSM System, the Fund offers four
classes of shares, each with a different combination of sales charges, ongoing
fees and other features. The Merrill Lynch Select PricingSM System permits an
investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances.
--------------
This Statement of Additional Information of the Fund is not a prospectus and
should be read in conjunction with the prospectus of the Fund, dated 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 to the Fund at the above telephone number or address. This Statement of
Additional Information has been incorporated by reference into the Prospectus.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
--------------
MERRILL LYNCH ASSET MANAGEMENT--MANAGER
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
--------------
The date of this Statement of Additional Information is December , 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital
appreciation by investing primarily in equity and debt securities of corporate
and governmental issuers in countries located in the Middle East and Africa
("Middle Eastern/African countries"). Reference is made to "Investment
Objective and Policies" in the Prospectus for a discussion of the investment
objective and policies of the Fund.
The securities markets of many countries at times in the past have moved
relatively independently of one another due to different economic, financial,
political and social factors. When such lack of correlation, or negative
correlation, in movements of these securities markets occurs, it may reduce
risk for the Fund's portfolio as a whole. This negative correlation also may
offset unrealized gains the Fund has derived from movements in a particular
market. To the extent the various markets move independently, total portfolio
volatility is reduced when the various markets are combined into a single
portfolio. Of course, movements in the various securities markets may be offset
by changes in foreign currency exchange rates. Exchange rates frequently move
independently of securities markets in a particular country. As a result, gains
in a particular securities market may be affected by changes in exchange rates.
While it is the policy of the Fund generally not to engage in trading for
short-term gains, Merrill Lynch Asset Management, L.P., the manager for the
Fund (the "Manager" or "MLAM"), will effect portfolio transactions without
regard to holding period if, in its judgment, such transactions are advisable
in light of a change in circumstances of a particular company or within a
particular industry or in general market, economic or financial conditions. As
a result of the investment policies described in the Prospectus, the Fund's
portfolio turnover rate may be higher than that of other investment companies.
Accordingly, while the Fund anticipates that its annual portfolio turnover rate
should not exceed 100% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. The Fund is subject to the Federal
income tax requirement that less than 30% of the Fund's gross income must be
derived from gains from the sale or other disposition of securities held for
less than three months.
The Fund's ability and decisions to purchase or sell portfolio securities may
be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a
daily basis on each day the Fund determines its net asset value in U.S.
dollars, the Fund intends to manage its portfolio so as to give reasonable
assurance that it will be able to obtain U.S. dollars to the extent necessary
to meet anticipated redemptions. See "Redemption of Shares". Under present
conditions, the Manager does not believe that these considerations will have
any significant effect on its portfolio strategy, although there can be no
assurance in this regard.
HEDGING TECHNIQUES
Reference is made to the discussion concerning hedging techniques under the
caption "Investment Objective and Policies--Other Investment Policies and
Practices--Portfolio Strategies Involving Futures, Options and Forward Foreign
Exchange Transactions" and in Appendix A to the Prospectus.
The Fund may engage in various portfolio strategies to hedge its portfolio
against investment and currency risks. These strategies include the use of
options on portfolio securities, currency futures and options, stock index
futures and options, and options on such futures and forward foreign currency
transactions. While the Fund's use of hedging strategies is intended to reduce
the volatility of the net asset value of its shares, the net asset value of the
Fund's shares will fluctuate.
2
<PAGE>
Although certain risks are involved in futures and options transactions (as
discussed in the Prospectus and below), the Manager believes that, because the
Fund will only engage in these transactions for hedging purposes, the futures
and options portfolio strategies of the Fund will not subject the Fund to the
risks frequently associated with the speculative use of futures and options
transactions.
The following information relates to the hedging instruments the Fund may
utilize with respect to currency risks.
Writing Covered Options. The Fund is authorized to write (i.e., sell) covered
call options on the securities in which it may invest and to enter into closing
purchase transactions with respect to certain of such options. A covered call
option is an option where the Fund, in return for a premium, gives another
party a right to buy specified securities owned by the Fund at a specified
future date and price set at the time of the contract. The principal reason for
writing call options is to attempt to realize, through the receipt of premiums,
a greater return than would be realized on the securities alone. By writing
covered call options, the Fund gives up the opportunity, while the option is in
effect, to profit from any price increase in the underlying security above the
option exercise price. In addition, the Fund's ability to sell the underlying
security will be limited while the option is in effect unless the Fund effects
a closing purchase transaction. A closing purchase transaction cancels out the
Fund's position as the writer of an option by means of an offsetting purchase
of an identical option prior to the expiration of the option it has written.
Covered call options serve as a partial hedge against a decline in the price of
the underlying security.
The writer of a covered call option has no control over when he may be
required to sell his securities since he may be assigned an exercise notice at
any time prior to the termination of his obligation as a writer. If an option
expires unexercised, the writer would realize a gain in the amount of the
premium. Such a gain, of course, may be offset by a decline in the market value
of the underlying security during the option period. If a call option is
exercised, the writer would realize a gain or loss from the sale of the
underlying security.
The Fund also may write put options which give the holder of the option the
right to sell the underlying security to the Fund at the stated exercise price.
The Fund will receive a premium for writing a put option which increases the
Fund's return. The Fund writes only covered put options which means that so
long as the Fund is obligated as the writer of the option, it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S.
Government securities or other high grade liquid debt 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 Fund will be obligated to purchase the underlying security
at a price that may be higher than the market value of that security at the
time of exercise for as long as the option is outstanding. The Fund may engage
in closing transactions in order to terminate put options that it has written.
The Fund will not write a put option if the aggregate value of the obligations
underlying the put shall exceed 50% of the Fund's net assets.
Options referred to herein and in the Prospectus may be options traded on
foreign securities exchanges. An option position may be closed only on an
exchange which provides a secondary market for an option of the same series. If
a secondary market does not exist, it might not be possible to effect closing
transactions in particular options, with the result, in the case of a covered
call option, that the Fund will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions
3
<PAGE>
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange
or the Options Clearing Corporation (the "Clearing Corporation") may not, at
all times, be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Clearing Corporation as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms.
The Fund also may enter into over-the-counter options transactions ("OTC
options"), which are two- party contracts with prices and terms negotiated
between the buyer and seller. The Fund will only enter into OTC options
transactions with respect to portfolio securities for which management believes
the Fund can receive on each business day at least two independent bids or
offers (one of which will be from an entity other than a party to the option).
The staff of the Securities and Exchange Commission (the "Commission") has
taken the position that OTC options and the assets used as cover for written
OTC options are illiquid securities.
Purchasing Options. The Fund may purchase put options to hedge against a
decline in the market value of its equity holdings. By buying a put, the Fund
has a right to sell the underlying security at the exercise price, thus
limiting the Fund's risk of loss through a decline in the market value of the
security until the put option expires. The amount of any appreciation in the
value of the underlying security will be offset partially by the amount of the
premium paid for the put option and any related transaction costs. Prior to its
expiration, a put option may be sold in a closing sale transaction; profit or
loss from the sale will depend on whether the amount received is more or less
than the premium paid for the put option plus the related transaction cost. A
closing sale transaction cancels out the Fund's position as the purchaser of an
option by means of an offsetting sale of an identical option prior to the
expiration of the option it has purchased. In certain circumstances, the Fund
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. The Fund
may purchase either exchange-traded options or OTC options. The Fund 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 Fund would exceed 5% of the market value of the
Fund's total assets.
Stock Index Futures and Options and Financial Futures. As described in the
Prospectus, the Fund is authorized to engage in transactions in stock index
futures and options and financial futures, and related options on such futures.
Set forth below is further information concerning futures transactions.
A financial futures contract is an agreement between two parties to buy and
sell a security, or, in the case of an index-based financial futures contract,
to make and accept a cash settlement for a set price on a future date. A
majority of transactions in financial futures contracts, however, do not result
in the actual delivery of the underlying instrument or cash settlement, but are
settled through liquidation, i.e., by entering into an offsetting transaction.
The purchase or sale of a financial futures contract differs from the
purchase or sale of a security in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the broker and the
relevant contract market, which varies, but is generally about 5% of the
contract amount, must be
4
<PAGE>
deposited with the broker. This amount is known as "initial margin" and
represents a "good faith" deposit assuring the performance of both the
purchaser and seller under the financial futures contract. Subsequent payments
to and from the broker, called "variation margin", are required to be made on a
daily basis as the price of the financial futures contract fluctuates, making
the long and short positions in the financial futures contract more or less
valuable, a process known as "mark to the market". At any time prior to the
settlement date of the financial futures contract, the position may be closed
out by taking an opposite position which will operate to terminate the position
in the financial futures contract. A final determination of variation margin is
then made, additional cash is required to be paid to or released by the broker,
and the purchaser realizes a loss or gain. In addition, a nominal commission is
paid on each completed sale transaction.
An order has been obtained from the Securities and Exchange Commission
exempting the Fund from the provisions of Section 17(f) and Section 18(f) of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
in connection with its strategy of investing in financial futures contracts.
Section 17(f) relates to the custody of securities and other assets of an
investment company and may be deemed to prohibit certain arrangements between
the Fund and commodities brokers with respect to initial and variation margin.
Section 18(f) of the Investment Company Act prohibits an open-end investment
company such as the Fund from issuing a "senior security" other than a
borrowing from a bank. The staff of the Securities and Exchange Commission has
in the past indicated that a financial futures contract may be a "senior
security" under the Investment Company Act.
Risk Factors in Futures and Options Transactions. Utilization of futures and
options transactions involves the risk of imperfect correlation in movements in
the prices of futures and options contracts and movements in the prices of the
securities and currencies which are the subject of the hedge. If the prices of
the futures and options contract move more or less than the prices of the
hedged securities and currencies, the Fund will experience a gain or loss which
will not be completely offset by movements in the prices of the securities and
currencies which are the subject of the hedge. The successful use of futures
and options also depends on the Manager's ability to predict correctly price
movements in the market involved in a particular options or futures
transaction.
Prior to exercise or expiration, an exchange-traded option position can only
be terminated by entering into a closing purchase or sale transaction. This
requires a secondary market on an exchange for call or put options of the same
series. The Fund will enter into an option or futures transaction on an
exchange only if there appears to be a liquid secondary market for such option
or future. However, there can be no assurance that a liquid secondary market
will exist for any particular call or put option or financial futures contract
at any specific time. Thus, it may not be possible to close an option or
futures position. The Fund will acquire only over-the-counter options for which
management believes (i) the Fund can receive on each business day at least two
independent bids or offers (one of which will be from an entity other than a
party to the option) unless there is only one dealer, in which case such
dealer's price will be used, or (ii) can be sold at a formula price provided
for in the over-the-counter option agreement. In the case of a futures position
or an option on a futures position written by the Fund, in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the security or currency
underlying the financial futures contracts it holds. The inability to close
futures and options positions also could have an adverse impact on the Fund's
ability to hedge effectively its portfolio.
5
<PAGE>
There also is the risk of loss by the Fund of margin deposits in the event of
bankruptcy of a broker with whom the Fund has an open position in a financial
futures contract or related option. The risk of loss from investing in futures
transactions is theoretically unlimited.
The exchanges on which the Fund intends to conduct options transactions have
generally established limitations governing the maximum number of call or put
options on the same underlying security 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. An exchange
may order the liquidation of positions found to be in violation of these
limits, and it may impose other sanctions or restrictions. The Manager does not
believe that these trading and position limits will have any adverse impact on
the portfolio strategies for hedging the Fund's portfolio.
Forward Foreign Exchange Transactions. Generally, the foreign exchange
transactions of the Fund will be conducted on a spot, i.e., cash, basis at the
spot rate for purchasing or selling currency prevailing in the foreign exchange
market. This rate under normal market conditions differs from the prevailing
exchange rate in an amount generally less than 1/10 of 1% due to the costs of
converting from one currency to another. However, the Fund has authority to
deal in forward foreign exchange between currencies of the different countries
in whose securities it will invest as a hedge against possible variations in
the foreign exchange rates between these currencies. This is accomplished
through contractual agreements to purchase or sell a specified currency at a
specified future date and price set at the time of the contract. The Fund's
dealings in forward foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward foreign currency with respect to specific
receivables or payables of the Fund accruing in connection with the purchase
and sale of its portfolio securities, the sale and redemption of shares of the
Fund or the payment of dividends by the Fund. Position hedging is the sale of
forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. The Fund will not speculate in
forward foreign exchange. The Fund may not position hedge with respect to the
currency of a particular country to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that particular foreign currency. If the Fund enters
into a position hedging transaction, its custodian will place cash or liquid
debt securities in a separate account of the Fund in an amount equal to the
value of the Fund's total assets committed to the consummation of such forward
contract. If the value of the securities placed in the separate account
declines, additional cash or securities will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to such contracts. The Fund will not enter into a position hedging
commitment if, as a result thereof, the Fund would have more than 15% of the
value of its total assets committed to such contracts. The Fund will not enter
into a forward contract with a term of more than one year.
The Fund also is authorized to purchase or sell listed or over-the-counter
foreign currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible variations
in foreign exchange rates. Such transactions may be effected with respect to
hedges on non-U.S. Dollar denominated securities owned by the Fund, sold by the
Fund but not yet delivered, or committed or anticipated to be purchased by the
Fund. As an illustration, the Fund may use such techniques to hedge the stated
value in U.S. dollars of an investment in a pound denominated security. In such
6
<PAGE>
circumstances, for example, the Fund may purchase a foreign currency put option
enabling it to sell a specified amount of pounds for dollars at a specified
price by a future date. To the extent the hedge is successful, a loss in the
value of the pound relative to the dollar will tend to be offset by an increase
in the value of the put option. To offset, in whole or part, the cost of
acquiring such a put option, the Fund also may sell a call option which, if
exercised, requires it to sell a specified amount of pounds for dollars at a
specified price by a future date (a technique called a "straddle"). By selling
such call option in this illustration, the Fund gives up the opportunity to
profit without limit from increases in the relative value of the pound to the
dollar. The Manager believes that "straddles" of the type which may be utilized
by the Fund constitute hedging transactions and are consistent with the
policies described above.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. The cost to the
Fund of engaging in foreign currency transactions varies with such factors as
the currencies involved, the length of the contract period and the market
conditions then prevailing. Since transactions in foreign currency exchange are
usually conducted on a principal basis, no fees or commissions are involved.
OTHER INVESTMENT POLICIES AND PRACTICES
Non-Diversified Status. The Fund is classified as non-diversified within the
meaning of the Investment Company Act, which means that the Fund is not limited
by such Act in the proportion of its assets that it may invest in securities of
a single issuer. The Fund's investments will be limited, however, in order to
qualify as a "regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"). See "Taxes." To qualify, the
Fund will comply with certain requirements, including limiting its investments
so that at the close of each quarter of the taxable year (i) not more than 25%
of the market value of the Fund's total assets will be invested in the
securities of a single issuer and (ii) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its total assets
will be invested in the securities of a single issuer, and the Fund will not
own more than 10% of the outstanding voting securities of a single issuer. A
fund which elects to be classified as "diversified" under the Investment
Company Act must satisfy the foregoing 5% and 10% requirements with respect to
75% of its total assets. To the extent that the Fund assumes large positions in
the securities of a small number of issuers, the Fund's net asset value may
fluctuate to a greater extent than that of a diversified company as a result of
changes in the financial condition or in the market's assessment of the
issuers, and the Fund may be more susceptible to any single economic, political
or regulatory occurrence than a diversified company.
When-Issued Securities and Delayed Delivery Transactions. The Fund may
purchase securities on a when-issued basis, and it may purchase or sell
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Fund with payment and delivery taking place in the
future to secure what is considered an advantageous yield and price to the Fund
at the time of entering into the transaction. Although the Fund has not
established any limit on the percentage of its assets that may be committed in
connection with such transactions, the Fund will maintain a segregated account
with its custodian of cash, cash equivalents, U.S. Government securities or
other high grade liquid debt securities denominated in U.S. dollars or non-U.S.
currencies in an aggregate amount equal to the amount of its commitment in
connection with such purchase transactions.
7
<PAGE>
Standby Commitment Agreements. The Fund, from time to time, may enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a fixed income security or a
stated number of shares of equity securities which may be issued and sold to
the Fund at the option of the issuer. The price and coupon of the security is
fixed at the time of the commitment. At the time of entering into the agreement
the Fund is paid a commitment fee, regardless of whether or not the security is
ultimately issued, which is typically approximately 0.50% of the aggregate
purchase price of the security which the Fund has committed to purchase. The
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price which is considered
advantageous to the Fund. The Fund will not enter into a standby commitment
with a remaining term in excess of 45 days and presently 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 that affect their
marketability, will not exceed 15% of its total assets taken at the time of
acquisition of such a commitment. The Fund at all times will maintain a
segregated account with its custodian of cash, cash equivalents, U.S.
Government securities or other high grade liquid debt securities denominated in
U.S. dollars or non-U.S. currencies in an aggregate amount equal to the
purchase price of the securities underlying a commitment.
There can be no assurance that the securities subject to a standby commitment
will be issued, and the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, the Fund may bear the
risk of 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 can
reasonably be expected to be issued, and the value of the security thereafter
will be reflected in the calculation of the Fund's net asset value. The cost
basis of the security will be adjusted by the amount of the commitment fee. In
the event the security is not issued, the commitment fee will be recorded as
income on the expiration date of the standby commitment.
Repurchase Agreements and Purchase and Sale Contracts. The Fund may invest in
securities pursuant to repurchase agreements or purchase and sale contracts.
Repurchase agreements may be entered into only with a member bank of the
Federal Reserve System or a primary dealer in U.S. Government securities, or an
affiliate thereof. 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 the Fund, to repurchase the security at a mutually agreed upon time and
price in a specified currency, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from market
fluctuations during such period although it may be affected by currency
fluctuations. In the case of repurchase agreements, the price 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, the Fund will require the seller to provide additional collateral if
the market value of the securities falls below the repurchase price at any time
during the term of the repurchase agreement; the Fund does not have the right
to seek additional collateral in the
8
<PAGE>
case of purchase and sale contracts. In the event of default by the seller
under a repurchase agreement construed to be a collateralized loan, the
underlying securities are not owned by the Fund but only constitute collateral
for the seller's obligation to pay the repurchase price. Therefore, the Fund
may suffer time delays and incur costs or possible losses in connection with
the disposition of the collateral. A purchase and sale contract differs from a
repurchase agreement in that the contract arrangements stipulate that the
securities are owned by the Fund. In the event of a default under such a
repurchase agreement or under a purchase and sale contract, instead of the
contractual fixed rate, the rate of return to the Fund would be dependent upon
intervening fluctuations of the market values of such securities and the
accrued interest on the securities. In such event, the Fund would have rights
against the seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to perform.
Repurchase agreements and purchase and sale contracts maturing in more than
seven days are deemed to be illiquid by the Securities and Exchange Commission
and are therefore subject to the Fund's investment restriction limiting
investments in securities that are not readily marketable to 15% of the Fund's
total assets. (However, under the law of certain states, the Fund presently is
limited with respect to such investments to 10% of its total assets.) See
"Investment Restrictions" below.
Lending of Portfolio Securities. Subject to the investment restrictions set
forth in the Prospectus and herein, the Fund may lend securities from its
portfolio to approved borrowers and receive collateral in cash or securities
issued or guaranteed by the U.S. Government which are maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities. The purpose of such loans is to permit the borrowers to use such
securities for delivery to purchasers when such borrowers have sold short. If
cash collateral is received by the Fund, it is invested in short-term money
market securities, and a portion of the yield received in respect of such
investment is retained by the Fund. Alternatively, if securities are delivered
to the Fund as collateral, the Fund and the borrower negotiate a rate for the
loan premium to be received by the Fund for lending its portfolio securities.
In either event, the total return on the Fund's portfolio is increased by loans
of its portfolio securities. The Fund will have the right to regain record
ownership of loaned securities to exercise beneficial rights such as voting
rights, subscription rights and rights to dividends, interest or other
distributions. Such loans are terminable at any time, and the borrower, after
notice, will be required to return borrowed securities within five business
days. The Fund may pay reasonable finder's, administrative and custodial fees
in connection with such loans. With respect to the lending of portfolio
securities, there is the risk of failure by the borrower to return the
securities involved in such transactions.
INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions and policies relating to the
investment of its assets and its activities, which are fundamental policies and
may not be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities (which for this purpose and under the
Investment Company Act, means the lesser of (i) 67% of the shares represented
at a meeting at which more than 50% of the outstanding shares are represented
or (ii) more than 50% of the outstanding shares). The Fund may not:
1. Invest more than 25% of its total assets, taken at market value at the
time of each investment, in the securities of issuers in any particular
industry (excluding the U.S. Government and its agencies and
instrumentalities).
2. Make investments for the purpose of exercising control or management.
Investments by the Fund in wholly-owned investment entities created under
the laws of certain countries will not be deemed to be the making of
investments for the purpose of exercising control or management.
9
<PAGE>
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that
invest in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers' acceptances and repurchase agreements and purchase and
sale contracts and any similar instruments shall not be deemed to be the
making of a loan, and except further that the Fund may lend its portfolio
securities, provided that the lending of portfolio securities may be made
only in accordance with applicable law and the guidelines set forth in this
Prospectus and the Statement of Additional Information, as they may be
amended from time to time.
5. Issue senior securities to the extent such issuance would violate
applicable law.
6. Borrow money, except that the Fund (i) may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3% of its
total assets (including the amount borrowed), (ii) may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) may obtain
such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities and (iv) may purchase securities on
margin to the extent permitted by applicable law. The Fund may not pledge
its assets other than to secure such borrowings or, to the extent permitted
by the Fund's investment policies as set forth in this Prospectus and the
Statement of Additional Information, as they may be amended from time to
time, in connection with hedging transactions, short sales, when-issued and
forward commitment transactions and similar investment strategies.
7. Underwrite securities of other issuers, except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act"), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to
the extent the Fund may do so in accordance with applicable law and the
Fund's Prospectus and Statement of Additional Information, as they may be
amended from time to time, and without the Fund registering as a commodity
pool operator under the Commodity Exchange Act.
Additional non-fundamental investment restrictions adopted by the Fund, which
may be changed by the Directors without shareholder approval, provide that the
Fund may not:
a. Purchase securities of other investment companies, except to the
extent that such purchases are permitted by applicable law. Applicable law
currently prohibits the Fund 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 Fund,
(ii) 5% of the Fund's total assets, taken at market value, would be
invested in any one such company, (iii) 10% of the Fund's total assets,
taken at market value, would be invested in such securities, and (iv) the
Fund, together with other investment companies having the same investment
adviser and companies controlled by such companies, owns not more than 10%
of the total outstanding stock of any one closed-end investment company.
Investments by the Fund in wholly-owned investment entities created under
the laws of certain countries will not be deemed an investment in other
investment companies.
b. Make short sales of securities or maintain a short position except to
the extent permitted by applicable law. The Fund does not, however,
currently intend to engage in short sales, except short sales "against the
box".
10
<PAGE>
c. Invest in securities which cannot be readily resold because of legal
or contractual restrictions, or which cannot otherwise be marketed,
redeemed, put to the issuer or to a third party, if at the time of
acquisition more than 15% of its total assets would be invested in such
securities. This restriction shall not apply to securities which mature
within seven days or securities which the Board of Directors of the Fund
has otherwise determined to be liquid pursuant to applicable law.
Notwithstanding the 15% limitation herein, to the extent that the laws of
any state in which the Fund's shares are registered or qualified for sale
require a lower limitation, the Fund will observe such limitation. As of
the date hereof, therefore, the Fund will not invest more than 10% of its
total assets in securities which are subject to this investment restriction
(c). Securities purchased in accordance with Rule 144A under the Securities
Act (each, a "Rule 144A security") and determined to be liquid by the Board
of Directors are not subject to the limitations set forth in this
investment restriction (c). Notwithstanding the fact that the Board may
determine that a Rule 144A security is liquid and not subject to
limitations set forth in this investment restriction (c), the State of Ohio
does not recognize Rule 144A securities as securities that are free of
restrictions as to resale. To the extent required by Ohio law, the Fund
will not invest more than 50% of its total assets in securities of issuers
that are restricted as to disposition, including Rule 144A securities.
d. Invest in warrants if, at the time of acquisition, its investments in
warrants, valued at the lower of cost or market value, would exceed 5% of
the Fund's net assets; included within such limitation, but not to exceed
2% of the Fund's net assets, are warrants which are not listed on the New
York Stock Exchange or the American Stock Exchange or a major foreign
exchange. For purposes of this restriction, warrants acquired by the Fund
in units or attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together with
predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities, asset-
backed securities or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those individual
officers and directors of the Fund, the officers and general partner of the
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 the Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or development activities.
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Prospectus and
this Statement of Additional Information, as amended from time to time.
i. Notwithstanding fundamental investment restriction (6) above, borrow
money or pledge its assets, except that the Fund (a) may borrow from a bank
as a temporary measure for extraordinary or emergency purposes or to meet
redemptions in amounts not exceeding 33 1/3% (taken at market value) of its
total assets and pledge its assets to secure such borrowings, (b) may
obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (c) may purchase securities
on margin to the extent permitted by applicable law. However, at the
present time, applicable law prohibits the Fund from purchasing securities
on margin. The deposit or payment by the Fund of
11
<PAGE>
initial or variation margin in connection with financial futures contracts
or options transactions is not considered to be the purchase of a security
on margin. The purchase of securities while borrowings are outstanding will
have the effect of leveraging the Fund. Such leveraging or borrowing
increases the Fund's exposure to capital risk, and borrowed funds are
subject to interest costs which will reduce net income. The Fund will not
purchase securities while borrowings exceed 5% of its total assets.
Portfolio securities of the Fund generally may not be purchased from, sold or
loaned to the Manager 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.
The staff of the Commission has taken the position that purchased over-the-
counter ("OTC") options and the assets used as cover for written OTC options
are illiquid securities. Therefore, the Fund has adopted an investment policy
pursuant to which it will not purchase or sell OTC options if, as a result of
any such transaction, the sum of the market value of OTC options currently
outstanding which are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding which were sold by
the Fund and margin deposits on the Fund's existing OTC options on financial
futures contracts exceeds 15% of the total assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. (Under the law of certain states, the Fund
presently is limited with respect to such investments to 10% of its net
assets.) However, if the OTC option is sold by the Fund to a primary U.S.
Government securities dealer recognized by the Federal Reserve Bank of New York
and if the Fund has the unconditional contractual right to repurchase such OTC
option from the dealer at a predetermined price, then the Fund will treat as
illiquid such amount of the underlying securities as is equal to the repurchase
price less the amount by which the option is "in-the-money" (i.e., current
market value of the underlying securities minus the option's strike price). The
repurchase price with the primary dealers is typically a formula price which is
generally based on a multiple of the premium received for the option, plus the
amount by which the option is "in-the-money". This policy as to OTC options is
not a fundamental policy of the Fund and may be amended by the Board of
Directors of the Fund without the approval of the Fund's shareholders. However,
the Fund will not change or modify this policy prior to the change or
modification by the Securities and Exchange Commission staff of its position.
In addition, as a non-fundamental policy which may be changed by the Board of
Directors and to the extent required by the Securities and Exchange Commission
or its staff, the Fund will, for purposes of investment restriction (1), treat
securities issued or guaranteed by the government of any one foreign country as
the obligations of a single issuer.
As another non-fundamental policy, the Fund will not invest in securities
which are (a) subject to material legal restrictions on repatriation of assets
or (b) cannot be readily resold because of legal or contractual restrictions or
which are not otherwise readily marketable, including repurchase agreements and
purchase and sale contracts maturing in more than seven days, if, regarding all
such securities, more than 15% of its total assets, taken at market value would
be invested in such securities.
Because of the affiliation of the Manager with the Fund, the Fund is
prohibited from engaging in certain transactions involving such firm or its
affiliates except for brokerage transactions permitted under the Investment
Company Act involving only usual and customary commissions or transactions
pursuant to an exemptive order under the Investment Company Act. See "Portfolio
Transactions and Brokerage". Without such an exemptive order, the Fund would be
prohibited from engaging in portfolio transactions with the Manager 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.
12
<PAGE>
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Director is Box
9011, Princeton, New Jersey 08543-9011.
Arthur Zeikel--President and Director(1)(2)--President of the Manager (which
term as used herein includes its corporate predecessor) since 1977 and Chief
Investment Officer since 1976; President of Fund Asset Management, L.P. ("FAM")
(which term as used herein includes its corporate predecessor) since 1977 and
Chief Investment Officer since 1976; President and Director of Princeton
Services, Inc. ("Princeton Services") since 1993; Executive Vice President of
Merrill Lynch since 1990 and a Senior Vice President thereof from 1985 to 1990;
Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since 1990;
Director of Merrill Lynch Funds Distributor, Inc. (the "Distributor").
Donald Cecil--Director(2)--1114 Avenue of the Americas, New York, New York
10036. Special Limited Partner of Cumberland Partners (investment partnership)
since 1982; Member of Institute of Chartered Financial Analysts; Member and
Chairman of Westchester County (N.Y.) Board of Transportation.
Edward H. Meyer--Director(2)--777 Third Avenue, New York, New York 10017.
President of Grey Advertising, Inc. since 1968, Chief Executive Officer since
1970 and Chairman of the Board of Directors since 1972; Director of The May
Department Stores Company, Bowne & Co., Inc. (financial printers), Ethan Allen
Interiors, Inc. and Harman International Industries, Inc.
Charles C. Reilly--Director(2)--9 Hampton Harbor Road, Hampton Bays, N.Y.
11946. Self-employed financial consultant since 1990; President and Chief
Investment Officer of Verus Capital, Inc. from 1979 to 1990; Senior Vice
President of Arnold and S. Bleichroeder, Inc. from 1973 to 1990; Adjunct
Professor, Columbia University Graduate School of Business since 1990; Adjunct
Professor, Wharton School, University of Pennsylvania, 1990; Director, Harvard
Business School Alumni Association.
Richard R. West--Director(2)--482 Tepi Drive, Southbury, Connecticut 06488.
Professor of Finance since 1984, and Dean from 1984 to 1993, of New York
University Leonard N. Stern School of Business Administration; Director of Re
Capital Corp. (reinsurance holding company), Bowne & Co., Inc. (financial
printers), Vornado, Inc. (real estate holding company), Smith-Corona
Corporation (manufacturer of typewriters and word processors) and Alexander's
Inc.
Terry K. Glenn--Executive Vice President(1)(2)--Executive Vice President of
the Manager and FAM since 1983; Executive Vice President and Director of
Princeton Services since 1993; President and Director of the Distributor since
1986.
Norman R. Harvey--Senior Vice President(1)(2)--Senior Vice President of the
Manager and FAM since 1982; Senior Vice President of Princeton Services since
1993.
Donald C. Burke--Vice President(1)(2)--Vice President and Director of
Taxation of the Manager and FAM since 1990; employee of Deloitte & Touche from
1982 to 1990.
13
<PAGE>
Grace Pineda--Vice President(1)--Vice President of the Manager since 1989.
Prior to joining the Manager, Ms. Pineda was a portfolio manager with Clemente
Capital, Inc.
Gerald M. Richard--Treasurer(1)(2)--Senior Vice President and Treasurer of
the Manager and FAM since 1974; Senior Vice President and Treasurer of
Princeton Services since 1993; Vice President of the Distributor since 1981
and Treasurer since 1984.
Michael J. Hennewinkel--Secretary(1)(2)--Vice President of the Manager and
FAM since 1985; attorney associated with the Manager and FAM since 1982.
James W. Harshaw, III--Assistant Secretary(1)(2)--Attorney associated with
the Manager and FAM since 1994; associate at a law firm from 1990 to 1994;
judicial law clerk for the United States Court of Appeals for the Third
Circuit from 1989 to 1990.
- --------
(1) Interested person, as defined in the Investment Company Act, of the Fund.
(2) Such Director or officer is a director, trustee or officer of certain
other investment companies for which the Manager, or an affiliate, FAM,
acts as investment adviser or manager.
At December , 1994, the Directors and officers of the Fund as a group (12
persons) owned an aggregate of less than 1% of the outstanding shares of the
Fund. At such date, Mr. Zeikel, a Director of the Fund, and the other officers
of the Fund, owned less than 1% of the outstanding shares of common stock of
ML & Co.
The Fund pays each Director who is not affiliated with the Manager (each, a
"non-affiliated Director") a fee of $3,500 per year plus $500 per Board
meeting attended, together with such Director's actual out-of-pocket expenses
relating to attendance at meetings. The Fund also compensates members of its
Audit and Nominating Committee, which consists of all of the non-affiliated
Directors, at a rate of $500 per meeting attended. The Chairman of the Audit
and Nominating Committee receives an additional fee of $250 per meeting
attended.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Fund--Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
Securities held by the Fund also may be held by, or be appropriate
investments for, other funds or investment advisory clients for which the
Manager or its affiliates act as an adviser. Because of different objectives
or other factors, a particular security may be bought for one or more clients
when one or more clients are selling the same security. If purchases or sales
of securities by the Manager for the Fund or other funds for which they act as
investment adviser or for other advisory clients arise for consideration at or
about the same time, transactions in such securities will be made, insofar as
feasible, for the respective funds and clients in a manner deemed equitable to
all. To the extent that transactions on behalf of more than one client of the
Manager 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.
14
<PAGE>
The Fund has entered into a management agreement (the "Management Agreement")
with the Manager. As described in the Prospectus, the Manager receives for its
services to the Fund monthly compensation at the annual rate of 1.00% of the
average daily net assets of the Fund.
The State of California imposes limitations on the expenses of the Fund.
These expense limitations require that the Manager reimburse the Fund in an
amount necessary to prevent the ordinary operating expenses of the Fund
(excluding interest, taxes, distribution fees, brokerage fees and commissions
and extraordinary charges such as litigation costs) from exceeding in any
fiscal year 2.5% of the Fund's first $30 million of average daily net assets,
2.0% of the next $70 million of average daily net assets and 1.5% of the
remaining average daily net assets. The Manager's obligation to reimburse the
Fund is limited to the amount of the management fee. No fee payment will be
made to the Manager during any fiscal year which will cause such expenses to
exceed the most restrictive expense limitation applicable at the time of such
payment.
The Fund has applied for an order from the State of California seeking to
partially waive the expense limitations described above. Pursuant to the terms
of such proposed waiver, the expense limitations that otherwise would apply are
waived to the extent that the Fund's expenses for management and auditing fees
exceed the average of such fees of a group of mutual funds managed by the
Manager or its subsidiary which primarily invest domestically.
The Management Agreement obligates the Manager to provide investment advisory
services and to pay all compensation of and furnish office space for officers
and employees of the Fund connected with investment and economic research,
trading and investment management of the Fund, as well as the fees of all
Directors of the Fund who are affiliated persons of the Manager or its
affiliates. The Fund pays all other expenses incurred in the operation of the
Fund, including, among other things, taxes; expenses for legal and auditing
services; costs of printing proxies, stock certificates, shareholder reports
and prospectuses and statements of additional information (except to the extent
paid by the Distributor); charges of the custodian, any sub-custodian and
transfer agent; expenses of redemption of shares; Commission fees; expenses of
registering the shares under Federal, state or foreign laws; fees and expenses
of unaffiliated Directors; accounting and pricing costs (including the daily
calculation of net asset value); insurance; interest; brokerage costs;
litigation and other extraordinary or non-recurring expenses; and other
expenses properly payable by the Fund. Accounting services are provided to the
Fund by the Manager, and the Fund reimburses the Manager for its costs in
connection with such services on a semi-annual basis. The Distributor will pay
certain promotional expenses of the Fund incurred in connection with the
offering of its shares. Certain expenses will be financed by the Fund pursuant
to distribution plans in compliance with Rule 12b-1 under the Investment
Company Act. See "Purchase of Shares--Alternative Sales Arrangements--
Distribution Plans."
The Manager is a limited partnership, the partners of which are ML & Co.,
Merrill Lynch Investment Management, Inc. and Princeton Services.
Duration and Termination. Unless earlier terminated as described below, the
Management Agreement will continue in effect for a period of two years from the
date of execution and will remain in effect from year to year thereafter if
approved annually (a) by the Board of Directors of the Fund or by a majority of
the outstanding shares of the Fund and (b) by a majority of the Directors who
are not parties to such contracts or "interested persons" (as defined in the
Investment Company Act) of any such party. Such contracts are not assignable
and may be terminated without penalty on 60 days' written notice at the option
of either party thereto or by the vote of a majority of the shareholders of the
Fund.
15
<PAGE>
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain
information as to the purchase of Fund shares.
The Fund issues four classes of shares under the Merrill Lynch Select
PricingSM System: shares of Class A and Class D are sold to investors choosing
the initial sales charge alternatives, and shares of Class B and Class C are
sold to investors choosing the deferred sales charge alternatives. Each Class
A, Class B, Class C and Class D share represents an identical interest in the
investment portfolio of the Fund, and has the same rights, except that Class B,
Class C and Class D shares bear the expenses of the ongoing account maintenance
fees, and Class B and Class C shares bear the expenses of the ongoing
distribution fees and the additional incremental transfer agency costs
resulting from the deferred sales charge arrangements. 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.
The Merrill Lynch Select PricingSM System is used by more than 50 mutual
funds advised by the Manager or an affiliate, FAM. Funds advised by the Manager
or FAM are referred to herein as "MLAM-advised mutual funds."
The Fund has entered into separate distribution agreements with the
Distributor in connection with the subscription and continuous offering of each
class of shares of the Fund (the "Distribution Agreements"). The Distribution
Agreements obligate the Distributor to pay certain expenses in connection with
the offering of each class of shares of the Fund. After the prospectuses,
statements of additional information and periodic reports have been prepared,
set in type and mailed to shareholders, the Distributor pays for the printing
and distribution of copies thereof used in connection with the offering to
dealers and investors. The Distributor also pays for other supplementary sales
literature and advertising costs. The Distribution Agreements are subject to
the same renewal requirements and termination provisions as the Management
Agreement described under "Management of the Fund--Management and Advisory
Arrangements."
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES
The term "purchase", as used in the Prospectus and this Statement of
Additional Information, 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 or her spouse and their children
under the age of 21 years purchasing shares for his or her or their own account
and single purchases by a trustee or other fiduciary purchasing 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, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of shares of
the Fund or shares of other registered investment companies at a discount;
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 Fund and of other
MLAM-advised mutual funds ("Eligible Class A Shares") are offered at net asset
value to shareholders of certain closed-end funds
16
<PAGE>
advised by MLAM or FAM who purchased such closed-end funds prior to October 21,
1994 and wish to reinvest the net proceeds from a sale of their closed-end fund
shares of common stock in Eligible Class A Shares, if the conditions set forth
below are satisfied. Alternatively, closed-end fund shareholders who purchased
such shares on or after October 21, 1994, and wish to reinvest the net proceeds
from the sale of their closed-end fund shares are offered Class A shares (if
eligible to buy Class A shares) or Class D shares of the Fund and other MLAM-
advised mutual funds ("Eligible Class D Shares") if the following conditions
are met. First, the sale of the closed-end fund shares must be made through
Merrill Lynch, and the net proceeds therefrom must be reinvested immediately in
Eligible Class A Shares or Eligible 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 maintained
continuously in a Merrill Lynch securities account. Fourth, there must be a
minimum purchase of $250 to be eligible for the investment option. Class A
shares of the Fund are offered at net asset value to shareholders of Merrill
Lynch Senior Floating Rate Fund, Inc. ("Senior Floating Rate Fund") who wish to
reinvest the net proceeds from a sale of certain of their shares of common
stock of Senior Floating Rate Fund in shares of the Fund. In order to exercise
this investment option, Senior Floating Rate Fund shareholders must sell their
Senior Floating Rate Fund shares to the Senior Floating Rate Fund in connection
with a tender offer conducted by Senior Floating Rate Fund and reinvest the
proceeds immediately in the Fund. This investment option is available only with
respect to the proceeds of Senior Floating Rate Fund shares as to which no
Early Withdrawal Charge (as defined in the Senior Floating Rate Fund's
prospectus) is applicable. Purchase orders from Senior Floating Rate Fund
shareholders wishing to exercise this investment option will be accepted only
on the day that the related Senior Floating Rate Fund tender offer terminates
and will be effected at the net asset value of the Fund at such day.
REDUCED INITIAL SALES CHARGES
Right of Accumulation. Reduced sales charges are applicable through a right
of accumulation under which eligible investors are permitted to purchase shares
of the Fund subject to an initial sales charge at the offering price applicable
to the total of (a) the 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 all classes of shares of the Fund and of any
other MLAM-advised mutual funds. For any such right of accumulation to be made
available, the Distributor must be provided at the time of purchase, by the
purchaser or the purchaser's securities dealer, with sufficient information to
permit confirmation of qualification, and acceptance of the purchase order is
subject to such confirmation. The right of accumulation may be amended or
terminated at any time.
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $25,000 or more of Class A or Class D shares of the Fund or any
other MLAM-advised mutual fund made within a thirteen-month period starting
with the first purchase pursuant to a Letter of Intention in the form provided
in the Prospectus. The Letter of Intention is available only to investors whose
accounts are maintained at the Fund's transfer agent. The Letter of Intention
is not available to employee benefit plans for which Merrill Lynch provides
plan-participant record-keeping services. The Letter of Intention is not a
binding obligation to purchase any amount of Class A or Class D shares;
however, its execution will result in the purchaser paying a lower sales charge
at the appropriate quantity purchase level. A purchase not originally made
pursuant to a Letter of Intention may be included under a subsequent Letter of
Intention executed within 90 days of such purchase if the Distributor is
informed in writing of this intent within such 90-day period. The value of
Class
17
<PAGE>
A or Class D shares of the Fund and of other MLAM-advised mutual funds
presently held, at cost or maximum offering price (whichever is higher), on the
date of the first purchase under the Letter of Intention, may be included as a
credit toward completion of such Letter, but the reduced sales charge
applicable to the amount covered by such Letter will be applied only to new
purchases. If the total amount of shares does not equal the amount stated in
the Letter of Intention (minimum of $25,000), the investor will be notified and
must pay, within 20 days of the expiration of such Letter, the difference
between the sales charge on the Class A or Class D shares purchased at the
reduced rate and the sales charge applicable to the shares actually purchased
through the Letter. Class A or Class D shares equal to five percent of the
intended amount will be held in escrow during the 13-month period (while
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 otherwise
would 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.
Employer Sponsored Retirement or Savings Plans. Class A and Class D shares
are offered at net asset value to employer sponsored retirement or savings
plans, such as tax qualified retirement plans within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
deferred compensation plans within the meaning of Sections 403(b) and 457 of
the Code, other deferred compensation arrangements, Voluntary Employee Benefits
Association ("VEBA") plans, and non-qualified After Tax Savings and Investment
programs, maintained on the Merrill Lynch Group Employee Services system,
herein referred to as "Employer Sponsored Retirement or Savings Plans",
provided that the plan has accumulated $20 million or more in MLAM-advised
mutual funds (in the case of Class A shares) or $5 million or more in MLAM-
advised mutual funds (in the case of Class D shares). Class D shares may be
offered at net asset value to new Employer Sponsored Retirement or Savings
Plans, provided that the plan has $3 million or more initially invested in
MLAM-advised mutual funds. Assets of Employer Sponsored Retirement or Savings
Plans with the same sponsor or an affiliated sponsor may be aggregated. Class A
and Class D shares also are offered at net asset value to Employer Sponsored
Retirement or Savings Plans that have at least 1,000 employees eligible to
participate in the plan (in the case of Class A shares) or between 500 and 999
employees eligible to participate in the plan (in the case of Class D shares).
Employees eligible to participate in Employer Sponsored Retirement or Savings
Plans of the same sponsoring employer or its affiliates may be aggregated. Any
Employer Sponsored Retirement or Savings Plan which does not meet the above
described qualifications to purchase Class A shares or Class D at net asset
value has the option of (i) purchasing Class A shares at the initial sales
charge schedule and possible CDSC schedule disclosed in the Prospectus if it is
otherwise eligible to purchase Class A shares, (ii) purchasing Class D shares
at the initial sales charge and possible CDSC schedule disclosed in the
Prospectus, (iii) if the Employer Sponsored Retirement or Savings Plan meets
the specified requirements, purchasing Class B shares with a waiver of the CDSC
upon redemption, or (iv) if the Employer Sponsored Retirement or Savings Plan
does not qualify to purchase Class B shares with a waiver of the CDSC upon
redemption, purchasing Class C shares at the CDSC schedule disclosed in the
Prospectus. The minimum initial and subsequent purchase requirements are waived
in connection with all of the above referenced Employer Sponsored Retirement or
Savings Plans.
18
<PAGE>
Purchase Privilege of Certain Persons. Directors of the Fund, members of the
Boards of other MLAM-advised investment companies, directors and employees of
ML & Co. and its subsidiaries (the term "subsidiaries", when used herein with
respect to ML & Co., includes the Manager, FAM and certain other entities
directly or indirectly wholly-owned and controlled by ML & Co.) and any trust,
pension, profit-sharing or other benefit plan for such persons may purchase
Class A shares of the Fund at net asset value.
Class D shares of the Fund will be offered at net asset value, without a
sales charge, to an investor who has a business relationship with a financial
consultant who joined Merrill Lynch from another investment firm within six
months prior to the date of purchase by such investor if the following
conditions are satisfied: First, the investor must advise Merrill Lynch that
it will purchase Class D shares of the Fund with proceeds from a redemption of
a mutual fund that was sponsored by the financial consultant's previous firm
and was subject to a sales charge either at the time of purchase or on a
deferred basis. Second, the investor also must establish that such redemption
had been made within 60 days prior to the investment in the Fund, and the
proceeds from the redemption had been maintained in the interim in cash or a
money market fund.
Class D shares of the Fund also are 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 sponsored by
a non-Merrill Lynch company for which Merrill Lynch has served as a selected
dealer and where Merrill Lynch has either received or given notice that such
arrangement will be terminated ("notice"), if the following conditions are
satisfied: First, the investor must purchase Class D shares of the Fund with
proceeds from a redemption of shares of such other mutual fund and such fund
was subject to a sales charge either at the time of purchase or on a deferred
basis. Second, such purchase of Class D shares must be made within 90 days
after such notice.
Class D shares of the Fund will be offered at net asset value, without a
sales charge, to an investor who has a business relationship with a Merrill
Lynch financial consultant and who has invested in a mutual fund for which
Merrill Lynch has not served as a selected dealer, if the following conditions
are satisfied: First, the investor must advise Merrill Lynch that it will
purchase Class D shares of the Fund with proceeds from a redemption of shares
of such other mutual fund 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.
TMASM Managed Trusts. Class A shares are offered to TMASM Managed Trusts to
which Merrill Lynch Trust Company provides discretionary trustee services at
net asset value.
Acquisition of Certain Investment Companies. The public offering price of
Class D shares may be reduced to the net asset value per Class D share in
connection with the acquisition of the assets of or merger or consolidation
with a public or private investment company. The value of the assets or
company acquired in a tax-free transaction may be adjusted in appropriate
cases to reduce possible adverse tax consequences to the Fund which might
result from an acquisition of assets having net unrealized appreciation which
is disproportionately higher at the time of acquisition than the realized or
unrealized appreciation of the Fund. The issuance of Class D shares for
consideration other than cash is limited to bona fide reorganizations,
statutory mergers or other acquisitions of portfolio securities which (i) meet
the investment objectives and policies of the Fund; (ii) are acquired for
investment and not for resale (subject to the understanding that the
disposition of the Fund's portfolio securities at all times shall remain
within its control); and (iii) are liquid
19
<PAGE>
securities, the value of which is readily ascertainable, which are not
restricted as to transfer either by law or liquidity of market (except that the
Fund may acquire through such transactions restricted or illiquid securities to
the extent the Fund does not exceed the applicable limits on acquisition of
such securities set forth under "Investment Objectives and Policies" herein).
Reductions in or exemptions from the imposition of a sales load are due to
the nature of the investors and/or the reduced sales efforts that will be
needed in obtaining such investments.
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") with respect to the account
maintenance and/or distribution fees paid by the Fund to the Distributor with
respect to such classes.
Payments of the account maintenance fees and/or distribution fees are subject
to the provisions of Rule 12b-1 under the Investment Company Act. Among other
things, each Distribution Plan provides that the Distributor shall provide and
the Directors shall review quarterly reports of the disbursement of the account
maintenance fees and/or distribution fees paid to the Distributor. In their
consideration of each Distribution Plan, the Directors must consider all
factors that they deem relevant, including information as to the benefits of
the Distribution Plan to the Fund and its related class of shareholders. Each
Distribution Plan further provides that, so long as the Distribution Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund, as defined in the Investment Company Act (the
"Independent Directors"), shall be committed to the discretion of the
Independent Directors then in office. In approving each Distribution Plan in
accordance with Rule 12b-1, the Independent Directors concluded that there is a
reasonable likelihood that such Distribution Plan will benefit the Fund and its
related class of shareholders. Each Distribution Plan may be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors
or by the vote of the holders of a majority of the outstanding related class of
voting securities of the Fund. A Distribution Plan cannot be amended to
increase materially the amount to be spent by the Fund without the approval of
the related class of shareholders, and all material amendments are required to
be approved by the vote of the Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
Distribution Plan, cast in person at a meeting called for that purpose. Rule
12b-1 further requires that the Fund preserve copies of each Distribution Plan
and any report made pursuant to such plan for a period of not less than six
years from the date of such Distribution Plan or such report, the first two
years in an easily accessible place.
Limitations on the Payment of Deferred Sales Charges. The maximum sales
charge rule in the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") imposes a limitation on certain asset-
based sales charges such as the distribution fee and the CDSC borne by the
Class B and Class C shares but not the account maintenance fee. The maximum
sales charge rule is applied separately to each class. As applicable to the
Fund, the maximum sales charge rule limits the aggregate of distribution fee
payments and CDSCs payable by the Fund to (1) 6.25% of eligible gross sales of
Class B shares and Class C shares, computed separately (defined to exclude
shares issued pursuant to dividend reinvestments and exchanges), plus (2)
interest on the unpaid balance for the respective class, computed separately,
at the prime rate plus 1% (the unpaid balance being the maximum amount payable
minus amounts received from the
20
<PAGE>
payment of the distribution fee and the CDSC). In connection with the Class B
shares, the Distributor voluntarily has agreed to waive interest charges on the
unpaid balance in excess of 0.50% of eligible gross sales. Consequently, the
maximum amount payable to the Distributor (referred to as the "voluntary
maximum") in connection with the Class B shares is 6.75% of eligible gross
sales. The Distributor retains the right to stop waiving the interest charges
at any time. To the extent payments would exceed the voluntary maximum, the
Fund will not make further payments of the distribution fee with respect to
Class B shares, and any CDSCs will be paid to the Fund rather than to the
Distributor; however, the Fund will continue to make payments of the account
maintenance fee. In certain circumstances, the amount payable pursuant to the
voluntary maximum may exceed the amount payable under the NASD formula. In such
circumstances, payments in excess of the amount payable under the NASD formula
will not be made.
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of Fund shares.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended for more than seven days only for periods during
which trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists, as defined by the Securities and Exchange Commission, as a
result of which disposal of portfolio securities or determination of the net
asset value of the Fund is not reasonably practicable, and for such other
periods as the Securities and Exchange Commission by order may permit for the
protection of shareholders of the Fund.
The value of shares at the time of redemption may be more or less than the
shareholder's cost, depending on the market value of the securities held by the
Fund at such time.
DEFERRED SALES CHARGES--CLASS B SHARES
As discussed in the Prospectus under "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares", while Class B shares redeemed
within four years of purchase are subject to a CDSC under most circumstances,
the charge is waived on redemptions of Class B shares in connection with
certain post-retirement withdrawals from an Individual Retirement Account
("IRA") or other retirement plan or 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 that the redemption is requested within one year of
the death or initial determination of disability.
Retirement Plans. Any Retirement Plan which does not meet the qualifications
to purchase Class A or Class D shares at net asset value has the option of
purchasing Class A or Class D shares at the sales charge schedule disclosed in
the Prospectus, or if the Retirement Plan meets the following requirements,
then it may
21
<PAGE>
purchase Class B shares with a waiver of the CDSC upon redemption. The CDSC is
waived for any Eligible 401(k) Plan redeeming Class B shares. "Eligible 401(k)
Plan" is defined as a retirement plan qualified under Section 401(k) of the
Code with a salary reduction feature offering a menu of investments to plan
participants. The CDSC also is waived for redemptions from a 401(a) plan
qualified under the Code, provided, however, that each such plan has the same
or an affiliated sponsoring employer as an Eligible 401(k) Plan purchasing
Class B shares of MLAM-advised mutual funds ("Eligible 401(a) Plan"). Other tax
qualified retirement plans within the meaning of Section 401(a) of the Code
which are provided specialized services (e.g., plans whose participants may
direct on a daily basis their plan allocations among a menu of investments) by
independent administration firms contracted through Merrill Lynch also may
purchase Class B shares with a waiver of the CDSC. The CDSC also is waived for
any Class B shares which are purchased by an Eligible 401(k) Plan or Eligible
401(a) Plan and are rolled over into a Merrill Lynch or Merrill Lynch Trust
Company custodied IRA and held in such account at the time of redemption. The
Class B CDSC also is waived for any Class B shares which are purchased by a
Merrill Lynch rollover IRA that was funded by a rollover from a terminated
401(k) plan managed by the MLAM Private Portfolio Group and held in such
account at the time of redemption. The minimum initial and subsequent purchase
requirements are waived in connection with all the above referenced Retirement
Plans.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Directors of the Fund, the
Manager is primarily responsible for the execution of the Fund's portfolio
transactions and the allocation of brokerage. In executing such transactions,
the Manager seeks to obtain the best net results for the Fund, taking into
account such factors as price (including the applicable brokerage commission or
dealer spread), size of order, difficulty of execution and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. While the Manager generally seeks reasonably competitive commission
rates, the Fund does not necessarily pay the lowest commission or spread
available. The Fund has no obligation to deal with any broker or group of
brokers in execution of transactions in portfolio securities. Subject to
obtaining the best price and execution, brokers who provide supplemental
investment research to the Manager may receive orders for transactions by the
Fund. Information so received will be in addition to and not in lieu of the
services required to be performed by the Manager under the Management Agreement
and the expenses of the Manager will not necessarily be reduced as a result of
the receipt of such supplemental information. It is possible that certain
supplementary investment research so received will primarily benefit one or
more other investment companies or other accounts for which investment
discretion is exercised. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions
effected for such other accounts or investment companies. In addition,
consistent with the Rules of Fair Practice of the NASD and policies established
by the Board of Directors of the Fund, the Manager may consider sales of shares
of the Fund as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund.
The Fund anticipates that its brokerage transactions involving securities of
companies domiciled in countries other than the United States will be conducted
primarily on the principal stock exchanges of such countries. Brokerage
commissions and other transaction costs on foreign stock exchange transactions
are generally higher than in the United States, although the Fund will endeavor
to achieve the best net results in effecting its portfolio transactions. There
is generally less government supervision and regulation of foreign stock
exchanges and brokers than in the United States.
22
<PAGE>
Foreign equity securities may be held by the Fund in the form of ADRs, EDRs,
GDRs or other securities convertible into foreign equity securities. ADRs, EDRs
and GDRs may be listed on stock exchanges or traded in over-the-counter markets
in the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, as well as GDRs traded in the United States, will
be subject to negotiated commission rates.
The Fund may invest in securities traded in the over-the-counter markets and
intends to deal directly with the dealers who make markets in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Under the Investment Company Act, persons affiliated with
the Fund and persons who are affiliated with such affiliated persons are
prohibited from dealing with the Fund as principal in the purchase and sale of
securities unless a permissive order allowing such transactions is obtained
from the Securities and Exchange Commission. Since transactions in the over-
the-counter market usually involve transactions with dealers acting as
principal for their own account, the Fund will not deal with affiliated
persons, including Merrill Lynch and its affiliates, in connection with such
transactions. However, affiliated persons of the Fund may serve as its broker
in over-the-counter transactions conducted on an agency basis provided that,
among other things, the fee or commission received by such affiliated broker is
reasonable and fair compared to the fee or commission received by non-
affiliated brokers in connection with comparable transactions. See "Investment
Objective and Policies--Investment Restrictions".
The Fund's ability and decisions to purchase or sell portfolio securities may
be affected by laws or regulations relating to the convertibility and
repatriation of assets. Because the shares of the Fund are redeemable on a
daily basis in U.S. dollars, the Fund intends to manage its portfolio so as to
give reasonable assurance that it will be able to obtain U.S. dollars to the
extent necessary to meet anticipated redemptions. Under present conditions, it
is not believed that these considerations will have any significant effect on
its portfolio strategies.
The Board of Directors has considered the possibilities of seeking to
recapture for the benefit of the Fund brokerage commissions and other expenses
of possible portfolio transactions by conducting portfolio transactions through
affiliated entities. For example, brokerage commissions received by affiliated
brokers could be offset against the advisory fee paid by the Fund. After
considering all factors deemed relevant, the Board of Directors made a
determination not to seek such recapture. The Board will reconsider this matter
from time to time.
Section 11(a) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), generally prohibits members of the U.S. 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 Securities and Exchange 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 Fund in any of its portfolio
transactions executed on any such securities exchange of which it is a member,
appropriate consents have been obtained from the Fund and annual statements as
to aggregate compensation will be provided to the Fund.
23
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined by the Manager
once daily Monday through Friday at 4:15 P.M., New York time, on each day
during which the New York Stock Exchange is open for trading. The New York
Stock Exchange is not open on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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 Fund also
will determine its net asset value on any day in which there is sufficient
trading in its portfolio securities that the net asset value might be affected
materially, but only if on any such day the Fund is required to sell or redeem
shares. Net asset value is computed by dividing the value of the securities
held by the Fund plus any cash or other assets (including interest and
dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares outstanding at such time.
Expenses, including the management fees and any account maintenance and/or
distribution fees, are accrued daily. The per share net asset value of the
Class B, Class C and Class D shares generally will be lower than the per share
net asset value of the Class A shares, reflecting the daily expense accruals of
the account maintenance, distribution and higher transfer agency fees
applicable with respect to the Class B and Class C shares and the daily expense
accruals of the account maintenance fees applicable with respect to the Class D
shares; moreover, the per share net asset value of the Class B and Class C
shares generally will be lower than the per share net asset value of the Class
D shares, reflecting the daily expense accruals of the distribution fees and
higher transfer agency fees applicable with respect to the Class B and Class C
shares of the Fund. 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 differentials between the classes.
Portfolio securities which are traded on stock exchanges are valued at the
last sale price (regular way) on the exchange on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Directors as
the primary market. Securities traded in the over-the-counter market are valued
at the last available bid price in the over-the-counter market prior to the
time of valuation. When the Fund writes a call option, the amount of the
premium received is recorded on the books of the Fund as an asset and an
equivalent liability. The amount of the liability is subsequently valued to
reflect the current market value of the option written, based upon the last
asked price in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the average of the last asked price as
obtained from one or more dealers. Options purchased by the Fund are valued at
their last bid price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the average of the last bid
price as obtained from two or more dealers unless there is only one dealer, in
which case that dealer's price is used. Other investments, including financial
futures contracts and related options, are stated at market value.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund. Such valuations and procedures will be
reviewed periodically by the Board of Directors.
Generally, trading in foreign securities, as well as U.S. Government
securities and money market instruments, is substantially completed each day at
various times prior to the close of the New York Stock Exchange. The values of
such securities used in computing the net asset value of the Fund's shares are
24
<PAGE>
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the New York Stock Exchange. Occasionally,
events affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close of the New
York Stock Exchange which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by the Directors.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services described below which are
designed to facilitate investment in its shares. Full details as to each of
such services and copies of the various plans described below can be obtained
from the Fund, the Distributor or Merrill Lynch. Certain of these services are
available only to U.S. investors.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the transfer agent has an
Investment Account and will receive, at least quarterly, statements from the
transfer agent. The statements will serve as transaction confirmations for
automatic investment purchases and the reinvestment of income dividends and
capital gains distributions. The statements also will show any other activity
in the account since the preceding statement. Shareholders will receive
separate transaction confirmations for each purchase or sale transaction other
than automatic investment purchases and the reinvestment of income dividends.
Share certificates are issued only for full shares and only upon the specific
request of the shareholder. Issuance of certificates representing all or only
part of the full shares in an Investment Account may be requested by a
shareholder directly from the transfer agent.
Shareholders considering transferring their Class A or Class D shares from
Merrill Lynch to another brokerage firm or financial institution should be
aware that, if the firm to which the Class A or Class D shares are to be
transferred will not take delivery of shares of the Fund, a shareholder either
must redeem the Class A or Class D shares so that the cash proceeds can be
transferred to the account at the new firm or such shareholder must continue to
maintain an Investment Account at the transfer agent for those Class A or Class
D shares. Shareholders interested in transferring their Class B or Class C
shares from Merrill Lynch and who do not wish to have an Investment Account
maintained for such shares at the transfer agent may request their new
brokerage firm to maintain such shares in an account registered in the name of
the brokerage firm for the benefit of the shareholder. If the new brokerage
firm is willing to accommodate the shareholder in this manner, the shareholder
must request that he or she be issued certificates for his or her shares and
then must turn the certificates over to the new firm for re-registration as
described in the preceding sentence.
AUTOMATIC INVESTMENT PLANS
A shareholder may make additions to an Investment Account at any time by
purchasing Class A shares (if he is an eligible Class A investor as described
in the Prospectus) or Class B, Class C or Class D shares at the applicable
public offering price either through the shareholder's securities dealer or by
mail directly to the Transfer Agent, acting as agent for such securities
dealer. Voluntary accumulation also can be
25
<PAGE>
made through a service known as the Automatic Investment Plan whereby the Fund
is authorized through pre-authorized checks or automated clearing house debits
of $50 or more to charge the regular bank account of the shareholder on a
regular basis to provide systematic additions to the Investment Account of such
shareholder. An investor whose shares of the Fund are held within a
CMA(R)/CBA(R) account may arrange to have periodic investments made in the Fund
in amounts of $100 or more ($1 for retirement accounts) through the
CMA(R)/CBA(R) Automated Investment Program.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions to the contrary are given as to the method of
payment of dividends and capital gains distributions, dividends and
distributions will be reinvested automatically in additional shares of the
Fund. Such reinvestment will be at the net asset value of the shares of the
Fund, without a sales charge, as of the close of business on the ex-dividend
date of the dividend or distribution. Shareholders may elect in writing to
receive their dividends or capital gains distributions, or both, in cash, in
which event payment will be mailed or direct deposited on or about the payment
date.
Shareholders, at any time, may notify the transfer agent in writing or by
telephone (1-800-MER-FUND) that they no longer wish to have their dividends
and/or distributions reinvested in shares of the Fund or vice versa, and
commencing ten days after receipt by the transfer agent of such notice, those
instructions will be effected.
TAXES
The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. If it so
qualifies, the Fund (but not its shareholders) will not be subject to Federal
income tax on the part of its net ordinary income and net realized capital
gains which it distributes to Class A, Class B, Class C and Class D
shareholders (together, the "shareholders"). The Fund intends to distribute
substantially all of such income.
Dividends paid by the Fund from its ordinary income and distributions of the
Fund's net realized short-term capital gains (together referred to hereafter as
"ordinary income dividends") are taxable to shareholders as ordinary income.
Distributions made from the Fund's net realized long-term capital gains
(including long-term gains from certain transactions in futures and options)
("capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has owned Fund shares.
Any loss upon the sale or exchange of Fund shares held for six months or less,
however, will be treated as long-term capital loss to the extent of any capital
gain dividends received by the shareholder. Distributions in excess of the
Fund's earnings and profits will first reduce the adjusted tax basis of a
holder's shares and, after such adjusted tax basis is reduced to zero, will
constitute capital gains to such holder (assuming the shares are held as a
capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends. Distributions by the Fund, whether from ordinary income or capital
gains, generally will not be eligible for the dividends received deduction
allowed to corporations under the Code. If the Fund pays a dividend in January
that was declared in the previous October, November or December to shareholders
of record on a specified date in one of such months, then such dividend will be
treated for tax purposes as being paid by the Fund and received by its
shareholders on December 31 of the year in which such dividend was declared.
26
<PAGE>
Ordinary income dividends paid by the Fund to shareholders who are
nonresident aliens or foreign entities will be subject to a 30% U.S.
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law. Nonresident shareholders are
urged to consult their own tax advisers concerning the applicability of the
U.S. withholding tax.
Under certain provisions of the Code, some shareholders may be subject to a
31% withholding tax on ordinary income dividends, capital gain dividends, and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
No gain or loss will be recognized by Class B shareholders on the conversion
of their Class B shares into Class D shares. A shareholder's basis in the Class
D shares acquired will be the same as such shareholder's basis in the Class B
shares converted, and the holding period for the acquired Class D shares will
include the holding period for the converted Class B shares.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate such taxes.
Shareholders may be able to claim U.S. foreign tax credits with respect to such
taxes, subject to certain conditions and limitations contained in the Code. For
example, certain retirement accounts cannot claim foreign tax credits on
investments in foreign securities held in the Fund. If more than 50% in value
of the Fund's total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible, and intends, to
file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their proportionate shares
of such withholding taxes in their U.S. income tax returns as gross income,
treat such proportionate shares as taxes paid by them and deduct such
proportionate shares in computing their taxable incomes or, alternatively, use
them as foreign tax credits against their U.S. income taxes. No deductions for
foreign taxes, however, may be claimed by noncorporate shareholders who do not
itemize deductions. A shareholder that is a nonresident alien individual or a
foreign corporation may be subject to U.S. withholding tax on the income
resulting from the Fund's election described in this paragraph but may not be
able to claim a credit or deduction against such U.S. tax for the foreign taxes
treated as having been paid by such shareholder. The Fund will report annually
to its shareholders the amount per share of such withholding taxes. For this
purpose, the Fund will allocate foreign taxes and foreign source income among
the Class A, Class B, Class C and Class D shareholders according to a method
(which it believes is consistent with the Securities and Exchange Commission
exemptive order permitting the issuance and sale of multiple classes of stock)
that is based on the gross income allocable to Class A, Class B, Class C and
Class D shareholders during the taxable year, or such other method as the
Internal Revenue Service may prescribe. It should be noted that the foreign tax
credit currently is unavailable for withholding taxes paid to certain countries
in which the Fund is allowed to invest. Shareholders, however, may be able to
deduct their proportionate shares of the taxes for which the credit has been
disallowed.
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
27
<PAGE>
previous years. While the Fund intends to distribute its income and capital
gains in the manner necessary to avoid imposition of the 4% excise tax, there
can be no assurance that sufficient amounts of the Fund's taxable income and
capital gains will be distributed to avoid entirely the imposition of the tax.
In such event, the Fund will be liable for the tax only on the amount by which
it does not meet the foregoing distribution requirements.
The Fund may invest up to 10% of its total assets in securities of closed-end
investment companies. If the Fund purchases shares of an investment company (or
similar investment entity) organized under foreign law, the Fund will be
treated as owning shares in a passive foreign investment company ("PFIC") for
U.S. Federal income tax purposes. The Fund may be subject to U.S. Federal
income tax, and an additional tax in the nature of interest (the "interest
charge"), on a portion of the distributions from such a company and on gain
from the disposition of the shares of such a company (collectively referred to
as "excess distributions"), even if such excess distributions are paid by the
Fund as a dividend to its shareholders. The Fund may be eligible to make an
election with respect to certain PFICs in which it owns shares that will allow
it to avoid the taxes on excess distributions. However, such election may cause
the Fund to recognize income in a particular year in excess of the
distributions received from such PFICs. Alternatively, under proposed
regulations the Fund would be able to elect to "mark to market" at the end of
each taxable year all shares that it holds in PFICs. If it made this election,
the Fund would recognize as ordinary income any increase in the value of such
shares. Unrealized losses, however, would not be recognized. By making the
mark-to-market election, the Fund could avoid imposition of the interest charge
with respect to its distributions from PFICs, but in any particular year might
be required to recognize income in excess of the distributions it received from
PFICs and its proceeds from dispositions of PFIC stock.
The Fund may invest in securities rated in the medium to lower rating
categories of nationally recognized rating organizations, and in unrated
securities ("high yield/high risk securities" or "junk bonds"), as described in
the Prospectus. Some of these high yield/high risk securities may be purchased
at a discount and may therefore cause the Fund to accrue income before amounts
due under the obligations are paid. In addition, a portion of the interest
payments on such high yield/high risk securities may be treated as dividends
for federal income tax purposes; in such case, if the issuer of such high
yield/high risk securities is a domestic corporation, dividend payments by the
Fund will be eligible for the dividends received deduction to the extent of the
deemed dividend portion of such interest payments.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61 day period beginning 30
days before and ending 30 days after the date that the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
TAX TREATMENT OF FUTURES, OPTIONS AND FORWARD FOREIGN EXCHANGE TRANSACTIONS
The Fund may write, purchase or sell futures, options or forward foreign
exchange contracts. Futures and options contracts that are "Section 1256
contracts" will be "marked to market" for Federal income tax purposes at the
end of each taxable year, i.e., each such option or financial futures contract
will be treated as sold for its fair market value on the last day of the
taxable year. Unless such contract is a non-equity option or a regulated
financial futures contract for a non-U.S. currency for which the Fund elects to
have gain or loss treated as ordinary gain or loss under Code Section 988 (as
described below), gain or loss from Section 1256 contracts will be 60% long-
term and 40% short-term capital gain or loss. The mark-to-market rules outlined
above, however, will not apply to certain transactions entered into by the Fund
solely to reduce the risk of changes in price or interest or currency exchange
rates with respect to its investments.
28
<PAGE>
A forward foreign exchange contract that is a Section 1256 contract will be
marked to market, as described above. However, the character of gain or loss
from such a contract will generally be ordinary under Code Section 988. The
Fund may, nonetheless, elect to treat the gain or loss from certain forward
foreign exchange contracts as capital. In this case, gain or loss realized in
connection with a forward foreign exchange contract that is a Section 1256
contract will be characterized as 60% long-term and 40% short-term capital gain
or loss.
Code Section 1092, which applies to certain "straddles", may affect the
taxation of the Fund's transactions in futures, options and forward foreign
exchange contracts and its short sales. Under Section 1092, the Fund may be
required to postpone recognition for tax purposes of losses incurred in certain
closing transactions in futures, options and forward foreign exchange contracts
and short sales of securities.
One of the requirements for qualification as a RIC is that less than 30% of
the Fund's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting certain short sales and closing
transactions within three months after entering into an options or futures
contract.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS
In general, gains from "foreign currencies" and from foreign currency
options, foreign currency futures and forward foreign exchange contracts
relating to investments in stock, securities or foreign currencies will be
qualifying income for purposes of determining whether the Fund qualifies as a
RIC. It is currently unclear, however, who will be treated as the issuer of a
foreign currency instrument or how foreign currency options, foreign currency
futures and forward foreign exchange contracts will be valued for purposes of
the RIC diversification requirements applicable to the Fund.
Under Code Section 988, special rules are provided for certain transactions
in a currency other than the taxpayer's functional currency (i.e., unless
certain special rules apply, currencies other than the U.S. Dollar). In
general, foreign currency gains or losses from certain debt instruments, from
certain forward contracts, from financial futures contracts that are not
"regulated futures contracts" and from unlisted options will be treated as
ordinary income or loss under Code Section 988. In certain circumstances, the
Fund may elect capital gain or loss treatment for such transactions. Regulated
financial futures contracts, as described above, will be taxed under Code
Section 1256 unless application of Section 988 is elected by the Fund. In
general, however, Code Section 988 gains or losses will increase or decrease
the amount of the Fund's investment company taxable income available to be
distributed to shareholders as ordinary income. Additionally, if Code Section
988 losses exceed other investment company taxable income during a taxable
year, the Fund would not be able to make any ordinary income dividend
distributions, and any distributions made before the losses were realized but
in the same taxable year would be recharacterized as a return of capital to
shareholders, thereby reducing the basis of each shareholder's Fund shares, and
resulting in a capital gain for any shareholder who received a distribution
greater than the shareholder's tax basis in Fund shares (assuming that the
shares were held as a capital asset). These rules and the mark-to-market rules
described above, however, will not apply to certain transactions entered into
by the Fund solely to reduce the risk of currency fluctuations with respect to
its investments.
29
<PAGE>
The Treasury Department has the authority to issue regulations concerning the
recharacterization of principal repayments and interest payments with respect
to debt obligations issued in hyperinflationary currencies, which may include
the currencies of certain countries in which the Fund intends to invest. To
date, no such regulations have been issued.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and the Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative or administrative action
either prospectively or retroactively.
Ordinary income and capital gain dividends 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 U.S. Government obligations. State law varies as
to whether dividend income attributable to U.S. Government obligations is
exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an investment
in the Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return and
other total return data in advertisements or information furnished to present
or prospective shareholders. Total return figures are based on the Fund's
historical performance and are not intended to indicate future performance.
Average annual total return is determined separately for Class A, Class B,
Class C and Class D shares in accordance with a formula specified by the
Securities and Exchange Commission.
Average annual total return quotations for the specified periods are computed
by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses, including any redemption fee that would be
applicable to a complete redemption of the investment at the end of the
specified period, 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.
The Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, both as a percentage and as a
dollar amount based on a hypothetical $1,000 investment, for various periods
other than those noted below. Such data will be computed as described above,
except that (1) as required by the periods of the quotations, actual annual,
annualized or aggregate data, rather than average annual data, may be quoted,
and (2) the maximum applicable sales charges will not be included with respect
to annual or annualized rates of return calculations. Aside from the impact on
the performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the average
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer period of time.
30
<PAGE>
In order to reflect the reduced sales charges in the case of Class A or Class
D shares, or the waiver of the CDSC in the case of Class B or Class C shares
applicable to certain investors, as described under "Purchase of Shares" and
"Redemption of Shares", respectively, the total return data quoted by the Fund
in advertisements directed to such investors may take into account reduced, and
not the maximum, sales charge or may not take into account the CDSC and
therefore may reflect greater total return since, due to the reduced sales
charges or the waiver of sales charges, a lower amount of expenses may be
deducted.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund was incorporated under Maryland law on March 15, 1994. It has an
authorized capital of 400,000,000 shares of common stock, par value $0.10 per
share. At the date of this Statement of Additional Information, the shares of
the Fund are divided into Class A, Class B, Class C and Class D shares, each of
which consists of 100,000,000 shares. Under the Articles of Incorporation of
the Fund, the Directors have the authority to issue separate classes of shares
which would represent interests in the assets of the Fund and have identical
voting, dividend, liquidation and other rights and the same terms and
conditions except that expenses related to the distribution and/or account
maintenance of the shares of a class may be borne solely by such class, and a
class may have exclusive voting rights with respect to matters relating to the
expenses being borne only by such class. The Fund has received an order (the
"Multi-Class System Order") from the Commission permitting the issuance and
sale of multiple classes of shares. The Multi-Class System Order permits the
Fund to issue additional classes of shares if the Board of Directors deems such
reissuance to be in the best interests of the Fund. Upon liquidation of the
Fund, shareholders of each class are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders, except for any
expenses which may be attributable only to one class. Shares have no preemptive
rights. The redemption, conversion and exchange rights are described elsewhere
herein and in the Prospectus.
Shareholders are entitled to one vote for each full share held and fractional
votes for fractional shares held in the election of Directors (to the extent
hereafter provided) and on other matters submitted to a vote of shareholders,
except that shareholders of a class bearing account maintenance and/or
distribution expenses as provided above shall have exclusive voting rights with
respect to matters relating to such account maintenance and/or distribution
expenditures. The Fund does not intend to hold annual meetings of shareholders
in any year in which the Investment Company Act does not require shareholders
to elect Directors. Also, the by-laws of the Fund require that a special
meeting of shareholders be held upon the written request of at least 10% of the
outstanding shares of the Fund entitled to vote at such meeting, if they comply
with applicable Maryland law. Voting rights for Directors are not cumulative.
Shares issued are fully paid and non-assessable and have no preemptive or
conversion rights. Redemption rights are discussed elsewhere herein and in the
Prospectus. Each share of Class A, Class B, Class C and Class D Common Stock is
entitled to participate equally in dividends declared by the Fund and in the
net assets of the Fund upon liquidation or dissolution after satisfaction of
outstanding liabilities, except that, as noted above, expenses related to the
account maintenance and/or distribution of the Class B, Class C and Class D
shares will be borne solely by such class. Stock certificates are issued by the
transfer agent only on specific request. Certificates for fractional shares are
not issued in any case.
The Manager provided the initial capital for the Fund by purchasing 10,000
shares of common stock of the Fund for $100,000. Such shares were acquired for
investment and can only be disposed of by redemption. The organizational
expenses of the Fund (estimated at approximately $ ) will be paid by the
Fund
31
<PAGE>
and will be amortized over a period not exceeding five years. The proceeds
realized by the Manager upon the redemption of any of the shares initially
purchased by it will be reduced by the proportional amount of the unamortized
organizational expenses which the number of such initial shares being redeemed
bears to the number of shares initially purchased. As of the date of this
Statement of Additional Information, the Manager owned 100% of the outstanding
shares of Common Stock of the Fund. The Manager may be deemed to control the
Fund until such time as it owns less than 25% of the outstanding shares of the
Fund.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the offering price for Class A, Class
B, Class C and Class D shares of the Fund based on the projected value of the
Fund's estimated net assets and projected number of shares outstanding on the
date its shares first are offered for sale to public investors is as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Assets..................................... $25,000 $25,000 $25,000 $25,000
Number of Shares Outstanding................... 2,500 2,500 2,500 2,500
Net Asset Value Per Share (net assets divided
by number of shares outstanding).............. $ 10.00 $ 10.00 $ 10.00 $ 10.00
Sales Charge for Class A and Class D Shares:
5.25% of offering price (5.54% of net amount
invested*).................................... $ .554 ** ** $ .554
------- ------- ------- -------
Offering Price................................. $10.554 $ 10.00 $ 10.00 $10.554
======= ======= ======= =======
</TABLE>
- --------
* Rounded to the nearest one-hundredth percent; assumes maximum sales charge
is applicable.
** Class B and Class C shares are not subject to an initial sales charge but
may be subject to a CDSC on redemption. See "Purchase of Shares--Deferred
Sales Charge Alternatives--Class B and Class C Shares" in the Prospectus
and "Redemption of Shares--Deferred Sales Charges--Class B and Class C
Shares" herein.
INDEPENDENT AUDITORS
, has been selected as the independent auditors of the Fund. The selection
of independent auditors is subject to ratification by the shareholders of the
Fund. In addition, the employment of such auditors may be terminated without
penalty by a vote of a majority of the outstanding shares of the Fund at a
meeting called for the purpose of terminating such employment. The independent
auditors are responsible for auditing the annual financial statements of the
Fund.
CUSTODIAN
The Chase Manhattan Bank, N.A., Global Securities Services, 4 MetroTech
Center, 18th Floor, Brooklyn, New York acts as the custodian of the Fund's
assets (the "Custodian"). Under its contract with the Fund, the Custodian is
authorized, among other things, to establish separate accounts in foreign
currencies and to cause foreign securities owned by the Fund to be held in its
offices outside of the United States and with certain foreign banks and
securities depositories. The Custodian is responsible for safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery
of securities and collecting interest and dividends on the Fund's investments.
32
<PAGE>
TRANSFER AGENT
Financial Data Services, Inc., Transfer Agency Mutual Fund Operations, 4800
Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Fund's
transfer agent (the "Transfer Agent"). The Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening, maintenance
and servicing of shareholder accounts. See "Management of the Fund--Transfer
Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood, One World Trade Center, New York, New York 10048-0557, is
counsel for the Fund.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on November 30 of each year. The Fund sends
to its shareholders, at least semi-annually, reports showing the Fund's
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each year.
After the end of each year shareholders will receive Federal income tax
information regarding dividends.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all of the information set forth in the Registration Statement and the exhibits
relating thereto, which the Fund has filed with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act, and the Investment
Company Act, to which reference is hereby made.
Under a separate agreement, Merrill Lynch has granted the Fund the right to
use the "Merrill Lynch" name and has reserved the right to withdraw its consent
to the use of such name by the Fund at any time or to grant the use of such
name to any other company, and the Fund has granted Merrill Lynch, under
certain conditions, the use of any other name it might assume in the future,
with respect to any corporation organized by Merrill Lynch.
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Merrill Lynch Middle East/Africa Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Merrill Lynch Middle East/Africa Fund, Inc. as of , 1994. This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of Merrill Lynch Middle
East/Africa Fund, Inc. as of , 1994 in conformity with generally
accepted accounting principles.
Princeton, New Jersey
, 1994
34
<PAGE>
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
, 1994
<TABLE>
<S> <C>
Assets:
Cash in Bank........................................................ $100,000
Prepaid registration fees (Note 3)..................................
Deferred organization expenses (Note 4).............................
--------
Total Assets..........................................................
Liabilities--accrued expenses.........................................
--------
Net Assets (equivalent to $10.00 per share on 2,500 Class A shares of
Common Stock (par value $0.10), 2,500 Class B shares of Common Stock
(par value $0.10), 2,500 Class C shares of Common Stock (par value
$0.10) and 2,500 Class D shares of Common Stock (par value $0.10)
outstanding with 400,000,000 shares authorized) (Note 1)............. $100,000
========
</TABLE>
- --------
Notes to Statement of Assets and Liabilities.
(1) Merrill Lynch Middle East/Africa Fund, Inc. (the "Fund") was organized as
a Maryland corporation on March 15, 1994. The Fund is registered under the
Investment Company Act of 1940 as an open-end management investment
company. To date, the Fund has not had any transactions other than those
relating to organizational matters and the sale of 2,500 Class A shares,
2,500 Class B shares, 2,500 Class C shares and 2,500 Class D shares of
Common Stock to Merrill Lynch Asset Management, L.P. (the "Manager").
(2) The Fund intends to enter into a management agreement with the Manager,
and distribution agreements and distribution plans with Merrill Lynch
Funds Distributor, Inc. (the "Distributor"). (See "Management of the
Fund--Management and Advisory Arrangements" and "Purchase of Shares" in
the Statement of Additional Information.) Certain officers and/or
directors of the Fund are officers and/or directors of the Manager and 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 Fund commences operations not exceeding five years. In the event
that the Manager (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 Fund is liquidated prior to
the end of the five-year period, the Manager (or any subsequent holder)
shall bear the unamortized deferred organization expenses.
35
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies......................................... 2
Hedging Techniques....................................................... 2
Other Investment Policies and Practices.................................. 7
Investment Restrictions.................................................. 9
Management of the Fund.................................................... 13
Directors and Officers................................................... 13
Management and Advisory Arrangements..................................... 14
Purchase of Shares........................................................ 16
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................. 16
Reduced Initial Sales Charges............................................ 17
Distribution Plans....................................................... 20
Redemption of Shares...................................................... 21
Deferred Sales Charges--Class B Shares................................... 21
Portfolio Transactions and Brokerage...................................... 22
Determination of Net Asset Value.......................................... 24
Shareholder Services...................................................... 25
Investment Account....................................................... 25
Automatic Investment Plans............................................... 25
Automatic Reinvestment of Dividends and Capital Gains Distributions...... 26
Taxes..................................................................... 26
Tax Treatment of Futures, Options and Forward Foreign Exchange Transac-
tions................................................................... 28
Special Rules for Certain Foreign Currency Transactions.................. 29
Performance Data.......................................................... 30
General Information....................................................... 31
Description of Shares.................................................... 31
Computation of Offering Price Per Share.................................. 32
Independent Auditors..................................................... 32
Custodian................................................................ 32
Transfer Agent........................................................... 33
Legal Counsel............................................................ 33
Reports to Shareholders.................................................. 33
Additional Information................................................... 33
Independent Auditors' Report.............................................. 34
Statement of Assets and Liabilities....................................... 35
</TABLE>
Code # 18412-1094
[LOGO]
Merrill Lynch
Middle East/Africa
Fund, 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:
Independent Auditors' Report
Statement of Assets and Liabilities as of , 1994.
(B) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
1 --Amended and Restated Articles of Incorporation of the
Registrant.
2 --By-Laws of the Registrant.
3 --None.
4(a) --Portions of the Articles of Incorporation and the By-Laws of
the Registrant defining the rights of shareholders.(a)
(b) --Specimen Share Certificates for Class A, Class B, Class C and
Class D Shares.(b)
5 --Form of Management Agreement between the Registrant and
Merrill Lynch Asset Management, L.P. (the "Manager").
6(a) --Form of Class A Shares Distribution Agreement between the
Registrant and Merrill Lynch Funds Distributor, Inc. (the
"Distributor").
(b) --Form of Class B Shares Distribution Agreement between the
Registrant and the Distributor.
(c) --Form of Class C Shares Distribution Agreement between the
Registrant and the Distributor.
(d) --Form of Class D Shares Distribution Agreement between the
Registrant and the Distributor.
7 --None.
8 --Form of Custody Agreement between the Registrant and The Chase
Manhattan Bank, N.A.
9(a) --Form of Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement between the Registrant
and Financial Data Services, Inc. (the "Transfer Agent").
(b) --Form of License Agreement relating to the use of the "Merrill
Lynch" name.
10 --Opinion of Brown & Wood, counsel for the Registrant.(b)
11 --Consent of , independent auditors for the
Registrant.(b)
12 --None.
13 --Certificate of the Manager.(b)
14 --None.
15(a) --Form of Class B Shares Distribution Plan and Class B Shares
Distribution Plan
Sub-Agreement of the Registrant.
(b) --Form of Class C Shares Distribution Plan and Class B Shares
Distribution Plan
Sub-Agreement of the Registrant.
(c) --Form of Class D Shares Distribution Plan and Class B Shares
Distribution Plan
Sub-Agreement of the Registrant.
16 --None.
17(a) --Financial Data Schedule for Class A Shares.(b)
(b) --Financial Data Schedule for Class B Shares.(b)
(c) --Financial Data Schedule for Class C Shares.(b)
(d) --Financial Data Schedule for Class D Shares.(b)
</TABLE>
- --------
(a) Reference is made to Article IV, Article V (Sections 3, 5, 6 and 7) and
Articles VI, VII and IX of the Registrant's Articles of Incorporation,
filed herewith as Exhibit 1 to the Registration Statement on Form N-1A and
to Article II, Article III (Sections 1, 3, 5 and 6) and Articles VI, VII,
XIII and XIV of the Registrant's By-Laws, filed herewith as Exhibit 2 to
the Registration Statement on Form N-1A.
(b) To be filed by amendment.
C-1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
Prior to the effective date of this Registration Statement, the Fund will
sell 2,500 Class A shares of its Common Stock, 2,500 Class B shares of its
Common Stock, 2,500 Class C shares of its Common Stock and 2,500 Class D shares
of its Common Stock to the Manager for an aggregate of $100,000.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD
HOLDERS AT
TITLE OF CLASS DECEMBER , 1994
- -------------- -----------------
<S> <C>
Class A Shares of Common Stock, par value $0.10 per share.....
Class B Shares of Common Stock, par value $0.10 per share.....
Class C Shares of Common Stock, par value $0.10 per share.....
Class D Shares of Common Stock, par value $0.10 per share.....
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is made to Article VI of the Registrant's Articles of
Incorporation, Article VI of the Registrant's By-Laws, Section 2-418 of the
Maryland General Corporation Law and Section 9 of each of the Class A, Class B,
Class C and Class D Shares Distribution Agreements.
Insofar as the conditional advancing of indemnification moneys for actions
based on the Investment Company Act of 1940, as amended (the "1940 Act") may be
concerned, Article VI of the Registrant's By-Laws provides that such payments
will be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only on receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which
exceeds the amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification; and (iii) (a) such
promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assumes that any repayments may be obtained
by the Registrant without delay or litigation, which bond, insurance or other
form of security must be provided by the recipient of the advance and (b) a
majority of a quorum of the Registrant's disinterested non-party Directors, or
an independent legal counsel in a written opinion, shall determine, based upon
a review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
In Section 9 of each of the Class A, Class B, Class C and Class D Shares
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, as
amended (the "1933 Act"), against certain types of civil liabilities arising in
connection with the Registration Statement or the Prospectus and Statement of
Additional Information.
Insofar as indemnification for liabilities arising under the 1933 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 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
C-2
<PAGE>
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 1933 Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE MANAGER
The Manager acts as the 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, Merrill
Lynch Global Resources Trust, Merrill Lynch Global SmallCap Fund, Inc., Merrill
Lynch Global Utility Fund, Inc., Merrill Lynch Growth Fund for Investment and
Retirement, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch High Income
Municipal Bond Fund, Inc., Merrill Lynch Institutional Intermediate Fund,
Merrill Lynch International Equity Fund, Merrill Lynch Latin America Fund,
Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc.,
Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust,
Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Series Fund, Inc.,
Merrill Lynch Short-Term Global Income Fund, Inc., Merrill Lynch Strategic
Dividend Fund, Merrill Lynch Technology Fund, Inc., Merrill Lynch U.S. Treasury
Money Fund, Merrill Lynch U.S.A. Government Reserves, Merrill Lynch Utility
Income Fund, Inc. and Merrill Lynch Variable Series Funds, Inc.
Fund Asset Management, L.P., an affiliate of the Manager ("FAM"), 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,
C-3
<PAGE>
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 Box 9011, Princeton, New
Jersey 08543-9011, except that the address of Merrill Lynch Funds for
Institutions Series and Merrill Lynch Institutional Intermediate Fund is One
Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of
the Manager, FAM, the Distributor and Princeton Administrators, L.P. is also
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 the Transfer Agent is 4800 Deer Lake Drive
East, Jacksonville, Florida 32246-6484.
Set forth below is a list of each executive officer and partner of the
Manager indicating each business, profession, vocation or employment of a
substantial nature in which each such person or entity has been engaged since
September 1, 1992, for his or her or its own account or in the capacity of
director, officer, partner or trustee. In addition, Mr. Zeikel is President,
Mr. Richard is Treasurer and Mr. Glenn is Executive Vice President of
substantially all of the investment companies described in the preceding
paragraph, and Messrs. Durnin, Giordano, Harvey, Hewitt, Kirstein and Monagle
and Ms. Griffin are directors, trustees or officers of one or more of such
companies.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION(S) PROFESSION,
NAME WITH THE MANAGER VOCATION OR EMPLOYMENT
- ---- ---------------- ---------------------------
<S> <C> <C>
ML & Co................. Limited Partner Financial Services Holding Company;
Limited Partner of FAM
Merrill Lynch Investment
Management, Inc........ Limited Partner Investment Advisory Services
Princeton Services, Inc.
("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 the
Transfer Agent; 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
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL BUSINESS,
POSITION(S) PROFESSION,
NAME WITH THE MANAGER VOCATION OR EMPLOYMENT
- ---- ---------------- ---------------------------
<S> <C> <C>
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 Secretary President, General Counsel, Director
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 of
Princeton Services
Stephen M.M. Miller..... Senior Vice President Executive Vice President of Princeton
Administrators, L.P.
Joseph T. Monagle, Jr... Senior Vice President Senior Vice President of FAM; Senior
Vice President of Princeton Services
Gerald M. Richard....... Senior Vice President 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 Insured Fund, MuniYield Arizona Fund, Inc.,
MuniYield Arizona Fund II, Inc., MuniYield California Fund, Inc., MuniYield
California
C-5
<PAGE>
Insured Fund, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund,
MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield Insured Fund II,
Inc., MuniYield Michigan Fund, Inc., MuniYield Michigan Insured Fund, Inc.,
MuniYield New Jersey Fund, Inc., MuniYield New Jersey Insured Fund, Inc.,
MuniYield New York Insured Fund, Inc., MuniYield New York Insured Fund II,
Inc., MuniYield New York Insured Fund III, Inc., MuniYield Pennsylvania Fund,
MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High
Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Senior Strategic
Income Fund, Inc., Taurus MuniCalifornia Holdings, Inc., 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 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 02111-2665.
<TABLE>
<CAPTION>
(3)
(2) POSITION(S) AND
(1) POSITION(S) AND OFFICE(S) OFFICE(S)
NAME WITH MLFD WITH THE REGISTRANT
- ---- ------------------------- -------------------
<S> <C> <C>
Terry K. Glenn.......... President and Director Executive Vice President
Arthur Zeikel........... Director President and Director
Philip L. Kirstein...... Director None
William E. Aldrich...... Senior Vice President None
Kevin Boman............. Vice President None
Robert W. Crook......... Senior Vice President None
Michael J. Brady........ Vice President None
William M. Breen........ Vice President None
Sharon Creveling........ Vice President and Assistant Treasurer None
Mark A. Desario......... Vice President None
James T. Fatseas........ Vice President None
Stanley Graczyk......... Vice President None
Michelle T. Lau......... 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 Secretary
</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 1940 Act and the rules thereunder are maintained at the offices of
the Registrant (800 Scudders Mill Road, Plainsboro, New Jersey 08536) and the
Transfer Agent (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
C-6
<PAGE>
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) The 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 the Registrant's registration statement under the
1933 Act.
(b) The Fund, if requested to do so by the holders of at least 10% of the
Fund's outstanding shares, will call a meeting of shareholders for the purpose
of voting upon the question of removal of a director or directors and will
assist communications with other shareholders as required by Section 16(c) of
the 1940 Act.
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 17TH DAY OF
NOVEMBER, 1994.
Merrill Lynch Middle East/Africa
Fund, Inc.
(Registrant)
/s/ ARTHUR ZEIKEL
By: _________________________________
(Arthur Zeikel, President)
EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY AUTHORIZES ARTHUR ZEIKEL,
TERRY K. GLENN AND MICHAEL J. HENNEWINKEL, OR ANY OF THEM, AS ATTORNEY-IN-FACT,
TO SIGN ON HIS BEHALF, INDIVIDUALLY AND IN EACH CAPACITY STATED BELOW, ANY
AMENDMENTS TO THE 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>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Arthur Zeikel President (Principal November 17, 1994
- ------------------------------------ Executive Officer) and
(Arthur Zeikel) Director
/s/ Gerald M. Richard Treasurer (Principal November 17, 1994
- ------------------------------------ Financial and Accounting
(Gerald M. Richard) Officer)
/s/ Donald Cecil Director November 17, 1994
- ------------------------------------
(Donald Cecil)
/s/ Edward H. Meyer Director November 17, 1994
- ------------------------------------
(Edward H. Meyer)
/s/ Charles C. Reilly Director November 17, 1994
- ------------------------------------
(Charles C. Reilly)
/s/ Richard R. West Director November 17, 1994
- ------------------------------------
(Richard R. West)
</TABLE>
C-8
<PAGE>
SECURITIES ACT REGISTRATION NO. 33-55843
INVESTMENT COMPANY ACT FILE NO. 811-07155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
----------------
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
<C> <S> <C>
1 Amended and Restated Articles of Incorporation of the Registrant
2 By-Laws of the Registrant
5 Form of Management Agreement between the Registrant and the Manager
6(a) Form of Class A Shares Distribution Agreement between the Registrant
and the Distributor
6(b) Form of Class B Shares Distribution Agreement between the Registrant
and the Distributor
6(c) Form of Class C Shares Distribution Agreement between the Registrant
and the Distributor
6(d) Form of Class D Shares Distribution Agreement between the Registrant
and the Distributor
8 Form of Custody Agreement between the Registrant and the Custodian
9(a) Form of Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between the Registrant and the Transfer
Agent
9(b) Form of License Agreement Relating to the use of the "Merrill Lynch"
Name
15(a) Form of Class B Shares Distribution Plan and Class B Shares
Distribution Plan Sub-Agreement of the Registrant
15(b) Form of Class C Shares Distribution Plan and Class B Shares
Distribution Plan Sub-Agreement of the Registrant
15(c) Form of Class D Shares Distribution Plan and Class B Shares
Distribution Plan Sub-Agreement of the Registrant
</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
<PAGE>
EXHIBIT 99.1
MIDDLE EAST/AFRICA FUND, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the "Corporation"),
does hereby certify to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The name of the corporation is Middle East/Africa Fund, Inc. The
Corporation desires to amend and restate its charter as currently in effect.
The original Articles of Incorporation were filed with the Maryland State
Department of Assessments and Taxation on March 15, 1994. Articles of Amendment
to the Articles of Incorporation were filed with the Maryland State Department
of Assessments and Taxation on April 19, 1994.
SECOND: Pursuant to Section 2-609 of the Maryland General Corporation Law,
these Articles of Amendment and Restatement restate and integrate and further
amend the provisions of the Articles of Incorporation of the Corporation.
THIRD: The text of the charter of the Corporation as heretofore amended
or supplemented is hereby restated and further amended to read in its entirety
as follows:
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MIDDLE EAST/AFRICA FUND, INC.
THE UNDERSIGNED, DAVID H. KANEFSKY, whose post office address is 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 MIDDLE EAST/AFRICA FUND, INC.
(the "Corporation").
ARTICLE II
PURPOSES AND POWERS
-------------------
The purpose or purposes for which the Corporation is formed 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
<PAGE>
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts and
on such terms and conditions, for such purposes and for such amount or kind of
consideration now or hereafter permitted by the General Laws of the State of
Maryland and by these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the value of the consideration per share to
be received by the Corporation upon the sale or other disposition of any shares
of its capital stock shall not be less than the net asset value per share of
such capital stock outstanding at the time of such event.
(4) To exchange, classify, reclassify, change the designation of, convert,
rename, redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its issued or unissued capital stock, in any
manner and to the extent now or hereafter permitted by the General Laws of the
State of Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise any and
all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
3
<PAGE>
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation
in this State is The Corporation Trust Incorporated, a corporation of this
State, and the post office address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
ARTICLE IV
CAPITAL STOCK
-------------
(1) The total number of shares of capital stock which the Corporation shall
have authority to issue is Four Hundred Million (400,000,000) shares, of the par
value of Ten Cents ($.10) per share, and of the aggregate par value of Forty
Million Dollars ($40,000,000). The capital stock initially is classified into
four classes, consisting of One Hundred Million (100,000,000) shares of Class A
Common Stock, One Hundred Million (100,000,000)
4
<PAGE>
shares of Class B Common Stock, One Hundred Million (100,000,000) shares of
Class C Common Stock and One Hundred Million (100,000,000) shares of Class D
Common Stock.
(2) The Board of Directors may classify and reclassify any unissued shares
of capital stock into one or more additional or other classes or series as may
be established from time to time by setting or changing in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares of stock and pursuant to such
classification or reclassification to increase or decrease the number of
authorized shares of any existing class or series.
(3) The Board of Directors may classify and reclassify any issued shares of
capital stock into one or more additional or other classes or series as may be
established from time to time by setting or changing in any one or more respects
the designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
existing class or series; provided, however, that any such classification or
reclassification shall not substantially adversely affect the rights of holders
of such issued shares. The Board's authority pursuant to this paragraph shall
include, but not be limited to,
5
<PAGE>
the power to vary among all of the holders of a particular class or series (a)
the length of time shares must be held prior to reclassification to shares of
another class or series (the "Holding Period(s)"), (b) the manner in which the
time for such Holding Period(s) is determined and (c) the class or series into
which the particular class or series is being reclassified; provided, however,
that, subject to the first sentence of this section, with respect to holders of
the Corporation's shares issued on or after the date of the Corporation's first
effective prospectus which sets forth Holding Period(s), the Holding Period(s),
the manner in which the time for such Holding Period(s) is determined and the
class or series into which the particular class or series is being reclassified
shall be disclosed in the Corporation's prospectus or statement of additional
information in effect at the time such shares, which are the subject of the
reclassification, were issued.
(4) Unless otherwise expressly provided in the charter of the Corporation,
including any Articles Supplementary creating any class or series of capital
stock, the holders of each class or series of capital stock shall be entitled to
dividends and distributions in such amounts and at such times as may be
determined by the Board of Directors, and the dividends and distributions paid
with respect to the various classes or series of capital stock may vary among
such classes and series. Dividends on a class or series may be declared or paid
only out of the net assets of that class or series. Expenses related to
6
<PAGE>
the distribution of, and other identified expenses that should properly be
allocated to, the shares of a particular class or series of capital stock may be
charged to and borne solely by such class or series and the bearing of expenses
solely by a class or series of capital stock may be appropriately reflected (in
a manner determined by the Board of Directors) and cause differences in the net
asset value attributable to, and the dividend, redemption and liquidation rights
of, the shares of each class or series of capital stock.
(5) Unless otherwise expressly provided in the charter of the Corporation,
including those matters set forth in Article II, Section (4) hereof and
including any Articles Supplementary creating any class or series of capital
stock, on each matter submitted to a vote of stockholders, each holder of a
share of capital stock of the Corporation shall be entitled to one vote for each
share standing in such holder's name on the books of the Corporation,
irrespective of the class or series thereof, and all shares of all classes and
series shall vote together as a single class; provided, however, that (a) as to
any matter with respect to which a separate vote of any class or series is
required by the Investment Company Act of 1940, as amended, and in effect from
time to time, or any rules, regulations or orders issued thereunder, or by the
Maryland General Corporation Law, such requirement as to a separate vote by that
class or series shall apply in lieu of a general vote of all classes and series
as described above, (b) in the event that the separate vote
7
<PAGE>
requirements referred to in (a) above apply with respect to one or more classes
or series, then, subject to paragraph (c) below, the shares of all other classes
and series not entitled to a separate class vote shall vote as a single class
and (c) as to any matter which does not affect the interest of a particular
class or series, such class or series shall not be entitled to any vote and only
the holders of shares of the affected classes and series, if any, shall be
entitled to vote.
(6) Notwithstanding any provision of the Maryland General Corporation Law
requiring a greater proportion than a majority of the votes of all classes or
series of capital stock of the Corporation (or of any class or series entitled
to vote thereon as a separate class or series) to take or authorize any action,
the 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
8
<PAGE>
series of capital stock of the Corporation shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation, to
share ratably in the remaining net assets of the Corporation applicable to that
class or series.
(8) Any fractional shares shall carry proportionately all of the rights of
a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(9) The presence in person or by proxy of the holders of shares entitled
to cast one-third of the votes entitled to be cast shall constitute a quorum at
any meeting of stockholders, except with respect to any matter which requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast one-
third of the votes entitled to be cast by each class entitled to vote as a
separate class shall constitute a quorum.
(10) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of the charter and the By-Laws of the
Corporation. As used in the charter of the Corporation, the terms "charter" and
"Articles of Incorporation" shall mean and include the Articles of Incorporation
of the Corporation as amended, supplemented and restated from time to time by
Articles of Amendment, Articles Supplementary, Articles of Restatement or
otherwise.
9
<PAGE>
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
Mark B. Goldfus
Michael J. Hennewinkel
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares 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
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.
10
<PAGE>
(4) Each director and each officer of the Corporation shall be indemnified
by the Corporation to the full extent permitted by the General Laws of the State
of Maryland, subject to the requirements of the Investment Company Act of 1940,
as amended. No amendment of these Articles of Incorporation or repeal of any
provision hereof shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State of
Maryland, subject to the requirements of the Investment Company Act of 1940, as
amended, no director or officer of the Corporation shall be personally liable to
the Corporation or its security holders for money damages. No amendment of
these Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.
(6) The Board of Directors of the Corporation is vested with the sole
power, to the exclusion of the stockholders, to make, alter or repeal from time
to time any of the By-Laws of the Corporation except any particular By-Law which
is specified as not subject to alteration or repeal by the Board of Directors,
subject to the requirements of the Investment Company Act of 1940, as amended.
11
<PAGE>
(7) The Board of Directors of the Corporation from time to time may change
the Corporation's name, without the vote or consent of the stockholders of the
Corporation, in any manner and to the extent now or hereafter permitted by the
General Laws of the State of Maryland and by these Articles of Incorporation.
ARTICLE VI
REDEMPTION
----------
Each holder of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the shares of capital
stock of the Corporation standing in the name of such holder on the books of the
Corporation, and all shares of capital stock issued by the Corporation shall be
subject to redemption by the Corporation, at the redemption price of such shares
as in effect from time to time as may be determined by the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment of
such redemption price in accordance with provisions of applicable law. The
redemption price of shares of capital stock of the Corporation shall be the net
asset value thereof as determined by the Board of Directors of the Corporation
from time to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by resolution of the
Board of
12
<PAGE>
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 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
13
<PAGE>
securities on "margin," a sale of securities "short," or an underwriting or the
sale of, or a participation in any underwriting or selling group in connection
with the public distribution of, any securities, shall be final and conclusive,
and shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation are
issued and sold on the condition and understanding, evidenced by the purchase of
shares of capital stock or acceptance of share certificates, that any and all
such determinations shall be binding as aforesaid. No provision of these
Articles of Incorporation shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, or of any valid rule, regulation or
order of the Securities and Exchange Commission thereunder or (b) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE VIII
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
14
<PAGE>
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.
IN WITNESS WHEREOF, the undersigned incorporator of Middle East/Africa
Fund, Inc. hereby executes the following Articles of Incorporation and
acknowledges the same to be his act.
Dated this 15th day of March, 1994.
/s/ David H. Kanefsky
---------------------
David H. Kanefsky
FOURTH: The authorized capital stock of the Corporation has not been
increased by these Amended and Restated Articles of Incorporation.
FIFTH: These Articles of Amendment and Restatement have been approved
by a majority of the entire Board of Directors of the Corporation, there being
no stock outstanding or subscribed for at the time of approval.
15
<PAGE>
SIXTH: The current address of the principal office of the Corporation
in the State of Maryland is as set forth in Article III of the foregoing
amendment and restatement of the charter. The name and address of the
Corporation's current resident agent is as set forth in Article III of the
foregoing amendment and restatement of the charter. The number of directors of
the Corporation and the names of those currently in office are as set forth in
Article V of the foregoing amendment and restatement of the charter.
SEVENTH: These Articles of Amendment and Restatement shall be
effective on the date of acceptance for record by the Maryland State Department
of Assessments and Taxation.
16
<PAGE>
IN WITNESS WHEREOF, MIDDLE EAST/AFRICA FUND, INC. has caused these
presents to be signed in its name and on its behalf by its Executive Vice
President and witnessed by its Assistant Secretary as of the 6th day of October,
1994.
WITNESS: MIDDLE EAST/AFRICA FUND, INC.
(a Maryland corporation)
/s/ JAMES W. HARSHAW, III By: /s/ TERRY K. GLENN
- ---------------------------- ------------------------
James W. Harshaw Terry K. Glenn
Assistant Secretary Executive Vice President
THE UNDERSIGNED, Executive Vice President of MIDDLE EAST/AFRICA FUND,
INC., a Maryland corporation, who executed on behalf of the Corporation the
foregoing Articles of Amendment and Restatement of which this certificate is
made a part, hereby acknowledges in the name and on behalf of the Corporation
the foregoing Articles of Amendment and Restatement to be the corporate act of
the Corporation and hereby certifies that to the best of his knowledge,
information and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
/s/ TERRY K. GLENN
-----------------------------
Terry K. Glenn
Executive Vice President
17
<PAGE>
EXHIBIT 99.2
BY-LAWS
-------
OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
ARTICLE I
Offices
-------
Section 1. Principal Office. The principal office of Merrill Lynch Middle
----------------
East/Africa Fund, Inc. (the "Corporation") shall be in the City of Baltimore,
State of Maryland.
Section 2. Principal Executive Office. The principal executive office of
--------------------------
the Corporation shall be at 800 Scudders Mill Road, Plainsboro, New Jersey
08536.
Section 3. Other Offices. The Corporation may have such other offices in
-------------
such places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The Corporation shall not be required to hold
--------------
an annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. In the event that the Corporation shall be required to hold an annual
meeting of stockholders to elect directors by the Investment
<PAGE>
Company Act of 1940, as amended, such meeting shall be held no later than 120
days after the occurrence of the event requiring the meeting. Any stockholders'
meeting held in accordance with this Section shall for all purposes constitute
the annual meeting of stockholders for the year in which the meeting is held.
Section 2. Special Meetings. Special meetings of the stockholders, unless
----------------
otherwise provided by law, may be called for any purpose or purposes by a
majority of the Board of Directors, the President, or on the written request of
the holders of at least 10% of the outstanding shares of capital stock of the
Corporation entitled to vote at such meeting if they comply with Section 2-
502(b) or (c) of the Maryland General Corporation Law.
Section 3. Place of Meetings. Meetings of the stockholders shall be held
-----------------
at such place within the United States as the Board of Directors may from time
to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place,
------------------------------------
date and time of the holding of each stockholders' meeting and, if the meeting
is a special meeting, the purpose or purposes of the special meeting, shall be
given personally or by mail, not less than ten nor more than ninety days before
the date of such meeting, to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of the meeting. Notice by mail
shall be deemed to be duly given when deposited in the United States mail
addressed to the stockholder
2
<PAGE>
at his address as it appears on the records of the Corporation, with postage
thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the Board of Directors, after the adjournment, shall fix
a new record date for an adjourned meeting, or the adjournment is for more than
one hundred and twenty days after the original record date, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of
------
shares of stock of the Corporation entitled to cast one-third of the votes
entitled to be cast, present in person or by proxy, shall constitute a quorum
for the transaction of any business, except with respect to any matter which
requires approval by a separate vote of one or more classes of stock, in which
case the presence in person or by proxy of the holders of shares entitled to
cast one-third of the votes entitled to be cast by each class entitled to vote
as a separate class shall constitute a quorum. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the shares
of stock present in person or by proxy and entitled to
3
<PAGE>
vote may adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until the
holders of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present any business may be
transacted which might have been transacted at the meeting as originally called.
The absence from any meeting, in person or by proxy, of holders of the number of
shares of stock of the Corporation in excess of a majority thereof which may be
required by the laws of the State of Maryland, the Investment Company Act of
1940, as amended, or other applicable statute, the Articles of Incorporation, or
these By-Laws, for action upon any given matter shall not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in person or by proxy, holders of
the number of shares of stock of the Corporation required for action in respect
of such other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the
------------
Chairman of the Board (if one has been designated by the Board), or in his
absence or inability to act, the President, or in the absence or inability to
act of the Chairman of the Board and the President, a Vice President, shall act
as chairman of the meeting. The Secretary, or in his absence or inability to
act, any person appointed by the chairman of the meeting, shall act as secretary
of the meeting and keep the minutes thereof.
4
<PAGE>
Section 7. Order of Business. The order of business at all meetings of
-----------------
the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
------
Articles of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of such stock standing in his name on
the record of stockholders of the Corporation as of the record date determined
pursuant to Section 9 of this Article or if such record date shall not have been
so fixed, then at the later of (i) the close of business on the day on which
notice of the meeting is mailed or (ii) the thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the Articles of Incorporation or these By-Laws,
any corporate action to be taken by vote of the stockholders (other than the
election of directors, which shall be by plurality vote)
5
<PAGE>
may be authorized by a majority of the total votes cast at a meeting of
stockholders by the holders of shares present in person or represented by proxy
and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a record
---------------------
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date, which may not be prior to the close of
business on the day the record date is fixed, shall be not more than ninety nor
less than ten days before the date of the meeting of the stockholders. All
persons who were holders of record of shares at such time, and not others, shall
be entitled to vote at such meeting and any adjournment thereof.
Section 10. Inspectors. The Board may, in advance of any meeting of
----------
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each
6
<PAGE>
inspector, before entering upon the discharge of his duties, may be required to
take and sign an oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors may be empowered to determine the number of shares outstanding and
the voting powers of each, the number of shares represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No director or candidate for the office of director shall act as inspector of an
election of directors. Inspectors need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting. Except as
------------------------------------------
otherwise provided by statute or the Articles of Incorporation, any action
required to be taken at any meeting of stockholders, or any action which may be
taken at any meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
7
<PAGE>
records of stockholders meetings: (i) a unanimous written consent which sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the Articles
--------------
of Incorporation, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the Corporation
may be exercised by or under authority of the Board of Directors except as
conferred on or reserved to the stockholders by law or by the Articles of
Incorporation or these By-Laws.
Section 2. Number of Directors. The number of directors shall be fixed
-------------------
from time to time by resolution of the Board of Directors adopted by a majority
of the entire Board of Directors; provided, however, that the number of
directors shall in no event be less than one nor more than fifteen. Any vacancy
created by an increase in Directors may be filled in accordance with Section 6
of this Article III. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless such director is specifi-
8
<PAGE>
cally removed pursuant to Section 5 of this Article III at the time of such
decrease. Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
------------------------------
annually at a meeting of stockholders held for that purpose; provided, however,
that if no meeting of the stockholders of the Corporation is required to be held
in a particular year pursuant to Section 1 of Article II of these By-Laws,
directors shall be elected at the next meeting held. The term of office of each
director shall be from the time of his election and qualification until the
election of directors next succeeding his election and until his successor shall
have been elected and shall have qualified, or until his death, or until he
shall have resigned or until December 31 of the year in which he shall have
reached seventy-two years of age, or until he shall have been removed as
hereinafter provided in these By-Laws, or as otherwise provided by statute or
the Articles of Incorporation.
Section 4. Resignation. A director of the Corporation may resign at any
-----------
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
9
<PAGE>
Section 5. Removal of Directors. Any director of the Corporation may be
--------------------
removed by the stockholders by a vote of a majority of the votes entitled to be
cast for the election of directors.
Section 6. Vacancies. Any vacancies in the Board, whether arising from
---------
death, resignation, removal, an increase in the number of directors or any other
cause, may be filled by a vote of the majority of the Board of Directors then in
office even though such majority is less than a quorum, provided that no
vacancies shall be filled by action of the remaining directors, if after the
filling of said vacancy or vacancies, less than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation.
In the event that at any time there is a vacancy in any office of a director
which vacancy may not be filled by the remaining directors, a special meeting
of the stockholders shall be held as promptly as possible and in any event
within sixty days, for the purpose of filling said vacancy or vacancies.
Section 7. Place of Meetings. Meetings of the Board may be held at such
-----------------
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular Meetings. Regular meetings of the Board may be held
----------------
without notice at such time and place as may be determined by the Board of
Directors.
10
<PAGE>
Section 9. Special Meetings. Special meetings of the Board may be called
----------------
by two or more directors of the Corporation or by the Chairman of the Board or
the President.
Section 10. Telephone Meetings. Members of the Board of Directors or of
------------------
any committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the Investment Company Act of 1940, as amended, participation in a meeting by
these means constitutes presence in person at the meeting.
Section 11. Notice of Special Meetings. Notice of each special meeting of
--------------------------
the Board shall be given by the Secretary as hereinafter provided, in which
notice shall be stated the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone
or any standard form of telecommunication, at least twenty-four hours before the
time at which such meeting is to be held, or by first-class mail, postage
prepaid, addressed to him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held.
Section 12. Waiver of Notice of Meetings. Notice of any special meeting
----------------------------
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice which is filed with the records of the meeting
or who
11
<PAGE>
shall attend such meeting. Except as otherwise specifically required by these
By-Laws, a notice or waiver or notice of any meeting need not state the purposes
of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two, of the
-----------------
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise expressly required by statute, the Articles of
Incorporation, these By-Laws, the Investment Company Act of 1940, as amended, or
other applicable statute, the act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum at any meeting of the Board, a majority of the directors
present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 14. Organization. The Board may, by resolution adopted by a
------------
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In
12
<PAGE>
the absence or inability of the Chairman of the Board to preside at a meeting,
the President or, in his absence or inability to act, another director chosen by
a majority of the directors present, shall act as chairman of the meeting and
preside thereat. The Secretary (or, in his absence or inability to act, any
person appointed by the Chairman) shall act as secretary of the meeting and keep
the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting. Subject to
-------------------------------------------------
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writings or writing are filed with the minutes of the proceedings of the Board
or committee.
Section 16. Compensation. Directors may receive compensation for services
------------
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board.
Section 17. Investment Policies. It shall be the duty of the Board of
-------------------
Directors to direct that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies and restrictions with respect to
securities investments and otherwise of the Corporation, as
13
<PAGE>
recited in the Prospectus of the Corporation included in the Registration
Statement of the Corporation, as recited in the current Prospectus and Statement
of Additional Information of the Corporation, as filed from time to time with
the Securities and Exchange Commission and as required by the Investment Company
Act of 1940, as amended. The Board however, may delegate the duty of management
of the assets and the administration of its day to day operations to an
individual or corporate management company and/or investment adviser pursuant to
a written contract or contracts which have obtained the requisite approvals,
including the requisite approvals of renewals thereof, of the Board of
Directors and/or the stockholders of the Corporation in accordance with the
provisions of the Investment Company Act of 1940, as amended.
ARTICLE IV
Committees
----------
Section 1. Executive Committee. The Board may, by resolution adopted by a
-------------------
majority of the entire board, designate an Executive Committee consisting of two
or more of the directors of the corporation, which committee shall have and may
exercise all the powers and authority of the Board with respect to all matters
other than:
14
<PAGE>
(a) the submission to stockholders of any action requiring authorization of
stockholders pursuant to statute or the Articles of Incorporation;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the directors for serving on the Board
or on any committee of the Board, including the Executive Committee;
(d) the approval or termination of any contract with an investment adviser
or principal underwriter, as such terms are defined in the Investment Company
Act of 1940, as amended, or the taking of any other action required to be taken
by the Board of Directors by the Investment Company Act of 1940, as amended;
(e) the amendment or repeal of these By-Laws or the adoption of new By-
Laws;
(f) the amendment or repeal of any resolution of the Board
which by its terms may be amended or repealed only by the Board;
(g) the declaration of dividends and the issuance of capital stock of the
Corporation; and
(h) the approval of any merger or share exchange which does not require
stockholder approval.
The Executive Committee shall keep written minutes of its proceedings and
shall report such minutes to the Board. All such proceedings shall be subject
to revision or alteration by the Board; provided, however, that third parties
shall not be prejudiced by such revision or alteration.
15
<PAGE>
Section 2. Other Committees of the Board. The Board of Directors may from
-----------------------------
time to time, by resolution adopted by a majority of the whole Board, designate
one or more other committees of the Board, each such committee to consist of two
or more directors and to have such powers and duties as the Board of Directors
may, by resolution, prescribe.
Section 3. General. One-third, but not less than two, of the members of
-------
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
may designate a chairman of any committee and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the absence or disqualification of any member of
any committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committees consisting in
whole or in part
16
<PAGE>
of persons who are not directors of the Corporation; provided, however, that no
such committee shall have or may exercise any authority or power of the Board in
the management of the business or affairs of the Corporation.
ARTICLE V
Officers, Agents and Employees
------------------------------
Section 1. Number of Qualifications. The officers of the Corporation
------------------------
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint such other officers, agents and
employees as it may deem necessary or proper. Any two or more offices may be
held by the same person, except the offices of President and Vice President, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. Such officers shall be elected by the Board of Directors each year
at a meeting of the Board of Directors, each to hold office for the ensuing year
and until his successor shall have been duly elected and shall have qualified,
or until his death, or until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws. The Board may from time to time elect,
or delegate to the President the power to appoint, such officers (including one
or more Assistant Vice Presidents, one or more Assistant Treasurers and one or
more Assistant Secretaries)
17
<PAGE>
and such agents, as may be necessary or desirable for the business of the
Corporation. Such officers and agents shall have such duties and shall hold
their offices for such terms as may be prescribed by the Board or by the
appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign at any
------------
time by giving written notice of resignation to the Board, the Chairman of the
Board, President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt; and, unless otherwise
specified therein, the acceptance of such resignation shall be necessary to make
it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer, agent or
-------------------------------------
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors.
Such removal shall be without prejudice to such person's contract rights, if
any, but the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
---------
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office
18
<PAGE>
which shall be vacant, in the manner prescribed in these By-Laws for the regular
election or appointment to such office.
Section 5. Compensation. The compensation of the officers of the
------------
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 6. Bonds or Other Security. If required by the Board, any
-----------------------
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive officer
---------
of the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board
Directors. He shall have, subject to the control of the Board of Directors,
general charge of the business and affairs of the Corporation. He may employ
and discharge employees and agents of the Corporation, except such as shall be
appointed by the Board, and he may delegate these powers.
Section 8. Vice President. Each Vice President shall have such powers and
--------------
perform such duties as the Board of Directors or the President may from time to
time prescribe.
Section 9. Treasurer. The Treasurer shall
---------
19
<PAGE>
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company or member of a national securities
exchange (as that term is defined in the Securities Exchange Act of 1934, as
amended) pursuant to a written agreement designating such bank or trust company
or member of a national securities exchange as custodian of the property of the
Corporation;
(b) keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit of
the Corporation;
(d) receive, and give receipts for, moneys due and payable, to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment of
its funds as ordered or authorized by the Board, taking proper vouchers
therefor; and
(f) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board
or the President.
Section 10. Secretary. The Secretary shall
---------
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the stockholders;
20
<PAGE>
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or the President.
Section 11. Delegation of Duties. In case of the absence of any officer
--------------------
of the Corporation, or for any other reason that the Board may deem sufficient,
the Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Indemnification
---------------
Each officer and director of the Corporation shall be indemnified by the
Corporation to the full extent permitted under
21
<PAGE>
the Maryland General Corporation Law, except that such indemnity shall not
protect any such person against any liability to the Corporation or any
stockholder thereof to which such person 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. Absent a court determination that
an officer or director seeking indemnification was not liable on the merits or
guilty of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office, the decision by the
Corporation to indemnify such person must be based upon the reasonable
determination of independent legal counsel in a written opinion or the vote of a
majority of a quorum of the directors who are neither "interested persons," as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended,
nor parties to the proceeding ("non-party independent directors"), after review
of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him in connection
with proceedings to which he is a party in the manner and to the full extent
permitted under the Maryland General Corporation Law
22
<PAGE>
without a preliminary determination as to his or her ultimate entitlement to
indemnification (except as set forth below); provided, however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation 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 Corporation for
his undertaking; (b) the Corporation is insured against losses arising by reason
of the advance; (c) a majority of a quorum of non-party independent directors,
or independent legal counsel in a written opinion, shall determine, based on a
review of facts readily available to the Corporation at the time the advance is
proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.
The Corporation may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland, from liability arising from his activities as officer or
director of the Corporation. The Corporation, however, may not purchase
insurance on behalf of any officer or director of the Corporation
23
<PAGE>
that protects or purports to protect such person from liability to the
Corporation or to its stockholders to which such officer or director 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.
The Corporation may indemnify, make advances or purchase insurance to the
extent provided in this Article VI on behalf of an employee or agent who is not
an officer or director of the Corporation.
ARTICLE VII
Capital Stock
-------------
Section 1. Stock Certificates. Each holder of stock of the Corporation
------------------
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the Chairman, President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed
with the seal of the Corporation. Any or all of the signatures or the seal on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature
24
<PAGE>
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate shall be issued, it may be
issued by the Corporation with the same effect as if such officer, transfer
agent or registrar were still in office at the date of issue.
Section 2. Books of Account and Record of Stockholders. There shall be
-------------------------------------------
kept at the principal executive office of the Corporation correct and complete
books and records of account of all the business and transactions of the
Corporation. There shall be made available upon request of any stockholder, in
accordance with Maryland law, a record containing the number of shares of stock
issued during a specified period not to exceed twelve months and the
consideration received by the Corporation for each such share.
Section 3. Transfers of Shares. Transfers of shares of stock of the
-------------------
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
25
<PAGE>
stockholders as the owner of such share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 4. Regulations. The Board may make such additional rules and
-----------
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
-----------------------------------------
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such
26
<PAGE>
form and with such surety or sureties, as the Board in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board, in its absolute discretion, may refuse to issue any
such new certificate, except pursuant to legal proceedings under the laws of the
State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions. The
-------------------------------------------------------
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
Section 7. Information to Stockholders and Others. Any stockholder of the
--------------------------------------
Corporation or his agent may inspect and copy during usual business hours the
Corporation's By-Laws, minutes of the proceedings of its stockholders, annual
statements of its
27
<PAGE>
affairs, and voting trust agreements on file at its principal office.
ARTICLE VIII
Seal
----
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
-----------
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 30th day of November.
ARTICLE X
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be
------------
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
----------
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation
28
<PAGE>
may from time to time determine. Every arrangement entered into with any bank
or other company for the safe keeping of the securities and investments of the
Corporation shall contain provisions complying with the Investment Company Act
of 1940, as amended, and the general rules and regulations thereunder.
ARTICLE XI
Execution of Instruments
------------------------
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
--------------------------
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds
------------------------------
or other securities at any time owned by the Corporation may be held on behalf
of the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board and,
when so authorized to be held on behalf of the Corporation or sold, transferred
or otherwise disposed of, may be transferred from the name of the Corporation by
the signature of the President or a Vice President or the Treasurer or pursuant
to any procedure approved by the Board of Directors, subject to applicable law.
29
<PAGE>
ARTICLE XII
Independent Public Accountants
------------------------------
The firm of independent public accountants which shall sign or certify
the financial statements of the Corporation which are filed with the Securities
and Exchange Commission shall be selected annually by the Board of Directors
and, if required by the provisions of the Investment Company Act of 1940, as
amended, ratified by the stockholders.
ARTICLE XIII
Annual Statement
----------------
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation of record on such date with respect to each
report as may be determined by the Board, at his address as the same appears on
the books of the Corporation. Such annual statement shall also be available at
the annual meeting of stockholders, if any, and, within 20 days after the
meeting (or, in the absence of an annual meeting, within 20 days after the end
of the month of October following the end of the fiscal year), be placed on file
at the Corporation's principal office. Each such
30
<PAGE>
report shall show the assets and liabilities of the Corporation as of the close
of the annual or quarterly period covered by the report and the securities in
which the funds of the Corporation were then invested. Such report shall also
show the Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or quarterly
period covered by the report and any other information required by the
Investment Company Act of 1940, as amended, and shall set forth such other
matters as the Board or such firm of independent public accountants shall
determine.
ARTICLE XIV
Amendments
----------
These By-Laws or any of them may be amended, altered or repealed by
the Board of Directors. The stockholders shall have no power to make, amend,
alter or repeal By-Laws.
31
<PAGE>
EXHIBIT 99.5
DRAFT: 11/16/94
MANAGEMENT AGREEMENT
AGREEMENT made this 14th day of October, 1994, by and between MERRILL LYNCH
MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (hereinafter referred to
as the "Fund"), and MERRILL LYNCH ASSET MANAGEMENT, L.P., a Delaware limited
partnership (hereinafter referred to as the "Manager").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Fund desires to retain the Manager to render management and
investment advisory services to the Fund in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:
<PAGE>
ARTICLE I
---------
Duties of the Manager
---------------------
The Fund hereby employs the Manager to act as a manager and investment
adviser of the Fund 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 Board of Directors of the Fund (the
"Directors"), for the period and on the terms and conditions set forth in this
Agreement. The Manager 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 Manager and its affiliates shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund.
(a) Management and Administrative Services. The Manager shall
--------------------------------------
perform (or arrange for the performance by affiliates of) the management and
administrative services necessary for the operation of the Fund including
administering shareholder accounts and handling shareholder relations. The
Manager shall provide the Fund with office space, equipment and facilities and
such other services as the Manager, subject to review by the Directors, shall
from time to time determine to be necessary or useful to perform its obligations
under this Agreement. The
2
<PAGE>
Manager shall also, on behalf of the Fund, 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 Manager shall generally
monitor the Fund's compliance with investment policies and restrictions as set
forth in the currently effective prospectus and statement of additional
information relating to the shares of the Fund under the Securities Act of 1933,
as amended (the "Prospectus" and "Statement of Additional Information",
respectively). The Manager 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 Fund as it
shall determine to be desirable.
(b) Investment Advisory Services. The Manager shall provide (or
----------------------------
arrange for affiliates to provide) the Fund with such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of the Fund, shall furnish continuously
an investment program for the Fund and shall determine from time to time which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests,
options, futures, options on futures or cash, subject always to the restrictions
3
<PAGE>
set forth in the Articles of Incorporation and By-Laws of the Fund, as amended
from time to time, the provisions of the Investment Company Act and the
statements relating to the Fund's investment objectives, investment policies and
investment restrictions as the same are set forth in the Prospectus and
Statement of Additional Information. The Manager shall also make decisions for
the Fund as to the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the Fund's portfolio securities shall
be exercised. Should the Directors at any time, however, make any definite
determination as to investment policy and notify the Manager thereof in writing,
the Manager 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 Manager shall take, on behalf of the Fund, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
portfolio securities for the Fund's account with brokers or dealers selected by
it, and to that end, the Manager is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers or dealers and the placing of such orders with respect to assets
of the Fund, the Manager is directed at all times to seek to obtain execution
and price within the policy guidelines determined by the
4
<PAGE>
Directors as set forth in the Prospectus and Statement of Additional
Information. Subject to this requirement and the provisions of the Investment
Company Act, the Securities Exchange Act of 1934, as amended, and other
applicable provisions of law, the Manager may select brokers or dealers with
which it or the Fund is affiliated.
(c) Notice Upon Change in Partners of Manager. The Manager is a
-----------------------------------------
limited partnership and its limited partners are Merrill Lynch & Co., Inc.,
Merrill Lynch Investment Management, Inc. and Princeton Services, Inc. The
Manager will notify the Fund of any change in the membership of the partnership
within a reasonable time after such change.
ARTICLE II
----------
Allocation of Charges and Expenses
----------------------------------
(a) The Manager. The Manager assumes and shall pay for maintaining
-----------
the staff and personnel necessary to perform its obligations under this
Agreement, and shall at its own expense, provide the office space, equipment and
facilities which it is obligated to provide under Article I hereof, and shall
pay all compensation of officers of the Fund and all Directors who are
affiliated persons of the Manager.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
--------
other expenses of the Fund (except for the expenses paid by the Distributor),
including, without limitation: redemption expenses, expenses of portfolio
transactions, expenses of registering shares under federal and state securities
laws,
5
<PAGE>
pricing costs (including the daily calculation of net asset value), expenses of
printing shareholder reports, stock certificates, prospectuses and statements of
additional information, Securities and Exchange Commission fees, interest,
taxes, custodian and transfer agency fees, fees and actual out-of-pocket
expenses of Directors who are not affiliated persons of the Manager, fees for
legal and auditing services, litigation expenses, costs of printing proxies and
other expenses related to shareholder meetings, and other expenses properly
payable by the Fund. It is also understood that the Fund will reimburse the
Manager for its costs in providing accounting services to the Fund. The
Distributor will pay certain of the expenses of the Fund incurred in connection
with the continuous offering of Fund shares.
ARTICLE III
-----------
Compensation of the Manager
---------------------------
(a) Management Fee. For the services rendered, the facilities
--------------
furnished and expenses assumed by the Manager, the Fund shall pay to the Manager
at the end of each calendar month a fee based upon the average daily value of
the net assets of the Fund, as determined and computed in accordance with the
description of the determination of net asset value contained in the Prospectus
and Statement of Additional Information, at the annual rate of 1.00% of the
average daily net assets of the Fund, commencing on the day following
effectiveness hereof. If this Agreement becomes effective subsequent to the
first day of a
6
<PAGE>
month or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fee as set forth above. Subject to the
provisions of subsection (b) hereof, payment of the Manager'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 of a share as of the last business day prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
(b) Expense Limitations. In the event the operating expenses of the
-------------------
Fund, including amounts payable to the Manager pursuant to subsection (a)
hereof, for any fiscal year ending on a date on which this Agreement is in
effect exceed the expense limitations applicable to the Fund imposed by
applicable state securities laws or regulations thereunder, as such limitations
may be raised or lowered from time to time, the Manager shall reduce its
management fee by the extent of such excess and, if required pursuant to any
such laws or regulations, will reimburse the Fund in the amount of such excess;
provided, however, to the extent permitted by law, there shall be excluded from
such expenses the amount of any interest, taxes, brokerage commissions,
distribution fees and extraordinary expenses (including but not limited to legal
claims and liabilities and
7
<PAGE>
litigation costs and any indemnification related thereto) paid or payable by the
Fund. Whenever the expenses of the Fund exceed a pro rata portion of the
applicable annual expense limitations, the estimated amount of reimbursement
under such limitations shall be applicable as an offset against the monthly
payment of the management fee due to the Manager. Should two or more such
expense limitations be applicable as at the end of the last business day of the
month, that expense limitation which results in the largest reduction in the
Manager's fee shall be applicable.
ARTICLE IV
----------
Limitation of Liability of the Manager
--------------------------------------
The Manager shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the management of the Fund, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Article IV,
the term "Manager" shall include any affiliates of the Manager performing
services for the Fund contemplated hereby and directors, officers and employees
of the Manager and such affiliates.
ARTICLE V
---------
Activities of the Manager
-------------------------
The services of the Manager to the Fund are not to be deemed to be
exclusive, and the Manager and any person controlled by or
8
<PAGE>
under common control with the Manager (for purposes of Article V referred to as
"affiliates") is free to render services to others. It is understood that
Directors, officers, employees and shareholders of the Fund are or may become
interested in the Manager and its affiliates, as directors, officers, employees
and shareholders or otherwise and that directors, officers, employees and
shareholders of the Manager and its affiliates are or may become similarly
interested in the Fund, and that the Manager and directors, officers, employees,
partners and shareholders of its affiliates may become interested in the Fund as
shareholder or otherwise.
ARTICLE VI
----------
Duration and Termination of this Contract
-----------------------------------------
This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force until September
30, 1996, and thereafter, but only so long as such continuance is specifically
approved at least annually by (i) the Directors, or by the vote of a majority of
the outstanding voting securities of the Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Manager, on sixty days' written notice to the
other party. This
9
<PAGE>
Agreement shall automatically terminate in the event of its assignment.
ARTICLE VII
-----------
Amendments of this Agreement
----------------------------
This Agreement may be amended by the parties only if such amendment is
specifically approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
ARTICLE VIII
------------
Definitions of Certain Terms
----------------------------
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the Rules 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,
10
<PAGE>
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
By_____________________________________
Title:
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By_____________________________________
Title:
11
<PAGE>
EXHIBIT 99.6(a)
DRAFT: 11/16/94
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of December, 1994 between MERRILL LYNCH
MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously;
and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class A shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
Class A shares of common stock in
<PAGE>
the Fund (sometimes herein referred to as "Class A shares") to eligible
investors (as defined below) and hereby agrees during the term of this Agreement
to sell Class A shares of the Fund to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class A shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class A shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class A
shares from the Fund shall not apply to Class A shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class A shares of any such
company by the Fund.
2
<PAGE>
(c) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class A shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class A shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class A shares from the Fund.
----------------------------------------
(a) Prior to the continuous offering of the Class A shares, commencing on a
date agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for Class A shares during a subscription
period which shall last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within five business days after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an offering
of its Class A shares and thereafter the Distributor shall have the right to buy
from the Fund the Class A shares needed, but not more than the Class A shares
needed (except for clerical errors in transmission) to fill unconditional orders
for Class A shares of the Fund placed with the Distributor by eligible investors
or securities dealers. Investors eligible to purchase Class A shares shall be
those persons so identified in the currently effective prospectus and
3
<PAGE>
statement of additional information of the Fund (the "prospectus" and "statement
of additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class A shares ("eligible
investors"). The price which the Distributor shall pay for the Class A shares
so purchased from the Fund shall be the net asset value, determined as set forth
in Section 3(e) hereof, used in determining the public offering price on which
such orders were based.
(c) 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(d) hereof, or
to securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) 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 5.75% of the
public offering price (5.54% of the net amount invested), subject to reductions
for volume purchases. Class A shares may be sold to certain Directors, officers
and employees of the Fund, directors and employees of Merrill Lynch & Co., Inc.
and its subsidiaries, and to certain other persons described in the prospectus
and statement of
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 Fund hereunder shall be made in the manner set forth in Section
3(g).
(e) The net asset value of Class A shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(f) The Fund shall have the right to suspend the sale of its Class A
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class A shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class A shares.
(g) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class A shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept
5
<PAGE>
or confirm orders for the purchase of Class A shares from eligible investors.
The Fund (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or its agent) of payment
therefor, will deliver deposit receipts or certificates for such Class A shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund in New York Clearing House funds. The Distributor agrees to cause such
payment and such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class A shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class A shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class A shares so
tendered in accordance with its obligations as set forth in Article 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(e) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class A shares purchased by or through the
6
<PAGE>
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class A
shares are tendered for redemption or repurchase within seven business days
after the date of the confirmation of the original purchase, the right to the
sales charge shall be forfeited by the Distributor and the selected dealer which
sold such Class A shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class A shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
7
<PAGE>
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class A shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class A shareholders, all necessary action to fix the number of
authorized Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class A shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class A shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and
8
<PAGE>
other material relating to its affairs and activities as may be required by the
Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class A shares of the Fund but shall not be obligated to sell any
specific number of Class A shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class A shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of
9
<PAGE>
sales to eligible investors and selected dealers, the collection of amounts
payable by eligible investors and selected dealers on such sales, and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of the National Association of Securities Dealers, Inc. (the
"NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class A shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class A shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the Class A shares is attached hereto as Exhibit B.
(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 Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class A
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class A shares to selected dealers or eligible investors
pursuant to this Agreement. The Distributor shall bear the costs and expenses
of preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Class A shares for sale to
11
<PAGE>
eligible investors and any expenses of advertising incurred by the Distributor
in connection with such offering.
(c) The Fund shall bear the cost and expenses of qualification of the
Class A shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class A shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the
12
<PAGE>
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Fund in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Fund in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled
13
<PAGE>
to participate at its own expense in the defense or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit shall bear
the fees and expenses of any additional counsel retained by them, but in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on behalf of the Distributor
for use in connection with the
14
<PAGE>
registration statement or related prospectus and statement of additional
information, as from time to time amended, or the annual or interim reports to
Class A shareholders. In case any action shall be brought against the Fund or
any person so indemnified, in respect of which indemnity may be sought against
the Distributor, the Distributor shall have the rights and duties given to the
Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until November 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 Fund and
(ii) by the vote of a majority of those Directors
15
<PAGE>
who are not parties to this Agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any
16
<PAGE>
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 MIDDLE EAST/AFRICA FUND, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
-----------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class A
shares of common stock, par value $0.10 per share (herein referred to as "Class
A shares"), of the Fund, and as such has the right to distribute Class A shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class A shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class A
shares and certain of the terms on which they are being offered are more fully
described in the enclosed Prospectus and Statement of Additional Information.
You have received a copy of the Class A shares Distribution Agreement (the
"Distribution Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to
sell to you, as a member of the Selected Dealers Group, Class A shares of the
Fund for resale to investors identified in the Prospectus and Statement of
Additional Information as eligible to purchase Class A shares ("eligible
investors") upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the Distribution
Agreement will continue through December __, 1994. The subscription period may
be extended upon agreement between the Fund and the Distributor. Subject to the
provisions of such Section and the conditions contained herein, we will sell to
you on the fifth business day following the termination of the subscription
period, or such other date as we may advise (the "Closing Date"), such number of
Class A shares as to which you have placed orders with us not later than 5:00
P.M. on the second full business day preceding the Closing Date.
A-1
<PAGE>
2. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account, and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.
3. Except as provided in Paragraph 4, below, the public offering prices,
sales charges and the related Selected Dealers' concession are as follows:
<TABLE>
<CAPTION>
Subscription Period
-------------------------------------------------------
Securities Dealers'
Sales Charge Concession
--------------------- ---------------------
Percentage* Percentage*
Public of Public of Public
Offering Dollar Offering Dollar Offering
Price Amount Price Amount Price
------- ----- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Less than $25,000.................. $10.554 $.554 5.25% $.554 5.25%
$25,000 but less than $50,000...... 10.499 .499 4.75 .499 4.75
$50,000 but less than $100,000..... 10.417 .417 4.00 .417 4.00
$100,000 but less than $250,000.... 10.309 .309 3.00 .309 3.00
$250,000 but less than $1,000,000.. 10.204 .204 2.00 .204 2.00
$1,000,000 and over**.............. 10.000 .000 0.00 .000 0.00
</TABLE>
__________________
*Rounded to the nearest one-hundredth percent.
**Initial sales charges may be waived for certain classes of offers as set forth
in the Prospectus and Statement of Additional Information of the Fund. Such
purchases may be subject to a contingent deferred sales charge as set forth in
the Prospectus and Statement of Additional Information.
The proceeds per Class A share to the Fund from the sale of all shares sold
during the subscription period will be $10.00.
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 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 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
A-2
<PAGE>
such company which has not been in existence for at least six months or which
has no purpose other than the purchase of shares of the Fund or shares of the
registered investment companies at a discount; provided, however, that it shall
not include purchases by any group of individuals whose sole organizational
nexus is that the participants therein are credit cardholders of a company,
policyholders of an insurance company, customers of either a bank or broker-
dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class A shares
of the Fund at the offering price applicable to the total of (a) the 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 the Class A, Class B, Class C and Class D shares of the Fund and of any other
open-end investment company advised by Merrill Lynch Asset Management, L.P. or
Fund Asset Management, L.P. (together, "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 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 or of shares of any other MLAM-
advised mutual fund made through you within a thirteen-month period starting
with the first purchase pursuant to a Letter of Intention in the form provided
in the Prospectus. A purchase not originally made pursuant to a Letter of
Intention may be included under a subsequent letter executed within 90 days of
such purchase if the Distributor is informed in writing of this intent within
such 90-day period. If the intended amount of shares is not purchased within
the thirteen-month period, an appropriate price adjustment will be made pursuant
to the terms of the Letter of Intention.
You agree to advise us promptly at your 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 shares at the applicable public
offering prices and subject to the terms hereof and of the Distribution
Agreement. All orders are subject to acceptance by the Distributor or the Fund
in the sole discretion of either. The minimum initial and subsequent
A-3
<PAGE>
purchase requirements are as set forth in the Prospectus, as amended from time
to time. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. All Class A shares purchased by Selected Dealers will be delivered in
the first instance at a settlement price computed on the basis of all sales
having been made in a purchase (as such term is defined above) involving a
public offering price of less than $25,000. All sales to you will be deemed to
have been made in such a transaction unless within 30 days after the Closing
Date you furnish to us, on forms supplied by us for the purpose, a statement
acceptable to us setting forth sales in purchases involving a public offering
price of $25,000 or more, in which case we will compute such Selected Dealers'
concessions on the basis of the information set forth in such statement.
6. Payment for Class A shares purchased by you is to be made by certified
or official bank check at the office of Merrill Lynch Funds Distributor, Inc.,
Box 9011, Princeton, New Jersey 08543-9011, on such date as we may advise, in
New York Clearing House funds payable to the order of Merrill Lynch Funds
Distributor, Inc., or by federal funds wire transfer, against delivery by us of
non-negotiable share deposit receipts ("Receipts") issued by Financial Data
Services, Inc., as shareholder servicing agent, acknowledging the deposit with
it of the Class A shares so purchased by you. You agree that as promptly as
practicable after the delivery of such Class A shares you will issue appropriate
written transfer instructions to the Fund or to the shareholder servicing agent
as to the purchasers to whom you sold the Class A shares.
7. If any Class A shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the Closing Date, it is agreed that
you shall forfeit your right to, and refund to us, any discount received by you
on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in
A-4
<PAGE>
the current Prospectus and Statement of Additional Information of the Fund and
in such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus and Statement of Additional Information. In
purchasing Class A shares through us you shall rely solely on the
representations contained in the Prospectus and Statement of Additional
Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospectus and Statement
of Additional Information, periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely. 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, 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
A-5
<PAGE>
responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
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. You agree that you will not sell any Class A shares of the Fund to any
account over which you exercise discretionary authority.
16. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By__________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
______________________________________________________
Date:_________________________________________________
A-6
<PAGE>
EXHIBIT B
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS A SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland Corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class A
shares of common stock, par value $0.10 per share (herein referred to as "Class
A shares"), of the Fund and as such has the right to distribute Class A shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class A shares are registered under the Securities Act of 1933,
as amended (the "Securities Act"). You have received a copy of the Class A
shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "Prospectus" and "Statement of Additional Information"
used herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act. We offer to sell to you, as a member of the Selected Dealers Group, Class
A shares of the Fund for resale to investors identified in the Prospectus and
Statement of Additional Information as eligible to purchase Class A shares
("eligible investors") upon the following terms and conditions:
1. In all sales of these Class A shares to eligible investors, you shall
act as dealer for your own account and in no transaction shall you have any
authority to act as agent for the Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other special programs as we from time to time agree,
in which case you shall have authority to offer and sell shares, as agent for
the Fund, to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional
B-1
<PAGE>
Information of the Fund. The procedure relating to the handling of orders shall
be subject to Section 5 hereof and instructions which we or the Fund shall
forward from time to time to you. All orders are subject to acceptance or
rejection by the Distributor or the Fund in the sole discretion of either. The
minimum initial and subsequent purchase requirements are as set forth in the
current Prospectus and Statement of Additional Information of the Fund.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ------------------ -------------- ------------- -----------
<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>
___________________
* 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 of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years
B-2
<PAGE>
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 but does not include purchases by
any such company which has not been in existence for at least six months or
which has no purpose other than the purchase of Class A shares of the Fund or
Class A shares of other registered investment companies at a discount; provided,
however, that it shall not include purchases by any group of individuals whose
sole organizational nexus is that the participants therein are credit
cardholders of a company, policyholders of an insurance company, customers of
either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class A shares
of the Fund at the offering price applicable to the total of (a) the 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 Fund and of any other
open-end investment company advised by Merrill Lynch Asset Management, L.P. or
Fund Asset Management, L.P. (together "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 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 MLAM-advised mutual
fund made through you within a thirteen-month period starting with the first
purchase pursuant to a Letter of Intention in the form provided in the
Prospectus. A purchase not originally made pursuant to a Letter of Intention
may be included under a subsequent letter executed within 90 days of such
purchase if the Distributor is informed in writing of this intent within such
90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter
B-3
<PAGE>
of Intention is set forth in the Prospectus and Statement of Additional
Information.
4. You shall not place orders for any of the Class A shares unless you
have already received purchase orders for such Class A shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class A shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class A shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class A shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class A shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class A shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class A shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class A shares.
8. No person is authorized to make any representations concerning Class A
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and
B-4
<PAGE>
Statement of Additional Information. In purchasing Class A shares through us
you shall rely solely on the representations contained in the Prospectus and
Statement of Additional Information and supplemental information above
mentioned. Any printed information which we furnish you other than the Fund's
Prospectus, Statement of Additional Information, periodic reports and proxy
solicitation material is our sole responsibility and not the responsibility of
the Fund, and you agree that the Fund shall have no liability or responsibility
to you in these respects unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class A shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act of 1933, as amended, or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class A shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class A
B-5
<PAGE>
shares in any jurisdiction. We will file with the Department of State in New
York a Further State Notice with respect to the Class A shares, if necessary.
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class A shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By__________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:_________________________________________________
By:_______________________________________
Address:___________________________________________
______________________________________________________
Date:__________________________________________
B-6
<PAGE>
EXHIBIT 99.6(b)
DRAFT: 11/16/94
CLASS B SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ___ day of December, 1994, between MERRILL
LYNCH MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the "Fund"), and
MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business
of selling shares of investment companies either directly to purchasers or
through other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's Class B
shares in order to promote the growth of the Fund and facilitate the
distribution of its Class B shares.
NOW, THEREFORE, the parties agree as follows:
<PAGE>
Section 1. Appointment of the Distributor. The Fund hereby appoints
------------------------------
the Distributor as the principal underwriter and distributor of the Fund to sell
Class B shares of common stock of the Fund (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 Fund to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class B shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time
to time designate other principal underwriters and distributors of Class 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. 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 rights granted to the Distributor to purchase Class
B shares from the Fund shall not apply to Class B shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding
2
<PAGE>
company with the Fund 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 Fund.
(c) Such exclusive rights also shall not apply to Class B shares
issued by the Fund pursuant to reinvestment of dividends or capital gains
distributions.
(d) Such exclusive rights also shall not apply to Class B shares
issued by the Fund pursuant to any reinstatement privilege afforded redeeming
shareholders or any other Class B shares as shall be equal between the Fund and
the Distributor from time to time.
Section 3. Purchase of Class B Shares from the Fund.
-----------------------------------------
(a) Prior to the continuous offering of the Class B shares,
commencing on a date agreed upon by the Fund and the Distributor, it is
contemplated that the Distributor will solicit subscriptions for Class B shares
during a subscription period which shall last for such period as may be agreed
upon by the parties hereto. The subscriptions will be payable within five
business days after the termination of the subscription period, at which time
the Fund will commence operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class B shares and thereafter the Distributor shall have the
right to buy from the Fund the Class B shares needed, but not more than the
Class B shares needed (except for clerical errors in transmission) to fill
3
<PAGE>
unconditional orders for Class B shares of the Fund 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 of the Fund (the "prospectus"
and "statement of additional information", respectively) under the Securities
Act of 1933, as amended (the "Securities Act"), relating to such Class B shares.
The price which the Distributor shall pay for the Class B shares so purchased
from the Fund shall be the net asset value, determined as set forth in Section
3(d) hereof.
(c) The Class B shares are to be resold by the Distributor to
investors at net asset value, as set forth in Section 3(d) hereof, or to
securities dealers having agreements with the Distributor upon the terms and
conditions set forth in Section 7 hereof.
(d) The net asset value of Class B shares of the Fund shall be
determined by the Fund or any agent of the Fund in accordance with the method
set forth in the prospectus and statement of additional information and
guidelines established by the Board of Directors.
(e) The Fund 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 Fund shall also have the right to suspend the
sale of its Class B
4
<PAGE>
shares if trading on the New York Stock Exchange shall have been suspended, if a
banking moratorium shall have been declared by Federal or New York authorities,
or if there shall have been some other event, which, in the judgment of the
Fund, makes it impracticable or inadvisable to sell the shares.
(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Class B shares
received by the Distributor. Any order may be rejected by the Fund; provided,
however, that the Fund will not arbitrarily or without reasonable cause refuse
to accept or confirm orders for the purchase of Class B shares. The Fund (or
its agent) will confirm orders upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts or certificates for such Class B shares pursuant to the
instructions of the Distributor. Payment shall be made to the Fund in New York
Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class B shares may be tendered for
redemption at any time, and the Fund 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
5
<PAGE>
Incorporation, as amended from time to time, and in accordance with the
applicable provisions set forth in the prospectus and statement of additional
information of the Fund. The price to be paid to redeem or repurchase the Class
B 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(s) or other charge(s), if any, set forth in the
prospectus and statement of additional information of the Fund. All payments by
the Fund hereunder shall be made in the manner set forth below.
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form.
The proceeds of any redemption of shares shall be paid by the Fund as follows
(i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance
shall be paid to or for the account of the shareholder, in each case in
accordance with the applicable provisions of the prospectus and statement of
additional information.
(b) Redemption of Class B shares or payment may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
closed, when trading on said Exchange is suspended, when trading on said
Exchange is restricted, when an emergency exists as a result of which
6
<PAGE>
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Class B
shares of the Fund, and this shall include, upon request by the Distributor, one
certified copy of all financial statements prepared for the Fund by independent
public accountants. The Fund shall make available to the Distributor such
number of copies of its prospectus and statement of additional information as
the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the
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 Fund 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
7
<PAGE>
Distributor and the Fund may approve. Any such qualification may be withheld,
terminated or withdrawn by the Fund at any time in its discretion. As provided
in Section 8(c) hereof, the expense of qualification and maintenance of
qualification shall be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class B shares of the Fund, but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class B shares of the Fund, the Distributor shall
use its best efforts in all respects duly to conform with the requirements of
all Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or
8
<PAGE>
to make any representations, other than those contained in the registration
statement or related prospectus and statement of additional information and any
sales literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected
dealer agreements with securities dealers of its choice ("selected dealers") for
the sale of Class B shares; provided, that the Fund 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(d) hereof. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the shares is attached hereto as Exhibit B.
9
<PAGE>
(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.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class 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
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 B shares for sale to the public and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that, so long as the Fund's Class 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 Fund under such Plan.
(c) The Fund 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 Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damage or expense and reasonable
counsel
11
<PAGE>
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 common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to Class B
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the Fund
in favor of the Distributor and any such controlling persons to be deemed to
protect such Distributor or any such controlling persons thereof against any
liability to the Fund or its security holders to which the Distributor or any
such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of the reckless disregard of their obligations and duties under this
Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case
12
<PAGE>
may be, shall have notified the Fund in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon the Distributor or such controlling persons
(or after the Distributor or such controlling persons shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or such controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses, as incurred, of any additional counsel retained by them,
but, in case the Fund does not elect to assume the defense of any such suit, it
will reimburse the Distributor or such controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses, as incurred, of
any counsel retained by them. The Fund shall promptly notify the
13
<PAGE>
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 B shares.
(b) The Distributor shall indemnify and hold harmless the Fund and
each of its Directors and officers and each person, if any, who controls the
Fund against any loss, liability, claim, damage or expense, as incurred,
described in the foregoing indemnity contained in subsection (a) of this
Section, but only with respect to statements or omissions made in reliance upon,
and in conformity with, information furnished to the Fund in writing by or on
behalf of the Distributor for use in connection with the registration statement
or related prospectus and statement of additional information, as from time to
time amended, or the annual or interim reports to shareholders. In case any
action shall be brought against the Fund or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Fund, and the Fund and
each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection
-----------------------------------------
with the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of
14
<PAGE>
the Fund, as agent for the Fund, to participants in such program. The terms of
this Agreement shall apply to such sales, including terms as to the offering
price of shares, the proceeds to be paid to the Fund, the duties of the
Distributor, the payment of expenses and indemnification obligations of the Fund
and the Distributor.
Section 11. Duration and Termination of this Agreement. This
------------------------------------------
Agreement shall become effective as of the date first above written and shall
remain in force until November 30, 1996, and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the
Directors, or by the vote of a majority of the outstanding voting securities of
the Fund, and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested
15
<PAGE>
person," when used in this Agreement, shall have the respective meanings
specified in the Investment Company Act.
Section 12. Amendments of this Agreement. This Agreement may be
----------------------------
amended by the parties only if such amendment is specifically approved by (i)
the Directors, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) by the vote of a majority of those Directors of the Fund who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
By _____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By _____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
-----------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an
agreement with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland
corporation (the "Fund"), 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 "Class B shares"), of the Fund, and as such has the right to
distribute Class B shares of the Fund for resale. The Fund is an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and its Class B shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class B
shares and certain of the terms on which they are being offered are more fully
described in the enclosed Prospectus and Statement of Additional Information.
You have received a copy of the Class B shares Distribution Agreement (the
"Distribution Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to
sell to you, as a member of the Selected Dealers Group, Class B shares of the
Fund upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the
Distribution Agreement will continue through December __, 1994. The
subscription period may be extended upon agreement between the Fund and the
Distributor. Subject to the provisions of such Section and the conditions
contained herein, we will sell to you on the fifth business day following the
termination of the subscription period, or such other date as we may advise (the
"Closing Date"), such number of Class B shares as to which you have placed
orders with us not later than 5:00 P.M. on the second full business day
preceding the Closing Date.
A-1
<PAGE>
2. 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 Fund, for us or for any other member of the
Selected Dealers Group, except in connection with the Merrill Lynch Mutual Fund
Adviser program and such other programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
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. All orders are subject to acceptance by the Distributor
or the Fund in the sole discretion of either. The minimum initial and
subsequent purchase requirements are as set forth in the Prospectus, as amended
from time to time. 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
Fund which is inconsistent in any respect with the information contained in the
Prospectus and Statement of Additional Information (as then amended or
supplemented) or cause any advertisement to be published in any newspaper or
posted in any public place without our consent and the consent of the Fund.
4. Payment for Class B shares purchased by you is to be made by
certified or official bank check at the office of Merrill Lynch Funds
Distributor, Inc., Box 9011, Princeton, New Jersey 08543-9011, on such date as
we may advise, in New York Clearing House funds payable to the order of Merrill
Lynch Funds Distributor, Inc., or by federal funds wire transfer, against
delivery by us of non-negotiable share deposit receipts ("Receipts") issued by
Financial Data Services, Inc., as shareholder servicing agent, acknowledging the
deposit with it of the Class B shares so purchased by you. You agree that as
promptly as practicable after the delivery of such Class B shares you will issue
appropriate written transfer instructions to the Fund or to the shareholder
servicing agent as to the purchasers to whom you sold the Class B shares.
5. No person is authorized to make any representations concerning
Class B shares of the Fund except those contained in
A-2
<PAGE>
the current Prospectus and Statement of Additional Information of the Fund and
in such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus and Statement of Additional Information. In
purchasing Class 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 Fund's Prospectus and Statement
of Additional Information, periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
6. You agree to deliver to each of the purchasers making purchases
from you a copy of the then current Prospectus and, if requested, the Statement
of Additional Information at or prior to the time of offering or sale and you
agree thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
7. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class B shares entirely. Each party hereto has the
right to cancel this Agreement upon notice to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
9. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
A-3
<PAGE>
10. 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.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You agree that you will not sell any Class B shares of the Fund to any
account over which you exercise discretionary authority.
13. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By
__________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:
-----------------------------------------------
By:
----------------------------------------------------
Address:
------------------------------------------------
---------------------------------------------------------
Date:
---------------------------------------------------
A-4
<PAGE>
EXHIBIT B
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS B SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), 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 Fund, and as such has the right to distribute Class B
shares of the Fund for resale. The Fund is an open-end investment company
registered under the Investment Company Act of 1940, as amended, and its Class B
shares being offered to the public are registered under the Securities Act of
1933, as amended (the "Securities Act"). You have received a copy of the Class
B shares Distribution Agreement (the "Distribution Agreement") between ourself
and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" as used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
(the "Commission") which is part of the most recent effective registration
statement pursuant to the Securities Act. We offer to sell to you, as a member
of the Selected Dealers Group, Class B shares of the Fund 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 Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor
B-1
<PAGE>
or the Fund in the sole discretion of either. The minimum initial and
subsequent purchase requirements are as set forth in the current Prospectus and
Statement of Additional Information of the Fund.
3. You shall not place orders for any of the Class 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 Fund, which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class B shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement, and (ii) to tender
Class B shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class B
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class 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
Fund's Prospectus, Statement of Additional Information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
B-2
<PAGE>
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class 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, or of the rules and regulations of the 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.
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.
B-3
<PAGE>
13. Your first order placed pursuant to this Agreement for the purchase of
Class B shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:
-------------------------------------------
By:
---------------------------------------------------
Address:
---------------------------------------------
------------------------------------------------------
Date:
-----------------------------------------------
B-4
<PAGE>
EXHIBIT 99.6(c)
DRAFT: 11/16/94
CLASS C SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ___ day of December, 1994, between MERRILL LYNCH
MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
-------------------
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's Class C shares
in order to promote the growth of the Fund and facilitate the distribution of
its Class C shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
Class C shares of common stock in the Fund (sometimes herein referred to as
"Class C shares") to
<PAGE>
the public and hereby agrees during the term of this Agreement to sell shares of
the Fund to the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor of the Class C shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class C shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class C shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class C
shares from the Fund shall not apply to Class C shares of the Fund issued in
connection with the merger or consolidation of any other investment company or
personal holding company with the Fund or the acquisition by purchase or
otherwise of all (or substantially all) the assets or the outstanding Class C
shares of any such company by the Fund.
2
<PAGE>
(c) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Class C shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class C shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class C Shares from the Fund.
----------------------------------------
(a) Prior to the continuous offering of the Class C shares, commencing on a
date agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for Class C shares during a subscription
period which shall last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within five business days after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class C shares, and thereafter the Distributor shall have the
right to buy from the Fund the Class C shares needed, but not more than the
Class C shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class C shares of the Fund placed with the Distributor
by eligible investors or securities dealers. Investors eligible to purchase
Class C shares shall be those
3
<PAGE>
persons so identified in the currently effective prospectus and statement of
additional information of the Fund (the "prospectus" and "statement of
additional information", respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such Class C shares. The price which
the Distributor shall pay for the Class C shares so purchased from the Fund
shall be the net asset value, determined as set forth in Section 3(d) hereof.
(c) The Class C shares are to be resold by the Distributor to investors at
net asset value, as set forth in Section 3(d) hereof, or to securities dealers
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(d) The net asset value of Class C shares of the Fund shall be determined
by the Fund or any agent of the Fund in accordance with the method set forth in
the prospectus and statement of additional information and guidelines
established by the Board of Directors.
(e) The Fund shall have the right to suspend the sale of its Class C
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class C shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some
4
<PAGE>
other event, which, in the judgment of the Fund, makes it impracticable or
inadvisable to sell the Class C shares.
(f) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class C shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its agent) of payment therefor, will deliver deposit
receipts or certificates for such Class C shares pursuant to the instructions of
the Distributor. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund.
--------------------------------------------- --------
(a) Any of the outstanding Class C shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class C shares so
tendered in accordance with its obligations as set forth in Article 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 of the Fund. The price to be
5
<PAGE>
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(d) hereof, less
any contingent deferred sales charge ("CDSC"), redemption fee or other
charge(s), if any, set forth in the prospectus and statement of additional
information of the Fund. All payments by the Fund hereunder shall be made in
the manner set forth below.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of shares shall be
paid by the Fund as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
(b) Redemption of Class C shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or
6
<PAGE>
during any other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Class C shares of the
Fund, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Distributor such number of
copies of its prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the shareholders, all necessary action to fix the number of
authorized shares and such steps as may be necessary to register the same under
the Securities Act to the end that there will be available for sale such number
of Class C shares as the Distributor reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class C shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense
7
<PAGE>
of qualification and maintenance of qualification shall be borne by the Fund.
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class C shares of the Fund but shall not be obligated to sell any
specific number of shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class C shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of
8
<PAGE>
additional information and any sales literature specifically approved by the
Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealer Agreements.
--------------------------
(a) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class C shares; provided, that the Fund shall approve the forms of
agreements with dealers. Class C shares sold to selected dealers shall be for
resale by such dealers only at net asset value determined as set forth in
Section 3(d) hereof. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell Class C
shares only to such selected dealers that are members in good standing of the
NASD.
9
<PAGE>
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class C
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class C shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class C shares for sale to
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
Fund's Class C Shares Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act remains in effect, any expenses incurred by the
Distributor hereunder may be paid from amounts recovered by it from the Fund
under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class C shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class C shares, which may be based upon the Securities Act,
or on any other statute or at
11
<PAGE>
common law, on the ground that the registration statement or related prospectus
and statement of additional information, as from time to time amended and
supplemented, or an annual or interim report to Class C shareholders of the
Fund, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made
in reliance upon, and in conformity with, information furnished to the Fund in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Fund in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
12
<PAGE>
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit shall bear the fees and
expenses, as incurred, of any additional counsel retained by them, but in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses, as incurred, of
any counsel retained by them. The Fund shall promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or Directors in connection with the issuance or sale of any of the
Class C shares.
13
<PAGE>
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense, as incurred, described in
the foregoing indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Fund or any person so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Fund, and the Fund and each person so
indemnified shall have the rights and duties given to the Distributor by the
provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid
14
<PAGE>
to the Fund, the duties of the Distributor, the payment of expenses and
indemnification obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until November 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 Fund and
(ii) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is
15
<PAGE>
specifically approved by (i) the Directors or by the vote of a majority of
outstanding voting securities of the Fund and (ii) by the vote of a majority of
those Directors of the Fund who are not parties to this Agreement or interested
persons of any such party cast in person at a meeting called for the purpose of
voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
By ____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By ____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
-----------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class C
shares of common stock, par value $0.10 per share (herein referred to as "Class
C shares"), of the Fund, and as such has the right to distribute Class C shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended, and its Class C shares
being offered to the public are registered under the Securities Act of 1933, as
amended (the "Securities Act"). Such Class C shares and certain of the terms on
which they are being offered are more fully described in the enclosed Prospectus
and Statement of Additional Information. You have received a copy of the Class
C shares Distribution Agreement (the "Distribution Agreement") between ourself
and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. This Agreement relates solely to the subscription
period described in Section 3(a) of such Distribution Agreement. Subject to the
foregoing, as principal, we offer to sell to you, as a member of the Selected
Dealers Group, Class C shares of the Fund upon the following terms and
conditions:
1. The subscription period referred to in Section 3(a) of the Distribution
Agreement will continue through December __, 1994. The subscription period may
be extended upon agreement between the Fund and the Distributor. Subject to the
provisions of such Section and the conditions contained herein, we will sell to
you on the fifth business day following the termination of the subscription
period, or such other date as we may advise (the "Closing Date"), such number of
Class C shares as to which you have placed orders with us not later than 5:00
P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class C shares to the public you shall act as
dealer for your own account, and in no transaction
A-1
<PAGE>
shall you have any authority to act as agent for the Fund, for us or for any
other member of the Selected Dealers Group, except in connection with the
Merrill Lynch Mutual Fund Adviser program and such other programs as we from
time to time agree, in which case you shall have authority to offer and sell
shares, as agent for the Fund, to participants in such program.
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. All orders are subject to acceptance by the Distributor or the Fund
in the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the Prospectus, as amended from time to time.
You agree that you will not offer or sell any of the Class C shares except under
circumstances that will result in compliance with the applicable Federal and
state securities laws and that in connection with sales and offers to sell Class
C shares you will furnish to each person to whom any such sale or offer is made
a copy of the Prospectus and, if requested, the Statement of Additional
Information (as then amended or supplemented) and will not furnish to any person
any information relating to the Class C shares of the Fund which is inconsistent
in any respect with the information contained in the Prospectus and Statement of
Additional Information (as then amended or supplemented) or cause any
advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. Payment for Class C shares purchased by you is to be made by certified
or official bank check at the office of Merrill Lynch Funds Distributor, Inc.,
Box 9011, Princeton, New Jersey 08543-9011, on such date as we may advise, in
New York Clearing House funds payable to the order of Merrill Lynch Funds
Distributor, Inc., or by federal funds wire transfer, against delivery by us of
non-negotiable share deposit receipts ("Receipts") issued by Financial Data
Services, Inc., as shareholder servicing agent, acknowledging the deposit with
it of the Class C shares so purchased by you. You agree that as promptly as
practicable after the delivery of such Class C shares you will issue appropriate
written transfer instructions to the Fund or to the shareholder servicing agent
as to the purchasers to whom you sold the Class C shares.
5. No person is authorized to make any representations concerning Class C
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C
A-2
<PAGE>
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus and Statement of Additional Information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
6. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
7. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class C shares entirely. Each party hereto has the
right to cancel this Agreement upon notice to the other party.
8. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
9. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
10. Upon application to us, we will inform you as to the states in which we
believe the 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
A-3
<PAGE>
State in New York a Further State Notice with respect to the Class C shares, if
necessary.
11. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You agree that you will not sell any Class C shares of the Fund to any
account over which you exercise discretionary authority.
13. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:__________________________________________
By:__________________________________________________
Address:_____________________________________________
_____________________________________________________
Date:________________________________________________
A-4
<PAGE>
EXHIBIT B
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS C SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
-------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class C
shares of common stock, par value $0.10 per share (herein referred to as the
"Class C shares"), of the Fund and as such has the right to distribute Class C
shares of the Fund for resale. The Fund is an open-end investment company
registered under the Investment Company Act of 1940, as amended, and its Class C
shares being offered to the public are registered under the Securities Act of
1933, as amended (the "Securities Act"). You have received a copy of the Class
C Shares Distribution Agreement (the "Distribution Agreement") between ourself
and the Fund and reference is made herein to certain provisions of such
Distribution Agreement. The terms "Prospectus" and "Statement of Additional
Information" as used herein refer to the prospectus and statement of additional
information, respectively, on file with the Securities and Exchange Commission
(the "Commission") which is part of the most recent effective registration
statement pursuant to the Securities Act. We offer to sell to you, as a member
of the Selected Dealers Group, Class C shares of the Fund upon the following
terms and conditions:
1. In all sales of these Class C shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the public
offering price applicable to each order, as set forth in the current Prospectus
and Statement of Additional Information of the Fund. The procedure relating to
the handling of orders shall be subject to Section 4 hereof and instructions
B-1
<PAGE>
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Fund.
3. You shall not place orders for any of the Class C shares unless you
have already received purchase orders for such Class C shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class C shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class C shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class C shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
4. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class C shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and (ii) to tender
Class C shares directly to the Fund or its agent for redemption subject to the
applicable terms and conditions set forth in Section 4 of the Distribution
Agreement.
5. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
6. No person is authorized to make any representations concerning Class C
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class C
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus, Statement of Additional Information, periodic reports
B-2
<PAGE>
and proxy solicitation material is our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
7. You agree to deliver to each of the purchasers making purchases from you
a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
8. We reserve the right in our discretion, without notice, to suspend sales
or withdraw the offering of Class C shares entirely or to certain persons or
entities in a class or classes specified by us. Each party hereto has the right
to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act or of the rules and regulations of the Commission issued
thereunder.
10. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we
believe the Class C shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class C shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class C shares, if necessary.
12. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
B-3
<PAGE>
13. Your first order placed pursuant to this Agreement for the purchase of
Class C shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By __________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name: ____________________________________________
By: ___________________________________________________
Address: ______________________________________________
______________________________________________
Date: _________________________________________________
B-4
<PAGE>
EXHIBIT 99.6(d)
DRAFT: 11/16/94
CLASS D SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ___ day of December, 1994 between MERRILL LYNCH
MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the "Fund"), and MERRILL
LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), as an open-end investment company,
and it is affirmatively in the interest of the Fund to offer its shares for sale
continuously;
and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Class D shares of
common stock in the Fund.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell
Class D shares of common stock in the Fund (sometimes herein referred to as
"Class D shares") to
<PAGE>
the public and hereby agrees during the term of this Agreement to sell Class D
shares of the Fund to the Distributor upon the terms and conditions herein set
forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
--------------------------
exclusive representative of the Fund to act as principal underwriter and
distributor, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Class D shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell Class D shares in the areas so designated shall terminate, but
this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
(b) The exclusive right granted to the Distributor to purchase Class D
shares from the Fund shall not apply to Class D shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Class D shares of any such
company by the Fund.
(c) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
2
<PAGE>
(d) Such exclusive right also shall not apply to Class D shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Class D shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Class D Shares from the Fund.
----------------------------------------
(a) Prior to the continuous offering of the Class D shares, commencing on a
date agreed upon by the Fund and the Distributor, it is contemplated that the
Distributor will solicit subscriptions for Class D shares during a subscription
period which shall last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within five business days after the
termination of the subscription period, at which time the Fund will commence
operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Class D shares, and thereafter the Distributor shall have the
right to buy from the Fund the Class D shares needed, but not more than the
Class D shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class D shares of the Fund placed with the Distributor
by eligible investors or securities dealers. Investors eligible to purchase
Class D shares shall be those persons so identified in the currently effective
prospectus and statement of additional information of the Fund (the "prospectus"
and "statement of additional information", respectively) under the Securities
Act of 1933, as amended (the "Securities Act"),
3
<PAGE>
relating to such Class D shares. The price which the Distributor shall pay for
the Class D shares so purchased from the Fund shall be the net asset value,
determined as set forth in Section 3(e) hereof, used in determining the public
offering price on which such orders were based.
(c) The Class D shares are to be resold by the Distributor to investors at
the public offering price, as set forth in Section 3(d) hereof, or to securities
dealers having agreements with the Distributor upon the terms and conditions
set forth in Section 7 hereof.
(d) The 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 5.75% of the public offering price
(5.54% of the net amount invested), subject to reductions for volume purchases.
Class D shares may be sold to certain Directors, officers and employees of the
Fund, directors and employees of Merrill Lynch & Co., Inc. and its subsidiaries,
and to certain other persons described in the prospectus and statement of
additional information, without a sales charge or at a reduced sales charge,
upon terms and conditions set forth in the prospectus and statement of
additional information. If the
4
<PAGE>
public offering price does not equal an even cent, the public offering price may
be adjusted to the nearest cent. All payments to the Fund hereunder shall be
made in the manner set forth in Section 3(g).
(e) The net asset value of Class D shares shall be determined by the Fund
or any agent of the Fund in accordance with the method set forth in the
prospectus and statement of additional information of the Fund and guidelines
established by the Directors.
(f) The Fund shall have the right to suspend the sale of its Class D
shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Fund shall also have the right to suspend the
sale of its Class D shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event, which, in
the judgment of the Fund, makes it impracticable or inadvisable to sell the
Class D shares.
(g) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class D shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class D shares. The Fund (or its agent) will
confirm orders upon their receipt, will make appropriate book entries and, upon
receipt by the Fund (or its
5
<PAGE>
agent) of payment therefor, will deliver deposit receipts or certificates for
such Class D shares pursuant to the instructions of the Distributor. Payment
shall be made to the Fund in New York Clearing House funds. The Distributor
agrees to cause such payment and such instructions to be delivered promptly to
the Fund (or its agent).
Section 4. Repurchase or Redemption of Class D Shares by the Fund.
------------------------------------------------------
(a) Any of the outstanding Class D shares may be tendered for redemption
at any time, and the Fund agrees to repurchase or redeem the Class D shares so
tendered in accordance with its obligations as set forth in Article 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(e) hereof, less any contingent deferred sales charge
("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus
and statement of additional information of the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Class D shares purchased by or through the
Distributor will not affect the sales charge secured by the Distributor or any
selected dealer in the course of the original sale, except that if any Class D
shares are tendered for
6
<PAGE>
redemption or repurchase within seven business days after the date of the
confirmation of the original purchase, the right to the sales charge shall be
forfeited by the Distributor and the selected dealer which sold such Class D
shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form. The proceeds of any
redemption of shares shall be paid by the Fund as follows: (i) any applicable
CDSC shall be paid to the Distributor, and (ii) the balance shall be paid to or
for the account of the shareholder, in each case in accordance with the
applicable provisions of the prospectus and statement of additional information.
(b) Redemption of Class D shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is
suspended, when trading on said Exchange is restricted, when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or during any other period when the
Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the
7
<PAGE>
Distributor may reasonably request for use in connection with the distribution
of Class D shares of the Fund, and this shall include, upon request by the
Distributor, one certified copy of all financial statements prepared for the
Fund by independent public accountants. The Fund shall make available to the
Distributor such number of copies of the prospectus and statement of additional
information as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Class D shareholders, all necessary action to fix the number of
authorized Class D shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be available for sale
such number of Class D shares as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Class D shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
8
<PAGE>
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of annual and interim reports of the Fund.
Section 6. Duties of the Distributor.
-------------------------
(a) The Distributor shall devote reasonable time and effort to effect
sales of Class D shares of the Fund but shall not be obligated to sell any
specific number of Class D shares. The services of the Distributor to the Fund
hereunder are not to be deemed exclusive and nothing herein contained shall
prevent the Distributor from entering into like arrangements with other
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
(b) In selling the Class D shares of the Fund, the Distributor shall use
its best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any selected dealer, as defined in Section 7 hereof, nor any
other person is authorized by the Fund to give any information or to make any
representations, other than those contained in the registration statement or
related prospectus and statement of additional information and any sales
literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales,
9
<PAGE>
and the cancellation of unsettled transactions, as may be necessary to comply
with the requirements of the National Association of Securities Dealers, Inc.
(the "NASD"), as such requirements may from time to time exist.
Section 7. Selected Dealers Agreements.
---------------------------
(a) The Distributor shall have the right to enter into selected dealers
agreements with securities dealers of its choice ("selected dealers") for the
sale of Class D shares and fix therein the portion of the sales charge which may
be allocated to the selected dealers; provided that the Fund shall approve the
forms of agreements with dealers and the dealer compensation set forth therein.
Class D shares sold to selected dealers shall be for resale by such dealers only
at the public offering price(s) set forth in the prospectus and statement of
additional information. The form of agreement with selected dealers to be used
during the subscription period described in Section 3(a) is attached hereto as
Exhibit A and the initial form of agreement with selected dealers to be used in
the continuous offering of the Class D shares is attached hereto as Exhibit B.
(b) Within the United States, the Distributor shall offer and sell Class D
shares only to such selected dealers as are members in good standing of the
NASD.
Section 8. Payment of Expenses.
-------------------
(a) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required
10
<PAGE>
registration statements and/or prospectuses and statements of additional
information under the Investment Company Act, the Securities Act, and all
amendments and supplements thereto, and preparing and mailing annual and interim
reports and proxy materials to Class D shareholders (including but not limited
to the expense of setting in type any such registration statements,
prospectuses, statements of additional information, annual or interim reports or
proxy materials).
(b) The Distributor shall be responsible for any payments made to selected
dealers as reimbursement for their expenses associated with payments of sales
commissions to financial consultants. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Class D shares to selected dealers or investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by selected dealers in connection with the offering of
the Class D shares for sale to the public and any expenses of advertising
incurred by the Distributor in connection with such offering. It is understood
and agreed that so long as the Fund's Class D Shares Distribution Plan pursuant
to Rule 12b-1 under the Investment Company Act remains in effect, any expenses
incurred by the Distributor
11
<PAGE>
hereunder in connection with account maintenance activities may be paid from
amounts recovered by it from the Fund under such plan.
(c) The Fund shall bear the cost and expenses of qualification of the
Class D shares for sale pursuant to this Agreement and, if necessary or
advisable in connection therewith, of qualifying the Fund as a broker or dealer
in such states of the United States or other jurisdictions as shall be selected
by the Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
---------------
(a) The Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith), as incurred, arising by reason of any
person acquiring any Class D shares, which may be based upon the Securities Act,
or on any other statute or at common law, on the ground that the registration
statement or related prospectus and statement of additional information, as from
time to time amended and supplemented, or an annual or interim report to
shareholders of the Fund, includes an untrue statement of a material fact or
omits to state a material fact
12
<PAGE>
required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
13
<PAGE>
agreement contained in this paragraph. The Fund will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Fund elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them, but in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any of the Class D shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Fund in writing by or on
14
<PAGE>
behalf of the Distributor for use in connection with the registration statement
or related prospectus and statement of additional information, as from time to
time amended, or the annual or interim reports to Class D shareholders. In case
any action shall be brought against the Fund or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Fund, and the Fund and
each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of subsection (a) of this Section 9.
Section 10. Merrill Lynch Mutual Fund Adviser Program. In connection with
-----------------------------------------
the Merrill Lynch Mutual Fund Adviser Program, the Distributor and its
affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, are authorized to
offer and sell shares of the Fund, as agent for the Fund, to participants in
such program. The terms of this Agreement shall apply to such sales, including
terms as to the offering price of shares, the proceeds to be paid to the Fund,
the duties of the Distributor, the payment of expenses and indemnification
obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date first above written and shall remain in
force until November 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
15
<PAGE>
the Fund and (ii) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Fund, or by the Distributor, on sixty days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
The terms "vote of a majority of the outstanding voting securities",
"assignment", "affiliated person" and "interested person", when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
----------------------------
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Section 13. Governing Law. The provisions of this Agreement shall be
-------------
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the
16
<PAGE>
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 MIDDLE EAST/AFRICA FUND, INC.
By_____________________________________
Title:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
17
<PAGE>
EXHIBIT A
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
-----------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class D
shares of common stock, par value $0.10 per share (herein referred to as "Class
D shares"), of the Fund, and as such has the right to distribute Class D shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class D shares being offered to the public are registered under
the Securities Act of 1933, as amended (the "Securities Act"). Such Class D
shares and certain of the terms on which they are being offered are more fully
described in the enclosed Prospectus and Statement of Additional Information.
You have received a copy of the Class D shares Distribution Agreement (the
"Distribution Agreement") between ourself and the Fund and reference is made
herein to certain provisions of such Distribution Agreement. This Agreement
relates solely to the subscription period described in Section 3(a) of such
Distribution Agreement. Subject to the foregoing, as principal, we offer to
sell to you, as a member of the Selected Dealers Group, Class D shares of the
Fund upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the Distribution
Agreement will continue through December __, 1994. The subscription period may
be extended upon agreement between the Fund and the Distributor. Subject to the
provisions of such Section and the conditions contained herein, we will sell to
you on the fifth business day following the termination of the subscription
period, or such other date as we may advise (the "Closing Date"), such number of
Class D shares as to which you have placed orders with us not later than 5:00
P.M. on the second full business day preceding the Closing Date.
2. In all sales of these Class D shares to the public you shall act as
dealer for your own account, and in no transaction shall you have any authority
to act as agent for the Fund, for us
A-1
<PAGE>
or for any other member of the Selected Dealers Group, except in connection with
the Merrill Lynch Mutual Fund Adviser program and such other special programs as
we from time to time agree in which case you shall have authority to offer and
sell shares, as agent for the Fund, to participants in such program.
3. Except as provided in Paragraph 4, below, the public offering prices,
sales charges and the related Selected Dealers' concession are as follows:
<TABLE>
<CAPTION>
Subscription Period
-------------------------------------------------------
Securities Dealers'
Sales Charge Concession
--------------------- ---------------------
Percentage* Percentage*
Public of Public of Public
Offering Dollar Offering Dollar Offering
Price Amount Price Amount Price
-------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
Less than $25,000.................. $10.554 $.554 5.25% $.554 5.25%
$25,000 but less than $50,000...... 10.499 .499 4.75 .499 4.75
$50,000 but less than $100,000..... 10.417 .417 4.00 .417 4.00
$100,000 but less than $250,000.... 10.309 .309 3.00 .309 3.00
$250,000 but less than $1,000,000.. 10.204 .204 2.00 .204 2.00
$1,000,000 and over**.............. 10.000 .000 0.00 .000 0.00
</TABLE>
__________________
*Rounded to the nearest one-hundredth percent.
**Initial sales charges may be waived for certain classes of offers as set forth
in the Prospectus and Statement of Additional Information of the Fund. Such
purchases may be subject to a contingent deferred sales charge as set forth in
the Prospectus and Statement of Additional Information.
The proceeds per Class D share to the Fund from the sale of all shares sold
during the subscription period will be $10.00.
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 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 although more than one beneficiary is
involved. The term "purchase" also includes purchases by any "company" as that
term is defined in the Investment Company Act, but does not include purchases by
any such company which has not been in existence for at least six months or
which has no purpose other than the purchase of shares of the Fund or shares of
the registered investment companies at a discount; provided, however, that it
shall not include purchases
A-2
<PAGE>
by any group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of an
insurance company, customers of either a bank or broker-dealer or clients of an
investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which eligible investors are permitted to purchase Class D shares of the
Fund at the offering price applicable to the total of (a) the 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 the Class A,
Class B, Class C and Class D shares of the Fund and of any other open-end
investment company advised by Merrill Lynch Asset Management, L.P. or Fund Asset
Management, L.P. (together, "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 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 or of shares of any other MLAM-
advised mutual fund made through you within a thirteen-month period starting
with the first purchase pursuant to a Letter of Intention in the form provided
in the Prospectus. A purchase not originally made pursuant to a Letter of
Intention may be included under a subsequent letter executed within 90 days of
such purchase if the Distributor is informed in writing of this intent within
such 90-day period. If the intended amount of shares is not purchased within
the thirteen-month period, an appropriate price adjustment will be made pursuant
to the terms of the Letter of Intention.
You agree to advise us promptly at your 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 D shares unless you
have already received purchase orders for such shares at the applicable public
offering prices and subject to the terms hereof and of the Distribution
Agreement. All orders are subject to acceptance by the Distributor or the Fund
in the sole discretion of either. The minimum initial and subsequent purchase
requirements are as set forth in the Prospectus, as amended from time to time.
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
A-3
<PAGE>
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 infor- mation relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. All Class D shares purchased by Selected Dealers will be delivered in
the first instance at a settlement price computed on the basis of all sales
having been made in a purchase (as such term is defined above) involving a
public offering price of less than $25,000. All sales to you will be deemed to
have been made in such a transaction unless within 30 days after the Closing
Date you furnish to us, on forms supplied by us for the purpose, a statement
acceptable to us setting forth sales in purchases involving a public offering
price of $25,000 or more, in which case we will compute such Selected Dealers'
concessions on the basis of the information set forth in such statement.
6. Payment for Class D shares purchased by you is to be made by certified
or official bank check at the office of Merrill Lynch Funds Distributor, Inc.,
Box 9011, Princeton, New Jersey 08543-9011, on such date as we may advise, in
New York Clearing House funds payable to the order of Merrill Lynch Funds
Distributor, Inc., or by federal funds wire transfer, against delivery by us of
non-negotiable share deposit receipts ("Receipts") issued by Financial Data
Services, Inc., as shareholder servicing agent, acknowledging the deposit with
it of the Class D shares so purchased by you. You agree that as promptly as
practicable after the delivery of such Class D shares you will issue appropriate
written transfer instructions to the Fund or to the shareholder servicing agent
as to the purchasers to whom you sold the Class D shares.
7. If any Class D shares sold to you under the terms of this Agreement are
repurchased by the Fund or by us for the account of the Fund or are tendered for
redemption within seven business days after the Closing Date, it is agreed that
you shall forfeit your right to, and refund to us, any discount received by you
on such Class D shares.
8. No person is authorized to make any representations concerning Class D
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
A-4
<PAGE>
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional Information and supplemental information
above mentioned. Any printed information which we furnish you other than the
Fund's Prospectus and Statement of Additional Information, periodic reports and
proxy solicitation material are our sole responsibility and not the
responsibility of the Fund, and you agree that the Fund shall have no liability
or responsibility to you in these respects unless expressly assumed in
connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain Proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely. 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, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which we
believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell shares in any
jurisdiction. We will file with the Department of State in New York a Further
State Notice with respect to the shares, if necessary.
A-5
<PAGE>
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. You agree that you will not sell any Class D shares of the Fund to any
account over which you exercise discretionary authority.
16. This Agreement shall terminate at the close of business on the Closing
Date, unless earlier terminated, provided, however, this Agreement shall
continue after termination for the purpose of Section 7 hereof and for the
purpose of settlement of accounts hereunder.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By___________________________________
(Authorized Signature)
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:____________________________________________
By:___________________________________________________
Address:______________________________________________
______________________________________________________
Date:_________________________________________________
A-6
<PAGE>
EXHIBIT B
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
CLASS D SHARES OF COMMON STOCK
SELECTED DEALERS AGREEMENT
--------------------------
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement
with Merrill Lynch Middle East/Africa Fund, Inc., a Maryland Corporation (the
"Fund"), pursuant to which it acts as the distributor for the sale of Class D
shares of common stock, par value $0.10 per share (herein referred to as "Class
D shares"), of the Fund and as such has the right to distribute Class D shares
of the Fund for resale. The Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and its Class D shares are registered under the Securities Act of 1933,
as amended (the "Securities Act"). You have received a copy of the Class D
shares Distribution Agreement (the "Distribution Agreement") between ourself and
the Fund and reference is made herein to certain provisions of such Distribution
Agreement. The terms "Prospectus" and "Statement of Additional Information"
used herein refer to the prospectus and statement of additional information,
respectively, on file with the Securities and Exchange Commission which is part
of the most recent effective registration statement pursuant to the Securities
Act. We offer to sell to you, as a member of the Selected Dealers Group, Class
D shares of the Fund upon the following terms and conditions:
1. In all sales of these Class D shares to the public, you shall act as
dealer for your own account and in no transaction shall you have any authority
to act as agent for the Fund, for us or for any other member of the Selected
Dealers Group, except in connection with the Merrill Lynch Mutual Fund Adviser
program and such other special programs as we from time to time agree, in which
case you shall have authority to offer and sell shares, as agent for the Fund,
to participants in such program.
2. Orders received from you will be accepted through us only at the
public offering price applicable to each order, as set forth in the current
Prospectus and Statement of Additional Information of the Fund. The procedure
relating to the handling of orders shall be subject to Section 5 hereof and
instructions
B-1
<PAGE>
which we or the Fund shall forward from time to time to you. All orders are
subject to acceptance or rejection by the Distributor or the Fund in the sole
discretion of either. The minimum initial and subsequent purchase requirements
are as set forth in the current Prospectus and Statement of Additional
Information of the Fund.
3. The sales charges for sales to eligible investors, computed as
percentages of the public offering price and the amount invested, and the
related discount to Selected Dealers are as follows:
<TABLE>
<CAPTION>
Discount to
Selected
Sales Charge Dealers as
Sales Charge as Percentage* Percentage
as Percentage of the Net of the
of the Amount Offering
Amount of Purchase Offering Price Invested Price
- ----------------------- --------------- --------------- ------------
<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>
___________________
* Rounded to the nearest one-hundredth percent.
** Initial sales charges will be waived for certain classes of offerees as set
forth in the current Prospectus and Statement of Additional Information of the
Fund. Such purchases may be subject to a contingent deferred sales charge as
set forth in the current Prospectus and Statement of Additional Information.
The term "purchase" refers to a single purchase by an individual, or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class D shares for his or their own account and to
single purchases by a trustee or other fiduciary purchasing Class
B-2
<PAGE>
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 but does
not include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of Class D
shares of the Fund or Class D shares of other registered investment companies at
a discount; provided, however, that it shall not include purchases by any group
of individuals whose sole organizational nexus is that the participants therein
are credit cardholders of a company, policyholders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
The reduced sales charges are applicable through a right of accumulation
under which certain eligible investors are permitted to purchase Class D shares
of the Fund 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 Fund and of any other
open-end investment company advised by Merrill Lynch Asset Management, L.P. or
Fund Asset Management, L.P. (together "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 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 MLAM-advised mutual
fund made through you within a thirteen-month period starting with the first
purchase pursuant to a Letter of Intention in the form provided in the
Prospectus. A purchase not originally made pursuant to a Letter of Intention
may be included under a subsequent letter executed within 90 days of such
purchase if the Distributor is informed in writing of this intent within such
90-day period. If the intended amount of shares is not purchased within the
thirteen-month period, an appropriate price adjustment will be made pursuant to
the terms of the Letter of Intention.
You agree to advise us promptly at our request as to amounts of any sales
made by you to eligible investors qualifying for reduced sales charges. Further
information as to the reduced sales charges pursuant to the right of
accumulation or a Letter of Intention is set forth in the Prospectus and
Statement of Additional Information.
B-3
<PAGE>
4. You shall not place orders for any of the Class D shares unless you
have already received purchase orders for such Class D shares at the applicable
public offering prices and subject to the terms hereof and of the Distribution
Agreement. You agree that you will not offer or sell any of the Class D shares
except under circumstances that will result in compliance with the applicable
Federal and state securities laws and that in connection with sales and offers
to sell Class D shares you will furnish to each person to whom any such sale or
offer is made a copy of the Prospectus and, if requested, the Statement of
Additional Information (as then amended or supplemented) and will not furnish to
any person any information relating to the Class D shares of the Fund which is
inconsistent in any respect with the information contained in the Prospectus and
Statement of Additional Information (as then amended or supplemented) or cause
any advertisement to be published in any newspaper or posted in any public place
without our consent and the consent of the Fund.
5. As a selected dealer, you are hereby authorized (i) to place orders
directly with the Fund for Class D shares of the Fund to be resold by us to you
subject to the applicable terms and conditions governing the placement of orders
by us set forth in Section 3 of the Distribution Agreement and subject to the
compensation provisions of Section 3 hereof and (ii) to tender Class D shares
directly to the Fund or its agent for redemption subject to the applicable terms
and conditions set forth in Section 4 of the Distribution Agreement.
6. You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding: e.g., by a change in the
- -
"net asset value" from that used in determining the offering price to your
customers.
7. If any Class D shares sold to you under the terms of this Agreement
are repurchased by the Fund or by us for the account of the Fund or are tendered
for redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right to,
and refund to us, any discount received by you on such Class D shares.
8. No person is authorized to make any representations concerning Class D
shares of the Fund except those contained in the current Prospectus and
Statement of Additional Information of the Fund and in such printed information
subsequently issued by us or the Fund as information supplemental to such
Prospectus and Statement of Additional Information. In purchasing Class D
shares through us you shall rely solely on the representations contained in the
Prospectus and Statement of Additional
B-4
<PAGE>
Information and supplemental information above mentioned. Any printed
information which we furnish you other than the Fund's Prospectus, Statement of
Additional Information, periodic reports and proxy solicitation material is our
sole responsibility and not the responsibility of the Fund, and you agree that
the Fund shall have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
9. You agree to deliver to each of the purchasers making purchases from
you a copy of the then current Prospectus and, if requested, the Statement of
Additional Information at or prior to the time of offering or sale and you agree
thereafter to deliver to such purchasers copies of the annual and interim
reports and proxy solicitation materials of the Fund. You further agree to
endeavor to obtain proxies from such purchasers. Additional copies of the
Prospectus and Statement of Additional Information, annual or interim reports
and proxy solicitation materials of the Fund will be supplied to you in
reasonable quantities upon request.
10. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Class D shares entirely or to certain persons
or entities in a class or classes specified by us. Each party hereto has the
right to cancel this agreement upon notice to the other party.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering. We
shall be under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not in any
way whatsoever constitute, a waiver by you of compliance with any provision of
the Securities Act, or of the rules and regulations of the Securities and
Exchange Commission issued thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States, we
both hereby agree to abide by the Rules of Fair Practice of such Association.
13. Upon application to us, we will inform you as to the states in which
we believe the Class D shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but we
assume no responsibility or obligation as to your right to sell Class D shares
in any jurisdiction. We will file with the Department of State in New York a
Further State Notice with respect to the Class D shares, if necessary.
B-5
<PAGE>
14. All communications to us should be sent to the address below. Any
notice to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
15. Your first order placed pursuant to this Agreement for the purchase of
Class D shares of the Fund will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By__________________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9011
Princeton, New Jersey 08543-9011
Accepted:
Firm Name:_________________________________________________
By:___________________________________________________
Address:______________________________________________
______________________________________________________
Date:_________________________________________________
B-6
<PAGE>
EXHIBIT 99.8
[LOGO] CHASE
GLOBAL
CUSTODY
AGREEMENT
<PAGE>
This AGREEMENT is effective ______________________, 19 ______, and is between
THE CHASE MANHATTAN BANK, N.A. (the "Bank") and _________________________ (the
"Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) a custody account in the name of the Customer ("Custody Account") for
any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) a deposit account in the name of the Customer ("Deposit Account") for
any and all cash in any currency received by the Bank or its Subcustodian for
the account of the Customer, which cash shall not be subject to withdrawal by
draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which
the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) cash will be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
<PAGE>
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold Assets together with assets belonging to other
customers of the Bank in accounts identified on such Subcustodian's books as
special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by
2
<PAGE>
debiting the Deposit Account for the amount previously credited. The Bank or
its Subcustodian shall have no duty or obligation to institute legal
proceedings, file a claim or a proof of claim in any insolvency proceeding or
take any other action with respect to the collection of such amount, but may act
for the Customer upon Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be made
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 a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in
its discretion if the related transaction fails to settle within
a reasonable period, determined by the Bank in its discretion,
after the contractual settlement date for the related
transaction.
(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
3
<PAGE>
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain instructions from the
Customer or its Authorized Person, as defined in Section 10, but if Instructions
are not received in time for the Bank to take timely action, or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the Deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees
4
<PAGE>
harmless from any liability arising directly or indirectly from their status as
a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term ["Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties
as are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank
shall be liable to the Customer for any loss which shall occur as
the result of the failure of a Subcustodian to exercise
reasonable care with respect to the safekeeping of such Assets to
the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of
any loss to the Customer by reason of the failure of the Bank or
its Subcustodian to utilize reasonable care, the Bank shall be
liable to the Customer only to the extent of the Customer's
direct damages, to be determined based on the market value of the
property which is the subject of the loss at the date of
discovery of such loss and without reference to any special
conditions or circumstances.
5
<PAGE>
(ii) The Bank will not be responsible for any act, omission, default
or for the solvency of any broker or agent which it or a
Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether
pursuant to Instructions or otherwise within the scope of this
Agreement if such act or omission was in good faith, without
negligence. In performing its obligations under this Agreement,
the Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment
of any taxes or other governmental charges, and any related
expenses with respect to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the advice
of counsel (who may be counsel for the Customer) on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of
investing, or 2) investing or holding Assets in a particular
country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or
affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes
or work stoppages, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security
other than as provided in Section 5(c) of this Agreement;
6
<PAGE>
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other
party to which Securities are delivered or payments are made
pursuant to this Agreement; or
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
7
<PAGE>
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (check one):
_____ employee benefit plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
_____ mutual fund assets subject to Securities and Exchange Commission
("SEC") rules and regulations;
_____ neither of the above.
This Agreement consists exclusively of this document together with Schedule
A, Exhibits I-___ and the following rider(s) [check applicable rider(s)]:
_____ ERISA
_____ MUTUAL FUND
_____ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
8
<PAGE>
Bank: The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, NY 10036
Attention: Global Custody Division
Customer: ______________________________________________
----------------------------------------------
----------------------------------------------
----------------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice,
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case the Bank will deliver the Assets
to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty
days following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By: _________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By: _________________________________
Title
9
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this __________ day of ___________________, 19___, before me
personally came ________________________, to me known, who being by me duly
sworn, did depose and say that he/she resides in ___________________________ at
_______________________; that he/she is _________________ of
_______________________("Customer"), the Customer which executed the foregoing
Agreement; that he/she knows the seal of the Customer; that the seal affixed to
the Agreement is such seal; that it was affixed by order of the Customer, and
that he/she signed his/her name thereto by like order.
Sworn to before me this _________________
day of ____________________, 19____
____________________________________
Notary
STATE OF )
: ss.
COUNTY OF )
On this __________ day of ___________________, 19___, before me personally
came ________________________, to me known, who being by me duly sworn, did
depose and say that he/she resides in ___________________________ at
_______________________; that he/she is _________________ a Vice President of
THE CHASE MANHATTAN BANK, N.A. ("Bank"), the Bank which executed the foregoing
Agreement; that he/she knows the seal of the Bank; that the seal affixed to the
Agreement is such corporate seal; that it was so affixed by order of the Board
of Directors of the Bank, and that he/she signed his/her name thereto by like
order.
Sworn to before me this _________________
day of ____________________, 19____
____________________________________
Notary
10
<PAGE>
ERISA Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
_________________________________________
_________________, effective ____________
Customer represents that the Assets being placed in the Bank's custody are
subject to ERISA. It is understood that in connection therewith the Bank is a
service provider and not a fiduciary of the plan and trust to which the assets
are related. The Bank shall not be considered a party to the underlying plan
and trust and the Customer hereby assumes all responsibility to assure that
instructions issued under this Agreement are in compliance with such plan and
trust and ERISA.
This Agreement will be interpreted so as to be in compliance with the
Department of Labor Regulations Section 2550.404b-1 concerning the maintenance
of indicia of ownership of plan assets outside the jurisdiction of the district
courts of the United States.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
As used in this Agreement, the term Subcustodian and the term securities
depositories include a branch of the Bank, a branch of a qualified U.S. bank, an
eligible foreign custodian, or an eligible foreign securities depository, where
such terms shall mean:
(a) "qualified U.S. bank" shall mean a U.S. bank as described in paragraph
(a)(2)(ii)(A)(1) of the Department of Labor Relations Section 2550.404b-1;
(b) "eligible foreign custodian" shall mean a banking institution
incorporated or organized under the laws of a country other than the United
States which is supervised or regulated by that country's government or an
agency thereof or other regulatory authority in the foreign jurisdiction having
authority over banks; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States which is supervised or regulated by that
country's government or an agency thereof or other regulatory authority in the
foreign jurisdiction having authority over such depositories or clearing
agencies and which is described in paragraph (c)(2) of the Department of Labor
Regulations Section 2550.404b-1.
SECTION 4. USE OF SUBCUSTODIAN.
Subsection (d) of this section is modified by deleting the last sentence.
11
<PAGE>
SECTION 5. DEPOSIT ACCOUNT TRANSACTIONS.
Subsection (b) is amended to read as follows:
(b) In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, such discretionary advance shall be
deemed a service provided by the Bank under this Agreement for which it is
entitled to recover its reasonable costs and expenses as may be determined by
the Bank in good faith.
SECTION 10. AUTHORIZED PERSONS.
Add the following paragraph at the end of Section 10:
Customer represents that: a) Instructions will only be issued by or for a
fiduciary pursuant to Department of Labor Relations Section 404b-1 and b) if
Instructions are to be issued by an investment manager, such entity will meet
the requirements of Section 3(38) of ERISA and will have been designated by the
Customer to manage assets held in the Accounts ("Investment Manager"). An
Investment Manager may designate certain of its employees to act as Authorized
Persons under this Agreement.
SECTION 14(A). FOREIGN EXCHANGE TRANSACTIONS.
Add the following paragraph at the end of Subsection 14(a):
Instructions to execute foreign exchange transactions with the Bank, its
subsidiaries, affiliates or Subcustodians will include (1) the time period in
which the transaction must be completed, (2) the location, i.e., Chase New York,
Chase London, etc., or the Subcustodian with whom the contract is to be executed
and (3) such additional information and guidelines as may be deemed necessary;
and, if the Instruction is a standing Instruction, a provision allowing such
Instruction to be overridden by specific contrary Instructions.
12
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
__________________________________________
__________________, effective ____________
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Act;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof), (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank or (iv) any other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent book-
entries.
13
<PAGE>
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through ____________ of Schedule A, and further represents that
its Board has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Customer's
fund(s) and its (their) shareholders. The Bank will supply the Customer with
any amendment to Schedule A for approval. The Customer has supplied or will
supply the Bank with certified copies of its Board of Directors resolution(s)
with respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11:
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange
14
<PAGE>
Act") and a member of the National Association of Securities Dealers, Inc.,
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(d) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches, each
branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
15
<PAGE>
GLOBAL CUSTODY AGREEMENT
with _________________
(Customer)
dated _________
SPECIFIC TERMS AND CONDITIONS
-----------------------------
16
<PAGE>
SEPTEMBER 1994
- --------------
CHASE MANHATTAN BANK - AGENT BANK LIST
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
- ------------ ------------------------------ ------------------------------
<S> <C> <C>
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- --------- Main Branch Buenos Aires
25 De Mayo 130/140
Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
- --------- Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
- ------- Schottengasse 6 Vienna
-A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
- ---------- 18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
- ------- 3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Standard Chartered Bank Standard Chartered Bank
- -------- Botswana Ltd. Botswana Ltd.
4th Floor Commerce House Gaborone
The Mall
Gaborone
BOTSWANA
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan SA.
- ------ Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
- ------ Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, NS.
- ----- Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia SA.
- -------- Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka,
- ------------- Na Prikope 14 A.S.
115 20 Praha 1 Praha
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
- ------- 2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
- ----- 24 Sherif Street Cairo
Cairo
EGYPT
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
- --------- 67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
- -------- 27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Kansallis-Osake-Pankki Kanasallis-Osake-Pankki
- ------- Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
- ------ Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
- ------- Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GREECE Barclays Bank Plc National Bank of Greece SA.
- ------ 1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, NA.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- --------- 40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
- ------- Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
- ----- Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
- --------- Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
- ------- International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
- ------ 19 Herzl Street Tel Aviv
65136 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- ----- Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, NA.
- ----- 1-3 Marunouchi l-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
- ------ P.O. Box 950544-5 Amman
Amman
Shmeisani
JORDAN
LUXEMBOURG Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
- ---------- 27 Avenue Monterey S.A.
LUXEMBOURG Luxembourg
MAURITIUS The Hongkong & Shanghai Banking Corp. Ltd. The Hong Kong & Shanghai
- --------- Place D'Armes Banking Corp. Ltd.
Pon Louis Mauritius
MAURITIUS
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
MALAYSIA
- --------- The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MEXICO The Chase Manhattan Bank, N.A. No correspondent Bank
- ------ Hamburgo 213, Piso 7
(Equities) Colonia Juarez, 06660 Mexico D.F.
MEXICO
(Government Bonds)
Banco Nacional de Mexico, No correspondent Bank
Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
- ------- 1 Rue Idriss Lahrizi Casablanca
Casablanca 01
MOROCCO
NETHERLANDS ABN AMRO N.V. Credit Lyonnais
- ----------- Securities Centre Bank Nederland N.V.
P.O. Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND National Nominees Limited National Bank of New Zealand
- ----------- Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
- ------ Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
- -------- State Life Building No. 1 Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
- ---- Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
PHILIPPINES The Hongkong and Shanghai The Hongkong and Shanghai
- ----------- Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
- ------ 6/12 Nowy Swiat Str Warsaw
00-920 Warsaw
POLAND
FOR MUTUAL FUNDS:
Bank Handlowy W. Warsawie. S.A. Bank Polslta Kasa Opieki SA.
Custody Dept. Capital Markets Centre - V Branch Warsaw
U1, Kasprzaka 18/20
01-211 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial de Lisboa Banco Pinto & Sotto Mayor
- -------- Servico de Gestaode Titulos Avenida Fontes Pereira de Melo
R. Mouzinho da Silveira, 36 r/c 1000 Lisbon
1200 Lisbon
PORTUGAL
SHANGHAI (CHINA) The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
- ---------------- Banking Corporation Limited Hong Kong
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN (CHINA) The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
- ---------------- Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.l Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- -------- Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SOUTH AFRICA
- ------------ Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai
- ----------- Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, l-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Zaragozano, SA.
- ----- Calle Peonias 2 Madrid Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
- --------- Banking Corporation Lirnited Banking Corporation Limited
24, Sir Baron Jayatilaka Mawatha, Colombo
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
- ------ Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND Union Bank of Switzerland Union Bank of Switzerland
- ----------- 45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
- ------ 673 Min Sheng East Road - 9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- -------- Bubhajit Building Bangkok
20 Norh Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
TUNISIA
- ------- Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
TUNISIA
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
- ------ Yildiz Posta Caddesi 52 Istanbul
Dedeman Ticaret Merkezi, Kat 11
80700 Esentepe
Istanbul
TURKEY
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, NA.
- ---- Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
- ------- Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank N.A.
- ------ 1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
- --------- Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
- -------- Ground Floor Harare
Kurima House
42 George Silundika Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
MODEL SUBCUSTODIAN AGREEMENT
Dear Sirs:
This will confirm to you that The Chase Manhattan Bank, N.A. ("Chase") has been
appointed to act as Trustee, Custodian or Subcustodian of securities and monies
on behalf of certain of its customers including, without limitation, investment
companies subject to the Investment Company Act of 1940, as amended and
qualified employee benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended.
Chase has been authorized to utilize the services of other banks, financial
institutions and securities depositories located in countries or jurisdictions
in which the principal trading markets for any shares, bonds, debentures or any
other securities (hereinafter collectively called "Securities") of its customers
are located or in which any Securities of its customers are to be presented for
payment or acquired, and for the purpose of holding cash and cash equivalents.
Chase wishes to utilize the services of your bank ("Bank") as Chase's agent
within _____ for such purposes and hereby establishes with Bank a Special
Custody Account which Bank understands and agrees will be used exclusively for
Securities and other assets of Chase's customers ("Account") and not for Chase's
own interest.
The services Bank will provide to Chase and the manner in which such services
will be performed will be as set forth below in this letter, which may be
mutually amended in writing from time to time by Bank and Chase. To the extent
inconsistent with this letter, as so amended, Bank's rules and conditions
regarding accounts generally or custody accounts specifically shall not apply.
1. The Account shall be used exclusively to hold, acquire, transfer or
otherwise care for, on behalf of Chase as Trustee, Custodian or
Subcustodian as aforesaid and the customers of Chase and not for Chase's
own interest, Securities and such cash or cash equivalents as are
transferred to Bank or as are received in payment of any transfer of or as
payment on, or interest on or dividend from, any such Securities
(hereinafter collectively called "Cash"), and beneficial ownership of the
Securities and Cash in the Account shall be freely transferable without
payment of money or value other than for safe custody and administration.
All transactions involving the Securities and Cash in the Account shall be
executed solely in accordance with Chase's Instructions as that term is
defined in Section 10, except that until Bank receives Instructions from
Chase to the contrary, Bank will:
a) present for payment all Securities held in the Account which are
called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon
presentation and hold the cash received in the Account pursuant to
this Agreement;
b) in respect of Securities held in the Account, execute in the name of
Chase such ownership and other certificates as may be required to
obtain payments in respect thereof;
c) exchange interim receipts or temporary Securities held in the Account
for definitive Securities; and
d) where any Securities held in any securities depository are called for a
partial redemption by the issuer of such Securities, allot in Bank's
sole discretion the called portion to the respective holders in any
manner deemed to be fair and equitable in Bank's judgment.
<PAGE>
Whenever pursuant to this Agreement or for any purpose relating hereto anything
whatsoever may or is required to be done or given by Chase, it shall be done or
given, as the case may be, by and for Chase by such officer or officers of Chase
or other person or persons as the governing body of Chase shall specify from
time to time. Any such specification by the governing body shall be by
resolution of which a copy certified by the President, or a Vice President, and
the seal attested by the Secretary or any Assistant Secretary of Chase shall be
furnished to Bank. Bank shall be conclusively entitled to rely upon the
identification of such persons as the holders of those offices so specified in
any such resolution, absent Instructions to the contrary. Chase shall furnish
to Bank specimens of the signatures of all of such officers and persons so
specified in any such resolution which shall be in force from time to time.
Bank shall act and be fully protected in acting in accordance with Instructions
signed or given by such officer or officers or person or persons so specified in
any such resolution received by Bank and in force at the time of the receipt by
Bank of such Instructions, and shall not be charged with any responsibility
respecting the application of monies paid out in accordance therewith.
Bank shall not be liable for any act or omission in respect of any Instructions
so given except in the case of wilful default, negligence, fraud, bad faith,
wilful misconduct, or reckless disregard of duties on the part of Bank. Bank in
executing all Instructions will take relevant action in accordance with accepted
industry practice.
2. The Account shall not be subject to any right, charge, security interest,
lien or claim of any kind (hereinafter collectively called "Claims") in
favor of Bank or any other institution with whom assets in the Account may
be maintained as provided in this Agreement or any creditor of Bank or of
such other institution, including a receiver or trustee in bankruptcy,
except to the extent of Bank's or such other institution's right to
compensation or reimbursement with regard to the Account's administration
in accordance with the terms of this Agreement. Bank shall provide Chase
with prompt notice of any attempt by any party to assert any Claim against
the Account and shall take all actions to protect the Account from such
Claim until Chase has had a reasonable time to respond to such notice.
3. The ownership of the assets of the Account, whether Securities, Cash or
both, and whether any such assets are held by Bank or in a securities
depository or clearing agency as hereinafter authorized, shall be clearly
recorded on Bank's books as belonging to Chase on behalf of Chase's
customers and not for Chase's own interest, and, to the extent securities
are physically held in the Account, such Securities shall also be
physically segregated from the general assets of Bank, the assets of Chase
in its individual capacity and the assets of Bank's other customers.
In order to facilitate the settlement of transactions, Bank may, with the
approval of Chase, which shall not be unreasonably withheld, maintain all or any
part of the Securities in the Account with a securities depository or clearing
agency which is incorporated or organized under the laws of a country other than
the United States of America and is supervised or regulated by a government
agency or regulatory authority in the foreign jurisdiction having authority over
such depositories or agencies, and which operates (i) the central system for
handling of securities or equivalent book entries in ______ or (ii) a trans-
national system for the central handling of securities or equivalent book
entries, provided, however, that while so maintained such Securities shall be
subject only to the directions of Bank and that Bank's duties, obligations and
responsibilities with regard to such Securities shall be the same as if such
Securities were held by Bank.
Securities which are eligible for deposit in a depository may be maintained with
the depository in an account for Bank's customers. Securities which are not
deposited in a depository will be held in the following forms:
a) Securities issued only in bearer form shall be held in bearer form.
b) Securities issued only in registered form shall be registered in the
name of Bank, or in the name of Bank's nominee, unless alternate
instructions are furnished by Chase.
2
<PAGE>
c) Securities issued in both bearer and registered form which are freely
interchangeable without penalty, shall be registered in the name of Bank,
or in the name of Bank's nominee, if received by Bank in registered form,
or shall be held in bearer form if received by Bank in bearer form, unless
alternate instructions are furnished by Chase.
4. Subject to the provisions of Section 8 hereof:
a) Bank shall be responsible for complying with all provisions of the law
of __________, or any other law, applicable to Bank in connection with
its duties hereunder, including (but not limited to) the payment of
all transfer or similar taxes and compliance with any currency
restrictions and securities laws;
b) All collections of funds or other property paid or distributed in
respect of Securities held in the Account shall be made at the risk of
the Account; and
c) Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by its Custody Division of any payment,
redemption or other transaction regarding Securities held in the
Account in respect of which Bank has agreed to take action as provided
in Section 1 hereof.
5. Subject to applicable law, Bank will permit independent public accountants
for Chase and customers of Chase reasonable access to its books and records
as they pertain to the Account in connection with such accountants'
examination of the books and records of Account.
6. Bank will either periodically or upon Chase's request supply Chase with
such statements regarding the Account as Chase may request and Bank is able
to supply, including an identification of, and the location of, any person
having physical possession of the Securities in the Account, and the name
and address of the governmental agency or other regulatory authority that
supervises or regulates Bank. In addition, Bank will furnish Chase
periodically with advices and/or notifications of any transfers of such
securities.
7. Bank agrees that, in the event of any loss of Securities or Cash in the
Account, Bank will use its best efforts to ascertain the circumstances
relating to such loss and promptly report the same to Chase.
8. Bank will indemnify Chase for any loss or liability to Chase's customers
and any other loss or liability incurred by Chase, individually or as
Trustee, Custodian or Subcustodian as aforesaid, with respect to the
Account ("including, but not limited to, Chase's legal fees and expenses
and any other legal fees and expenses for which Chase is liable, and any
loss or liability in connection with a claim settled by agreement between
Chase and a customer, which agreement is accepted by Bank) to the extent
that such loss or liability arises from negligence, fraud, bad faith, will
misconduct or reckless disregard of duties on the part of Bank. Chase will
indemnify Bank for any loss or liability Bank incurs from any action taken
or omitted to be taken by Bank with respect to the Account, except such
loss or liability as results from the negligence, fraud, bad faith, wilful
misconduct or reckless disregard of duties on the part of Bank.
9. Bank acknowledges that under U.S. regulatory requirements Bank must be a
regulated entity and must have a certain minimum shareholders' equity in
order to be used by Chase to provide the services contemplated in this
Agreement. Bank represents and warrants that it (i) is a banking
institution organized under the law of __________, (ii) is regulated as a
banking institution by __________, which is the agency of the Government of
responsible for the regulation of Banks and (iii) on and after the date
hereof or such later date as shall be specified in Instructions, has
shareholders' equity in excess of two hundred thirty million U.S. dollars
(U.S$230,000,000), or such lesser amount as shall be specified in any order
of the United States Securities and Exchange Commission applicable to Bank,
or the equivalent thereof in
3
<PAGE>
__________ currency determined at current rates. For purposes of this
Section, shareholders' equity of the Bank shall mean such shareholders'
equity as would be shown on any financial statement of the Bank if such
financial statement were prepared according to United States generally
accepted accounting principles. Bank will immediately notify Chase in
writing or by other authorized means of any development or occurrence (and
the circumstances related thereto) which could render Bank unable to make
the foregoing representation at any date. Upon such notification Chase may
terminate this Agreement immediately without prior notice to Bank.
10. As used in this Agreement, the term "Instructions" means instructions of
Chase received by Bank via telephone, or in writing, including but not
limited to telex, TWX, facsimile transmission, bank wire or other
teleprocess or electronic instruction system which Bank believes in good
faith to have been given by Chase or which are transmitted with proper
__________ testing or authentication pursuant to terms and conditions which
Chase may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. Bank
shall safeguard any testkeys, identification codes or other __________
security devices which Chase shall make available to it. Either party may
electronically record any Instructions given by telephone, and any other
telephone discussions, with respect to the Account. Instructions by
telephone shall be confirmed by telex or such other communication as may be
mutually acceptable.
11. Chase agrees to pay Bank such compensation, including reimbursement of
reasonable expenses (if not charged to the Account), as may be mutually
agreed upon from time to time between Bank and Chase.
12. Either Bank or Chase may terminate this Agreement by 60 days written notice
to the other party, provided that any such notice, whether given by Chase
or by Bank shall be followed within 60 days by Instructions specifying the
names of the persons to whom Bank shall deliver the Securities in the
Account and to whom the cash in the Account shall be paid. If within 60
days following the giving of such notice of termination Bank does not
receive such Instructions, Bank shall continue to hold such Securities and
cash subject to this Agreement until such Instructions are given. The
obligations of the parties under Section 4(a), 8 and 11 of this Agreement
shall survive the termination of this Agreement.
13. Notices with respect to termination, specification of officers and other
persons ant terms and conditions for Instructions shall be in writing, and
delivered by mail, postage prepaid, to the following addresses (or to such
other address as either party hereto may from time to time designate by
notice duly given in accordance with this paragraph):
To Bank at:
To Chase at:
The Manager
Global Custody Division
Chase Manhattan Bank, N.A.
Woolgate House
Coleman Street
London EC2P 2HD
4
<PAGE>
14. This Agreement shall not be assignable by either party but shall bind any
successor in interest of Chase and Bank, respectively.
15. This Agreement shall be governed by and construed in accordance with
__________ Law.
If the foregoing correctly sets forth the understanding between Bank and Chase
with respect to Bank's services in connection with the Account, kindly sign and
return to us the enclosed additional copy of this letter.
Very truly yours,
THE CHASE MANHATTAN BANK, N.A.
By: ___________________________
The foregoing is hereby agreed
to this ____ day of __________
By: _________________________
5
<PAGE>
EXHIBIT 99.9(a)
DRAFT: 11/16/94
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY
AND SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT made as of the ___ day of December, 1994 by and between
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC., a Maryland corporation (the
"Fund"), and FINANCIAL DATA SERVICES, INC. ("FDS"), a New Jersey corporation.
WITNESSETH:
WHEREAS, the Fund wishes to appoint FDS to be the Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent upon, and subject to, the terms
and provisions of this Agreement, and FDS is desirous of accepting such
appointment upon, and subject to, such terms and provisions:
NOW THEREFORE, in consideration of mutual covenants contained in this
Agreement, the Fund and FDS agree as follows:
1. Appointment of FDS as Transfer Agent, Dividend Disbursing Agent and
-------------------------------------------------------------------
Shareholder Servicing Agent.
- ----------------------------
a. The Fund hereby appoints FDS to act as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject
to, the terms and provisions of this Agreement.
b. FDS hereby accepts the appointment as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund, and agrees to act
as such upon, and subject to, the terms and provisions of this Agreement.
2. Definitions.
-----------
a. In this Agreement:
(i) The term "Act" means the Investment Company Act of 1940 as amended
from time to time and any rule or regulation thereunder;
(ii) The term "Account" means any account of a Shareholder, or, if the
shares are held in an account in the name of MLPF&S for benefit of an identified
customer, such account, including a Plan Account, any account under a plan (by
whatever name referred to in the Prospectus) pursuant to the Self-Employed
Individuals Retirement Act of 1962 ("Keogh Act Plan") and any plan (by whatever
name referred to in the Prospectus) in
<PAGE>
conjunction with Section 401 of the Internal Revenue Code ("Corporation Master
Plan");
(iii) The term "application" means an application made by a Shareholder or
prospective Shareholder respecting the opening of an Account;
(iv) The term "MLFD" means Merrill Lynch Funds Distributor, Inc., a
Delaware corporation;
(v) The term "MLPF&S" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation;
(vi) The term "Officer's Instruction" means an instruction in writing
given on behalf of the Fund to FDS, and signed on behalf of the Fund by the
President, any Vice President, the Secretary or the Treasurer of the Fund;
(vii) The term "Prospectus" means the Prospectus and the Statement of
Additional Information of the Fund as from time to time in effect;
(viii) The term "Shares" means shares of stock or beneficial interest, as
the case may be, of the Fund, irrespective of class or series;
(ix) The term "Shareholder" means the holder of record of Shares;
(x) The term "Plan Account" means an account opened by a Shareholder or
prospective Shareholder in respect to an open account, monthly payment or
withdrawal plan (in each case by whatever name referred to in the Prospectus),
and may also include an account relating to any other plan if and when provision
is made for such plan in the Prospectus.
3. Duties of FDS as Transfer Agent, Dividend Disbursing Agent and
--------------------------------------------------------------
Shareholder Servicing Agent.
- ---------------------------
a. Subject to the succeeding provisions of the Agreement, FDS hereby
agrees to perform the following functions as Transfer Agent, Dividend Disbursing
Agent and Shareholder Servicing Agent for the Fund;
(i) Issuing, transferring and redeeming Shares;
(ii) Opening, maintaining, servicing and closing Accounts;
(iii) Acting as agent for the Fund Shareholders and/or customers of MLPF&S
in connection with Plan Accounts, upon the terms and subject to the conditions
contained in the Prospectus and application relating to the specific Plan
Account;
2
<PAGE>
(iv) Acting as agent of the Fund and/or MLPF&S, maintaining such records
as may permit the imposition of such contingent deferred sales charges as may be
described in the Prospectus, including such reports as may be reasonably
requested by the Fund with respect to such Shares as may be subject to a
contingent deferred sales charge;
(v) Upon the redemption of Shares subject to such a contingent deferred
sales charge, calculating and deducting from the redemption proceeds thereof the
amount of such charge in the manner set forth in the Prospectus. FDS shall pay,
on behalf of MLFD, to MLPF&S such deducted contingent deferred sales charges
imposed upon all Shares maintained in the name of MLPF&S, or maintained in the
name of an account identified as a customer account of MLPF&S. Sales charges
imposed upon any other Shares shall be paid by FDS to MLFD;
(vi) Exchanging the investment of an investor into, or from the shares of
other open-end investment companies or other series portfolios of the Fund, if
any, if and to the extent permitted by the Prospectus at the direction of such
investor;
(vii) Processing redemptions;
(viii) Examining and approving legal transfers;
(ix) Replacing lost, stolen or destroyed certificates representing Shares,
in accordance with, and subject to, procedures and conditions adopted by the
Fund;
(x) Furnishing such confirmations of transactions relating to their Shares
as required by applicable law;
(xi) Acting as agent for the Fund and/or MLPF&S, furnishing such
appropriate periodic statements relating to Accounts, together with additional
enclosures, including appropriate income tax information and income tax forms
duly completed, as required by applicable law;
(xii) Acting as agent for the Fund and/or MLPF&S, mailing annual, semi-
annual and quarterly reports prepared by or on behalf of the Fund, and mailing
new Prospectuses upon their issue to Shareholders as required by applicable law;
(xiii) Furnishing such periodic statements of transactions effected by
FDS, reconciliations, balances and summaries as the Fund may reasonably request;
(xiv) Maintaining such books and records relating to transactions effected
by FDS as are required by the Act, or by any other applicable provision of law,
rule or regulation, to be maintained by the Fund or its transfer agent with
respect to such transactions, and preserving, or causing to be preserved any
such books and records for such periods as may be required by any such
3
<PAGE>
law, rule or regulation and as may be agreed upon from time to time between FDS
and the Fund. In addition, FDS agrees to maintain and preserve master files and
historical computer tapes on a daily basis in multiple separate locations a
sufficient distance apart to insure preservation of at least one copy of such
information;
(xv) Withholding taxes on non-resident alien Accounts, preparing and
filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(xvi) Reinvesting dividends for full and fractional shares and disbursing
cash dividends, as applicable.
b. FDS agrees to act as proxy agent in connection with the holding of
annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Fund the results of such tabulation accompanied by
appropriate certifications, and preparing and furnishing to the Fund certified
lists of Shareholders as of such date, in such form and containing such
information as may be required by the Fund.
c. FDS agrees to deal with, and answer in a timely manner, all
correspondence and inquiries relating to the functions of FDS under this
Agreement with respect to Accounts.
d. FDS agrees to furnish to the Fund such information and at such
intervals as is necessary for the Fund to comply with the registration and/or
the reporting requirements (including applicable escheat laws) of the Securities
and Exchange Commission, Blue Sky authorities or other governmental authorities.
e. FDS agrees to provide to the Fund such information as may reasonably be
required to enable the Fund to reconcile the number of outstanding Shares
between FDS's records and the account books of the Fund.
f. Notwithstanding anything in the foregoing provisions of this paragraph,
FDS agrees to perform its functions thereunder subject to such modification
(whether in respect of particular cases or in any particular class of cases) as
may from time to time be contained in an Officer's Instruction.
4. Compensation.
------------
The charges for services described in this Agreement, including "out-of-
pocket" expenses, will be set forth in the Schedule of Fees attached hereto.
4
<PAGE>
5. Right of Inspection.
-------------------
FDS agrees that it will in a timely manner make available to, and permit,
any officer, accountant, attorney or authorized agent of the Fund to examine and
make transcripts and copies (including photocopies and computer or other
electronical information storage media and print-outs) of any and all of its
books and records which relate to any transaction or function performed by FDS
under or pursuant to this Agreement.
6. Confidential Relationship.
-------------------------
FDS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all
information germane thereto, as confidential and not to be disclosed to any
person (other than the Shareholder concerned, or the Fund, or as may be
disclosed in the examination of any books or records by any person lawfully
entitled to examine the same) except as may be authorized by the Fund by way of
an Officer's Instruction.
7. Indemnification.
---------------
The Fund shall indemnify and hold FDS harmless from any loss, costs, damage
and reasonable expenses, including reasonable attorney's fees (provided that
such attorney is appointed with the Fund's consent, which consent shall not be
unreasonably withheld), incurred by it resulting from any claim, demand, action,
or suit in connection with the performance of its duties hereunder, provided
that this indemnification shall not apply to actions or omissions of 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 Fund reasonable opportunity to defend against said claim in
its own name or in the name of FDS. An action taken by FDS upon any Officer's
Instruction reasonably believed by it to have been properly executed shall not
constitute willful misconduct, failure to act in good faith or negligence under
this Agreement.
5
<PAGE>
8. Regarding FDS.
-------------
a. FDS hereby agrees to hire, purchase, develop and maintain such
dedicated personnel, facilities, equipment, software, resources and capabilities
as may be reasonably determined by the Fund to be necessary for the satisfactory
performance of the duties and responsibilities of FDS. FDS warrants and
represents that its officers and supervisory personnel charged with carrying out
its functions as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent for the Fund possess the special skill and technical knowledge
appropriate for that purpose. FDS shall at all times exercise due care and
diligence in the performance of its functions as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent for the Fund. FDS agrees that,
in determining whether it has exercised due care and diligence, its conduct
shall be measured by the standard applicable to persons possessing such special
skill and technical knowledge.
b. FDS warrants and represents that is duly authorized and permitted to
act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent
under all applicable laws and that it will immediately notify the Fund of any
revocation of such authority or permission or of the commencement of any
proceeding or other action which may lead to such revocation.
9. Termination.
-----------
a. This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or FDS (without penalty to the Fund or FDS) provided that
the terminating party gives the other party written notice of such termination
at least sixty (60) days in advance, except that the Fund may terminate this
Agreement immediately upon written notice to FDS if the authority or permission
of FDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder
Servicing Agent has been revoked or if any proceeding or other action which the
Fund reasonably believes will lead to such revocation has been commenced.
b. Upon termination of this Agreement, FDS shall deliver all unissued and
cancelled 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 Fund along with a
certified locator document clearly indicating the complete contents therein, to
such successor as may be specified in a notice of termination or Officer's
Instruction; and the Fund assumes all responsibility for failure thereafter to
produce any paper, record or documents so delivered and
6
<PAGE>
identified in the locator document, if and when required to be produced.
10. Amendment.
---------
Except to the extent that the performance by FDS or its functions under
this Agreement may from time to time be modified by an Officer's Instruction,
this Agreement may be amended or modified only by further written Agreement
between the parties.
11. Governing Law.
-------------
This Agreement shall be governed by the laws of the State of New Jersey.
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 MIDDLE EAST/AFRICA FUND, INC.
By:_____________________________________
Title:
FINANCIAL DATA SERVICES, INC.
By:_____________________________________
Title:
7
<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 B and Class C Shareholder Account in
addition to reimbursement for the out-of-pocket expenses incurred by FDS
pursuant to this Agreement.
8
<PAGE>
EXHIBIT 99.9(b)
DRAFT: 11/16/94
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of the ___ day of December, 1994, by and between MERRILL
LYNCH & CO., INC., a Delaware corporation ("ML&Co."), and MERRILL LYNCH MIDDLE
EAST/AFRICA FUND, 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 April 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:
1. ML&Co. hereby grants the Fund a non-exclusive license to use the words
"Merrill Lynch" in its corporate name.
<PAGE>
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.
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.
2
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERRILL LYNCH & CO., INC.
By________________________
Executive Vice President
MERRILL LYNCH MIDDLE EAST/AFRICA
FUND, INC.
By___________________________
Executive Vice President
3
<PAGE>
EXHIBIT 99.15(a)
DRAFT: 11/16/94
CLASS B DISTRIBUTION PLAN
OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the __ day of December, 1994, by and between
Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").
W I T N E S S E T H :
--------------------
WHEREAS, the Fund 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, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class B Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class B
shares of common stock, par value $0.10 per share (the "Class B shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class B Shares Distribution 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 this Class B Shares Distribution Plan
will benefit the Fund and its shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, this Class B Shares Distribution Plan (the "Plan") in accordance with Rule
12b-1 under the Investment Company Act on the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of average daily net assets of
the Fund relating to Class B shares
<PAGE>
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 Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class B shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.75% of average daily net assets of the Fund
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 Fund. 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 Fund
and the costs of preparing and distributing promotional materials. The
distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
2
<PAGE>
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 Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on 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 Fund.
9. This 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 Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 6 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 6 hereof.
10. While 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 Fund 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 MIDDLE EAST/AFRICA FUND, 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 December, 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 Middle
East/Africa Fund, Inc., a Maryland corporation (the "Fund"), 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 Fund; and
WHEREAS, MLFD and the Fund 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 Fund at the annual rate of 0.25% of average daily net assets of the Fund
relating to Class B shares for account maintenance services related to the Class
B shares of the Fund and a distribution fee from the Fund at the annual rate of
0.75% of average daily net assets of the Fund 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
Fund's 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 Fund 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 Fund, and incur
distribution expenditures of the types referred to in paragraph 2 of the Plan.
3. As compensation for its activities and services performed under this
Agreement, MLFD shall pay the Securities Firm an account maintenance fee and a
distribution fee at the end
<PAGE>
of each calendar month in an amount agreed upon by the parties hereto.
4. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to enable MLFD to comply with the
reporting requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period referred to in
Paragraph 4 of the Plan.
5. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of 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)
DRAFT: 11/16/94
CLASS C DISTRIBUTION PLAN
OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the ____ day of December, 1994, by and between
Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class C Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class C
shares of common stock, par value $0.10 per share (the "Class C shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class C Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee and a distribution fee to
MLFD with respect to the Fund's Class C shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of
<PAGE>
average daily net assets of the Fund relating to Class C shares to compensate
MLFD and securities firms with which MLFD enters into related agreements
pursuant to Paragraph 3 hereof ("Sub-Agreements") for providing account
maintenance activities with respect to Class C shareholders of the Fund.
Expenditures under the Plan may consist of payments to financial consultants for
maintaining accounts in connection with Class C shares of the Fund and payment
of expenses incurred in connection with such account maintenance activities
including the costs of making services available to shareholders including
assistance in connection with inquiries related to shareholder accounts.
2. The Fund shall pay MLFD a distribution fee under the Plan at the end of
each month at the annual rate of 0.75% of average daily net assets of the Fund
relating to Class C shares to compensate MLFD and securities firms with which
MLFD enters into related Sub-Agreements for providing sales and promotional
activities and services. Such activities and services will relate to the sale,
promotion and marketing of the Class C shares of the Fund. Such expenditures
may consist of sales commissions to financial consultants for selling Class C
shares of the Fund, compensation, sales incentives and payments to sales and
marketing personnel, and the payment of expenses incurred in its sales and
promotional activities, including advertising expenditures related to the Fund
and the costs of preparing and distributing promotional materials. The
distribution fee may also be used to pay the financing costs of carrying the
unreimbursed expenditures described in this Paragraph 2. Payment of the
distribution fee described in this Paragraph 2 shall be subject to any
limitations set forth in any applicable regulation of the National Association
of Securities Dealers, Inc.
3. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities and services of the type referred to in Paragraphs 1 and 2
hereof. MLFD may reallocate all or a portion of its account maintenance fee or
distribution fee to such Securities Firms as compensation for the above-
mentioned activities and services. Such Sub-Agreement shall provide that the
Securities Firms shall provide MLFD with such information as is reasonably
necessary to permit MLFD to comply with the reporting requirements set forth in
Paragraph 4 hereof.
4. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee and the distribution fee during such period.
2
<PAGE>
5. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class C voting securities of the Fund.
6. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
7. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 6.
8. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class C voting
securities of the Fund.
9. The Plan may not be amended to increase materially the rate of payments
provided for herein unless such amendment is approved by at least a majority, as
defined in the Investment Company Act, of the outstanding Class C voting
securities of the Fund, and by the Directors of the Fund in the manner provided
for in Paragraph 6 hereof, and no material amendment to the Plan shall be made
unless approved in the manner provided for approval and annual renewal in
Paragraph 6 hereof.
10. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
11. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, 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 December, 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 Middle
East/Africa Fund, Inc. a Maryland corporation (the "Fund"), pursuant to which it
acts as the exclusive distributor for the sale of Class C shares of common
stock, par value $0.10 per share (the "Class C shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class C Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class C shares for account maintenance activities
related to Class C shares of the Fund and a distribution fee from the Fund at
the annual rate of 0.75% of average daily net assets of the Fund relating to
Class C shares for providing sales and promotional activities and services
related to the distribution of Class C shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and sales and promotional activities and services for the
Fund's Class C shareholders and the Securities Firm is willing to perform such
activities and services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class C shares of the Fund and incur expenditures
in connection with such activities and services of the types referred to in
Paragraph 1 of the Plan.
2. The Securities Firm shall provide sales and promotional activities and
services with respect to the sale of the Class C shares of the Fund, and incur
distribution expenditures, of the types referred to in Paragraph 2 of the Plan.
<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 Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
6. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 6.
7. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
Title:
2
<PAGE>
EXHIBIT 99.15(c)
DRAFT: 11/16/94
CLASS D DISTRIBUTION PLAN
OF
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, INC.
PURSUANT TO RULE 12B-1
DISTRIBUTION PLAN made as of the day of December, 1994, by and between
Merrill Lynch Middle East/Africa Fund, Inc., a Maryland corporation (the
"Fund"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation
("MLFD").
W I T N E S S E T H :
--------------------
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, MLFD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Fund proposes to enter into a Class D Shares Distribution
Agreement with MLFD, pursuant to which MLFD will act as the exclusive
distributor and representative of the Fund in the offer and sale of Class D
shares of common stock, par value $0.10 per share (the "Class D shares"), of the
Fund to the public; and
WHEREAS, the Fund desires to adopt this Class D Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act, pursuant to
which the Fund will pay an account maintenance fee to MLFD with respect to the
Fund's Class D shares; and
WHEREAS, the Directors of the Fund have determined that there is a
reasonable likelihood that adoption of the Plan will benefit the Fund and its
shareholders.
NOW, THEREFORE, the Fund hereby adopts, and MLFD hereby agrees to the terms
of, the Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. The Fund shall pay MLFD an account maintenance fee under the Plan at
the end of each month at the annual rate of 0.25% of
<PAGE>
average daily net assets of the Fund relating to Class D shares to compensate
MLFD and securities firms with which MLFD enters into related agreements ("Sub-
Agreements") pursuant to Paragraph 2 hereof for providing account maintenance
activities with respect to Class D shareholders of the Fund. Expenditures under
the Plan may consist of payments to financial consultants for maintaining
accounts in connection with Class D shares of the Fund and payment of expenses
incurred in connection with such account maintenance activities including the
costs of making services available to shareholders including assistance in
connection with inquiries related to shareholder accounts.
2. The Fund hereby authorizes MLFD to enter into Sub-Agreements with
certain securities firms ("Securities Firms"), including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to provide compensation to such Securities Firms
for activities of the type referred to in Paragraph 1. MLFD may reallocate all
or a portion of its account maintenance fee to such Securities Firms as
compensation for the above-mentioned activities. Such Sub-Agreement shall
provide that the Securities Firms shall provide MLFD with such information as is
reasonably necessary to permit MLFD to comply with the reporting requirements
set forth in Paragraph 3 hereof.
3. MLFD shall provide the Fund for review by the Board of Directors, and
the Directors shall review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 regarding the disbursement of the account
maintenance fee during such period.
4. This Plan shall not take effect until it has been approved by a vote of
at least a majority, as defined in the Investment Company Act, of the
outstanding Class D voting securities of the Fund.
5. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Directors of
the Fund and (b) those Directors of the Fund who are not "interested persons" of
the Fund, as defined in the Investment Company Act, and have no direct or
indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting or
meetings called for the purpose of voting on the Plan and such related
agreements.
6. The Plan shall continue in effect for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Paragraph 5.
2
<PAGE>
7. The Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding Class D voting
securities of the Fund.
8. The Plan may not be amended to increase materially the rate of payments
provided for in Paragraph 1 hereof unless such amendment is approved by at least
a majority, as defined in the Investment Company Act, of the outstanding Class D
voting securities of the Fund, and by the Directors of the Fund in the manner
provided for in Paragraph 5 hereof, and no material amendment to the Plan shall
be made unless approved in the manner provided for approval and annual renewal
in Paragraph 5 hereof.
9. While the Plan is in effect, the selection and nomination of Directors
who are not interested persons, as defined in the Investment Company Act, of the
Fund shall be committed to the discretion of the Directors who are not
interested persons.
10. The Fund shall preserve copies of the Plan and any related agreements
and all reports made pursuant to Paragraph 3 hereof, for a period of not less
than six years from the date of the Plan, or the agreements or such report, as
the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Plan
as of the date first above written.
MERRILL LYNCH MIDDLE EAST/AFRICA FUND, 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 December, 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 Middle
East/Africa Fund, Inc., a Maryland corporation (the "Fund"), pursuant to which
it acts as the exclusive distributor for the sale of Class D shares of common
stock, par value $0.10 per share (the "Class D shares"), of the Fund; and
WHEREAS, MLFD and the Fund have entered into a Class D Shares Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), pursuant to which MLFD receives an account
maintenance fee from the Fund at the annual rate of 0.25% of average daily net
assets of the Fund relating to Class D shares for providing account maintenance
activities and services with respect to Class D shares; and
WHEREAS, MLFD desires the Securities Firm to perform certain account
maintenance activities and services, including assistance in connection with
inquiries related to shareholder accounts, for the Fund's Class D shareholders
and the Securities Firm is willing to perform such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. The Securities Firm shall provide account maintenance activities and
services with respect to the Class D shares of the Fund and incur expenditures
in connection with such activities and services, of the types referred to in
Paragraph 1 of the Plan.
2. As compensation for its services performed under this Agreement, MLFD
shall pay the Securities Firm a fee at the end of each calendar month in an
amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such
information as reasonably requested by MLFD to
<PAGE>
enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding
the disbursement of the fee during such period referred to in Paragraph 3 of the
Plan.
4. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Directors of the Fund and (b) those
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the Act, and have no direct or indirect financial interest in the operation
of the Plan, this Agreement or any agreements related to the Plan or this
Agreement (the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Agreement.
5. This Agreement shall continue in effect for as long as such continuance
is specifically approved at least annually in the manner provided for approval
of the Plan in Paragraph 5.
6. This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Plan or any amendment to
the Plan that requires such termination.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By_____________________________________
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_____________________________________
2
