AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
SECURITIES ACT FILE NO. 333-15265
INVESTMENT COMPANY ACT FILE NO. 811-7899
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 1 [X]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
|
MERRILL LYNCH INDEX FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
P.O. BOX 9011,
PRINCETON, NEW JERSEY 08543-9011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
|
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (609) 282-2800
ARTHUR ZEIKEL
BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
COUNSEL FOR THE FUND: PHILIP L. KIRSTEIN, ESQ.
JOEL H. GOLDBERG, ESQ. MERRILL LYNCH ASSET MANAGEMENT, L.P.
SHEREFF, FRIEDMAN, HOFFMAN & P.O. BOX 9011
GOODMAN, LLP PRINCETON, NEW JERSEY 08543-9011
919 THIRD AVENUE, NEW YORK, NEW YORK 10022
|
THE REGISTRANT DECLARES THAT AN INDEFINITE AMOUNT OF COMMON STOCK, PAR VALUE $.0001 PER SHARE, IS BEING REGISTERED BY THIS REGISTRATION STATEMENT PURSUANT TO SECTION 24(F) UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND RULE 24F-2 THEREUNDER.
MERRILL LYNCH INDEX TRUST HAS ALSO EXECUTED THIS REGISTRATION STATEMENT
MERRILL LYNCH INDEX FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
N-1A ITEM NO. LOCATION IN PROSPECTUS
- ------------- ---------------------------------------
PART A
Item 1. Cover Page............................... Cover Page
Item 2. Synopsis................................. Fee Table
Item 3. Condensed Financial Information.......... Not Applicable
Item 4. General Description of Registrant........ Investment Objectives and Policies;
Management of the Fund; Other
Investment Policies and Practices;
Additional Information
Item 5. Management of the Fund................... Fee Table; Management of the Fund
Item 5A. Management's Discussion of Fund
Performance............................ Not Applicable
Item 6. Capital Stock and Other Securities....... Additional Information
Item 7. Purchase of Securities Being Offered..... Purchase of Shares; Additional
Information
Item 8. Redemption or Repurchase................. Fee Table; Redemption of Shares
Item 9. Pending Legal Proceedings................ Not Applicable
PART B
Item 10. Cover Page............................... Cover Page
Item 11. Table of Contents........................ Back Cover Page
Item 12. General Information and History.......... Not Applicable
Item 13. Investment Objectives and Policies....... Investment Objectives and Policies
Item 14. Management of the Fund................... Management of the Funds
Item 15. Control Persons and Principal Holders of
Securities............................. Not Applicable
Item 16. Investment Advisory and Other Services... Management of the Funds; Purchase of
Shares; Additional Information
Item 17. Brokerage Allocation..................... Brokerage
Item 18. Capital Stock and Other Securities....... Additional Information
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............... Purchase of Shares; Redemption of
Shares; Determination of Net Asset
Value; Shareholder Services
Item 20. Tax Status............................... Dividends and Distributions; Taxes
Item 21. Underwriters............................. Purchase of Shares
Item 22. Calculations of Performance Data......... Performance Data
Item 23. Financial Statements..................... Financial Statements
|
PART C
Information required to be included is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
JANUARY 31, 1997
Merrill Lynch Index Funds, Inc. (the "Corporation") currently consists of four portfolios or series: Merrill Lynch S&P 500 Index Fund ("S&P 500 Index Fund"), Merrill Lynch Small Cap Index Fund ("Small Cap Index Fund"), Merrill Lynch Aggregate Bond Index Fund ("Aggregate Bond Index Fund") and Merrill Lynch International Index Fund ("International Index Fund")(collectively, the "Funds," and each, a "Fund"). Each Fund is a non-diversified mutual fund whose investment objective is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of a securities index that has been selected as a proxy for the performance of a selected market segment. The index is subject to change if, in the Directors' judgment, a different index would serve as a better proxy for such market segment. Each Fund will seek to achieve its objective by investing all of its assets in the series (collectively, the "Series," and each, a "Series") of Merrill Lynch Index Trust (the "Trust") that has the same investment objective as the Fund. Each Fund's investment experience will correspond directly to the investment experience of the respective Series in which it invests. There can be no assurance that the investment objectives of the Funds will be achieved. For more information on the Funds' and the Series' investment objectives and policies, see "Investment Objectives and Policies" on page 4.
This Prospectus is a concise statement of information about the Funds that is relevant to making an investment in the Funds. This Prospectus should be retained for future reference. A statement containing additional information about the Funds, dated January 31, 1997 (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 Funds at the above telephone number or address. The Statement of Additional Information is hereby incorporated by reference into this Prospectus.
MERRILL LYNCH ASSET MANAGEMENT, L.P.--ADMINISTRATOR
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.--DISTRIBUTOR
FEE TABLE
The following table provides a summary of estimated expenses, both recurring and non-recurring, relating to shares of the Fund and the Series. For purposes of this table, expenses of the Series in which each Fund invests are treated as if they were expenses of that Fund, since that is their practical effect. It is expected that there will be little duplication of expenses by the Funds and the Series, and that, accordingly, the combined per share expenses of each Fund and corresponding Series should not be significantly greater than the expenses of each Fund alone would be if, instead of investing in shares of the Series, the Fund retained an investment adviser and invested directly in the types of securities held by the Series.
CLASS A SHARES
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
---------- ---------- -------------- -------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases....... None None None None
Sales Charge Imposed on Dividend Reinvestment... None None None None
Deferred Sales Charge........................... None None None None
Redemption Fee.................................. None None None None
Exchange Fee.................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Investment Advisory Fees (a).................... 0.05% 0.08% 0.06% 0.11%
Other Expenses:
Administrative Fees(b)........................ 0.20% 0.22% 0.14% 0.24%
Custodian Fees................................ 0.01% 0.02% 0.02% 0.07%
Other (expenses of the Funds and the
Series)(c).................................. 0.18% 0.25% 0.23% 0.25%
---- ---- ---- ----
Total Other Expenses........................ 0.39% 0.49% 0.39% 0.56%
Reinbursement of Expenses(d).................. (0.04%) (0.07%) (0.10%) (0.02%)
---- ---- ---- ----
TOTAL OPERATING EXPENSES OF THE FUNDS AND THE
SERIES........................................ 0.40% 0.50% 0.35% 0.65%
==== ==== ==== ====
|
CLASS D SHARES
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
---------- ---------- -------------- -------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases....... None None None None
Sales Charge Imposed on Dividend Reinvestment... None None None None
Deferred Sales Charge........................... None None None None
Redemption Fee.................................. None None None None
Exchange Fee.................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Investment Advisory Fees (a).................... 0.05% 0.08% 0.06% 0.11%
Rule 12b-1 Account Maintenance Fees............. 0.25% 0.25% 0.25% 0.25%
Other Expenses..................................
Administrative Fees(b)........................ 0.20% 0.22% 0.14% 0.24%
Custodian Fees................................ 0.01% 0.02% 0.02% 0.07%
Other (expenses of the Funds and the
Series)(c).................................. 0.18% 0.25% 0.23% 0.25%
---- ---- ---- ----
Total Other Expenses........................ 0.39% 0.49% 0.39% 0.56%
---- ---- ---- ----
Reinbursement of Expenses(d).................. (0.04%) (0.07%) (0.10%) (0.02%)
TOTAL OPERATING EXPENSES OF THE FUNDS AND THE
SERIES........................................ 0.65% 0.75% 0.60% 0.90%
==== ==== ==== ====
|
(a) Paid by the Series of the Trust. See "Management of the Funds--Expenses"--page .
(b) Paid by the Funds. See "Management of the Funds--Expenses"--page .
(c) Includes fees of the Transfer Agent. See "Management of the Funds--Transfer Agency Services"--page .
(d) Merrill Lynch Asset Management, L.P. (the "Administrator") anticipates voluntarily reimbursing a portion of other expenses. The Administrator may discontinue or reduce such reimbursement at any time without notice. Absent such reimbursement, the total operating expenses of the Funds and the Series are shown below.
CLASS A SHARES
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL INDEX FUND INDEX FUND INDEX FUND INDEX FUND - ---------- ---------- -------------- ------------- 0.44% 0.57% 0.45% 0.67% |
CLASS D SHARES
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL INDEX FUND INDEX FUND INDEX FUND INDEX FUND - ---------- ---------- -------------- ------------- 0.69% 0.82% 0.70% 0.92% |
EXAMPLE:
An investor would pay the following expenses on a $1,000 investment assuming (1) the Total Operating Expenses in respect of each class of shares of each Fund as set forth on page 2, (2) a 5% annual return throughout the period and (3) redemption at the end of:
Class A Shares
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
---------- ---------- -------------- -------------
One year.................................. $ 4 $ 5 $ 4 $ 7
Three years............................... $ 13 $ 16 $ 11 $ 21
|
Class D Shares
S&P 500 SMALL CAP AGGREGATE BOND INTERNATIONAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
---------- ---------- -------------- -------------
One year.................................. $ 7 $ 8 $ 6 $ 9
Three years............................... $ 21 $ 24 $ 19 $ 29
|
The foregoing Fee Table is intended to assist investors in understanding the costs and expenses that a shareholder in each class of each Fund will bear directly or indirectly. The expenses set forth under "Other Expenses" are based on estimated amounts through the end of a Series' and a Fund's first full 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 RATE OF RETURN, AND ACTUAL EXPENSES OR ANNUAL RATE OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR PURPOSES OF THE EXAMPLE. Merrill Lynch may charge its customers a processing fee (presently $4.85) for confirming purchases and repurchases. Purchases and redemptions directly through the Funds' transfer agent are not subject to the processing fee. See "Purchase of Shares" and "Redemption of Shares."
INVESTMENT OBJECTIVES AND POLICIES
The Corporation currently consists of four series: Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund. Each Fund is a non-diversified mutual fund whose investment objective is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of a specified securities index. Each Fund will seek to achieve its objective by investing all of its assets in the series of Merrill Lynch Index Trust that has the same investment objective as the Fund. Each Fund's investment experience will correspond directly to the investment experience of the respective Series in which it invests. There can be no assurance that the investment objectives of the Funds will be achieved.
The Funds' and Series' investment objectives are not fundamental policies, and may be changed by the Directors of the Corporation and the Trustees of the Trust, respectively, without shareholder approval. THE TRUSTEES AND THE DIRECTORS MAY ALSO CHANGE THE TARGET INDEX OF ANY RESPECTIVE SERIES AND FUND IF THEY CONSIDER THAT A DIFFERENT INDEX WOULD FACILITATE THE MANAGEMENT OF THE SERIES AND FUND IN A MANNER WHICH BETTER ENABLES THE FUND AND SERIES TO SEEK TO REPLICATE THE TOTAL RETURN OF THE MARKET SEGMENT REPRESENTED BY THE CURRENT INDEX.
STRUCTURE OF THE FUNDS AND THE SERIES
Unlike many other mutual funds, which directly acquire and manage their own portfolio securities, each Fund seeks to achieve its investment objective by investing all of its assets in the corresponding Series of the Trust. Each Series is a separate series of a registered investment company with the same investment objective as its corresponding investing Fund. Because the Funds will not invest in any securities other than shares of the respective Series, investors in the Funds will acquire an indirect interest in the Series.
In addition to selling their shares to the Funds, the Series may sell their shares to other mutual funds and institutional investors. All investors in the Series invest on the same terms and conditions and pay a proportionate share of the Series' expenses. However, other investors in the Series may sell their shares at prices different from those of the Funds as a result of the imposition of sales charges or different operating expenses. Therefore, investors in the Funds should be aware that these differences may result in different returns experienced by the various entities investing in the Series. Information concerning other holders of shares of the Series is available from the Administrator by calling 1-800-MER-FUND.
The Board of Directors of the Corporation believes that this structure may enable the Funds to benefit from certain economies of scale. This view is based on the premise that (i) certain of the expenses of managing an investment portfolio that seeks to replicate the total return of a securities index are relatively fixed so that a larger investment portfolio may achieve a lower ratio of operating expenses to net assets and (ii) a larger investment portfolio may be able to reduce certain securities transaction costs to the extent that contributions to and redemptions from the investment portfolio from different investing entities may offset each other and thus produce a lower net cash flow.
A Fund's investment in a Series may be withdrawn by the Board of Directors at any time if the Board determines that it is in the best interests of the Fund to do so. If any such withdrawal were made, the Board would consider what action might be taken, including the investment of all of the assets of the Fund in another pooled investment entity having the same investment objective as the Fund or the retaining of an investment adviser to manage the Fund's assets directly in accordance with the investment objective of the Fund. The
inability to find another such pooled entity or equivalent investment management could have a significant impact on the investments of the Fund's shareholders.
Investors in the Funds should be aware that smaller entities investing in the Series may be materially affected by the actions of larger entities investing in the Series. For example, investors in the Series holding larger positions than the Funds could have greater voting power and effective voting control over the operations of the Series. Changes in the investment objective, policies or restrictions of a Series might cause a Fund to have difficulty in finding a substitute Series or equivalent investment management and might cause it to redeem its shares of the Series, and such a redemption could result in a distribution in kind of portfolio securities held by the Series, instead of cash. If securities were distributed to a Fund, and the Fund desired to convert the securities to cash, it would incur brokerage, tax or other charges in converting securities to cash. In addition, such a distribution in kind might result in a less diversified portfolio of investments of a Fund. These possibilities also exist for traditionally structured funds which have large or institutional investors who may withdraw from the fund.
Whenever a Fund is requested to vote on matters pertaining to a Series, the Fund will hold a meeting of shareholders, and the Fund's votes with respect to the Series will all be cast in the same proportion as the shares of the Fund for which voting instructions are received.
MERRILL LYNCH S&P 500 INDEX FUND
The investment objective of the Merrill Lynch S&P 500 Index Fund is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of the Standard & Poor's(R) 500 Composite Stock Price Index (the "S&P 500"). There can be no assurance that the investment objective of the Fund will be achieved.
The Fund seeks to achieve its investment objective by investing all of its assets in the Merrill Lynch S&P 500 Index Series of the Trust, which has the same investment objective as the Fund. The following is a description of the investment policies of the Series.
In seeking to replicate the total return of the S&P 500, Merrill Lynch Asset Management, L.P. ("MLAM" or the "Manager") generally will allocate the Series' investments among common stocks in approximately the same weightings as the index. In addition, the Manager may use options and futures contracts and other types of financial instruments relating to all or a portion of the index. The Series may also engage in securities lending and index arbitrage. See "Other Types of Investments and Investment Techniques."
The S&P 500 is composed of the common stocks of 500 large capitalization companies from various industrial sectors, most of which are listed on the New York Stock Exchange Inc. A company's stock market capitalization is the total market value of its outstanding shares. The S&P 500 represents a significant portion of the market value of all common stocks publicly traded in the United States.
MERRILL LYNCH SMALL CAP INDEX FUND
The investment objective of the Merrill Lynch Small Cap Index Fund is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income)
of the Russell 2000(R) Index (the "Russell 2000"). There can be no assurance that the investment objective of the Fund will be achieved.
The Fund seeks to achieve its investment objective by investing all of its assets in the Merrill Lynch Small Cap Index Series of the Trust, which has the same investment objective as the Fund. The following is a description of the investment policies of the Series.
In seeking to replicate the total return of the Russell 2000, the Manager may not allocate the Series' investments among all of the common stocks in the index, or in the same weightings as the index. Instead, the Series may invest in a statistically selected sample of the stocks included in the Russell 2000 and other types of financial instruments. The Manager may use options and futures contracts and other types of financial instruments relating to all or a portion of the index. The investments to be included in the Series will be selected so that the market capitalizations, industry weightings and other fundamental characteristics of the stocks, and of the stocks underlying or otherwise related to the foregoing financial instruments, closely approximate those same factors in the Russell 2000, with the objective of reducing the selected investment portfolio's deviation from the performance of the Index (this deviation is referred to as "tracking error"). The Series may also engage in securities lending and index arbitrage. See "Other Types of Investments and Investment Techniques."
The Russell 2000 is composed of approximately 2,000 smaller-capitalization common stocks from various industrial sectors. A company's stock market capitalization is the total market value of its outstanding shares.
MERRILL LYNCH AGGREGATE BOND INDEX FUND
The investment objective of the Merrill Lynch Aggregate Bond Index Fund is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of the Lehman Brothers Aggregate Bond Index (the "Aggregate Bond Index"). There can be no assurance that the investment objective of the Fund will be achieved.
The Fund seeks to achieve its investment objective by investing all of its assets in the Merrill Lynch Aggregate Bond Index Series of the Trust, which has the same investment objective as the Fund. The following is a description of the investment policies of the Series.
In seeking to replicate the total return of the Aggregate Bond Index, the Manager may not allocate the Series' investments among all of the fixed-income securities in the index, or in the same weightings as the index. Instead, the Series may invest in a statistically selected sample of fixed-income securities and other types of financial instruments. The Manager may use options and futures contracts and other types of financial instruments relating to all or a portion of the index. The investments to be included in the Series will be selected with the objective of reducing the selected investment portfolio's deviation from the performance of the Aggregate Bond Index (tracking error). The Series may, from time to time, substitute a different type of bond for one included in the index. Substitution may result in levels of interest rate, credit or prepayment risks that differ from the levels of risks on the securities composing the Aggregate Bond Index. See "Risk Factors--Investments in Fixed-Income Securities." The Series may also engage in securities lending and index arbitrage. See "Other Types of Investments and Investment Techniques."
The Aggregate Bond Index is composed primarily of dollar-denominated investment grade fixed-income securities in the following classes: U.S. Treasury and agency securities, U.S. corporate bonds, foreign
corporate bonds, foreign sovereign debt (debt securities issued or guaranteed by foreign governments and governmental agencies), supranational debt (debt securities issued by entities, such as the World Bank, constituted by the governments of several countries to promote economic development) and mortgage-backed securities with maturities greater than one year. Corporate bonds contained in the index represent issuers from various industrial sectors.
The Series may invest in U.S. Treasury bills, notes and bonds and other "full faith and credit" obligations of the U.S. Government. The Series may also invest in U.S. Government agency securities, which are debt obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government. "Agency" securities may not be backed by the "full faith and credit" of the U.S. Government. U.S. Government agencies may include the Federal Farm Credit Bank, the Resolution Trust Corporation and the Government National Mortgage Association. "Agency" obligations are not explicitly guaranteed by the U.S. Government and so are perceived as somewhat riskier than comparable Treasury bonds.
The Series' corporate fixed-income securities will be primarily of investment grade quality--i.e., those rated at least Baa3 by Moody's Investors Service, Inc. ("Moody's") or BBB- by Standard & Poor's Ratings Group ("S&P"), the equivalent by another nationally recognized statistical rating organization ("NRSRO") or, if unrated, of equal quality in the opinion of the Manager. Securities rated Baa or BBB are considered medium grade obligations. Interest payments and principal are regarded as adequate for the present but certain protective elements found in higher rated bonds may be lacking. Such bonds lack outstanding investment characteristics and, in fact, have speculative characteristics. Descriptions of the ratings of fixed-income securities are contained in Appendix B to this Prospectus.
The Series may also invest in other instruments that "pass through" payments on such obligations, such as collateralized mortgage obligations ("CMOs").
MERRILL LYNCH INTERNATIONAL INDEX FUND
The investment objective of the Merrill Lynch International Index Fund is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of the Morgan Stanley Capital International EAFE(R) GDP weighted Index (the "EAFE Index"). There can be no assurance that the investment objective of the Fund will be achieved.
The Fund seeks to achieve its investment objective by investing all of its assets in the Merrill Lynch International Index Series of the Trust, which has the same investment objective as the Fund. The following is a description of the investment policies of the Series.
In seeking to replicate the total return of the EAFE Index, the Manager may not allocate the Series' investments among all of the countries, or all of the companies within a country, represented in the index, or in the same weightings as the index. Instead, the Series may invest in a statistically selected sample of the equity securities included in the EAFE Index and other types of financial instruments. In addition, the Manager may use options and futures contracts and other types of financial instruments relating to all or a portion of the index. The investments to be included in the Series will be selected so that the market capitalizations, industry weightings and other fundamental characteristics of the stocks, and of the stocks underlying or otherwise related to the foregoing financial instruments, closely approximate those same factors in the EAFE Index, with the objective of reducing the selected investment portfolio's deviation from the performance of the Index
(tracking error). The Series may also engage in securities lending and index arbitrage. See "Other Types of Investments and Investment Techniques."
The EAFE Index is composed of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States and which are selected from among the larger capitalization companies in such markets. A company's stock market capitalization is the total market value of its outstanding shares. The countries currently included in the EAFE Index are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and United Kingdom. The weighting of the index among these countries is based upon gross domestic product (GDP). (Market capitalization is the basis for country weightings in another version of the EAFE Index. Using the GDP weighting tends to decrease the relative weighting of Japan and the United Kingdom while increasing the weighting of certain European countries, generally resulting in a more diversified index.)
ABOUT INDEXING AND MANAGEMENT OF THE SERIES
About Indexing. The Series are not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial, and market analyses and investment judgment. Instead, each Series, utilizing essentially a "passive" or "indexing" investment approach, seeks to replicate, before each Series' expenses (which can be expected to reduce the total return of the Series), the total return of its respective index.
Indexing and Managing the Series. Under normal conditions each Series will invest at least 80% of its assets (exclusive of assets held as collateral for securities loans or as margin for futures transactions) in securities or other financial instruments which are contained in, or related to the securities contained in, the applicable index (equity securities, in the case of the Merrill Lynch S&P 500 Index Series, Merrill Lynch Small Cap Index Series and Merrill Lynch International Index Series (the "Equity Series"), and fixed-income securities in the case of the Merrill Lynch Aggregate Bond Index Series (the "Fixed-Income Series")).
Because each Series seeks to replicate the total return of its respective index, generally the Manager will not attempt to judge the merits of any particular security as an investment but will seek only to replicate the total return of the securities in the relevant index. However, the Manager may omit or remove a security which is included in an index from the portfolio of a Series if, following objective criteria, the Manager judges the security to be insufficiently liquid or believes the merit of the investment has been substantially impaired by extraordinary events or financial conditions.
In managing the Series, the Manager may employ index arbitrage. Index arbitrage involves the sale of a replicating selection, or "basket," of stocks with the simultaneous purchase of an equivalent dollar value of related futures contracts, or alternatively the purchase of such an equity basket with a simultaneous sale of related futures contracts. This technique is designed to take advantage of a possible mispricing which could arise between the securities market and the futures market. Extensive use of this technique could, however, be limited by applicable tax laws.
In addition, the Manager may acquire certain financial instruments based upon individual securities or based upon or consisting of one or more baskets of securities (which basket may be based upon a target index). Certain of these instruments may represent an indirect ownership interest in such securities or baskets.
Others may provide for the payment to a Series or by a Series of amounts based upon the performance (positive, negative or both) of a particular security or basket. The Manager will select such instruments when it believes that the use of the instrument will correlate substantially with the expected total return of a target security or index. In connection with the use of such instruments, the Manager may enter into short sales in an effort to adjust the weightings of particular securities represented in the basket to more accurately reflect such securities' weightings in the target index.
Each Series' ability to replicate the total return of its respective index may be affected by, among other things, transaction costs, administration and other expenses incurred by the Series, taxes (including foreign withholding taxes, which will affect the International Index Series and the Aggregate Bond Index Series due to foreign tax withholding practices), changes in either the composition of the index or the assets of a Series, and the timing and amount of Series investor contributions and withdrawals, if any. In addition, each Fund's total return will be affected by incremental operating costs (e.g., transfer agency, accounting) that will be borne by the Fund. Under normal circumstances, it is anticipated that each Series' total return over periods of one year and longer will, on a gross basis and before taking into account expenses, be within 5 basis points (a basis point is one one-hundredth of one percent (0.01%)) for the S&P 500 Index Fund, 100 basis points for the Small Cap Index Fund, 150 basis points for the International Index Fund, and 25 basis points for the Aggregate Bond Index Fund, of the total return of the applicable indices. There can be no assurance, however, that these levels of correlation will be achieved. In the event that this correlation is not achieved over time, the Trustees of the Trust and the Directors of the Corporation will consider alternative strategies for the Series and the Funds.
OTHER TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES OF THE SERIES
Cash Management. Generally, the Manager will employ futures and options on futures to provide liquidity necessary to meet anticipated redemptions or for day-to-day operating purposes. However, if considered appropriate in the opinion of the Manager, a portion of a Series' assets may be invested in certain types of instruments with remaining maturities of 397 days or less for liquidity purposes. Such instruments would consist of: (i) obligations of the U.S. Government, its agencies, instrumentalities, authorities or political subdivisions ("U.S. Government Securities"); (ii) other fixed-income securities rated Aa or higher by Moody's or AA or higher by S&P or, if unrated, of comparable quality in the opinion of the Manager; (iii) commercial paper; (iv) bank obligations, including negotiable certificates of deposit, time deposits and bankers' acceptances; and (v) repurchase agreements. At the time the Series invests in commercial paper, bank obligations or repurchase agreements, the issuer or the issuer's parent must have outstanding debt rated Aa or higher by Moody's or AA or higher by S&P or outstanding commercial paper, bank obligations or other short-term obligations rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available, the instrument must be of comparable quality in the opinion of the Manager.
Futures, Options, Swaps and Indexed Instruments. Each Series will also utilize options, futures, options on futures, swaps and other indexed instruments. Futures and options on futures may be employed to provide liquidity as described in the preceding paragraph, and may also be employed in connection with a Series' index arbitrage strategies. Futures, options on futures, swaps and other indexed instruments may be employed as a proxy for a direct investment in securities underlying the Series' index. In addition, the Merrill Lynch International Index Series may engage in futures contracts on foreign currencies in connection with certain foreign securities transactions.
The Manager will choose among the foregoing instruments based on its judgment of how best to meet each Series' goals. In connection therewith, the Manager will assess such factors as current and anticipated securities prices, relative liquidity and price levels in the options, futures and swap markets compared to the securities markets, and the Series' cash flow and cash management needs.
The Series' use of the foregoing instruments and the associated risks are described in detail in Appendix A to this Prospectus.
Foreign Exchange Transactions. The Merrill Lynch International Index Series may engage in futures contracts on foreign currencies and foreign currency forward and spot transactions in connection with transactions or anticipated transactions in securities denominated in foreign currencies. Specifically, the Series may purchase or sell a currency to settle a security transaction or sell a currency in which the Series has received or anticipates receiving a dividend or distribution.
OTHER INVESTMENT POLICIES AND PRACTICES OF THE SERIES
Illiquid Investments. Each of the Series may invest up to 15% of its net assets in illiquid investments. Pursuant to that restriction the Series may not invest in instruments which cannot be readily resold because of legal or contractual restrictions, which cannot otherwise be marketed, redeemed, put to the issuer or a third party, which do not mature within seven days, or which the Trustees have not determined to be liquid, if, regarding all such instruments, more than 15% of its net assets, taken at market value, would be invested in such instruments.
The Series may purchase, without regard to the above limitation, securities that are not registered under the Securities Act of 1933 (the "Securities Act") but that can be offered and sold to "qualified institutional buyers" under Rule 144A under the Securities Act, provided that the Trustees, or the Manager pursuant to guidelines adopted by the Trustees, continuously determines, based on the trading markets for the specific Rule 144A security, that it is liquid. The Trustees, however, will retain oversight and are ultimately responsible for these determinations. The Trustees monitor the Series' investments in these securities, focusing on such factors, among others, as valuation, liquidity and availability of information. This investment practice could have the effect of increasing the level of illiquidity in the Series to the extent that qualified institutional buyers become for a time uninterested in purchasing these securities.
Repurchase Agreements. Each Series may invest in securities pursuant to repurchase agreements. Repurchase agreements may be entered into only with a member bank of the Federal Reserve System, primary dealers in U.S. Government securities, or an affiliate thereof, or with other entities which the Manager otherwise deems to be creditworthy. Under repurchase agreements, the counterparty agrees, upon entering into the contract, to repurchase the security from the Series 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 event of default by the seller under a repurchase agreement the Series may suffer time delays and incur costs or possible losses in connection with disposition of the collateral. Repurchase agreements maturing in more than seven days are deemed illiquid by the Securities and Exchange Commission and are therefore subject to the Series' investment restrictions limiting investments in securities that are not readily marketable to 15% of the Series' net assets.
Lending of Portfolio Securities. To the extent permitted by law, each Series may from time to time lend securities from its portfolio to banks, brokers and other financial institutions and receive collateral in cash or securities issued or guaranteed by the United States government. Such collateral will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. Each Series' policy concerning lending is fundamental and it may not be changed without the approval of the holders of a majority of the Series' outstanding voting securities, as defined in the Investment Company Act. During the period of such a loan, the Series receives the income on the loaned securities and either receives the income on the collateral or other compensation, i.e., negotiated loan premium or fee, for entering into the loan and thereby increases its yield. In the event that the borrower defaults on its obligation to return borrowed securities, because of insolvency or otherwise, the Series could experience delays and costs in gaining access to the collateral and could suffer a loss to the extent that the value of the collateral falls below the market value of the borrowed securities. Presently, the Series does not intend to lend portfolio securities representing in excess of 33 1/3% of its total assets.
When-Issued Securities and Delayed Delivery Transactions. The Merrill Lynch Aggregate Bond Index Series 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 Series with payment and delivery taking place in the future to secure what is considered an advantageous yield and price to the Series at the time of entering into the transaction. Although the Series has not established any limit on the percentage of its assets that may be committed in connection with such transactions, the Series will maintain a segregated account with its custodian of liquid securities in an aggregate amount equal to the amount of its commitment in connection with such purchase transactions.
Dollar Rolls. The Aggregate Bond Index Series may enter into dollar rolls, in which the Series will sell securities for delivery in the current month and simultaneously contract to repurchase substantially similar (the same type and coupon) securities on a specified future date from the same party. During the roll period, the Series forgoes principal and interest paid on the securities sold. The Series is compensated by the difference between the current sales price and the forward price for the future purchase (often referred to as the "drop") as well as by the interest earned on the cash proceeds of the initial sale.
The Series will establish a segregated account with its custodian in which it will maintain liquid securities in an aggregate amount equal to the amount of the forward commitment. Dollar rolls involve the risk that the market value of the securities subject to the Series' forward purchase commitment may decline below the price of the securities the Series has sold. In the event the buyer of the securities files for bankruptcy or becomes insolvent, the Series' use of the proceeds of the current sale portion of the transaction may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Series' obligation to purchase the similar securities in the forward transaction. Dollar rolls are speculative techniques which can be deemed to involve leverage and are considered borrowings by the Series for purposes of the percentage limitations applicable to borrowings.
Standby Commitment Agreements. The Merrill Lynch Aggregate Bond Index Series may from time to time enter into standby commitment agreements. Such agreements commit the Series, for a stated period of time, to purchase a stated amount of a fixed income security which may be issued and sold to the Series 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 Series is paid a commitment fee, regardless of whether or not the security is ultimately issued, which is typically approximately 0.5% of the aggregate purchase price of the security
which the Series has committed to purchase. The Series 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 Series. The Series will not enter into a standby commitment with a remaining term in excess of 90 days and 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 all other illiquid securities, will not exceed 15% of its total assets taken at the time of acquisition of such commitment or security. The Series will at all times maintain a segregated account with its custodian of liquid securities in an aggregate amount equal to the purchase price of the securities underlying the commitment.
There can be no assurance that the securities subject to a standby commitment will be issued and 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 Series 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 will thereafter be reflected in the calculation of the Series' 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.
Short Sales. In connection with the use of certain instruments based upon or consisting of one or more baskets of securities, the Manager may sell a security a Series does not own, or in an amount greater than the Series owns (i.e., make short sales). Such transactions will be used only in an effort to adjust the weightings of particular securities represented in the basket to reflect such securities' weightings in the target index. The Manager will not employ short sales in reflection of the Manager's outlook for the securities markets or for the performance of the securities sold short. Generally, to complete a short sale transaction, the Series will borrow the security to make delivery to the buyer. The Series is then obligated to replace the security borrowed. The price at the time of replacement may be more or less than the price at which the security was sold by the Series. Until the security is replaced, the Series is required to pay to the lender any interest which accrues during the period of the loan. To borrow the security, the Series may be required to pay a premium which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker to the extent necessary to meet margin requirements until the short position is closed out. Until the Series replaces the borrowed security, it will (a) maintain in a segregated account with its custodian cash or liquid securities at such a level that the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current market value of the security sold short or (b) otherwise cover its short position.
INVESTMENT RESTRICTIONS
The Funds' and the Series' 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 Funds' or Series' outstanding voting securities as defined in the Investment Company Act.
Among the more significant fundamental restrictions, a Series or 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); provided, that in replicating the weighting of a particular industry in its target index, a Series or Fund may invest more that 25% of its total assets in securities of issuers in that industry. In addition, although each Fund is classified as a non-diversified fund under the Investment Company Act and is not subject to the diversification requirements of the Investment Company Act., each Fund is required to comply with certain requirements under the Internal Revenue Code of 1986, as amended (the "Code"). To ensure that the Funds satisfy these requirements, the Declaration of Trust requires that each Series be managed in compliance with the Code requirements as though such requirements were applicable to the Series. These requirements include 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 a Fund's total assets are invested in the securities of a single issuer, or any two or more issuers which are controlled by the Fund and engaged in the same, similar or related businesses, 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 are invested in the securities of a single issuer, and the Fund does not own more than 10% of the outstanding voting securities of a single issuer. The U.S. Government, its agencies and instrumentalities are not included within the definition of "issuer" for purposes of the diversification requirements of the Code. These requirements will be satisfied at the Series level and not at the level of the Funds based upon a ruling received from the Internal Revenue Service ("IRS") which entitles the Funds to "look through" the shares of the Series to the underlying investments of the Series for purposes of these diversification requirements.
The Funds' and Series' investment objectives are not fundamental policies, and may be changed by the Directors and the Trustees, respectively, without shareholder approval. THE TRUSTEES AND THE DIRECTORS MAY ALSO CHANGE THE TARGET INDEX OF ANY RESPECTIVE SERIES AND FUND IF THEY CONSIDER THAT A DIFFERENT INDEX WOULD FACILITATE THE MANAGEMENT OF THE SERIES AND FUND IN A MANNER WHICH BETTER ENABLES THE FUND AND SERIES TO SEEK TO REPLICATE THE TOTAL RETURN OF THE MARKET SEGMENT REPRESENTED BY THE CURRENT INDEX.
RISK FACTORS
Each Fund will be subject to the risks associated with an investment in its corresponding Series. These risks are set forth below.
Cash Flows; Expenses. The ability of each Series to satisfy its investment objective depends to some extent on the Manager's ability to manage cash flow (primarily from purchases and redemptions and distributions from the Series' investments). The Manager will make investment changes to a Series' portfolio to accommodate cash flow while continuing to seek to replicate the total return of the Series' target index. Investors should also be aware that the investment performance of each index is a hypothetical number which does not take into account brokerage commissions and other transaction costs, custody and other costs of investing, which will be borne by the Series, and any incremental operating costs (e.g., transfer agency, accounting) that will be borne by the Funds. Finally, since each Series seeks to replicate the total return of its target index, the Manager generally will not attempt to judge the merits of any particular security as an investment.
Options, Futures, Swaps and Indexed Instruments. The Manager expects to use options, futures, options on futures, swaps and indexed instruments as described above under "About Indexing and Management of the Series--Other Types of Investments and Techniques--Futures, Options, Swaps and Indexed Instruments."
Use of such instruments may involve investment risks and transaction costs to which the Series would not be subject absent the use of these instruments. A discussion of these instruments is contained in Appendix A to this Prospectus.
Investment in Foreign Securities. Investments on an international basis involve certain risks not typically 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 or U.S. governmental laws or restrictions applicable to such investments. Securities prices in different countries are subject to different economic, financial, political and social factors. Moreover, individual foreign economies may differ favorably or unfavorably from the United States economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. Also, it is anticipated that most of the foreign securities held by a Series will not be registered with the Securities and Exchange Commission nor will the issuers thereof be subject to the reporting requirements of such agency. In addition, foreign investors such as the Series may be subject to withholding taxes in certain countries, which may reduce the returns of the Series.
Since the Merrill Lynch International Index Series will invest heavily in securities denominated or quoted in currencies other than the United States dollar, changes in foreign currency exchange rates will affect the value of securities in the Series' portfolio and the unrealized appreciation or depreciation of investments so far as United States investors are concerned. Currencies of certain foreign countries may be volatile and therefore may affect the value of securities denominated in such currencies. Changes in foreign currency exchange rates relative to the United States dollar will affect the United States dollar value of the Series' assets denominated in that currency and the return on such assets. The rate of exchange between the dollar and other currencies is determined by forces of supply and demand in the foreign exchange markets. These forces are, in turn, affected by the international balance of payments, the level of interest and inflation rates and other economic and financial conditions, government intervention, speculation and other factors.
Investment in Fixed-Income Securities. Because the Merrill Lynch Aggregate Bond Index Series will invest in fixed-income securities, it will be subject to the general risks inherent is such securities, primarily interest rate risk, credit risk and prepayment risk.
Interest rate risk is the potential for fluctuations in bond prices due to changing interest rates. As a rule bond prices vary inversely with interest rates. If interest rates rise, bond prices generally decline; if interest rates fall, bond prices generally rise. In addition, for a given change in interest rates, longer-maturity bonds generally fluctuate more in price than shorter-maturity bonds. To compensate investors for these larger fluctuations, longer-maturity bonds usually offer higher yields than shorter-maturity bonds, other factors, including credit quality, being equal. These basic principles of bond prices also apply to U.S. Government Securities. A security backed by the "full faith and credit" of the U.S. Government is guaranteed only as to its stated interest rate and face value at maturity, not its current market price. Just like other fixed-income securities, government-guaranteed securities will fluctuate in value when interest rates change.
Credit risk is the possibility that an issuer of securities held by the Series will be unable to make payments of either interest or principal or will be perceived to have a diminished capacity to make such payments in the future. The credit risk of the Series is a function of the diversification and credit quality of its underlying securities.
The Series may also be exposed to event risk, which includes the possibility that fixed-income securities held by the Series may suffer a substantial decline in credit quality and market value due to issuer restructurings. Certain restructurings such as mergers, leveraged buyouts, takeovers or similar events, are often financed by a significant expansion of corporate debt. As a result of the added debt burden, the credit quality and market value of a firm's existing debt securities may decline significantly. Other types of restructurings (such as corporate spinoffs or privatizations of governmental or agency borrowers or the termination of express or implied governmental credit support) may also result in decreased credit quality of a particular issuer.
Prepayment risk is the possibility that the principal of the mortgage loans underlying mortgage-backed securities may be prepaid at any time. As a general rule, prepayments increase during a period of falling interest rates and decrease during a period of rising interest rates. As a result of prepayments, in periods of declining interest rates the Series may be required to reinvest its assets in securities with lower interest rates. In periods of increasing interest rates, prepayments generally may decline, with the effect that the mortgage-backed securities held by the Series may exhibit price characteristics of longer-term debt securities.
The corporate substitution strategy used by the Series (discussed above) may increase or decrease the Series' exposure to the foregoing risks relative to those of the Aggregate Bond Index.
Investments in Small Companies. The Merrill Lynch Small Cap Index Series will invest primarily in securities of smaller capitalization issuers. Investments in securities of smaller capitalization issuers involve special considerations and risks not typically associated with investments in securities of larger capitalization issuers, including an issuer's limited product lines, markets or financial resources, or dependence on a limited management group. In addition, many smaller capitalization stocks trade less frequently and in smaller volume, and may be subject to more abrupt or erratic price movements, than stocks of larger companies. The securities of smaller companies may also be more sensitive to market changes than the securities of larger companies.
Portfolio Turnover. Although the Series will use a passive, indexing approach to investing, each Series may engage in a substantial number of portfolio transactions. The rate of portfolio turnover will be a limiting factor when the Manager considers whether to purchase or sell securities for a Series only to the extent that the Manager will consider the impact of transaction costs on a Series' tracking error. Changes in the securities comprising a Series' index will tend to increase that Series' portfolio turnover rate, as the Manager restructures the Series' holdings to reflect the changes in the index. The portfolio turnover rate is, in summary, the percentage computed by dividing the lesser of a Series' purchases or sales of securities by the average net asset value of the Series. High portfolio turnover involves correspondingly greater brokerage commissions for a Series investing in equity securities and other transaction costs which are borne directly by a Series. A high portfolio turnover rate may also result in the realization of taxable capital gains, including short-term capital gains taxable at ordinary income rates.
While it is impossible to predict the portfolio turnover rates for each of the Series, it is anticipated that the portfolio turnover rates for each of the Series will not exceed 100%.
ADDITIONAL INFORMATION CONCERNING THE INDICES
S&P 500. "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500", and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Corporation and the Trust. The S&P 500 Index Fund and the S&P 500 Index Series are not sponsored, endorsed, sold or promoted
by Standard & Poor's, a division of the McGraw Hill Companies, Inc. ("Standard & Poor's") and Standard & Poor's makes no representation regarding the advisability of investing in the Fund or the Series.
The Fund and the Series are not sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's makes no representation or warranty, express or implied, to the owners of shares of the Fund or the Series or any member of the public regarding the advisability of investing in securities generally or in the Fund or the Series particularly or the ability of the S&P 500 to track general stock market performance. Standard & Poor's only relationship to the Fund and the Series is the licensing of certain trademarks and trade names of Standard & Poor's and of the S&P 500 which is determined, composed and calculated by Standard & Poor's without regard to the Fund and the Series. Standard & Poor's has no obligation to take the needs of the Fund and the Series or the owners of shares of the Fund and the Series into consideration in determining, composing or calculating the S&P 500. Standard & Poor's is not responsible for and has not participated in the determination of the prices and amount of the Fund and the Series or the timing of the issuance of sale of shares of the Fund and the Series or in the determination or calculation of the equation by which the Fund and the Series is to be converted into cash. Standard & Poor's has no obligation or liability in connection with the administration, marketing or trading of the Fund and the Series.
Standard & Poor's does not guarantee the accuracy and/or the completeness of the S&P 500 Index or any data included therein, and Standard & Poor's shall have no liability for any errors, omissions, or interruptions therein. Standard & Poor's makes no warranty, express or implied, as to results to be obtained by the Fund, the Series, owners of shares of the Fund and the Series, or any other person or entity from the use of the S&P 500 Index or any data included therein. Standard & Poor's makes no express or implied warranties and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 Index or any data included therein. Without limiting any of the foregoing, in no event shall Standard & Poor's have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.
Russell 2000. The Merrill Lynch Small Cap Index Fund and the Merrill Lynch Small Cap Index Series are not promoted, sponsored or endorsed by, nor in any way affiliated with Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Fund or the Series nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000(R) Index. Frank Russell Company has no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating the Index.
Frank Russell Company's publication of the Russell 2000(R) Index in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all securities upon which the Index is based. Frank Russell company makes no representation, warranty, or guarantee as to the accuracy, completeness, reliability, or otherwise of the Index or any data included in the Index. Frank Russell company makes no representation or warranty regarding the use, or the results of use, of the Index or any data included therein, or any security (or combination thereof) comprising the Index. Frank Russell company makes no other express or implied warranty, and expressly disclaims any warranty, of any kind, including, without means of limitation, any warranty of merchantability or fitness for a particular purpose with respect to the Index or any data or any security (or combination thereof) included therein.
EAFE Index. The Morgan Stanley Capital International ("MSCI") EAFE(R) Index is the exclusive property of Morgan Stanley & Co. Incorporated ("Morgan Stanley"). The MSCI EAFE(R) Index is a service mark of Morgan Stanley Group Inc. and has been licensed for use by MLAM and its affiliates.
The Merrill Lynch International Index Fund and the Merrill Lynch International Index Series are not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or warranty, express or implied, to the owners of shares of the Fund and the Series or any member of the public regarding the advisability of investing in securities generally or in the Fund and a the Series particularly or the ability of the EAFE Index to track general stock market performance. Morgan Stanley is the licensor of certain trademarks, service marks and trade names of Morgan Stanley and of the EAFE Index. Morgan Stanley has no obligation to take the needs of the Fund and the Series or the owners of shares of the Fund and the Series into consideration in determining, composing or calculating the EAFE Index. Morgan Stanley is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of shares of the Fund and the Series to be issued or in the determination or calculation of the equation by which the shares of the Fund and the Series is redeemable for cash. Morgan Stanley has no obligation or liability to owners of shares of the Fund and the Series in connection with the administration, marketing or trading of the Fund and the Series.
Although Morgan Stanley shall obtain information for inclusion in or for use in the calculation of the index from sources which Morgan Stanley considers reliable, Morgan Stanley does not guarantee the accuracy and/or the completeness of the index or any data included therein. Morgan Stanley makes no warranty, express or implied, as to results to be obtained by licensee, licensee's customers and counterparties, owners of shares of the Fund and the Series, or any other person or entity from the use of the index or any data included therein in connection with the rights licensed hereunder or for any other use. Morgan Stanley makes no express or implied warranties, and hereby expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the index or any data included therein. Without limiting any of the foregoing, in no event shall Morgan Stanley have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
MANAGEMENT OF THE FUNDS
BOARD OF DIRECTORS
The Board of Directors of the Corporation consists of four individuals, three of whom are not "interested persons" of the Fund as defined in the Investment Company Act. The Board of Directors is responsible for the overall supervision of the operations of the Funds and performs the various duties imposed on the directors of investment companies by the Investment Company Act.
The Directors of the Fund are:
TERRY K. GLENN*--Executive Vice President of MLAM and Fund Asset Management, L.P. ("FAM") since 1983; Executive Vice President and Director of Princeton Services, Inc. since 1993; President of Merrill Lynch Funds Distributor, Inc. (the "Distributor") since 1986 and Director thereof since 1991; President of Princeton Administrators, L.P. since 1988; and Director of Merrill Lynch Financial Data Services, Inc. since 1985.
JACK B. SUNDERLAND--President and Director of American Independent Oil Company, Inc. (energy company) since 1987; Member of Council on Foreign Relations since 1971.
STEPHEN B. SWENSRUD--Principal of Fernwood Associates (financial consultants).
J. THOMAS TOUCHTON--Managing Partner of The Witt-Touchton Company and its predecessor The Witt Co. (private placement partnership) since 1972; Trustee Emeritus of Washington and Lee University; Director of TECO Energy, Inc. (electric utility holding company).
* Interested person, as defined by the Investment Company Act, of the Fund.
The Directors of the Corporation are also Trustees of the Trust. The Directors have adopted procedures that they believe are reasonably designed to resolve any conflicts that arise in connection with this overlap.
ADMINISTRATION OF THE CORPORATION AND THE FUNDS
The Corporation does not have an investment adviser, since all of each Fund's assets will be invested in its corresponding Series. The Corporation has retained the services of MLAM as administrator of the Funds (the "Administrator"). Under the Administration Agreement, the Administrator provides the Funds with administrative services.
ADVISORY ARRANGEMENTS OF THE TRUST AND THE SERIES
MLAM, with offices at 800 Scudders Mill Road, Plainsboro, New Jersey (mailing address: Box 9011, Princeton, New Jersey 08543-9011) also acts as manager for the Trust and each Series and provides them with management and investment advisory services.
MLAM is owned and controlled by Merrill Lynch & Co., Inc. ("ML & Co."), a financial services holding company and the parent of Merrill Lynch. MLAM or its affiliate, FAM, acts as the manager and investment adviser for more than 130 other registered investment companies. MLAM also offers portfolio management and portfolio analysis services to individuals and institutions. As of October 31, 1996, MLAM and FAM had a total of approximately $217.6 billion in investment company and other portfolio assets under management, including accounts of certain affiliates of MLAM.
Eric Mitofsky is primarily responsible for the day-to-day management of the investments of the Merrill Lynch S&P 500 Index Series, Merrill Lynch Small Cap Index Series and Merrill Lynch International Index Series. Mr. Mitofsky has been associated with MLAM since 1987, and has been a Vice President of MLAM since 1992. Jay C. Harbeck and Gregory M. Maunz are primarily responsible for the day-to-day management of the investments of the Merrill Lynch Aggregate Bond Index Series. Mr. Harbeck has been a Vice President of MLAM since 1986, and Mr. Maunz has been a Vice President of MLAM since 1985.
EXPENSES
The Funds pay the Administrator monthly compensation at the annual rates of the average daily net assets of each Fund as follows:
NAME OF FUND ADMINISTRATION FEE
----------------------------------------------------------------- ------------------
Merrill Lynch S&P 500 Index Fund................................. 0.20%
Merrill Lynch Small Cap Index Fund............................... 0.22%
Merrill Lynch Aggregate Bond Index Fund.......................... 0.14%
Merrill Lynch International Index Fund........................... 0.24%
|
In addition, the administration agreement with the Administrator (the "Administration Agreement") obligates the Corporation to pay certain expenses incurred in its operations including, among other things, legal and audit fees, registration fees, unaffiliated Directors' fees and expenses, custodian and transfer agency fees, accounting costs, the costs of issuing and redeeming shares and certain of the costs of printing proxies, shareholder reports, prospectuses and statements of additional information. Accounting services are provided to each Fund by the Administrator, and each Fund reimburses the Administrator for its costs in connection with such services on a semi-annual basis.
The Series of the Trust pay the Manager monthly compensation at the annual rates of the average daily net assets of each Series as follows:
NAME OF SERIES MANAGEMENT FEE
------------------------------------------------------------------ --------------
Merrill Lynch S&P 500 Index Series................................ 0.05%
Merrill Lynch Small Cap Index Series.............................. 0.08%
Merrill Lynch Aggregate Bond Index Series......................... 0.06%
Merrill Lynch International Index Series.......................... 0.11%
|
In addition, the management agreement with the Manager (the "Management Agreement") obligates the Trust to pay certain expenses incurred in its operations including, among other things, legal and audit fees, registration fees, unaffiliated trustees' fees and expenses, custodian and transfer agency fees, accounting costs, the costs of issuing and redeeming shares and certain of the costs of printing proxies, shareholder reports, prospectuses and statements of additional information. Accounting services are provided to the Trust by the Manager, and each Series reimburses the Manager for its costs in connection with such services on a semi-annual basis.
The Directors of the Corporation believe that the aggregate per share expenses of each Fund and corresponding Series should not be significantly greater than the expenses which each Fund would incur if it retained the services of an investment adviser and the assets of each Fund were invested directly in the type of securities held by the corresponding Series.
TRANSFER AGENCY SERVICES
Merrill Lynch Financial Data Services, Inc. ("MLFDS" or the "Transfer Agent"), which is a wholly-owned subsidiary of ML & Co., acts as the Corporation'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 a fee for its services and is entitled to reimbursement for out-of-pocket expenses incurred by it under the Transfer Agency Agreement. MLFDS also acts as the transfer agent to the Trust.
CODES OF ETHICS
The Board of Directors of the Corporation has adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act which incorporates the Codes of Ethics of the Trust and of MLAM (together, the "Ethics Codes"). The Ethics Codes significantly restrict the personal investing activities of all employees of
the Manager and, as described below, impose additional, more onerous, restrictions on fund investment personnel.
The Ethics Codes require that all employees of the Manager preclear any personal securities investment (with limited exceptions, such as government securities). The preclearance requirement and associated procedures are designed to identify any substantive prohibition or limitation applicable to the proposed investment. The substantive restrictions applicable to all employees of the Manager include a ban on acquiring any securities in a "hot" initial public offering and a prohibition from profiting on short-term trading in securities. In addition, no employee may purchase or sell any security which at the time is being purchased or sold (as the case may be), or to the knowledge of the employee is being considered for purchase or sale, by any fund advised by the Manager. Furthermore, the Ethics Codes provide for trading "blackout periods" which prohibit trading by investment personnel of the Trust within periods of trading by the Series in the same (or equivalent) security (15 or 30 days depending upon the transaction).
PURCHASE OF SHARES
Merrill Lynch Funds Distributor, Inc. (the "Distributor"), an affiliate of both MLAM and Merrill Lynch, acts as the distributor of the shares of the Fund.
The Fund offers two classes of shares, Class A shares and Class D shares. Class A shares of the Fund are offered at a price equal to the next determined net asset value per share without the imposition of any front-end or deferred sales charge, and are not subject to any ongoing account maintenance or distribution fee. Distribution of Class A shares of the Fund is limited to certain eligible investors. Class D shares of each Fund are offered at a price equal to the next determined net asset value per share without the imposition of any front-end or deferred sales charge and are not subject to any ongoing distribution fee, but are subject to an ongoing account maintenance fee at an annual rate of 0.25% of average daily net assets.
Class A shares are offered to a limited group of investors who participate in certain investment programs which charge a fee for participation, including the Merrill Lynch Mutual Fund Adviser program. In addition, Class A shares are offered to ML & Co. and its subsidiaries and their directors and employees and to members of the Boards of MLAM-advised investment companies, including the Corporation. For more information about these programs, contact the Distributor at 1-800-MER-FUND.
Shares may be purchased directly from the Distributor, P.O. Box 9081, Princeton, New Jersey 08543-9081 (609) 282-2800), which has entered into a dealer agreement with Merrill Lynch. Shareholders may redeem their shares at any time at the next determined net asset value. The minimum initial purchase is $1,000 and the minimum subsequent purchase is $50, except that for retirement plans the minimum initial investment is $100 and the minimum subsequent purchase is $1. Merrill Lynch may charge its customers a processing fee (currently $4.85) for confirming purchases and repurchases. Purchase and redemptions directly through the Corporation's transfer agent are not subject to processing fees.
The Distributor also acts as the placement agent for the Trust.
ACCOUNT MAINTENANCE PLAN
Pursuant to a plan adopted by the Corporation with respect to the Class D shares of each Fund pursuant to Rule 12b-1 under the Investment Company Act (the "Plan"), the Class D shares of each Series pay the
Distributor an ongoing account maintenance fee, accrued daily and paid monthly, at the annual rate of 0.25% of the average daily net assets attributable to such shares. Pursuant to a sub-agreement with the Distributor, Merrill Lynch also provides account maintenance services in respect of the Class D shares of each Fund. The ongoing account maintenance fee compensates the Distributor and Merrill Lynch for providing account maintenance services to Class D shareholders.
REDEMPTION OF SHARES
Each Fund is required to redeem all full and fractional shares of the Fund upon 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. There will be no additional charge for redemption if the redemption request is sent directly to the Transfer Agent. Shareholders liquidating their holdings will receive upon redemption all dividends reinvested through the date of redemption. The value of shares at the time of redemption may be more or less than the shareholder's cost, depending on the market value of the securities held by the Fund at such time. The Corporation will generally pay redemptions in cash; however, if requested by a shareholder, at the discretion of the Administrator the Corporation may pay a redemption or repurchase of shares in an amount of $10,000,000 or more (which amount may be decreased or increased by the Administrator from time to time) with portfolio securities.
REDEMPTION
A shareholder wishing to redeem shares may do so without charge by tendering the shares directly to the Transfer Agent, Merrill Lynch Financial Data Services, Inc., P.O. Box 45289, Jacksonville, Florida 32232-5289. Redemption requests delivered other than by mail should be delivered to Merrill Lynch Financial Data Services, Inc., Transfer Agency Operations Department, 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484. Redemption requests should not be sent to the Corporation. Proper notice of redemption in the case of shares deposited with the Transfer Agent may be accomplished by a written letter requesting redemption. Proper notice of redemption in the case of shares for which certificates have been issued may be accomplished by a written letter as noted above accompanied by certificates for the shares to be redeemed. The notice in either event requires the signatures of all persons in whose names the shares are registered, signed exactly as their names appear on the Transfer Agent's register or on the certificate, as the case may be. The signature(s) on the notice must be guaranteed by an "eligible guarantor institution" as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, the existence and validity of which may be verified by the Transfer Agent through the use of industry publications. "Eligible guarantor institution(s)" include certain banks, brokers, dealers, credit unions, securities exchanges and associations, clearing agencies and savings association. 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 a 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 it has assured itself that good payment (e.g., cash or certified check drawn on a United States bank) has been collected for the purchase of such shares. Normally, this delay will not exceed 10 days.
REPURCHASE
Each Fund also will repurchase shares through a shareholder's listed securities dealer. The Funds 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 such request is received by a Fund from such dealer not later than 30 minutes after the close of business on the New York Stock Exchange (generally 4:00 P.M., New York time), on the same day. Dealers have the responsibility to submit such repurchase requests to the Fund not later than 30 minutes after the close of business on the New York Stock Exchange 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 a Fund. 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 Fund's Transfer Agent are not subject to the processing fee. The Corporation 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 a Fund, however, may redeem shares as set forth above.
SHAREHOLDER SERVICES
The Corporation offers a number of shareholder services and investment plans designed to facilitate investment in its shares. Full details as to each of such services, copies of the various plans described below and instructions as to how to participate in the various plans and services, or to change options with respect thereto, can be obtained from the Corporation, the Distributor or Merrill Lynch. Included in such services are the following:
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the Transfer Agent has an Investment Account and will receive statements, at least quarterly, from the Transfer Agent. These statements will serve as transaction confirmations for automatic investment purchases and the reinvestment of ordinary income dividends and long-term capital gains distributions. The statement will also show any other activity in the account since the preceding statements. Shareholders will receive separate transaction confirmations for each purchase or sale transaction other than automatic investment purchase and the reinvestment of ordinary income dividends and long-term capital gains distribution. Shareholders may make additions to their Investment Account at any time by mailing a check directly to the Transfer Agent. Shareholders may also 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 interested in transferring their 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 be issued certificates for his shares, and then must turn the certificates over
to the new firm for re-registration as described in the preceding sentence. Shareholders considering transferring from Merrill Lynch to another brokerage firm or financial institution should be aware that, if the firm to which the account is to be transferred will not take delivery of shares of a Fund, a shareholder must either redeem the shares so that the cash proceeds can be transferred to the account at the new firm, or such shareholder must continue to maintain an account at Merrill Lynch for those shares.
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.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All dividends and capital gains distributions are reinvested automatically in full and fractional shares of the Funds at the net asset value per share next determined on the ex-dividend date of such dividends and distributions. A shareholder may at any time, by written notification or by telephone (1-800-MER-FUND) or by written notification to Merrill Lynch if the shareholder's account is maintained with Merrill Lynch, or the Transfer Agent, if the shareholder's account is maintained with the Transfer Agent, elect to have subsequent dividends, or both dividends and capital gains distributions, paid in cash rather than reinvested, in which event payment will be mailed on or about the payment date.
SYSTEMATIC WITHDRAWAL PLANS
A shareholder may elect to receive systematic withdrawal payments from such shareholder's Investment Account in the form of payments by check or through automatic payment by direct deposit to such shareholder's bank account on either a monthly or quarterly basis. Shareholders whose shares are held within a CMA(R), CBA(R) or Retirement Account may elect to have shares redeemed on a monthly, bi-monthly, quarterly, semiannual or annual basis through the Systematic Redemption Program, subject to certain conditions.
AUTOMATIC INVESTMENT PLANS
Regular additions of shares may be made in an investor's Investment Account by prearranged charges of $50 or more to such investor's regular bank account. Investors who maintain CMA(R) accounts may arrange to have periodic investments made in the Funds in their CMA(R) account or in certain related accounts in amounts of $100 or more through the CMA(R) Automated Investment Program.
RETIREMENT PLANS
Self-directed individual retirement accounts and other retirement plans are available from Merrill Lynch. Under these plans, investments may be made in the Funds and in certain of the other mutual funds sponsored by Merrill Lynch as well as in other securities. Merrill Lynch charges an initial establishment fee and an annual custodial fee for each account. In addition, eligible shareholders of a Fund may participate in a variety of qualified employee benefit plans which are available from the Distributor. The minimum initial purchase to establish any such plan is $100 and the minimum subsequent purchase is $1.
PERFORMANCE DATA
From time to time a Fund may include its average annual total return and/or yield for various specified time periods in advertisements or information furnished to present or prospective shareholders. Average annual total return and yield are computed in accordance with formulas specified by the Securities and Exchange Commission.
Average annual total return quotations for the specified periods will be computed by finding the average annual compounded rates of return (based on net investment income and any capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the redeemable value of such investment at the end of each period. Average annual total return will be computed assuming all dividends and distributions are reinvested and taking into account all applicable recurring and nonrecurring expenses.
Each 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 the rates of return calculated will not be average annual rates, but rather, actual annual, annualized or aggregate rates of return. Aside from the impact on the performance data calculations of including or excluding the maximum applicable sales charges, actual annual or annualized total return 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 a longer period of time. A 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 a Fund's historical performance and are not intended to indicate future performance. A 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 a Fund will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
Yield quotations will be computed based on a 30-day period by dividing (a)
the net income based on the yield of each security earned during the period by
(b) the average number of shares outstanding during the period that were
entitled to receive dividends multiplied by the maximum offering price per share
on the last day of the period.
Each Fund will generally compare its performance to the index it attempts to replicate. A Fund may also compare its performance to data contained in publications such as Lipper Analytical Services, Inc., or performance data published by Morningstar Publications, Inc., Money Magazine, U.S. News and World Report, Business Week, CDA Investment Technology, Inc., Forbes Magazine and Fortune Magazine. From time to time, a Fund may include the Fund's Morningstar risk-adjusted performance ratings in advertisements or supplemental sales literature. As with other performance data, performance comparisons should not be considered representative of a Fund's relative performance for any future period.
The Funds' annual report will contain additional performance information and will be available upon request and without charge.
TAXES
The Funds and Their Shareholders. Each Fund intends to qualify for the special tax treatment afforded regulated investment companies ("RICs") under the Code. If it so qualifies, in any taxable year in which it distributes (in cash or additional shares of the Fund) at least 90% of its taxable net income, the Fund will not be subject to Federal income tax to the extent that it distributes its net investment income and realized capital gains to its shareholders. Each Fund intends to distribute substantially all of such income.
Dividends paid by a 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 a Fund's net realized long-term capital gains (including long-term gains from certain transactions in futures and options)("capital gains 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 gains distributions received by the shareholder with respect to such shares. Distributions in excess of a 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 a Fund. Not later than 60 days after the close of its taxable year, the Funds will provide shareholders with a written notice designating the amounts of any ordinary income dividends or capital gains dividends. A portion of the ordinary income dividends paid by the S&P 500 Index Fund and the Small Cap Index Fund may be eligible for the 70% dividends received deduction allowed to corporations under the Code, if certain requirements are met. Distributions paid by the Aggregate Bond Index Fund and the International Index Fund will not be eligible for the dividends received deduction. If a 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 a Fund to shareholders who are nonresident aliens or foreign entities generally will be subject to a 30% United States 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 the applicable treaty law. Nonresident shareholders are urged to consult their own tax advisers concerning the applicability of the United States withholding tax.
Foreign source income received by the International Index Fund and the Aggregate Bond Index 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 of the International Index Fund may be able to claim U.S. foreign tax credits with respect to such taxes, subject to certain provisions and limitations contained in the Code. For example, certain retirement accounts cannot claim foreign tax credits on investments in foreign securities held by the Fund. The International Index Fund expects to be eligible, and intends, to file an election with the IRS pursuant to which shareholders of the Fund will be required to include their proportionate share of such withholding taxes in their U.S. income tax returns as gross income, treat such proportionate shares as taxes paid by them, and deduct such proportionate shares in computing their taxable incomes or, alternatively, subject to certain restrictions, 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 International Index Fund will report annually to its shareholders the amount per share of such withholding taxes.
Redemptions and exchanges of a Fund's shares are taxable events, and, accordingly, shareholders may realize gains or losses on such events. A loss realized on a sale or exchange of shares of a 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.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on reportable dividends, capital gains distributions and redemption payments ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom a certified taxpayer identification number is not on file with the Funds or who, to the Funds' 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 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 these Treasury regulations are subject to change by legislative or administrative action either prospectively or retroactively.
Ordinary income and capital gains dividends, as well as gains on the sale or exchange of shares, may also be subject to state and local taxes.
This summary does not discuss the state or local income tax, or the estate or inheritance tax, consequences of an investment in a Fund.
Shareholders are urged to consult their advisers as to specific questions regarding Federal, foreign, state or local taxes.
The Series. The Trust and each Fund have received a private letter ruling from the IRS, in which the IRS has ruled that each Series is classified as a partnership for tax purposes and, based upon that ruling, that each Fund will be entitled to look to the underlying assets of the Series in which it has invested for purposes of satisfying the diversification and other requirements of the Code applicable to RICs. If any of the facts upon which such ruling is premised change in any material respect (e.g., if the Trust were required to register its interests under the Securities Act) and the Trust is unable to obtain a revised private letter ruling from the IRS indicating that each Series will continue to be classified as a partnership, then the Board of Directors of the Corporation will determine, in its discretion, the appropriate course of action for the Funds. One possible course of action would be to withdraw the Funds' investments from the Series and to retain an investment adviser to manage the Funds' assets in accordance with the investment policies applicable to the respective Fund. See "Investment Objectives and Policies."
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
It is each Fund's intention to distribute all of its net investment income, if any. Dividends from such net investment income will be paid at least annually with respect to each of the S&P 500 Index Fund, Small Cap Index Fund and International Index Fund. Dividends with respect to the Aggregate Bond Fund will be declared daily and paid monthly. All net realized long- or short-term capital gains, if any, are distributed to Fund shareholders at least annually. Dividends will be reduced by account maintenance and transfer agency fees payable by the shareholders of a Fund. Dividends and distributions will be reinvested automatically in shares of the Funds, at net asset value. Shareholders may elect in writing to receive any such dividends or distributions, or both, in cash. Dividends and distributions are taxable to shareholder whether they are reinvested in shares of a Fund or received in cash. From time to time, a 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.
See "Shareholder Services--Automatic Reinvestment of Dividends and Capital Gains Distributions" for information as to how to elect either dividend reinvestment or cash payments.
DETERMINATION OF NET ASSET VALUE
Net asset value per share is determined once daily as of 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 P.M., New York time) on days during which the New York Stock Exchange is open for trading (a "Pricing Day"). The net asset value is computed by dividing the market value of the securities held by a 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 Administrator and the Distributor, and the advisory fees payable indirectly by the Series of the Trust to the Manager, are accrued daily.
The principal assets of each Fund will normally be its interest of the underlying Series, which will be valued at its net asset value. A Series' securities which are traded on stock exchanges are valued at the last sale price as of the close of business on the day the securities are being valued, or, lacking any sales, at the closing bid price. Securities traded in the over-the-counter market are valued at the last quoted bid prices as at the close of trading on the New York Stock Exchange on each day by brokers that make markets in the securities. Portfolio securities which are traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. Other investments, including 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 market value, as determined in good faith by or under the direction of the Trustees of the Trust.
Each investor in the Trust may add to or reduce its investment in any Series on each Pricing Day. The value of each investor's (including the respective Funds') interest in a Series will be determined as of 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 P.M., New York Time) by multiplying the net asset value of the Series by the percentage, effective for that day, that represents that investor's share of the aggregate interests in such Series. Any additions or withdrawals, which are to be effected on that day, will then be effected. The investor's percentage of a Series will then be re-computed as
the percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Series as of the time or determination on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the aggregate investments in the Series by all investors in the Series effected on such day, and (ii) the denominator of which is the aggregate net asset value of the Series as of such time on such day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investments in the Series by all investors in the Series. The percentage so determined will then be applied to determine the value of the investor's interest in such Series as of 15 minutes after the close of business of the New York Stock Exchange on the next Pricing Day of the Series.
ORGANIZATION OF THE CORPORATION
The Corporation is a Maryland corporation incorporated on October 25, 1996. It has an authorized capital of 1,000,000,000 shares of Common Stock, par value $0.0001 per share, divided into 125,000,000 shares each of Class A and Class D shares for each of the four Funds: Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund. Class A and Class D shares of a Fund represent interests in the same assets of the Series and are identical in all respects except that the Class D shares bear certain expenses related to the account maintenance associated with such shares. Class D shares have exclusive voting rights with respect to matters relating to the class' account maintenance expenditures.
Shareholders are entitled to one vote for each full share held and to fractional votes for fractional shares held in the election of Directors (to the extent hereafter provided) and on other matters submitted to the vote of shareholders. All shares of each Fund have equal voting rights, except that each Fund has exclusive voting rights to matters affecting only such Fund, and except that as noted above, Class D shares have exclusive voting rights with respect to matters relating to the class' account maintenance expenditures. There normally will be no meeting of shareholders for the purpose of electing Directors unless and until such time as less than a majority of the Directors holding office have been elected by the shareholders, at which time the Directors then in office will call a shareholders' meeting for the election of Directors. Shareholders may, in accordance with the terms of the Articles of Incorporation, cause a meeting of shareholders to be held for the purpose of voting on the removal of Directors. Also, the Corporation will be required to call a special meeting of shareholders in accordance with the requirements of the Investment Company Act to seek approval of new management and advisory arrangements, of a material increase in account maintenance fees or of a change in fundamental policies, objectives or restrictions. Except as set forth above, the Directors shall continue to hold office and appoint successor Directors. Each issued and outstanding share is entitled to participate equally in dividends and distributions declared and in net assets upon liquidation or dissolution remaining after satisfaction of outstanding liabilities, except that, as noted above, Class D shares bear certain additional expenses. Shares issued are fully-paid and non-assessable by the Fund. Voting rights for Directors are not cumulative.
The Trust consists of four Series, and is organized as a Delaware business trust. Whenever investors in a Series are requested to vote on a fundamental policy of a Series, the Corporation will hold a meeting of its shareholders and will cast its vote as instructed by such shareholders.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Funds at the address or telephone number set forth on the cover page of this Prospectus.
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:
Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, Florida
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 Merrill Lynch Financial Data Services, Inc. at 800-637-3863.
APPENDIX A
The Series are authorized to use certain instruments, including indexed securities, options, futures and swaps, as described below. Such instruments, which may be regarded as derivatives, are referred to collectively herein as "Strategic Instruments."
INDEXED SECURITIES
The Series may invest in securities the potential return of which is based on the change in particular measurements of value or rate (an "index"). As an illustration, a Series may invest in a debt security that pays interest and returns principal based on the change in the value of a securities index or a basket of securities, or based on the relative changes of two indices. If a Series invests in such securities, it may be subject to reduced or eliminated interest payments or loss of principal in the event of an adverse movement in the relevant index or indices.
OPTIONS ON SECURITIES AND SECURITIES INDICES
Purchasing Options. Each Series is authorized to purchase put options on securities held in its portfolio or securities indices the performance of which is substantially replicated by securities held in its portfolio. When a Series purchases a put option, in consideration for an upfront payment (the "option premium") the Series acquires a right to sell to another party specified securities owned by the Series at a specified price (the "exercise price") on or before a specified date (the "expiration date"), in the case of an option on securities, or to receive from another party a payment based on the amount a specified securities index declines below a specified level on or before the expiration date, in the case of an option on a securities index. The purchase of a put option limits the Series' risk of loss in the event of a decline in the market value of the portfolio holdings underlying the put option prior to the option's expiration date. If the market value of the portfolio holdings associated with the put option increases rather than decreases, however, the Series will lose the option premium and will consequently realize a lower return on the portfolio holdings than would have been realized without the purchase of the put.
Each Series is also authorized to purchase call options on securities it intends to purchase or securities indices. When a Series purchases a call option, in consideration for the option premium the Series acquires the right to purchase from another party specified securities at the exercise price on or before the expiration date, in the case of an option on securities, or to receive from another party a payment based on the amount a specified securities index increases beyond a specified level on or before the expiration date, in the case of an option on a securities index. The purchase of a call option may protect the Series from having to pay more for a security as a consequence of increases in the market value for the security during a period when the Series is contemplating its purchase, in the case of an option on a security, or attempting to identify specific securities in which to invest in a market the Series believes to be attractive, in the case of an option on an index (an "anticipatory hedge"). In the event the Series determines not to purchase a security underlying a call option, however, the Series may lose the entire option premium.
Each Series is also authorized to purchase put or call options in connection with closing out put or call options it has previously sold.
Writing Options. Each Series is authorized to write (i.e., sell) call options on securities held in its portfolio or securities indices the performance of which is substantially replicated by securities held in its
portfolio. When a Series writes a call option, in return for an option premium the Series gives another party the right to buy specified securities owned by the Series at the exercise price on or before the expiration date, in the case of an option on securities, or agrees to pay to another party an amount based on any gain in a specified securities index beyond a specified level on or before the expiration date, in the case of an option on a securities index. In the event the party to which a Series has written an option fails to exercise its rights under the option because the value of the underlying securities is less than the exercise price, the Series will partially offset any decline in the value of the underlying securities through the receipt of the option premium. By writing a call option, however, a Series limits its ability to sell the underlying securities, and gives up the opportunity to profit from any increase in the value of the underlying securities beyond the exercise price, while the option remains outstanding.
Each Series may also write put options on securities or securities indices. When a Series writes a put option, in return for an option premium the Series gives another party the right to sell to the Series a specified security at the exercise price on or before the expiration date, in the case of an option on a security, or agrees to pay to another party an amount based on any decline in a specified securities index below a specified level on or before the expiration date, in the case of an option on a securities index. In the event the party to which the Series has written an option fails to exercise its rights under the option because the value of the underlying securities is greater than the exercise price, the Series will profit by the amount of the option premium. By writing a put option, however, a Series will be obligated to purchase the underlying security at a price that may be higher than the market value of the security at the time of exercise as long as the put option is outstanding, in the case of an option on a security, or make a cash payment reflecting any decline in the index, in the case of an option on an index. Accordingly, when the Series writes a put option it is exposed to a risk of loss in the event the value of the underlying securities falls below the exercise price, which loss potentially may substantially exceed the amount of option premium received by the Series for writing the put option. A Series will write a put option on a security or a securities index only if the Series would be willing to purchase the security at the exercise price for investment purposes (in the case of an option on a security) or is writing the put in connection with trading strategies involving combinations of options--for example, the sale and purchase of options with identical expiration dates on the same security or index but different exercise prices (a technique called a "spread").
Each Series is also authorized to sell call or put options in connection with closing out call or put options it has previously purchased.
Other than with respect to closing transactions, the Series will only write call or put options that are "covered." A call or put option will be considered covered if a Series has segregated assets with respect to such option in the manner described in "Risk Factors in Strategic Instruments" below. A call option will also be considered covered if a Series owns the securities it would be required to deliver upon exercise of the option (or, in the case of option on a securities index, securities which substantially replicate the performance of such index) or owns a call option, warrant or convertible instrument which is immediately exercisable for, or convertible into, such security.
Types of Options. Each Series may engage in transactions in options on securities or securities indices on exchanges and in the over-the-counter ("OTC") markets. In general, exchange-traded options have standardized exercise prices and expiration dates and require the parties to post margin against their obligations, and the performance of the parties' obligations in connection with such options is guaranteed by the exchange or a related clearing corporation. OTC options have more flexible terms negotiated between the
buyer and seller, but generally do not require the parties to post margin and are subject to greater risk of counterparty default. See "Additional Risk Factors of OTC Transactions" below.
FUTURES
Each Series may engage in transactions in futures and options thereon. Futures are standardized, exchange-traded contracts which obligate a purchaser to take delivery, and a seller to make delivery, of a specific amount of a commodity at a specified future date at a specified price. No price is paid upon entering into a futures contract. Rather, upon purchasing or selling a futures contract the Series is required to deposit collateral ("margin") equal to a percentage (generally less than 10%) of the contract value. Each day thereafter until the futures position is closed, the Series will pay additional margin representing any loss experienced as a result of the futures position the prior day or be entitled to a payment representing any profit experienced as a result of the futures position the prior day. The Series will further limit transactions in futures and options on futures to the extent necessary to prevent the Series from being deemed a "commodity pool" under regulations of the Commodity Futures Trading Commission.
SWAPS
The Series are authorized to enter into equity swap agreements, which are OTC contracts in which one party agrees to make periodic payments based on the change in market value of a specified equity security, basket of equity securities or equity index in return for periodic payments based on a fixed or variable interest rate or the change in market value of a different equity security, basket of securities or equity index. Swap agreements may also be used to obtain exposure to an equity or market without owning or taking physical custody of securities in circumstances in which direct investment is restricted by local law or is otherwise impractical.
RISK FACTORS IN STRATEGIC INSTRUMENTS
The Series intend to enter into transactions involving Strategic Instruments only if there appears to be a liquid secondary market for such instruments or, in the case of illiquid instruments traded in OTC transactions, such instruments satisfy the criteria set forth below under "Additional Risk Factors of OTC Transactions." However, there can be no assurance that, at any specific time, either a liquid secondary market will exist for a Strategic Instrument or a Series will otherwise be able to sell such instrument at an acceptable price. It may therefore not be possible to close a position in a Strategic Instrument without incurring substantial losses, if at all.
Certain transactions in Strategic Instruments (e.g., futures transactions, sales of put options) may expose a Series to potential losses which exceed the amount originally invested by the Series in such instruments. When a Series engages in such a transaction, the Series will deposit in a segregated account at its custodian liquid securities with a value at least equal to the Series' exposure, on a mark-to-market basis, to the transaction (as calculated pursuant to requirements of the Securities and Exchange Commission). Such segregation will ensure that the Series has assets available to satisfy its obligations with respect to the transaction, but will not limit the Series' exposure to loss.
ADDITIONAL RISK FACTORS OF OTC TRANSACTIONS; LIMITATIONS ON THE USE OF OTC STRATEGIC INSTRUMENTS
Certain Strategic Instruments traded in OTC markets, including indexed securities, swaps and OTC options, may be substantially less liquid than other instruments in which a Series may invest. The absence of liquidity may make it difficult or impossible for a Series to sell such instruments promptly at an acceptable price. The absence of liquidity may also make it more difficult for the Series to ascertain a market value for such instruments. A Series will therefore acquire illiquid OTC instruments (i) if the agreement pursuant to which the instrument is purchased contains a formula price at which the instrument may be terminated or sold, or (ii) for which the Manager anticipates the Series 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 that dealer's quotation may be used.
The staff of the Securities and Exchange Commission has taken the position that purchased OTC options and the assets underlying written OTC options are illiquid securities. The Series have therefore adopted an investment policy pursuant to which they will not purchase or sell OTC options (including OTC options on futures contracts) if, as a result of such transactions, the sum of the market value of OTC options currently outstanding which are held by the Series, the market value of the securities underlying OTC call options currently outstanding which have been sold by the Series and margin deposits on the Series' outstanding OTC options exceeds 15% of the total assets of the Series, taken at market value, together with all other assets of the Series which are deemed to be illiquid or are otherwise not readily marketable. However, if an OTC option is sold by the Series to a dealer in U.S. government securities recognized as a "primary dealer" by the Federal Reserve Bank of New York and the Series has the unconditional contractual right to repurchase such OTC option at a predetermined price, then the Series 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 exercise price).
Because Strategic Instruments traded in OTC markets are not guaranteed by an exchange or clearing corporation and generally do not require payment of margin, to the extent that a Series has unrealized gains in such instruments or has deposited collateral with its counterparty the Series is at risk that its counterparty will become bankrupt or otherwise fail to honor its obligations. The Series will attempt to minimize the risk that a counterparty will become bankrupt or otherwise fail to honor its obligations by engaging in transactions in Strategic Instruments traded in OTC markets only with financial institutions which have substantial capital or which have provided the Series with a third-party guaranty or other credit enhancement.
ADDITIONAL LIMITATIONS ON THE USE OF STRATEGIC INSTRUMENTS
The Series may not use any Strategic Instrument to gain exposure to an asset or class of assets that it would be prohibited by its investment restrictions from purchasing directly.
APPENDIX B -- DESCRIPTION OF COMMERCIAL
PAPER AND BOND RATINGS
COMMERCIAL PAPER
Description of relevant commercial paper ratings of Standard & Poor's Ratings Group ("S&P") 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 an adequate capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
Description of the relevant commercial paper ratings of Moody's Investors Service, Inc. ("Moody's") are as follows:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt 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.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term 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 measurement and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
CORPORATE BONDS
Descriptions of the bond ratings of S&P are:
AAA-- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories.
BB, B, CCC, CC or C--Debt rated BB, B, CCC, CC or C is regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse debt conditions.
C1 -- The rating C1 is reserved for income bonds on which no interest is being paid.
D -- Debt rated D is in default and payment of interest and/or repayment of principal is in arrears.
The ratings from AA to CC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Descriptions of the bond ratings of Moody's are as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change,
such changes as can be visualized are more unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat greater 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 and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative to a high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Moody's applies modifiers to each rating classification from Aa through B to indicate relative ranking within its rating categories. The modifier "1" indicates that a security ranks in the higher end of its rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that the issue ranks in the lower end of its rating category.
[This page is intentionally left blank.]
MERRILL LYNCH INDEX FUNDS, INC.--AUTHORIZATION FORM (PART 1)
NOTE: THIS FORM MAY NOT BE USED FOR PURCHASES THROUGH THE MERRILL LYNCH BLUEPRINTSM PROGRAM. YOU MAY REQUEST A MERRILL LYNCH BLUEPRINTSM PROGRAM
APPLICATION BY CALLING (800) 637-3766.
I, being of legal age, wish to purchase: (choose one)
[ ] Class A shares Class D shares
of the following Funds of Merrill Lynch Index Funds, Inc.
[ ] Merrill Lynch S&P 500 Index Fund [ ] Merrill Lynch Aggregate Bond Index Fund [ ] Merrill Lynch Small Cap Index Fund [ ] Merrill Lynch International Index Fund |
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.
I enclose a check for $.......... payable to Merrill Lynch Financial Data Services, Inc., as an initial investment (minimum $1,000 per Fund). I understand that this purchase will be executed at the applicable offering price next to be determined after this Application is received by you.
Name............................................................................
First Name Initial Last Name
Name of Co-Owner (if any).......................................................
First Name Initial Last Name
Address.........................................................................
................................................................................
(Zip Code)
Occupation......................................................................
................................................................................
Signature of Owner
Name and Address of Employer....................................................
................................................................................
................................................................................
|
Signature of Co-Owner (if any)
2. DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTION
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 Index Funds, 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 MERRILL LYNCH 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.
3. SOCIAL SECURITY NUMBER 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 in the Prospectus under "Taxes") either because I have not been notified that I am subject thereto as a result of a failure to report all interest or dividends, or the Internal Revenue Service ("IRS") has notified me that I am no longer subject thereto.
INSTRUCTION: YOU MUST STRIKE OUT THE LANGUAGE IN (2) ABOVE IF YOU HAVE BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING AND IF YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS THAT BACKUP WITHHOLDING HAS BEEN TERMINATED. THE UNDERSIGNED AUTHORIZES THE FURNISHING OF THIS CERTIFICATION TO OTHER MERRILL LYNCH SPONSORED MUTUAL FUNDS.
............................................................. ............................................................
Signature of Owner Signature of Co-Owner (if any)
|
5. FOR DEALER ONLY
This form, when completed, should be mailed to:
ML Index Funds
c/o Merrill Lynch Financial Data Services, Inc.
P.O. Box 45289
Jacksonville, Florida 32232-5289
We hereby authorize Merrill Lynch Funds Distributor, Inc. to act as our agent in connection with transactions under this authorization form and agree to notify the Distributor of any purchases or sales made under a Letter of Intention, Automatic Investment Plan or Systematic Withdrawal Plan. We guarantee the shareholder's signature.
...............................................................
Dealer Name and Address
By .............................................................................
Authorized Signature of Dealer
- --------- ------------
..............................
- --------- ------------
Branch-Code F/C No. F/C Last Name
- --------- ---------------
- --------- ---------------
Dealer's Customer Account No.
|
MERRILL LYNCH INDEX FUNDS, INC.--AUTHORIZATION FORM (PART 2)
1. ACCOUNT REGISTRATION
------------------------------------------------------
Name of Owner..................................................
------------------------------------------------------
Social Security No.
or Taxpayer Identification No.
Name of Co-Owner (if any)......................................
Address........................................................ Account Number ............................................
(if existing account)
...............................................................
|
2. SYSTEMATIC WITHDRAWAL PLAN--CLASS A AND CLASS D SHARES ONLY (SEE TERMS AND CONDITIONS IN THE STATEMENT OF ADDITIONAL INFORMATION)
MINIMUM REQUIREMENTS: $10,000 for monthly disbursements, $5,000 for quarterly, of [ ] Class A or [ ] Class D shares of the following Funds of Merrill Lynch Index Funds, Inc.
[ ] Merrill Lynch S&P 500 Index Fund [ ] Merrill Lynch Aggregate Bond Index Fund [ ] Merrill Lynch Small Cap Index Fund [ ] Merrill Lynch International Index Fund |
at cost or current offering price. Withdrawals to be made either (check one) [ ] Monthly on the 24th day of each month, or [ ] Quarterly on the 24th day of March, June, September and December. If the 24th falls on a weekend or holiday, the next succeeding business day will be utilized. Begin systematic withdrawal on ............. (month), or as soon as possible thereafter.
SPECIFY HOW YOU WOULD LIKE YOUR WITHDRAWAL PAID TO YOU (CHECK ONE): [ ] $............. or [ ] .............% of the current value of [ ] Class A or [ ] Class D shares in the account.
SPECIFY WITHDRAWAL METHOD: [ ] check or [ ] direct deposit to bank account (check one and complete part (a) or (b) below):
DRAW CHECKS PAYABLE (CHECK ONE)
(A) I HEREBY AUTHORIZE PAYMENT BY CHECK
[ ] as indicated in Item 1.
[ ] to the order of..........................................................
Mail to (check one)
[ ] the address indicated in Item 1.
[ ] Name (please print)......................................................
Address ...................................................................
......................................................................
Signature of Owner
..............................................................................
Date ....................................................................
Signature of Co-Owner (if any) .......................................
(B) I HEREBY AUTHORIZE PAYMENT BY DIRECT DEPOSIT TO BANK ACCOUNT AND, IF NECESSARY, DEBIT ENTRIES AND ADJUSTMENTS FOR ANY CREDIT ENTRIES MADE TO MY ACCOUNT. I AGREE THAT THIS AUTHORIZATION WILL REMAIN IN EFFECT UNTIL I PROVIDE WRITTEN NOTIFICATION TO MERRILL LYNCH FINANCIAL DATA SERVICES, INC. AMENDING OR TERMINATING THIS SERVICE.
Specify type of Account (check one): [ ] checking [ ] savings
Name on your account............................................................
Bank Name.......................................................................
Bank Number ............................................................. Account Number..................................................................
Bank Address....................................................................
................................................................................
Signature of Depositor
..............................................................................
Date............................................................................
Signature of Depositor..........................................................
(If joint account, both must sign)
NOTE: IF DIRECT DEPOSIT IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID" OR
A DEPOSIT SLIP FROM YOUR SAVINGS ACCOUNT SHOULD ACCOMPANY THIS APPLICATION.
3. APPLICATION FOR AUTOMATIC INVESTMENT PLAN
I hereby request that Merrill Lynch Financial Data Services, Inc. draw an automated clearing house ("ACH") debit on my checking account as described below each month to purchase (choose one):
[ ] Class A shares [ ] Class D shares
of the following "Funds" of Merrill Lynch Index Funds, Inc.
[ ] Merrill Lynch S&P 500 Index Fund [ ] Merrill Lynch Aggregate Bond Index Fund [ ] Merrill Lynch Small Cap Index Fund [ ] Merrill Lynch International Index Fund |
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.
MERRILL LYNCH FINANCIAL DATA SERVICES, INC.
You are hereby authorized to draw an ACH debit each month on my bank account for investment in Merrill Lynch Index Funds, Inc. as indicated below:
Amount of each ACH debit $...................................................
Account Number...............................................................
Please date and invest ACH debits on the 20th of each month beginning
.............................. or as soon thereafter as possible.
(month)
I agree that you are drawing these ACH debits voluntarily at my request and that you shall not be liable for any loss arising from any delay in preparing or failure to prepare any such debit. If I change banks or desire to terminate or suspend this program, I agree to notify you promptly in writing. I hereby authorize you to take any action to correct erroneous ACH debits of my bank account or purchases of fund shares including liquidating shares of the Fund and crediting my bank account. I further agree that if a debit is not honored upon presentation, Merrill Lynch Financial Data Services, Inc. is authorized to discontinue immediately the Automatic Investment Plan and to liquidate sufficient shares held in my account to offset the purchase made with the dishonored debit.
................. .......................................
Date Signature of Depositor
.......................................
Signature of Depositor
(If joint account, both must sign)
AUTHORIZATION TO
HONOR ACH DEBITS
DRAWN BY MERRILL LYNCH
FINANCIAL DATA SERVICES, INC.
To..........................................................................Bank
(Investor's Bank)
Bank Address....................................................................
City .......... State .......... Zip Code.......................................
|
As a convenience to me, I hereby request and authorize you to pay and charge to my account ACH debits drawn on my account by and payable to Merrill Lynch Financial Data Services, Inc. . I agree that your rights in respect to each such debit shall be the same as if it were a check drawn on you and signed personally by me. This authority is to remain in effect until revoked by me in writing. Until you receive such notice, you shall be fully protected in honoring any such debit. I further agree that if any such debit be dishonored, whether with or without cause and whether intentionally or inadvertently, you shall be under no liability.
.................... .......................................
Date Signature of Depositor
.................... ....................................... Bank Account Number Signature of Depositor
(If joint account, both must sign)
NOTE: IF AUTOMATIC INVESTMENT PLAN IS ELECTED, YOUR BLANK, UNSIGNED CHECK MARKED "VOID" SHOULD ACCOMPANY THIS APPLICATION.
ADMINISTRATOR OF THE CORPORATION AND MANAGER OF THE TRUST
Merrill Lynch Asset Management, L.P.
Administrative Offices:
800 Scudders Mill Road
Plainsboro, New Jersey
Mailing Address:
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:
Box 9081
Princeton, New Jersey 08543-9081
CUSTODIAN
Merrill Lynch S&P 500 Index Fund
Merrill Lynch Small Cap Index Fund
Merrill Lynch Aggregate Bond Index Fund
Merrill Lynch Trust Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch International Index Fund
State Street Bank Trust Company
P.O. Box 351
Boston Massachusetts 02101
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc.
Administrative Offices:
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
Mailing Address:
P.O. Box 45289
Jacksonville, Florida 32246-5289
INDEPENDENT AUDITORS
Deloitte & Touche LLP
117 Campus Drive
Princeton, New Jersey 08540-6400
COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, New York 10022
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION, 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 CORPORATION 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
PAGE
----
Fee Table............................... 2
Investment Objectives and Policies...... 4
Management of the Funds................. 17
Purchase of Shares...................... 20
Redemption of Shares.................... 21
Shareholder Services.................... 22
Performance Data........................ 24
Taxes................................... 25
Additional Information.................. 27
Appendix A.............................. A-1
Appendix B.............................. A-5
Authorization Form...................... A-9
Code #19003-0197
|
YZa
MERRILL LYNCH
INDEX FUNDS, INC.
PROSPECTUS mlynch compass
January 31, 1997
Distributor:
Merrill Lynch
Funds Distributor, Inc.
This prospectus should be
retained for future reference.
STATEMENT OF ADDITIONAL INFORMATION
Merrill Lynch Index Funds, Inc. (the "Corporation") currently consists of four portfolios or series: Merrill Lynch S&P 500 Index Fund ("S&P 500 Index Fund"), Merrill Lynch Small Cap Index Fund ("Small Cap Index Fund"), Merrill Lynch Aggregate Bond Index Fund ("Aggregate Bond Index Fund") and Merrill Lynch International Index Fund ("International Index Fund") (collectively, the "Funds," and each, a "Fund"). Each Fund is a non-diversified mutual fund whose investment objective is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of a specified securities index. Each Fund will seek to achieve its objective by investing all of its assets in the series (collectively, the "Series," and each, a "Series") of Merrill Lynch Index Trust (the "Trust") that has the same investment objective as the Fund. Each Fund's investment experience will correspond directly to the investment experience of the respective Series in which it invests. There can be no assurance that the investment objectives of the Funds will be achieved.
Each Fund offers two classes of shares, Class A shares and Class D shares. Class A shares of each Fund are offered at a price equal to the next determined net asset value per share without the imposition of any front-end or deferred sales charge, and are not subject to any ongoing account maintenance or distribution fee. Distribution of Class A shares of each Fund is limited to certain eligible investors. Class D shares of each Fund are offered at a price equal to the next determined net asset value per share without the imposition of any front-end or deferred sales charge and are not subject to any ongoing distribution fee, but are subject to an ongoing account maintenance fee at an annual rate of 0.25% of average daily net assets.
This Statement of Additional Information for the Funds is not a prospectus and should be read in conjunction with the prospectus of the Funds, dated January 31, 1997 (the "Prospectus"), which has been filed with the Securities and Exchange Commission and can be obtained, without charge, by calling or by writing the Funds at the above telephone number or address. This Statement of Additional Information has been incorporated by reference into the Prospectus.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS JANUARY 31, 1997
INVESTMENT OBJECTIVES AND POLICIES
Merrill Lynch Index Funds, Inc. currently consists of four series: Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund. Each Fund is a non-diversified mutual fund whose investment objective is to provide investment results that, before expenses, seek to replicate the total return (i.e., the combination of capital changes and income) of a specified securities index. Each Fund will seek to achieve its objective by investing all of its assets in the Series of Merrill Lynch Index Trust that has the same investment objective as the Fund. Each Fund's investment experience will correspond directly to the investment experience of the respective Series in which it invests. Reference is made to the discussion under "Investment Objectives and Policies" in the Prospectus for information with respect to each Fund's and each Series' investment objective and policies. There can be no assurance that the investment objectives of the Funds will be achieved.
The Funds' and Series' investment objectives are not fundamental policies, and may be changed by the Directors of the Corporation and the Trustees of the Trust, respectively, without shareholder approval. THE TRUSTEES AND THE DIRECTORS MAY ALSO CHANGE THE TARGET INDEX OF ANY RESPECTIVE SERIES AND FUND IF THEY CONSIDER THAT A DIFFERENT INDEX WOULD FACILITATE THE MANAGEMENT OF THE SERIES AND FUND IN A MANNER WHICH BETTER ENABLES THE FUND AND SERIES TO SEEK TO REPLICATE THE TOTAL RETURN OF THE MARKET SEGMENT REPRESENTED BY THE CURRENT INDEX.
INVESTMENT RESTRICTIONS
The Corporation has adopted the following restrictions and policies relating to the investment of each Fund's assets and activities, which are fundamental policies and may not be changed with respect to a Fund without the approval of the holders of a majority of the Fund's outstanding voting securities (which for this purpose and under the Investment Company Act of 1940, as amended (the "Investment Company Act") means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares). Provided that none of the following restrictions shall prevent a Fund from investing all of its assets in shares of another registered investment company with the same investment objective (in a master/feeder structure), each Fund may not:
1. Make any investment inconsistent with the Fund's classification as a non-diversified company under the Investment Company Act.
2. Invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); provided, that in replicating the weighting of a particular industry in its target index, a Series or Fund may invest more that 25% of its total assets in securities of issuers in that industry.
3. Make investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that, to the extent permitted by applicable law, a Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.
5. Make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers' acceptances, repurchase agreements or any similar instruments shall not be deemed to be
the making of a loan, and except further that a Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate applicable law.
7. Borrow money, except that (i) a Fund may borrow from banks (as defined in the Investment Company Act) in amounts up to 33 1/3% of its total assets (including the amount borrowed), (ii) a Fund may borrow up to an additional 5% of its total assets for temporary purposes, (iii) a Fund may obtain such short- term credit as may be necessary for the clearance of purchases and sales of portfolio securities and (iv) the Fund may purchase securities on margin to the extent permitted by applicable law. A 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 the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time, in connection with hedging transactions, short sales, when-issued and forward commitment transactions and similar investment strategies.
8. Underwrite securities of other issuers except insofar as a Fund technically may be deemed an underwriter under the Securities Act in selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to the extent that a Fund may do so in accordance with applicable law and the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.
The Trust has adopted investment restrictions substantially identical to the foregoing, which are fundamental policies of the Trust and may not be changed with respect to any Series without the approval of the holders of a majority of the interests of the Series.
In addition, the Trust and the Corporation have adopted as an operating policy, which may be changed by the Trustees and the Directors without shareholder approval, that no Series or Fund, respectively, will make any additional investments if the amount of its borrowings exceeds 5% of its total assets. For purposes of this policy, borrowings will not include the use of investment techniques that may be deemed to create leverage, including, but not limited to, such techniques as dollar rolls, when-issued securities, options and futures.
Portfolio securities of each Fund's underlying Series generally may not be purchased from, sold or loaned to Merrill Lynch Asset Management, L.P. ("MLAM") or its affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the Investment Company Act.
Because of the affiliation of MLAM with the Corporation, the Series are prohibited from engaging in certain transactions involving MLAM's affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), or its affiliates except for brokerage transactions permitted under the Investment Company Act involving only usual and customary commissions or transactions pursuant to an exemptive order under the Investment Company Act. See "Portfolio Transactions and Brokerage." Without such an exemptive order, the Series are prohibited from engaging in portfolio transactions with Merrill Lynch or its affiliates acting as principal and from purchasing securities in public offerings which are not registered under the Securities Act in which such firms or any of their affiliates participate as an underwriter or dealer.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
The Directors and executive officers of the Corporation and their principal occupations for at least the last five years are set forth below. Unless otherwise noted, the address of each executive officer and Director is P.O. Box 9011, Princeton, New Jersey 08543-9011.
TERRY K. GLENN (56) -- President and Director(1)(2) -- Executive Vice President of MLAM and Fund Asset Management, L.P. ("FAM") since 1983; Executive Vice President and Director of Princeton Services, Inc. since 1993; President of Merrill Lynch Funds Distributor, Inc. (the "Distributor") since 1986 and Director thereof since 1991; President of Princeton Administrators, L.P. since 1988; and Director of Merrill Lynch Financial Data Services, Inc. since 1985.
JACK B. SUNDERLAND (68) -- Director(2) -- P.O. Box 7, West Cornwall, Connecticut. 06796. President and Director of American Independent Oil Company, Inc. (energy company) since 1987; Member of Council on Foreign Relations since 1971.
STEPHEN B. SWENSRUD (63) -- Director(2) -- 24 Federal Street, Suite 400, Boston, Massachusetts 02110. Principal of Fernwood Associates (financial consultants).
J. THOMAS TOUCHTON (58) -- Director(2) -- Suite 3405, One Tampa City Center, Tampa, Florida 33602. Managing Partner of The Witt-Touchton Company and its predecessor The Witt Co. (private placement partnership) since 1972; Trustee Emeritus of Washington and Lee University; Director of TECO Energy, Inc. (electric utility holding company).
NORMAN R. HARVEY (63) -- Senior Vice President(1)(2) -- Senior Vice President of MLAM and FAM since 1982.
JOSEPH T. MONAGLE, JR. (47) -- Senior Vice President(1)(2) -- Senior Vice President of MLAM since 1990; Vice President of MLAM from 1978 to 1990.
GREGORY MAUNZ (43) -- Vice President(1)(2) -- Vice President of MLAM since 1985; Portfolio Manager of MLAM since 1984.
ERIC MITOFSKY (42) -- Vice President(1)(2) -- Vice President of MLAM since 1992; Senior Desk Analyst with Merrill Lynch Program Trading Desk from 1987 to 1992.
JAY C. HARBECK (61) -- Vice President(1)(2) -- Vice President of MLAM and FAM since 1986.
GERALD M. RICHARD (47) -- Treasurer(1)(2) -- Senior Vice President and Treasurer of MLAM since 1984; Senior Vice President and Treasurer of FAM since 1984; Treasurer of the Distributor since 1984 and Vice President since 1981.
MARK B. GOLDFUS (49) -- Secretary(1)(2) -- Vice President of MLAM and FAM since 1985.
(1) Interested person, as defined in the Investment Company Act, of the Corporation.
(2) Such Director or officer is a director, trustee or officer of other investment companies for which MLAM or FAM acts as investment adviser.
As of the date of this Statement of Additional Information, the officers and Directors of the Corporation as a group (nine persons) owned an aggregate of less than 1/4 of 1% of the outstanding shares of Common Stock of Merrill Lynch & Co., Inc. and owned an aggregate of less than 1% of the outstanding shares of any of the Funds.
Pursuant to the terms of the Administration Agreement with the Corporation, MLAM pays all compensation of officers of the Corporation as well as the fees of all Directors who are affiliated persons of MLAM. The Corporation and the Trust pay each individual who serves as a Director/Trustee not affiliated with MLAM a fee of $2,500 per year plus $250 per meeting attended, together with such individual's out-of-pocket expenses relating to attendance at meetings. The Corporation and the Trust also compensate members of the Audit and Nominating Committee, which consists of all of the Directors/Trustee who are not interested persons of the Funds and the Series, with a fee of $1,000 per year.
COMPENSATION OF DIRECTORS
The following table sets forth the aggregate compensation the Corporation and the Trust expect to pay to the non-interested Directors/Trustees for the current fiscal year and the aggregate compensation paid by all investment companies advised by MLAM and its affiliate, FAM ("MLAM/FAM-Advised Funds") to the non-interested Directors/Trustees for the calendar year ended December 31, 1996 (the most recent year for which such information is available).
TOTAL COMPENSATION
FROM FUNDS/SERIES AND
AGGREGATE PENSION OR RETIREMENT MLAM/FAM
COMPENSATION FROM BENEFITS ACCRUED AS ADVISED FUNDS PAID
NAME OF DIRECTOR FUNDS/SERIES PART OF FUND/SERIES EXPENSES TO DIRECTORS(1)
- ----------------------------- ----------------- ---------------------------- ---------------------
Jack B. Sunderland........... $ 4,500 None $ 139,100
Stephen B. Swensrud.......... $ 4,500 None $ 171,500
J. Thomas Touchton........... $ 4,500 None $ 139,100
|
(1) In addition to the Corporation, the Directors served on other MLAM/FAM Advised Funds as follows:
Mr. Sunderland (20 registered investment companies consisting of 29 portfolios); Mr. Swensrud (20 registered investment companies consisting of 49 portfolios); Mr. Touchton (20 registered investment companies consisting of 29 portfolios).
ADMINISTRATION ARRANGEMENTS
MLAM is owned and controlled by Merrill Lynch & Co., Inc., a financial services holding company and the parent of Merrill Lynch. Reference is made to "Management of the Funds" in the Prospectus for certain information concerning the administration arrangements of the Corporation and the management and advisory arrangements of the Trust.
The Corporation has entered into an administration agreement with MLAM as Administrator (the "Administration Agreement"). As discussed in the Prospectus, the Administrator receives for its services to the Funds monthly compensation at the annual rates of the average daily net assets of each Fund as follows:
NAME OF FUND ADMINISTRATION FEE
- ---------------------------------------- ------------------
Merrill Lynch S&P 500 Index Fund...................................... 0.20%
Merrill Lynch Small Cap Index Fund.................................... 0.22%
Merrill Lynch Aggregate Bond Index Fund............................... 0.14%
Merrill Lynch International Index Fund................................ 0.24%
|
The Administration Agreement obligates the Administrator to provide certain administrative services to the Corporation and the Funds and to pay all compensation of and furnish office space for officers and employees of the Corporation as well as the fees of all Directors who are affiliated persons of the Administrator or any of their affiliates. Each Fund pays all other expenses incurred in the operation of the Fund, including, among other things, taxes, expenses for legal and auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses and statements of additional information (except to the extent paid by the Distributor), charges of the Custodian, any Sub-custodian and Transfer Agent, expenses of redemption of shares, Securities and Exchange Commission fees, expenses of registering the shares under federal, state or foreign laws, fees and expenses of unaffiliated Directors, accounting and pricing costs (including the daily calculation of net asset value), insurance, interest, brokerage costs, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Corporation or the Fund. Merrill Lynch Funds Distributor, Inc. (the "Distributor") will pay the promotional expenses of the Funds incurred in connection with the offering of its shares.
Duration and Termination. Unless earlier terminated as described below, the Administration Agreement will remain in effect for two years from the date of its adoption. Thereafter, it will remain in effect from year to year with respect to each Fund if approved annually (a) by the Board of Trustees and (b) by a majority of the Trustees who are not parties to such contract or interested persons (as defined in the Investment Company Act) of any such party. Such contract is not assignable and may be terminated with respect to a Fund without penalty on 60 days' written notice at the option of either party thereto or by the vote of the shareholders of the Fund.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Each Fund invests all of its assets in shares of the corresponding Series of the Trust. Accordingly, the Funds do not invest directly in portfolio securities and do not require investment advisory services. All portfolio management occurs at the level of the Trust. The Trust has entered into a management agreement with MLAM as Manager (the "Management Agreement"). As discussed in the Prospectus, the Manager receives for its services to the Series monthly compensation at the annual rates of the average daily net assets of each Series as follows:
NAME OF SERIES MANAGEMENT FEE
- ------------------------------------------ --------------
Merrill Lynch S&P 500 Index Series...................................... 0.05%
Merrill Lynch Small Cap Index Series.................................... 0.08%
Merrill Lynch Aggregate Bond Index Series............................... 0.06%
Merrill Lynch International Index Series................................ 0.11%
|
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 Trust connected with investment and economic research, trading and investment management of the Trust, as well as the fees of all Trustees who are affiliated persons of the Manager or any of their affiliates. Each Series pays all other expenses incurred in the operation of the Series, including, among other things, taxes, expenses for legal and auditing services, costs of printing proxies, stock certificates, shareholder reports and prospectuses and statements of additional information (except to the extent paid by the Distributor), charges of the Custodian, any Sub-custodian and Transfer Agent, expenses of redemption of shares, Securities and Exchange Commission fees, expenses of registering the shares under federal, state or foreign laws, fees and expenses of unaffiliated Trustees, 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 Trust or the Series. The Distributor will pay the promotional expenses of the Trust incurred in connection with the offering of its shares.
Securities held by the Series of the Trust may also 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 Series or other funds for which it acts as investment adviser or for its 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.
Duration and Termination. Unless earlier terminated as described below, the Management Agreement will remain in effect for two years from the date of its adoption. Thereafter, it will remain in effect from year to year with respect to each Series if approved annually (a) by the Board of Trustees or by a majority of the outstanding shares of the Series and (b) by a majority of the Trustees who are not parties to such contract or interested persons (as defined in the Investment Company Act) of any such party. Such contract is not
assignable and may be terminated with respect to a Series without penalty on 60 days' written notice at the option of either party thereto or by the vote of the shareholders of the Series.
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" in the Prospectus for certain information as to the purchase of Fund shares.
The Corporation has entered into a distribution agreement with the Distributor in connection with the offering of shares of the Funds (the "Distribution Agreement"). The Distribution Agreement obligates the Distributor to pay certain expenses in connection with the offering of the shares of the Funds. 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 Agreement is subject to the same renewal requirements and termination provisions as the Management Agreement described above.
The Corporation reserves the right to suspend the offering of its shares at any time.
Account Maintenance Plan. Reference is made to "Purchase of Shares--Account Maintenance Plan" in the Prospectus for certain information with respect to the Account Maintenance Plan (the "Plan") of the Class D shares of the Funds.
The payment of the account maintenance fee is subject to the provisions of Rule 12b-1 under the Investment Company Act. Among other things, the Plan provides that the Distributor shall provide and the Directors shall review quarterly reports of the disbursement of the account maintenance fees paid to the Distributor. In their consideration of the Plan, the Directors must consider all factors they deem relevant, including information as to the benefits of the Plan to the Funds and their shareholders. The Plan further provides that, so long as the Plan remains in effect, the selection and nomination of Directors who are not "interested persons" of the Funds, 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 the Plan in accordance with Rule 12b-1, the Independent Directors concluded that there is reasonable likelihood that the Plan will benefit the Fund and its shareholders. The Plan can be terminated at any time, without penalty, by the vote of a majority of the Independent Directors or with respect to any Fund by the vote of the holders of a majority of the outstanding Class D shares of the Fund. The Plan cannot be amended to increase materially the amount to be spent by the Class D shares of a Fund without shareholder approval, and all material amendments are required to be approved by the vote of Directors, including a majority of the Independent Directors who have no direct or indirect financial interest in the Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further requires that the Fund preserve copies of the Plan and any report made pursuant to such plan for a period of not less than six years from the date of the Plan or such report, the first two years in an easily accessible place.
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 only for any period 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 a Fund is not reasonably practicable, and for such other periods as the Securities and Exchange Commission may by order permit for the protection of shareholders of the Fund.
The value of shares at the time of redemption may be more or less than the shareholder's cost, depending on the market value of the securities held by the Fund and the Series at that time.
Shares are redeemable at the option of the Corporation if, in the opinion of the Corporation, ownership of the shares has or may become concentrated to the extent which would cause the Corporation or a Fund to be deemed a personal holding company within the meaning of the Code.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Because the Funds will invest exclusively in shares of their corresponding Series it is expected that all transactions in portfolio securities will be entered into by the Series. The Manager is responsible for making the Series' portfolio decisions, placing the Series' brokerage business, evaluating the reasonableness of brokerage commissions and negotiating the amount of any commissions paid subject to a policy established by the Trust's Trustees and officers. The Trust has no obligation to deal with any broker or group of brokers in the execution of transactions in portfolio securities. Orders for transactions in portfolio securities are placed for the Trust with a number of brokers and dealers, including Merrill Lynch. In placing orders, it is the policy of the Trust to obtain the most favorable net results, taking into account various factors, including price, commissions, if any, size of the transaction and difficulty of execution. Where practicable, the Manager surveys a number of brokers and dealers in connection with proposed portfolio transactions and selects the broker or dealer which offers the Trust the best price and execution or other services which are of benefit to the Trust. Securities firms also may receive brokerage commissions on transactions including covered call options written by the Trust and the sale of underlying securities upon the exercise of such options. In addition, consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and policies established by the Trustees, the Manager may consider sales of shares of the Funds as a factor in the selection of brokers or dealers to execute portfolio transactions for the Trust.
The Trust does not use any particular broker or dealer, and brokers who provide supplemental investment research to the Manager may receive orders for transactions by the Trust. Such supplemental research services ordinarily consist of, quantitative and modeling information, assessments and analyses of the business or prospects of a company, industry or economic sector. 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. If in the judgment of the Manager the Trust will be benefited by supplemental research services, the Manager is authorized to pay brokerage commissions to a broker furnishing such services which are in excess of commissions which another broker may have charged for effecting the same transaction. The expenses of the Manager will not necessarily be reduced as a result of the receipt of such supplemental information, and the Manager may use such information in servicing its other accounts.
The Trust anticipates that 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 Trust 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.
The Trust invests in certain securities traded in the over-the-counter market and, where possible, deals directly with the dealers who make a market in the securities involved, except in those circumstances in which better prices and execution are available elsewhere. Under the Investment Company Act, persons affiliated with the Trust are prohibited from dealing with the Trust as principal in purchase and sale of securities. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principal for their own accounts, affiliated persons of the Trust, including Merrill Lynch, will not serve as the Trust's dealer in such transactions. However, affiliated persons of the Trust may serve as its broker in the over-the-counter transactions conducted on an agency basis.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as amended, Merrill Lynch may execute transactions for the Trust on the floor of any national securities exchange provided that prior authorization of such transactions is obtained and Merrill Lynch furnishes a statement to the Trust at least annually setting forth the compensation it has received in connection with such transactions.
The Trustees have considered the possibility of recapturing for the benefit of the Trust brokerage commissions, dealer spreads and other expenses of possible portfolio transactions, such as underwriting commissions, by conducting such portfolio transactions through affiliated entities, including Merrill Lynch. For example, brokerage commissions received by Merrill Lynch could be offset against the management fee paid by the Trust to the Manager. After considering all factors deemed relevant, the Trustees made a determination not to seek such recapture. The Trustees will reconsider this matter from time to time.
Portfolio Turnover. Although the Series will use a passive, indexing approach to investing, each Series may engage in a substantial number of portfolio transactions. The rate of portfolio turnover will be a limiting factor when the Manager considers whether to purchase or sell securities for a Series only to the extent that the Manager will consider the impact of transaction costs on a Series' tracking error. Changes in the securities comprising a Series' index will tend to increase that Series' portfolio turnover rate, as the Manager restructures the Series' holdings to reflect the changes in the index. A high rate of portfolio turnover would result in correspondingly greater brokerage commission expenses. Portfolio turnover rate is calculated by dividing the lesser of the Series' annual sales or purchases of portfolio securities (exclusive of purchases and sales of Government securities and of all other securities, including options, whose maturity or expiration dates at the time of acquisition were one year or less) by the monthly average value of the securities in the Series during the fiscal year.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information -- Determination of Net Asset Value" in the Prospectus concerning the determination of net asset value.
The net asset value of the shares of the Funds is determined once daily Monday through Friday as of 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 P.M., New York time) on each day the New York Stock Exchange is open for trading (a "Pricing Day"). The New York Stock Exchange is not open for trading on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value is computed by dividing the value of the securities held by a 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 Administrator and the Distributor, and the advisory fees payable indirectly by the Series of the Trust to the Manager, are accrued daily.
The principal assets of each Fund will normally be its interest of the underlying Series, which will be valued at its net asset value. A Series' securities which are traded on stock exchanges are valued at the last sale price as of the close of business on the day the securities are being valued, or, lacking any sales, at the closing bid price. Securities traded in the over-the-counter market are valued at the last quoted bid prices as at the close of trading on the New York Stock Exchange on each day by brokers that make markets in the securities. Portfolio securities which are traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. Other investments, including 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 market value, as determined in good faith by or under the direction of the Trustees of the Trust.
Each investor in the Trust may add to or reduce its investment in any Series on each Pricing Day. The value of each investor's (including the respective Funds') interest in a Series will be determined as of 15 minutes after the close of business on the New York Stock Exchange (generally 4:00 p.m., New York Time) by multiplying the net asset value of the Series by the percentage, effective for that day, that represents that investor's share of the aggregate interests in such Series. Any additions or withdrawals, which are to be effected on that day, will then be effected. The investor's percentage of the aggregate beneficial interests in a Series will then be re-computed as the percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Series as of the time or determination on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the aggregate investments in the Series by all investors in the Series. The percentage so determined will then be applied to determine the value of the investor's interest in such Series as of such time on the next Pricing Day of the Series.
SHAREHOLDER SERVICES
The Funds offer a number of shareholder services described below which are designed to facilitate investment in their shares. Full details as to each of such services and copies of the various plans described below can be obtained from the Funds, the Distributor or Merrill Lynch. Certain of these services are available only to United States investors.
INVESTMENT ACCOUNT
Each shareholder whose account is maintained at the Transfer Agent has an Investment Account and will receive statements, at least quarterly, from the Transfer Agent. These statements will serve as transaction
confirmations for automatic investment purchases and the reinvestment of ordinary income dividends and long-term capital gains distributions. The statement will also show any other activity in the account since the preceding statements. Shareholders will receive separate transaction confirmations for each purchase or sale transaction other than automatic investment purchase and the reinvestment of ordinary income dividends and long-term capital gains distribution. Shareholders may make additions to their Investment Account at any time by mailing a check directly to the Transfer Agents. Shareholders may also 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 interested in transferring their 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 be issued certificates for his shares, and then must turn the certificates over to the new firm for re-registration as described in the preceding sentence. Shareholders considering transferring from Merrill Lynch to another brokerage firm or financial institution should be aware that, if the firm to which the account is to be transferred will not take delivery of shares of a Fund, a shareholder must either redeem the shares so that the cash proceeds can be transferred to the account at the new firm, or such shareholder must continue to maintain an account at Merrill Lynch for those shares.
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 of an Investment Account may be requested by a shareholder directly from Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent").
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions 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 Funds. Such reinvestment will be at the net asset value of shares of a Fund, without sales charge, as of the close of business on the ex-dividend date of the dividend or distribution. Shareholders may elect in writing or by telephoning (1-800-MER-FUND) to receive either their income dividends or capital gains distributions, or both, in cash, in which event payment will be mailed on or about the payment date. Shareholders may, at any time, notify the Transfer Agent in writing 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 the receipt by the Transfer Agent of such notice, those instructions will be effected.
SYSTEMATIC WITHDRAWAL PLANS
A shareholder may elect to receive systematic withdrawal payments from such shareholder's Investment Account in the form of payments by check or through automatic payment by direct deposit to such shareholder's bank account on either a monthly or quarterly basis. Shareholders whose shares are held within a CMA(R), CBA(R) or Retirement Account may elect to have shares redeemed on a monthly, bi-monthly, quarterly, semiannual or annual basis through the Systematic Redemption Program, subject to certain conditions.
AUTOMATIC INVESTMENT PLANS.
Regular additions of shares may be made in an investor's Investment Account by prearranged charges of $50 or more to such investor's regular bank account. Investors who maintain CMA(R) accounts may arrange to have periodic investments made in the Funds in their CMA(R) account or in certain related accounts in amounts of $100 or more through the CMA(R) Automated Investment Program.
RETIREMENT PLANS
Self-directed individual retirement accounts and other retirement plans are available from Merrill Lynch. Under these plans, investments may be made in a Fund and certain of the other mutual funds sponsored by Merrill Lynch as well as in other securities. Merrill Lynch charges an initial establishment fee and an annual custodial fee for each account. Information with respect to these plans is available on request from Merrill Lynch. The minimum initial purchase to establish any such plan is $100 and the minimum subsequent purchase is $1.
Capital gains and income received in each of the plans referred to above are exempt from Federal taxation until distributed from the plans. Investors considering participation in any such plan should review specific tax laws relating thereto and should consult their attorneys or tax advisers with respect to the establishment and maintenance of any such plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
It is the Corporation's intention to distribute all of its net investment income, if any. Dividends from such net investment income will be paid at least annually with respect to each of the S&P 500 Index Fund, Small Cap Index Fund and International Index Fund. Dividends with respect to the Aggregate Bond Index Fund will be declared daily and paid monthly. All net realized long- or short-term capital gains, if any, are distributed to Fund shareholders at least annually. From time to time, a 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 taxable year. See "Shareholder Services -- Reinvestment of Dividends and Capital Gains Distributions" for information concerning the manner in which dividends and distributions may be reinvested automatically in shares of the Funds. Shareholders may elect in writing to receive any such dividends or distributions, or both, in cash.
TAXES
The Funds intend to qualify for the special tax treatment afforded regulated investment companies ("RICs") under the Internal Revenue Code of 1986, as amended (the "Code"). As a RIC, a Fund will not be subject to Federal income tax on the part of its net ordinary income and net realized capital gains which it distributes to shareholders. In order to qualify, the Fund must among other things, (i) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of securities, or other income (including but not limited to gains from options or futures) derived with respect to its business of investing in such stock or securities; (ii) derive less than 30% of its gross income from gains from the sale or other disposition of stock, securities, options or futures held for less than 3 months; (iii) distribute at least 90% of its dividend, interest and certain other taxable income each year; (iv) at the end of each fiscal quarter maintain at least 50% of the value of its total assets in cash, government securities, securities of other RICs, and other securities of issuers which represent, with respect to each issuer, no more
than 5% of the value of the Fund's total assets and 10% of the outstanding voting securities of such issuer; and (v) at the end of each fiscal quarter have no more than 25% of its assets invested in the securities (other than those of the government or other RICs) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar or related trades and businesses.
Dividends paid by a 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 a Fund's net realized long-term capital gains (including long-term gains from certain transactions in futures and options) 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 gains distributions received by the shareholder with respect to such shares. Distributions in excess of a 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 and distributions are taxable to shareholders even though they are reinvested in additional shares of a Fund. Not later than 60 days after the close of its taxable year, the Funds will provide shareholders with a written notice designating the amounts of any ordinary income dividends or capital gains dividends. A portion of the ordinary income dividends paid by the S&P 500 Index Fund and Small Cap Index Fund may be eligible for the 70% dividends received deduction allowed to corporations under the Code, if certain requirements are met. For this purpose, the Funds will allocate dividends eligible for the dividends received deduction between the Class A and Class D shareholders according to a method that is based upon the gross income that is allocable to the Class A and Class D shareholders during the taxable year, or such other method as the Internal Revenue Service may prescribe. Distributions paid by the Aggregate Bond Index Fund and the International Index Fund will not be eligible for the dividends received deduction. If a 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.
Redemptions and exchanges of a Fund's shares are taxable events, and, accordingly, shareholders may realize gains or losses on such events. A loss realized on a sale or exchange of shares of a 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.
Ordinary income dividends paid by a Fund to shareholders who are nonresident aliens or foreign entities generally will be subject to a 30% United States 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 the applicable treaty law. Nonresident shareholders are urged to consult their own tax advisers concerning the applicability of the United States withholding tax.
Dividends and interest received by the International Index Fund and the Aggregate Bond Index 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 of the International Index Fund may be able to claim U.S. foreign tax credits with respect to such taxes, subject to certain provisions and
limitations contained in the Code. For example, certain retirement accounts cannot claim foreign tax credits on investments in foreign securities held by the Fund. The International Index Fund expects to 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 share of such withholding taxes in their U.S. income tax returns as gross income, treat such proportionate share as taxes paid by them, and deduct such proportionate share in computing their taxable incomes or, alternatively, subject to certain restrictions, use them as foreign tax credits against their U.S. income taxes. No deductions for foreign taxes, however, may be claimed by noncorporation shareholder 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 International Equity 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 and Class D shareholders according to a method similar to that described above for the allocation of dividends eligible for the dividends received deduction.
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 basis, and 98% of its capital gains, determined, in general, on an October 31 year end, plus certain undistributed amounts from previous years. For purposes of determining its distribution requirements, each Fund will account for its share of items of income, gain, loss and deductions of the Series as they are taken into account by the Series. While each 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.
Under certain provisions of the Code, some shareholders may be subject to a 31% withholding tax on reportable dividends, capital gains distributions and redemption payments ("backup withholding"). Generally, shareholders subject to backup withholding will be those for whom a certified taxpayer identification number is not on file with the Corporation or who, to the Corporation'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.
TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS
Each Fund may purchase or sell options and futures. Options and futures contracts that are "Section 1256 contracts" will be "marked to market" for Federal income tax purposes at the end of each taxable year, i.e., each such option or futures contract will be treated as sold for its fair market value on the last day of the taxable year. In general, unless the special election referred to in the previous sentence is made, 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 a Fund solely to reduce the risk of changes in price or interest rates with respect to its investments.
Code Section 1092, which applies to certain "straddles", may affect the
taxation of each Fund's transactions in options and futures contracts. Under
Section 1092, a Fund may be required to postpone recognition for tax purposes of
losses incurred in certain closing transactions in options and futures.
Similarly, Code Section 1091, which deals with "wash sales," may cause a Fund to
postpone recognition of certain losses
for tax purposes; and Code Section 1258, which deals with "conversion transactions," may apply to recharacterize certain capital gains as ordinary income for tax purposes.
One of the requirements for qualification as a RIC is that less than 30% of a Fund's gross income may be derived from gains from the sale or other disposition of securities held for less than three months. Accordingly, the Funds may be restricted in effecting 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 a Series 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 a Series.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (i.e.,
unless certain special rules apply, currencies other than the United States
dollar). In general, foreign currency gains or losses from certain forward
contracts, from futures contracts that are not "regulated futures contracts" and
from unlisted options will be treated as ordinary income or loss under Code
Section 988. In certain circumstances, a Series may elect capital gain or loss
treatment for such transactions. In general, however, Code Section 988 gains or
losses will increase or decrease the amount of a Fund's investment company
taxable income available to be distributed to shareholders as ordinary income,
rather than increasing or decreasing the amount of the Fund's net capital gains.
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
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.
THE SERIES
The Trust and each Fund have received a private letter ruling from the Internal Revenue Service ("IRS"), in which the IRS has ruled that each Series is classified as a partnership for tax purposes and, based upon that ruling, that each Fund will be entitled to look to the underlying assets of the Series in which it has invested for purposes of satisfying the diversification requirements and other requirements of the Code applicable to RICs. If any of the facts upon which such ruling is premised change in any material respect (e.g., if the Trust were required to register its interests under the Securities Act) and the Trust is unable to obtain a revised private letter ruling from the IRS indicating that each Series will continue to be classified as a partnership, then the Board of Directors of the Corporation will determine, in its discretion, the appropriate course of action for the Funds. One possible course of action would be to withdraw the Funds' investments from the Series and to retain an investment adviser to manage the Funds' assets in accordance with the investment policies applicable to the respective Fund. See "Investment Objectives and Policies."
The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations presently in effect, and does not address the state and local tax, or estate or inheritance
tax, consequences of an investment is a Fund. 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.
Dividends and capital gains distributions and gain on the sale or exchange of shares in a Fund may also be subject to state and local taxes.
Shareholders are urged to consult their own tax advisers regarding specific questions as to Federal, state, local or foreign taxes or estate or inheritance tax. Foreign investors should consider applicable foreign taxes in their evaluation of an investment in a Fund.
PERFORMANCE DATA
From time to time a Fund may include its Fund's average annual total return, other total return data and/or yield in advertisements or information furnished to present or prospective shareholders. Total return figures are based on a Fund's historical performance and are not intended to indicate future performance. Average annual total return and yield are determined 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.
Each 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. Such data will be computed as described above, except that as required by the periods of the quotations, actual annual, annualized or aggregate data, rather than average annual data, may be quoted. 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.
From time to time, a Fund may include its Fund's Morningstar risk-adjusted performance ratings in advertisements or supplemental sales literature.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Corporation is a Maryland corporation incorporated on October 25, 1996. It has an authorized capital of 1,000,000,000 shares of Common Stock, par value $0.0001 per share, divided into 125,000,000 shares each of Class A and Class D shares for each of the four Funds: Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund. Class A and Class D shares of a Fund represent interests in the same assets of the Series and are identical in all respects except that the Class D shares bear certain expenses related to the account maintenance associated with such shares. Class D shares have exclusive voting rights with respect to matters relating to the class' account maintenance expenditures.
Shareholders are entitled to one vote for each full share held and to fractional votes for fractional shares held in the election of Directors (to the extent hereafter provided) and on other matters submitted to the vote of shareholders. All shares of each Fund have equal voting rights, except that each Fund has exclusive voting rights to matters affecting only such Fund, and except that as noted above, Class D shares have exclusive voting rights with respect to matters relating to the class' account maintenance expenditures. There normally will be no meeting of shareholders for the purpose of electing Directors unless and until such time as less than a majority of the Directors holding office have been elected by the shareholders, at which time the Directors then in office will call a shareholders' meeting for the election of Directors. Shareholders may, in accordance with the terms of the Articles of Incorporation, cause a meeting of shareholders to be held for the purpose of voting on the removal of Directors. Also, the Corporation will be required to call a special meeting of shareholders in accordance with the requirements of the Investment Company Act to seek approval of new management and advisory arrangements, of a material increase in account maintenance fees or of a change in fundamental policies, objectives or restrictions. Except as set forth above, the Directors shall continue to hold office and appoint successor Directors. Each issued and outstanding share is entitled to participate equally in dividends and distributions declared and in net assets upon liquidation or dissolution remaining after satisfaction of outstanding liabilities, except that, as noted above, Class D shares bear certain additional expenses. Shares issued are fully-paid and non-assessable by the Fund. Voting rights for Directors are not cumulative.
Stock certificates are issued by the Transfer Agent only on specific request. Certificates for fractional shares are not issued in any case.
The Trust consists of four Series, and is organized as a Delaware business trust. Whenever a Fund is requested to vote on a fundamental policy of a Series, the Corporation will hold a meeting of the investing Fund's shareholders and will cast its vote as instructed by such Fund's shareholders.
MLAM provided the initial capital for each Fund by purchasing 2,500 Class A shares of each Fund (10,000 total) and 2,500 Class D shares of each Fund (10,000 total), for an aggregate of $50,000 per Fund. Such shares were acquired for investment and can only be disposed of by redemption. The organizational expenses of the Corporation will be paid by the Corporation and amortized over a period not exceeding five years. The proceeds realized by MLAM upon redemption of any of such shares will be reduced by the proportionate amount of the unamortized organizational expenses which the number of shares redeemed bears to the number of shares initially purchased.
COMPUTATION OF OFFERING PRICE PER SHARE
Based upon the projected value of each Fund's estimated assets and projected number of shares of each class outstanding on the date its shares are first offered to the public, the initial offering price of the shares of each class of each Fund is expected to be $10.00 ($25,000 net assets divided by 2,500 shares outstanding).
INDEPENDENT AUDITORS
Deloitte & Touche, LLP, has been selected as the independent auditors of the Corporation and the Trust. The selection of the Corporation's independent auditors is subject to ratification by shareholders in years when an annual meeting of shareholders is held. In addition, employment of such auditors may be terminated without any penalty by vote of a majority of the outstanding shares of the Corporation at a meeting called for the purpose of terminating such employment. The independent auditors are responsible for auditing the annual financial statements of the Funds.
CUSTODIAN
Merrill Lynch Trust Company, 800 Scudders Mill Road, Plainsboro, New Jersey, acts of custodian of the assets of Merrill Lynch S&P 500 Index Series, Merrill Lynch Small Cap Index Series and Merrill Lynch Aggregate Bond Index Series. State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston Massachusetts 02101, acts as custodian of the assets of Merrill Lynch International Index Series. Under its contract with the Trust, State Street is authorized to establish separate accounts in foreign currencies and to cause foreign securities owned by the International Index Series to be held in its offices outside the United States and with certain foreign banks and securities depositories. The Custodian is responsible for safeguarding and controlling cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on investments. Each Custodian is responsible for safeguarding and controlling cash and securities, handling the receipt and delivery of the securities and collecting interest and dividends on investments.
TRANSFER AGENT
Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484, acts as the Transfer Agent of the Corporation and the Trust. 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 Funds -- Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third Avenue, New York, New York 10022, is counsel for the Corporation and the Trust.
REPORTS TO SHAREHOLDERS
The Corporation sends to its shareholders at least quarterly reports showing the Funds' portfolio and other information. An annual report, containing financial statements audited by independent auditors, is sent to shareholders each year. After the end of each year shareholders will receive Federal income tax information regarding dividends and capital gains distributions.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not contain all the information set forth in the Registration Statement and the exhibits relating thereto, which the Corporation 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 separate agreements Merrill Lynch has granted the Corporation and the Trust 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 Corporation and the Trust at any time or to grant the use of such name to any other company, and the Corporation and the Trust have 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.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Merrill Lynch Index Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of the Merrill Lynch S&P 500 Index Fund, Merrill Lynch SmallCap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund of Merrill Lynch Index Funds, Inc. as of January 17, 1997. These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our opinion.
In our opinion, such statements of assets and liabilities presents fairly, in all material respects, the financial position of the Merrill Lynch S&P 500 Index Fund, Merrill Lynch SmallCap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund of Merrill Lynch Index Funds, Inc. as of January 17, 1997, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
January 22, 1997
MERRILL LYNCH INDEX FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 17, 1997
MERRILL
MERRILL MERRILL LYNCH MERRILL
LYNCH LYNCH AGGREGATE LYNCH
S&P 500 SMALL CAP BOND INTERNATIONAL
INDEX FUND INDEX FUND INDEX FUND INDEX FUND
------------ ------------ ------------ ------------
Assets:
Cash in Bank................................... $ 25,000 $ 25,000 $ 25,000 $ 25,000
Prepaid registration fees (Note 3)............. 173,685 43,421 28,947 28,947
Deferred organization expenses (Note 4)........ 84,211 21,053 14,035 14,035
------------ ------------ ------------ ------------
Total Assets................................. 282,896 89,474 67,982 67,982
Liabilities:
Liabilities and accrued expenses............... 257,896 64,474 42,982 42,982
------------ ------------ ------------ ------------
Net Assets (equivalent to $0.0001 per share on
1,250 Class A shares of Common Stock (par value
$0.0001), 1,250 Class D shares of Common Stock
(par value $0.0001) outstanding with
1,000,000,000 shares authorized) (Note 1)...... $ 25,000 $ 25,000 $ 25,000 $ 25,000
============= ============= ============= =============
Net Assets Consist of:
Class A Shares of Common Stock, $0.0001 par
value, 125,000,000 shares authorized......... $ 1 $ 1 $ 1 $ 1
Class D Shares of Common Stock, $0.0001 par
value, 125,000,000 shares authorized......... 1 1 1 1
Paid-in Capital in excess of par............... 24,998 24,998 24,998 24,998
------------ ------------ ------------ ------------
Net Assets....................................... $ 25,000 $ 25,000 $ 25,000 $ 25,000
============= ============= ============= =============
Net Asset Value:
Class A -- Based on net assets of $12,500 and
1,250 shares outstanding....................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
============= ============= ============= =============
Class D -- Based on net assets of $12,500 and
1,250 shares outstanding....................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
============= ============= ============= =============
|
Notes to Statement of Assets and Liabilities.
(1) Merrill Lynch Index Funds, Inc. (the "Corporation") was organized as a Maryland corporation on October 25, 1996 and consists of four portfolios or series; Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund and Merrill Lynch International Index Fund. The Corporation is registered under the investment Company Act of 1940 as a non-diversified mutual fund. To date, the Corporation has not had any transactions other than those relating to organizational matters and the sale of 5,000 Class A shares and 5,000 Class D shares of Common Stock to Merrill Lynch Asset Management, L.P. (the "Administrator").
(2) The Corporation has entered into an administration agreement (the "Administration Agreement") with the Administrator, and a distribution agreement (the "Distribution Agreement") with Merrill Lynch Funds Distributor, Inc. (the "Distributor"). (See "Management of the Funds -- Administration Arrangements" in the Statement of Additional Information.) Certain officers and/or directors of the Corporation are officers and/or directors of the Administrator 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 Corporation commences operations not exceeding five years. In the event that the Administrator (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 Corporation is liquidated prior to the end of the five-year period, the Administrator (or any subsequent holder) shall bear the unamortized deferred organization expenses.
TABLE OF CONTENTS
PAGE
IN THIS
STATEMENT
---------
Investment Objectives and
Policies....................... 2
Investment Restrictions........ 2
Management of the Funds.......... 4
Directors and Officers......... 4
Compensation of Directors...... 5
Administration Arrangements.... 5
Management and Advisory
Arrangements................ 7
Purchase of Shares............... 8
Redemption of Shares............. 8
Portfolio Transactions and
Brokerage...................... 9
Determination of Net Asset
Value.......................... 10
Shareholder Services............. 11
Investment Account............. 11
Automatic Reinvestment of
Dividends and Capital Gains
Distributions............... 12
Systematic Withdrawal
Plans..................... 12
Automatic Investment
Plans..................... 13
Retirement Plans............ 13
Dividends, Distributions and
Taxes....................... 13
Dividends and
Distributions............. 13
Taxes....................... 13
Tax Treatment of Options and
Future Transactions......... 15
Special Rules for Certain
Foreign Currency
Transactions................ 16
The Series..................... 16
Performance Data................. 17
General Information.............. 18
Description of Shares....... 18
Computation of Offering
Price per Share........... 19
Independent Auditors........ 19
Custodian................... 19
Transfer Agent.............. 19
Legal Counsel............... 19
Reports to Shareholders..... 19
Additional Information...... 20
Report of Independent Auditors... 21
Financial Statements............. 22
Code 19004-0197
|
MERRILL LYNCH
INDEX FUNDS, INC.
STATEMENT OF mlynch compass ADDITIONAL INFORMATION January 31, 1997 Distributor: Merrill Lynch Funds Distributor, Inc. |
PART C. OTHER INFORMATION
|
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Contained in Part A, the Prospectus:
None
Contained in Part B, the Statement of Additional Information:
Statement of Assets and Liabilities
(b) Exhibits:
EXHIBIT
NUMBER
------
1(a) -- Articles of Incorporation of Registrant.*
1(b) -- Articles of Amendment.
2 -- By-Laws of Registrant.*
3 -- None.
4 -- Instrument Defining Rights of Shareholders. Incorporated by reference to
Exhibits 1 and 2 above.
5 -- Not Applicable.
6 -- Distribution Agreement between Registrant and Merrill Lynch Funds
Distributor, Inc.
7 -- None.
8(a) -- Form of Custody Agreement between Registrant and Merrill Lynch Trust Company.
8(b) -- Form of Custody Agreement between Registrant and State Street Bank and Trust
Company.
9(a) -- Form of Administration Agreement between Registrant and Merrill Lynch Asset
Management, L.P.
(b) -- Form of Transfer Agency, Dividend Disbursing Agency and Shareholder Servicing
Agency Agreement between Registrant and Merrill Lynch Financial Data
Services, Inc.
(c) -- License Agreement relating to Use of Name between Merrill Lynch & Co., Inc.
and Registrant.
10 -- Opinion and consent of Shereff, Friedman, Hoffman & Goodman, LLP, counsel for
Registrant.
11 -- Consent of Deloitte & Touche LLP, independent auditors for the Registrant.
12 -- None.
13 -- Certificate of Merrill Lynch Asset Management.
14 -- Not Applicable.
15 -- Account Maintenance Plan of the Registrant and Plan Sub-Agreement.
16 -- Not Applicable.
17(a) -- Financial Data Schedules -- Not Applicable.
17(b) -- Powers of Attorney.
18 -- Rule 18f-3 Plan.
|
* Previously filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Prior to the effective date of this Registration Statement, the Registrant sold shares of each Class of each Series of Registrant to Merrill Lynch Asset Management, L.P. (the "Administrator" or "MLAM"), which, as sole shareholder, may be deemed to control Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
One.
ITEM 27. INDEMNIFICATION.
Reference is made to Article VI of Registrant's Articles of Incorporation, Article VI of Registrant's By-Laws and Section 2-418 of the Maryland General Corporation Law.
Article VI of the By-Laws provides that each current and former officer and Director of the Registrant shall be indemnified by the Registrant to the full extent permitted under the General Laws of the State of Maryland, except that such indemnity shall not protect any such person against any liability to the Registrant 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 Registrant to indemnify such person must be based upon the reasonable determination of independent counsel or 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 Registrant claiming indemnification with the scope of Article VI of the By-Laws shall be entitled to advances from the Registrant 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 General Laws of the State of Maryland; provided, however, that the person seeking indemnification shall provide to the Registrant a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Registrant has been met and a written undertaking to repay any such advance, if it should ultimately be determined that the standard of conduct has not been met, and provided further that at least one of the following additional conditions is met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Registrant for his undertaking; (b) the Registrant is insured against losses arising by reason of the advance; (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 Registrant 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 Registrant may indemnify, make advances or purchase insurance to the extent provided in Article VI of the By-Laws on behalf of an employee or agent who is not an officer or Director of the Registrant.
The Registrant has purchased an insurance policy insuring its officers and Directors against liabilities, and certain costs of defending claims against such officers and Directors, to the extent such officers and Directors are not found to have committed conduct constituting willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties.
Article IV of the Administration Agreement between Registrant and MLAM (Exhibit 9(a) hereof) limits the liability of MLAM to liabilities arising from willful misfeasance, bad faith or gross negligence in the performance of their respective duties or from reckless disregard of their respective duties and obligations.
In Section 9 of the Distribution Agreement relating to the securities being offered hereby, the Registrant agrees to indemnify the Distributor and each person, if any, who controls the Distributor within the meaning of the Securities Act of 1933 (the "Act"), against certain types of civil liabilities arising in connection with the Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the Act may be permitted to Directors, officers and controlling persons of the Registrant and the principal underwriter pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Director, officer, or controlling person of the Registrant and the principal underwriter in connection with the successful defense of any action, suit or proceeding) is asserted by such Director, officer or controlling person or the principal underwriter in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Merrill Lynch Asset Management, L.P. (the "Manager" or "MLAM"), the investment adviser of Merrill Lynch Index Trust, acts as investment adviser for the following open-end investment companies: Merrill Lynch Adjustable Rate Securities Fund, Inc., Merrill Lynch Americas Income Fund, Inc., Merrill Lynch Asset Builder Program, Inc., Merrill Lynch Asset Growth Fund, Inc., Merrill Lynch Asset Income Fund, Inc., 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 Global Value Fund, Inc., Merrill Lynch Growth Fund, Merrill Lynch Healthcare Fund, Inc., Merrill Lynch Intermediate Government Bond Fund, Merrill Lynch International Equity Fund, Merrill Lynch Latin America Fund, Inc., Merrill Lynch Middle East/Africa Fund, Inc., Merrill Lynch Municipal Series Trust, Merrill Lynch Pacific Fund, Inc., Merrill Lynch Ready Assets Trust, Merrill Lynch Retirement Series Trust, 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.A. Government Reserves, Merrill Lynch U.S. Treasury Money Fund, Merrill Lynch Utility Income Fund, Inc. and Merrill Lynch Variable Series Funds, Inc.; and the following closed-end investment companies: Convertible Holdings, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Municipal Strategy Fund, Inc. and Merrill Lynch Senior Floating Rate Fund, Inc.
Fund Asset Management, L.P. ("FAM"), an affiliate of MLAM, acts as the investment adviser for the following open-end investment companies: 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., Financial Institutions Series Trust, Merrill Lynch Basic Value Fund, Inc., Merrill Lynch California Municipal Series Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill Lynch Emerging Tigers 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. and The Municipal Fund Accumulation Program, Inc.; and the following closed-end investment companies: Apex Municipal Fund, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities Fund 2000, Inc., MuniAssets Fund, Inc., MuniEnhanced Fund, Inc., MuniInsured Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., MuniVest Florida Fund, MuniVest Michigan Insured Fund, Inc., MuniVest New Jersey Fund, Inc., MuniVest Pennsylvania Insured Fund, MuniYield Arizona Fund, Inc., MuniYield California Fund, Inc., MuniYield California Insured Fund, Inc., MuniYield California Insured Fund II, Inc., MuniYield Florida Fund, MuniYield Florida Insured Fund, MuniYield Fund, Inc., MuniYield Insured Fund, Inc., MuniYield 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 Pennsylvania Fund, MuniYield Quality Fund, Inc., MuniYield Quality Fund II, Inc., Senior High Income Portfolio, Inc., Taurus MuniCalifornia Holdings, Inc., Taurus MuniNew York Holdings, Inc., and Worldwide DollarVest Fund, Inc.
The address of each of these investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011, except that the address of Merrill Lynch Funds for Institutions Series and Merrill Lynch Institutional Intermediate Fund is One Financial Center, 15th Floor, Boston, Massachusetts 02111-2646. The address of the Manager, FAM, Princeton Services, Inc. ("Princeton Services") and Princeton Administrators, L.P.
("Princeton Administrators") is also P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of Merrill Lynch Funds Distributor, Inc. ("MLFD") is P.O. Box 9081, Princeton, New Jersey 08543-9081. 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 Merrill Lynch Financial Data Services ("FDS") 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 July 1, 1994 for his own account or in the capacity of director, officer, partner or trustee. In addition, Mr. Zeikel is President, Mr. Glenn is Executive Vice President, and Mr. Richard is Treasurer of substantially all of the investment companies described in the first paragraph of Item 28, and Messrs. Giordano, Harvey, Hewitt, Kirstein and Monagle are directors, trustees or officers of one or more of such companies.
OTHER SUBSTANTIAL BUSINESS,
PROFESSION, VOCATION OR
NAME POSITIONS WITH MANAGER EMPLOYMENT
- ---------------------------- ------------------------------ ---------------------------------
ML&Co....................... Limited Partner Financial Services Holding
Company; Limited Partner of FAM
Princeton Services.......... General Partner General Partner of FAM
Arthur Zeikel............... President and Director President of FAM; President and
Director of Princeton Services;
Director of MLFD; Executive Vice
President of ML & Co.
Terry K. Glenn.............. Executive Vice President and Executive Vice President of FAM;
Director Executive Vice President and
Director of Princeton Services;
President and Director of MLFD;
President of Princeton
Administrators;
Director of FDS
Vincent R. Giordano......... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Elizabeth Griffin........... Senior Vice President Senior Vice President of FAM:
Senior Vice President of
Princeton Services
Norman R. Harvey............ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Michael J. Hennewinkel...... 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 President, General Senior Vice President, General
Counsel, Secretary and Counsel and Secretary of FAM;
Director Senior Vice President, General
Counsel, Director and Secretary
of Princeton Services; Director
of MLFD
Ronald M. Kloss............. Senior Vice President and Senior Vice President and
Controller Controller of FAM; Senior Vice
President and Controller of
Princeton Services
Stephen M.M. Miller......... Senior Vice President Executive Vice President of
Princeton Administrators; Senior
Vice President of Princeton
Services
|
OTHER SUBSTANTIAL BUSINESS,
PROFESSION, VOCATION OR
NAME POSITIONS WITH MANAGER EMPLOYMENT
- ---------------------------- ------------------------------ ---------------------------------
Joseph T. Monagle........... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Michael J. Quinn............ Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services; Managing
Director and First Vice President
of Merrill, Lynch, Pierce, Fenner
& Smith Incorporated
Richard L. Reller........... Senior Vice President Senior Vice President of FAM;
Senior Vice President of
Princeton Services
Gerald M. Richard........... Senior Vice President and Senior Vice President and
Treasurer Treasurer of FAM; Senior Vice
President and Treasurer of
Princeton Services; Vice
President and Treasurer of MLFD
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
|
(b) Merrill Lynch Asset Management U.K. Limited ("MLAM U.K.") acts as sub-adviser for the following registered investment companies: Merrill Lynch EuroFund, Merrill Lynch Global Allocation Fund, Inc., Merrill Lynch Global SmallCap Fund, Inc., Merrill Lynch International Equity Fund and Merrill Lynch Short-Term Global Income Fund, Inc. The address of each of these investment companies is P.O. Box 9011, Princeton, New Jersey 08543-9011. The address of MLAM U.K. is Milton Gate, 1 Moor Lane, London EC2Y 9HA, England.
Set forth below is a list of each executive officer and director of MLAM U.K. indicating each business, profession, vocation or employment of a substantial nature in which each person has been engaged since July 1, 1994, for his or her own account or in the capacity of director, officer, partner or trustee. In addition, Messrs. Zeikel, Albert, Bascand, Glenn, Richard and Yardley are officers of one or more of the registered investment companies listed in the first two paragraphs of this Item 28:
OTHER SUBSTANTIAL BUSINESS,
PROFESSION, VOCATION OR
NAME POSITIONS WITH MLAM U.K. EMPLOYMENT
- ---------------------------- ------------------------------ ---------------------------------
Arthur Zeikel............... Director and Chairman President of the Manager and FAM;
President and Director of
Princeton Services, Director of
MLFD; Executive Vice President of
ML & Co.
Alan J. Albert.............. Senior Managing Director Vice President of the Manager
Terry K. Glenn.............. Director Executive Vice President of the
Manager and FAM; Executive Vice
President and Director of
Princeton Services; President and
Director of MLFD; Director of
MLFDS; President of Princeton
Administrators
Adrian Holmes............... Managing Director Director of Merrill Lynch Global
Asset Management
Andrew John Bascand......... Director Director of Merrill Lynch Global
Asset Management
Edward Gobora............... Director Director of Merrill Lynch Global
Asset Management
Richard Kilbride............ Director Director of Merrill Lynch Global
Asset Management
|
OTHER SUBSTANTIAL BUSINESS,
PROFESSION, VOCATION OR
NAME POSITIONS WITH MLAM U.K. EMPLOYMENT
- ---------------------------- ------------------------------ ---------------------------------
Robert M. Ryan.............. Director Vice President, Institutional
Marketing, Debt and Equity Group,
Merrill Lynch Capital Markets
from 1989 to 1994
Gerald M. Richard........... Senior Vice President Senior Vice President and
Treasurer of the Manager and FAM;
Senior Vice President and
Treasurer of Princeton Services;
Vice President and Treasurer of
MLFD
Stephen J. Yardley.......... Director Director of Merrill Lynch Global
Asset Management
Carol Ann Langham........... Company Secretary None
Debra Anne Searle........... Assistant Company Secretary None
|
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) MLFD acts as the principal underwriter for the Registrant, placement agent for Merrill Lynch Index Trust and as principal underwriter for each of the open-end investment companies referred to in the first two paragraphs of Item 28 except 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. and The Municipal Fund Accumulation Program, Inc., and MLFD also acts as principal underwriter for the following closed-end funds: Merrill Lynch High Income Municipal Bond Fund, Inc., Merrill Lynch Senior Floating Rate Fund, Inc. and Merrill Lynch Municipal Strategy 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 9081, Princeton, New Jersey 08543-9081, except that the address of Messrs. Aldrich, Breen, Crook, Fatseas and Wasel is One Financial Center, Boston, Massachusetts 02111-2646.
(2) (3)
(1) POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH THE DISTRIBUTOR WITH REGISTRANT
- ----------------------------------------- ----------------------------------- ---------------------
Terry K. Glenn........................... President and Director President
Arthur Zeikel............................ Director None
Philip L. Kirstein....................... Director None
William E. Aldrich....................... Senior Vice President None
Robert W. Crook.......................... Senior Vice President None
Kevin P. Boman........................... Vice President None
Michael J. Brady......................... Vice President None
William M. Breen......................... Vice President None
Mark A. DeSario.......................... Vice President None
James T. Fatseas......................... Vice President None
Debra W. Landsman-Yaros.................. Vice President None
Michelle T. Lau.......................... Vice President None
Gerald M. Richard........................ Vice President and Treasurer Treasurer
Salvatore Venezia........................ Vice President None
William Wasel............................ Vice President None
Robert Harris............................ Secretary None
|
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder are maintained at the offices of the Registrant,
800 Scudders Mill Road, Plainsboro, New Jersey 08536, and its Transfer Agent, Merrill Lynch Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida 32246-6484.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the caption "Management of the Funds" in the Prospectus constituting Part A of the Registration Statement and under "Management of the Funds" in the Statement of Additional Information constituting Part B of the Registration Statement, the Registrant is not party to any Management-related service contract.
ITEM 32. UNDERTAKINGS.
To file a post-effective amendment, using financial statements which may not be certified, within four to six months of the effective date of this Registration Statement.
The Registrant will furnish each person to whom a Prospectus is delivered with a copy of Registrant's latest annual request to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Plainsboro, and State of New Jersey, on the 30th day of January, 1997.
MERRILL LYNCH INDEX FUNDS, INC.
Registrant
/s/ TERRY K. GLENN
By:
|
(Terry K. Glenn, President)
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------------- -------------------------------------- -----------------
/s/ TERRY K. GLENN President and Director January 30, 1997
- ------------------------------------- (Principal Executive Officer)
(Terry K. Glenn)
/s/ GERALD M. RICHARD Treasurer (Principal Financial January 30, 1997
- ------------------------------------- Accounting Officer) and Director
(Gerald M. Richard)
* Director January 30, 1997
- -------------------------------------
(Jack B. Sunderland)
* Director January 30, 1997
- -------------------------------------
(Stephen B. Swensrud)
* Director January 30, 1997
- -------------------------------------
(J. Thomas Touchton)
By: /s/ TERRY K. GLENN
- -------------------------------------
(Terry K. Glenn, Attorney-in-fact)
|
SIGNATURES
Merrill Lynch Index Trust has duly caused this Amendment to the Registration Statement of Merrill Lynch Index Funds, Inc. to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Plainsboro, and State of New Jersey, on the 30th day of January, 1997.
MERRILL LYNCH INDEX TRUST
/S/ TERRY K. GLENN
By:
|
(Terry K. Glenn, President)
This Amendment to the Registration Statement of Merrill Lynch Index Funds, Inc. has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------------- -------------------------------------- -----------------
/S/ TERRY K. GLENN President and Trustee January 30, 1997
- ------------------------------------- (Principal Executive Officer)
(Terry K. Glenn)
/S/ GERALD M. RICHARD Treasurer (Principal Financial January 30, 1997
- ------------------------------------- Accounting Officer) and Trustee
(Gerald M. Richard)
* Trustee January 30, 1997
- -------------------------------------
(Jack B. Sunderland)
* Trustee January 30, 1997
- -------------------------------------
(Stephen B. Swensrud)
* Trustee January 30, 1997
- -------------------------------------
(J. Thomas Touchton)
By: /s/ TERRY K. GLENN
- -------------------------------------
(Terry K. Glenn, Attorney-in-fact)
|
EXHIBIT INDEX
EXHIBITS DESCRIPTION
------ ---------------------------------------------------------------
1(a) -- Articles of Incorporation of Registrant*.......................
1(b) -- Articles of Amendment..........................................
2 -- By-Laws of Registrant*.........................................
3 -- None...........................................................
4 -- Instrument Defining Rights of Shareholders. Incorporated by
reference to Exhibits 1 and 2 above............................
5 -- Not Applicable.................................................
6 -- Distribution Agreement between Registrant and Merrill Lynch
Funds Distributor, Inc.........................................
7 -- None...........................................................
8(a) -- Form of Custody Agreement between Registrant and Merrill Lynch
Trust Company..................................................
8(b) -- Form of Custody Agreement between Registrant and State Street
Bank and Trust Company.........................................
9(a) -- Form of Administration Agreement between Registrant and Merrill
Lynch Asset Management, L.P....................................
(b) -- Form of Transfer Agency, Dividend Disbursing Agency and
Shareholder Servicing Agency Agreement between Registrant and
Merrill Lynch Financial Data Services, Inc.....................
(c) -- Form of License Agreement relating to Use of Name between
Merrill Lynch & Co., Inc. and Registrant.......................
10 -- Opinion and consent of Shereff, Friedman, Hoffman & Goodman,
LLP, counsel for Registrant....................................
11 -- Consent of Deloitte & Touche LLP, independent auditors for the
Registrant.....................................................
12 -- None...........................................................
13 -- Certificate of Merrill Lynch Asset Management..................
14 -- Not Applicable.................................................
15 -- Account Maintenance Plan of the Registrant and Plan
Sub-Agreement..................................................
16 -- Not Applicable.................................................
17(a) -- Financial Data Schedules -- Not Applicable.....................
17(b) -- Powers of Attorney.............................................
18 -- Rule 18f-3 Plan................................................
|
* Previously filed.
EXHIBIT 1(b)
MERRILL LYNCH INDEX FUNDS, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Merrill Lynch Index Funds, Inc., a Maryland corporation (hereinafter called the "Corporation") having its principal Maryland office c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland, 21202, hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation currently has authority to issue is One Hundred Million
(100,000,000) shares, of the par value of One Hundredth of One Cent ($.0001)
per share, and of the aggregate par value of Ten Thousand Dollars ($10,000).
Such capital stock consists of four series, known as Merrill Lynch Large Cap
Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond
Index Fund and Merrill Lynch International Equity Index Fund (collectively, the
"Series," and each, a "Series"). Each Series consists of Twenty Five Million
(25,000,000) shares. The shares of each Series consist of two classes of
shares designated Class A shares and Class D shares (the "Classes"). Each
Class of each Series consists of Twelve Million Five Hundred Thousand
(12,500,000) shares.
SECOND: Article IV, Section (1) of the Articles of Incorporation is hereby amended to increase the shares of capital stock of the Corporation as follows:
The total number of shares of capital stock which the Corporation shall have authority to issue is One Billion (1,000,000,000) shares, of the par value of One Hundredth of One Cent ($.0001) per share, and of the aggregate par value of One Hundred Thousand Dollars ($100,000). Each Series shall consist, until further changed, of Two Hundred Fifty Million (250,000,000) shares. Each Class of each Series shall consist, until further changed, of One Hundred Twenty Five Thousand (125,000,000) shares.
THIRD: Article IV, Section (1) of the charter of the Corporation is hereby further amended to change the names of two of the Series as follows:
Old Name of Series New Name of Series
- ------------------ -------------------
Merrill Lynch Large Cap Index Fund Merrill Lynch S&P 500
Index Fund
Merrill Lynch International Equity Index Fund Merrill Lynch
International Index Fund
|
FOURTH: The foregoing amendments do not change the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms and conditions of redemption of shares of capital stock of the Corporation or of any Class of any
Series thereof as the same are currently set forth in Article IV of the Corporation's Articles of Incorporation.
FIFTH: The foregoing amendments have been effected in the manner and by the vote required by the Corporation's charter and the laws of the State of Maryland. The amendments were approved by a majority of the entire Board of Directors of the Corporation; and at the time of approval by the Board of Directors there were no shares of stock of the Corporation entitled to vote on the matter either outstanding or subscribed for.
SIXTH: Except as amended hereby, the Corporation's charter shall remain in full force and effect.
The President acknowledges these Articles of Amendment to the corporate act of the Corporation and states that to the best of his knowledge, information and belief, the matters set forth in these Articles of Amendment with respect to the authorization and approval of the amendments of the Corporation's charter are true in all material respects, and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, MERRILL LYNCH INDEX FUNDS, INC. has caused these Articles of Amendment to be signed in its name and on its behalf by its President, a duly authorized officer of the Corporation, and attested by its Secretary effective the 20th day of December, 1996.
MERRILL LYNCH INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
-----------------------------------------
Terry K. Glenn
President
ATTEST:
/s/ Mark B. Goldfus
- ------------------------
Mark B. Goldfus
Secretary
|
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT made as of January 1, 1997, between MERRILL LYNCH INDEX FUNDS, INC., a Maryland corporation (the "Corporation"), on behalf of its series listed on Appendix A hereto (the "Funds"), and MERRILL LYNCH FUNDS DISTRIBUTOR, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H :
WHEREAS, the Corporation 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 Corporation to offer its shares for sale continuously; and
WHEREAS, the Directors of the Corporation (the "Directors") are authorized to establish separate series relating to separate portfolios of securities, each of which may offer separate classes of shares of common stock, par value $0.0001 per share (the "Shares"); and
WHEREAS, the Directors have established and designated the Funds as series of the Corporation; 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 Corporation and the Distributor wish to enter into an agreement with each other with respect to the subscription offering and the continuous offering of the Funds' Shares in order to promote the growth of the Funds and facilitate the distribution of the Shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Corporation hereby appoints the Distributor as the principal underwriter and distributor of the Funds to sell the Shares to the public and hereby
agrees during the term of this Agreement to sell the Shares 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 Funds to act as principal underwriter and distributor of the Shares, except that:
(a) The Corporation may, with respect to any Fund, upon written notice to the Distributor, from time to time designate other principal underwriters and distributors of the 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 the 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 Shares from each Fund shall not apply to Shares issued in connection with the merger or consolidation of any other investment company or personal holding company with a Fund or the acquisition by purchase or otherwise of all (or substantially all) the assets or the outstanding shares of any such company by a Fund.
(c) Such exclusive right also shall not apply to Shares issued by a Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive right also shall not apply to Shares issued by a Fund pursuant to any conversion, exchange or reinstatement privilege afforded redeeming shareholders or to any other Shares as shall be agreed between the Corporation and the Distributor from time to time.
Section 3. Purchase of Shares from the Corporation.
(a) Prior to the continuous offering of the Shares of a Fund, commencing on a date agreed upon by the Corporation and the Distributor, the Distributor may solicit subscriptions for Shares
during a subscription period which shall last for such period as may be agreed upon by the parties hereto. If so, the subscriptions will be due and payable on the fifth business day after the conclusion of the subscription offering, at which time the Shares will be issued against payment and the Funds will commence operations.
(b) After the subscription offering, if any such offering is made, or at such other time agreed to by the Distributor and the Corporation, each Fund will commence an offering of Shares and thereafter the Distributor shall have the right to buy from the Corporation the Shares needed, but not more than the Shares needed (except for clerical errors in transmission) to fill unconditional orders for Shares of a Fund placed with the Distributor by eligible investors or securities dealers. The price which the Distributor shall pay for the Shares so purchased from a Fund shall be the net asset value, determined as set forth in Section 3(d) hereof.
(c) The 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 the Shares shall be determined by the Corporation or any agent of the Corporation in accordance with the method set forth in the prospectus and statement of additional information and guidelines established by the Board of Directors of the Corporation (the "Directors").
(e) The Corporation shall have the right to suspend the sale of Shares of any Fund at any time. In addition, the Corporation shall have the right to suspend the sale of Shares at times when redemption is suspended pursuant to the conditions set forth in Section 4(b) hereof. The Corporation shall also have the right to suspend the sale of 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 Corporation, makes it impracticable or inadvisable to sell the Shares.
(f) The Corporation, or any agent of the Corporation designated in writing by the Corporation, shall be promptly advised of all purchase orders for Shares received by the Distributor. Any order may be rejected by the Corporation; provided, however, that the Corporation will not arbitrarily or without reasonable cause refuse to accept or confirm orders for the purchase of Shares. The Corporation (or its agent) will confirm orders upon their receipt, will make appropriate book entries and, upon receipt by the Corporation (or its agent) of payment therefor, will deliver deposit receipts or certificates for such Shares pursuant to the instructions of the Distributor. Payment shall be made to the Corporation in New York Clearing House Funds. The Distributor agrees to cause such payment and such instructions to be delivered promptly to the Corporation (or its agent).
Section 4. Repurchase or Redemption of Shares by the Corporation.
(a) Any of the outstanding Shares may be tendered for redemption at any time, and the Corporation agrees to repurchase or redeem the 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 relating to the Funds. The price to be paid to redeem or repurchase the Shares shall be equal to the net asset value calculated in accordance with the provisions of Section 3(d) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set forth in the prospectus and statement of additional information relating to the Fund. All payments by the Corporation hereunder shall be made in the manner set forth below.
The Corporation 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 Corporation 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 Shares or payment may be suspended at any time and, in addition, 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 of securities owned by a Fund is not reasonably practicable or it is not reasonably practicable for the Corporation to fairly determine the value of the net assets of the Fund, or during any other period when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Corporation.
(a) The Corporation 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 Shares of any Fund, and this shall include, upon request by the Distributor, one certified copy of all financial statements prepared for the Corporation by independent public accountants. The Corporation shall make available to the Distributor such number of copies of its prospectus and statement of additional information relating to the Fund as the Distributor shall reasonably request.
(b) The Corporation shall take, from time to time, but subject to any necessary approval of Fund 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 of 1933, as amended (the "Securities Act"), to the end that there will be available for sale such number of Shares as the Distributor reasonably may be expected to sell.
(c) The Corporation shall use its best efforts to make such filings as may be required in connection with the sale of Shares in such states as the Distributor and the Corporation may approve. As provided in Section 8(c) hereof, the expense of such filings shall be borne by the Corporation.
(d) The Corporation will furnish, in reasonable quantities upon request by the Distributor, copies of annual and interim reports of the Funds.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect sales of Shares of the Funds but shall not be obligated to sell any specific number of Shares. The services of the Distributor to the Corporation 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 Shares of the Funds, 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 Corporation 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 Corporation.
(c) The Distributor shall adopt and follow procedures, as approved by the officers of the Corporation, 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 Shares; provided, that the Corporation shall approve the forms
of agreements with dealers. 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 any subscription period as described in Section 3(a) is attached hereto
as Exhibit A and the 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 Shares only to such selected dealers that are members in good standing of the NASD.
Section 8. Payment of Expenses.
(a) The Corporation shall bear all costs and expenses of the Funds, including fees and disbursements of the Corporation's 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 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 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 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 if the Corporation adopts, pursuant to Rule 12b-1 under the Investment Company Act, a Distribution Plan providing for the payment by one or more of the Funds of expenses of related to distribution of Shares, any expenses incurred by the Distributor hereunder may be paid from amounts recovered by it from the Fund under such Plan.
(c) The Corporation shall bear the cost and expenses of qualification of the Shares for sale pursuant to this Agreement and, if necessary or advisable in connection therewith, of qualifying the Corporation as a broker or dealer in such states of the United States or other jurisdictions as shall be selected by the Corporation and the Distributor pursuant to Section 5(c) hereof.
Section 9. Indemnification.
(a) The Corporation 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 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 Funds, 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 Corporation in connection therewith by or on behalf of the Distributor; provided, however, that in no case (i) is the indemnity of the Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Shares.
(b) The Distributor shall indemnify and hold harmless the Corporation and each of its Directors and officers and each person, if any, who controls the Corporation 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 Corporation 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 Corporation 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 Corporation, and the Corporation 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 Advisor 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 Corporation, as agent for the Corporation, to participants in such program as described in the prospectus and statement of additional information of the Funds. 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 Funds, the duties of the Distributor, the payment of expenses and indemnification obligations of the Corporation 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 December 31, 1998 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 Corporation, 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 Corporation 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.
Section 13. Governing Law. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect and the applicable provisions of the Investment Company Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
------------------------------
Title: President
|
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By: /s/ Gerald M. Richard
---------------------------------------
Title: Vice President and Treasurer
|
Appendix A
SERIES OF MERRILL LYNCH INDEX FUNDS, INC.
Merrill Lynch S&P 500 Index Fund
Merrill Lynch Small Cap Index Fund
Merrill Lynch Aggregate Bond Index Fund
Merrill Lynch International Index Fund
As of January 1, 1997
EXHIBIT 6
EXHIBIT A
MERRILL LYNCH INDEX FUNDS, INC.
SELECTED DEALER AGREEMENT
FOR SUBSCRIPTION PERIOD
Ladies and Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Index Funds, Inc., a Maryland corporation (the "Corporation") on behalf of its series listed on Appendix A hereto (the "Funds"), pursuant to which it acts as the distributor for the sale of shares of common stock, par value $0.0001 per share (the "shares"), of the Funds, and as such has the right to distribute shares of the Funds for resale. The Corporation is an open-end investment company registered under the Investment Company Act of 1940, as amended, and the Funds' shares being offered to the public are registered under the Securities Act of 1933, as amended (the "Securities Act"). Such 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 of the Funds (the "Prospectus" and "Statement of Additional Information," respectively). You have received a copy of the Distribution Agreement (the "Distribution Agreement") between the Distributor and the Corporation 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, shares of the Funds upon the following terms and conditions:
1. The subscription period referred to in Section 3(a) of the Distribution Agreement will continue through ________________ ___, 1996. The subscription period may be extended upon agreement between the Corporation and the Distributor. Subject to the provisions of such Section and the conditions contained herein, we will sell 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 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 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 Corporation or the Funds, 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 Funds, as described in the Prospectus and Statement of Additional Information, to participants in such programs.
3. You shall not place orders for any of the 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 Corporation 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 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 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) relating to the Funds and will not furnish to any person any information relating to the shares of the Funds 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 Corporation.
4. Payment for shares purchased by you is to be made by certified mail or official bank check at the office of Merrill Lynch Funds Distributor, Inc., Box 9081, Princeton, New Jersey 08543-9081, on such date as we may advise, in New York Clearing House funds payable to the order of Merrill Lynch Funds Distributor, Inc. against delivery by us of non-negotiable share deposit receipts ("Receipts") issued by Merrill Lynch Financial Data Services, Inc., as shareholder servicing agent, acknowledging the deposit with it of the shares so purchased by you. You agree that as promptly as practicable after the delivery of such shares you will issue appropriate written transfer instructions to the Corporation or to the shareholder servicing agent as to the purchasers to whom you sold the shares.
5. No person is authorized to make any representations concerning shares of the Funds except those contained in the current Prospectus and Statement of Additional Information relating to the Funds and in such printed information subsequently issued by us or the Corporation as information supplemental to such Prospectus and Statement of Additional Information. In purchasing shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Prospectus and Statement of Additional Information, periodic reports and proxy solicitation material are our sole responsibility and not the responsibility of the Corporation, and you agree that the Corporation 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 relating to the Funds. 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 Corporation 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 shares of any Fund 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 subscription period. 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 operates 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 miles 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 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.
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 shares of the Funds 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.
Please return one signed copy of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9081
Princeton, New Jersey 08543-9081
Accepted:
Firm Name: Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:
----------------------------------
Address: 800 Scudders Mill Road
Plainsboro, New Jersey 08536
Date: ________________________, 199_
|
EXHIBIT 6
EXHIBIT B
MERRILL LYNCH INDEX FUNDS, INC.
SELECTED DEALER AGREEMENT
Gentlemen:
Merrill Lynch Funds Distributor, Inc. (the "Distributor") has an agreement with Merrill Lynch Index Funds, Inc., a Maryland corporation (the "Corporation") on behalf of its series listed on Appendix A hereto (the "Funds"), pursuant to which it acts as the distributor for the sale of shares of common stock, par value $0.0001 per share (the "shares"), of the Funds and as such has the right to distribute shares for resale. The Corporation is an open-end investment company registered under the Investment Company Act of 1940, as amended, and its shares being offered to the public are registered under the Securities Act of 1933, as amended. You have received a copy of the Distribution Agreement (the "Distribution Agreement") between ourself and the Corporation on behalf of the Funds 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, relating to the Funds on file with the Securities and Exchange Commission which is part of the most recent effective registration statement pursuant to the Securities Act of 1933, as amended. We offer to sell to you, as a member of the Selected Dealers Group, shares of the Funds upon the following terms and conditions:
1. In all sales of 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 Corporation or the Funds, 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 Funds, as described in the Prospectus and Statement of Additional Information, to participants in such programs.
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. The procedure relating to the handling of orders shall be subject to Section 4 hereof and instructions which we or the Corporation shall forward from time to time to you. All orders are subject to acceptance or rejection by the Distributor or the Corporation 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.
3. You shall not place orders for any of the 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. You agree that you will not offer or sell any of the
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 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 shares of the Funds 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 Corporation.
4. As a selected dealer, you are hereby authorized (i) to place orders directly with the Corporation for shares of the Funds 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 shares directly to the Corporation 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 shares of the Funds except those contained in the current Prospectus and Statement of Additional Information and in such printed information subsequently issued by us or the Corporation as information supplemental to such Prospectus and Statement of Additional Information. In purchasing shares through us you shall rely solely on the representations contained in the Prospectus and Statement of Additional Information and supplemental information above mentioned. Any printed information which we furnish you other than the Prospectus, Statement of Additional Information, periodic reports and proxy solicitation material is our sole responsibility and not the responsibility of the Corporation and you agree that the Corporation 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 relating to the Funds. 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 Funds 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 shares entirely or to certain persons or entities in a class or classes specified by us. Each party hereto has the right to cancel this Agreement upon notice to the other party.
9. We shall have full authority to take such action as we may deem advisable in respect of all matters pertaining to the continuous offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us herein. Nothing contained in this paragraph is intended to operate as, and the provisions of this paragraph shall not in any way whatsoever constitute, a waiver by you of compliance with any provision of the Securities Act of 1933, as amended, or of the rules and regulations of the Securities and Exchange Commission issued thereunder.
10. You represent that you are a member of the National Association of Securities Dealers, Inc. and, with respect to any sales in the United States, we both hereby agree to abide by the Rules of Fair Practice of such Association.
11. Upon application to us, we will inform you as to the states in which we believe the 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.
12. All communications to us should be sent to the address below. Any notice to you shall be duly given if mailed or telegraphed to you at the address specified by you below.
13. Your first order placed pursuant to this Agreement for the purchase of shares of the Funds will represent your acceptance of this Agreement.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Please return one signed copy
of this Agreement to:
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
Box 9081
Princeton, New Jersey 08543-9011
Accepted:
EXHIBIT 8(A)
CUSTODIAN CONTRACT
Between
MERRILL LYNCH INDEX FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
GlobalSeriesCorp
21N
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It................................................................. 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States............. 2
2.1 Holding Securities........................................ 2
2.2 Delivery of Securities.................................... 2
2.3 Registration of Securities................................ 4
2.4 Bank Accounts............................................. 5
2.5 Availability of Federal Funds............................. 5
2.6 Collection of Income...................................... 5
2.7 Payment of Fund Monies.................................... 5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased........................... 7
2.9 Appointment of Agents..................................... 7
2.10 Deposit of Fund Assets in Securities System............... 7
2.10A Fund Assets Held in the Custodian's Direct
Paper System.............................................. 8
2.11 Segregated Account........................................ 9
2.12 Ownership Certificates for Tax Purposes................... 10
2.13 Proxies................................................... 10
2.14 Communications Relating to Portfolio Securities........... 10
2.15 Reports to Fund by Independent Public Accountants......... 10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States......................... 11
3.1 Appointment of Foreign Sub-Custodians..................... 11
3.2 Assets to be Held......................................... 11
3.3 Foreign Securities Depositories........................... 11
3.4 Agreements with Foreign Banking Institutions.............. 11
3.5 Access of Independent Accountants of the Fund............. 12
3.6 Reports by Custodian...................................... 12
3.7 Transactions in Foreign Custody Account................... 12
3.8 Liability of Foreign Sub-Custodians....................... 12
3.9 Liability of Custodian.................................... 13
3.10 Reimbursement for Advances................................ 13
3.11 Monitoring Responsibilities............................... 13
|
3.12 Branches of U.S. Banks.................................... 14
3.13 Tax Law................................................... 14
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund.............................................. 14
5. Proper Instructions................................................ 15
6. Actions Permitted Without Express Authority........................ 15
7. Evidence of Authority.............................................. 16
8. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and Net Income.......... 16
9. Records............................................................ 16
10. Opinion of Fund's Independent Accountants.......................... 17
11. Compensation of Custodian.......................................... 17
12. Responsibility of Custodian........................................ 17
13. Effective Period, Termination and Amendment........................ 18
14. Successor Custodian................................................ 19
15. Interpretive and Additional Provisions............................. 19
16. Additional Funds................................................... 20
17. Massachusetts Law to Apply......................................... 20
18. Prior Contracts.................................................... 20
19. Shareholder Communications......................................... 20
|
CUSTODIAN CONTRACT
This Contract between Merrill Lynch Index Funds, Inc., a corporation
|
organized and existing under the laws of Maryland, having its principal place of business at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian,"
WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, Merrill Lynch International Index Fund (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the Portfolio(s) of the Fund, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Articles of Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of capital stock of the Fund representing interests in the Portfolios, ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System") and
(b) commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), 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 Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund, related to the Portfolio ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian, which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.9, or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize all reasonable efforts to timely collect income due the Fund on such securities and to notify the Fund of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make federal funds available to such Portfolio as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2(10) shall be the responsibility of the Fund. Subject to the exercise reasonable The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A hereof; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by
an officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
|
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
|
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of
the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of
|
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from the Fund on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants The Custodian shall
provide the Fund, on behalf of each of the Portfolios at such times as
the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
|
control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Portfolio's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 5 of this Contract, together with a certified resolution of the Fund's Board of Directors, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Portfolio's foreign securities transactions. The Custodian shall identify on its books as belonging to the applicable Portfolio of the Fund, the foreign securities of that Portfolio of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Portfolios shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Portfolio will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to each applicable Portfolio; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Portfolios held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use all reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Portfolio(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Portfolio(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Portfolio and delivery of securities maintained for the account of each applicable Portfolio may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an
|
exemptive order from the Securities and Exchange Commission is notified
by such foreign sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b)
Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. Subject to the exercise of reasonable care, the Custodian
shall have no responsibility or liability for any obligations now or
hereafter imposed on the Fund or the Custodian as custodian of the Fund
by the tax law of the United States of America or any state or
political subdivision thereof. It shall be the responsibility of the
Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose but subject to the
|
limitations of the Articles of Incorporation and any applicable votes of the Board of Directors of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Portfolio such payments as are received for Shares of that Portfolio issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed or initialled by one or more person or persons as the Board of Directors shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Directors of the Fund accompanied by a detailed description of procedures approved by the Board of Directors, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Directors and the Custodian are satisfied that such procedures afford adequate safeguards for the Portfolios' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio and provided that the Fund shall not object to such payments;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Directors of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of each Portfolio and/or compute the net asset value per share of the outstanding shares of each Portfolio or, if directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Fund's currently effective prospectus related to such Portfolio and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Fund's currently effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund on behalf of each applicable Portfolio and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States (except as specifically provided in Article 3.9) and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody of any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the
Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System by such Portfolio, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended and
that the Custodian shall not with respect to a Portfolio act under Section 2.10A
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors has approved the initial use
of the Direct Paper System by such Portfolio; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund on behalf of one or more of
the Portfolios may at any time by action of its Board of Directors (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract.
16. Additional Funds
In the event that the Fund establishes one or more series of Shares in addition to Merrill Lynch International Index Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
17. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets.
19. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether the Fund authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose stock the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consent or object by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of , 1997.
ATTEST MERRILL LYNCH INDEX FUNDS, INC.
_______________________________ By__________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_______________________________ By__________________________________
Executive Vice President
|
Schedule A
The following foreign banking institutions and foreign securities depositories have been approved by the Board of Directors of Merrill Lynch Index Funds, Inc. for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Date:_________________________________
EXHIBIT 8(G)
FORM OF
CUSTODIAN CONTRACT
Between
MERRILL LYNCH INDEX FUNDS, INC.
and
MERRILL LYNCH TRUST COMPANY
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By
It......................................................................... 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States..................... 2
2.1 Holding Securities.................................................. 2
2.2 Delivery of Securities.............................................. 2
2.3 Registration of Securities.......................................... 4
2.4 Bank Accounts....................................................... 5
2.5 Availability of Federal Funds....................................... 5
2.6 Collection of Income................................................ 5
2.7 Payment of Fund Monies.............................................. 5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased..................................... 7
2.9 Appointment of Agents............................................... 7
2.10 Deposit of Fund Assets in Securities System......................... 7
[2.10A Fund Assets Held in the Custodian's Direct
Paper System]....................................................... 8
2.11 Segregated Account.................................................. 9
2.12 Ownership Certificates for Tax Purposes............................. 10
2.13 Proxies............................................................. 10
2.14 Communications Relating to Portfolio Securities..................... 10
2.15 Reports to Fund by Independent Public Accountants................... 10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States................................. 11
3.1 Appointment of Foreign Sub-Custodians............................... 11
3.2 Assets to be Held................................................... 11
3.3 Foreign Securities Depositories..................................... 11
3.4 Agreements with Foreign Banking Institutions........................ 11
3.5 Access of Independent Accountants of the Fund....................... 12
3.6 Reports by Custodian................................................ 12
3.7 Transactions in Foreign Custody Account............................. 12
3.8 Liability of Foreign Sub-Custodians................................. 12
3.9 Liability of Custodian.............................................. 13
3.10 Reimbursement for Advances.......................................... 13
3.11 Monitoring Responsibilities......................................... 13
|
3.12 Branches of U.S. Banks.............................................. 14
3.13 Tax Law............................................................. 14
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund...................................................... 14
5. Proper Instructions........................................................ 15
6. Actions Permitted Without Express Authority................................ 15
7. Evidence of Authority...................................................... 16
8. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.......................................... 16
9. Records.................................................................... 16
10. Opinion of Fund's Independent Accountants.................................. 17
11. Compensation of Custodian.................................................. 17
12. Responsibility of Custodian................................................ 17
13. Effective Period, Termination and Amendment................................ 18
14. Successor Custodian........................................................ 19
15. Interpretive and Additional Provisions..................................... 19
16. Additional Funds........................................................... 20
17. New Jersey Law to Apply.................................................... 20
18. Prior Contracts............................................................ 20
19. Shareholder Communications................................................. 20
|
CUSTODIAN CONTRACT
This Contract between Merrill Lynch Index Funds, Inc., a corporation organized and existing under the laws of Maryland, having its principal place of business at 800 Scudders Mill Road, Plainsboro, New Jersey 08536 hereinafter called the "Fund," and Merrill Lynch Trust Company, a ____________ trust company, having its principal place of business at ___________________, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in __ series, Merrill Lynch ________, Merrill Lynch ______, and Merrill Lynch _______ (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the Portfolio(s) of the Fund, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Articles of Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of capital stock of the Fund representing interests in the Portfolios, ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall be
responsible or liable to the Fund on account of any actions or omissions of any
sub-custodian as if the Custodian itself had acted or omitted to act. The
Custodian may employ as sub-custodian for the Fund's foreign securities on
behalf of the applicable Portfolio(s) the foreign banking institutions and
foreign securities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities that are maintained pursuant to
Section 2.10 in a clearing agency that acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System") and
(b) commercial paper of an issuer for which Merrill Lynch Trust Company
acts as issuing and paying agent ("[Direct Paper]") that is deposited
and/or maintained in the [Direct Paper] System of the Custodian (the
"[Direct Paper] System") pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian [or in the Custodian's
[Direct Paper] book entry system account ("[Direct Paper] System
Account")] only upon receipt of Proper Instructions from the Fund on
behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Portfolio, but only against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), 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 Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio of the Fund;
14) Upon receipt of Proper Instructions from the transfer agent ("Transfer Agent") for the Fund, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund, related to the Portfolio ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian, which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.9, or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name," the Custodian shall utilize all reasonable efforts to timely collect income due the Fund on such securities and to notify the Fund of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make federal funds available to such Portfolio as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. Subject to the exercise of reasonable care, the Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the [Direct Paper] System, in accordance with the conditions set forth in Section 2.11 hereof; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by
an officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System," in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
|
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
[2.10A Fund Assets Held in the Custodian's [Direct Paper] System. The
Custodian may deposit and/or maintain securities owned by a Portfolio
in the [Direct Paper] System of the Custodian subject to the following
|
provisions:
1) No transaction relating to securities in the [Direct Paper]
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
[Direct Paper] System only if such securities are represented
in an account ("Account") of the Custodian in the [Direct
Paper] System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the [Direct Paper] System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of [Direct Paper] on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account of
the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.]
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of
|
segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii)
for the purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from the Fund on behalf of the applicable Portfolio, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.15 Reports to Fund by Independent Public Accountants The Custodian shall
provide the Fund, on behalf of each of the Portfolios at such times as
the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting
|
control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Portfolio's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions," as defined in Section 5 of this Contract, together with a certified resolution of the Fund's Board of Directors, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities," as defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Portfolio's foreign securities transactions. The Custodian shall identify on its books as belonging to the applicable Portfolio of the Fund, the foreign securities of that Portfolio of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Portfolios shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership for the assets of each Portfolio will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to each applicable Portfolio; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Portfolios held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use all reasonable efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Portfolio(s) held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Portfolio(s) securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Portfolio and delivery of securities maintained for the account of each applicable Portfolio may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
the Portfolios assets are maintained in a foreign
|
branch of a banking institution which is a "bank" as defined by Section
2(a)(5) of the Investment Company Act of 1940 meeting the qualification
set forth in Section 26(a) of said Act. The appointment of any such
branch as a sub-custodian shall be governed by paragraph 1 of this
Contract.
3.13 Tax Law. Subject to the exercise of reasonable care, the Custodian
shall have no responsibility or liability for any obligations now or
hereafter imposed on the Fund or the Custodian as custodian of the Fund
by the tax law of the United States of America or any state or
political subdivision thereof. It shall be the responsibility of the
Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose but subject to the
|
limitations of the Articles of Incorporation and any applicable votes of the Board of Directors of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Portfolio such payments as are received for Shares of that Portfolio issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed or initialled by one or more person or persons as the Board of Directors shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Directors of the Fund accompanied by a detailed description of procedures approved by the Board of Directors, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Directors and the Custodian are satisfied that such procedures afford adequate safeguards for the Portfolios' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, provided that all such payments shall be promptly accounted for to the Fund on behalf of the Portfolio, and the Fund shall not object to such payments;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Directors of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of each Portfolio and/or compute the net asset value per share of the outstanding shares of each Portfolio or, if directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Fund's currently effective prospectus related to such Portfolio and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Fund's currently effective prospectus related to such Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission.
11. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund on behalf of each applicable Portfolio and the Custodian.
12. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States (except as specifically provided in Article 3.9) and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody of any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System by such Portfolio, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended and
that the Custodian shall not with respect to a Portfolio act under Section 2.10A
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors has approved the initial use
of the [Direct Paper] System by such Portfolio; provided further, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Articles of
Incorporation, and further provided, that the Fund on behalf of one or more of
the Portfolios may at any time by action of its Board of Directors (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
14. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in _________, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract.
16. Additional Funds
In the event that the Fund establishes one or more series of Shares in addition to Merrill Lynch International Index Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
17. New Jersey Law to Apply
This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The State of New Jersey.
18. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios and the Custodian relating to the custody of the Fund's assets.
19. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether the Fund authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose stock the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consent or object by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
|
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the day of , 1997.
ATTEST MERRILL LYNCH INDEX FUNDS, INC.
____________________ By__________________________________
ATTEST MERRILL LYNCH TRUST COMPANY
____________________ By__________________________________
Executive Vice President
|
Schedule A
The following foreign banking institutions and foreign securities depositories have been approved by the Board of Directors of Merrill Lynch Index Funds, Inc. for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Date:____________________
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
AGREEMENT made as of January 1, 1997, by and between MERRILL LYNCH INDEX FUNDS, INC., a Maryland corporation (hereinafter referred to as the "Corporation") on behalf of its series listed on Appendix A hereto (hereinafter referred to as the "Funds"), and MERRILL LYNCH ASSET MANAGEMENT, L.P., a Delaware limited partnership, doing business as MERRILL LYNCH ASSET MANAGEMENT (hereinafter referred to as the "Administrator").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in business as an open-end management investment company registered under the Investment Company Act of 1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Directors of the Corporation (the "Directors") are authorized to establish separate series relating to separate portfolios of securities, each of which may offer separate classes of shares; and
WHEREAS, the Directors have established and designated the Funds as series of the Corporation; and
WHEREAS, the Corporation desires to retain the Administrator to provide management and administrative services to the Funds in the manner and on the terms hereinafter set forth; and
WHEREAS, the Administrator is willing to provide management and administrative services to the Funds on the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the Corporation and the Administrator hereby agree as follows:
ARTICLE I
DUTIES OF THE ADMINISTRATOR
The Corporation hereby employs the Administrator to act as a manager and administrator of the Funds, and to furnish, or arrange for affiliates to furnish, the management and administrative services described below, subject to review by and the overall control of the Board of Directors of the Corporation (hereinafter referred to as the "Directors"), for the period and on the terms and conditions set forth in this Agreement. The Administrator 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 Administrator and its affiliates shall for all purposes herein be deemed to be independent contractors and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent
the Corporation or the Funds in any way or otherwise be deemed agents of the Corporation or the Funds.
Management Services. The Administrator shall perform (or arrange for the performance by affiliates of) the management and administrative services necessary for the operation of the Corporation and the Funds including administering shareholder accounts and handling shareholder relations. The Administrator shall provide the Corporation and the Funds with office space, facilities, equipment and necessary personnel and such other services as the Administrator, 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 Administrator shall also, on behalf of the Corporation and the Funds, conduct relations with custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. The Administrator 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 Funds as it shall determine to be desirable.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
(a) The Administrator. The Administrator 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, facilities and necessary personnel which it is obligated to provided under Article I hereof, and shall pay compensation of all Officers of the Corporation and all Directors of the Corporation who are affiliated persons of the Administrator.
(b) The Corporation. The Corporation assumes and shall pay or cause to be paid all other expenses of the Corporation and the Funds (except for the expenses paid by the Distributor), including, without limitation: taxes, expenses for legal and auditing services, costs of printing proxies, stock certificates, shareholder reports, prospectuses and statements of additional information, charges of the custodian, any sub-custodian and transfer agent, expenses of portfolio transactions, expenses of redemption of shares, Securities and Exchange Commission fees, expenses of registering the shares under Federal, state and foreign laws, fees and actual out-of-pocket expenses of Directors who are not affiliated persons of the Administrator, accounting and pricing costs (including the daily calculation of the net asset value), insurance, interest, brokerage costs, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Funds. It is also understood that the Corporation shall reimburse the Administrator for its costs in providing accounting services to the Corporation and the Funds. The Distributor will pay certain of the expenses of the Funds incurred in connection with the continuous offering of shares of common stock in the Funds.
ARTICLE III
COMPENSATION OF THE ADMINISTRATOR
Administrative Fees. For the services rendered, the facilities furnished and expenses assumed by the Administrator, each Fund shall pay to the Administrator 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 set forth for such Fund in Appendix A hereto, as the same shall from time to time be amended pursuant hereto, commencing on the day following effectiveness hereof. If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for 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. Payment of the Administrator's compensation for the preceding month shall be made as promptly as possible after completion of the computations contemplated above. 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.
ARTICLE IV
LIMITATION OF LIABILITY OF THE ADMINISTRATOR
The Administrator shall not be liable for any error of judgment or mistake of law or for any loss arising out of any act or omission in the management and administration of the Corporation and any 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 "Administrator" shall include any affiliates of the Administrator performing services for the Corporation or a Fund contemplated hereby and partners, shareholders, directors, officers and employees of the Administrator and such affiliates.
ARTICLE V
ACTIVITIES OF THE ADMINISTRATOR
The services of the Administrator to the Corporation and the Fund are not to be deemed to be exclusive, and the Administrator and each affiliate is free to render services to others. It is understood that Directors, officers, employees and shareholders of the Corporation and the Funds are or may become interested in the Administrator and its affiliates, as directors, officers, employees, partners and shareholders or otherwise, and that the Administrator and directors, officers, employees, partners and shareholders of the Administrator and its affiliates are or may become similarly interested in the Corporation or the Funds as shareholders or otherwise.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above
written and shall remain in force until April 30, 1998, and thereafter, but
only so long as such continuance is specifically approved at least annually by
(i) the Directors, 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 the vote of a majority of the outstanding voting securities of the Corporation, or by the Administrator, on sixty days' written notice to the other party. This 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 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 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 said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with laws of the State of New York and the applicable provisions of the Investment Company Act. To the extent that the applicable laws of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
MERRILL LYNCH INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
-------------------------------
Title: President
|
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: /s/ Arthur Zeikel
--------------------------------
Title: President
|
APPENDIX A
Name of Fund Administrative Fee
------------ ------------------
Merrill Lynch S&P 500 Index Fund 0.20%
Merrill Lynch Small Cap Index Fund 0.22%
Merrill Lynch Aggregate Bond Index Fund 0.14%
Merrill Lynch International Index Fund 0.24%
As of January 1, 1997
|
EXHIBIT 9(b)
TRANSFER AGENCY, DIVIDEND DISBURSING AGENCY AND
SHAREHOLDER SERVICING AGENCY AGREEMENT
THIS AGREEMENT, made as of January 1, 1997 by and between MERRILL LYNCH INDEX FUNDS, INC., a Maryland corporation (the "Corporation"), on behalf of itself and each of its series listed on Exhibit A (each, a "Fund"), and Merrill Lynch Financial Data Services, Inc., a New Jersey corporation ("MLFDS").
WITNESSETH:
WHEREAS, the Corporation wishes to appoint MLFDS to be the Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Fund upon, and subject to, the terms and provisions of this Agreement, and MLFDS 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 Corporation and MLFDS agree as follows:
1. APPOINTMENT OF MLFDS AS TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND SHAREHOLDER SERVICING AGENT.
(a) The Corporation hereby appoints MLFDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Funds upon, and subject to, the terms and provisions of this Agreement.
(b) MLFDS hereby accepts the appointment as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Funds, 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 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 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 Funds to MLFDS, and signed on behalf of the Funds by the President, any Vice President, the Secretary or the Treasurer of the Corporation;
(VII) 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;
(VIII) The term "Prospectus" means the Prospectus and the Statement of Additional Information of the relevant Fund as from time to time in effect;
(IX) The term "Shareholder" means a holder of record of shares;
(X) The term "Shares" means shares of stock of the Corporation irrespective of class or series.
3. DUTIES OF MLFDS AS TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND SHAREHOLDER SERVICING AGENT.
(a) Subject to the succeeding provisions of the Agreement, MLFDS hereby agrees to perform the following functions as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent for the Funds;
(I) Issuing, transferring and redeeming Shares;
(II) Opening, maintaining, servicing and closing Accounts;
(III) Acting as agent for the Funds' 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;
(IV) Acting as agent of the Funds 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 Corporation 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. MLFDS 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 MLFDS 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 Corporation, 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 Funds;
(X) Furnishing such confirmations of transactions relating to their Shares as required by applicable law;
(XI) Acting as agent for the Corporation 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 Corporation and/or MLPF&S, mailing annual, semi-annual and quarterly reports prepared by or on behalf of the Funds, and mailing new Prospectuses upon their issue to Shareholders as required by applicable law;
(XIII) Furnishing such periodic statements of transactions effected by MLFDS, reconciliations, balances and summaries as the Funds may reasonably request;
(XIV) Maintaining such books and records relating to transactions effected by MLFDS as are required by the Act, or by any other applicable provision of law, rule or regulation, to be maintained by the Corporation or its transfer agent with respect to such transactions, and preserving, or causing to be preserved, any such books and records for such periods as may be required by any such law, rule or regulation and as may be agreed upon from time to time between
MLFDS and the Corporation. In addition, MLFDS 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) MLFDS 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 Corporation the results of such tabulation accompanied by appropriate certificates, and preparing and furnishing to the Corporation certified lists of Shareholders as of such date, in such form and containing such information as may be required by the Corporation.
(c) MLFDS agrees to deal with, and answer in a timely manner, all correspondence and inquiries relating to the functions of MLFDS under this Agreement with respect to Accounts.
(d) MLFDS agrees to furnish to the Corporation such information and at such intervals as is necessary for the Funds 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) MLFDS agrees to provide to the Corporation such information as may reasonably be required to enable the Funds to reconcile the number of outstanding Shares between MLFDS's records and the account books of the Corporation.
(f) Notwithstanding anything in the foregoing provisions of this paragraph, MLFDS 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.
5. RIGHT OF INSPECTION.
MLFDS agrees that it will, in a timely manner, make available to, and permit, any officer, accountant, attorney or authorized agent of the Corporation 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 MLFDS under or pursuant to this Agreement.
6. CONFIDENTIAL RELATIONSHIP.
MLFDS 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 Corporation, 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 Corporation by way of an Officer's Instruction.
7. INDEMNIFICATION.
The Corporation shall indemnify and hold MLFDS harmless from any loss, costs, damage and reasonable expenses, including reasonable attorney's fees (provided that such attorney is appointed with the Corporation'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 MLFDS in cases of willful misconduct, failure to act in good faith or negligence by MLFDS, its officers, employees or agents, and further provided that prior to confessing any claim against it which may be subject to this indemnification, MLFDS shall give the Corporation reasonable opportunity to defend against said claim in its own name or in the name of MLFDS. An action taken by MLFDS 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.
8. REGARDING MLFDS.
(a) MLFDS hereby agrees to hire, purchase, develop and maintain such dedicated personnel, facilities, equipment, software, resources and capabilities as may be reasonably determined by the Corporation to be necessary for the satisfactory performance of the duties and responsibilities of MLFDS. MLFDS 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 Corporation possess the special skill and technical knowledge appropriate for that purpose. MLFDS 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 Corporation. MLFDS 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.
MLFDS warrants and represents that it is duly authorized and permitted to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent under all applicable laws and that it will immediately notify the Corporation 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 Corporation or MLFDS (without penalty to the Corporation or MLFDS) provided that the terminating party gives the other party written notice of such termination at least sixty (60) days in advance, except that the Corporation may terminate this Agreement immediately upon written notice to MLFDS if the authority or permission of MLFDS to act as Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent has been revoked or if any proceeding or other action which the Corporation reasonably believes will lead to such revocation has been commenced.
(b) Upon termination of this Agreement, MLFDS shall deliver all unissued and canceled stock certificates representing Shares remaining in its possession, and all Shareholder records, books, stock ledgers, instruments and other documents (including computerized or other electronically stored information) made or accumulated in the performance of its duties as Transfer Agent, Disbursing Agent and Shareholder Servicing Agent for the Corporation 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 Corporation assumes all responsibility for failure thereafter to produce any paper, record or document so delivered and identified in the locator document, if and when required to be produced.
10. AMENDMENT.
Except to the extent that the performance by MLFDS 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 York.
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 INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
--------------------------------
Title: President
|
MERRILL LYNCH FINANCIAL DATA
SERVICES, INC.
Schedule of Fees
The Fund will pay to MLFDS a fee of [ ] in addition to reimbursement for out-of-pocket expenses incurred by MLFDS pursuant to this Agreement.
Exhibit A
INDIVIDUAL SERIES OF MERRILL LYNCH INDEX FUNDS, INC.
Merrill Lynch S&P 500 Index Fund
Merrill Lynch Small Cap Index Fund
Merrill Lynch Aggregate Bond Index Fund
Merrill Lynch International Index Fund
Date: as of January 1, 1997
EXHIBIT 9(C)
LICENSE AGREEMENT RELATING TO USE OF NAME
AGREEMENT made as of December 15, 1996 by and between MERRILL LYNCH & CO., INC. ("ML&Co."), a Delaware corporation, and MERRILL LYNCH INDEX FUNDS, INC., a Maryland corporation (the "Corporation"), on its own behalf and on behalf of its currently existing series, and on behalf of each series of the Corporation that may be formed in the future (the "Funds").
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 Corporation was incorporated under the laws of the State of Maryland on October 25, 1996; and
WHEREAS, the Corporation 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 words "Merrill Lynch" in its name and in the name of each Fund;
NOW, THEREFORE, in consideration of the premises and of the covenants hereinafter contained, ML&Co. and the Corporation hereby agree as follows:
1. ML&Co. hereby grants the Corporation a non-exclusive license to use the words "Merrill Lynch" in its corporate name and in the name of the Funds.
2. ML&Co. hereby consents to the qualification of the Corporation as a foreign corporation under the laws of the State New York with the words "Merrill Lynch" in its corporate
name and in the name of the Funds 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 of the Corporation and of the Funds; and, as soon as practicable after receipt by the Corporation of written notice of the withdrawal of such non-exclusive license, and in no event later than ninety days thereafter, the Corporation will change its name and the name of the Funds so that such names 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 Corporation shall be necessary; but, if required by an applicable law of any state, the Corporation will forthwith grant all requisite consents.
5. The Corporation will not grant to any other company the right to use a name similar to that of the Corporation or the Funds or ML&Co. without the written consent of ML&Co.
6. Regardless of whether the Corporation and/or the Funds should hereafter change their names and eliminate the words "Merrill Lynch" or any variation thereof from such names, the Corporation 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 Corporation and/or the Funds or to that to which the Corporation and/or the Funds may change their names and 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 each Funds' 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 Corporation agrees to give and execute 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. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements and understandings, whether written or oral, with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MERRILL LYNCH & CO., INC.
By: /s/ Arthur Zeikel
---------------------------
Executive Vice President
|
MERRILL LYNCH INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
----------------------------
President
|
EXHIBIT 10
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 THIRD AVENUE
NEW YORK, N.Y. 10022-9998
January 29, 1997
VIA TELECOPIER AND FIRST CLASS MAIL
Merrill Lynch Index Funds, Inc.
P.O. Box 9011
Princeton, New Jersey 08543-9011
Dear Sirs:
Merrill Lynch Index Funds, Inc. (the "Corporation"), on behalf of each of its series: Merrill Lynch S&P 500 Index Fund, Merrill Lynch Small Cap Index Fund, Merrill Lynch Aggregate Bond Index Fund, and Merrill Lynch International Index Fund, proposes to issue and sell an indefinite number of shares of common stock (the "Shares"), par value $0.0001 per share, in the manner and on the terms set forth in its Registration Statement on Form N-1A filed with the Securities and Exchange Commission (File No. 811-7899; 333-15265) (the "Registration Statement").
We have, as counsel, participated in various proceedings relating to the Corporation and to the Shares. We have examined copies, either certified or otherwise proved to our satisfaction to be genuine, of its Articles of Incorporation, as amended to date, and By-Laws, as currently in effect, and other documents relating to its organization and operation. In addition, we have received a certificate dated January 28, 1997 of the Maryland State Department of Assessments and Taxation that the Corporation is in good standing under the laws of the State of Maryland. We have also reviewed the Registration Statement and all amendments filed as of the date of this opinion and the documents filed as exhibits thereto. We are generally familiar with the business affairs of the Corporation.
Based upon the foregoing, it is our opinion that:
1. The Corporation has been duly incorporated and is validly existing under the laws of the State of Maryland.
2. The Corporation is authorized to issue up to one
billion (1,000,000,000) Shares. Under Maryland law,
(a) the number of Shares may be increased or
decreased by action of the Board of Directors, and
(b) Shares which are
Merrill Lynch Index Funds, Inc.
January 29, 1997
issued and subsequently redeemed by the Corporation are, by virtue of such redemption, restored to the status of authorized and unissued Shares.
3. Subject to the effectiveness of the Registration Statement and in compliance with applicable state securities laws, upon the issuance of the Shares for a consideration not less than the par value thereof as required by Maryland law, and for the net asset value thereof as required by the Investment Company Act of 1940, as amended, and in accordance with the terms of the Registration Statement, such Shares will be legally issued and outstanding and fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and Exchange Commission as a part of the Registration Statement and with any state securities commission where such filing is required. We also consent to the reference to our firm as counsel in the prospectus and statement of additional information filed as a part thereof. In giving this consent we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
We are members of the Bar of the State of New York and do not hold ourselves out as being conversant with the laws of any jurisdiction other than those of the United States of America and the State of New York. We note that we are not licensed to practice law in the State of Maryland, and to the extent that any opinion expressed herein involves the law of Maryland, such opinion should be understood to be based solely upon our review of the published statutes of that State and, where applicable, published cases, rules or regulations of regulatory bodies of that State.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP |
SFH&G:JHG:JLS:KLJ:JHY
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
Merrill Lynch Index Funds, Inc.
We consent to the use in Pre-Effective Amendment No. 1 to Registration Statement No. 333-15265 of our report dated January 22, 1997 appearing in the Statement of Additional Information, which is a part of such Registration Statement.
/s/ Deloitte & Touche LLP Deloitte & Touche LLP Princeton, New Jersey January 24, 1997 |
EXHIBIT 13
CERTIFICATE OF SOLE SHAREHOLDER
Merrill Lynch Asset Management, L.P., the holder of the shares of common stock indicated below, par value $0.0001 per share, of Merrill Lynch Index Funds, Inc., a Maryland Corporation (the "Corporation"), does hereby confirm to the Corporation its representation that it purchased such shares for investment purposes, with no present intention of redeeming or reselling any portion thereof, and does further agree that if it redeems any portion of such shares prior to the amortization of the Corporation's organization expenses, the proceeds thereof will be reduced by the proportionate amount of the unamortized organizational expenses which the number of shares being redeemed bears to the number of shares initially purchased.
Merrill Lynch Asset Management, L.P.
By: /s/ Gerald M. Richard
------------------------------------------
Gerald M. Richard
Senior Vice President and Treasurer
Dated: January 30, 1997
|
Name of Fund Number of Class A Number of Class D
------------ ----------------- -----------------
Shares Shares
------ ------
Merrill Lynch S&P 500 Index Fund 2500 2500
Merrill Lynch Small Cap Index Fund 2500 2500
Merrill Lynch Aggregate Bond Index Fund 2500 2500
Merrill Lynch International Index Fund 2500 2500
|
EXHIBIT 15
ACCOUNT MAINTENANCE PLAN
OF
MERRILL LYNCH INDEX FUNDS, INC.
PURSUANT TO RULE 12B-1
ACCOUNT MAINTENANCE PLAN made as of January 1, 1997, by and between Merrill Lynch Index Funds, Inc., a Maryland corporation (the "Corporation"), on behalf of it series listed on Appendix A hereto (the "Funds"), and Merrill Lynch Funds Distributor, Inc., a Delaware corporation ("MLFD").
W I T N E S S E T H:
WHEREAS, the Corporation 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 Corporation proposes to enter into a Distribution Agreement with MLFD, pursuant to which MLFD will act as the exclusive distributor and representative of the Corporation in the offer and sale of shares of common stock, par value $0.0001 per share (the "shares"), of the Funds to the public; and
WHEREAS, the Corporation on behalf of the Funds desires to adopt this Account Maintenance Plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act pursuant to which each separate Fund will pay an account maintenance fee to MLFD with respect to the Fund's Class D shares; and
WHEREAS, the Directors of the Corporation have determined that there is a reasonable likelihood that adoption of the Plan will benefit the Funds and their respective Class D shareholders.
NOW, THEREFORE, the Corporation on behalf of each 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 Corporation shall pay MLFD with respect to the Class D shares of each Fund 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 attributable to the Class D shares of the Fund to compensate MLFD and securities firms with which MLFD enters into related agreements pursuant to Paragraph 2 hereof ("Sub-Agreements") 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 Class D shareholders (including assistance in connection with inquiries related to shareholder accounts).
2. The Corporation 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 Paragraph 1 hereof. MLFD may reallocate all or a portion of its account maintenance fee to such Securities Firms as compensation for the above-mentioned activities and services. Such compensation will be in an amount as set forth in the individual Sub-Agreements. Such Sub-Agreements 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 Corporation 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, together with any related agreements, by votes of a majority of both (a) the Directors of the Corporation and (b) those Directors of the Corporation who are not "interested persons" of the Corporation, 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.
5. 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 4.
6. The Plan may be terminated at any time by vote of a majority of the Rule 12b-1 Directors, or with respect to any Fund by vote of a majority of the outstanding Class D shares of that Fund.
7. The Plan may not be amended to increase materially the rate of payments provided for herein with respect to any Fund unless such amendment is approved by at least a majority, as defined in the Investment Company Act, of the outstanding Class D shares of the Fund, and by the Directors of the Corporation in the manner provided for in Paragraph 4 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for approval and annual renewal in Paragraph 4 hereof.
8. 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 Corporation shall be committed to the discretion of the Directors who are not interested persons.
9. The Corporation 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 Account Maintenance Plan as of the date first above written.
MERRILL LYNCH INDEX FUNDS, INC.
By: /s/ Terry K. Glenn
----------------------------------------
Title: President
|
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By: /s/ Gerald M. Richard
----------------------------------------
Title: Vice President and Treasurer
|
Appendix A
SERIES OF MERRILL LYNCH INDEX FUNDS, INC.
Merrill Lynch S&P 500 Index Fund
Merrill Lynch Small Cap Index Fund
Merrill Lynch Aggregate Bond Index Fund
Merrill Lynch International Index Fund
As of January 1, 1997
EXHIBIT 15
ACCOUNT MAINTENANCE PLAN SUB-AGREEMENT
AGREEMENT made as of January 1, 1997, by and between Merrill Lynch Funds Distributor, Inc. ("MLFD"), and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Securities Firm").
W I T N E S S E T H :
WHEREAS, MLFD has entered into an agreement with Merrill Lynch Index Funds, Inc., a Maryland corporation (the "Corporation"), pursuant to which it acts as the exclusive distributor for the sale of shares of common stock, par value $0.0001 per share (the "shares"), of the several series of the Corporation (the "Funds"); and
WHEREAS, MLFD and the Corporation have entered into an Account Maintenance 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 each Fund at the annual rate of 0.25% of the average daily net assets attributable to the Class D shares of the Fund for account maintenance activities related to Class D shares of the Fund; and
WHEREAS, MLFD desires the Securities Firm to perform certain account maintenance activities for the Funds' Class D 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 with respect to the Class D shares of each Fund of the types referred to in Paragraph 1 of the Plan.
2. As compensation for its activities and services performed under this Sub-Agreement, MLFD shall pay the Securities Firm an account maintenance fee at the end of each calendar month in an amount agreed upon by the parties hereto.
3. The Securities Firm shall provide MLFD, at least quarterly, such information as reasonably requested by MLFD to enable MLFD to comply with the reporting requirements of Rule 12b-1 regarding the disbursement of the account maintenance fee during such period referred to in Paragraph 3 of the Plan.
4. This Sub-Agreement shall not take effect until it has been approved by votes of a majority of both (a) the Directors of the Corporation and (b) those Directors of the Corporation who are not "interested persons" of the Corporation, 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 written above.
MERRILL LYNCH FUNDS DISTRIBUTOR, INC.
By: /s/ Gerald M. Richard
-------------------------------------
Title: Vice President and Treasurer
|
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ David Conine
-------------------------------------
|
EXHIBIT 17(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Investment Company Act of 1940 of MERRILL LYNCH INDEX TRUST (the "Trust"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the Corporation and/or the Trust, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day of December, 1996.
/s/ Jack B. Sunderland
------------------------------
Jack B. Sunderland
Trustee
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of common stock, par value $0.0001 per share, of the Corporation, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10 day of December, 1996.
/s/ Jack B. Sunderland ---------------------------- Jack B. Sunderland Director |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of common stock, par value $0.0001 per share, of the Corporation, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10 day of December, 1996.
/s/ Stephen B. Swensrud ---------------------------- Stephen B. Swensrud Director |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Investment Company Act of 1940 of MERRILL LYNCH INDEX TRUST (the "Trust"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the Corporation and/or the Trust, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day of December, 1996.
/s/ Stephen B. Swensrud ----------------------------- Stephen B. Swensrud Trustee |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of common stock, par value $0.0001 per share, of the Corporation, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10 day of December, 1996.
/s/ J. Thomas Touchton
-----------------------------
J. Thomas Touchton
Director
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn, Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Investment Company Act of 1940 of MERRILL LYNCH INDEX TRUST (the "Trust"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the Corporation and/or the Trust, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 10th day of December, 1996.
/s/ J. Thomas Touchton ---------------------------- J. Thomas Touchton Trustee |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and his behalf and in his place and stead in any and all capacities, to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of common stock, par value $0.0001 per share, of the Corporation, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 12. day of December, 1996.
/s/ Gerald M. Richard ---------------------------- Gerald M. Richard Treasurer |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Terry K. Glenn and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Investment Company Act of 1940 of MERRILL LYNCH INDEX TRUST (the "Trust"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the Corporation and/or the Trust, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 12th day of December, 1996.
/s/ Gerald M. Richard --------------------------- Gerald M. Richard Treasurer |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the offer and sale of shares of common stock, par value $0.0001 per share, of the Corporation, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 12 day of December, 1996.
/s/ Terry K. Glenn
---------------------------
Terry K. Glenn
President and Director
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose name appears below hereby nominates, constitutes and appoints Gerald M. Richard and Mark B. Goldfus (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him and on his behalf and in his place and stead in any and all capacities, to execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Securities Act of 1933 and the Investment Company Act of 1940 of MERRILL LYNCH INDEX FUNDS, INC. (the "Corporation"), and to make, execute and sign all amendments and supplements to the Registration Statement on Form N-1A under the Investment Company Act of 1940 of MERRILL LYNCH INDEX TRUST (the "Trust"), and to file the same with the Securities and Exchange Commission, and any other regulatory authority having jurisdiction over the Corporation and/or the Trust, and any and all exhibits and other documents requisite in connection therewith, granting unto said attorneys and each of them, full power and authority to perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned himself might or could do.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 12th day of December, 1996.
/s/ Terry K. Glenn
----------------------------
Terry K. Glenn
President and Trustee
|
Exchange Privileges
Holders of Class A Shares, Class B Shares, Class C Shares and Class D Shares shall have such exchange privileges as set forth in each Fund's current prospectus. Exchange privileges may vary among Classes and among holders of a Class.
Other Rights and Obligations
Except as otherwise described above, in all respects, each Class shall
have the same rights and obligations as each other Class.